-----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, CzlrHLK9vTF29CzNEdh2TzVDUQg5wYHu+si3E2hoXVSzaFZGpR014pBlEfLFYmdB Q/J8cGPlNhf0Vkk4oR5Fpw== 0001193125-05-122721.txt : 20050611 0001193125-05-122721.hdr.sgml : 20050611 20050609121703 ACCESSION NUMBER: 0001193125-05-122721 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050609 DATE AS OF CHANGE: 20050609 EFFECTIVENESS DATE: 20050609 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04708 FILM NUMBER: 05886896 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-CSR 1 dncsr.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: March 31, 2005 ------------------------- Item 1. Reports to Stockholders SunAmerica Income Funds, Annual Report at March 31, 2005. [GRAPHIC] SunAmerica Income Funds 2005 ANNUAL REPORT [LOGO] AIG Sun America Mutual Funds March 31, 2005 ANNUAL 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 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................... 77 TRUSTEE AND OFFICER INFORMATION................... 78 COMPARISONS: PORTFOLIO VS. INDEXES................ 80
Shareholder Letter Dear Shareholder: We are pleased to present the annual performance summary of the SunAmerica Income Funds for the 12-month period from March 31, 2004 to March 31, 2005. As always, we look forward to this opportunity to share with you the economic and market conditions that have shaped the Funds' investments during this time. The past 12 months encompassed a period in which fixed income markets performed well, despite seven separate increases by the Federal Reserve Bank of its target federal funds rate. An improving economy, continued low inflation and the measured approach taken by the Fed bolstered bond prices into the first quarter of 2005. Fixed income investors were particularly rewarded for risk, with higher yielding credits exhibiting the best performance. In March 2005, however, momentum turned negative. The Federal Reserve Chairman raised the possibility that inflation might not be fully tamed and stoked speculation that monetary policy might be tightened at a faster pace. In addition, General Motors, the largest issuer in the investment grade arena, announced a significant earnings revision, and its debt was downgraded. This rattled investors and the market turned risk averse. The Funds' fiscal year opened on a weak note, with the yield on the bellwether 10-year U.S. Treasury rising from below 4% to as high as 4.87% in anticipation of an impending tightening of the money supply. In June 2004, the Federal Reserve Bank raised its target Federal Funds rate 25 basis points to 1.25%, and it continued to raise the rate in 25 basis point increments throughout the reporting period. By the close of the Fund's fiscal year, the Fed Funds' rate has risen from 1.00% to 2.75%. Initially the credit markets faltered as investors reacted to the change in monetary policy. But evidence of a cooling of the economy surfaced in the late summer and fall, and by the end of the third quarter, the yield on the 10-year U.S. Treasury had eased off sharply to approach 4%. The Treasury market rallied and remained in a trading range until March, when sentiment sent rates higher. In the first half of the year Treasuries, GNMAs and mortgage-backed securities (MBS) performed well, with current coupon GNMAs trading at about 100 basis points over the 10-year Treasury. In the second half, the yield spread between the 10-year U.S. Treasury and GNMAs widened. GNMA securities outperformed as investors reached to yield and GNMA prices rose. But, this trend quickly reversed in mid-March and GNMAs traded down. The yield on the 10-year Treasury rose before closing the month just below 4.50%. The high yield market benefited the most throughout the reporting period, with the lower rated sectors exhibiting the best performance. Emerging market debt kept pace, buoyed by the uptick in oil and commodity prices. The U.S. dollar continued to weaken against other currencies and non-U.S. dollar- denominated government bonds turned in strong results. The municipal market continued to provide an attractive after-tax return. For the period covered in this report, the municipal bonds outperformed the Treasuries, with the Lehman Municipal Bond Index returning 2.67% versus 0.04% for the Lehman U.S. Treasury Index. Thank you for your continued investment in our Funds. A more detailed commentary on the performance of each fund is included at the end of the report. We also 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 Wiese Hutch Bryan Rob Vanden Assem
- -------- Past performance is no guarantee of future results. 2 SunAmerica Income Funds EXPENSE EXAMPLE -- March 31, 2005 -- (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) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at October 1, 2004 and held until March 31, 2005. Actual Expenses The "Actual" section of the table provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the column under the heading entitled "Expenses Paid During the Six Months Ended March 31, 2005" 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 the Six Months Ended March 31, 2005" column does not include small account fees that may be charged if your account balance is below $500 ($250 for retirement plan accounts). In addition, the "Expenses Paid During the Six Months Ended March 31, 2005" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Fund's prospectus and/or the retirement plan document for a full description of these fees. Had these fees been included, the "Expenses Paid During the Six Months Ended March 31, 2005" column would have been higher and the "Ending Account Value" would have been lower. Hypothetical Example for Comparison Purposes The "Hypothetical" section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in these Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. For shareholder accounts in classes other than Class I, Class X, and Class Z the "Expenses Paid During the Six Months Ended March 31, 2005" column does not include small account fees that may be charged if your account balance is below $500 ($250 for retirement plan accounts). In addition, the "Expenses Paid During the Six Months Ended March 31, 2005" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Fund's prospectus and/or the retirement plan document for a full description of these fees. Had these fees been included, the "Expenses Paid During the Six Months Ended March 31, 2005" column would have been higher and the "Ending Account Value" would have been lower. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, including sales charges on purchase payments, contingent deferred sales charges; small account fees and administrative fees, if applicable to your account. Please refer to your prospectus and/or qualified retirement plan document for more information. Therefore, the "Hypothetical" example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs and other fees were included, your costs would have been higher. 3 SunAmerica Income Funds EXPENSE EXAMPLE -- March 31, 2005 -- (unaudited) (continued)
Actual Hypothetical ------------------------------------------------ ---------------------------------- Ending Account Ending Account Expenses Paid Value Using a Value Using During the Six Hypothetical 5% Beginning Actual Return Months Ended Beginning Assumed Return Account Value at March 31, March 31, Account Value at March 31, at October 1, 2004 2005 2005* at October 1, 2004 2005 ------------------ -------------- -------------- ------------------ --------------- Core Bond Fund Class A #.................... $1,000.00 $1,012.09 $ 5.52 $1,000.00 $1,019.45 Class B #.................... $1,000.00 $1,009.78 $ 8.77 $1,000.00 $1,016.21 Class C #.................... $1,000.00 $1,008.81 $ 8.76 $1,000.00 $1,016.21 Class I #.................... $1,000.00 $1,013.60 $ 5.02 $1,000.00 $1,019.95 Class Z #.................... $1,000.00 $1,014.98 $ 2.66 $1,000.00 $1,022.29 U.S. Government Securities Fund Class A #.................... $1,000.00 $1,007.03 $ 4.95 $1,000.00 $1,020.00 Class B #.................... $1,000.00 $1,002.72 $ 8.19 $1,000.00 $1,016.75 Class C #.................... $1,000.00 $1,003.77 $ 8.19 $1,000.00 $1,016.75 GNMA Fund Class A #.................... $1,000.00 $1,008.42 $ 4.96 $1,020.00 $1,020.00 Class B #.................... $1,000.00 $1,004.28 $ 8.20 $1,016.75 $1,016.75 Class C #.................... $1,000.00 $1,004.29 $ 8.20 $1,016.75 $1,016.75 Class X...................... $1,000.00 $1,008.62 $ 3.91 $1,021.04 $1,021.04 Strategic Bond Fund Class A #.................... $1,000.00 $1,061.26 $ 7.09 $1,000.00 $1,018.05 Class B #.................... $1,000.00 $1,057.90 $10.42 $1,000.00 $1,014.81 Class C #.................... $1,000.00 $1,057.72 $10.41 $1,000.00 $1,014.81 High Yield Bond Fund Class A #.................... $1,000.00 $1,083.58 $ 7.06 $1,000.00 $1,018.15 Class B #.................... $1,000.00 $1,079.97 $10.42 $1,000.00 $1,014.91 Class C #.................... $1,000.00 $1,082.31 $10.43 $1,000.00 $1,014.91 Class Z #.................... $1,000.00 $1,086.54 $ 4.11 $1,000.00 $1,020.99 Tax Exempt Insured Fund Class A...................... $1,000.00 $1,009.35 $ 6.31 $1,000.00 $1,018.65 Class B...................... $1,000.00 $1,005.89 $ 9.75 $1,000.00 $1,015.21 Class C #.................... $1,000.00 $1,005.08 $ 9.75 $1,000.00 $1,015.21
--------------- Expenses Paid During the Six Expense Ratio Months Ended as of March 31, March 31, 2005* 2005* -------------- ------------- Core Bond Fund Class A #.................... $ 5.54 1.10% Class B #.................... $ 8.80 1.75% Class C #.................... $ 8.80 1.75% Class I #.................... $ 5.04 1.00% Class Z #.................... $ 2.67 0.53% U.S. Government Securities Fund Class A #.................... $ 4.99 0.99% Class B #.................... $ 8.25 1.64% Class C #.................... $ 8.25 1.64% GNMA Fund Class A #.................... $ 4.99 0.99% Class B #.................... $ 8.25 1.64% Class C #.................... $ 8.25 1.64% Class X...................... $ 3.93 0.78% Strategic Bond Fund Class A #.................... $ 6.94 1.38% Class B #.................... $10.20 2.03% Class C #.................... $10.20 2.03% High Yield Bond Fund Class A #.................... $ 6.84 1.36% Class B #.................... $10.10 2.01% Class C #.................... $10.10 2.01% Class Z #.................... $ 3.98 0.79% Tax Exempt Insured Fund Class A...................... $ 6.34 1.26% Class B...................... $ 9.80 1.95% Class C #.................... $ 9.80 1.95%
- -------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 182 days divided by 365 days. These ratios do not reflect transaction costs, including sales charges on purchase payments, contingent deferred sales charges, small account fees and administrative fees, if applicable to your account. Please refer to your Prospectus and/or qualified retirement plan document for more information. # During the stated period, the investment adviser either waived a portion of or all fees and assumed a portion of or all expenses for the Funds. As a result, if these fees and expenses had not been waived or assumed, the "Actual/Hypothetical Ending Account Value" would have been lower and the "Actual/Hypothetical Expenses Paid During the Six Months Ended March 31, 2005" and the "Expenses Ratios" would have been higher. 4 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2005
U.S. Government Strategic Core Bond Securities GNMA Bond Fund Fund Fund Fund ------------ --------------- ------------ ------------ ASSETS: Long-term investment securities, at value* (unaffiliated)...... $185,641,925 $211,723,388 $493,453,462 $118,243,283 Short-term investment securities, at value*.................... 10,000,000 -- 79,966,200 7,634,000 Repurchase agreements (cost equals market)..................... 10,166,000 36,147,000 105,783,000 2,465,000 ------------ ------------ ------------ ------------ Total investments............................................ 205,807,925 247,870,388 679,202,662 128,342,283 ------------ ------------ ------------ ------------ Cash........................................................... 284,700 653 73 5,872,876 Foreign cash*.................................................. -- -- -- 295,535 Deposit with broker for securities sold short.................. -- -- -- -- Receivable for: Shares of beneficial interest sold........................... 107,067 29,379 428,039 1,874,054 Dividends and interest....................................... 1,662,553 1,125,421 1,914,987 1,669,290 Investments sold............................................. 5,890,886 7,231,620 12,397,062 3,356,421 Prepaid expenses and other assets.............................. 5,047 3,801 9,673 2,566 Due from investment adviser for expense reimbursements/fee waivers....................................................... 25,987 72,360 70,857 -- ------------ ------------ ------------ ------------ Total assets................................................... 213,784,165 256,333,622 694,023,353 141,413,025 ------------ ------------ ------------ ------------ LIABILITIES: Payable for: Shares of beneficial interest redeemed....................... 116,175 204,332 1,102,228 147,006 Investments purchased........................................ 6,203,710 14,232,592 145,853,799 5,361,197 Interest on securities sold short............................ 4,167 -- -- 3,500 Investment advisory and management fees...................... 103,935 117,480 194,399 70,538 Distribution and service maintenance fees.................... 58,401 84,041 237,149 77,422 Transfer agent fees and expenses............................. 53,662 58,732 143,242 33,606 Trustees' fees and expenses.................................. 31,385 105,745 48,669 25,948 Other accrued expenses....................................... 183,675 109,802 119,228 46,354 Line of credit............................................... -- -- -- -- Dividends payable.............................................. 9,724 157,395 249,139 183,706 Collateral upon return of securities loaned.................... -- 29,400,000 49,600,000 -- Due to custodian............................................... -- -- -- -- Securities sold short, at value#............................... 2,445,312 -- -- 2,054,062 Unrealized depreciation on forward foreign currency contracts.. -- -- -- 13,574 ------------ ------------ ------------ ------------ Total liabilities.............................................. 9,210,146 44,470,119 197,547,853 8,016,913 ------------ ------------ ------------ ------------ Net Assets..................................................... $204,574,019 $211,863,503 $496,475,500 $133,396,112 ------------ ------------ ------------ ------------ NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value................. $ 201,882 $ 226,161 $ 442,917 $ 382,402 Paid-in capital................................................ 206,863,873 223,038,532 497,621,745 161,169,241 ------------ ------------ ------------ ------------ 207,065,755 223,264,693 498,064,662 161,551,643 Accumulated undistributed net investment income (loss)......... 110,959 (137,838) (12,374) 387,799 Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short, and foreign exchange transactions................................. (1,358,786) (9,162,866) 1,574,683 (31,938,957) Unrealized appreciation (depreciation) on investments.......... (1,231,800) (2,100,486) (3,151,471) 3,424,744 Unrealized appreciation (depreciation) on securities sold short (12,109) -- -- (10,172) Unrealized appreciation (depreciation) on foreign exchange transactions.................................................. -- -- -- (18,945) ------------ ------------ ------------ ------------ Net Assets..................................................... $204,574,019 $211,863,503 $496,475,500 $133,396,112 ------------ ------------ ------------ ------------ *Cost Long-term investment securities (unaffiliated)............... $186,873,725 $213,823,874 $496,604,933 $114,818,539 ============ ============ ============ ============ Short-term investment securities............................. $ 10,000,000 $ -- $ 79,966,200 $ 7,634,000 ============ ============ ============ ============ Foreign currency............................................. $ -- $ -- $ -- $ 298,491 ============ ============ ============ ============ # Proceeds from securities sold short.......................... $ 2,433,203 -- -- 2,043,890 ============ ============ ============ ============
High Yield Tax Exempt Bond Insured Fund Fund ------------- ----------- ASSETS: Long-term investment securities, at value* (unaffiliated)...... $ 316,171,090 $69,234,188 Short-term investment securities, at value*.................... -- 6,795,119 Repurchase agreements (cost equals market)..................... -- -- ------------- ----------- Total investments............................................ 316,171,090 76,029,307 ------------- ----------- Cash........................................................... -- -- Foreign cash*.................................................. 153,409 -- Deposit with broker for securities sold short.................. 1,192,271 -- Receivable for: Shares of beneficial interest sold........................... 402,393 6,178 Dividends and interest....................................... 6,027,953 989,383 Investments sold............................................. 10,879,380 -- Prepaid expenses and other assets.............................. 8,073 1,945 Due from investment adviser for expense reimbursements/fee waivers....................................................... 76,860 690 ------------- ----------- Total assets................................................... 334,911,429 77,027,503 ------------- ----------- LIABILITIES: Payable for: Shares of beneficial interest redeemed....................... 1,597,576 53,653 Investments purchased........................................ 1,191,885 -- Interest on securities sold short............................ 20,902 -- Investment advisory and management fees...................... 227,790 32,800 Distribution and service maintenance fees.................... 155,604 31,156 Transfer agent fees and expenses............................. 66,890 14,886 Trustees' fees and expenses.................................. 47,409 33,001 Other accrued expenses....................................... 99,076 57,254 Line of credit............................................... 10,676,048 -- Dividends payable.............................................. 501,527 71,709 Collateral upon return of securities loaned.................... -- -- Due to custodian............................................... 1,269,440 -- Securities sold short, at value#............................... 1,163,750 -- Unrealized depreciation on forward foreign currency contracts.. -- -- ------------- ----------- Total liabilities.............................................. 17,017,897 294,459 ------------- ----------- Net Assets..................................................... $ 317,893,532 $76,733,044 ------------- ----------- NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value................. $ 715,980 $ 59,900 Paid-in capital................................................ 414,382,100 72,997,524 ------------- ----------- 415,098,080 73,057,424 Accumulated undistributed net investment income (loss)......... (1,879,694) (34,061) Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short, and foreign exchange transactions................................. (109,276,321) 307,432 Unrealized appreciation (depreciation) on investments.......... 13,930,212 3,402,249 Unrealized appreciation (depreciation) on securities sold short 21,438 -- Unrealized appreciation (depreciation) on foreign exchange transactions.................................................. (183) -- ------------- ----------- Net Assets..................................................... $ 317,893,532 $76,733,044 ------------- ----------- *Cost Long-term investment securities (unaffiliated)............... $ 302,240,878 $65,831,939 ============= =========== Short-term investment securities............................. $ -- $ 6,795,119 ============= =========== Foreign currency............................................. $ 153,592 $ -- ============= =========== # Proceeds from securities sold short.......................... $ 1,185,188 -- ============= ===========
See Notes to Financial Statements 5 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2005 -- (continued)
U.S. Government Strategic Core Bond Securities GNMA Bond Fund Fund Fund Fund ------------ --------------- ------------ ----------- Class A (unlimited shares authorized): Net assets......................................................... $167,786,789 $174,905,167 $338,031,201 $59,278,592 Shares of beneficial interest issued and outstanding............... 16,559,794 18,671,171 30,185,326 17,007,981 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge)...................... $ 10.13 $ 9.37 $ 11.20 $ 3.49 Maximum sales charge (4.75% of offering price)..................... 0.51 0.47 0.56 0.17 ------------ ------------ ------------ ----------- Maximum offering price to public................................... $ 10.64 $ 9.84 $ 11.76 $ 3.66 ============ ============ ============ =========== Class B (unlimited shares authorized): Net assets......................................................... $ 4,977,376 $ 27,012,856 $102,497,052 $37,250,358 Shares of beneficial interest issued and outstanding............... 492,472 2,882,251 9,128,512 10,692,778 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 10.11 $ 9.37 $ 11.23 $ 3.48 ============ ============ ============ =========== Class C (unlimited shares authorized): Net assets......................................................... $ 4,779,681 $ 9,945,480 $ 54,935,553 $36,867,162 Shares of beneficial interest issued and outstanding............... 472,241 1,062,712 4,887,570 10,539,432 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 10.12 $ 9.36 $ 11.24 $ 3.50 ============ ============ ============ =========== Class I (unlimited shares authorized): Net assets......................................................... $ 1,404,511 $ -- $ -- $ -- Shares of beneficial interest issued and outstanding............... 138,428 -- -- -- Net asset value, offering and redemption price per share........... $ 10.15 $ -- $ -- $ -- ============ ============ ============ =========== Class Z (unlimited shares authorized): Net assets......................................................... $ 25,625,662 $ -- $ -- $ -- Shares of beneficial interest issued and outstanding............... 2,525,279 -- -- -- Net asset value, offering and redemption price per share........... $ 10.15 $ -- $ -- $ -- ============ ============ ============ =========== Class X (unlimited shares authorized): Net assets......................................................... $ -- $ -- $ 1,011,694 $ -- Shares of beneficial interest issued and outstanding............... -- -- 90,287 -- Net asset value, offering and redemption price per share........... $ -- $ -- $ 11.21 $ -- ============ ============ ============ ===========
High Yield Tax Exempt Bond Insured Fund Fund ------------ ----------- Class A (unlimited shares authorized): Net assets......................................................... $101,660,552 $62,032,261 Shares of beneficial interest issued and outstanding............... 22,943,365 4,842,968 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge)...................... $ 4.43 $ 12.81 Maximum sales charge (4.75% of offering price)..................... 0.22 0.64 ------------ ----------- Maximum offering price to public................................... $ 4.65 $ 13.45 ============ =========== Class B (unlimited shares authorized): Net assets......................................................... $ 61,961,458 $ 8,999,651 Shares of beneficial interest issued and outstanding............... 13,957,646 702,174 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 4.44 $ 12.82 ============ =========== Class C (unlimited shares authorized): Net assets......................................................... $ 65,384,668 $ 5,701,132 Shares of beneficial interest issued and outstanding............... 14,671,041 444,896 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 4.46 $ 12.81 ============ =========== 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......................................................... $ 88,886,854 $ -- Shares of beneficial interest issued and outstanding............... 20,025,984 -- Net asset value, offering and redemption price per share........... $ 4.44 $ -- ============ =========== 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 year ended March 31, 2005
Core U.S. Government Bond Fund Securities Fund ----------- --------------- INVESTMENT INCOME: Dividends* (unaffiliated)................................................................ $ 10 $ -- Interest (unaffiliated).................................................................. 10,552,114 9,761,307 ----------- ----------- Total investment income................................................................ 10,552,124 9,761,307 ----------- ----------- EXPENSES: Investment advisory and management fees.................................................. 1,245,364 1,484,291 Distribution and service maintenance fees: Class A................................................................................ 540,520 654,699 Class B................................................................................ 51,043 306,113 Class C................................................................................ 48,265 120,561 Service fees--Class I@................................................................... 5,245 -- Transfer agent fees: Class A................................................................................ 339,756 456,215 Class B................................................................................ 16,448 84,846 Class C................................................................................ 13,903 35,248 Class I@............................................................................... 4,616 -- Class Z................................................................................ -- -- Class X................................................................................ -- -- Registration fees:....................................................................... Class A................................................................................ 51,717 26,125 Class B................................................................................ 7,305 8,760 Class C................................................................................ 11,953 7,158 Class I@............................................................................... -- -- Class Z................................................................................ -- -- Class X................................................................................ -- -- Custodian fees........................................................................... 60,603 87,709 Reports to shareholders.................................................................. -- 127,053 Audit and tax fees....................................................................... 31,384 35,610 Legal fees............................................................................... 6,570 6,205 Trustees' fees and expenses.............................................................. 16,712 13,937 Interest expense......................................................................... -- 1,489 Interest expense on securities sold short................................................ -- -- Other expenses........................................................................... 12,810 15,180 ----------- ----------- Total expenses before fee waivers, expense reimbursements and custody credits.......... 2,464,214 3,471,199 Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (219,634) (915,381) Custody credits earned on cash balances................................................ (1,470) (2,721) ----------- ----------- Net expenses........................................................................... 2,243,110 2,553,097 ----------- ----------- Net investment income (loss).............................................................. 8,309,014 7,208,210 ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... (309,327) 498,065 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............................ (309,327) 498,065 ----------- ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (4,270,180) (7,299,356) Change in unrealized appreciation (depreciation) on forward currency contracts............ -- -- Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... -- -- Change in unrealized appreciation (depreciation) on securities sold short................. (12,109) -- ----------- ----------- Net unrealized gain (loss) on investments and foreign currencies.......................... (4,282,289) (7,299,356) ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currencies............. (4,591,616) (6,801,291) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 3,717,398 $ 406,919 =========== =========== * Net of foreign withholding taxes on interest and dividends of........................... $ 83 $ -- =========== ===========
GNMA Fund ------------ INVESTMENT INCOME: Dividends* (unaffiliated)................................................................ $ -- Interest (unaffiliated).................................................................. 19,790,101 ------------ Total investment income................................................................ 19,790,101 ------------ EXPENSES: Investment advisory and management fees.................................................. 2,424,795 Distribution and service maintenance fees: Class A................................................................................ 1,182,805 Class B................................................................................ 1,170,011 Class C................................................................................ 672,154 Service fees--Class I@................................................................... -- Transfer agent fees: Class A................................................................................ 790,503 Class B................................................................................ 294,735 Class C................................................................................ 161,090 Class I@............................................................................... -- Class Z................................................................................ -- Class X................................................................................ 18,717 Registration fees:....................................................................... Class A................................................................................ 79,415 Class B................................................................................ 20,786 Class C................................................................................ 22,641 Class I@............................................................................... -- Class Z................................................................................ -- Class X................................................................................ -- Custodian fees........................................................................... 185,085 Reports to shareholders.................................................................. 197,077 Audit and tax fees....................................................................... 38,384 Legal fees............................................................................... 12,076 Trustees' fees and expenses.............................................................. 39,316 Interest expense......................................................................... 172 Interest expense on securities sold short................................................ -- Other expenses........................................................................... 26,904 ------------ Total expenses before fee waivers, expense reimbursements and custody credits.......... 7,336,666 Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (905,003) Custody credits earned on cash balances................................................ (15) ------------ Net expenses........................................................................... 6,431,648 ------------ Net investment income (loss).............................................................. 13,358,453 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... 3,461,416 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............................ 3,461,416 ------------ Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (11,084,127) Change in unrealized appreciation (depreciation) on forward currency contracts............ -- 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.......................... (11,084,127) ------------ Net realized and unrealized gain (loss) on investments and foreign currencies............. (7,622,711) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 5,735,742 ============ * Net of foreign withholding taxes on interest and dividends of........................... $ -- ============
- -------- @ See Note 1 See Notes to Financial Statements 7 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the year ended March 31, 2005 -- (continued)
