-----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, KaXket7cwY9smtpAUTkQ1wmaiFCax3GSdkABWsiXe3wo/l53V/MKT4C+abMaPURf a20FTd+45TXe3dTEmqSQ9A== 0001193125-06-127316.txt : 20060609 0001193125-06-127316.hdr.sgml : 20060609 20060609105912 ACCESSION NUMBER: 0001193125-06-127316 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060609 DATE AS OF CHANGE: 20060609 EFFECTIVENESS DATE: 20060609 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: 06895815 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 0000795307 S000007631 GNMA Securities C000020820 Class A C000020821 Class B C000020822 Class C 0000795307 S000007632 U.S. Government Securities C000020823 Class A C000020824 Class B C000020825 Class C 0000795307 S000007633 High Yield Bond C000020826 Class A C000020827 Class B C000020828 Class C 0000795307 S000007634 Strategic Bond C000020829 Class A C000020830 Class B C000020831 Class C 0000795307 S000007635 Tax Exempt Insured C000020832 Class A C000020833 Class B C000020834 Class C 0000795307 S000007636 Core Bond C000020835 Class A C000020836 Class B C000020837 Class C C000020838 Class Z C000020839 Class I 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 811-4708 SunAmerica Income Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent M. Marra Senior Vice President & 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, 2006 Item 1. Reports to Stockholders SunAmerica Income Funds, Annual Report at March 31, 2006. 2006 Annual SunAmerica Report - ---------------------
[PHOTO] [GRAPHIC] Income Funds March 31, 2006 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..................... 68 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................... 84 TRUSTEE AND OFFICER INFORMATION................... 85 COMPARISONS: PORTFOLIO VS. INDEXES................ 88
Shareholder Letter Dear Shareholder: We are pleased to present the annual performance summary of the SunAmerica Income Funds for the 12-month period ended March 31, 2006. As always, we appreciate this opportunity to share with you the economic and market conditions that have shaped the Funds' investment performance during this time period. The past 12 months marked a continuation of the Federal Reserve Bank's tightening policy. Over the course of the period, the Federal Funds rate increased by two full percentage points, rising to 4.75% as of March 31, 2006. In addition to this headwind, fixed income investors were challenged by rising oil prices, inflation concerns, and the economic impact of an active hurricane season. Despite these challenges, our Funds provided positive returns for the period. Moreover, five of the six Funds covered in this annual report finished in the top half of their respective Lipper and Morningstar categories for the 12-month period. During the last three quarters of 2005, the Treasury market experienced a flattening yield curve as short-term yields rose more than longer yields in response to the Federal Reserve's series of increases in the Federal Funds rate benchmark. Since mid-January, fixed income yields have risen substantially in response to solid first quarter growth, higher oil prices and renewed inflation concerns. However, housing demand is weakened and supply increased as mortgage rates rose. In this environment, riskier asset classes outperformed as exemplified by the performance of both high-yield and emerging market bonds. High-yield bonds performed well as fundamentals remained solid. Emerging market bonds posted strong results as the economic backdrop of emerging economies improved and commodity prices increased. Within the mortgage-backed securities market, the period began with rates dropping sharply for both mortgage-backed and Treasury securities. After this initial decline, however, rates rose steadily, with occasional pullbacks, to end the period higher. The municipal market continued to provide an attractive after-tax return. For the period covered in this report, municipal bonds outperformed Treasuries, with the Lehman Brothers Municipal Bond Index* returning 3.81% versus 1.95% for the Lehman Brothers 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 SunAmerica Income Funds Investment Professionals AIG SunAmerica Asset Management Corp. AIG Global Investment Corp. ------------------------------------- - Michael Cheah Rich Mercante J. Hutchinson Bryan Andrew Doulous Gregory Braun Geoffrey Cornell
- -------- Past performance is no guarantee of future results. * The Lehman Brothers Municipal Bond Index is a broad market performance benchmark for the tax exempt bond market. It is currently derived from approximately 40,000 issues. ** The Lehman Brothers U.S. Treasury Index is comprised of public obligations of the U.S. Treasury with a remaining maturity of one year or more. 2 SunAmerica Income Funds EXPENSE EXAMPLE -- March 31, 2006 -- (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. The example set forth below is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at October 1, 2005 and held until March 31, 2006. 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, 2006" to estimate the expenses you paid on your account during this period. For shareholder accounts in classes other than Class I and Class Z the "Expenses Paid During the Six Months Ended March 31, 2006" 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, 2006" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Fund's prospectus and/or your retirement plan document for a full description of these fees. Had these fees been included, the "Expenses Paid During the Six Months Ended March 31, 2006" 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 and Class Z the "Expenses Paid During the Six Months Ended March 31, 2006" 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, 2006" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Fund's prospectus and/or your retirement plan document for a full description of these fees. Had these fees been included, the "Expenses Paid During the Six Months Ended March 31, 2006" 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, 2006 -- (unaudited) (continued)