Strategic High Yield Tax Exempt Bond Fund Bond Fund Insured Fund ----------- ----------- ------------ INVESTMENT INCOME: EXPENSES: Dividends* (unaffiliated)................................................................ $ 42,679 $ 276,814 $ 27 Interest (unaffiliated).................................................................. 8,010,066 29,479,238 3,618,802 ----------- ----------- ----------- Total investment income................................................................ 8,052,745 29,756,052 3,618,829 ----------- ----------- ----------- EXPENSES: Investment advisory and management fees.................................................. 707,356 2,434,703 412,187 Distribution and service maintenance fees: Class A................................................................................ 163,087 428,047 226,047 Class B................................................................................ 358,559 673,872 119,819 Class C................................................................................ 245,975 569,973 58,709 Service fees--Class I@................................................................... 4,436 -- -- Transfer agent fees: Class A................................................................................ 117,645 285,420 150,196 Class B................................................................................ 87,007 156,637 28,468 Class C................................................................................ 58,722 135,583 13,759 Class I@............................................................................... 3,974 -- -- Class Z................................................................................ -- -- -- Class X................................................................................ -- -- -- Registration fees: Class A................................................................................ 14,565 25,388 11,181 Class B................................................................................ 11,347 12,855 6,014 Class C................................................................................ 10,613 17,490 9,213 Class I@............................................................................... 3,740 -- -- Class Z................................................................................ -- -- -- Class X................................................................................ -- -- -- Custodian fees........................................................................... 72,051 127,288 54,469 Reports to shareholders.................................................................. 51,236 57,330 20,676 Audit and tax fees....................................................................... 34,256 51,558 32,297 Legal fees............................................................................... 9,249 10,610 4,437 Trustees' fees and expenses.............................................................. 6,232 18,543 4,762 Interest expense......................................................................... -- 24,003 5 Dividend and interest expense on securities sold short................................... -- 97,466 -- Other expenses........................................................................... 11,582 14,470 9,821 ----------- ----------- ----------- Total expenses before fee waivers, expense reimbursements and custody credits.......... 1,971,632 5,141,236 1,162,060 Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (31,223) (240,077) (5,550) Custody credits earned on cash balances................................................ (23,901) (14,323) (359) ----------- ----------- ----------- Net expenses........................................................................... 1,916,508 4,886,836 1,156,151 ----------- ----------- ----------- Net investment income (loss).............................................................. 6,136,237 24,869,216 2,462,678 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... 5,201,037 10,506,237 314,275 Net realized gain (loss) on securities sold short......................................... -- (107,378) -- Net realized foreign exchange gain (loss) on other assets and liabilities................. 103,451 21,495 -- ----------- ----------- ----------- Net realized gain (loss) on investments and foreign currencies............................ 5,304,488 10,420,354 314,275 ----------- ----------- ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (2,735,089) 6,049,742 (1,499,351) Change in unrealized appreciation (depreciation) on forward currency contracts............ -- -- -- Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... 25,641 2,129 -- Change in unrealized appreciation (depreciation) on securities sold short................. (10,172) 15,253 -- ----------- ----------- ----------- Net unrealized gain (loss) on investments and foreign currencies.......................... (2,719,620) 6,067,124 (1,499,351) ----------- ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currencies............. 2,584,868 16,487,478 (1,185,076) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 8,721,105 $41,356,694 $ 1,277,602 =========== =========== =========== * Net of foreign withholding taxes on interest and dividends of........................... $ 3,757 $ 451 $ -- =========== =========== ===========
- -------- @ See Note 1 See Notes to Financial Statements 8 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS
Core Bond Fund -------------------------- For the year For the year ended ended March 31, March 31, 2005 2004 ------------ ------------ Operations: Net investment income (loss)................................................. $ 8,309,014 $ 8,609,219 Net realized gain (loss) on investments and foreign currencies............... (309,327) 7,228,394 Net unrealized appreciation (depreciation) on investments and foreign currencies.................................................................. (4,282,289) (2,724,903) ------------ ------------ Net increase (decrease) in net assets resulting from operations................ 3,717,398 13,112,710 ------------ ------------ Distributions to shareholders from: Net investment income (Class A).............................................. (6,506,042) (1,752,869) Net investment income (Class B).............................................. (181,405) (128,070) Net investment income (Class C).............................................. (171,529) (100,070) Net investment income (Class I)@............................................. (90,049) (539,121) Net investment income (Class Z).............................................. (1,999,235) (6,618,532) Net investment income (Class X).............................................. -- -- Net realized gain on securities (Class A).................................... (1,959,055) -- Net realized gain on securities (Class B).................................... (60,672) -- Net realized gain on securities (Class C).................................... (57,101) -- Net realized gain on securities (Class I)@................................... (23,429) -- Net realized gain on securities (Class Z).................................... (308,101) -- Net realized gain on securities (Class X).................................... -- -- ------------ ------------ Total distributions to shareholders............................................ (11,356,618) (9,138,662) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6)...................................................................... (14,834,404) (99,825,778) ------------ ------------ Total increase (decrease) in net assets........................................ (22,473,624) (95,851,730) NET ASSETS: Beginning of period............................................................ 227,047,643 322,899,373 ------------ ------------ End of period+................................................................. $204,574,019 $227,047,643 ============ ============ +Includes accumulated undistributed net investment income (loss)............... $ 110,959 $ 198,080 ============ ============
U.S. Government Securities Fund -------------------------- For the year For the year ended ended March 31, March 31, 2005 2004 ------------ ------------ Operations: Net investment income (loss)................................................. $ 7,208,210 $ 8,037,454 Net realized gain (loss) on investments and foreign currencies............... 498,065 2,311,744 Net unrealized appreciation (depreciation) on investments and foreign currencies.................................................................. (7,299,365) (2,984,953) ------------ ------------ Net increase (decrease) in net assets resulting from operations................ 406,919 7,364,245 ------------ ------------ Distributions to shareholders from: Net investment income (Class A).............................................. (6,470,275) (6,367,993) Net investment income (Class B).............................................. (861,625) (1,202,312) Net investment income (Class C).............................................. (338,902) (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).................................... -- -- ------------ ------------ Total distributions to shareholders............................................ (7,670,802) (8,059,030) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6)...................................................................... (37,234,269) (40,708,822) ------------ ------------ Total increase (decrease) in net assets........................................ (44,498,152) (41,403,607) NET ASSETS: Beginning of period............................................................ 256,361,655 297,765,262 ------------ ------------ End of period+................................................................. $211,863,503 $256,361,655 ============ ============ +Includes accumulated undistributed net investment income (loss)............... $ (137,838) $ (138,253) ============ ============
- -------- @ See Note 1 See Notes to Financial Statements 9 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund -------------------------- For the year For the year ended ended March 31, March 31, 2005 2004 ------------ ------------ Operations: Net investment income (loss)................................................. $ 13,358,453 $ 12,805,080 Net realized gain (loss) on investments and foreign currencies............... 3,461,416 1,476,272 Net unrealized appreciation (depreciation) on investments and foreign currencies.................................................................. (11,084,127) (1,054,237) ------------ ------------ Net increase (decrease) in net assets resulting from operations................ 5,735,742 13,227,115 ------------ ------------ Distributions to shareholders from: Net investment income (Class A).............................................. (10,096,979) (8,229,827) Net investment income (Class B).............................................. (2,758,584) (3,268,894) Net investment income (Class C).............................................. (1,598,731) (2,301,935) Net investment income (Class I)@............................................. -- (586) Net investment income (Class Z).............................................. -- -- Net investment income (Class X).............................................. (262,529) (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) ------------ ------------ Total distributions to shareholders............................................ (14,716,823) (23,726,395) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6)...................................................................... (65,557,982) (4,226,113) ------------ ------------ Total increase (decrease) in net assets........................................ (74,539,063) (14,725,393) NET ASSETS: Beginning of period............................................................ 571,014,563 585,739,956 ------------ ------------ End of period+................................................................. $496,475,500 $571,014,563 ============ ============ +Includes accumulated undistributed net investment income (loss)............... $ (12,374) $ 4,199 ============ ============
Strategic Bond Fund -------------------------- For the year For the year ended ended March 31, March 31, 2005 2004 ------------ ------------ Operations: Net investment income (loss)................................................. $ 6,136,237 $ 5,727,055 Net realized gain (loss) on investments and foreign currencies............... 5,304,488 4,382,421 Net unrealized appreciation (depreciation) on investments and foreign currencies.................................................................. (2,719,620) 4,765,239 ------------ ------------ Net increase (decrease) in net assets resulting from operations................ 8,721,105 14,874,715 ------------ ------------ Distributions to shareholders from: Net investment income (Class A).............................................. (3,082,007) (2,573,307) Net investment income (Class B).............................................. (2,151,861) (1,914,488) Net investment income (Class C).............................................. (1,452,318) (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).................................... -- -- ------------ ------------ Total distributions to shareholders............................................ (6,802,946) (5,771,394) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6)...................................................................... 25,739,107 14,052,523 ------------ ------------ Total increase (decrease) in net assets........................................ 27,657,266 23,155,844 NET ASSETS: Beginning of period............................................................ 105,738,846 82,583,002 ------------ ------------ End of period+................................................................. $133,396,112 $105,738,846 ============ ============ +Includes accumulated undistributed net investment income (loss)............... $ 387,799 $ 160,688 ============ ============
- -------- @ See Note 1 See Notes to Financial Statements 10 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund -------------------------- For the year For the year ended ended March 31, March 31, 2005 2004 ------------ ------------ Operations: Net investment income (loss)..................................................... $ 24,869,216 $ 22,245,096 Net realized gain (loss) on investments and foreign currencies................... 10,420,354 16,147,344 Net unrealized appreciation (depreciation) on investments and foreign currencies. 6,067,124 22,647,739 ------------ ------------ Net increase (decrease) in net assets resulting from operations.................... 41,356,694 61,040,179 ------------ ------------ Distributions to shareholders from: Net investment income (Class A).................................................. (9,494,138) (7,714,823) Net investment income (Class B).................................................. (4,894,387) (5,797,385) Net investment income (Class C).................................................. (4,060,550) (3,614,674) Net investment income (Class I)@................................................. -- (1,687) Net investment income (Class Z).................................................. (6,995,720) (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)........................................ -- -- ------------ ------------ Total distributions to shareholders................................................ (25,444,795) (23,821,470) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6).......................................................................... 3,593,907 47,785,931 ------------ ------------ Total increase (decrease) in net assets............................................ 19,505,806 85,004,640 NET ASSETS: Beginning of period................................................................ 298,387,726 213,383,086 ------------ ------------ End of period+..................................................................... $317,893,532 $298,387,726 ============ ============ +Includes accumulated undistributed net investment income (loss)................... $ (1,879,694) $ (1,327,919) ============ ============
Tax Exempt Insured Fund -------------------------- For the year For the year ended ended March 31, March 31, 2005 2004 ------------ ------------ Operations: Net investment income (loss)..................................................... $ 2,462,678 $ 2,635,731 Net realized gain (loss) on investments and foreign currencies................... 314,275 1,897,409 Net unrealized appreciation (depreciation) on investments and foreign currencies. (1,499,351) (129,136) ------------ ------------ Net increase (decrease) in net assets resulting from operations.................... 1,277,602 4,404,004 ------------ ------------ Distributions to shareholders from: Net investment income (Class A).................................................. (2,053,393) (2,009,916) Net investment income (Class B).................................................. (297,218) (366,880) Net investment income (Class C).................................................. (145,957) (122,956) Net investment income (Class I)@................................................. -- -- Net investment income (Class Z).................................................. -- -- Net investment income (Class X).................................................. -- -- Net realized gain on securities (Class A)........................................ (842,208) (2,345,579) Net realized gain on securities (Class B)........................................ (135,607) (558,969) Net realized gain on securities (Class C)........................................ (82,894) (187,274) Net realized gain on securities (Class I)@....................................... -- -- Net realized gain on securities (Class Z)........................................ -- -- Net realized gain on securities (Class X)........................................ -- -- ------------ ------------ Total distributions to shareholders................................................ (3,557,277) (5,591,574) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6).......................................................................... (12,519,717) (11,118,979) ------------ ------------ Total increase (decrease) in net assets............................................ (14,799,392) (12,306,549) NET ASSETS: Beginning of period................................................................ 91,532,436 103,838,985 ------------ ------------ End of period+..................................................................... $ 76,733,044 $ 91,532,436 ============ ============ +Includes accumulated undistributed net investment income (loss)................... $ (34,061) $ (6,949) ============ ============
- -------- @ See Note 1 See Notes to Financial Statements 11 SunAmerica Income Funds FINANCIAL HIGHLIGHTS
CORE BOND FUND -------------- Net gain (loss) on Net investments Dividend Net Net Asset (both Dividends from net Asset Assets, Value, Net realized Total from from net realized Total Value, end of beginning investment and investment investment Return of gain on Distri- end of Total period Period Ended of period income(1) unrealized) operations income capital investments butions period Return(2) (000's) - ----------------- --------- ---------- ----------- ---------- ---------- --------- ----------- ------- ------ --------- -------- Class A - - 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 4/01/04-3/31/05 10.49 0.40 (0.20) 0.20 (0.43) -- (0.13) (0.56) 10.13 1.94 167,787 Class B - - 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 4/01/04-3/31/05 10.46 0.33 (0.19) 0.14 (0.36) -- (0.13) (0.49) 10.11 1.37 4,977 Class C* - - 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 4/01/04-3/31/05 10.48 0.33 (0.20) 0.13 (0.36) -- (0.13) (0.49) 10.12 1.27 4,780 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 4/01/04-3/31/05 10.50 0.42 (0.20) 0.22 (0.44) -- (0.13) (0.57) 10.15 2.14 1,405 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 4/01/04-3/31/05 10.50 0.50 (0.23) 0.27 (0.49) -- (0.13) (0.62) 10.15 2.62 25,626
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 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 1.15(4) 3.91(4) 203 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 1.81(4) 3.25(4) 203 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 1.81(4) 3.25(4) 203 1.16%(3)(4) 6.18%(3)(4) 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 1.07(4) 3.98(4) 203 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 0.61(4) 4.41(4) 203
- -------- * 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. (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):
10/31/00 10/31/01 3/31/02(3) 3/31/03 3/31/04 3/31/05 -------- -------- ---------- ------- ------- ------- Core Bond Fund Class A.................. 0.49% 0.04% 0.19% 0.11% 0.10% 0.11% Core Bond Fund Class B.................. 0.50 0.03 0.32 0.23 0.15 0.31 Core Bond Fund Class C.................. 0.54 0.04 0.32 0.18 0.14 0.38 Core Bond Fund Class I.................. -- 0.03 0.13 0.05 0.05 0.06 Core Bond Fund Class Z.................. 0.01(3) 0.03 0.02 -- 0.02 0.05
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 Dividend Asset Assets, Ratio of Value, Net realized Total from from net from net Total Value, end of expenses beginning investment and investment investment realized Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income gains butions period Return(2) (000's) net assets - ------------ --------- ---------- ----------- ---------- ---------- -------- ------- ------ --------- -------- ---------- Class A ------- 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(4) (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(3) 3/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 0.99(3) 3/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 0.99(3) Class B ------- 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(4) (0.08) 0.23 (0.34) -- (0.34) 8.80 2.55 38,878 2.09(3) 3/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595 1.76(3) 3/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 1.64(3) 3/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 1.64(3) Class C* -------- 3/31/01 $8.32 $0.37 $ 0.61 $ 0.98 $(0.39) $-- $(0.39) $8.91 12.10% $ 3,303 2.20%(3) 3/31/02 8.91 0.29(4) (0.09) 0.20 (0.32) -- (0.32) 8.79 2.40 12,209 2.10(3) 3/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322 1.75(3) 3/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 1.64(3) 3/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 1.64(3)
Ratio of net investment income to average Portfolio net assets Turnover - ---------- --------- 5.27% 1,561% 4.12(4) 570 3.88(3) 614 3.14(3) 256 3.26(3) 246 4.59% 1,561% 3.42(3)(4) 570 3.20(3) 614 2.45(3) 256 2.61(3) 246 4.48%(3) 1,561% 3.33(3)(4) 570 3.18(3) 614 2.45(3) 256 2.61(3) 246
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
3/31/01 3/31/02 3/31/03 3/31/04 3/31/05 ------- ------- ------- ------- ------- U.S. Government Securities Fund Class A. -- % -- % 0.21% 0.37% 0.39% U.S. Government Securities Fund Class B. -- 0.01 0.23 0.37 0.43 U.S. Government Securities Fund Class C. 1.18 0.16 0.27 0.38 0.48
(4)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 Dividends 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 - - 3/31/01 $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 3/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031 Class B - - 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 3/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497 Class C* - - 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 3/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936 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 3/31/05 11.39 0.33 (0.15) 0.18 (0.36) -- (0.36) 11.21 1.63 1,012
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 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(5) 2.73(5) 204 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(5) 2.10(5) 204 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(5) 2.11(5) 204 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 0.78 2.88 204
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. @ 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)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):
3/31/01 3/31/02 3/31/03 3/31/04 3/31/05 ------- ------- ------- ------- ------- 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 0.18 GNMA Fund Class C............. 0.62 0.21 0.13 0.16 0.18 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 - - 11/01/99-10/31/00 $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 4/01/04-3/31/05 3.41 0.20 0.11 0.31 (0.23) -- -- (0.23) 3.49 9.36 Class B - - 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 4/01/04-3/31/05 3.41 0.18 0.10 0.28 (0.21) -- -- (0.21) 3.48 8.35 Class C* - - 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 4/01/04-3/31/05 3.42 0.18 0.11 0.29 (0.21) -- -- (0.21) 3.50 8.65
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 - ------- ---------- ---------- --------- $ 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 59,279 1.40(5)(8) 5.94(5)(8) 188 $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 37,250 2.05(5)(8) 5.32(5)(8) 188 $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 36,867 2.05(5)(8) 5.29(5)(8) 188
- -------- * 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. (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):
10/31/00 10/31/01 03/31/02(4) 3/31/03 3/31/04 3/31/05 -------- -------- ----------- ------- ------- ------- Strategic Bond Fund Class A............. 0.32% 0.17% 0.01% -- % 0.02% 0.03% Strategic Bond Fund Class B............. 0.32 0.18 0.01 -- 0.02 0.02 Strategic Bond Fund Class C............. 0.32 0.17 0.08 0.11 0.02 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 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%. (10)Net 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 Dividends Net Asset (both Dividends from net Asset Net Assets, Value, Net realized Total from from net realized Total Value, end of beginning investment and investment investment gain on Distri- end of Total period Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investment butions+ period+ Return(2) (000's) - ----------------- ---------- ---------- ------------ ----------- ---------- ---------- -------- ------- --------- ----------- Class A - - 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 4/01/04-3/31/05 4.23 0.33 0.21 0.54 (0.34) -- (0.34) 4.43 13.26 101,661 Class B - - 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 4/01/04-3/31/05 4.24 0.31 0.20 0.51 (0.31) -- (0.31) 4.44 12.57 61,961 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 4/01/04-3/31/05 4.25 0.30 0.22 0.52 (0.31) -- (0.31) 4.46 12.77 65,385 Class Z* - - 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 4/01/04-3/31/05 4.23 0.35 0.23 0.58 (0.37) -- (0.37) 4.44 14.18 88,887
Ratio of net Ratio of investment expense income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 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 1.38(5) 7.59(5) 85 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 2.03(5) 7.04(5) 85 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 2.03(5) 6.97(5) 85 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 0.81(5) 8.23(5) 85
- -------- * 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. @ 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):
10/31/00 10/31/01 3/31/02(4) 3/31/03 3/31/04 3/31/05 -------- -------- ---------- ------- ------- ------- High Yield Bond Fund Class A............ 0.43% 0.18% -- % -- % -- % 0.08% High Yield Bond Fund Class B............ 0.42 0.18 -- -- -- 0.07 High Yield Bond Fund Class C............ -- 0.18 0.01 0.10 0.01 0.09 High Yield Bond Fund Class Z............ 0.60 0.18 0.03 0.03 0.00 0.05
(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 Net Net Asset (both Dividends Asset Assets, Ratio of Value, Net realized Total from from net Distributions Total Value, end of expenses beginning investment and investment investment from net Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income realized gains butions period Return(2) (000's) net assets - ------------ --------- ---------- ----------- ---------- ---------- -------------- ------- ------ --------- ------- ---------- Class A - - 3/31/01 $12.37 $0.56 $ 0.66 $1.22 $(0.57) $ -- $(0.57) $13.02 10.08% $72,394 1.26% 3/31/02 13.02 0.52(5) (0.30) 0.22 (0.52) -- (0.52) 12.72 1.70 75,071 1.29(3) 3/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358 1.24 3/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 1.26 3/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 1.25 Class B - - 3/31/01 $12.37 $0.47 $ 0.66 $1.13 $(0.48) $ -- $(0.48) $13.02 9.31% $16,302 1.97% 3/31/02 13.02 0.41(5) (0.28) 0.13 (0.43) -- (0.43) 12.72 0.95 18,090 2.04(3) 3/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031 1.97 3/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 1.96 3/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 1.94 Class C* - - 3/31/01 $12.37 $0.47 $ 0.66 $1.13 $(0.48) $ -- $(0.48) $13.02 9.32% $ 721 1.95%(4) 3/31/02 13.02 0.41(5) (0.28) 0.13 (0.43) -- (0.43) 12.72 0.99 4,095 1.95(3)(4) 3/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451 1.95(4) 3/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 1.95(4) 3/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 1.95(4)
Ratio of net investment income to average Portfolio net assets Turnover - ---------- --------- 4.41% 24% 3.99(3)(5) 140 3.12 195 2.90 131 3.14 153 3.71% 24% 3.22(3)(5) 140 2.39 195 2.20 131 2.44 153 3.73%(4) 24% 3.21(3)(4)(5) 140 2.40(4) 195 2.21(4) 131 2.44(4) 153
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. (1) Calculated based upon average shares outstanding. (2) Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3) 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) Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
3/31/01 3/31/02 3/31/03 3/31/04 3/31/05 ------- ------- ------- ------- ------- Tax Exempt Insured Fund Class C......... 1.59% 0.56% 0.00% 0.12% 0.09%
(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 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 -- March 31, 2005 -- (unaudited) Industry Allocation* Federal National Mortgage Association....................... 19.1% Federal Home Loan Mortgage Corporation...................... 17.5% Financial Services.......................................... 17.1% U.S Treasury Bonds.......................................... 5.7% Repurchase Agreement........................................ 5.0% U.S. Treasury Notes......................................... 4.8% Foreign Government Agency................................... 4.2% Banks....................................................... 3.7% Telecommunications.......................................... 3.3% Utilities................................................... 3.2% Energy Sources.............................................. 2.5% Broadcasting & Media........................................ 1.7% Leisure & Tourism........................................... 1.7% Automotive.................................................. 1.6% Insurance................................................... 1.6% Transportation.............................................. 1.3% Metals & Mining............................................. 1.0% Pharmaceuticals............................................. 1.0% Business Services........................................... 0.6% Health Services............................................. 0.6% Food, Beverage & Tobacco.................................... 0.5% Forest Products............................................. 0.5% Conglomerate................................................ 0.4% Housing & Household Durables................................ 0.4% Aerospace & Military Technology............................. 0.3% Chemicals................................................... 0.3% Real Estate Companies....................................... 0.3% Retail...................................................... 0.2% Retail Stores............................................... 0.2% Energy Services............................................. 0.1% Machinery................................................... 0.1% Government National Mortgage Association.................... 0.1% ----- 100.6% =====
Credit Quality+# Government -- Treasury.................. 11.6% Government -- Agency.................... 39.1% AAA..................................... 7.2% AA...................................... 1.6% A....................................... 10.5% BBB..................................... 19.3% BB...................................... 3.2% B....................................... 2.1% CCC..................................... 1.4% CC...................................... 0.3% C....................................... 0.1% Not Rated@.............................. 3.6% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or, the rating is unavailable from the data source. + Source: Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 18 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 5.0% Financial Services -- 5.0% Bear Stearns Commercial Mtg. Securities, Inc. Commercial Mtg. Certificates, Series 1999-C1, Class A2 6.02% due 2/14/31(1)......................... $ 525,000 $ 550,643 Bear Stearns Commercial Mtg. Securities, Inc. Commercial Mtg. Certificates, Series 2001-Top4, Class A3 5.61% due 11/15/33(1)........................ 100,000 103,981 DLJ Commercial Mtg. Corp. Commercial Mtg. Certificates, Series 1999-CG3, Class A1B 7.34% due 10/10/32(1)........................ 1,000,000 1,105,125 Honda Auto Receivables Owner Trust Asset Backed Notes, Series 2002-4, Class A4 2.70% due 3/17/08............................ 2,000,000 1,979,350 Honda Auto Receivables Owner Trust Asset Backed Notes, Series 2003-3, Class A4 2.77% due 11/21/08........................... 1,000,000 976,079 Morgan Stanley Dean Witter Capital I Commercial Mtg. Certificates, Series 2002-Top1, Class A4 6.66% due 4/01/05(1)......................... 1,850,600 2,006,939 Morgan Stanley Dean Witter Capital I Commercial Mtg. Certificates, Series 2000-LIF2, Class A2 7.20% due 4/01/05(1)......................... 2,125,000 2,351,709 Residential Funding Mtg. Securities II, Series 2004 HI1, Class A3 Series 2004 HI1, Class A3 3.05% due 7/25/16............................ 1,100,000 1,074,629 ----------- Total Asset-Backed Securities (cost $2,999,790)............................ 10,148,455 ----------- BONDS & NOTES -- 29.6% Aerospace & Military Technology -- 0.3% Raytheon Co. Debenture 6.40% due 12/15/18........................... 562,000 606,875 ----------- Automotive -- 1.6% Dana Corp. Notes 7.00% due 3/01/29............................ 297,000 260,820 General Motors Corp. Notes 7.20% due 1/15/11............................ 905,000 817,009 General Motors Corp. Sr. Debentures 8.38% due 7/15/33............................ 616,000 527,131 General Motors Corp. Debentures 8.80% due 3/01/21............................ 755,000 679,183 Hertz Corp. Sr. Notes 4.70% due 10/02/06........................... 517,000 509,907
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Automotive (continued) Hertz Corp. Notes 6.90% due 8/15/14......................... $190,000 $ 181,059 Hertz Corp. Notes 7.63% due 6/01/12......................... 337,000 341,682 ---------- 3,316,791 ---------- Banks -- 3.1% American Express Centurion Bank Notes 2.98% due 4/18/05(2)...................... 337,000 337,140 BankBoston Capital Trust IV Guaranteed Capital Securities 3.56% due 6/08/05(2)...................... 622,000 607,581 Chemical Bank Sub. Notes 6.13% due 11/01/08........................ 359,000 377,055 Credit Suisse First Boston New York Sub. Notes 6.50% due 5/01/08*........................ 337,000 354,916 First Maryland Capital II Guaranteed Sub. Capital Income Securities 3.59% due 5/02/05(2)...................... 508,000 495,460 HSBC Bank USA Sub. Notes 5.88% due 11/01/34........................ 671,000 675,418 Key Bank NA Sr. Notes 4.10% due 6/30/05......................... 232,000 232,625 Key Bank NA Sub. Notes 7.00% due 2/01/11......................... 249,000 276,438 National City Bank Notes 3.38% due 10/15/07........................ 617,000 605,070 PNC Funding Corp. Guaranteed Sr. Notes 5.75% due 8/01/06......................... 565,000 577,495 Popular North America, Inc. Notes 4.25% due 4/01/08......................... 614,000 609,882 Sovereign Bank Certificate Of Deposit 4.00% due 2/01/08......................... 562,000 555,286 Suntrust Bank Bonds 5.40% due 4/01/20......................... 409,000 408,544 Wells Fargo & Co. Notes 3.11% due 6/15/05(2)...................... 205,000 205,059 ---------- 6,317,969 ---------- Broadcasting & Media -- 1.5% Charter Communications Holdings, LLC Sr. Notes 11.13% due 1/15/11........................ 500,000 403,750
19 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------- BONDS & NOTES (continued) Broadcasting & Media (continued) Cox Communications, Inc. Debentures 6.80% due 8/01/28............... $217,000 $ 223,940 Cox Communications, Inc. Debentures 7.63% due 6/15/25............... 232,000 258,010 Cox Communications, Inc. Notes 7.75% due 11/01/10.............. 917,000 1,018,473 Liberty Media Corp. Sr. Notes 4.51% due 6/15/05(2)............ 579,000 586,689 Time Warner Entertainment Co. LP Sr. Debentures 8.38% due 3/15/23............... 499,000 611,412 ---------- 3,102,274 ---------- Business Services -- 0.5% American Standard, Inc. Bonds 5.50% due 4/01/15*.............. 246,000 246,936 PHH Corp. Notes 6.00% due 3/01/08............... 562,000 580,350 Seitel, Inc. Sr. Notes 11.75% due 7/15/11.............. 250,000 281,250 ---------- 1,108,536 ---------- Chemicals -- 0.3% ICI North America, Inc. Debentures 8.88% due 11/15/06.............. 42,000 44,869 Rohm & Haas Co. Sr. Debentures 7.85% due 7/15/29............... 394,000 509,576 ---------- 554,445 ---------- Conglomerate -- 0.3% Tyco International Group SA Participation Certificates 4.44% due 6/15/07*.............. 544,000 544,180 ---------- Energy Services -- 0.1% Hanover Compressor Co. Guaranteed Senior Note 9.00% due 6/01/14............... 250,000 267,500 ---------- Energy Sources -- 2.4% ConocoPhillips Sr. Notes 7.00% due 3/30/29............... 854,000 1,006,936 Enterprise Products Operating LP Guaranteed Sr. Notes 5.00% due 3/01/15*.............. 219,000 205,299 Enterprise Products Operating LP Notes 6.65% due 10/15/34.............. 297,000 302,808 FirstEnergy Corp., Series C Notes 7.38% due 11/15/31.............. 297,000 336,412
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Energy Sources (continued) FPL Group Capital, Inc. Notes 4.09% due 2/16/07........................ $1,002,000 $ 999,538 Indiantown Cogeneration LP, Series A-9 9.26% due 12/15/10....................... 216,085 237,065 Kerr Mcgee Corp. Guaranteed Notes 7.88% due 9/15/31........................ 594,000 670,251 Nexen, Inc Notes 5.88% due 3/10/35........................ 242,000 231,468 Nexen, Inc. Notes 7.88% due 3/15/32........................ 251,000 306,244 Pemex Project Funding Master Trust Guaranteed Notes 8.63% due 2/01/22........................ 363,000 412,459 Pennzoil Co. Debentures 10.25% due 11/01/05...................... 132,000 136,442 ---------- 4,844,922 ---------- Financial Services -- 5.9% Capital One Financial Corp. Sr. Notes 4.74% due 5/17/07........................ 343,000 344,869 Caterpillar Financial Services Notes 4.70% due 3/15/12........................ 409,000 402,973 Chase Manhattan Corp. Subordinated Note 7.88% due 6/15/10........................ 327,000 371,995 Chukchansi Economic Development Authority Sr. Notes 14.50% due 6/15/09*...................... 500,000 615,000 Citigroup, Inc. Subordinated Note 5.00% due 9/15/14........................ 351,000 344,603 Consolidated Communications Holdings Sr. Notes 9.75% due 4/01/12*....................... 375,000 397,500 Countrywide Home Loans, Inc. Tranche Trust 00255 5.50% due 8/01/06........................ 843,000 857,076 Ford Motor Credit Co. Sr. Notes 4.95% due 1/15/08........................ 562,000 539,003 Ford Motor Credit Co. Notes 7.88% due 6/15/10........................ 440,000 447,956 General Electric Capital Corp. Notes 2.80% due 1/15/07........................ 579,000 566,005 General Electric Capital Corp. Notes 5.38% due 3/15/07........................ 562,000 574,152
20 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) General Motors Acceptance Corp. Notes 6.75% due 12/01/14................................ $264,000 $ 228,044 Household Finance Corp. Notes 6.38% due 10/15/11................................ 562,000 607,129 J.P. Morgan Chase & Co. Global Sub. Notes 6.63% due 3/15/12................................. 428,000 467,933 J.P. Morgan Chase Capital XV Notes 5.88% due 3/15/35................................. 242,000 233,702 John Deere Capital Corp. Notes 3.88% due 3/07/07................................. 931,000 925,661 Merrill Lynch & Co., Inc. Notes 4.25% due 2/08/10................................. 440,000 428,301 Morgan Stanley Dean Witter & Co. Bonds 6.75% due 4/15/11................................. 321,000 349,865 National Rural Utilities Cooperative Finance Corp. Secured Collateral Trust Bonds 3.88% due 2/15/08................................. 448,000 441,120 NGC Corp. Capital Trust I Guaranteed Sub. Notes, Series B 8.32% due 6/01/27................................. 750,000 592,500 Pricoa Global Funding I Secured Notes 4.35% due 6/15/08*................................ 289,000 288,439 Principal Life Global Funding Secured Notes 5.13% due 6/28/07*................................ 482,000 488,818 Px Escrow Corp. Sr. Sub. Disc. Notes 9.63% due 2/01/06(4).............................. 150,000 145,500 Sprint Capital Corp. Guaranteed Sr. Notes 6.88% due 11/15/28................................ 396,000 423,954 TIAA Global Markets Notes 4.13% due 11/15/07*............................... 684,000 680,213 Transamerica Finance Corp. Sr. Notes 6.40% due 9/15/08................................. 205,000 219,080 ----------- 11,981,391 ----------- Food, Beverage & Tobacco -- 0.5% American Stores Co. Debentures 7.90% due 5/01/17................................. 161,000 183,714 Coca-Cola Enterprises, Inc. Debentures 8.50% due 2/01/22................................. 480,000 632,228 SABMiller, PLC Guaranteed Notes 144A 6.63% due 8/15/33*................................ 268,000 293,788 ----------- 1,109,730 -----------
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- Forest Products -- 0.5% Packaging Corp. of America Sr. Notes 5.75% due 8/01/13...................... $481,000 $ 476,263 Sealed Air Corp. Bonds 6.88% due 7/15/33*..................... 319,000 345,709 Weyerhaeuser Co. Notes 6.13% due 3/15/07...................... 235,000 243,153 ---------- 1,065,125 ---------- Health Services -- 0.6% Community Health Systems, Inc. Sr. Sub. Notes 6.50% due 12/15/12*.................... 225,000 219,375 Coventry Health Care, Inc. Sr. Notes 6.13% due 1/15/15*..................... 478,000 477,402 HCA, Inc. Sr. Notes 6.95% due 5/01/12...................... 125,000 129,744 Tenet Healthcare Corp. Sr. Notes 6.50% due 6/01/12...................... 350,000 322,000 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13..................... 25,000 24,563 ---------- 1,173,084 ---------- Household & Personal Products -- 0.0% Revlon Consumer Products Corp. Sr. Sub. Notes 8.63% due 2/01/08...................... 25,000 23,063 ---------- Housing & Household Durables -- 0.4% Maytag Corp. Notes 5.00% due 5/15/15...................... 830,000 724,731 ---------- Insurance -- 1.5% Americo Life, Inc. Notes 7.88% due 5/01/13*..................... 318,000 333,815 Fidelity National Financial, Inc. Notes 7.30% due 8/15/11...................... 854,000 916,870 ING Security Life Institutional Funding Notes 2.70% due 2/15/07*..................... 578,000 561,526 Kingsway America Inc. Guaranteed Senior Notes 7.50% due 2/01/14...................... 319,000 327,213 Liberty Mutual Group Notes 6.50% due 3/15/35*..................... 189,000 181,784 MIC Financing Trust I Pass-Thru Certificates 8.38% due 2/01/27*..................... 176,000 184,297 Ohio Casualty Corp. Notes 7.30% due 6/15/14...................... 521,000 556,875 ---------- 3,062,380 ----------
21 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Leisure & Tourism -- 1.7% American Airlines, Inc. Pass-Thru Certificates, Series 2001-1, Class A2 6.82% due 5/23/11.................... $525,000 $ 488,006 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-1 7.20% due 1/02/19.................... 124,877 123,977 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class B 7.63% due 1/02/15.................... 950,432 770,223 Atlas Air, Inc. Pass-Thru Certificates, Series 2000-1 8.71% due 1/02/19.................... 144,217 147,987 Continental Airlines, Inc. Pass-Thru Certificates, Series 1998-1, Class A 6.65% due 9/15/17.................... 58,017 55,063 Continental Airlines, Inc. Pass-Thru Certificates, Series 1997-4, Class A 6.90% due 1/02/18.................... 81,106 79,583 Delta Airlines, Inc. Sr. Notes 10.00% due 8/15/08................... 225,000 99,000 Hilton Hotels Corp. Sr. Notes 7.50% due 12/15/17................... 412,000 472,262 Hilton Hotels Corp. Sr. Notes 7.95% due 4/15/07.................... 680,000 725,823 MGM Mirage, Inc. Sr. Notes 5.88% due 2/27/14.................... 325,000 306,719 Riviera Holdings Corp. Guaranteed Sr. Notes 11.00% due 6/15/10................... 125,000 138,125 United Airlines, Inc. Pass-Thru Certificates, Series 2000-2, Class A1 7.03% due 10/01/10(5)................ 7,840 7,279 ---------- 3,414,047 ---------- Medical Products -- 0.0% MEDIQ/PRN Life Support Services, Inc. Sr. Notes 11.00% due 6/01/08(3)................ 10,000 0 ---------- Metals & Mining -- 0.4% Barrick Gold Corp. Bonds 5.80% due 11/15/34................... 254,000 256,285 Newmont Mining Corp. Notes 5.88% due 4/01/35.................... 533,000 522,299 ---------- 778,584 ----------
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- Pharmaceuticals -- 1.0% Merck & Co., Inc. Notes 2.50% due 3/30/07...................... $337,000 $ 326,574 Pfizer, Inc. Global Notes 2.50% due 3/15/07...................... 578,000 562,185 Pfizer, Inc. Notes 4.65% due 3/01/18...................... 485,000 459,253 Schering-Plough Co. Sr. Notes 6.50% due 12/01/33..................... 367,000 410,613 Wyeth Notes 6.95% due 3/15/11...................... 320,000 350,930 ---------- 2,109,555 ---------- Real Estate Companies -- 0.3% EOP Operating LP Notes 8.38% due 3/15/06...................... 583,000 606,159 ---------- Retail -- 0.2% Wal-Mart Stores, Inc. Notes 4.00% due 1/15/10...................... 435,000 423,367 ---------- Retail Stores -- 0.2% Federated Department Stores, Inc. Debentures 6.90% due 4/01/29...................... 295,000 315,984 ---------- Telecommunications -- 2.5% Alltel Corp. Notes 4.66% due 5/17/07...................... 440,000 442,675 American Cellular Corp., Series B Sr. Notes 10.00% due 8/01/11..................... 740,000 680,800 AT&T Wireless Services, Inc. Sr. Notes 7.35% due 3/01/06...................... 787,000 811,435 GTE Corp. Debentures 6.94% due 4/15/28...................... 230,000 248,758 iPCS, Inc. Senior Note 11.50% due 5/01/12..................... 450,000 506,250 Iridium, LLC Guaranteed Sr. Notes, Series C 11.25% due 7/15/05+(6)................. 25,000 4,250 LCI International, Inc. Sr. Notes 7.25% due 6/15/07...................... 905,000 852,963 Qwest Corp. Debentures 7.13% due 11/15/43..................... 750,000 633,750 Telecomunicaciones de Puerto Rico, Inc. Guaranteed Notes 6.80% due 5/15/09...................... 409,000 430,966 Verizon New York, Inc., Series B Sr. Debentures, Series B 7.38% due 4/01/32...................... 481,000 539,813 ---------- 5,151,660 ----------
22 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- BONDS & NOTES (continued) Transportation -- 1.3% Burlington Northern Santa Fe Corp. Debentures 8.13% due 4/15/20...................... $937,000 $ 1,182,824 Norfolk Southern Corp. Debentures 6.00% due 3/15/15...................... 477,000 464,610 Norfolk Southern Corp. Bonds 9.00% due 3/01/21...................... 461,000 620,955 Ryder Systems, Inc. Notes 4.63% due 4/01/10...................... 409,000 405,286 ----------- 2,673,675 ----------- Utilities -- 2.5% AES Corp. Sr. Notes 7.75% due 3/01/14...................... 550,000 567,875 Carolina Power & Light Co. 1st Mtg. 5.15% due 4/01/15...................... 205,000 203,956 Duke Capital Corp., LLC Sr. Notes 8.00% due 10/01/19..................... 562,000 666,738 El Paso Production Holding Co. Guaranteed Sr. Notes 7.75% due 6/01/13...................... 650,000 658,125 Georgia Power Co. Sr. Notes, Series G 6.20% due 2/01/06...................... 318,000 324,367 Indianapolis Power & Light Co. 1st Mtg. Bonds 6.60% due 1/01/34*..................... 228,000 246,076 Old Dominion Electric Cooperative 1st Mtg. Bonds, Series A 5.68% due 12/01/28..................... 289,000 292,815 Reliant Energy, Inc. Sr. Sec. Notes 6.75% due 12/15/14..................... 125,000 116,563 Reliant Resources, Inc. Notes 9.50% due 7/15/13...................... 275,000 299,062 Sempra Energy Sr. Notes 4.62% due 5/17/07...................... 440,000 441,744 Southern California Edison Co. Series 2004 G 5.75% due 4/01/35...................... 535,000 536,825 TECO Energy, Inc. Sr. Notes 7.50% due 6/15/10...................... 48,000 51,120 Virginia Electric & Power Co. Notes 4.10% due 12/15/08..................... 381,000 373,568 Virginia Electric & Power Co., Series A Sr. Notes, Series A 5.75% due 3/31/06...................... 416,000 422,972 ----------- 5,201,806 ----------- Total Bonds & Notes (cost $68,033,012)..................... 60,477,833 -----------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- CONVERTIBLE BONDS -- 0.2% Leisure & Tourism -- 0.0% Six Flags, Inc. 4.50% due 5/15/15........................ $ 75,000 $ 69,469 ---------- Utilities -- 0.2% Calpine Corp. 4.75% due 11/15/23....................... 475,000 321,812 ---------- Total Convertible Bonds (cost $416,252).......................... 391,281 ---------- FOREIGN BONDS & NOTES -- 8.0% Banks -- 0.6% HBOS Treasury Services, PLC Notes 3.50% due 11/30/07*...................... 731,000 715,954 Skandinaviska Enskilda Banken Sub. Notes 5.47% due 3/23/15*(7).................... 409,000 409,140 ---------- 1,125,094 ---------- Broadcasting & Media -- 0.2% Telenet Group Holding NV Sr. Disc. Notes 11.50% due 6/15/14*(4)................... 575,000 434,844 ---------- Business Services -- 0.1% SCL Terminal Aereo Santiago SA Sr. Secured Notes 6.95% due 7/01/12*....................... 76,789 80,006 ---------- Conglomerate -- 0.1% Tyco International Group SA Guaranteed Notes 7.00% due 6/15/28........................ 246,000 279,251 ---------- Energy Sources -- 0.1% Gazprom International SA Guaranteed Sr. Notes 7.20% due 2/01/20*....................... 275,000 280,500 ---------- Financial Services -- 0.6% Deutsche Telekom International Finance BV Guaranteed Bonds 8.75% due 6/15/30........................ 502,000 656,541 Nationwide Building Society Sr. Notes 2.63% due 1/30/07*....................... 578,000 562,954 ---------- 1,219,495 ---------- Government Agency -- 4.2% Argentina Bonos Bonds 3.01% due 8/03/05........................ 620,000 521,420 Aries Vermogensverwaltungs Gm 9.60% due 10/25/14....................... 1,000,000 1,200,700 ---------- 1,722,120 ---------- Federal Republic of Brazil Notes 8.00% due 4/15/14........................ 635,055 628,704
23 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Government Agency (continued) Federal Republic of Brazil Bonds 11.00% due 8/17/40.............. $ 600,000 $ 667,800 Government of Canada Debentures 7.50% due 9/15/29............... 625,000 805,406 Ministry Finance Russia Debentures 3.00% due 5/14/08............... 560,000 514,808 Republic of Panama Global Bond 7.25% due 3/15/15............... 100,000 99,250 Republic of Turkey Notes 9.00% due 6/30/11............... 480,000 525,600 Republic of Venezuela Bonds 8.50% due 10/08/14.............. 260,000 256,100 Russian Federation Bonds 5.00% due 3/31/07(4)............ 1,250,000 1,280,625 Russian Federation Bonds 5.00% due 3/31/07*(4)........... 325,000 333,938 United Kingdom Notes 2.25% due 7/08/08*.............. 749,000 707,815 United Mexican States Tranche 00017 6.75% due 9/27/34............... 264,000 257,664 United Mexican States Notes 7.50% due 4/08/33............... 700,000 742,000 ---------- 6,819,710 ---------- Insurance -- 0.1% Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.............. 175,000 169,750 ---------- Machinery -- 0.1% Atlas Copco AB Notes 6.50% due 4/01/08*.............. 232,000 242,347 ---------- Metals & Mining -- 0.6% Noranda, Inc. Notes 6.00% due 10/15/15.............. 987,000 1,012,064 Noranda, Inc. Debentures 7.00% due 7/15/05............... 285,000 288,008 ---------- 1,300,072 ---------- Telecommunications -- 0.8% Koninklijke (Royal) KPN NV Sr. Notes 7.50% due 10/01/05.............. 339,000 345,365 Telecom Italia Capital SA Guaranteed Sr. Notes 4.00% due 1/15/10*.............. 619,000 591,776
Principal Amount/ Value Security Description Shares (Note 2) ----------------------------------------------------------- Telecommunications (continued) Telus Corp. Notes 7.50% due 6/01/07................. $ 544,000 $ 579,047 Telus Corp. Notes 8.00% due 6/01/11................. 161,000 186,444 ----------- 1,702,632 ----------- Utilities -- 0.5% Calpine Canada Energy Finance, ULC Guaranteed Sr. Notes 8.50% due 5/01/08................. 150,000 106,500 Scottish Power, PLC Notes 5.38% due 3/15/15................. 409,000 408,020 Scottish Power, PLC Bonds 5.81% due 3/15/25................. 484,000 479,695 ----------- 994,215 ----------- Total Foreign Bonds & Notes (cost $16,485,716)................ 16,370,036 ----------- U.S. GOVERNMENT OBLIGATIONS -- 10.5% U.S Treasury Bonds -- 5.7% 5.38% due 2/15/31................. 9,684,000 10,554,427 6.88% due 8/15/25................. 134,000 168,165 7.25% due 8/15/22................. 726,000 928,060 ----------- 11,650,652 ----------- U.S. Treasury Notes -- 4.8% 0.88% due 4/15/10 TIPS............ $1,023,600 1,001,270 2.00% due 8/31/05................. 3,860,000 3,843,714 2.00% due 1/15/14 TIPS............ 758,469 776,341 2.50% due 10/31/06................ 85,000 83,446 3.00% due 12/31/06................ 680,000 671,367 3.13% due 1/31/07................. 562,000 555,634 3.50% due 2/15/10................. 1,631,000 1,583,026 3.63% due 1/15/10................. 440,000 429,464 4.00% due 2/15/15................. 1,070,000 1,028,036 4.25% due 8/15/13................. 2,000 1,972 ----------- 9,974,270 ----------- Total U.S. Government Obligations (cost $21,880,637)................ 21,624,922 ----------- U.S. GOVERNMENT AGENCIES -- 36.7% Federal Home Loan Mortgage Corporation -- 17.5% 3.38% due 8/23/07................. 633,000 622,271 3.75% due 3/03/08................. 1,740,000 1,724,467 4.50% due 11/01/18................ 2,864,654 2,810,171 4.50% due 2/01/19................. 2,127,414 2,084,769 5.00% due 10/01/33................ 59,816 58,692 5.00% due 3/01/34................. 1,392,661 1,363,512 5.00% due 5/01/34................. 5,315,809 5,204,547 5.00% due 6/01/34................. 4,644,983 4,547,762 5.50% due 2/01/18................. 1,933,335 1,975,260 5.50% due 10/01/18................ 1,555,055 1,588,776 5.50% due 10/01/33................ 1,598,099 1,605,187 5.50% due 1/01/35................. 2,964,369 2,974,189 6.00% due 2/01/32................. 52,753 54,063
24 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Federal Home Loan Mortgage Corporation (continued) 6.00% due 11/01/33......................... $3,277,775 $ 3,355,751 6.50% due 8/01/16.......................... 16,390 17,145 6.50% due 6/01/32.......................... 976,762 1,015,407 6.50% due 8/01/32.......................... 1,883,175 1,957,182 6.50% due 2/01/33.......................... 191,699 199,232 6.50% due 9/01/33.......................... 534,593 554,840 7.00% due 3/01/12(9)....................... 12,422 13,057 7.00% due 11/01/16(9)...................... 77,229 81,151 7.50% due 4/01/31(9)....................... 462,001 494,670 7.50% due 12/01/31(9)...................... 1,109,491 1,187,943 8.00% due 10/01/29(9)...................... 19,127 20,591 8.00% due 7/01/30(9)....................... 6,271 6,749 8.00% due 8/01/30(9)....................... 19,038 20,489 8.00% due 10/01/30(9)...................... 30,433 32,753 8.00% due 11/01/30(9)...................... 52,697 56,713 8.00% due 12/01/30(9)...................... 103,914 111,834 8.00% due 1/01/31(9)....................... 89,352 96,163 ----------- 35,835,336 ----------- Federal National Mortgage Association -- 19.1% 4.50% due 6/01/18.......................... 811,994 795,383 4.50% due 2/01/35.......................... 1,497,616 1,421,945 5.00% due 6/01/18.......................... 2,227,314 2,228,528 5.00% due 9/01/18.......................... 712,612 713,001 5.00% due 10/01/18......................... 1,500,805 1,501,623 5.00% due 11/01/18......................... 1,203,092 1,203,748 5.00% due 11/01/33......................... 56,238 55,142 5.00% due 3/01/34.......................... 3,833,481 3,750,395 5.50% due 12/01/19......................... 1,200,000 1,223,749 5.50% due 12/01/33......................... 7,615,180 7,640,395 5.50% due 3/01/34.......................... 965,646 967,708 5.50% due 7/01/34.......................... 2,773,329 2,779,251 5.50% due 9/01/34.......................... 977,880 979,968 6.00% due 12/01/16......................... 1,023,109 1,057,145 6.00% due 5/01/17.......................... 190,743 197,098 6.00% due 12/01/33......................... 3,962,349 4,051,173 6.00% due 8/01/34.......................... 3,014,995 3,083,657 6.00% due 10/01/34......................... 1,067,685 1,091,604 6.00% due TBA due Apr...................... 1,200,000 1,226,250 6.18% due 7/01/08.......................... 18,280 19,021 6.98% due 6/01/07(9)....................... 6,349 6,554 7.00% due 9/01/10(9)....................... 2,591 2,706 7.00% due 7/01/11.......................... 254 266 7.00% due 11/01/11(9)...................... 1,843 1,931 7.00% due 5/01/12(9)....................... 2,225 2,331 7.00% due 5/01/12.......................... 782 821 7.00% due 6/01/12(9)....................... 4,851 5,095 7.00% due 9/01/12(9)....................... 2,657 2,790 7.00% due 10/01/12(9)...................... 570 599 7.00% due 7/01/13(9)....................... 2,865 3,013 6.27% due 11/01/07......................... 50,142 51,874 7.00% due 4/01/28(9)....................... 14,662 15,482 7.00% due 10/01/28(9)...................... 1,720 1,816 7.00% due 9/01/31(10)...................... 1,039,893 1,097,140 7.04% due 3/01/07(9)....................... 10,195 10,580 6.31% due 2/01/08.......................... 155,882 161,218 6.34% due 1/01/08.......................... 17,299 17,954 6.43% due 1/01/08.......................... 18,199 18,931
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- Federal National Mortgage Association (continued) 6.50% due 3/01/17....................... $ 525,098 $ 548,484 6.50% due 4/01/29....................... 79,798 83,085 6.50% due 2/01/32....................... 534,151 555,354 6.50% due 7/01/32....................... 252,305 262,320 7.50% due 10/01/10(9)................... 128,886 134,912 7.50% due 11/01/14(10).................. 7,693 8,053 7.50% due 5/01/15....................... 5,049 5,327 7.50% due 6/01/15....................... 82,848 87,407 7.50% due 7/01/15(10)................... 36,844 38,872 7.50% due 8/01/15(10)................... 12,602 13,295 ------------ 39,124,994 ------------ Government National Mortgage Association -- 0.1% 6.50% due 6/15/29....................... 110,056 115,138 7.00% due 12/15/22(10).................. 72,652 77,236 7.00% due 8/15/29(10)................... 75,388 79,804 8.00% due 4/15/30(10)................... 17,398 18,758 ------------ 290,936 ------------ Total U.S. Government Agencies (cost $75,576,765)...................... 75,251,266 ------------ COMMON STOCK -- 0.0% Machinery -- 0.0% Manitowoc Co., Inc. (cost $261)............................. 28 1,131 ------------ PREFERRED STOCK -- 0.7% Financial Services -- 0.7% General Electric Capital Corp. 4.50%(12). 34,000 765,000 Merrill Lynch & Co., Inc. 3.65%(2)+...... 24,608 612,001 ------------ 1,377,001 ------------ Machinery -- 0.0% Fairfield Manufacturing Co., Inc. 11.25%(3)(8)(11)+....................... 28 0 ------------ Total Preferred Stock (cost $1,481,292)....................... 1,377,001 ------------ WARRANTS -- 0.0% Communication Equipment -- 0.0% Concentric Network Corp. Expires 12/15/17(3) (strike price $5.43)(11)+............... 5 0 ------------ Telecommunications -- 0.0% KMC Telecom Holdings, Inc. Expires 01/31/08(3) (strike price $0.01)(11)+............... 50 0 ------------ Total Warrants (cost $0)............................... 0 ------------ Total Long-Term Investment Securities (cost $186,873,725)..................... 185,641,925 ------------ SHORT-TERM INVESTMENT SECURITIES -- 4.9% Financial Services -- 4.9% San Paolo Us Financial 2.85% due 04/01/05 (cost $10,000,000)(10).................. 10,000,000 10,000,000 ------------
25 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- REPURCHASE AGREEMENT -- 5.0% Agreement with State Street Bank & Trust., bearing interest at 2.65% dated 03/31/05 to be repurchased 04/01/05 in the amount of $10,166,748 and collateralized by $10,530,000 of Federal Home Loan Bank, bearing interest at 3.625% due 01/15/08 having an approximate value of $10,470,990 (cost $10,166,000)(10).................... $10,166,000 $ 10,166,000 ------------ TOTAL INVESTMENTS -- (cost $207,039,725)@...................... 100.6% 205,807,925 Other assets less liabilities................ (0.6) (1,233,906) ----------- ------------ NET ASSETS -- 100.0% $204,574,019 =========== ============ U.S. GOVERNMENT AGENCY SOLD SHORT -- (1.2%) Federal Home Loan Mortgage Corporation -- (1.2%) 5.00% TBA due Dec. (proceeds $2,433,203)..................... (2,500,000) (2,445,312) ------------
- -------- + Non-income producing security * Securities exempt from registration under Rule 144A of the Securities Act of 1933. The Portfolio has no rights to demand registration of these securities. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, the aggregate value of these securities was $11,024,348 representing 5.4% of net assets. Unless otherwise indicated, these securities are not considered to be illiquid. @ See Note 5 for cost of investments on a tax basis. TBA- Securities purchased on a forward commitment basis with an appropriate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. TIPS- Treasury Inflation Protected Securities (1) Commercial mortgaged backed security. (2) "Floating rate" security where the coupon rate fluctuates. The rate steps up or down for each rate downgrade or upgrade. The rate reflected is as of March 31, 2005. (3) Fair valued security. (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) Company has filed Chapter 11 bankruptcy. (6) Bond in default. (7) Variable rate security -- the rate reflected is as of March 31, 2005; maturity date reflects next reset date. (8) PIK ("Payment-in-Kind") payment made with additional securities in lieu of cash. (9) The security or a portion thereof represents collateral for securities sold short. (10) The security or a portion thereof represents collateral for TBAs. (11) Illiquid security. (12) Security is a "step-up" preferred stock where the dividend rate increases or steps up at a predetermined rate. Rate reflected is as of March 31, 2005. See Notes to Financial Statements 26 SunAmerica U.S. Government Securities Fund PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited) Industry Allocation* Government National Mortgage Association.......... 52.8% U.S Treasury Bonds................................ 17.5% U.S. Treasury Notes............................... 17.2% Repurchase Agreements............................. 17.1% Private Export Funding............................ 4.9% Federal Farm Credit Bank.......................... 2.9% Federal Home Loan Bank............................ 1.9% Small Business Administration..................... 1.5% Federal National Mortgage Association............. 1.0% International Bank for Reconstruction and Development...................................... 0.2% ----- 117.0% =====
Credit Quality+# Government -- Treasury............................ 34.8% Government -- Agency.............................. 64.2% Not Rated@........................................ 1.0% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source: Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 27 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 34.7% U.S Treasury Bonds -- 17.5% 5.38% due 2/15/31(1)............. $34,000,000 $ 37,056,022 ------------ U.S. Treasury Notes -- 17.2% 4.00% due 2/15/15(4)............. 38,000,000 36,509,678 ------------ Total U.S. Government Obligations (cost $75,753,452).............. 73,565,700 ------------ U.S. GOVERNMENT AGENCIES -- 65.2% Federal Farm Credit Bank -- 2.9% 2.50% due 3/15/06................ 5,000,000 4,943,085 5.64% due 4/04/11................ 500,000 526,737 6.00% due 3/07/11................ 200,000 213,924 6.30% due 12/03/13............... 500,000 552,389 ------------ 6,236,135 ------------ Federal Home Loan Bank -- 1.9% 4.38% due 3/17/10................ 4,000,000 3,982,392 ------------ Federal Home Loan Mortgage Corporation -- 0.0% 8.00% due 6/01/08................ 17,086 17,374 8.25% due 7/01/06................ 2,183 2,197 8.50% due 5/01/08................ 3,581 3,663 94.97% due 4/01/05(2)............ 9,573 9,529 ------------ 32,763 ------------ Federal National Mortgage Association -- 1.0% 6.53% due 5/25/30................ 2,033,613 2,130,635 8.00% due 1/01/23................ 36,580 39,530 11.00% due 2/01/15............... 36 39 11.50% due 9/01/19............... 24,095 26,675 ------------ 2,196,879 ------------ Government National Mortgage Association -- 52.8% 4.50% due 5/15/18................. 1,564,090 1,544,368 4.50% due 8/15/18................. 798,886 788,812 4.50% due 8/15/18................. 1,563,775 1,544,057 4.50% due 9/15/18................. 1,629,044 1,608,503 4.50% due 9/15/18................. 4,852,559 4,791,371 4.50% due 10/15/18................ 5,989,930 5,914,400 4.50% due 9/15/33................. 6,322,336 6,061,555 5.00% due 4/15/18................. 7,073,788 7,153,131 5.00% due 8/15/33................. 3,072,393 3,036,209 5.00% due 9/15/33................. 1,322,109 1,306,538 5.00% due 10/15/33................ 914,082 903,317 5.00% due 11/15/34................ 294,058 290,411 5.00% TBA due Dec................. 7,000,000 6,901,566 5.50% due 11/15/32................ 23,683 23,934 5.50% due 3/15/33................. 801,001 809,220 5.50% due 4/15/33................. 1,152,735 1,164,563 5.50% due 5/15/33................. 2,280,330 2,303,729 5.50% due 6/15/33................. 10,492,459 10,600,124 5.50% due 7/15/33................. 2,921,844 2,951,825 5.50% due 10/15/33................ 2,913,150 2,943,043 5.50% due 12/15/33................ 594,818 600,922 5.50% due 1/15/34................. 4,711,523 4,758,615 5.50% due 2/15/34................. 3,198,880 3,230,853 6.00% due 1/15/28................. 6,008 6,191 6.00% due 4/15/28................. 2,165,921 2,232,428 6.00% due 5/15/28................. 6,124 6,310 6.00% due 10/15/28................ 21,272 21,918 6.00% due 1/15/29................. 3,285 3,384 6.00% due 3/15/29................. 107,126 110,363 6.00% due 4/15/29................. 68,518 70,588 6.00% due 5/15/29................. 130,323 134,261
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- Government National Mortgage Association (continued) 6.00% due 5/15/31............ $ 99,889 $ 102,865 6.00% due 11/15/31........... 291,358 300,036 6.00% due 11/15/31........... 90,893 93,600 6.00% due 12/15/31........... 536,510 552,491 6.00% due 1/15/32............ 332,265 342,046 6.00% due 2/15/32............ 55,871 57,516 6.00% due 3/15/32............ 14,316 14,738 6.00% due 8/15/32............ 468,046 481,825 6.00% due 11/15/32........... 104,317 107,388 6.00% due 12/15/32........... 14,615 15,045 6.00% due 1/15/33............ 35,409 36,412 6.00% due 2/15/33............ 201,470 207,176 6.00% due 3/15/33............ 192,530 197,982 6.00% due 4/15/33............ 579,715 596,132 6.00% due 7/15/33............ 467,864 481,114 6.00% due 8/15/33............ 4,612,226 4,748,528 6.00% due 9/15/33............ 656,472 675,063 6.00% due 10/15/33........... 1,996,660 2,053,228 6.00% due 11/15/33........... 264,807 272,306 6.00% due 12/15/33........... 467,960 481,213 6.00% due 2/15/34............ 689,424 708,806 6.00% due 5/15/34............ 111,707 114,847 6.00% due 7/15/34............ 4,758,487 4,892,264 6.00% due 8/15/34............ 339,105 348,638 6.00% due 9/15/34............ 2,191,227 2,252,829 6.00% due 9/15/34............ 853,867 877,872 6.00% due 10/15/34........... 9,415,006 9,679,694 6.00% due 11/15/34........... 1,038,702 1,067,904 6.50% due 2/15/29............ 32,802 34,317 6.50% due 5/15/31............ 64,130 67,062 6.50% due 6/15/31............ 101,157 105,781 6.50% due 7/15/31............ 132,565 138,626 6.50% due 8/15/31............ 156,543 163,700 6.50% due 9/15/31............ 243,066 254,178 6.50% due 10/15/31........... 634,720 663,737 6.50% due 11/15/31........... 26,122 27,316 6.50% due 12/15/31........... 52,021 54,399 6.50% due 1/15/32............ 67,586 70,676 6.50% due 2/15/32............ 768,033 803,157 6.50% due 2/15/32............ 691,590 723,218 6.50% due 6/15/32............ 349,574 365,561 7.00% due 7/15/23............ 59,748 63,497 7.00% due 10/15/23........... 172,036 182,829 7.00% due 9/15/25............ 402,425 427,200 7.00% due 3/20/29............ 34,741 36,646 7.00% due 6/20/29............ 5,964 6,291 7.00% due 11/20/30........... 155,489 163,883 7.50% due 4/15/17............ 17,489 18,821 7.50% due 8/15/23............ 342,879 370,174 7.50% due 9/15/23............ 1,031,415 1,113,520 7.50% due 10/15/23........... 26,530 28,642 8.00% due 11/15/06........... 1,229 1,254 8.00% due 2/15/08............ 1,780 1,850 9.00% due 12/15/16........... 110,450 120,391 11.00% due 8/20/15........... 326 359 11.00% due 9/20/15........... 753 830 11.50% due 3/15/13........... 25,474 28,410 11.50% due 6/15/13........... 17,331 19,264 11.50% due 5/20/15........... 4,180 4,651 12.50% due 9/15/14........... 8,210 9,247 13.00% due 1/15/11........... 3,779 4,250 13.00% due 2/15/11........... 5,600 6,297