Actual Hypothetical ----------------------------------------------- ------------------------------------------------ Ending Account Ending Account Expenses Paid Value Using a Expenses Paid Value Using During the Hypothetical 5% During the Beginning Actual Return Period Ended Beginning Assumed Return Period Ended Account Value at March 31, March 31, Account Value at March 31, March 31, at October 1, 2005 2006 2006* at October 1, 2005 2006 2006* ------------------ -------------- ------------- ------------------ --------------- ------------- Core Bond Fund Class A #.................... $1,000.00 $1,005.59 $ 5.50 $1,000.00 $1,019.45 $ 5.54 Class B #.................... $1,000.00 $1,001.31 $ 8.73 $1,000.00 $1,016.21 $ 8.80 Class C #.................... $1,000.00 $1,002.33 $ 8.74 $1,000.00 $1,016.21 $ 8.80 Class I #.................... $1,000.00 $1,006.11 $ 5.00 $1,000.00 $1,019.95 $ 5.04 Class Z #.................... $1,000.00 $1,007.47 $ 2.65 $1,000.00 $1,022.29 $ 2.67 U.S. Government Securities Fund Class A #.................... $1,000.00 $ 996.11 $ 4.93 $1,000.00 $1,020.00 $ 4.99 Class B #.................... $1,000.00 $ 991.84 $ 8.14 $1,000.00 $1,016.75 $ 8.25 Class C #.................... $1,000.00 $ 992.86 $ 8.15 $1,000.00 $1,016.75 $ 8.25 GNMA Fund Class A #.................... $1,000.00 $1,003.90 $ 4.95 $1,000.00 $1,020.00 $ 4.99 Class B #.................... $1,000.00 $ 999.79 $ 8.18 $1,000.00 $1,016.75 $ 8.25 Class C #.................... $1,000.00 $1,000.71 $ 8.18 $1,000.00 $1,016.75 $ 8.25 Strategic Bond Fund Class A #.................... $1,000.00 $1,020.96 $ 6.70 $1,000.00 $1,018.30 $ 6.69 Class B #.................... $1,000.00 $1,017.67 $ 9.91 $1,000.00 $1,015.11 $ 9.90 Class C #.................... $1,000.00 $1,017.75 $ 9.86 $1,000.00 $1,015.16 $ 9.85 High Yield Bond Fund Class A #.................... $1,000.00 $1,043.93 $ 6.93 $1,000.00 $1,018.15 $ 6.84 Class B #.................... $1,000.00 $1,040.56 $10.23 $1,000.00 $1,014.91 $10.10 Class C #.................... $1,000.00 $1,040.54 $10.23 $1,000.00 $1,014.91 $10.10 Tax Exempt Insured Fund Class A...................... $1,000.00 $1,001.93 $ 6.39 $1,000.00 $1,018.55 $ 6.44 Class B...................... $1,000.00 $ 999.47 $ 9.67 $1,000.00 $1,015.26 $ 9.75 Class C #.................... $1,000.00 $ 999.12 $ 9.72 $1,000.00 $1,015.21 $ 9.80
Expense Ratio as of March 31, 2006* ------------- Core Bond Fund Class A #.................... 1.10% Class B #.................... 1.75% Class C #.................... 1.75% Class I #.................... 1.00% Class Z #.................... 0.53% U.S. Government Securities Fund Class A #.................... 0.99% Class B #.................... 1.64% Class C #.................... 1.64% GNMA Fund Class A #.................... 0.99% Class B #.................... 1.64% Class C #.................... 1.64% Strategic Bond Fund Class A #.................... 1.33% Class B #.................... 1.97% Class C #.................... 1.96% High Yield Bond Fund Class A #.................... 1.36% Class B #.................... 2.01% Class C #.................... 2.01% Tax Exempt Insured Fund Class A...................... 1.28% Class B...................... 1.94% Class C #.................... 1.95%
- -------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 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, 2006" and the "Expenses Ratios" would have been higher. 4 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2006
U.S. Government Strategic Core Bond Securities GNMA Bond Fund Fund Fund Fund ------------ --------------- ------------ ------------ ASSETS: Long-term Investment securities, at value* (unaffiliated)......... $172,441,341 $160,705,616 $419,066,425 $288,699,046 Long-term Investment securities, at value* (affiliated)........... 132,813 -- -- 143,437 Short term investment securities, at value*....................... -- -- -- 5,393,000 Repurchase agreements (cost equals market)........................ 1,935,000 17,487,000 149,767,000 10,034,000 ------------ ------------ ------------ ------------ Total Investments............................................... 174,509,154 178,192,616 568,833,425 304,269,483 ------------ ------------ ------------ ------------ Cash.............................................................. 41,536 823 186 3,011,614 Foreign cash*..................................................... -- -- -- 641,311 Receivable for: Shares of beneficial interest sold.............................. 19,039 172,134 161,710 3,388,409 Dividends and interest.......................................... 1,744,033 1,170,109 1,800,554 4,606,894 Investments sold................................................ -- 5,852,240 11,704,479 1,153,476 Prepaid Expenses and other assets................................. 3,770 4,183 9,969 4,994 Due from investment adviser for expense reimbursements/fee waivers.......................................................... 68,868 48,713 78,076 -- Unrealized appreciation on forward currency contracts............. -- -- -- 81,770 ------------ ------------ ------------ ------------ Total assets...................................................... 176,386,400 185,440,818 582,588,399 317,157,951 ------------ ------------ ------------ ------------ LIABILITIES: Payable for: Shares of beneficial interest redeemed.......................... 36,921 254,780 706,153 842,935 Investments purchased........................................... 952,892 5,841,458 161,289,236 4,441,351 Investment advisory and management fees......................... 89,267 98,713 166,286 166,136 Distribution and service maintenance fees....................... 53,602 68,687 192,780 166,387 Transfer agent fees and expenses................................ 