28 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES (continued) Government National Mortgage Association (continued) 13.00% due 3/15/11..................... $ 299 $ 337 13.00% due 4/15/11..................... 635 715 13.00% due 9/15/13..................... 5,622 6,354 13.00% due 10/20/14.................... 4,323 4,860 13.00% due 11/15/14.................... 890 1,008 13.00% due 2/20/15..................... 1,560 1,750 13.50% due 2/15/13..................... 12,891 14,679 15.00% due 1/15/12..................... 540 624 15.00% due 2/15/12..................... 1,267 1,466 15.00% due 6/15/12..................... 13,648 15,793 15.00% due 9/15/12..................... 742 859 15.50% due 8/15/11..................... 5,453 6,306 15.50% due 9/15/11..................... 41,022 47,446 ------------ 111,758,298 ------------ International Bank for Reconstruction and Development -- 0.2% 5.00% due 3/28/06...................... 350,000 354,722 ------------ Private Export Funding -- 4.9% 5.87% due 7/31/08...................... 10,000,000 10,484,790 ------------ Small Business Administration -- 1.5% 6.30% due 6/01/18...................... 2,982,429 3,111,709 ------------ Total U.S. Government Agencies (cost $138,070,422)................... 138,157,688 ------------ Total Long-Term Investment Securities -- 99.9% (cost $213,823,874)................... 211,723,388 ------------
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- REPURCHASE AGREEMENTS -- 17.1% State Street Joint Repurchase Agreement (3)..................... $ 147,000 $ 147,000 UBS Warburg, Inc. Joint Repurchase Agreement Account (3)............. 36,000,000 36,000,000 ------------ Total Repurchase Agreements (cost $36,147,000)................ 36,147,000 ------------ TOTAL INVESTMENTS -- (cost $249,970,874) @............. 117.0% 247,870,388 Liabilities in excess of other assets (17.0) (36,006,885) ----------- ------------ NET ASSETS -- 100.0% $211,863,503 =========== ============
- -------- 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) Variable rate security -- the rate reflected is as of March 31, 2005; maturity date reflects next reset date. (3) See Note 2 for details of Joint Repurchase Agreement. (4) The security or a portion thereof is out on loan (See Note 2). See Notes to Financial Statements 29 SunAmerica GNMA Fund PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited) Industry Allocation* Government National Mortgage Association.......... 81.4% Repurchase Agreement.............................. 21.3% United States Treasury Bills...................... 16.1% U.S. Treasury Notes............................... 9.8% Federal Home Loan Bank............................ 3.0% Federal Farm Credit Bank.......................... 3.0% Federal National Mortgage Association............. 2.0% Small Business Administration..................... 0.2% ----- 136.8% =====
Credit Quality+# Government -- Treasury............................ 9.9% Government -- Agency.............................. 90.1% ----- 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. 30 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 9.8% U.S. Treasury Notes -- 9.8% 4.00% due 3/15/10(3)............ $ 20,000,000 $ 19,843,760 4.00% due 2/15/15(3)............ 30,000,000 28,823,430 ------------ 48,667,190 ------------ Total U.S. Government Obligations (cost $49,523,107).............. 48,667,190 ------------ U.S. GOVERNMENT AGENCY -- 89.6% Federal Home Loan Bank -- 3.0% 4.38% due 3/17/10............... 15,000,000 14,933,970 ------------ Federal National Mortgage Association -- 2.0% 5.00% due 1/25/18............... 10,000,000 10,094,166 ------------ Government National Mortgage Association -- 81.4% 4.50% due 5/15/18................ 3,128,180 3,088,735 4.50% due 8/15/18................ 1,563,775 1,544,057 4.50% due 9/15/18................ 4,994,281 4,931,307 4.50% due 10/15/18............... 6,886,255 6,799,424 4.50% due 8/15/33................ 4,416,312 4,234,150 4.50% due 9/15/33................ 5,003,722 4,797,330 5.00% due 3/15/18................ 1,068,669 1,080,655 5.00% due 4/15/18................ 11,873,579 12,006,759 5.00% due 5/15/18................ 16,325,999 16,509,120 5.00% due 1/15/33................ 23,851 23,570 5.00% due 5/15/33................ 19,276 19,051 5.00% due 8/15/33................ 4,422,832 4,370,744 5.00% due 9/15/33................ 3,645,544 3,602,610 5.00% due 10/15/33............... 9,188,332 9,080,120 5.00% due 4/15/34................ 92,655 91,506 5.00% due 5/15/34................ 222,947 220,182 5.00% due 11/15/34............... 1,006,101 993,623 5.00% due 12/15/34............... 977,815 965,687 5.00% TBA due Apr................ 22,000,000 21,690,636 5.50% due 6/15/29................ 9,640 9,762 5.50% due 12/15/32............... 1,315,669 1,329,620 5.50% due 1/15/33................ 727,025 734,485 5.50% due 2/15/33................ 3,361,967 3,396,464 5.50% due 3/15/33................ 1,951,794 1,971,822 5.50% due 4/15/33................ 10,489,182 10,596,814 5.50% due 5/15/33................ 12,679,160 12,809,264 5.50% due 6/15/33................ 11,844,373 11,965,910 5.50% due 6/15/33................ 1,501,814 1,517,714 5.50% due 7/15/33................ 713,372 720,692 5.50% due 8/15/33................ 4,581,888 4,628,904 5.50% due 9/15/33................ 644,764 651,379 5.50% due 10/15/33............... 11,349,718 11,466,180 5.50% due 12/15/33............... 12,887,009 13,019,245 5.50% due 1/15/34................ 18,158,915 18,340,416 5.50% due 2/15/34................ 1,132,401 1,143,720 5.50% due 2/15/34................ 1,126,473 1,137,732 5.50% TBA due Apr................ 110,000,000 110,962,500 6.00% due 11/15/23............... 9,807 10,146 6.00% due 1/15/24................ 9,326 9,636 6.00% due 7/15/28................ 6,481 6,678 6.00% due 12/15/28............... 349,744 360,373 6.00% due 1/15/29................ 1,235,546 1,272,877 6.00% due 2/15/29................ 1,253,975 1,291,864 6.00% due 3/15/29................ 909,040 936,506
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Government National Mortgage Association (continued) 6.00% due 4/15/29............ $ 2,342,131 $ 2,412,955 6.00% due 5/15/29............ 241,401 248,695 6.00% due 6/15/29............ 714,997 736,601 6.00% due 7/15/29............ 382,548 394,106 6.00% due 8/15/29............ 42,531 43,816 6.00% due 10/15/29........... 241,157 248,444 6.00% due 4/15/31............ 29,754 30,641 6.00% due 7/15/31............ 43,086 44,369 6.00% due 10/15/31........... 135,276 139,305 6.00% due 11/15/31........... 2,376,693 2,447,487 6.00% due 12/15/31........... 1,178,512 1,213,616 6.00% due 1/15/32............ 1,149,122 1,182,952 6.00% due 2/15/32............ 109,929 113,166 6.00% due 3/15/32............ 695,297 715,766 6.00% due 7/15/32............ 194,246 199,965 6.00% due 8/15/32............ 2,929,501 3,016,500 6.00% due 9/15/32............ 1,953,338 2,010,843 6.00% due 10/15/32........... 361,846 372,499 6.00% due 11/15/32........... 13,387 13,781 6.00% due 12/15/32........... 225,627 232,269 6.00% due 1/15/33............ 2,746,152 2,823,923 6.00% due 2/15/33............ 5,309,125 5,459,479 6.00% due 3/15/33............ 2,355,619 2,422,331 6.00% due 4/15/33............ 2,701,508 2,778,015 6.00% due 5/15/33............ 2,052,722 2,110,855 6.00% due 6/15/33............ 2,132,957 2,193,362 6.00% due 8/15/33............ 3,510,497 3,609,915 6.00% due 10/15/33........... 770,636 792,460 6.00% due 11/15/33........... 1,568,680 1,613,105 6.00% due 12/15/33........... 5,499,097 5,654,831 6.00% due 1/15/34............ 3,995,843 4,108,179 6.00% due 2/15/34............ 20,315,753 20,886,898 6.00% due 3/15/34............ 850,335 874,241 6.00% due 4/15/34............ 8,412,991 8,649,508 6.00% due 5/15/34............ 122,582 126,028 6.00% due 6/15/34............ 890,338 915,368 6.00% due 7/15/34............ 6,399,733 6,579,651 6.00% due 8/15/34............ 416,331 428,036 6.00% due 11/15/34........... 861,154 885,364 6.00% due 1/15/35............ 104,566 107,489 6.50% due 3/15/28............ 46,120 48,293 6.50% due 8/15/28............ 93,887 98,286 6.50% due 12/15/28........... 2,634 2,757 6.50% due 1/15/29............ 10,006 10,468 6.50% due 2/15/29............ 3,343 3,498 6.50% due 3/15/29............ 182,918 191,365 6.50% due 4/15/29............ 2,885 3,019 6.50% due 5/15/29............ 24,978 26,143 6.50% due 6/15/29............ 74,493 77,933 6.50% due 7/15/29............ 10,173 10,643 6.50% due 10/15/29........... 10,227 10,699 6.50% due 8/15/31............ 539,023 563,665 6.50% due 9/15/31............ 34,477 36,053 6.50% due 10/15/31........... 583,740 610,427 6.50% due 11/15/31........... 431,669 451,403 6.50% due 12/15/31........... 418,276 437,399 6.50% due 2/15/32............ 578,142 604,582
31 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- U.S. GOVERNMENT AGENCY (continued) Government National Mortgage Association (continued) 6.50% due 5/15/32.................. $2,947,392 $ 3,082,184 6.50% due 6/15/32.................. 225,881 236,211 7.00% due 3/15/23.................. 171,828 182,608 7.00% due 1/20/24.................. 1,297 1,372 7.00% due 3/20/24.................. 1,337 1,415 7.00% due 7/20/25.................. 7,259 7,679 7.00% due 9/15/25.................. 174,765 185,524 7.00% due 1/20/29.................. 80,529 84,944 7.00% due 2/20/29.................. 16,493 17,397 7.00% due 6/20/29.................. 29,573 31,194 7.00% due 7/20/29.................. 113,893 120,138 7.00% due 9/20/29.................. 11,108 11,717 7.00% due 10/20/29................. 21,850 23,048 7.00% due 11/20/29................. 7,818 8,247 7.00% due 3/20/30.................. 9,636 10,156 7.00% due 6/20/30.................. 21,386 22,541 7.00% due 8/20/30.................. 62,127 65,481 7.00% due 9/20/30.................. 49,654 52,335 7.00% due 10/20/30................. 68,585 72,287 8.00% due 1/15/30.................. 991 1,068 8.00% due 4/15/30.................. 55,085 59,392 8.00% due 5/15/30.................. 8,404 9,061 8.00% due 8/15/30.................. 96,019 103,526 8.00% due 11/15/26................. 391,409 422,227 8.00% due 12/15/29................. 33,844 36,493 8.50% due 3/15/17.................. 44,162 48,167 8.50% due 5/15/21.................. 89,978 98,812 8.50% due 12/15/22................. 152,220 167,340 8.50% due 1/15/23.................. 153,603 169,058 8.50% due 9/15/24.................. 65,686 72,357 9.00% due 7/15/16.................. 92,423 100,742 9.00% due 10/15/16................. 21,567 23,508 ------------ 403,891,645 ------------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ Small Business Administration -- 0.2% 6.30% due 6/01/18................. $ 994,143 $ 1,037,236 ------------- Federal Farm Credit Bank -- 3.0% 2.50% due 3/15/06(1).............. 15,000,000 14,829,255 ------------- Total U.S. Government Agency (cost $447,081,826)............... 444,786,272 ------------- Total Long-Term Investment Securities -- 99.4% (cost $496,604,933)............... 493,453,462 ------------- SHORT-TERM INVESTMENT SECURITIES -- 16.1% United States Treasury Bills 2.54% due 04/07/05(1) (cost $79,966,200)................ 80,000,000 79,966,200 ------------- REPURCHASE AGREEMENTS -- 21.3% State Street Joint Repurchase Agreement(1)(2)................... 5,783,000 5,783,000 UBS Securities, LLC Joint Repurchase Agreement(1)(2)........ 100,000,000 100,000,000 ------------- Total Repurchase Agreements (cost $105,783,000)............... 105,783,000 ------------- TOTAL INVESTMENTS -- (cost $682,354,133)@.............. 136.8% 679,202,662 Liabilities in excess of other assets (36.8) (182,727,162) ------------ ------------- NET ASSETS -- 100.0% $ 496,475,500 ============ =============
- -------- 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) The security or a portion thereof is out on loan (See Note 2). See Notes to Financial Statements 32 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited) Industry Allocation* Foreign Government Agency......................... 28.2% Federal National Mortgage Association............. 7.6% Financial Services................................ 6.6% U.S. Treasury Notes............................... 5.9% Time Deposit...................................... 5.7% Telecommunications................................ 5.2% Federal Home Loan Mortgage Corporation............ 4.2% Leisure & Tourism................................. 4.1% Broadcasting & Media.............................. 4.0% Utilities......................................... 3.7% Energy Sources.................................... 3.0% U.S Treasury Bonds................................ 2.0% Repurchase Agreement.............................. 1.9% Forest Products................................... 1.5% Pharmaceuticals................................... 1.2% Chemicals......................................... 1.1% Insurance......................................... 1.1% Energy Services................................... 0.9% Real Estate Investment Trusts..................... 0.7% Food, Beverage & Tobacco.......................... 0.7% Health Services................................... 0.7% Metals & Mining................................... 0.7% Retail Stores..................................... 0.7% Transportation.................................... 0.7% Automotive........................................ 0.6% Banks............................................. 0.6% Business Services................................. 0.6% Household & Personal Products..................... 0.4% Communication Equipment .......................... 0.3% Medical Products.................................. 0.3% Restaurants....................................... 0.3% Electronics....................................... 0.2% Machinery......................................... 0.2% Retail............................................ 0.2% Aerospace & Military Technology................... 0.1% Government National Mortgage Association.......... 0.1% Housing & Household Durables...................... 0.1% Real Estate Companies............................. 0.1% ---- 96.2% ====
Credit Quality+# Government -- Treasury........ 9.1% Government -- Agency.......... 11.8% AAA........................... 12.7% AA............................ 5.4% A............................. 3.1% BBB........................... 13.4% BB............................ 12.4% B............................. 12.9% CCC........................... 8.5% CC............................ 1.1% C............................. 0.2% Below C....................... 0.1% Not Rated@.................... 9.3% ------ 100.00% ======
Country Allocation* United States................... 62.9% Brazil.......................... 4.3% Russia.......................... 3.6% Mexico.......................... 3.0% Canada.......................... 2.7% United Kingdom.................. 2.1% Australia....................... 1.6% Italy........................... 1.6% Japan........................... 1.3% Sweden.......................... 1.3% Argentina....................... 1.1% Spain........................... 1.0% Turkey.......................... 0.9% Belgium......................... 0.8% Venezuela....................... 0.8% Columbia........................ 0.7% Denmark......................... 0.7% Germany......................... 0.7% Greece.......................... 0.6% France.......................... 0.5% Netherlands..................... 0.5% Cayman Island................... 0.4% Peru............................ 0.4% South Africa.................... 0.4% Austria......................... 0.3% Finland......................... 0.3% Ireland......................... 0.3% Poland.......................... 0.3% Ukraine......................... 0.3% Hungary......................... 0.2% Luxembourg...................... 0.2% Uruguay......................... 0.2% Bermuda......................... 0.1% Czech Republic.................. 0.1% ---- 96.2% ====
- -------- * 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. 33 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- ASSET-BACKED SECURITIES -- 2.2% Financial Services -- 2.2% Commercial Mtg. Asset Trust Commercial Mtg. Certificates, Series 1999-C1, Class C 7.35% due 4/17/05(1)............ $1,200,000 $1,384,109 DLJ Commercial Mtg. Corp. Commercial Mtg. Certificates, Series 1998-CG1, Class S 0.83% due 4/01/05(1)(2)(3)...... 7,746,958 160,142 DLJ Commercial Mtg. Corp. Commercial Mtg. Certificates, Series 1998-CF2, Class S 0.99% due 3/01/05(1)(2)(3)...... 6,537,459 177,758 Mid-State Trust Asset Backed Notes, Series 6, Class A1 7.34% due 7/01/35............... 783,914 828,506 PNC Mtg. Securities Corp. Mtg. Certificates, Series 1992-2, Class DB3 6.91% due 4/01/05(2)(4)......... 326,949 328,855 ---------- 2,879,370 ---------- Total Asset Backed Securities (cost $2,653,754)............... 2,879,370 ---------- BONDS & NOTES -- 28.4% Aerospace & Military Technology -- 0.1% DeCrane Aircraft Holdings Guaranteed Sr. Sub. Notes, Series B 12.00% due 9/30/08.............. 175,000 110,250 Raytheon Co. Debenture 6.40% due 12/15/18.............. 67,000 72,350 ---------- 182,600 ---------- Apparel & Textiles -- 0.0% Warnaco, Inc. Sr. Notes 8.88% due 6/15/13............... 50,000 53,625 ---------- Automotive -- 0.5% BREED Technologies, Inc. Guaranteed Sr. Sub. Notes 9.25% due 4/15/08+(5)(6)(9)..... 500,000 0 Dana Corp. Notes 7.00% due 3/01/29............... 143,000 125,580 Diamond Triumph Auto Glass, Inc. Guaranteed Sr. Sub. Notes 9.25% due 4/01/08(6)(9)......... 100,000 70,000 Exide Corp. Term Loan 10.00% due 3/15/25+(6)(9)....... 225,000 0 General Motors Corp. Notes 7.20% due 1/15/11............... 190,000 171,526 General Motors Corp. Sr. Debentures 8.38% due 7/15/33............... 56,000 47,921
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- Automotive (continued) General Motors Corp. Debentures 8.80% due 3/01/21.................. $275,000 $247,385 Hertz Corp. Notes 7.63% due 6/01/12.................. 40,000 40,556 Stanadyne Corp. Sr. Sub. Notes 10.00% due 8/15/14................. 25,000 25,750 -------- 728,718 -------- Banks -- 0.5% American Express Centurion Bank Notes 2.98% due 4/18/05(6)(7)............ 40,000 40,017 Chemical Bank Sub. Notes 6.13% due 11/01/08................. 63,000 66,168 Credit Suisse First Boston New York Sub. Notes 6.50% due 5/01/08*................. 40,000 42,127 HSBC Bank USA Sub. Notes 5.88% due 11/01/34................. 171,000 172,126 Popular North America, Inc. Notes 4.25% due 4/01/08.................. 108,000 107,276 Sovereign Bank Certificate Of Deposit 4.00% due 2/01/08.................. 67,000 66,199 Suntrust Bank Bonds 5.40% due 4/01/20.................. 72,000 71,920 Wells Fargo & Co. Notes 3.11% due 6/15/05(7)............... 36,000 36,010 -------- 601,843 -------- Broadcasting & Media -- 3.2% Adelphia Communications Corp. Sr. Notes 10.25% due 6/15/11+(5)............. 250,000 230,625 Affinity Group, Inc. Sr. Sub. Notes 9.00% due 2/15/12.................. 150,000 157,500 Charter Communications Holdings, LLC Sr. Notes 9.63% due 11/15/09................. 925,000 723,812 Charter Communications Holdings, LLC Sr. Disc. Notes 9.92% due 4/01/11(8)............... 125,000 95,937 Charter Communications Holdings, LLC Sr. Notes 10.00% due 5/15/11................. 75,000 57,563
34 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- BONDS & NOTES (continued) Broadcasting & Media (continued) Charter Communications Holdings, LLC Sr. Notes 10.25% due 1/15/10................ $ 25,000 $ 20,063 Charter Communications Holdings, LLC Sr. Notes 10.75% due 10/01/09............... 450,000 369,000 Charter Communications Holdings, LLC Sr. Notes 11.13% due 1/15/11................ 300,000 242,250 Coleman Cable, Inc. Sr. Notes 9.88% due 10/01/12*............... 75,000 76,500 Cox Communications, Inc. Debentures 6.80% due 8/01/28................. 153,000 157,894 Cox Communications, Inc. Debentures 7.63% due 6/15/25................. 163,000 181,274 Cox Communications, Inc. Notes 7.75% due 11/01/10................ 110,000 122,172 Fisher Communications, Inc. Sr. Notes 8.63% due 9/15/14................. 150,000 161,625 Haights Cross Operating Co. Guaranteed Sr. Notes 11.75% due 8/15/11................ 100,000 112,250 Insight Communications Co., Inc. Sr. Sub. Disc. Notes 12.25% due 2/15/11(8)............. 275,000 273,625 Liberty Media Corp. Notes 5.70% due 5/15/13................. 275,000 259,196 Paxson Communications Corp. Guaranteed Sr. Sub. Notes 12.25% due 1/15/09(8)............. 350,000 325,500 Salem Communications Holding Corp. Guaranteed Sr. Sub. Notes 7.75% due 12/15/10................ 50,000 51,813 Telex Communications, Inc. Sr. Sec. Notes 11.50% due 10/15/08............... 50,000 54,750 Time Warner Entertainment Co. LP Sr. Debentures 8.38% due 3/15/23................. 198,000 242,604 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 8.75% due 1/15/14................. 125,000 118,437 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 10.00% due 3/01/11................ 250,000 255,625 ---------- 4,290,015 ---------- Business Services -- 0.6% American Standard, Inc. Bonds 5.50% due 4/01/15*................ 43,000 43,163
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------- Business Services (continued) Davita, Inc. Sr. Sub. Notes 7.25% due 3/15/15*............. $100,000 $ 98,000 Mobile Mini, Inc. Sr. Notes 9.50% due 7/01/13.............. 100,000 112,500 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 9/01/10............. 275,000 292,875 PHH Corp. Notes 6.00% due 3/01/08.............. 67,000 69,188 Seitel, Inc. Sr. Notes 11.75% due 7/15/11............. 200,000 225,000 -------- 840,726 -------- Chemicals -- 0.6% Equistar Chemicals LP Sr. Notes 10.63% due 5/01/11............. 175,000 196,437 Foamex LP/Foamex Capital Corp. Guaranteed Sr. Sec. Notes 10.75% due 4/01/09............. 50,000 44,000 Huntsman International, LLC Sr. Sub. Notes 7.38% due 1/01/15*............. 169,000 168,155 Lyondell Chemical Co. Guaranteed Sr. Sec. Notes 9.50% due 12/15/08............. 50,000 53,500 Phosphate Resource Partners LP Sr. Notes 7.00% due 2/15/08.............. 125,000 128,750 Rockwood Specialties Group Sr. Sub. Notes 7.50% due 11/15/14*............ 75,000 75,000 Rockwood Specialties, Inc. Sr. Sub. Notes 10.63% due 5/15/11............. 75,000 83,250 -------- 749,092 -------- Communication Equipment -- 0.3% Rural Cellular Corp. Sr. Sub. Notes 9.63% due 5/15/08.............. 150,000 143,250 Rural Cellular Corp. Sr. Sub. Notes 9.75% due 1/15/10.............. 250,000 228,750 -------- 372,000 -------- Computers & Business Equipment -- 0.0% Activant Solutions, Inc. Sr. Notes 9.09% due 6/30/05*(7).......... 25,000 25,500 -------- Electronics -- 0.1% Freescale Semiconductor, Inc. Sr. Notes 7.13% due 7/15/14.............. 100,000 104,500
35 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------- BONDS & NOTES (continued) Electronics (continued) Sanmina-SCI Corp. Sr. Sub. Notes 6.75% due 3/01/13*.............. $ 75,000 $ 70,313 -------- 174,813 -------- Energy Services -- 0.3% Frontier Oil Corp. Sr. Notes 6.63% due 10/01/11.............. 50,000 49,750 Hanover Compressor Co. Sub. Notes Zero coupon due 3/31/07......... 25,000 22,000 Oslo Seismic Services, Inc. 1st Mtg. Notes 8.28% due 6/01/11............... 208,944 220,593 Pride International, Inc. Sr. Notes 7.38% due 7/15/14............... 50,000 53,000 -------- 345,343 -------- Energy Sources -- 3.0% Belden & Blake Corp. Sec. Notes 8.75% due 7/15/12............... 75,000 74,437 Calpine Corp. Sec. Notes 8.75% due 7/15/13*.............. 780,000 588,900 Chesapeake Energy Corp. Sr. Notes 6.88% due 1/15/16............... 50,000 50,500 Chesapeake Energy Corp. Guaranteed Sr. Notes 7.75% due 1/15/15............... 25,000 26,437 Chesapeake Energy Corp. Guaranteed Sr. Notes 9.00% due 8/15/12............... 25,000 27,594 Citgo Petroleum Corp. Sr. Notes 6.00% due 10/15/11.............. 75,000 74,062 Colorado Interstate Gas Co. Debentures 6.85% due 6/15/37............... 150,000 152,211 ConocoPhillips Sr. Notes 7.00% due 3/30/29............... 125,000 147,385 Costilla Energy, Inc. Sr. Notes 10.25% due 10/01/06+(5)(6)(9)... 500,000 0 Encore Acquisition Co. Sr. Sub. Notes 6.25% due 4/15/14............... 50,000 50,000 Encore Acquisition Co. Guaranteed Sr. Notes 8.38% due 6/15/12............... 75,000 81,000 Enterprise Products Operating LP Guaranteed Sr. Notes 5.00% due 3/01/15*.............. 42,000 39,373
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- Energy Sources (continued) Enterprise Products Operating LP Notes 6.65% due 10/15/34....................... $ 143,000 $ 145,796 EXCO Resources, Inc. Guaranteed Notes 7.25% due 1/15/11........................ 50,000 50,750 FirstEnergy Corp., Series C Notes 7.38% due 11/15/31....................... 143,000 161,976 FPL Group Capital, Inc. Notes 4.09% due 2/16/07........................ 120,000 119,705 Kerr Mcgee Corp. Guaranteed Notes 7.88% due 9/15/31........................ 286,000 322,714 Mission Energy Holding Co. Sr. Sec. Notes 13.50% due 7/15/08....................... 1,125,000 1,350,000 Nexen, Inc. Notes 5.88% due 3/10/35........................ 170,000 162,602 Nexen, Inc. Notes 7.88% due 3/15/32........................ 176,000 214,737 Roseton Danskammer Guaranteed Pass-Thru Certificates, Series B 7.67% due 11/08/16....................... 150,000 138,000 ---------- 3,978,179 ---------- Financial Services -- 3.7% Affinity Group, Inc. Sr. Sub. Notes 10.00% due 2/15/15*...................... 125,000 130,000 Arch Western Finance LLC Sr. Notes 6.75% due 7/01/13........................ 125,000 125,625 Bear Island Paper Co., LLC Sr. Notes 10.00% due 12/01/07...................... 250,000 252,812 Borden United States Finance Corp. Sr. Sec. Notes 9.00% due 7/15/14*....................... 75,000 81,000 Capital One Financial Corp. Sr. Notes 4.74% due 5/17/07........................ 41,000 41,223 Caterpillar Financial Services Notes 4.70% due 3/15/12........................ 72,000 70,939 Chukchansi Economic Development Authority Sr. Notes 14.50% due 6/15/09*...................... 500,000 615,000 Consolidated Communications Holdings Sr. Notes 9.75% due 4/01/12*....................... 200,000 212,000 Countrywide Home Loans, Inc. Tranche Trust 00255 5.50% due 8/01/06........................ 101,000 102,686
36 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------ BONDS & NOTES (continued) Financial Services (continued) ESI Tractebel Acquisition Corp. Guaranteed Bonds 7.99% due 12/30/11.............. $ 228,000 $241,850 Ford Motor Credit Co. Sr. Notes 4.95% due 1/15/08............... 67,000 64,259 Ford Motor Credit Co. Notes 7.88% due 6/15/10............... 53,000 53,958 General Electric Capital Corp. Notes 5.38% due 3/15/07............... 67,000 68,449 General Motors Acceptance Corp. Notes 6.75% due 12/01/14.............. 20,000 17,276 H & E Equipment Services, LLC Guaranteed Sr. Sec. Notes 11.13% due 6/15/12.............. 125,000 140,625 Hilcorp Finance Co. Sr. Notes 10.50% due 9/01/10*............. 250,000 277,500 Household Finance Corp. Notes 6.38% due 10/15/11.............. 67,000 72,380 Huntsman Advanced Materials, LLC Sr. Sec. Notes 11.00% due 7/15/10*............. 175,000 200,813 iPCS, Inc. Escrow 14.00% due 7/15/10(6)(9)........ 2,075,000 0 J.P. Morgan Chase Capital XV Notes 5.88% due 3/15/35............... 170,000 164,171 John Deere Capital Corp. Notes 3.88% due 3/07/07............... 164,000 163,059 MedCath Holdings Corp. Sr. Notes 9.88% due 7/15/12............... 125,000 134,375 Merrill Lynch & Co., Inc. Notes 4.25% due 2/08/10............... 53,000 51,591 Muzak, LLC/ Muzak Finance Corp. Guaranteed Sr. Sub. Notes 9.88% due 3/15/09............... 75,000 33,750 Nexstar Finance Holdings, LLC Guaranteed Sr. Disc. Notes 11.38% due 4/01/13(8)........... 300,000 235,500 NGC Corp. Capital Trust I Guaranteed Sub. Notes, Series B 8.32% due 6/01/27............... 800,000 632,000 PCA, LLC Sr. Notes 11.88% due 8/01/09.............. 225,000 189,000 Px Escrow Corp. Sr. Sub. Disc. Notes 9.63% due 2/01/06(8)............ 125,000 121,250
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- Financial Services (continued) Sprint Capital Corp. Guaranteed Sr. Notes 6.88% due 11/15/28.............. $ 62,000 $ 66,377 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 11.50% due 6/01/10.............. 162,000 186,300 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 12.88% due 10/15/08............. 75,000 88,875 TIAA Global Markets Notes 4.13% due 11/15/07*............. 44,000 43,756 Transamerica Finance Corp. Sr. Notes 6.40% due 9/15/08............... 36,000 38,473 ---------- 4,916,872 ---------- Food, Beverage & Tobacco -- 0.7% American Stores Co. Debentures 7.90% due 5/01/17............... 77,000 87,863 Coca-Cola Enterprises, Inc. Debentures 8.50% due 2/01/22............... 78,000 102,737 North Atlantic Holding Co., Inc. Sr. Disc. Notes 12.25% due 3/01/14(8)........... 250,000 47,500 North Atlantic Trading, Inc. Sr. Notes 9.25% due 3/01/12............... 150,000 112,500 SABMiller, PLC Guaranteed Notes 6.63% due 8/15/33*.............. 128,000 140,317 Stater Brothers Holdings, Inc. Sr. Notes 8.13% due 6/15/12............... 200,000 193,000 Wornick Co. Sr. Sec. Notes 10.88% due 7/15/11.............. 250,000 261,250 ---------- 945,167 ---------- Forest Products -- 1.0% Boise Cascade LLC Sr. Notes 5.54% due 4/15/05*(7)........... 125,000 127,500 Caraustar Industries, Inc. Notes 7.38% due 6/01/09............... 25,000 24,813 Constar International, Inc. Sr. Notes 6.17% due 4/15/05*(7)........... 50,000 50,000 Constar International, Inc. Sr. Sub. Notes 11.00% due 12/01/12............. 125,000 125,000 Crown Cork & Seal Co., Inc. Debentures 8.00% due 4/15/23............... 100,000 96,500
37 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- BONDS & NOTES (continued) Forest Products (continued) FiberMark, Inc. Sr. Notes 10.75% due 4/15/11+(5)............. $125,000 $ 91,250 Packaging Corp. of America Sr. Notes 5.75% due 8/01/13.................. 58,000 57,429 Pliant Corp. Sr. Sub. Notes 13.00% due 6/01/10................. 225,000 190,125 Sealed Air Corp. Bonds 6.88% due 7/15/33*................. 116,000 125,712 Speciality Paperboard, Inc. Sr. Notes 9.38% due 10/15/06+(5)............. 550,000 394,625 ---------- 1,282,954 ---------- Health Services -- 0.7% Community Health Systems, Inc. Sr. Sub. Notes 6.50% due 12/15/12*................ 100,000 97,500 Concentra Operating Corp. Sr. Sub. Notes 9.13% due 6/01/12.................. 50,000 53,000 Coventry Health Care, Inc. Sr. Notes 6.13% due 1/15/15*................. 57,000 56,929 Genesis Healthcare Corp. Sr. Sub. Notes 8.00% due 10/15/13................. 50,000 54,500 HCA, Inc. Notes 6.38% due 1/15/15.................. 150,000 148,896 HCA, Inc. Sr. Notes 6.95% due 5/01/12.................. 25,000 25,949 Pediatric Services Of America, Inc. Guaranteed Sr. Sub. Notes 10.00% due 4/15/08(6).............. 25,000 25,250 Psychiatric Solutions, Inc. Guaranteed Sr. Sub. Notes 10.63% due 6/15/13................. 67,000 74,370 Team Health, Inc. Sr. Sub. Notes 9.00% due 4/01/12.................. 150,000 146,625 Tenet Healthcare Corp. Sr. Notes 6.50% due 6/01/12.................. 125,000 115,000 Tenet Healthcare Corp. Sr. Notes 9.25% due 2/01/15*................. 100,000 99,750 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13................. 75,000 73,687 ---------- 971,456 ----------
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- Household & Personal Products -- 0.3% Procter & Gamble Co. 2.00% due 6/21/10................. JPY 39,000,000 $ 387,354 Revlon Consumer Products Corp. Sr. Sub. Notes 8.63% due 2/01/08................. 75,000 69,188 ---------- 456,542 ---------- Housing & Household Durables -- 0.1% Maytag Corp. Notes 5.00% due 5/15/15................. 100,000 87,317 ---------- Insurance -- 1.0% Americo Life, Inc. Notes 7.88% due 5/01/13*................ 38,000 39,890 Crum & Forster Holdings Corp. Sr. Notes 10.38% due 6/15/13................ 125,000 140,000 Fidelity National Financial, Inc. Notes 7.30% due 8/15/11................. 91,000 97,699 Liberty Mutual Group Notes 6.50% due 3/15/35*................ 263,000 252,959 MIC Financing Trust I Pass-Thru Certificates 8.38% due 2/01/27*................ 123,000 128,799 Ohio Casualty Corp. Notes 7.30% due 6/15/14................. 590,000 630,626 ---------- 1,289,973 ---------- Internet Content -- 0.0% Spheris, Inc. Sr. Sub. Notes 11.00% due 12/15/12*.............. 50,000 51,000 ---------- Leisure & Tourism -- 3.4% American Airlines, Inc. Pass-Thru Certificates, Series 2001-1, Class A2 6.82% due 5/23/11................. 225,000 209,145 American Airlines, Inc. Pass-Thru Certificate Series 1991 B 1 9.71% due 1/30/07*(9)............. 67,618 62,209 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-2 6.88% due 7/02/09................. 280,875 269,855 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-1 7.20% due 1/02/19................. 83,251 82,652 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class B 7.63% due 1/02/15................. 751,504 609,013
38 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- BONDS & NOTES (continued) Leisure & Tourism (continued) Atlas Air, Inc. Pass-Thru Certificates, Series 2000-1 8.71% due 1/02/19........................ $329,639 $338,256 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class C 8.77% due 1/02/11+(5).................... 62,428 32,995 Atlas Air, Inc. Pass-Thru Certificates Series 2000-1, Class B 9.06% due 7/02/17........................ 157,740 144,586 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-1, Class C 6.95% due 8/02/09........................ 128,295 105,387 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-2, Class C1 7.73% due 3/15/11........................ 45,376 33,353 Continental Airlines, Inc. Secured Pass-Thru Certificates, Series 2000-2, Class B 8.31% due 10/02/19....................... 121,819 104,647 Delta Airlines, Inc. Pass-Thru Certificates, Series 2000 1 Class 2A 7.57% due 5/18/12........................ 350,000 326,239 Delta Airlines, Inc. Notes 7.90% due 12/15/09....................... 125,000 48,125 Delta Airlines, Inc. Sr. Notes 9.50% due 11/18/08*...................... 100,000 82,000 Delta Airlines, Inc. Sr. Notes 10.00% due 8/15/08....................... 300,000 132,000 Eldorado Resorts, LLC Sr. Notes 9.00% due 4/15/14(6)..................... 425,000 425,000 Hilton Hotels Corp. Sr. Notes 7.50% due 12/15/17....................... 36,000 41,265 Hilton Hotels Corp. Sr. Notes 7.95% due 4/15/07........................ 82,000 87,526 Hollywood Casino Shreveport Capital Corp. Guaranteed Sr. Sec. Notes 13.00% due 8/01/06+(5)................... 400,000 330,000 Host Marriott LP Sr. Notes 6.38% due 3/15/15*....................... 150,000 143,250 Leslie's Poolmart, Inc. Sr. Notes 7.75% due 2/01/13*....................... 50,000 50,500 Riviera Holdings Corp. Guaranteed Sr. Notes 11.00% due 6/15/10....................... 135,000 149,175
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- Leisure & Tourism (continued) True Temper Sports, Inc. Guaranteed Sr. Sub. Notes 8.38% due 9/15/11.................. $200,000 $ 186,000 Turning Stone Casino Resort Sr. Notes 9.13% due 12/15/10*................ 75,000 77,906 Waterford Gaming, LLC Sr. Notes 8.63% due 9/15/12*................. 199,000 208,950 Worldspan LP Sr. 2nd Lien Sec. Notes 9.02% due 2/15/11*(7).............. 275,000 266,750 ---------- 4,546,784 ---------- Machinery -- 0.1% Dresser Rand Group, Inc. Sr. Sub. Notes 7.38% due 11/01/14*................ 100,000 100,000 Park Ohio Industries, Inc. Sr. Sub. Notes 8.38% due 11/15/14*................ 75,000 72,375 Venture Holdings Co., LLC Guaranteed Sr. Sub. Notes 11.00% due 6/01/07+(5)............. 100,000 625 ---------- 173,000 ---------- Medical Products -- 0.3% CDRV Investors, Inc. Sr. Disc. Notes 9.63% due 1/01/15*(8).............. 125,000 75,313 Encore Medical IHC, Inc. Sr. Sub. Notes 9.75% due 10/01/12*................ 75,000 73,125 Inverness Medical Innovations, Inc. Sr. Sub. Notes 8.75% due 2/15/12.................. 125,000 126,875 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11................ 125,000 128,125 ---------- 403,438 ---------- Metals & Mining -- 0.6% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11................. 75,000 80,250 Associated Materials, Inc. Sr. Disc. Notes 11.25% due 3/01/14(8).............. 275,000 191,125 Barrick Gold Corp. Bonds 5.80% due 11/15/34................. 45,000 45,405 CSN Islands VIII Corp. Guaranteed Sr. Notes 9.75% due 12/16/13*................ 200,000 206,000 Eagle-Picher, Inc. Sr. Notes 9.75% due 9/01/13+(10)............. 50,000 32,000
39 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- BONDS & NOTES (continued) Metals & Mining (continued) Newmont Mining Corp. Notes 5.88% due 4/01/35................. $255,000 $249,880 Renco Metals, Inc. Guaranteed Sr. Notes 11.50% due 07/01/03+(5)(6)(9)(12). 500,000 0 -------- 804,660 -------- Pharmaceuticals -- 0.4% Curative Health Services, Inc. Sr. Notes 10.75% due 5/01/11................ 150,000 123,375 Merck & Co., Inc. Notes 2.50% due 3/30/07................. 40,000 38,762 NeighborCare, Inc. Guaranteed Sr. Sub. Notes 6.88% due 11/15/13................ 225,000 236,250 Pfizer, Inc. Notes 4.65% due 3/01/18................. 58,000 54,921 Schering-Plough Co. Sr. Notes 6.50% due 12/01/33................ 58,000 64,893 Wyeth Notes 6.95% due 3/15/11................. 58,000 63,606 -------- 581,807 -------- Real Estate Companies -- 0.1% EOP Operating LP Notes 8.38% due 3/15/06................. 70,000 72,781 -------- Real Estate Investment Trusts -- 0.5% National Health Investors, Inc. Notes 7.30% due 7/16/07................. 100,000 103,786 Omega Healthcare Investors, Inc. Sr. Notes 7.00% due 4/01/14................. 75,000 75,000 Senior Housing Properties Trust Sr. Notes 8.63% due 1/15/12................. 202,000 223,210 Trustreet Properties, Inc. Sr. Notes 7.50% due 4/01/15*................ 225,000 223,875 -------- 625,871 -------- Restaurants -- 0.3% Denny's Holdings, Inc. Sr. Notes 10.00% due 10/01/12*.............. 250,000 263,750 Sbarro, Inc. Sr. Notes 11.00% due 9/15/09................ 144,000 138,960 -------- 402,710 --------
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- Retail -- 0.2% Federated Department Stores, Inc. Debentures 6.90% due 4/01/29................... $ 52,000 $ 55,699 Rent-Way, Inc. Sr. Notes 11.88% due 6/15/10.................. 175,000 193,813 Wal Mart Stores, Inc. Notes 4.00% due 1/15/10................... 29,000 28,224 -------- 277,736 -------- Retail Stores -- 0.4% Alderwoods Group, Inc. Sr. Notes 7.75% due 9/15/12*.................. 50,000 51,125 Carriage Services, Inc. Notes 7.88% due 1/15/15*.................. 137,000 137,685 Collins & Aikman Floor Cover Guaranteed Sr. Notes 9.75% due 2/15/10................... 75,000 79,875 General Nutrition Centers, Inc. Sr. Sub. Notes 8.50% due 12/01/10.................. 50,000 42,500 Saks, Inc. Guaranteed Notes 7.00% due 12/01/13.................. 75,000 67,875 Saks, Inc. Guaranteed Notes 9.88% due 10/01/11.................. 100,000 108,000 -------- 487,060 -------- Telecommunications -- 2.0% AirGate PCS, Inc. Sr. Sec. Notes 9.38% due 9/01/09*.................. 198,300 210,198 Alaska Communications Holdings, Inc. Guaranteed Sr. Notes 9.88% due 8/15/11................... 82,000 86,510 Alltel Corp. Notes 4.66% due 5/17/07................... 53,000 53,322 American Cellular Corp., Series B Sr. Notes 10.00% due 8/01/11.................. 375,000 345,000 AT&T Wireless Services, Inc. Sr. Notes 7.35% due 3/01/06................... 94,000 96,919 Cincinnati Bell, Inc. Notes 7.25% due 6/15/23................... 25,000 24,000 Cincinnati Bell, Inc. Sr. Sub. Notes 8.38% due 1/15/14................... 25,000 24,625 Citizens Communications Co. Debentures 7.45% due 7/01/35................... 153,000 141,448
40 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- BONDS & NOTES (continued) Telecommunications (continued) GTE Corp. Debentures 6.94% due 4/15/28...................... $ 56,000 $ 60,567 Intelsat, Ltd Sr. Disc. Notes 9.25% due 2/01/15*(8).................. 150,000 94,875 LCI International, Inc. Sr. Notes 7.25% due 6/15/07...................... 1,100,000 1,036,750 Qwest Corp. Debentures 7.13% due 11/15/43..................... 125,000 105,625 Qwest Corp. Debentures 7.25% due 10/15/35..................... 100,000 89,750 Telecomunicaciones de Puerto Rico, Inc. Guaranteed Notes 6.80% due 5/15/09...................... 72,000 75,867 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 9.38% due 2/01/11...................... 30,000 21,225 TSI Telecommunications Services, Inc. Guaranteed Sr. Sub. Notes 12.75% due 2/01/09..................... 50,000 55,750 US West Communications, Inc. Debentures 7.50% due 6/15/23...................... 25,000 23,125 Valor Telecommunications Sr. Notes 7.75% due 2/15/15*..................... 100,000 99,500 ---------- 2,645,056 ---------- Transportation -- 0.7% Burlington Northern Santa Fe Corp. Debentures 8.13% due 4/15/20...................... 162,000 204,501 Norfolk Southern Corp. Debentures 6.00% due 3/15/15...................... 335,000 326,298 Norfolk Southern Corp. Bonds 9.00% due 3/01/21...................... 168,000 226,292 Petroleum Helicopters, Inc. Guaranteed Sr. Notes, Series B 9.38% due 5/01/09...................... 50,000 53,125 Progress Rail Services Corp. Sr. Notes 7.75% due 4/01/12*..................... 100,000 100,000 Ryder Systems, Inc. Notes 4.63% due 4/01/10...................... 72,000 71,346 ---------- 981,562 ---------- Utilities -- 2.7% AES Corp. Sr. Sub. Debentures 8.88% due 11/01/27..................... 150,000 159,000
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ Utilities (continued) AES Drax Energy, Ltd. Sec. Notes 11.50% due 8/30/10+(5).............. $725,000 $ 3,625 Carolina Power & Light Co. 1st Mtg. 5.15% due 4/01/15................... 36,000 35,817 Cincinnati Bell Telephone Co. Guaranteed Notes 7.18% due 12/15/23.................. 50,000 50,000 Cincinnati Bell Telephone Co. Guaranteed Notes 7.20% due 11/29/23.................. 225,000 225,000 Duke Capital Corp., LLC Sr. Notes 8.00% due 10/01/19.................. 67,000 79,487 Dynegy Holdings, Inc. Sr. Notes 8.75% due 2/15/12................... 100,000 95,750 El Paso Natural Gas Co. Sr. Notes 7.63% due 8/01/10................... 100,000 104,861 El Paso Natural Gas Co. Debentures 8.63% due 1/15/22................... 325,000 369,080 El Paso Production Holding Co. Guaranteed Sr. Notes 7.75% due 6/01/13................... 325,000 329,062 Ferrellgas L. P. Sr. Notes 6.75% due 5/01/14................... 225,000 219,375 Mirant Corp. Sr. Notes 7.90% due 7/15/09+*(5).............. 975,000 777,562 Pacific Energy Partners LP Sr. Notes 7.13% due 6/15/14................... 125,000 129,375 Reliant Energy, Inc. Sr. Sec. Notes 6.75% due 12/15/14.................. 50,000 46,625 Reliant Resources, Inc. Notes 9.50% due 7/15/13................... 50,000 54,375 Sempra Energy Sr. Notes 4.62% due 5/17/07................... 53,000 53,210 Southern California Edison Co. Series 2004 G 5.75% due 4/01/35................... 257,000 257,877 Tiverton/Rumford Power Assoc., Ltd. Guaranteed Notes 9.00% due 7/15/18*.................. 124,172 93,129 Transcontinental Gas Pipe Line Corp. Sr. Notes 8.88% due 7/15/12................... 25,000 29,313 Williams Cos, Inc. Notes 7.88% due 9/01/21................... 400,000 436,000 ----------- 3,548,523 ----------- Total Bonds & Notes (cost $38,027,127).................. 37,894,723 -----------
41 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------- CONVERTIBLE BONDS -- 0.8% Energy Services -- 0.0% Unisource Energy Corp. Sr. Notes 4.50% due 3/01/35*........... $ 25,000 $ 26,250 -------- Health Services -- 0.1% Genesis Healthcare Corp. Sr. Sub. Debentures 2.50% due 3/15/25*........... 75,000 77,437 -------- Leisure & Tourism -- 0.3% Six Flags, Inc. Sr. Notes 4.50% due 5/15/15............ 375,000 347,344 -------- Pharmaceuticals -- 0.0% Elan Capital Corp. Bonds 6.50% due 11/10/08........... 50,000 35,500 -------- Utilities -- 0.4% Calpine Corp. Sr. Notes 4.75% due 11/15/23........... 750,000 508,125 -------- Total Convertible Bonds (cost $1,125,216)............ 994,656 -------- FOREIGN BONDS & NOTES -- 32.7% Banks -- 0.1% HBOS Treasury Services, PLC Notes 3.50% due 11/30/07*.......... 88,000 86,189 Skandinaviska Enskilda Banken Sub. Notes 5.47% due 3/23/15*(2)........ 72,000 72,024 -------- 158,213 -------- Broadcasting & Media -- 0.6% CF Cable TV, Inc. Sr. Notes 9.13% due 7/15/07............ 50,000 50,736 Rogers Cable, Inc. Sr. Sec. Priority Notes 6.25% due 6/15/13............ 50,000 48,500 Rogers Cable, Inc. Bonds 8.75% due 5/01/32............ 50,000 58,000 Telenet Group Holding NV Sr. Disc. Notes 11.50% due 6/15/14*(8)....... 850,000 642,812 -------- 800,048 -------- Chemicals -- 0.5% Rhodia SA Sr. Sub. Notes 8.88% due 6/01/11............ 625,000 607,813 -------- Conglomerate -- 0.0% Tyco International Group SA Guaranteed Notes 7.00% due 6/15/28............ 43,000 48,812 --------
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- Electronics -- 0.1% Magnachip Semiconductor SA Sr. Sec. Notes 6.88% due 12/15/11*...................... $ 50,000 $ 50,500 Magnachip Semiconductor SA Sr. Sub. Notes 8.00% due 12/15/14*...................... 50,000 51,125 Stats ChipPAC, Ltd. Sr. Notes 6.75% due 11/15/11*...................... 75,000 70,875 ---------- 172,500 ---------- Energy Services -- 0.3% ENI Coordination Center Guaranteed Notes 5.25% due 12/27/07....................... GBP 205,000 388,319 ---------- Financial Services -- 0.3% AAC Group Holding Corp. Sr. Notes 10.25% due 10/01/12*(8).................. 100,000 72,000 Bluewater Finance, Ltd. Guaranteed Sr. Notes 10.25% due 2/15/12....................... 175,000 189,875 Deutsche Telekom International Finance BV Guaranteed Bonds 8.75% due 6/14/30........................ 132,000 172,636 ---------- 434,511 ---------- Forest Products -- 0.5% Abitibi-Consolidated, Inc. Debentures 8.55% due 8/01/10........................ 150,000 152,250 Abitibi-Consolidated, Inc. Debentures 8.85% due 8/01/30........................ 50,000 46,875 Stora Enso Oyj Notes 3.88% due 12/15/09....................... SEK 3,000,000 427,016 ---------- 626,141 ---------- Government Agency -- 28.1% Argentina Republic Bonds 3.01% due 8/03/05........................ 1,590,000 1,337,189 Argentina Republic Unsub. Notes 12.00% due 6/19/31(5).................... 413,400 124,020 Aries Vermogensverwaltungs GmbH Bonds 9.60% due 10/25/14....................... 500,000 600,350 Australia Commonwealth Bonds 6.75% due 11/15/06....................... AUD 1,365,000 1,072,715 Australia Commonwealth Bonds 7.50% due 9/15/09........................ AUD 1,240,000 1,025,703 Austria Republic Sr. Notes 5.38% due 12/01/34*(6)................... CAD 475,000 393,641
42 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------- FOREIGN BONDS & NOTES (continued) Government Agency (continued) Canadian Government Bonds 4.25% due 9/01/08......... CAD 1,405,000 $1,186,904 Canadian Government Bonds 5.75% due 9/01/06......... CAD 1,110,000 951,139 Colombia Republic Bonds 12.00% due 10/22/15(6).... COP 912,000,000 366,404 Deutsche Bundesrepublik Bonds 5.63% due 1/04/28......... EUR 200,000 318,397 Dutch Government Bonds 5.25% due 7/15/08......... EUR 355,000 495,881 Federal Republic of Brazil Notes 3.13% due 4/15/05(7)...... 1,301,481 1,221,830 Federal Republic of Brazil Notes 8.00% due 4/15/14......... 705,238 698,185 Federal Republic of Brazil Notes 8.00% due 4/15/14......... 807,744 799,667 Federal Republic of Brazil Bonds 8.88% due 4/15/24......... 145,000 137,533 Federal Republic of Brazil Bonds 10.13% due 5/15/27........ 245,000 257,250 Federal Republic of Brazil Notes 10.25% due 6/17/13........ 580,000 630,750 Federal Republic of Brazil Bonds 11.00% due 8/17/40........ 915,000 1,018,395 Federal Republic of Brazil Notes 12.00% due 4/15/10........ 150,000 175,500 Federal Republic of Brazil Notes 11.00% due 1/11/12........ 600,000 678,000 Government of Hungary Bonds 9.25% due 10/12/07........ HUF 40,000,000 218,319 Japan Bonds 3.00% due 9/20/05......... JPY 105,000,000 992,574 Kingdom of Denmark Bonds 7.00% due 11/15/07........ DKK 5,170,000 997,682 Kingdom of Sweden Bonds 5.00% due 1/28/09......... SEK 3,200,000 485,596 Kingdom of Sweden Bonds 5.50% due 10/08/12........ SEK 4,245,000 678,633
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- Government Agency (continued) Kingdom of Sweden Bonds 6.75% due 5/05/14......... SEK 3,000,000 525,591 Poland Republic Bonds 6.00% due 5/24/09......... PLN 1,390,000 449,110 Republic of Colombia Notes 10.75% due 1/15/13........ $ 470,000 $ 525,225 Republic of Greece Sr. Notes 4.65% due 4/19/07......... EUR 300,000 404,896 Republic of Greece Bonds 5.25% due 5/18/12......... EUR 310,000 445,334 Republic of Italy Bonds 5.25% due 12/15/05........ EUR 695,000 919,249 Republic of Italy Bonds 5.25% due 11/01/29........ EUR 778,000 1,160,756 Republic of Peru Bonds 5.00% due 3/07/07(2)...... 170,000 158,950 Republic of Peru Guaranteed Global Bonds 9.13% due 2/21/12......... 305,000 343,125 Republic of Peru Notes 9.88% due 2/06/15......... 75,000 86,625 Republic of South Africa Notes 6.50% due 6/02/14......... 230,000 241,500 Republic of South Africa Bonds 13.00% due 8/31/10........ ZAR 1,230,000 237,535 Republic of Turkey Notes 8.00% due 2/14/34......... 70,000 68,687 Republic of Turkey Notes 9.50% due 1/15/14......... 130,000 146,250 Republic of Turkey Notes 11.00% due 1/14/13........ 280,000 338,800 Republic of Turkey Bonds 11.75% due 6/15/10........ 170,000 205,062 Republic of Turkey Sr. Bonds 11.88% due 1/15/30........ 380,000 504,450 Republic of Uruguay Bonds 7.50% due 3/15/15......... 225,000 205,875 Republic of Venezuela Debentures 3.63% due 6/20/05(7)...... 142,850 142,136
43 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------- FOREIGN BONDS & NOTES (continued) Government Agency (continued) Republic of Venezuela Bonds 8.50% due 10/08/14........ $ 650,000 $ 640,250 Republic of Venezuela Bonds 9.25% due 9/15/27......... 295,000 292,935 Russia Federation Debentures 3.00% due 5/14/11......... 400,000 334,760 Russian Federation Debentures 3.00% due 5/14/08......... 615,000 565,369 Russian Federation Bonds 7.50% due 3/31/07*(8)..... 650,000 667,875 Russian Federation Bonds 7.50% due 3/31/07(8)...... 2,650,000 2,714,925 Russian Federation Bonds 8.25% due 3/31/10......... 475,000 511,623 Spanish Government Bonds 5.15% due 7/30/09......... EUR 238,000 335,661 Spanish Government Bonds 6.15% due 1/31/13......... EUR 694,000 1,065,382 Ukraine Republic Sr. Notes 7.65% due 6/11/13......... 250,000 267,500 Ukraine Republic Sr. Notes 11.00% due 3/15/07........ 186,675 200,302 United Kingdom Bonds 7.50% due 12/07/06........ GBP 510,000 1,007,527 United Kingdom Treasury Bonds 5.00% due 3/07/12......... GBP 690,000 1,328,179 United Mexican States Notes 5.88% due 1/15/14......... 200,000 198,500 United Mexican States Notes 6.38% due 1/16/13......... 185,000 191,937 United Mexican States Notes 6.63% due 3/03/15......... 560,000 583,520 United Mexican States Notes 7.50% due 1/14/12......... 220,000 242,880 United Mexican States Notes 7.50% due 4/08/33......... 400,000 424,000 United Mexican States Bonds 8.00% due 12/24/08........ MXN 8,851,000 740,644 United Mexican States Bonds 8.13% due 12/30/19........ 445,000 509,970
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Government Agency (continued) United Mexican States Bonds 8.30% due 8/15/31............... $ 325,000 $ 372,125 United Mexican States Bonds 9.00% due 12/24/09.............. MXN 4,350,000 372,610 ----------- 37,539,887 ----------- Household & Personal Products -- 0.1% Vitro Envases Norteamerica SA Sr. Sec. Notes 10.75% due 7/23/11*............. 150,000 153,000 ----------- Insurance -- 0.1% Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.............. 175,000 169,750 ----------- Leisure & Tourism -- 0.1% Grupo Posadas SA De CV Sr. Notes 8.75% due 10/04/11*............. 175,000 186,375 ----------- Metals & Mining -- 0.1% Noranda, Inc. Notes 6.00% due 10/15/15.............. 91,000 93,311 ----------- Pharmaceuticals -- 0.8% Abbott Japan Co. Ltd. Guaranteed Bonds 1.05% due 11/06/08.............. JPY 76,000,000 721,055 Elan Finance, PLC Sr. Notes 6.49% due 5/15/05*(7)........... 150,000 112,500 Elan Finance, PLC Sr. Notes 7.75% due 11/15/11*............. 250,000 186,875 ----------- 1,020,430 ----------- Retail Stores -- 0.2% Jean Coutu Group PJC, Inc. Sr. Sub. Notes 8.50% due 8/01/14............... 150,000 145,688 Jostens Holding Corp. Sr. Disc. Notes 10.25% due 12/01/13(8).......... 190,000 138,700 ----------- 284,388 ----------- Telecommunications -- 0.2% Empresa Brasileira De Telcom Guaranteed Sr. Notes, Series B 11.00% due 12/15/08............. 25,000 27,625 Intelsat, Bermuda Ltd Sr. Notes 8.63% due 1/15/15*.............. 175,000 178,500 Telecom Italia Capital SA Guaranteed Sr. Notes 4.00% due 1/15/10*.............. 74,000 70,745 ----------- 276,870 -----------
44 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Utilities -- 0.6% Calpine Canada Energy Finance, ULC Guaranteed Sr. Notes 8.50% due 5/01/08................. $ 350,000 $ 248,500 Chivor SA Notes 9.75% due 12/30/14*............... 100,000 102,000 Cia de Saneamento Basico do Estado de Sao Paulo Notes 12.00% due 6/20/08*............... 75,000 82,875 Scottish Power, PLC Notes 5.38% due 3/15/15................. 72,000 71,828 Scottish Power, PLC Bonds 5.81% due 3/15/25................. 340,000 336,976 ----------- 842,179 ----------- Total Foreign Bonds & Notes (cost $42,340,442)................ 43,802,547 ----------- U.S. GOVERNMENT OBLIGATIONS -- 7.9% U.S Treasury Bonds -- 2.0% 5.38% due 2/15/31.................. 2,399,000 2,614,629 ----------- U.S. Treasury Notes -- 5.9% 2.00% due 8/31/05.................. 7,478,000 7,446,450 3.13% due 1/31/07.................. 67,000 66,241 3.50% due 2/15/10.................. 196,000 190,235 3.63% due 1/15/10.................. 53,000 51,731 4.00% due 2/15/15.................. 98,000 94,157 ----------- 7,848,814 ----------- Total U.S. Government Obligations (cost $10,428,417)................ 10,463,443 ----------- U.S. GOVERNMENT AGENCY -- 11.9% Federal Home Loan Mortgage Corporation -- 4.2% 3.75% due 3/03/08.................. 310,000 307,233 4.50% due 2/01/20.................. 298,786 292,752 5.00% due 9/01/18.................. 796,322 797,615 5.00% due 5/01/34.................. 1,123,173 1,099,665 5.00% due 2/01/35.................. 2,691,188 2,634,861 6.00% due 12/01/31................. 393,575 403,346 6.50% due 5/01/29.................. 15,918 16,569 7.00% due 6/01/29.................. 25,794 27,198 8.50% due 5/01/08.................. 35,507 37,147 10.00% due 5/15/20(4).............. 33,111 33,099 11.57% due 6/15/21(3)(4)........... 21,614 417 ----------- 5,649,902 ----------- Federal National Mortgage Association -- 7.6% 0.45% due 10/17/36(2)(3)(4)........ 3,518,596 47,458 0.54% due 3/17/20(2)(3)(4)......... 1,222,306 10,173 0.84% due 6/25/38(2)(3)(4)......... 3,312,351 144,511 1.32% due 2/25/35(2)(3)(4)......... 1,782,376 63,491 4.50% due 6/01/19.................. 727,056 711,488 4.50% due 2/01/35.................. 349,197 331,584 5.00% due 6/01/19.................. 691,942 691,920 5.50% due 3/01/18.................. 1,020,000 1,040,483 5.50% due 7/01/19.................. 664,888 678,047
Principal Amount** Value Security Description /Shares (Note 2) ------------------------------------------------------------ Federal National Mortgage Association (continued) 5.50% due 1/01/29................. $ 13,238 $ 13,331 5.50% due 6/01/29................. 200,525 201,693 5.50% due 6/01/34................. 1,838,490 1,842,416 5.50% due 3/01/35................. 793,851 795,596 6.00% due 2/01/32................. 189,382 193,825 6.00% due 5/01/34................. 38,433 39,294 6.00% due 10/01/34................ 970,623 992,367 6.00% TBA due Dec................. 1,020,000 1,042,312 6.50% due 4/01/34................. 624,977 648,872 6.50% due 2/01/35................. 399,662 414,920 7.50% due 1/01/30................. 20,683 22,145 7.50% due 9/01/30................. 5,064 5,419 8.00% due 11/01/28................ 45,638 49,177 8.80% due 1/25/19(4).............. 63,805 68,622 10.40% due 4/25/19(4)............. 11,938 13,171 13.00% due 11/15/15............... 12,943 14,515 ----------- 10,076,830 ----------- Government National Mortgage Association -- 0.1% 7.50% due 7/15/27................. 31,761 34,127 7.50% due 10/15/27................ 130,172 139,867 ----------- 173,994 ----------- Total U.S. Government Agency (cost $16,303,151)............... 15,900,726 ----------- COMMON STOCK -- 3.9% Broadcasting & Media -- 0.0% Ono Finance, PLC*(6).............. 100 0 ----------- Energy Services -- 0.3% Trico Marine Services, Inc.+...... 20,000 425,000 ----------- Entertainment Products -- 0.0% Magna Entertainment Corp.+........ 7,300 44,822 ----------- Leisure & Tourism -- 0.3% Aztar Corp.+...................... 2,200 62,832 Boyd Gaming Corp.................. 2,900 151,235 Isle Capri Casinos, Inc.+......... 2,300 61,042 MGM Mirage, Inc.+................. 2,075 146,952 ----------- 422,061 ----------- Machinery -- 0.1% NES Rentals Holding, Inc.+........ 19,435 193,961 ----------- Real Estate Investment Trusts -- 0.2% Meristar Hospitality Corp.+....... 31,820 222,740 National Health Investors, Inc.... 4,100 106,518 ----------- 329,258 ----------- Telecommunications -- 3.0% Alamosa Holdings, Inc.+........... 24,721 288,494 Dobson Communications Corp.+...... 270 545 IMPSAT Fiber Networks, Inc.+...... 4,019 25,722 iPCS, Inc.+....................... 59,130 1,957,203 IWO Holdings, Inc.+............... 50,781 1,574,211 Telewest Global, Inc.+............ 6,202 110,334 ----------- 3,956,509 ----------- Total Common Stock (cost $2,974,729)................ 5,371,611 -----------
45 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Value Security Description Shares (Note 2) --------------------------------------------------------------------- PREFERRED STOCK -- 0.7% Broadcasting & Media -- 0.2% Paxson Communications Corp. 14.25%(11)........ 35 238,875 ----------- Financial Services -- 0.4% Merrill Lynch & Co., Inc. 3.65%............... 4,321 107,463 General Electric Capital Corp. 4.50%(14)...... 16,000 360,000 TCR Holdings, Class B(6)...................... 570 6 TCR Holdings, Class C(6)...................... 314 3 TCR Holdings, Class D(6)...................... 827 8 TCR Holdings, Class E(6)...................... 1,711 17 ----------- 467,497 ----------- Retail Stores -- 0.1% GNC Corp. 12.00%(11).......................... 100 80,000 Rent-Way, Inc.(6)(13)......................... 4 48,658 ----------- 128,658 ----------- Telecommunications -- 0.0% Dobson Communications Corp. 13.00%............ 25 17,500 ----------- Total Preferred Stock (cost $955,672).............................. 852,530 ----------- RIGHTS -- 0.1% Government Agency -- 0.1% United Mexico States VRR -- Class C(6)........ 1,400,000 18,900 United Mexico States VRR -- Class D(6)........ 1,400,000 34,300 United Mexico States VRR -- Class E(6)........ 1,400,000 30,100 ----------- 83,300 ----------- Total Rights (cost $0).................................... 83,300 ----------- WARRANTS+ -- 0.0% Broadcasting & Media -- 0.0% Knology Holdings, Inc. Expires 10/22/07* (strike price $0.10)(6)(9)......... 1,500 375 ----------- Telecommunications -- 0.0% GT Group Telecom, Inc. Expires 02/01/10* (strike price $0.00)(6)(9)......... 150 2 Leap Wireless International, Inc. Expires 04/15/10* (strike price $96.80)(6)(9)........ 500 0 Leap Wireless, Inc. Expires 04/15/10* (strike price $96.80)(6)(9).......................... 350 0 ----------- 2 ----------- Total Warrants (cost $10,031)............................... 377 ----------- Total Long-Term Investment Securities (cost $114,818,539).......................... 118,243,283 ----------- SHORT-TERM INVESTMENT SECURITIES -- 5.7% Time Deposit with State Street Bank & Trust Co. 1.30% due 04/01/05(16)............. 1,538,000 1,538,000 Time Deposit with State Street Bank & Trust Co. 2.25% due 04/01/05(16)............. 6,096,000 6,096,000 ----------- Total Short-term Securities (cost $7,634,000)............................ 7,634,000 -----------
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------- REPURCHASE AGREEMENT -- 1.9% State Street Bank & Trust Co. Joint Repurchase Agreement(15)(16)....... $ 2,465,000 $ 2,465,000 ------------ TOTAL INVESTMENTS -- (cost $124,917,539)@............... 96.2% 128,342,283 Other assets less liabilities......... 3.8% 5,053,829 ----------- ------------ NET ASSETS -- 100.0% $133,396,112 =========== ============ U.S. GOVERNMENT AGENCIES SOLD SHORT -- (1.5%) Federal Home Loan Mortgage Corporation -- (1.5%) 5.00% TBA due Dec. (proceeds $2,043,891).............. (2,100,000) (2,054,062) ------------
- -------- + Non-income producing security * Securities exempt from registration under Rule 144A of the Securities Act of 1933. The Portfolio has no rights to demand registration of these securities. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, the aggregate value of these securities was $10,711,133 representing 8.0% of net assets. Unless otherwise indicated, these securities are not considered to be illiquid. ** In United States dollars unless otherwise indicated AUD --Australian Dollar HUF --Hungarian Forint CAD --Canadian Dollar JPY --Japanese Yen COP --Columbian Peso MXN --Mexican Peso DKK --Danish Krone PLN --Polish Zloty EUR --Euro SEK --Swedish Krona GBP --Pound Sterling ZAR --South African Rand @ See Note 5 for cost of investments on a tax basis. (1) Commercial Mortgage-Backed Security (2) Variable rate security -- the rate reflected is as of March 31, 2005; maturity date reflects next reset date. (3) Interest only (4) Collateralized Mortgage Obligation (5) Bond in default. (6) Fair valued security; see Note 1. (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 March 31, 2005. (8) Security is a "step-up" bond where the coupon rate increases or steps up at a predetermined rate. Rate shown reflects the increased rate. (9) Illiquid Security. (10) Bond in default and company has filed Chapter 11 subsequent to March 31, 2005. (11) PIK ("Payment in Kind") Security. Payment made with additional securities in lieu of cash. (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. The Fund has no right to demand registration of these securities. The securities are valued pursuant to Note 2. Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is 46 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued) generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of March 31, 2005, the Strategic Bond Fund held the following restricted securities:
Acquisition Acquisition Market % of Name Date Shares Cost Value Net Assets - ---- ----------- ------ ----------- ------- ---------- Rent-Way Preferred Stock...... 05/29/2003 3 $25,000 $34,756 0.03% Rent-Way Preferred Stock...... 05/19/2004 1 $10,000 $13,902 0.01% ------- ---- $48,658 0.04% ======= ====
(14) Security is a "step-up" preferred stock where the dividend rate increases or steps up at a predetermined rate. The rate reflected is as of March 31, 2005. (15) See Note 2 for details of Joint Repurchase Agreement. (16) The security or a portion thereof represents collateral for TBAs. TBA -- Securities purchased on a forward commitment basis with an appropriate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. VRR -- Value Recovery Right Open Forward Foreign Currency Contracts
Gross Unrealized Contract In Delivery Appreciation to Deliver Exchange For Date (Depreciation) ---------------------------- CAD* 2,710,000 USD 2,186,101 05/04/2005 $(54,733) USD 2,199,675 CAD 2,710,000 05/04/2005 41,159 -------- Net Unrealized Appreciation (Depreciation)... $(13,574) ========
- -------- * Represents open forward currency contracts and offsetting or partially offsetting open forward foreign currency contracts that do not have additional market risk but have continued counterparty settlement risk. CAD -- CanadianDollar USD -- UnitedStates Dollar See Notes to Financial Statements 47 SunAmerica High Yield Bond Fund PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited) Industry Allocation* Telecommunications...................... 15.7% Broadcasting & Media.................... 12.1% Leisure & Tourism....................... 11.8% Utilities............................... 10.9% Financial Services...................... 10.4% Energy Sources.......................... 7.3% Chemicals............................... 3.9% Forest Products......................... 3.5% Real Estate Investment Trusts........... 2.4% Retail Stores........................... 2.3% Energy Services......................... 2.2% Business Services....................... 2.1% Food, Beverage & Tobacco................ 1.9% Health Services......................... 1.9% Pharmaceuticals......................... 1.8% Metals & Mining......................... 1.6% Machinery............................... 1.1% Communication Equipment................. 1.0% Medical Products........................ 1.0% Insurance............................... 0.9% Electronics............................. 0.8% Household & Personal Products........... 0.7% Retail.................................. 0.5% Restaurants............................. 0.4% Aerospace & Military Technology......... 0.3% Automotive.............................. 0.3% Transportation.......................... 0.3% Internet Content........................ 0.2% Apparel & Textiles...................... 0.1% Computers & Business Equipment.......... 0.1% Entertainment Products.................. 0.1% ---- 99.5% ====
Credit Quality+# BBB..................................... 1.7% BB...................................... 12.3% B....................................... 39.1% CCC..................................... 26.4% CC...................................... 0.7% C....................................... 0.6% Not Rated@.............................. 19.2% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source: Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 48 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- BONDS & NOTES -- 74.4% Aerospace & Military Technology -- 0.3% DeCrane Aircraft Holdings Guaranteed Sr. Sub. Notes, Series B 12.00% due 9/30/08.................. $1,700,000 $1,071,000 ---------- Apparel & Textiles -- 0.1% Warnaco, Inc. Sr. Notes 8.88% due 6/15/13................... 350,000 375,375 ---------- Automotive -- 0.3% Diamond Triumph Auto Glass, Inc. Guaranteed Sr. Sub. Notes 9.25% due 4/01/08(1)(9)............. 820,000 574,000 Exide Corp. Term Loan 10.00% due 4/15/05+(1)(9)........... 1,650,000 0 Stanadyne Corp. Sr. Sub. Notes 10.00% due 8/15/14.................. 250,000 257,500 ---------- 831,500 ---------- Broadcasting & Media -- 9.6% Adelphia Communications Corp. Sr. Notes 10.25% due 6/15/11+(2)(3)........... 2,100,000 1,937,250 Affinity Group, Inc. Sr. Sub. Notes 9.00% due 2/15/12................... 975,000 1,023,750 AMC Entertainment, Inc. Sr. Sub. Notes 8.00% due 3/01/14................... 50,000 47,750 Charter Communications Holdings, LLC Sr. Notes 9.63% due 11/15/09.................. 2,525,000 1,975,813 Charter Communications Holdings, LLC Sr. Disc. Notes 9.92% due 4/01/11(4)................ 3,375,000 2,590,312 Charter Communications Holdings, LLC Sr. Notes 10.00% due 5/15/11.................. 450,000 345,375 Charter Communications Holdings, LLC Sr. Notes 10.25% due 1/15/10.................. 375,000 300,938 Charter Communications Holdings, LLC Sr. Notes 10.75% due 10/01/09................. 2,075,000 1,701,500 Charter Communications Holdings, LLC Sr. Notes 11.13% due 1/15/11.................. 4,875,000 3,936,562 Coleman Cable, Inc. Sr. Notes 9.88% due 10/01/12*................. 450,000 459,000 Fisher Communications, Inc. Sr. Notes 8.63% due 9/15/14................... 1,150,000 1,239,125 Haights Cross Operating Co. Guaranteed Sr. Notes 11.75% due 8/15/11.................. 775,000 869,938 Insight Communications Co., Inc. Sr. Disc. Notes 12.25% due 2/15/11(4)............... 3,875,000 3,855,625
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------------- Broadcasting & Media (continued) Liberty Media Corp. Sr. Notes 5.70% due 5/15/13............................ $2,800,000 $ 2,639,084 Ono Finance, PLC Sub. Debenture zero coupon due 5/31/09*(1)(9)(12)........... 500 0 Paxson Communications Corp. Guaranteed Sr. Sub. Notes 12.25% due 1/15/09(4)........................ 3,350,000 3,115,500 Sinclair Broadcast Group, Inc. Sr. Sub. Notes 8.00% due 3/15/12............................ 650,000 663,000 Telex Communications, Inc. Sec. Notes 11.50% due 10/15/08.......................... 300,000 328,500 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 8.75% due 1/15/14............................ 1,050,000 994,875 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 10.00% due 3/01/11(5)........................ 2,300,000 2,351,750 ----------- 30,375,647 ----------- Business Services -- 2.1% Davita, Inc. Sr. Sub. Notes 7.25% due 3/15/15*........................... 825,000 808,500 Di Finance Subordinated, LLC Division Capital Corp. Sr. Sub. Notes 9.50% due 2/15/13*........................... 825,000 801,281 Mobile Mini, Inc. Sr. Notes 9.50% due 7/01/13............................ 575,000 646,875 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 9/01/10........................... 1,950,000 2,076,750 Seitel, Inc. Sr. Notes 11.75% due 7/15/11........................... 1,750,000 1,968,750 Service Corp. International Sr. Notes 6.75% due 4/01/16............................ 400,000 384,000 ----------- 6,686,156 ----------- Chemicals -- 2.3% Equistar Chemicals LP Sr. Notes 10.63% due 5/01/11........................... 1,225,000 1,375,063 Foamex LP/Foamex Capital Corp. Guaranteed Sr. Sec. Notes 10.75% due 4/01/09........................... 350,000 308,000 Huntsman International, LLC Sr. Sub. Notes 7.38% due 1/01/15*........................... 685,000 681,575 Huntsman, LLC Sr. Note 11.50% due 7/15/12*.......................... 82,000 95,940