48,539 42,088 101,341 57,479 Trustees' fees and expenses..................................... 24,820 97,670 49,861 25,836 Other accrued expenses.......................................... 100,337 89,944 76,216 58,591 Dividends Payable................................................. -- 106,001 171,873 361,787 Due to custodian.................................................. -- -- -- -- Unrealized depreciation on forward currency contracts............. -- -- -- 20,479 ------------ ------------ ------------ ------------ Total liabilities................................................. 1,306,378 6,599,341 162,753,746 6,140,981 ------------ ------------ ------------ ------------ Net assets........................................................ $175,080,022 $178,841,477 $419,834,653 $311,016,970 ============ ============ ============ ============ NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value.................... $ 175,313 $ 195,259 $ 381,512 $ 880,420 Paid-in capital................................................... 180,037,588 194,065,939 429,088,700 336,471,823 ------------ ------------ ------------ ------------ 180,212,901 194,261,198 429,470,212 337,318,092 Accumulated undistributed net investment income (loss)............ 409,784 57,877 20,580 (225) Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short and foreign exchange transactions..................................................... (3,763,876) (12,238,161) (3,571,949) (28,098,808) Unrealized appreciation (depreciation) on investments............. (1,778,787) (3,239,437) (6,084,190) 1,721,428 Unrealized appreciation (depreciation) on foreign exchange transactions..................................................... -- -- -- 76,483 ------------ ------------ ------------ ------------ Net Assets..................................................... $175,080,022 $178,841,477 $419,834,653 $311,016,970 ============ ============ ============ ============ *Cost Long-term Investment securities (unaffiliated).................. $174,223,126 $163,945,053 $425,150,615 $286,991,569 ============ ============ ============ ============ Long-term Investment securities (affiliated).................... $ 129,815 $ -- $ -- $ 129,486 ============ ============ ============ ============ Short-term investment securities................................ $ -- $ -- $ -- $ 5,393,000 ============ ============ ============ ============ Foreign Currency................................................ $ -- $ -- $ -- $ 625,456 ============ ============ ============ ============
High Yield Tax Exempt Bond Insured Fund Fund ------------ ----------- ASSETS: Long-term Investment securities, at value* (unaffiliated)......... $324,432,093 $58,322,437 Long-term Investment securities, at value* (affiliated)........... 850,000 -- Short term investment securities, at value*....................... -- 9,559,427 Repurchase agreements (cost equals market)........................ 6,779,000 -- ------------ ----------- Total Investments............................................... 332,061,093 67,881,864 ------------ ----------- Cash.............................................................. 314,498 -- Foreign cash*..................................................... 143,414 -- Receivable for: Shares of beneficial interest sold.............................. 908,524 4,324 Dividends and interest.......................................... 6,141,331 846,464 Investments sold................................................ 612,967 -- Prepaid Expenses and other assets................................. 47,310 1,522 Due from investment adviser for expense reimbursements/fee waivers.......................................................... 28,534 -- Unrealized appreciation on forward currency contracts............. -- -- ------------ ----------- Total assets...................................................... 340,257,671 68,734,174 ------------ ----------- LIABILITIES: Payable for: Shares of beneficial interest redeemed.......................... 669,587 436,394 Investments purchased........................................... 1,654,338 -- Investment advisory and management fees......................... 211,318 29,332 Distribution and service maintenance fees....................... 168,524 26,916 Transfer agent fees and expenses................................ 76,580 25,680 Trustees' fees and expenses..................................... 47,896 30,188 Other accrued expenses.......................................... 57,894 57,811 Dividends Payable................................................. 844,457 62,598 Due to custodian.................................................. -- -- Unrealized depreciation on forward currency contracts............. -- -- ------------ ----------- Total liabilities................................................. 3,730,594 668,919 ------------ ----------- Net assets........................................................ $336,527,077 $68,065,255 ============ =========== NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value.................... $ 730,409 $ 54,042 Paid-in capital................................................... 419,675,162 65,438,663 ------------ ----------- 420,405,571 65,492,705 Accumulated undistributed net investment income (loss)............ (2,050,534) (6,151) Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short and foreign exchange transactions..................................................... (92,479,057) 418,579 Unrealized appreciation (depreciation) on investments............. 10,661,275 2,160,122 Unrealized appreciation (depreciation) on foreign exchange transactions..................................................... (10,178) -- ------------ ----------- Net Assets..................................................... $336,527,077 $68,065,255 ============ =========== *Cost Long-term Investment securities (unaffiliated).................. $313,870,282 $56,162,315 ============ =========== Long-term Investment securities (affiliated).................... $ 750,536 $ -- ============ =========== Short-term investment securities................................ $ -- $ 9,559,427 ============ =========== Foreign Currency................................................ $ 153,592 $ -- ============ ===========