49 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Chemicals (continued) Lyondell Chemical Co. Guaranteed Sr. Sec. Notes 9.50% due 12/15/08................. $2,175,000 $2,327,250 Phosphate Resource Partners LP Sr. Notes 7.00% due 2/15/08.................. 725,000 746,750 Rockwood Specialties Group Sub. Notes 7.50% due 11/15/14*................ 925,000 925,000 Rockwood Specialties, Inc. Sr. Sub. Notes 10.63% due 5/15/11................. 400,000 444,000 Westlake Chemical Corp. Sr. Notes 8.75% due 7/15/11.................. 471,000 515,156 ---------- 7,418,734 ---------- Communication Equipment -- 1.0% Rural Cellular Corp. Sr. Sub. Notes 9.63% due 5/15/08.................. 1,550,000 1,480,250 Rural Cellular Corp. Sr. Sub. Notes 9.75% due 1/15/10.................. 1,875,000 1,715,625 ---------- 3,195,875 ---------- Computers & Business Equipment -- 0.1% Activant Solutions, Inc. Sr. Notes 9.09% due 6/30/05*(6).............. 225,000 229,500 ---------- Electronics -- 0.5% Freescale Semiconductor, Inc. Sr. Notes 7.13% due 7/15/14.................. 875,000 914,375 Sanmina-SCI Corp. Sub. Notes 6.75% due 3/01/13*................. 625,000 585,938 ---------- 1,500,313 ---------- Energy Services -- 1.0% Frontier Oil Corp. Sr. Notes 6.63% due 10/01/11................. 400,000 398,000 Hanover Compressor Co. Sub. Notes zero coupon due 3/31/07(12)........ 300,000 264,000 Oslo Seismic Services, Inc. 1st Mtg. Notes 8.28% due 6/01/11.................. 1,910,344 2,016,848 Pride International, Inc. Sr. Notes 7.38% due 7/15/14.................. 350,000 371,000 ---------- 3,049,848 ---------- Energy Sources -- 7.2% Belden & Blake Corp. Sr. Sec. Notes 8.75% due 7/15/12.................. 450,000 446,625
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- Energy Sources (continued) Calpine Corp. 2nd Priority Sr. Sec. Notes 8.75% due 7/15/13*.......................... $7,055,000 $ 5,326,525 Chesapeake Energy Corp. Sr. Notes 6.88% due 1/15/16........................... 275,000 277,750 Chesapeake Energy Corp. Guaranteed Sr. Notes 7.75% due 1/15/15........................... 150,000 158,625 Chesapeake Energy Corp. Guaranteed Sr. Notes 9.00% due 8/15/12........................... 175,000 193,156 Citgo Petroleum Corp. Sr. Notes 6.00% due 10/15/11.......................... 550,000 543,125 Colorado Interstate Gas Co. Debentures 6.85% due 6/15/37........................... 1,000,000 1,014,739 Encore Acquisition Co. Sr. Sub. Notes 6.25% due 4/15/14........................... 300,000 300,000 Encore Acquisition Co. Guaranteed Sr. Notes 8.38% due 6/15/12........................... 550,000 594,000 EXCO Resources, Inc. Guaranteed Notes 7.25% due 1/15/11........................... 475,000 482,125 KCS Energy, Inc. Sr. Notes 7.13% due 4/01/12........................... 375,000 378,750 Mission Energy Holding Co. Sr. Sec. Notes 13.50% due 7/15/08.......................... 9,100,000 10,920,000 Roseton Danskammer Guaranteed Pass-Thru Certificates, Series B 7.67% due 11/08/16.......................... 2,575,000 2,369,000 ----------- 23,004,420 ----------- Financial Services -- 9.8% Affinity Group, Inc. Sr. Sub. Notes 10.00% due 2/15/15*......................... 950,000 988,000 Arch Western Finance LLC Sr. Notes 6.75% due 7/01/13........................... 900,000 904,500 Bear Island Paper Co., LLC Sr. Notes, Series B 10.00% due 12/01/07......................... 1,950,000 1,971,937 Borden United States Finance Corp. Sr. Sec. Notes 9.00% due 7/15/14*.......................... 800,000 864,000 Chukchansi Economic Development Authority Sr. Notes 14.50% due 6/15/09*......................... 3,225,000 3,966,750 Consolidated Communications Holdings Sr. Notes 9.75% due 4/01/12*.......................... 1,400,000 1,484,000
50 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) ESI Tractebel Acquisition Corp. Guaranteed Bonds 7.99% due 12/30/11.............. $ 781,000 $ 828,443 H & E Equipment Services, LLC Guaranteed Sr. Sec. Notes 11.13% due 6/15/12.............. 950,000 1,068,750 Hilcorp Finance Co. Sr. Notes 10.50% due 9/01/10*............. 2,000,000 2,220,000 Huntsman Advanced Materials, LLC Sr. Sec. Notes 11.00% due 7/15/10*............. 1,175,000 1,348,313 iPCS, Inc. 14.00% due 7/15/10*+(1)(2)(9)... 11,825,000 0 MedCath Holdings Corp. Sr. Notes 9.88% due 7/15/12............... 950,000 1,021,250 Muzak, LLC/ Muzak Finance Corp. Guaranteed Sr. Sub. Notes 9.88% due 3/15/09............... 525,000 236,250 Nexstar Finance Holdings, LLC Sr. Disc. Notes 11.38% due 4/01/13(4)........... 2,675,000 2,099,875 NGC Corp. Capital Trust I Guaranteed Sub. Notes, Series B 8.32% due 6/01/27............... 7,325,000 5,786,750 PCA, LLC Sr. Notes 11.88% due 8/01/09.............. 2,000,000 1,680,000 Px Escrow Corp. Sr. Disc. Notes 9.63% due 2/01/06(4)............ 2,175,000 2,109,750 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 11.50% due 6/01/10.............. 1,121,000 1,289,150 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 12.88% due 10/15/08............. 1,125,000 1,333,125 ----------- 31,200,843 ----------- Food, Beverage & Tobacco -- 1.9% North Atlantic Holding Co., Inc. Sr. Disc. Notes 12.25% due 3/01/14(4)........... 2,050,000 389,500 North Atlantic Trading, Inc. Sr. Notes 9.25% due 3/01/12............... 1,400,000 1,050,000 Stater Brothers Holdings, Inc. Sr. Notes 8.13% due 6/15/12............... 1,425,000 1,375,125 Wornick Co. Sr. Sec. Notes 10.88% due 7/15/11.............. 3,025,000 3,161,125 ----------- 5,975,750 ----------- Forest Products -- 2.9% Boise Cascade LLC Sr. Notes 5.54% due 4/15/05*(6)........... 2,450,000 2,499,000
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- Forest Products (continued) Constar International, Inc. Notes 6.17% due 5/16/05*(6).............. $ 425,000 $ 425,000 Constar International, Inc. Sr. Sub. Notes 11.00% due 12/01/12................ 321,000 321,000 Crown Cork & Seal Co., Inc. Debentures 8.00% due 4/15/23.................. 1,750,000 1,688,750 FiberMark, Inc. Sr. Notes 10.75% due 4/15/11+(2)............. 750,000 547,500 Pliant Corp. Sr. Sub. Notes 13.00% due 6/01/10................. 1,675,000 1,415,375 Speciality Paperboard, Inc. Sr. Notes 9.38% due 10/15/06+(2)............. 3,275,000 2,349,812 ---------- 9,246,437 ---------- Health Services -- 1.7% Community Health Systems, Inc. Sr. Sub. Notes 6.50% due 12/15/12*................ 750,000 731,250 Concentra Operating Corp. Sr. Sub. Notes 9.13% due 6/01/12.................. 375,000 397,500 Pediatric Services Of America, Inc. Guaranteed Sr. Sub. Notes 10.00% due 4/15/08(1).............. 200,000 202,000 Psychiatric Solutions, Inc. Sr. Sub. Notes 10.63% due 6/15/13................. 433,000 480,630 Team Health, Inc. Sr. Sub. Notes 9.00% due 4/01/12.................. 1,500,000 1,466,250 Tenet Healthcare Corp. Sr. Notes 6.50% due 6/01/12.................. 1,025,000 943,000 Tenet Healthcare Corp. Sr. Notes 9.25% due 2/01/15*................. 750,000 748,125 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13................. 575,000 564,937 ---------- 5,533,692 ---------- Household & Personal Products -- 0.1% Revlon Consumer Products Corp. Sr. Sub. Notes 8.63% due 2/01/08.................. 475,000 438,188 ---------- Insurance -- 0.3% Crum & Forster Holdings Corp. Sr. Notes 10.38% due 6/15/13................. 775,000 868,000 ---------- Internet Content -- 0.2% Spheris, Inc. Sr. Sub. Notes 11.00% due 12/15/12*............... 475,000 484,500 ----------
51 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------------- BONDS & NOTES (continued) Leisure & Tourism -- 8.7% American Airlines, Inc. Pass-Thru Certificates, Series 2001-1, Class A2 6.82% due 5/23/11............................. $2,150,000 $1,998,499 American Airlines, Inc. Pass Through Certificate Series 1991 Class B1 9.71% due 1/30/07*(9)......................... 533,434 490,760 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-2 6.88% due 7/02/09............................. 2,761,936 2,653,576 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-1 7.20% due 1/02/19............................. 645,195 640,550 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class B 7.63% due 1/02/15............................. 5,437,354 4,406,389 Atlas Air, Inc. Pass-Thru Certificates, Series 2000-1 8.71% due 1/02/19............................. 2,781,331 2,854,035 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class C 8.77% due 1/02/11(2).......................... 574,341 303,551 Atlas Air, Inc. Pass-Thru Certificates Series 2000-1, Class B 9.06% due 7/02/17............................. 1,084,465 994,031 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-1, Class C 6.95% due 8/02/09............................. 664,660 545,981 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-2, Class C1 7.73% due 3/15/11............................. 340,319 250,147 Delta Airlines, Inc. Pass-Thru Certificate Series 2000 1 Class 2A 7.57% due 5/18/12............................. 2,350,000 2,190,461 Delta Airlines, Inc. Notes 7.90% due 12/15/09............................ 1,100,000 423,500 Delta Airlines, Inc. Sr. Notes 9.50% due 11/18/08*........................... 900,000 738,000 Delta Airlines, Inc. Sr. Notes 10.00% due 8/15/08............................ 3,175,000 1,397,000 Hollywood Casino Shreveport Capital Corp. Guaranteed Sr. Sec. Notes 13.00% due 8/01/06+(2)........................ 2,311,000 1,906,575 Leslie's Poolmart, Inc. Sr. Notes 7.75% due 2/01/13*............................ 300,000 303,000 Riviera Holdings Corp. Guaranteed Sr. Notes 11.00% due 6/15/10............................ 800,000 884,000
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Leisure & Tourism (continued) True Temper Sports, Inc. Guaranteed Sr. Sub. Notes 8.38% due 9/15/11.................. $1,400,000 $ 1,302,000 Turning Stone Casino Resort Sr. Notes 9.13% due 12/15/10*................ 600,000 623,250 Waterford Gaming, LLC Sr. Notes 8.63% due 9/15/12*................. 1,169,000 1,227,450 Worldspan LP Sr. Notes 9.02% due 5/16/05*(6).............. 1,550,000 1,503,500 ----------- 27,636,255 ----------- Machinery -- 0.6% Briggs & Stratton Corp. Guaranteed Sr. Notes 8.88% due 3/15/11.................. 475,000 541,500 Dresser Rand Group, Inc. Sr. Sub. Notes 7.38% due 11/01/14*................ 775,000 775,000 Park Ohio Industries, Inc. Sr. Sub. Notes 8.38% due 11/15/14*................ 700,000 675,500 Venture Holdings Co., LLC Guaranteed Sr. Sub. Notes 11.00% due 6/01/07+(2)(3).......... 550,000 3,438 ----------- 1,995,438 ----------- Medical Products -- 1.0% CDRV Investors, Inc. Sr. Disc. Notes 9.63% due 1/01/15*(4).............. 925,000 557,312 Encore Medical IHC, Inc. Sr. Sub. Notes 9.75% due 10/01/12*................ 625,000 609,375 Inverness Medical Innovations, Inc. Sr. Sub. Notes 8.75% due 2/15/12.................. 875,000 888,125 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11................ 1,000,000 1,025,000 ----------- 3,079,812 ----------- Metals & Mining -- 1.5% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11................. 600,000 642,000 Associated Materials, Inc. Sr. Disc. Notes 11.25% due 3/01/14(4).............. 1,550,000 1,077,250 CSN Islands IX Corp. Sr. Notes 10.00% due 1/15/15*................ 100,000 103,000 CSN Islands VII Corp. Guaranteed Notes 10.75% due 9/12/08*................ 225,000 246,937 CSN Islands VIII Corp. Guaranteed Sr. Notes 9.75% due 12/16/13*................ 1,500,000 1,545,000
52 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- BONDS & NOTES (continued) Metals & Mining (continued) Eagle-Picher, Inc. Sr. Notes 9.75% due 9/01/13+(2)(7)............... $ 475,000 $ 304,000 Renco Metals, Inc. Guaranteed Sr. Notes 11.50% due 7/01/03+(1)(2)(3)(8)(9)(12). 2,150,000 0 Ryerson Tull, Inc. Sr. Notes 8.25% due 12/15/11..................... 275,000 261,250 Ryerson Tull, Inc. Notes 9.13% due 7/15/06...................... 500,000 515,000 ---------- 4,694,437 ---------- Pharmaceuticals -- 0.8% Curative Health Services, Inc. Sr. Notes 10.75% due 5/01/11..................... 1,125,000 925,313 NeighborCare, Inc. Sr. Sub. Notes 6.88% due 11/15/13..................... 1,600,000 1,680,000 ---------- 2,605,313 ---------- Real Estate Investment Trusts -- 1.6% National Health Investors, Inc. Notes 7.30% due 7/16/07...................... 1,120,000 1,162,403 Omega Healthcare Investors, Inc. Notes 6.95% due 8/01/07...................... 225,000 231,750 Senior Housing Properties Trust Sr. Notes 8.63% due 1/15/12(5)................... 1,675,000 1,850,875 Trustreet Properties, Inc. Sr. Notes 7.50% due 4/01/15*..................... 1,925,000 1,915,375 ---------- 5,160,403 ---------- Restaurants -- 0.4% Sbarro, Inc. Sr. Notes 11.00% due 9/15/09..................... 1,225,000 1,182,125 ---------- Retail -- 0.5% Rent-Way, Inc. Sr. Sec. Notes 11.88% due 6/15/10..................... 1,500,000 1,661,250 ---------- Retail Stores -- 1.3% Alderwoods Group, Inc. Sr. Notes 7.75% due 9/15/12*..................... 425,000 434,562 Carriage Services, Inc. Notes 7.88% due 1/15/15*..................... 1,034,000 1,039,170 Collins & Aikman Floor Cover Guaranteed Sr. Notes 9.75% due 2/15/10...................... 480,000 511,200 Rite Aid Corp. Debentures 6.88% due 8/15/13...................... 400,000 372,000
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Retail Stores (continued) Saks, Inc. Guaranteed Notes 7.00% due 12/01/13................... $ 950,000 $ 859,750 Saks, Inc. Guaranteed Notes 9.88% due 10/01/11................... 725,000 783,000 ----------- 3,999,682 ----------- Telecommunications -- 7.2% AirGate PCS, Inc. Sr. Sec. Notes 9.38% due 9/01/09*................... 1,258,300 1,333,798 Alaska Communications Holdings, Inc. Guaranteed Sr. Notes 9.88% due 8/15/11.................... 147,000 155,085 American Cellular Corp., Series B Sr. Notes 10.00% due 8/01/11................... 3,775,000 3,473,000 Cincinnati Bell, Inc. Sr. Notes 7.00% due 2/15/15*................... 275,000 261,250 Cincinnati Bell, Inc. Unsub. Notes 7.25% due 6/15/23.................... 225,000 216,000 Cincinnati Bell, Inc. Sr. Sub. Notes 8.375% due 1/15/14................... 300,000 295,500 Cincinnati Bell, Inc. Sr. Sub. Notes 8.38% due 1/15/14*................... 75,000 73,875 Dobson Communications Corp. Sr. Notes 10.88% due 7/01/10................... 25,000 22,125 Intelsat, Ltd Sr. Disc. Notes 9.25% due 2/01/15*(4)................ 1,325,000 838,063 LCI International, Inc. Sr. Notes 7.25% due 6/15/07.................... 10,425,000 9,825,562 Qwest Corp. Debentures 7.13% due 11/15/43................... 2,150,000 1,816,750 Qwest Corp. Debentures 7.25% due 10/15/35................... 1,375,000 1,234,062 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 8.75% due 11/15/11................... 1,150,000 802,125 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 9.38% due 2/01/11.................... 1,325,000 937,438 TSI Telecommunications Services, Inc. Guaranteed Sr. Sub. Notes 12.75% due 2/01/09................... 300,000 334,500 US West Communications, Inc. Debentures 7.50% due 6/15/23.................... 250,000 231,250 Valor Telecommunications Sr. Notes 7.75% due 2/15/15*................... 900,000 895,500 ----------- 22,745,883 -----------
53 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Transportation -- 0.3% Petroleum Helicopters, Inc. Guaranteed Sr. Notes, Series B 9.38% due 5/01/09................... $ 275,000 $ 292,188 Progress Rail Services Corp. Sr. Notes 7.75% due 4/01/12*.................. 825,000 825,000 ---------- 1,117,188 ---------- Utilities -- 9.1% AES Corp. Sr. Sub. Debentures 8.88% due 11/01/27.................. 1,350,000 1,431,000 AES Drax Energy, Ltd. Sec. Notes 11.50% due 8/30/10+(2).............. 4,460,000 22,300 Cincinnati Bell Telephone Co. Guaranteed Notes 7.18% due 12/15/23.................. 375,000 375,000 Cincinnati Bell Telephone Co. Guaranteed Notes 7.20% due 11/29/23.................. 1,525,000 1,525,000 Dynegy Holdings, Inc. Sr. Notes 8.75% due 2/15/12................... 875,000 837,813 Edison Mission Energy Sr. Notes 9.88% due 4/15/11................... 1,400,000 1,617,000 El Paso Natural Gas Co. Sr. Notes 7.63% due 8/01/10................... 725,000 760,244 El Paso Natural Gas Co. Debentures 8.63% due 1/15/22................... 2,125,000 2,413,216 El Paso Production Holding Co. Guaranteed Sr. Notes 7.75% due 6/01/13................... 3,025,000 3,062,812 Ferrellgas L. P. Sr. Notes 6.75% due 5/01/14................... 1,800,000 1,755,000 Mirant Corp. Sr. Notes 7.90% due 7/15/09*+(2).............. 9,525,000 7,596,187 Pacific Energy Partners LP Sr. Notes 7.13% due 6/15/14................... 850,000 879,750 Reliant Energy, Inc. Sr. Sec. Notes 6.75% due 12/15/14.................. 2,025,000 1,888,312 Reliant Resources, Inc. Sr. Sec. Notes 9.50% due 7/15/13................... 500,000 543,750 Tiverton/Rumford Power Assoc., Ltd. Guaranteed Notes 9.00% due 7/15/18*.................. 1,092,712 819,534 Transcontinental Gas Pipe Line Corp. Sr. Notes 8.88% due 7/15/12................... 725,000 850,063
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Utilities (continued) Williams Cos, Inc. Notes 7.88% due 9/01/21................. $2,425,000 $ 2,643,250 ------------ 29,020,231 ------------ Total Bonds & Notes (cost $232,273,521)............... 236,383,795 ------------ CONVERTIBLE BONDS -- 3.3% Energy Services -- 0.1% Unisource Energy Corp. 4.50% due 3/01/35*................ 200,000 210,000 ------------ Health Services -- 0.2% Genesis Healthcare Corp. 2.50% due 3/15/25*................ 675,000 696,938 ------------ Leisure & Tourism -- 1.6% Eldorado Resorts, LLC 9.00% due 4/15/14(1).............. 2,675,000 2,675,000 Six Flags, Inc. 4.50% due 5/15/15................. 2,625,000 2,431,406 ------------ 5,106,406 ------------ Pharmaceuticals -- 0.1% Elan Capital Corp. 6.50% due 11/10/08(9)............. 425,000 301,750 ------------ Utilities -- 1.3% Calpine Corp. 4.75% due 11/15/23................ 6,025,000 4,081,937 ------------ Total Convertible Bonds (cost $11,442,880)................ 10,397,031 ------------ FOREIGN BONDS & NOTES -- 9.1% Broadcasting & Media -- 1.8% CF Cable TV, Inc. Sr. Notes 9.13% due 7/15/07................. 400,000 405,885 Rogers Cable, Inc. Sr. Sec. Notes 5.50% due 3/15/14................. 525,000 481,688 Rogers Cable, Inc. Sr. Sec. Priority Notes 6.25% due 6/15/13................. 75,000 72,750 Rogers Cable, Inc. Bonds 8.75% due 5/01/32................. 450,000 522,000 Telenet Group Holding NV Sr. Disc. Notes 11.50% due 6/15/14*(4)............ 5,625,000 4,253,906 ------------ 5,736,229 ------------ Chemicals -- 1.6% Rhodia SA Sr. Sub. Notes 8.88% due 6/01/11................. 5,175,000 5,032,687 ------------
54 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Electronics -- 0.3% Magnachip Semiconductor SA Sr. Sub. Notes 8.00% due 12/15/14*................... $ 525,000 $ 536,813 Stats Chippac, Ltd. Sr. Notes 6.75% due 11/15/11*................... 325,000 307,125 ---------- 843,938 ---------- Energy Sources -- 0.1% North America Energy Partners, Inc. Sr. Notes 8.75% due 12/01/11.................... 525,000 472,500 ---------- Financial Services -- 0.6% AAC Group Holding Corp. Sr. Disc. Notes 10.25% due 10/01/12*(4)............... 925,000 666,000 Bluewater Finance, Ltd. Guaranteed Sr. Notes 10.25% due 2/15/12.................... 1,075,000 1,166,375 ---------- 1,832,375 ---------- Forest Products -- 0.6% Abitibi-Consolidated, Inc. Notes 8.55% due 8/01/10..................... 1,475,000 1,497,125 Abitibi-Consolidated, Inc. Debentures 8.85% due 8/01/30..................... 575,000 539,063 ---------- 2,036,188 ---------- Household & Personal Products -- 0.3% Vitro Envases Norteamerica SA Sr. Sec. Notes 10.75% due 7/23/11*................... 950,000 969,000 ---------- Insurance -- 0.6% Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.................... 1,850,000 1,794,500 ---------- Leisure & Tourism -- 0.4% Grupo Posadas SA De CV Sr. Notes 8.75% due 10/04/11*................... 1,075,000 1,144,875 ---------- Metals & Mining -- 0.1% International Utility Structures, Inc. Sr. Sub. Notes 10.75% due 2/01/08+(1)(2)(9)(10)...... 2,150,000 279,500 Vitro SA de CV Notes 11.75% due 11/01/13*.................. 175,000 166,250 ---------- 445,750 ---------- Pharmaceuticals -- 0.9% Elan Finance, PLC Sr. Notes 6.49% due 5/15/05*(5)(6).............. 1,225,000 918,750 Elan Finance, PLC Sr. Notes 7.75% due 11/15/11*................... 2,450,000 1,831,375 ---------- 2,750,125 ----------
Principal Value Security Description Amount/Shares (Note 2) --------------------------------------------------------------------- Retail Stores -- 0.8% Jean Coutu Group PJC, Inc. Sr. Sub. Notes 8.50% due 8/01/14........................ $1,725,000 $ 1,675,406 Jostens Holding Corp. Sr. Disc. Notes 10.25% due 12/01/13(4)................... 1,275,000 930,750 ----------- 2,606,156 ----------- Telecommunications -- 0.5% Empresa Brasileira De Telcom Guaranteed Sr. Notes, Series B 11.00% due 12/15/08...................... 150,000 165,750 Intelsat, Bermuda Ltd Sr. Notes 8.63% due 1/15/15*....................... 1,500,000 1,530,000 ----------- 1,695,750 ----------- Utilities -- 0.5% AES Chivor Notes 9.75% due 12/30/14*...................... 875,000 892,500 Cia de Saneamento Basico do Estado de Sao Paulo Notes 12.00% due 6/20/08*...................... 550,000 607,750 ----------- 1,500,250 ----------- Total Foreign Bonds & Notes (cost $31,077,775)....................... 28,860,323 ----------- LOAN AGREEMENTS -- 0.3% Household & Personal Products -- 0.3% Vitro Envases Norteamerica SA 10.25% due 2/26/10(9) (Cost $998,182).......................... 998,182 1,005,668 ----------- COMMON STOCK -- 11.4% Energy Services -- 1.1% Trico Marine Services, Inc.+.............. 168,000 3,570,000 ----------- Energy Sources -- 0.0% Tri-Union Development Corp.(1)(9)......... 1,061 11 Tribo Petroleum Corp.+(1)(9).............. 1,800 18 ----------- 29 ----------- Entertainment Products -- 0.1% Magna Entertainment Corp.+................ 58,300 357,962 ----------- Leisure & Tourism -- 1.1% Aztar Corp.+.............................. 18,500 528,360 Boyd Gaming Corp.......................... 22,600 1,178,590 Capital Gaming International, Inc.+(1)(9). 77 0 Isle Capri Casinos, Inc.+................. 18,700 496,298 MGM Mirage, Inc.+......................... 17,225 1,219,874 ----------- 3,423,122 ----------- Machinery -- 0.5% NES Rentals Holding, Inc.+................ 150,124 1,498,238 ----------- Real Estate Investment Trusts -- 0.8% Meristar Hospitality Corp.+............... 209,550 1,466,850 National Health Investors, Inc............ 36,300 943,074 ----------- 2,409,924 -----------
55 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Value Security Description Shares (Note 2) --------------------------------------------------------------------- COMMON STOCK (continued) Telecommunications -- 7.8% Alamosa Holdings, Inc.+...................... $141,290 $ 1,648,854 Dobson Communications Corp.+................. 147,082 297,106 iPCS, Inc.+.................................. 336,972 11,153,773 IWO Holdings, Inc.+.......................... 346,093 10,728,883 Telewest Global, Inc.+....................... 56,210 999,976 ------------ 24,828,592 ------------ Total Common Stock (cost $20,975,567).......................... 36,087,867 ------------ PREFERRED STOCK -- 1.0% Broadcasting & Media -- 0.6% Paxson Communications Corp. 14.25%(11)....... 297 2,027,025 ------------ Retail Stores -- 0.2% GNC Corp. 12.00%(11)......................... 725 580,000 Rent-Way, Inc.(1)(9)(13)..................... 13 180,729 ------------ 760,729 ------------ Telecommunications -- 0.2% Dobson Communications Corp. 13.00%........... 925 647,500 ------------ Total Preferred Stock (cost $4,139,448)........................... 3,435,254 ------------ WARRANTS+ -- 0.0% Broadcasting & Media -- 0.0% Knology Holdings, Inc.* Expires 10/22/07 (strike price $0.10)(9).... 4,500 1,125 ------------ Business Services -- 0.0% Maxim Crane Works Holdings, Inc. Expires 01/20/10 (strike price $30.05)(9)... 1,587 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (strike price $33.04)(9)... 1,619 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (strike price $31.58)(9)... 1,182 0 ------------ 0 ------------ Telecommunications -- 0.0% GT Group Telecom, Inc.* Expires 02/01/10 (strike price $0.00)(1)(9). 2,650 27 KMC Telecom Holdings, Inc. Expires 01/31/08 (strike price $0.01)(1)(9). 3,650 0 Leap Wireless International, Inc.* Expires 04/15/10 (strike price $96.80)(1)(9)................. 2,250 0 Leap Wireless, Inc.* Expires 04/15/10 (strike price $96.80)(1)(9)................. 1,950 0 ------------ 27 ------------ Total Warrants (cost $1,333,505)........................... 1,152 ------------ Total Long-Term Investment Securities -- 99.3% (cost $302,240,878)......................... 316,171,090 ------------ TOTAL INVESTMENTS -- (cost $302,240,878)@........................ 99.5% 316,171,090 Other assets less liabilities.................. 0.5 1,722,442 -------- ------------ NET ASSETS -- 100.0% $317,893,532 ======== ============
Shares/ Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ BONDS & NOTES SOLD SHORT -- (0.4%) Forest Products -- (0.4%) Ainsworth Lumber Co- Ltd. 6.75% 3/15/14 (proceeds $1,185,188).......... $(1,225,000) $(1,163,750) -----------
- -------- + Non-income producing security * Securities exempt from registration under Rule 144A of the Securities Act of 1933. The Portfolio has no rights to demand registration of these securities. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, the aggregate value of these securities was $65,835,028 representing 20.7% of net assets. Unless otherwise indicated, these securities are not considered to be illiquid. @ See Note 5 for cost of investments on a tax basis. (1) Fair valued security. (2) Bond in default. (3) Company has filed Chapter 11 bankruptcy. (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) The security or a portion thereof represents collateral for securities sold short. (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 March 31, 2005. (7) Bond in default and company has filed Chapter 11 bankruptcy subsequent to 3/31/05. (8) Security is subject to litigation, the outcome of which is still to be determined. (9) Illiquid security. (10) Company has filed foreign bankruptcy. (11) PIK ("Payment-in-Kind") Security. Payment made with additional securities in lieu of cash. (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 High Yield Bond Fund may invest in restricted securities. The Fund has no right to demand registration of these securities. The securities are valued pursuant to Note 2. Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of March 31, 2005, the High Yield Bond Fund held the following restricted securities:
Acquisition Acquisition Market % of Name Date Shares Cost Value Net Assets ---- ----------- ------ ----------- -------- ---------- Rent-Way Preferred Stock 5/29/2003 10 $100,000 $139,022 0.04% Rent-Way Preferred Stock 5/19/2004 3 $ 30,000 $ 41,707 0.01% -------- ---- $180,729 0.05% ======== ====
See Notes to Financial Statements 56 SunAmerica Tax Exempt Insured Fund PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited) Industry Allocation* Ohio.................................... 21.1% Massachusetts........................... 12.2% Indiana................................. 9.0% New York................................ 7.9% Missouri................................ 7.7% Alabama................................. 6.5% California.............................. 5.8% New Jersey.............................. 5.6% New Mexico.............................. 4.9% South Carolina.......................... 4.3% Washington.............................. 4.1% Texas................................... 3.9% South Dakota............................ 3.1% Arizona................................. 2.7% Georgia................................. 0.2% Registered Investment Companies......... 0.1% ---- 99.1% ====
Credit Quality+# AAA..................................... 80.8% AA...................................... 4.6% A....................................... 10.7% BBB..................................... 3.9% ----- 100.0% =====
- -------- * Calculated as a percentage on net assets. + Source Standard & Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 57 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- MUNICIPAL BONDS -- 90.2% Alabama -- 6.5% Jefferson County, Alabama Sewer, Capital Improvement, Series D, 5.25% due 02/01/26(1)......................... $4,500,000 $ 4,961,790 ----------- Arizona -- 2.7% Phoenix, Arizona Civic Improvement Corp. Wastewater Systems Revenue, Junior Lien, 5.00% due 07/01/28(1)......................... 2,000,000 2,073,240 ----------- California -- 3.5% California State, Variable Purpose, 5.50% due 04/01/28............................ 2,500,000 2,694,650 ----------- Georgia -- 0.2% Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/09(1)......................... 60,000 66,936 Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/13(1)......................... 85,000 98,781 ----------- 165,717 ----------- Indiana -- 9.0% Indiana Health Facility Financing Authority Revenue, Ascension Health Subordinated Credit A, 5.00% due 11/01/10............................ 3,000,000 3,186,900 Indiana Transportation Finance Authority Highway Revenue, Series A, 5.25% due 06/01/26(1)......................... 3,500,000 3,730,160 ----------- 6,917,060 ----------- Massachusetts -- 12.2% Commonwealth of Massachusetts, Consolidated Loan Series B, 5.75% due 06/01/15(1)......................... 2,000,000 2,090,600 Massachusetts State Water Resources Authority, Series A, 5.00% due 08/01/24(1)......................... 3,910,000 4,099,791 University Massachusetts Building Authority Project Revenue, Series 4, 5.25% due 11/01/27(1)......................... 3,000,000 3,190,140 ----------- 9,380,531 ----------- Missouri -- 7.4% Sikeston, Missouri, Electric Revenue, 6.20% due 06/01/10(1)......................... 5,000,000 5,651,650 ----------- New Jersey -- 5.6% New Jersey Economic Development Authority, School Facilities Construction, Series C, 5.00% due 06/15/12(1)......................... 4,000,000 4,341,400 ----------- New Mexico -- 4.9% New Mexico Finance Authority Transportation, Sr. Lien Series A, 5.25% due 06/15/21(1)......................... 3,500,000 3,766,630 ----------- New York -- 7.9% New York State Thruway Authority Second General Highway And Bridge Trust Fund, Series A, 5.25% due 04/01/15(1)......................... 2,500,000 2,759,575
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------- New York (continued) New York, New York, Series D, 5.00% due 11/01/28.............................. $2,000,000 $ 2,048,860 Niagara Falls, New York, Public Improvement, General Obligation, 7.50% due 03/01/13(1)........................... 445,000 554,781 Niagara Falls, New York, Public Improvement, General Obligation, 7.50% due 03/01/14(1)........................... 555,000 704,079 ----------- 6,067,295 ----------- Ohio -- 21.1% Cincinnati, Ohio City School District, Classroom Facilities Construction & Improvement, 5.00% due 12/01/24(1)........................... 3,000,000 3,132,630 Cuyahoga County, Ohio Revenue, Cleveland Clinic Health Systems, Series A, 5.75% due 01/01/24.............................. 2,000,000 2,170,360 Franklin County, Ohio Hospital Revenue, OhioHealth Corp., Series C, 5.25% due 05/15/23.............................. 3,000,000 3,163,860 Ohio State Special Obligation, Elementary And Secondary Education Capital Facilities A, 5.00% due 06/01/06(1)........................... 3,000,000 3,079,950 Olentangy Local School District Ohio, School Facilities Construction & Improvement, Series A, 5.25% due 12/01/27(1)........................... 3,250,000 3,453,613 Woodridge, Ohio Local School District, General Obligation, 6.80% due 12/01/14(1)........................... 1,000,000 1,177,770 ----------- 16,178,183 ----------- South Dakota -- 3.1% South Dakota State Health & Educational Facilities Revenue, McKennan Hospital, 6.25% due 07/01/10(1)........................... 2,120,000 2,383,770 ----------- Texas -- 2.0% San Antonio Texas Hotel Occupancy Texas, Unrefunded Capital Appreciation Gonzalez, zero coupon due 08/15/17(1)..................... 2,700,000 1,536,712 ----------- 1,536,712 ----------- Washington -- 4.1% Washington State Public Power Supply, Refunding Series A, 6.00% due 07/01/06(1)........................... 3,000,000 3,115,560 ----------- Total Long-Term Investment Securities -- 90.2% (cost $65,831,939).............................. 69,234,188 ----------- SHORT-TERM INVESTMENT SECURITIES -- 8.9% California -- 2.3% California Housing Finance Agency Revenue, Amt Home Mortgage Series U, 2.35% due 04/06/05(1)(2)........................ 1,800,000 1,800,000 ----------- Missouri -- 0.3% Missouri Higher Education Loan, Student Loan Revenue, Series B, 2.35% due 04/06/05(1)(2)........................ 200,000 200,000 -----------
58 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value Security Description Amount/Shares (Note 2) ---------------------------------------------------------------------- SHORT-TERM INVESTMENT SECURITIES (continued) South Carolina -- 4.3% Piedmont Municipal Power Agency South Carolina Electric Revenue, Refunding Subseries B6, 2.30% due 04/06/05(1)(2).................. $2,800,000 $ 2,800,000 South Carolina, Jobs Economic Development Authority Economic Development Revenue, Adjustable Zeuna Staeker U.S.A. Inc., 2.35% due 04/06/05(2)..................... 485,000 485,000 ----------- 3,285,000 ----------- Texas -- 1.9% Brownsville, Texas Utility System Revenue, Series A, 2.27% due 04/06/05(1)(2).................. 125,000 125,000 San Antonio Texas Water Revenue, Refunding Subordinated Series A, 2.27% due 04/06/05(1)(2).................. 1,300,000 1,300,000 ----------- 1,425,000 ----------- Registered Investment Companies -- 0.1% SSGA Municipal Money Market Fund, Tax Free Money Market Fund.................... 85,119 85,119 ----------- Total Short-Term Investment Securities (cost $6,795,119)......................... 6,795,119 ----------- TOTAL INVESTMENTS -- (cost $72,627,058)........................ 99.1% 76,029,307 Other assets less liabilities................ 0.9 703,737 ---------- ----------- NET ASSETS -- 100.0% $76,733,044 ========== ===========
- -------- @ See Note 3 for cost of investments on a tax basis. (1) All or part of this security is insured by the Financial Security Assurance ("FSA"), Financial Guaranteed Insurance Corp. ("FGIC"), Municipal Bond Insurance Association ("MBIA"), or American Municipal Bond Assurance Corp. ("AMBAC"). The aggregate value is $62,194,558 or 81.1% of Net Assets. (2) Variable rate security -- the rate reflected is as of March 31, 2005; maturity date reflects next reset date. See Notes to Financial Statements 59 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 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 -- March 31, 2005 -- (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 as 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. Class A, Class B and Class C shares each 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements: Security Valuations: Stocks are generally valued based upon closing sales prices reported on recognized securities exchanges or, for listed securities having no sales 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 Fund if acquired within 60 days of maturity or, if already held by the Fund on the 60th day, are amortized to maturity based on the value determined on the 61st day. Securities for which 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 -- March 31, 2005 -- (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 March 31, 2005, 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 0.20% $ 147,000 GNMA...................... 7.77 5,783,000 Strategic Bond............ 3.31 2,465,000
As of such date, the repurchase agreement in that joint account and the collateral thereof were as follows: State Street Bank & Trust Co., dated March 31, 2005, bearing interest at a rate of 2.40% per annum, with a principal amount of $74,416,000, a repurchase price of $74,420,961 and a maturity date of April 1, 2005. The repurchase agreement is collateralized by the following:
Interest Rate/ Type of collateral Discount Yield Maturity Date Principal Amount Market Value - ------------------ -------------- ------------- ---------------- ------------ U.S. Treasury Bills 2.57% 04/28/05 $65,040,000 $64,909,920 U.S. Treasury Bills 2.77 06/30/05 8,725,000 8,663,925 U.S. Treasury Notes 1.25 05/31/05 2,330,000 2,333,856
In addition, at March 31, 2005, 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 14.40% $ 36,000,000 GNMA...................... 40.00 100,000,000
As of such date, the repurchase agreement in that joint account and the collateral therefore were as follows: UBS Warburg, LLC, dated March 31, 2005, bearing interest at a rate of 2.60% per annum, with a principal amount of $250,000,000, a repurchase price of $250,018,056 and a maturity date of April 1, 2005. The repurchase agreement is collateralized by the following:
Interest Rate/ Type of collateral Discount Yield Maturity Date Principal Amount Market Value - ------------------ -------------- ------------- ---------------- ------------ U.S Treasury Inflation Index Note 3.50% 01/15/11 $150,000,000 $184,312,500 U.S Treasury Inflation Index Note 3.38 01/15/12 58,481,000 70,688,909
Securities Transactions, Investment Income, Expenses, Dividends and Distributions to Shareholders: Security transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are calculated on the identified cost basis. Interest income, is accrued daily except when collection is not expected. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. For financial statement purposes, the Funds amortize all premiums and accrete all discounts on fixed income securities. 62 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued) Funds which earn foreign income and capital gains may be subject to foreign withholding taxes at various rates. Under applicable foreign law, a withholding tax may be imposed on interest, dividends, and capital gains at various rates. 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 by these reclassifications. Each Fund intends to comply with the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all of their net income (taxable and tax exempt) to their shareholders. Therefore, no federal tax provision is required. Each Fund is considered a separate entity for tax purposes. Investment Securities Loaned: During the year ended March 31, 2005, 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 year ended March 31, 2005, $1,489 and $172 of broker rebates were reclassified to interest expense for the U.S. Government Securities Fund and the GNMA Fund, respectively. As with other extensions of credit, should the borrower of the securities fail financially, the Funds may bear the risk of delay in recovery or may be subject to replacing the loaned securities by purchasing them with the cash collateral held, which may be less than 100% of the market value of such securities at the time of replacement. At March 31, 2005 the U.S. Government Securities Fund and the GNMA Fund had $29,400,000 and $49,600,000, in securities on loan, respectively. 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 -- March 31, 2005 -- (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: Each Fund may engage in "short sales against the box." A short sale is against the box to the extent that the Fund contemporaneously owns, or has the right to obtain without payment, securities identical to those sold short. In addition, the High Yield Bond Fund ("Fund") may sell a security it does not own in anticipation of a decline in the market value of that security "short sales." To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing it at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. Until the Fund replaces a borrowed security, the Fund will maintain daily a segregated account, containing cash or liquid securities, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short. Liabilities for securities sold short are reported at market value in the financial statements. Such liabilities are subject to off balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short could exceed the liabilities recorded in the Statement of Assets and Liabilities. The Fund bears the risk of potential inability of the broker to meet their obligation to perform. Mortgage-Backed Dollar Rolls: During the year ended March 31, 2005, 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 -- March 31, 2005 -- (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
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
- -------- @ See Note 1 65 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued) 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
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 year ended March 31, 2005, SAAMCo has agreed to reimburse expenses as follows:
Fund Amount ---- -------- Core Bond Class A................. $162,631 Core Bond Class B................. 15,983 Core Bond Class C................. 18,512 Core Bond Class I................. 1,278 Core Bond Class Z................. 21,230 U.S. Government Securities Class A 724,432 U.S. Government Securities Class B 133,022 U.S. Government Securities Class C 57,927 GNMA Class A...................... 569,423 GNMA Class B...................... 211,538 GNMA Class C...................... 124,042 GNMA Class X...................... -- Strategic Bond Class A............ 15,085 Strategic Bond Class B............ 8,091 Strategic Bond Class C............ 6,585 Strategic Bond Class I@........... 1,462 High Yield Bond Class A........... 95,022 High Yield Bond Class B........... 47,068 High Yield Bond Class C........... 53,695 High Yield Bond Class Z........... 44,292 Tax Exempt Insured Class A........ -- Tax Exempt Insured Class B........ -- Tax Exempt Insured Class C........ 5,550
- -------- @ See Note 1 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 66 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued) 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 year ended March 31, 2005, 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. For the period ended March 31, 2005, SACS earned fees (see Statement of Operations) based upon the aforementioned rates. SACS receives sales charges on each Fund's Class A shares, portions of which are reallowed to affiliated broker-dealers and non-affiliated broker-dealers. SACS also receives the proceeds of contingent deferred sales charges paid by investors in connection with certain redemptions of Class A, Class B and Class C shares. SACS has advised the Funds that for the year ended March 31, 2005, 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 $ 35,725 $ 14,996 $ 14,895 $128,015 GNMA...................... 228,277 106,024 82,110 639,657 Strategic Bond............ 381,761 83,274 234,661 161,670 High Yield Bond........... 509,725 74,120 351,689 267,507 Core Bond................. 28,079 9,467 13,940 12,481 Tax Exempt Insured........ 55,260 25,972 19,521 37,515
Class C -------------- Contingent Deferred Sales Fund Charges - ---- -------------- U.S. Government Securities $12,333 GNMA...................... 78,716 Strategic Bond............ 16,063 High Yield Bond........... 64,722 Core Bond................. 2,359 Tax Exempt Insured........ 4,146
67 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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. Except for Class Z shares the Service Agreement permits the Funds to compensate SAFS for services rendered, based upon an annual rate of 0.22% of average daily net assets, which is approved annually by the Trustees. For the year ended March 31, 2005 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 March 31, 2005 -------- -------------- Core Bond Class A................. $339,756 $31,310 Core Bond Class B................. 11,229 920 Core Bond Class C................. 10,618 899 Core Bond Class I................. 4,616 291 U.S. Government Securities Class A 411,525 32,906 U.S. Government Securities Class B 67,345 5,081 U.S. Government Securities Class C 26,523 1,891 GNMA Class A...................... 743,465 63,235 GNMA Class B...................... 257,403 19,586 GNMA Class C...................... 147,874 10,456 GNMA Class X...................... 18,371 196 Strategic Bond Class A............ 102,512 10,526 Strategic Bond Class B............ 78,883 7,037 Strategic Bond Class C............ 54,115 6,311 High Yield Bond Class A........... 269,058 25,908 High Yield Bond Class B........... 148,252 12,331 High Yield Bond Class C........... 125,394 12,835 Tax Exempt Insured Class A........ 142,086 11,658 Tax Exempt Insured Class B........ 26,360 1,706 Tax Exempt Insured Class C........ 12,916 1,068
At March 31, 2005, affiliate funds of the SunAmerica Focused Funds, Inc. owned 93%, 8%, 49% and 7% of the outstanding Class A Shares of Core Bond Fund, U.S. Government Securities Fund, GNMA Fund, and High Yield Bond Fund, respectively. At March 31, 2005, AIGGIC, an indirect wholly owned subsidiary of AIG, owned 100% of the outstanding Class Z shares of the Core Bond Fund and the High Yield Bond Fund. SAAMCO, an indirect wholly owned subsidiary of AIG, owned 11% of the outstanding Class X shares of the GNMA Fund. Note 4. Purchases and Sales of Investment Securities The aggregate cost of purchases and proceeds from sales and maturities of long-term investments during the year ended March 31, 2005 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).. $276,650,842 $ -- $ 1,858,122 $172,310,359 $295,332,028 $110,757,510 Sales (excluding U.S. government securities).. 286,708,823 -- -- 159,136,425 262,178,354 118,425,526 Purchases of U.S. government securities... 138,064,981 559,995,161 990,064,481 48,473,369 -- 2,206,820 Sales of U.S. government securities.............. 138,850,928 545,798,883 1,032,826,977 35,747,107 -- 2,248,680
68 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued) Note 5. Federal Income Taxes The following details the tax basis of distributions as well as the components of distributable earnings. The tax basis components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences primarily arising from wash sales, Fund mergers, treatment of defaulted securities and derivative transactions.
Distributable Earnings Tax Distributions For the year ended March 31, 2005 For the year ended March 31, 2005 ------------------------------------------ ------------------------------------ Long-term Unrealized Ordinary Gains/Capital Appreciation Ordinary Long-term Fund Income Loss Carryforward (Depreciation) Income Capital Gains Tax Exempt - ---- ---------- ----------------- -------------- ----------- ------------- ---------- Core Bond................. $ 142,616 $ (829,951) $(1,772,744) $ 8,948,407 $2,408,211 $ -- U.S. Government Securities 204,257 (8,261,085) (3,082,198) 7,670,802 -- -- GNMA...................... 1,981,521 175,792 (3,451,608) 14,716,823 -- -- Strategic Bond............ 898,394 (31,658,823) 3,121,797 6,802,946 -- -- High Yield Bond........... 584,405 (108,983,290) 13,407,456 25,444,795 -- -- Tax Exempt Insured........ 67,635 307,430 3,404,127 543,743 516,966 2,496,568
Tax Distributions For the year ended March 31, 2004 ----------------------------------- Ordinary Long-Term Fund Income Capital Gain Tax Exempt ---- ----------- ------------ ---------- Core Bond................. $ 9,138,662 $ -- $ -- U.S. Government Securities 8,059,030 -- -- GNMA...................... 21,435,452 2,290,943 -- Strategic Bond............ 5,771,394 -- -- High Yield Bond........... 23,821,470 -- -- Tax Exempt Insured........ 1,670,225 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. Core Government Tax Exempt Bond Securities GNMA Strategic High Yield Insured Fund Fund Fund Bond Fund Bond Fund Fund ------------ ------------ ------------ ------------ ------------ ----------- Cost......................................... $207,568,560 $250,952,586 $682,654,270 $125,204,944 $302,784,889 $72,625,180 ============ ============ ============ ============ ============ =========== Appreciation................................. 1,401,523 1,231,933 1,211,062 6,954,340 29,855,750 3,532,992 Depreciation................................. (3,162,158) (4,314,131) (4,662,670) (3,817,000) (16,469,549) (128,865) ------------ ------------ ------------ ------------ ------------ ----------- Unrealized appreciation (depreciation) -- net $ (1,760,635) $ (3,082,198) $ (3,451,608) $ 3,137,340 $ 13,386,201 $ 3,404,127 ============ ============ ============ ============ ============ ===========
As of March 31, 2005, for Federal income tax purposes, the Fund's indicated below have capital loss carryforwards, which expire in the year indicated, which are available to offset future capital gains, if any:
Capital Loss Carryforward ------------------------------------------------------------------------ Fund 2007 2008 2009 2010 2011 2012 2013 - ---- ---------- ----------- ----------- ----------- ----------- ---- -------- Core Bond................. $ -- $ -- $ -- $ -- $ -- $-- $829,951 U.S. Government Securities 997,836 7,263,249 -- -- -- -- -- Strategic Bond............ 4,743,799 4,808,434 5,601,470 6,464,175 10,040,945 -- -- High Yield Bond........... -- 16,495,916 11,242,842 32,249,552 48,994,980 -- --
Included in the capital loss carryforward amounts at March 31, 2005 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.......... 4,735,632 North American High Yield Bond Fund........... 8,284,211
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 -- March 31, 2005 -- (continued) The Fund's indicated below utilized capital loss carryforwards, which offset net taxable gains realized in the year ended March 31, 2005:
Capital Loss Fund Utilized - ---- ------------ U.S. Government Securities Fund $ 380,510 GNMA Fund...................... 333,039 Strategic Bond Fund............ 4,611,883 High Yield Bond Fund........... 10,252,262
As of March 31, 2005, U.S. Government Securities Fund had $832,102 of capital loss carryforwards that expired. For the period ended March 31, 2005, the reclassifications arising from book/tax differences resulted in increases (decreases) that were primarily due to net paydown adjustments, expiration of capital loss carry forward amounts and treatment of foreign currency to the components of net assets as follows:
Accumulated Accumulated Undistributed Net Undistributed Net Investment Income Realized Gain (Loss) (Loss) Capital Paid-in ----------------- ----------------- --------------- Core Bond Fund................. $ 552,125 $ (552,125) $ -- U.S. Government Securities Fund 463,007 369,095 (832,102) GNMA Fund...................... 1,341,797 (1,341,797) -- Strategic Bond Fund............ 893,820 (893,820) -- High Yield Bond Fund........... 23,804 (23,804) -- Tax Exempt Insured Fund........ 6,778 (6,778) --
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 For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ ------------------------- ---------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Shares sold......... 4,080,810* $ 41,782,506* 12,157,837** $126,019,538** 75,896 $ 777,468 230,410 $ 2,390,630 Reinvested shares... 820,201 8,427,158 166,183 1,724,538 16,776 171,948 9,326 96,502 Shares redeemed..... (1,771,439) (18,067,712) (954,192) (9,874,674) (143,212)* (1,463,512)* (396,722)** (4,094,764)** ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Net increase (decrease)......... 3,129,572 $ 32,141,952 11,369,828 $117,869,402 (50,540) $ (514,096) (156,986) $ (1,607,632) ========== ============ ========== ============ ======== =========== ========== ============ Core Bond Fund --------------------------------------------------------------------------------------------------------- Class C+ Class I --------------------------------------------------- --------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ ------------------------- ---------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Shares sold......... 92,653 $ 949,365 311,782 $ 3,235,617 51,056 $ 524,372 794,446 $ 8,247,779 Reinvested shares... 19,166 196,692 8,152 84,453 10,987 112,886 48,795 505,629 Shares redeemed..... (150,429) (1,541,314) (352,835) (3,659,430) (217,983) (2,213,708) (2,544,683) (26,520,623) ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Net increase (decrease)......... (38,610) $ (395,257) (32,901) $ (339,360) (155,940) $(1,576,450) (1,701,442) $(17,767,215) ========== ============ ========== ============ ======== =========== ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of $8,993 shares of Class B shares in the amount of $91,677 to 8,970 shares of Class A shares in the amount of $91,677. ** 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 -- March 31, 2005 -- (continued)
Core Bond Fund ----------------------------------------------------- Class Z ----------------------------------------------------- For the For the year ended year ended March 31, 2005 March 31, 2004 ------------------------ --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Shares sold.... -- $ -- -- $ -- Reinvested shares........ 225,039 2,309,447 638,407 6,619,027 Shares redeemed (4,558,155) (46,800,000) (19,744,617) (204,600,000) ---------- ------------ ----------- ------------- Net increase (decrease).... (4,333,116) $(44,490,553) (19,106,210) $(197,980,973) ========== ============ =========== ============= U.S. Government Securities Fund -------------------------------------------------------------------------------------------------------------- Class A Class B ----------------------------------------------------- ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ --------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Shares sold.... 1,851,870* $ 17,318,940* 8,249,574** $ 79,163,236** 270,431 $ 2,539,712 604,504 $ 5,811,186 Reinvested shares........ 517,015 4,852,956 485,614 4,631,195 68,488 642,865 95,405 911,700 Shares redeemed (4,914,341) (46,091,272) (9,407,755) (89,858,298) (1,250,517)* (11,737,869)* (3,402,329)** (32,359,944)** ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Net increase (decrease).... (2,545,456) $(23,919,376) (672,567) $ (6,063,867) (911,568) $ (8,555,292) (2,702,420) $(25,637,058) ========== ============ =========== ============= ========== ============ ========== ============ U.S. Government Securities Fund ----------------------------------------------------- Class C+ ----------------------------------------------------- For the For the year ended year ended March 31, 2005 March 31, 2004 ------------------------ --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Shares sold.... 225,967 $ 2,132,586 769,814 $ 7,424,108 Reinvested shares........ 27,763 260,245 40,198 383,624 Shares redeemed (762,001) (7,152,432) (1,765,228) (16,815,629) ---------- ------------ ----------- ------------- Net increase (decrease).... (508,271) $ (4,759,601) (955,216) $ (9,007,897) ========== ============ =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 181,948 shares of Class B shares in the amount of $1,713,174 to 182,020 shares of Class A shares in the amount of $1,713,174. ** 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 -- March 31, 2005 -- (continued)
GNMA Fund -------------------------------------------------------------------------------------------------------------- Class A Class B ----------------------------------------------------- ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ --------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Shares sold. 6,894,773* $ 77,011,294* 20,547,588** $ 235,257,794** 508,758 $ 5,716,800 2,951,236 $ 34,058,784 Reinvested shares..... 796,791 8,909,301 1,035,426 11,718,293 173,434 1,942,448 377,158 4,280,751 Shares redeemed... (7,168,924) (80,162,014) (14,030,583) (159,555,489) (3,556,936)* (39,827,017)* (7,691,285)** (87,771,353)** ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Net increase (decrease). 522,640 $ 5,758,581 7,552,431 $ 87,420,598 (2,874,744) $(32,167,769) (4,362,891) $(49,431,818) ========== ============ =========== ============= ========== ============ ========== ============ GNMA Fund -------------------------------------------------------------------------------------------------------------- Class C+ Class I ----------------------------------------------------- ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ --------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Shares sold. 853,099 $ 9,604,217 3,729,057 $ 43,094,583 -- $ -- (126) $ (1,423) Reinvested shares..... 101,604 1,138,268 274,348 3,116,823 -- -- 78 877 Shares redeemed... (3,789,770) (42,453,144) (8,127,227) (92,785,359) -- -- (3,502) (39,640) ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Net increase (decrease). (2,835,067) $(31,710,659) (4,123,822) $ (46,573,953) -- $ -- (3,550) $ (40,186) ========== ============ =========== ============= ========== ============ ========== ============ GNMA Fund ----------------------------------------------------- Class X ----------------------------------------------------- For the For the year ended year ended March 31, 2005 March 31, 2004 ------------------------ --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Shares sold. 273,192 $ 3,065,920 407,941 $ 4,654,916 Reinvested shares..... 22,436 251,259 26,729 302,771 Shares redeemed... (946,348) (10,755,314) (49,150) (558,441) ---------- ------------ ----------- ------------- Net increase (decrease). (650,720) $ (7,438,135) 385,520 $ 4,399,246 ========== ============ =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 130,250 shares of Class B shares in the amount of $1,464,891 to 130,598 shares of Class A shares in the amount of $1,464,891. ** 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 -- March 31, 2005 -- (continued)
Strategic Bond Fund ------------------------------------------------------------------------------------------------------------ Class A Class B --------------------------------------------------- ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ ------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold.......... 6,957,950* $ 24,096,113* 4,819,218** $ 15,918,204** 3,302,013 $ 11,307,598 4,759,644 $ 15,630,339 Reinvested shares........ 532,965 1,826,684 467,498 1,542,884 359,941 1,230,161 333,984 1,103,198 Shares redeemed (3,331,876) (11,327,054) (4,479,867) (14,659,821) (3,556,677)* (12,132,722)* (3,552,293)** (11,726,594)** ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease).... 4,159,039 $ 14,595,743 806,849 $ 2,801,267 105,277 405,037 1,541,335 $ 5,006,943 ========== ============ ========== ============ ========== ============ ========== ============ Strategic Bond Fund ------------------------------------------------------------------------------------------------------------ Class C+ Class I --------------------------------------------------- ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ------------------------ ------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold.......... 5,570,700 $ 19,497,879 3,749,967 $ 12,469,971 -- $ -- -- $ -- Reinvested shares........ 243,819 839,417 188,761 626,355 29,881 99,113 70,772 233,826 Shares redeemed...... (1,723,947) (5,880,680) (2,151,437) (7,085,839) (1,122,765) (3,817,402) -- -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease).... 4,090,572 $ 14,456,616 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 457,044 shares of Class B shares in the amount of $1,587,294 to 456,684 shares of Class A shares in the amount of $1,587,294. ** 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 -- March 31, 2005 -- (continued)
High Yield Bond Fund --------------------------------------------------------------------------------------------------------------- Class A Class B ------------------------------------------------------ ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 -------------------------- -------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------ Shares sold.. 33,645,561* $ 144,289,277* 24,186,781** $ 97,119,896** 2,940,030 $ 12,724,157 8,482,068 $ 34,228,906 Reinvested shares...... 1,222,912 5,293,782 1,176,656 4,828,068 485,730 2,096,352 657,839 2,698,352 Shares redeemed.... (34,116,411) (147,909,905) (21,361,447) (86,944,156) (6,876,355)* (29,724,616)* (7,449,571)** (30,359,369)** ----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease).. 752,062 $ 1,673,154 4,001,990 $ 15,003,808 (3,450,595) $(14,904,107) 1,690,336 $ 6,567,889 =========== ============= =========== ============ ========== ============ ========== ============ High Yield Bond Fund --------------------------------------------------------------------------------------------------------------- Class C+ Class I ------------------------------------------------------ ------------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 -------------------------- -------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------ Shares sold.. 7,504,054 $ 32,828,182 10,265,844 $ 41,606,962 -- $ -- 50,125 $ 199,923 Reinvested shares...... 475,915 2,070,792 460,883 1,902,362 -- -- 227 905 Shares redeemed.... (5,742,182) (25,067,974) (5,858,398) (23,969,331) -- -- (54,097) (219,345) ----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease).. 2,237,787 $ 9,831,000 4,868,329 $ 19,539,993 -- $ -- (3,745) $ (18,517) =========== ============= =========== ============ ========== ============ ========== ============ High Yield Bond Fund ------------------------------------------------------ Class Z ------------------------------------------------------ For the For the year ended year ended March 31, 2005 March 31, 2004 -------------------------- -------------------------- Shares Amount Shares Amount ----------- ------------- ----------- ------------ Shares sold.. -- $ -- -- $ -- Reinvested shares...... 1,616,351 6,993,860 1,634,144 6,692,758 Shares redeemed.... -- -- -- -- ----------- ------------- ----------- ------------ Net increase (decrease).. 1,616,351 $ 6,993,860 1,634,144 $ 6,692,758 =========== ============= =========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 949,983 shares of Class B shares in the amount of $4,158,286 to 951,789 of shares of Class A shares in the amount of $4,158,286. ** 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 -- March 31, 2005 -- (continued)
Tax Exempt Insured Fund ---------------------------------------------------------------------------------------------------- Class A Class B ------------------------------------------------- ------------------------------------------------ For the For the For the For the year ended year ended year ended year ended March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004 ---------------------- ------------------------- ---------------------- ----------------------- Shares Amount Shares Amount Shares Amount Shares Amount -------- ------------ ---------- ------------ -------- ----------- -------- ----------- Shares sold.... 224,481* $ 2,913,673* 682,967** $ 9,118,210** 31,978 $ 416,668 114,501 $ 1,538,768 Reinvested shares........ 143,521 1,856,004 223,173 2,932,244 19,131 247,355 43,442 569,970 Shares redeemed (777,009) (10,040,254) (1,529,607) (20,408,255) (612,542)* (7,956,706)* (321,289)** (4,281,374)** -------- ------------ ---------- ------------ -------- ----------- -------- ----------- Net increase (decrease).... (409,007) $ (5,270,577) (623,467) $ (8,357,801) (561,433) $(7,292,683) (163,346) $(2,172,636) ======== ============ ========== ============ ======== =========== ======== =========== Tax Exempt Insured Fund ------------------------------------------------- Class C+ ------------------------------------------------- For the For the year ended year ended March 31, 2005 March 31, 2004 ---------------------- ------------------------- Shares Amount Shares Amount -------- ------------ ---------- ------------ Shares sold.... 104,291 $ 1,344,350 138,250 $ 1,836,415 Reinvested shares........ 9,966 128,971, 15,551 204,119 Shares redeemed (110,179) (1,429,778) (196,573) (2,629,076) -------- ------------ ---------- ------------ Net increase (decrease).... 4,078 $ 43,543 (42,772) $ (588,542) ======== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 104,915 shares of Class B shares in the amount of $1,365,087 to 104,980 shares of Class A shares in the amount of $1,365,087. ** 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 year ended March 31, 2005, the following Funds had borrowings:
Weighted Days Interest Average Debt Average Fund Outstanding Charges Utilized Interest - ---- ----------- -------- ------------ -------- High Yield Bond 22 $24,003 $12,825,223 2.45% Tax Exempt Insured 1 5 83,777 2.31
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 year ended March 31, 2005 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 AIG SunAmerica mutual funds (an "Eligible Trustee") retires after reaching age 60 but before age 70, or who has at least 5 years of consecutive service after reaching age 65 but before age 70, or dies while a Trustee, such person will be eligible to receive a 75 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued) 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 and expenses line on the Statement of Operations.
Retirement Retirement Retirement Plan Plan Plan Liability Expense Payments ---------- ---------- ---------- Fund As of March 31, 2005 - ---- -------------------------------- Core Bond................. $ 21,933 $3,022 $ 883 U.S. Government Securities 104,769 3,342 10,707 GNMA...................... 45,728 7,386 2,390 Strategic Bond............ 25,486 1,351 2,445 High Yield Bond........... 46,406 4,199 3,698 Tax Exempt Insured........ 31,863 1,215 3,002
76 SunAmerica Income Funds REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of SunAmerica Income Funds: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the 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, (constituting the six portfolios of the SunAmerica Income Funds hereafter referred to as the "Funds") at March 31, 2005, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Houston, Texas May 23, 2005 77 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- March 31, 2005 -- (unaudited) The following table contains basic information regarding the Trustees and Officers that oversee operations of the Funds and other investment companies within the Fund complex.
Number of Position Term of Funds in Name, Held With Office and Fund Complex Address and SunAmerica Length of Principal Occupations Overseen by Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) - ---------------------- ---------- -------------- ------------------------------------ ------------ TRUSTEE Jeffrey S. Burum Trustee 2004-present Founder and CEO of National 36 DOB: February 27, 1963 Housing Development Corp. Dr. Judith L. Craven Trustee 2001-present Retired. 76 DOB: October 6, 1945 William F. Devin Trustee 2001-present Retired. 76 DOB: December 30, 1938 Samuel M. Eisenstat Chairman 1986-present Attorney, solo practitioner. 46 DOB: March 7, 1940 of the Board Stephen J. Gutman Trustee 1986-present Partner and Member of Managing 46 DOB: May 10, 1943 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, AIG 85 DOB: January 23, 1954 SunAmerica Asset Management Corp. ("SAAMCo") (August 1995 to present); Director, AIG SunAmerica Capital Services, Inc. ("SACS") (August 1993 to present). William J. Shea(5) Trustee 2004-present President and CEO, Conseco, Inc. 46 DOB: February 9, 1948 (Financial Services) (2001 to 2004); Chairman of the Board of Centennial Technologies, Inc. (1998 to 2001); Vice Chairman, Bank Boston Corporation (1993 to 1998) OFFICERS Vincent M. Marra President 2004-present Senior Vice President and Chief N/A DOB: May 28, 1950 Operating Officer, SAAMCo (February 2003-present); Chief Administrative Officer and Chief Financial Officer, Carret & Co., LLC (June 2002 to February 2003); President, Bowne Digital Solutions (1999 to May 2002) Donna M. Handel Treasurer 2002-present Assistant Treasurer (1993 to 2002); N/A DOB: June 25, 1966 Senior Vice President, SAAMCo (December 2004 to present); Vice President, SAAMCo (1997 to December 2004)
Name, Address and Other Directorships Date of Birth* Held by Trustee(2) - ---------------------- ---------------------------------- TRUSTEE Jeffrey S. Burum None DOB: February 27, 1963 Dr. Judith L. Craven Director, A.G. Belo Corporation DOB: October 6, 1945 (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 Member of the Board of Governors, DOB: December 30, 1938 Boston Stock Exchange (1985- Present). Samuel M. Eisenstat Director, North European Oil DOB: March 7, 1940 Royalty Trust. Stephen J. Gutman None DOB: May 10, 1943 Peter A. Harbeck(3) None DOB: January 23, 1954 William J. Shea(5) None DOB: February 9, 1948 OFFICERS Vincent M. Marra N/A DOB: May 28, 1950 Donna M. Handel N/A DOB: June 25, 1966
- -------- * 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 (24 portfolios), VALIC Company II (15 funds), Seasons Series Trust (24 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 because he is an officer and director of the advisor and a director of the principal underwriter of the Trust. (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. (5) Effective November 30, 2004, William J. Shea began serving as a Trustee. Additional information concerning the Trustees is contained in the Statement of Additional Information and is available without charge by calling (800) 858-8850. 78 SunAmerica Income Funds SHAREHOLDER TAX INFORMATION -- March 31, 2005 -- (unaudited) Certain tax information regarding the SunAmerica Income Funds is required to be provided to shareholders based upon each Fund's income and distributions for the taxable periods ended March 31, 2005. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2005. The information necessary to complete your income tax returns will be included with your Form 1099-DIV to be received under separate cover in January 2006. During the year ended March 31, 2005 the Funds paid the following dividends per share along with the percentage of ordinary income dividends that qualified for the 70% dividends received deductions for corporations.
Net Net Net Long- Qualifying % for the Total Investment Short-Term Term 70% Dividends Dividends Income Capital Gains Capital Gains Received Deduction --------- ---------- ------------- ------------- -------------------- Core Bond Class A...................... $0.56 $0.43 $ -- $0.13 -- % Core Bond Class B...................... 0.49 0.36 -- 0.13 -- Core Bond Class C...................... 0.49 0.36 -- 0.13 -- Core Bond Class I...................... 0.57 0.44 -- 0.13 -- Core Bond Class Z...................... 0.62 0.49 -- 0.13 -- U.S. Government Securities Fund Class A 0.32 0.32 -- -- -- U.S. Government Securities Fund Class B 0.26 0.26 -- -- -- U.S. Government Securities Fund Class C 0.26 0.26 -- -- -- GNMA Fund Class A...................... 0.33 0.33 -- -- -- GNMA Fund Class B...................... 0.26 0.26 -- -- -- GNMA Fund Class C...................... 0.26 0.26 -- -- -- GNMA Fund Class X...................... 0.36 0.36 -- -- -- Strategic Bond Fund Class A............ 0.23 0.23 -- -- 0.57 Strategic Bond Fund Class B............ 0.21 0.21 -- -- 0.57 Strategic Bond Fund Class C............ 0.21 0.21 -- -- 0.57 High Yield Bond Fund Class A........... 0.34 0.34 -- -- 0.97 High Yield Bond Fund Class B........... 0.31 0.31 -- -- 0.97 High Yield Bond Fund Class C........... 0.31 0.31 -- -- 0.97 High Yield Bond Fund Class Z........... 0.37 0.37 -- -- 0.97 Tax Exempt Insured Class A............. 0.58 0.41* 0.09 0.08 -- Tax Exempt Insured Class B............. 0.49 0.32* 0.09 0.08 -- Tax Exempt Insured Class C............. 0.49 0.32* 0.09 0.08 --
- -------- * Tax exempt interest dividends For the year ended March 31, 2005, certain dividends paid by the Strategic Bond Fund and High Yield Bond Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, the following represents the maximum amount that may be considered qualified dividend income:
Portfolio Amount --------- -------- Strategic Bond Fund. $ 42,679 High Yield Bond Fund 276,814
79 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) As required by the Securities and Exchange Commission, the following graphs compare the performance of a $10,000 investment in the SunAmerica Income Funds' portfolios to a similar investment in an index. Please note that "inception" as used herein reflects the date on which a specific class of shares commenced operations. It is important to note that the SunAmerica Income Funds are professionally managed mutual funds while the indices are not available for investment and are unmanaged. The comparison is shown for illustrative purposes only. The graphs present the performance of the class of that particular Fund which has been in existence the longest. The performance of the other classes will vary based upon the difference in sales charges and fees assessed to shareholders of that class. 80 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) Core Bond Fund For the annual period ended March 31, 2005, the SunAmerica Core Bond Fund Class A returned 1.94% at NAV. The Fund's benchmark, the Lehman Brothers U.S. Aggregate Bond Index, returned 1.15% in the same period. The fixed income markets delivered positive returns in the 12-month annual period covered in this report, despite seven consecutive increases in the federal funds rate by the Federal Reserve Bank. An improving economy, continued low inflation and the measured approach taken by the Fed bolstered bond prices into the first quarter of 2005. Fixed income investors were particularly rewarded for risk, with higher yielding credits exhibiting the best performance. In March 2005, however, momentum turned negative. The Federal Reserve Chairman raised the possibility that inflation might not be fully tamed, and stoked speculation that monetary policy might be tightened at a faster pace. In addition, General Motors, the largest issuer in the investment grade arena, announced a significant earnings revision, and its debt was downgraded. This rattled investors and the market turned risk averse. The Fund's outperformance for the period was driven by overweight positions in higher risk credits. In the first three quarters of the reporting period, the Fund had exposure to high-yield and emerging markets. In the last quarter of the period, the portfolio was adjusted to reduce exposure to High-Yield and Emerging Markets given the potential for a more challenging 2005. From a sector selection perspective, an overweight in the top performing Industrial sectors benefited the fund, as did specific security selections in the high-yield segments of both these sectors. For example, long-term positions in TeleNet Goup and Insight Communications, both higher risk Telecom credits, appreciated along with the high-yield markets. Among industrials, the fund's position in the air cargo service company Atlas Air added to its bottom line, and in the Utility sector, a position in Mission Energy provided additional lift. A focus on longer duration credit assets also boosted returns. Duration as a whole, however, was a mild detractor to returns as the U.S. Treasury market showed surprising strength in the face of an active Federal Reserve. An underweight in GNMA issues also created some performance drag. 81 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Lehman Brothers Core Bond Fund Class A/#/ U.S. Aggregate Bond Index ------------------------ -------------------- 3/95 9,522 10,000.00 3/96 10,534 11,077.52 3/97 10,933 11,621.49 3/98 12,283 13,015.92 3/99 12,850 13,859.16 3/00 12,916 14,119.24 3/01 14,058 15,887.76 3/02 14,487 16,736.32 3/03 15,875 18,692.10 3/04 16,557 19,702.43 3/05 16,878 19,928.62
Class A Class B Class C Class I Class Z ------------------ ------------------ ------------------ ------------------ ------------------ SEC SEC SEC SEC SEC Core Average Average Average Average Average Bond Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Fund Return+ Return++ Return+ Return++ Return+ Return++ Return+ Return++ Return+ Return++ - ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return -2.88% 1.94% -2.49% 1.37% 0.31% 1.27% 2.14% 2.14% 2.62% 2.62% - --------------------------------------------------------------------------------------------------------------- 5 Year Return 4.47% 30.68% 4.44% 26.25% 4.79% 26.38% N/A N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- 10 Year Return 5.37% 77.25% 5.36% 68.48% 5.23% 66.55% N/A N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Since Inception* 5.88% 132.71% 5.21% 74.90% 5.05% 71.89% 5.80% 30.51% 6.28% 33.30% - ---------------------------------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. ++ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 5/1/91; Class B: 4/1/94; Class C: 4/1/94; Class I: 7/10/00; Class Z: 7/10/00 # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12 month period ending March 31, 2005, the SunAmerica Core Bond Class A returned (2.88%), compared to 1.15% for the Lehman Brothers Aggregate Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. 82 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) U.S. Government Securities Fund For the annual period ended March 31, 2005, the SunAmerica U.S. Government Securities Fund Class B returned -0.14% at NAV. The Fund's benchmark, the Lehman Brothers Government Bond Index returned 0.11%. The primary reason for the under-performance was an over-weight position in longer-duration bonds, which weaken in a rising interest rate environment. The Fund's fiscal year opened on a weak note, with the yield on the bellwether 10-year U.S. Treasury rising from below 4% to as high as 4.88% in anticipation of an impending tightening of monetary policy. In June 2004 the Federal Reserve Bank raised its target Federal Funds rate 25 basis points to 1.25 %, and it continued to raise the rate in 25 basis point increments throughout the reporting period. By the close of the fund's fiscal year, the Fed Funds' rate had risen to 2.75%. Initially the credit markets faltered as investors reacted to the change in monetary policy. But evidence of a cooling of the economy surfaced in the late summer and fall, and by late September, the yield on the 10-year U.S. Treasury had eased off sharply to 4.12%. The U. S. Treasury market began the year on a positive note, as the yield on the 10-year Treasury note decreased 25 basis points, piercing the 4.00% level by early February. Momentum proved short-lived, however, as sentiment shifted when the Federal Reserve Chairman suggested that inflation remained a threat. These comments stoked speculation that monetary policy might be tightened at a faster pace than the generally assumed "measured pace." As a result, the market closed the quarter on a weak note, with the yield on the 10-year Treasury note rising to 4.48%. While sector selection had little impact on the Fund's performance, the Fund continued to benefit from a strategy of not owning securities issued by Freddie Mac and the Federal National Mortgage Association (Fannie Mae). This became more acute as concern grew for the potential for credit downgrades in these markets. [CHART] U.S. Government Lehman Brothers Securities Fund Class B Government Bond Index ----------------------- ---------------- 3/95 10,000 10,000.00 3/96 10,887 11,043.78 3/97 11,248 11,520.92 3/98 12,238 12,920.94 3/99 12,757 13,783.60 3/00 12,787 14,128.36 3/01 14,360 15,870.65 3/02 14,750 16,496.20 3/03 16,742 18,707.54 3/04 17,293 19,501.61 3/05 17,399 19,522.81
Class A Class B Class C U.S. ---------------------- ---------------------- ---------------------- Government SEC Average SEC Average SEC Average Securities Annual Cumulative Annual Cumulative Annual Cumulative Fund Return+ Return++ Return+ Return++ Return+ Return++ - ---------------- ----------- ---------- ----------- ---------- ----------- ---------- 1 Year Return -4.16% 0.61% -4.02% -0.14% -1.11% -0.14% - ------------------------------------------------------------------------------------- 5 Year Return 5.74% 38.73% 5.74% 34.18% 5.99% 33.77% - ------------------------------------------------------------------------------------- 10 Year Return 5.74% 83.46% 5.69% 73.99% N/A N/A - ------------------------------------------------------------------------------------- Since Inception* 5.26% 89.29% 6.17% 213.30% 5.35% 35.51% - -------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. ++ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 10/1/93; Class B: 3/3/86; Class C: 6/1/99. For the 12 month period ending March 31, 2005, the SunAmerica U.S. Government Securities Class B returned -4.02%, compared to 0.11% for the Lehman Brothers Government Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. 83 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) GNMA Fund For the annual period ended March 31, 2005, the SunAmerica GNMA Fund Class B returned 0.75% at NAV. The Fund's benchmark, the Citigroup Mortgage GNMA Index, returned 2.96%. The primary reason for the under-performance was an over-weight position in longer-duration bonds, which weaken in a rising interest rate environment. The Fund's fiscal year opened on a weak note, with the yield on the bellwether 10-year U.S. Treasury rising from below 4% to as high as 4.88% in anticipation of an impending tightening of the monetary policy. In June 2004, the Federal Reserve Bank raised its target Federal Funds rate 25 basis points to 1.25%, and it continued to raise the rate in 25 basis point increments throughout the reporting period. By the close of the fund's fiscal year, the Fed Funds' rate has risen to 2.75%. In the first half of the year Treasuries, GNMAs and mortgage-backed securities (MBS) performed well, with current coupon GNMAs trading at about 100 basis points over the 10-year Treasury. In the second half, the yield spread between the 10-year U.S. Treasury and GNMAs widened. Then GNMA securities outperformed as investors reached for yield and GNMA prices rose. But, this trend quickly reversed in mid-March and GNMAs traded down. The yield on the 10-year Treasury rose before closing the month just below 4.50%. While sector selection had little impact on the Fund's performance, the Fund continued to benefit from a strategy of not owning securities issued by Freddie Mac and the Federal National Mortgage Association (Fannie Mae). This became more acute as concern grew for the potential for credit downgrades in these markets. [CHART] Citigroup Mortgage GNMA Fund Class B GNMA Index ----------------- ------------------ 3/95 10,000 10,000.00 3/96 11,013 11,086.34 3/97 11,543 11,748.28 3/98 12,864 13,024.94 3/99 13,600 13,843.39 3/00 13,810 14,252.42 3/01 15,532 15,953.26 3/02 16,144 17,001.69 3/03 18,007 18,433.87 3/04 18,438 19,131.92 3/05 18,577 19,698.40
Class A Class B Class C Class X ------------------ ------------------ ------------------ ------------------ SEC SEC SEC SEC Average Average Average Average GNMA Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Fund Return+ Return++ Return+ Return++ Return+ Return++ Return+ Return++ - ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return -3.43% 1.41% -3.18% 0.75% -0.23% 0.75% 1.63% 1.63% - -------------------------------------------------------------------------------------------- 5 Year Return 5.76% 38.90% 5.79% 34.51% 6.09% 34.36% N/A N/A - -------------------------------------------------------------------------------------------- 10 Year Return 6.56% 98.32% 6.39% 85.77% N/A N/A N/A N/A - -------------------------------------------------------------------------------------------- Since Inception* 5.97% 104.26% 7.68% 407.24% 5.68% 38.02% 5.62% 18.06% - --------------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. ++ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 10/11/93; Class B: 4/25/83; Class C: 6/1/99; Class X: 3/19/02. For the 12 month period ending March 31, 2005, the SunAmerica GNMA Class B returned -3.18%, compared to 2.96% for the Citigroup Mortgage GNMA Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. 84 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) Strategic Bond Fund For the annual period ended March 31, 2005, the SunAmerica Strategic Bond Fund Class A returned 9.36% at NAV. The Fund's benchmark, the Lehman Brothers U.S. Aggregate Bond Index, returned 1.15% in the same period. The fixed income markets performed well in the 12-month annual period covered in this report, despite seven consecutive increases in the federal funds rate by the Federal Reserve Bank. An improving economy, continued low inflation and the measured approach taken by the Fed bolstered bond prices into the first quarter of 2005. Strong demand for product and a limited supply added to the market's strength. Investment grade issuance declined across the board as companies turned to stock buybacks and demand overseas grew for U.S. credit. Fixed income investors were particularly rewarded for risk, with higher yielding credits exhibiting the best performance. In March 2005, however, momentum turned negative. The Federal Reserve Chairman raised the possibility that inflation might not be fully tamed, and stoked speculation that monetary policy might be tightened at a faster pace. In addition, General Motors, the largest issuer in the investment grade arena, announced a significant earnings revision, and its debt was downgraded. This rattled investors and the market turned risk averse. Throughout much of the period, the U.S. dollar continued to weaken against other currencies, and emerging markets debt gained strength with the uptick in oil and commodity prices. The Fund's positions in higher risk credits drove its strong performance in the 12-month period covered by this report. These also account for its significant outperformance of its benchmark, the Lehman Brothers Aggregate Bond Index. From a sector selection perspective, overweights in the top performing Telecom and Industrials sectors benefited the fund, as did specific security selections in the high-yield segments of both these sectors. For example, two of the portfolio's distressed Telecom credits, defaulted bonds of Sprint affiliates IPCS and IWO, were converted into equity upon reorganization and have appreciated significantly on a bond equivalent basis. In the Utility sector, a position in Mission Energy provided additional lift. The Fund also saw its position in Russian government debt appreciate, sparked by an upgrade to investment grade. Holdings in Brazil government debt further added to performance as that nation's fiscal condition continued to strengthen and liquidity improved. While a focus on longer duration credit assets boosted returns, duration as a whole was a mild detractor to returns. This is because the U.S. Treasury market showed surprising strength in the face of an active Federal Reserve. 85 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Strategic Bond Lehman Brothers Fund Class A/#/ U.S. Aggregate Bond Index --------------- -------------------- 3/95 9,530 10,000.00 3/96 11,428 11,077.52 3/97 12,843 11,621.49 3/98 14,472 13,015.92 3/99 14,311 13,859.16 3/00 14,620 14,119.24 3/01 15,376 15,887.76 3/02 16,058 16,736.32 3/03 17,514 18,692.10 3/04 20,674 19,702.43 3/05 22,545 19,928.62
Class A Class B Class C ------------------ ------------------ ------------------ SEC SEC SEC Average Average Average Strategic Annual Cumulative Annual Cumulative Annual Cumulative Bond Fund Return+ Return++ Return+ Return++ Return+ Return++ - ------------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 4.17% 9.36% 4.35% 8.35% 7.65% 8.65% - ---------------------------------------------------------------------------------------- 5 Year Return 7.98% 54.20% 8.00% 48.94% 8.44% 49.98% - ---------------------------------------------------------------------------------------- 10 Year Return 8.47% 136.56% 8.40% 124.11% 8.34% 122.77% - ---------------------------------------------------------------------------------------- Since Inception* 6.99% 126.92% 7.66% 125.21% 7.54% 122.47% - ----------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. ++ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 11/1/93; Class B: 4/1/94; Class C: 4/1/94; Class I: 7/10/00 # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12 month period ending March 31, 2005, the SunAmerica Strategic Bond Class A returned 4.17%, compared to 1.15% for the Lehman Brothers U.S. Aggregate Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. 86 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) High Yield Bond Fund For the annual period ended March 31, 2005, the SunAmerica High Yield Bond Fund Class A returned 13.26% at NAV. The Fund's benchmark, the Citigroup High Yield Market Index, returned 7.21% for the same period. In the 12-month period covered in this report the fixed income markets performed well, despite seven successive increases in the federal funds rate by the Federal Reserve Bank. In June 2004 the Fed raised the federal funds rate 25 basis points and has done so steadily throughout the period resulting in an increase of 1.75% to 2.75%. Throughout the reporting period fixed income investors were rewarded for risk. The high yield market benefited most, with the lower rated sectors exhibiting the best performance. Default rates remained at historic lows. This was due in large part to an improving economy and the ability of lower quality credits to continue to access the capital markets and strengthen balance sheets. As company fundamentals improved, the spread between high yield bonds and the bellwether 10-year U.S. Treasury tightened, and the prices of high yield bonds appreciated. The Fund benefited from a combination of security selection and from being overweight higher risk credits. The higher risk credits outperformed the overall index over the 12-month reporting period. The biggest contributor to fund performance was the wireless sector, representing close to two-thirds of the fund's total outperformance versus the index. This performance came primarily from distressed credit plays in that sector. Two of these distressed credits, defaulted bonds of Sprint affiliates IPCS and IWO, converted into equity holdings upon reorganization. Since then these positions have appreciated significantly on a bond equivalent basis. The next largest contributor was the utility sector, where the fund benefited from its holdings in Mirant Corporation. Mirant is an independent power producer and another distressed credit. Its holding company defaulted bonds will also turn into equity upon reorganization. While gaming, transportation services, and oil field services were positive, sector selection contributed little to fund performance overall. Positive contribution from an underweight in the automotive and home construction sectors was offset by negative performance from cash and an overweight in pharmaceuticals. Holdings in pharmaceutical company Elan, which has recently pulled its multiple sclerosis drug Tysabri from the market, created a drag on performance. 87 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] High Yield Bond Citigroup Fund Class A/#/ High Yield Market Index --------------- ----------------------- 11/98 9,524 10,000.00 3/99 9,999 10,651.21 3/00 9,710 10,396.98 3/01 9,877 10,679.18 3/02 9,692 10,828.00 3/03 9,454 11,360.56 3/04 11,917 13,904.34 3/05 13,497 14,906.18
Class A Class B Class C Class Z ------------------ ------------------ ------------------ ------------------ SEC SEC SEC SEC Average Average Average Average High Yield Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Bond Fund Return+ Return++ Return+ Return++ Return+ Return++ Return+ Return++ - ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 7.91% 13.26% 8.57% 12.57% 11.77% 12.77% 14.18% 14.18% - -------------------------------------------------------------------------------------------- 5 Year Return 5.78% 39.01% 5.83% 34.48% N/A N/A 7.36% 42.63% - -------------------------------------------------------------------------------------------- 10 Year Return N/A N/A N/A N/A N/A N/A N/A N/A - -------------------------------------------------------------------------------------------- Since Inception* 4.79% 41.72% 4.88% 35.68% 5.95% 30.50% 6.12% 46.28% - --------------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. ++ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 11/1/98; Class B: 11/1/98; Class C: 8/21/00; Class Z: 11/1/98 # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12 month period ending March 31, 2005, the SunAmerica High Yield Bond Class A returned 7.91%, compared to 7.21% for the Citigroup High Yield Market Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. 88 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) Tax Exempt Insured Fund For the annual period ended March 31, 2005, the SunAmerica Tax Exempt Insured Fund Class A returned 1.83% at NAV. The Fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 2.67%. The 12-month annual period covered in this report opened on a weak note, with the yield on the bellwether 10-year U.S. Treasury rising in anticipation of an impending tightening of the money supply. In June 2004, the Federal Reserve Bank raised its target Federal Funds rate 25 basis point to 1.25%, and it continued to raise the rate in 25 basis point increments throughout the reporting period. By the close of the Fund's fiscal year, the rate has risen from 1.75% to 2.75%. Initially the credit markets faltered as investors reacted to the change in policy. But evidence of a cooling of the economy surfaced early in the fall of 2004. In the third quarter, the credit markets rallied and remained in a trading range through early 2005. In March 2005, however, momentum turned negative. The Federal Reserve Chairman raised the possibility that inflation might not be fully tamed and stoked speculation that monetary policy might be tightened at a faster pace. Throughout this period the market continued to float near record numbers of new municipal issues. Municipal new issuance totaled $359 billion in 2004, the third highest issuance on record. In the first quarter of 2005 alone, new issuance approached $100 billion, spurred in large part by historically low rates and a rejuvenation of advance refundings. While the municipal yield curve continued to flatten as short-term rates ticked upwards, it remained steeper than the U.S. Treasury curve. Over the period, municipals outperformed Treasuries as the Lehman Municipal Bond Index returned 2.67% versus 0.04% for the Lehman U.S. Treasury Index. The Fund's performance was helped by its being overweight the hospital sector, which outperformed the Lehman Municipal Bond Index for the twelve-month period. Hospital bonds are higher yielding than General Obligation or Water and Sewer bonds, and traditionally outperform in a rising rate environment. The fund also benefited from several credit upgrades on securities it holds in the hospital sector. These included bonds issued by Cuyahoga County, OH bonds for the Cleveland Clinic and bonds issued by Franklin County, OH for Ohio Health. As a result of the upgrades, the prices of these bonds appreciated. In addition, the Fund benefited from a credit upgrade of its State of California General Obligation bonds. These bonds had been purchased without any credit enhancements, and were upgraded from BBB to A by both Moody's and S&P. A position in New York City General Obligation bonds, which have appreciated in line with the City's positive credit fundamentals, also added to the fund's performance. The Fund continued to hold both positions at the end of the year. As of the close of the period, 80% of the fund's portfolio was invested in essential service and general obligation bonds that are insured with AAA bond insurers. 89 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Tax Exempt Lehman Brothers Insured Fund Class A/#/ Municipal Bond Index ----------------------- -------------------- 3/95 9,529 10,000.00 3/96 10,231 10,838.25 3/97 10,665 11,428.78 3/98 11,761 12,653.24 3/99 12,295 13,437.89 3/00 12,148 13,427.16 3/01 13,373 14,893.53 3/02 13,624 15,461.47 3/03 14,861 16,989.91 3\04 15,594 17,986.18 3\05 15,867 18,465.82
Class A Class B Class C ------------------ ------------------ ------------------ SEC SEC SEC Average Average Average Annual Cumulative Annual Cumulative Annual Cumulative Tax Exempt Insured Fund Return+ Return++ Return+ Return++ Return+ Return++ - ----------------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return -3.03% 1.83% -2.69% 1.21% 0.15% 1.12% - -------------------------------------------------------------------------------- 5 Year Return 4.46% 30.62% 4.41% 26.09% 4.75% 26.12% - -------------------------------------------------------------------------------- 10 Year Return 4.73% 66.52% 4.65% 57.57% N/A N/A - -------------------------------------------------------------------------------- Since Inception* 5.71% 207.31% 4.22% 60.75% 3.92% 25.12% - --------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. ++ Cumulative returns do not include sales load. If sales load had been included, return would be lower. * Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 6/1/99. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12 month period ending March 31, 2005, SunAmerica Tax Exempt Insured Class A returned -3.03%, compared to 2.67% for the Lehman Brothers Municipal Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. 90 [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 U.S. Jeffrey S. Burum Jersey City, NJ Securities and Exchange William J. Shea 07311-4992 Commission for its first and third fiscal quarters Officers Distributor on Form N-Q for fiscal Vincent M. Marra, AIG SunAmerica Capital quar-ters ending after President Services, Inc. July 9, 2004. Once filed, Donna M. Handel, Harborside Financial the Trust's Form N-Q will Treasurer Center be available without Michael Cheah, Vice 3200 Plaza 5 charge on the President Jersey City, NJ U.S. Securities and J. Steven Neamtz, Vice 07311-4992 Exchange Commis-sion President website at www.sec.gov. Thomas Lynch, Assistant Shareholder Servicing You can also obtain Secretary Agent copies of Form N-Q by Gregory R. Kingston, AIG SunAmerica Fund (i) visiting the U.S. Vice President and Services, Inc. Securities and Ex-change Assistant Treasurer Harborside Financial Commission Public Robert A. Chopyak, Center Reference Room in Assistant Treasurer 3200 Plaza 5 Washington DC Jersey City, NJ (information on the 07311-4992 operation of the Public Reference Room may be Custodian and Transfer obtained by calling Agent 1-800-SEC-0330); (ii) State Street Bank and sending your request and Trust Company a duplicating fee to the P.O. Box 419572 U.S. Securities and Kansas City, MO Exchange Commission 64141-6572 Public Reference Room, Washington, DC 20549-0102 VOTING PROXIES ON TRUST or (iii) sending your PORTFOLIO SECURITIES request electronically to A description of the publicinfo.sec.gov. policies and proce-dures that the Trust uses to PROXY VOTING RECORD ON determine how to vote SUNAMERICA INCOME FUNDS proxies relating to Information regarding how secu-rities held in the the Trust voted proxies Fund's portfolio which is related to securities available in the Trust's held in the SunAmerica State-ment of Additional Income Funds' dur-ing the Information, may be twelve month period ended obtained without charge June 30, 2004 is upon re-quest, by calling available without charge, (800) 858-8850. The upon request, by calling information is also (800) 858-8850 or on the available from the EDGAR U.S. Secu-rities and database on the U.S. Exchange Commission Secu-rities and Exchange web-site at Commission's website at http://www.sec.gov. http://www.sec.gov. This report is submitted solely for the general information of shareholders of the Fund. Distribution of this report to persons other than shareholders of the Fund is authorized only in connection with a currently effective prospectus, setting forth details of the Fund, which must precede or accompany this report.
91 [LOGO] AIG Sun America Mutual Funds Distributed by: AIG SunAmerica Capital Services, Inc. Investors should carefully consider the investment objectives, risks, charges and expenses of any mutual fund distributed by AIG SunAmerica Capital Services, Inc. before investing. This and other important information is contained in the prospectus, which can be obtained from your financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext. 6003. Read the prospectus carefully before you invest. www.sunamericafunds.com INANN - 3/05 Item 2. Code of Ethics SunAmerica Income Funds (the "registrant") has adopted a Code of Ethics applicable to its Principal Executive and Principal Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. Effective December 2, 2004, the Code of Ethics was amended to reflect Vincent M. Marra as President, replacing Robert M. Zakem. Item 3. Audit Committee Financial Expert. Currently, the registrant does not have an Audit Committee member who possesses all of the attributes required to be an "audit committee financial expert" as defined in instruction 2(b) of Item 3 of Form N-CSR. However, the Board of Directors believes that each member of the Audit Committee has substantial experience relating to the review of financial statements and the operations of audit committees. Accordingly, the Board believes that the members are qualified to evaluate the registrant's financial statements, supervise the registrant's preparation of its financial statements, and oversee the work of the registrant's independent auditors. Item 4. Principal Accountant Fees and Services. (a)-(d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant's principal accountant were as follows: 2004 2005 Audit Fees $135,006 $151,621 Audit-Related Fees $ 61,820 $ 48,006 Tax Fees $ 58,721 $ 57,188 All Other Fees $ 0 $ 0 Audit Fees include amounts related to the audit of the registrant's annual financial statements and services normally provided by the principal accountant in connection with statutory and regulatory filings. Audit-Related Fees principally include a SAS No. 100 review of the registrant's Semiannual Shareholder Report. Tax Fees principally include tax compliance, tax advice, tax planning and preparation of tax returns. (e) (1) The registrant's audit committee pre-approves all audit services provided by the registrant's principal accountant for the registrant and all non-audit services provided by the registrant's principal accountant for the registrant, its investment adviser and any entity controlling, controlled by, or under common control with the investment adviser ("Adviser Affiliate") that provides ongoing services to the registrant, if the engagement by the investment adviser or Adviser Affiliate relates directly to the operations and financial reporting of the registrant. (2) No services included in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant's principal accountant for non-audit services rendered to the registrant, its investment adviser, and Adviser Affiliate that provides ongoing services to the registrant for 2005 and 2004 were $1,754,930 and $1,091,789, respectively. (h) Non-audit services rendered to the registrant's investment adviser and any Adviser Affiliate that were not pre-approved pursuant to Paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were considered by the registrant's audit committee as to whether they were compatible with maintaining the principal accountant's independence. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. Controls and Procedures. (a) An evaluation was performed within 90 days of the filing of this report, under the supervision and with the participation of the registrant's management, including the President and Treasurer, of the effectiveness of the design and operation of the registrant's disclosure controls and procedures. Based on that evaluation, the registrant's management, including the President and Treasurer, concluded that the registrant's disclosure controls and procedures are effective. (b) There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d)) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. However, internal controls with respect to monitoring proof of claims filings have been enhanced. Item 12. Exhibits. (a) (1) Code of Ethics applicable to its Principal Executive and Principal Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406.Code of Ethics. (2) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (3) Not applicable. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SunAmerica Income Funds By: /s/ Vincent M. Marra ------------------- Vincent M. Marra President Date: June 9, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Vincent M. Marra ------------------- Vincent M. Marra President Date: June 9, 2005 By: /s/ Donna M. Handel ------------------- Donna M. Handel Treasurer Date: June 9, 2005 EX-99.CODE ETH 2 dex99codeeth.txt CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND PRINCIPAL ACCOUNTING OFFICERS Exhibit 99.406. Code of Ethics ANCHOR SERIES TRUST AIG SERIES TRUST SUNAMERICA EQUITY FUNDS SUNAMERICA FOCUSED SERIES, INC. SUNAMERICA INCOME FUNDS SUNAMERICA MONEY MARKET FUNDS, INC. SUNAMERICA SENIOR FLOATING RATE FUND, INC. (collectively, the "Funds") CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND PRINCIPAL ACCOUNTING OFFICERS I. Introduction The Boards of Directors/Trustees of the Funds (the "Boards") have adopted this Code of Ethics (this "Code") pursuant to Section 406 of the Sarbanes-Oxley Act applicable to the Funds' Principal Executive Officer and Principal Accounting Officer (the "Covered Officers" each of whom is set forth in Exhibit A) for the purpose of promoting: . Honest and ethical conduct, including the ethical handling of conflicts of interest between personal and professional relationships; . Full, fair, accurate, timely and understandable disclosure; . Compliance with applicable laws and governmental rules and regulations; . The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and . Accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest A "conflict of interest" occurs when a Covered Officer's private interest improperly interferes with the interests of, or his or her service to, a Trust. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Trust. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the "Investment Company Act") and the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Funds because of their status as "affiliated persons" of the Funds. The compliance programs and procedures of the Funds and the Funds' investment adviser, AIG SunAmerica Asset Management Corp. ("SAAMCo"), are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between, the Funds and SAAMCo, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Funds or for SAAMCo, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Funds and SAAMCo. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and SAAMCo and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Boards that the Covered Officers may also be officers or employees of other investment companies advised by SAAMCo. In particular, each Covered Officer must: . Not use his or her personal influence or personal relationships to influence investment decisions or financial reporting by a Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; . Not cause a Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Trust; and . Report at least annually to the Ethics Committee any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest. There are certain potential conflict of interest situations that should be discussed with the Ethics Committee if material. Examples of these include: . Service as a director on the board of any company; . The receipt of any non-nominal gifts; . The receipt of any entertainment from any company with which a Trust has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; 2 . Any ownership interest in, or any consulting or employment relationship with, any of the Funds' service providers, other than SAAMCo, the Funds' principal underwriter or any affiliated person thereof; . A direct or indirect financial interest in commissions, transaction charges or spreads paid by a Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. Disclosure and Compliance . Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; . Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Boards and auditors, or to governmental regulators and self-regulatory organizations; . Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and SAAMCo with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents that the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and . It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: . Upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read and understands the Code; . Annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; . Not retaliate against any other Covered Officer or affiliated person of the Funds for reports of potential violations of this Code that are made in good faith; and . Notify the Ethics Committee promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. 3 The Ethics Committee is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. The Ethics Committee will also consider waivers sought by the Covered Officers. The Funds will act according to the following procedures in investigating and enforcing this Code: . The Ethics Committee will take all appropriate action to investigate any potential violations reported to it; . If, after such investigation, the Ethics Committee believes that no violation has occurred, the Ethics Committee is not required to take any further action; . If the Ethics Committee determines that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of SAAMCo or its board; or a recommendation to dismiss the Covered Officer; . The Ethics Committee will be responsible for granting waivers, as appropriate; . The Ethics Committee will inform the Boards of violations or waivers of this Code; and . Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole Code of Ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to investment companies thereunder. Insofar as other policies or procedures of the Funds, SAAMCo, the Funds' principal underwriter or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Code of Ethics of the Funds, SAAMCo and the Funds' principal underwriter, under Rule 17j-1 of the Investment Company Act, and SAAMCo's more detailed policies and procedures set forth in the SAAMCo Compliance Procedures Manual are separate requirements applying to Covered Officers and others, and are not part of this Code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Boards. VII. Confidentiality 4 All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Funds, the Ethics Committee, SAAMCo and the Boards and their independent counsel. VIII. Internal Use The Code is intended solely for internal use by the Funds and does not constitute an admission, by or on behalf of the Funds, as to any fact, circumstance or legal conclusion. Date: August 7, 2003 5 Exhibit A Robert M. Zakem, as President of the Funds (Through December 1, 2004) Vincent Marra, as President of the Funds Donna M. Handel, as Treasurer of the Funds 6 EX-99.CERT 3 dex99cert.txt CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT Exhibit 99.CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Vincent M. Marra, 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quater of the period covered by this 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: May 20, 2005 /s/ Vincent M. Marra -------------------- Vincent M. Marra 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this 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: May 20, 2005 /s/ Donna M. Handel ------------------- Donna M. Handel Treasurer EX-99.906CERT 4 dex99906cert.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Exhibit 99.906.CERT CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Vincent M. Marra, 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: May 20, 2005 /s/ Vincent M. Marra --------------- Vincent M. Marra 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-----