See Notes to Financial Statements 5 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2006 -- (continued)
U.S. Government Strategic High Yield Core Bond Securities GNMA Bond Bond Fund Fund Fund Fund Fund ------------ --------------- ------------ ------------ ------------ Class A (unlimited shares authorized): Net assets.................................................. $157,086,579 $151,284,209 $303,342,586 $167,071,786 $214,040,906 Shares of beneficial interest issued and outstanding........ 15,729,558 16,517,290 27,587,904 47,346,229 46,518,637 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge) $ 9.99 $ 9.16 $ 11.00 $ 3.53 $ 4.60 Maximum sales charge (4.75% of offering price).............. 0.50 0.46 0.55 0.18 0.23 ------------ ------------ ------------ ------------ ------------ Maximum offering price to public............................ $ 10.49 $ 9.62 $ 11.55 $ 3.71 $ 4.83 ============ ============ ============ ============ ============ Class B (unlimited shares authorized): Net assets.................................................. $ 4,377,225 $ 19,276,278 $ 76,303,715 $ 46,293,784 $ 52,346,212 Shares of beneficial interest issued and outstanding........ 439,390 2,103,657 6,921,692 13,121,791 11,360,693 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) $ 9.96 $ 9.16 $ 11.02 $ 3.53 $ 4.61 ============ ============ ============ ============ ============ Class C (unlimited shares authorized): Net assets.................................................. $ 3,304,796 $ 8,280,990 $ 40,188,352 $ 97,651,400 $ 70,139,959 Shares of beneficial interest issued and outstanding........ 331,263 904,987 3,641,576 27,573,957 15,161,522 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) $ 9.98 $ 9.15 $ 11.04 $ 3.54 $ 4.63 ============ ============ ============ ============ ============ Class I (unlimited shares authorized): Net assets.................................................. $ 1,296,320 $ -- $ -- $ -- $ -- Shares of beneficial interest issued and outstanding........ 129,633 -- -- -- -- Net asset value, offering and redemption price per share.... $ 10.00 $ -- $ -- $ -- $ -- ============ ============ ============ ============ ============ Class Z (unlimited shares authorized): Net assets.................................................. $ 9,015,102 $ -- $ -- $ -- $ -- Shares of beneficial interest issued and outstanding........ 901,469 -- -- -- -- Net asset value, offering and redemption price per share.... $ 10.00 $ -- $ -- $ -- $ -- ============ ============ ============ ============ ============
Tax Exempt Insured Fund ----------- Class A (unlimited shares authorized): Net assets.................................................. $56,874,593 Shares of beneficial interest issued and outstanding........ 4,515,978 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge) $ 12.59 Maximum sales charge (4.75% of offering price).............. 0.63 ----------- Maximum offering price to public............................ $ 13.22 =========== Class B (unlimited shares authorized): Net assets.................................................. $ 6,693,968 Shares of beneficial interest issued and outstanding........ 531,170 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) $ 12.60 =========== Class C (unlimited shares authorized): Net assets.................................................. $ 4,496,694 Shares of beneficial interest issued and outstanding........ 357,041 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) $ 12.59 =========== 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.................................................. $ -- 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, 2006
Core U.S. Government Bond Fund Securities Fund ----------- --------------- INCOME: Dividends* (unaffiliated)................................................................ $ 95,857 $ -- Interest (unaffiliated).................................................................. 10,131,315 9,567,198 Interest (affiliated).................................................................... 13,750 -- ----------- ----------- Total investment income................................................................ 10,240,922 9,567,198 ----------- ----------- EXPENSES: Investment advisory and management fees.................................................. 1,130,807 1,294,823 Distribution and service maintenance fees: Class A................................................................................ 579,736 580,613 Class B................................................................................ 47,946 241,436 Class C................................................................................ 40,350 94,005 Service fees -- Class I.................................................................. 3,398 -- Transfer agent fees: Class A................................................................................ 364,207 413,735 Class B................................................................................ 14,454 67,929 Class C................................................................................ 15,210 25,354 Class I................................................................................ 2,991 -- Class Z................................................................................ -- -- Class X................................................................................ -- -- Registration fees: Class A................................................................................ 10,549 20,951 Class B................................................................................ 9,125 12,915 Class C................................................................................ 12,915 18,655 Class I................................................................................ -- -- Class Z................................................................................ -- -- Custodian and accounting fees............................................................ 82,405 83,251 Reports to shareholders.................................................................. -- 19,307 Audit and tax fees....................................................................... 29,200 33,783 Legal fees............................................................................... 2,826 11,949 Trustees' fees and expenses.............................................................. 4,438 12,591 Interest expense......................................................................... 425 29,155 Interest expense on securities sold short................................................ -- -- Other expenses........................................................................... 10,625 14,269 ----------- ----------- Total expenses before fee waivers, expense reimbursements and custody credits.......... 2,361,607 2,974,721 Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (299,402) (753,137) Custody credits earned on cash balances................................................ (5,030) (3,294) ----------- ----------- Net expenses........................................................................... 2,057,175 2,218,290 ----------- ----------- Net investment income (loss).............................................................. 8,183,747 7,348,908 ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... (2,156,726) (2,629,101) Net realized foreign exchange gain (loss) on other assets and liabilities................. -- -- Net increase from payments by affiliates (Note 3)......................................... -- -- ----------- ----------- Net realized gain (loss) on investments and foreign currencies............................ (2,156,726) (2,629,101) ----------- ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (541,675) (1,138,951) Change in unrealized appreciation (depreciation) on investments (affiliated).............. (5,312) -- Change in unrealized appreciation (depreciation) on futures contracts and options contracts................................................................................ -- -- 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.......................... (534,878) (1,138,951) ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currencies............. (2,691,604) (3,768,052) ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 5,492,143 $ 3,580,856 =========== =========== *Net of foreign withholding taxes on interest and dividends of........................... $ 9,130 $ -- =========== ===========
GNMA Fund ----------- INCOME: Dividends* (unaffiliated)................................................................ $ -- Interest (unaffiliated).................................................................. 19,638,114 Interest (affiliated).................................................................... -- ----------- Total investment income................................................................ 19,638,114 ----------- EXPENSES: Investment advisory and management fees.................................................. 2,166,733 Distribution and service maintenance fees: Class A................................................................................ 1,162,687 Class B................................................................................ 915,278 Class C................................................................................ 491,510 Service fees -- Class I.................................................................. -- Transfer agent fees: Class A................................................................................ 740,289 Class B................................................................................ 229,628 Class C................................................................................ 127,935 Class I................................................................................ -- Class Z................................................................................ -- Class X................................................................................ 665 Registration fees: Class A................................................................................ 15,925 Class B................................................................................ 10,796 Class C................................................................................ 14,350 Class I................................................................................ -- Class Z................................................................................ -- Custodian and accounting fees............................................................ 234,744 Reports to shareholders.................................................................. 74,665 Audit and tax fees....................................................................... 32,494 Legal fees............................................................................... 12,370 Trustees' fees and expenses.............................................................. 28,655 Interest expense......................................................................... -- Interest expense on securities sold short................................................ -- Other expenses........................................................................... 26,860 ----------- Total expenses before fee waivers, expense reimbursements and custody credits.......... 6,285,584 Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (686,775) Custody credits earned on cash balances................................................ (712) ----------- Net expenses........................................................................... 5,598,097 ----------- Net investment income (loss).............................................................. 14,040,017 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... (1,409,187) Net realized foreign exchange gain (loss) on other assets and liabilities................. -- Net increase from payments by affiliates (Note 3)......................................... -- ----------- Net realized gain (loss) on investments and foreign currencies............................ (1,409,187) ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (2,932,719) Change in unrealized appreciation (depreciation) on investments (affiliated).............. -- Change in unrealized appreciation (depreciation) on futures contracts and options contracts................................................................................ -- 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.......................... (2,932,719) ----------- Net realized and unrealized gain (loss) on investments and foreign currencies............. (4,341,906) ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 9,698,111 =========== *Net of foreign withholding taxes on interest and dividends of........................... $ -- ===========
See Notes to Financial Statements 7 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the year ended March 31, 2006 -- (continued)
Strategic High Yield Tax Exempt Bond Fund Bond Fund Insured Fund ----------- ----------- ------------ INCOME: Dividends* (unaffiliated)................................................................ $ 129,179 $ 188,311 $ -- Interest (unaffiliated).................................................................. 13,524,955 26,562,692 3,219,458 Interest (affiliated).................................................................... 14,850 88,000 -- ----------- ----------- ----------- Total investment income................................................................ 13,668,984 26,839,003 3,219,458 ----------- ----------- ----------- EXPENSES: Investment advisory and management fees.................................................. 1,362,193 2,295,706 362,721 Distribution and service maintenance fees: Class A................................................................................ 359,559 581,258 207,486 Class B................................................................................ 426,691 561,024 79,326 Class C................................................................................ 641,679 669,076 53,298 Service fees -- Class I.................................................................. -- -- -- Transfer agent fees: Class A................................................................................ 244,498 398,672 163,790 Class B................................................................................ 102,622 133,354 18,864 Class C................................................................................ 150,288 156,900 11,802 Class I................................................................................ -- -- -- Class Z................................................................................ -- -- -- Class X................................................................................ -- -- -- Registration fees: Class A................................................................................ 24,210 21,270 8,676 Class B................................................................................ 14,350 10,599 4,305 Class C................................................................................ 20,090 9,490 14,255 Class I................................................................................ -- -- -- Class Z................................................................................ -- -- -- Custodian and accounting fees............................................................ 192,431 114,238 40,246 Reports to shareholders.................................................................. 42,875 58,500 14,450 Audit and tax fees....................................................................... 37,963 41,215 36,792 Legal fees............................................................................... 4,380 11,038 8,201 Trustees' fees and expenses.............................................................. 11,632 20,156 3,906 Interest expense......................................................................... -- 147,788 -- Interest expense on securities sold short................................................ -- 47,345 -- Other expenses........................................................................... 11,862 19,651 10,128 ----------- ----------- ----------- Total expenses before fee waivers, expense reimbursements and custody credits.......... 3,647,323 5,297,280 1,038,246 Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (707) (370,814) (10,386) Custody credits earned on cash balances................................................ (143,137) (26,124) (677) ----------- ----------- ----------- Net expenses........................................................................... 3,503,479 4,900,342 1,027,183 ----------- ----------- ----------- Net investment income (loss).............................................................. 10,165,505 21,938,661 2,192,275 ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... 3,453,121 16,177,474 828,946 Net realized foreign exchange gain (loss) on other assets and liabilities................. 38,458 -- -- Net increase from payments by affiliates (Note 3)......................................... 34,151 203,640 -- ----------- ----------- ----------- Net realized gain (loss) on investments and foreign currencies............................ 3,525,730 16,381,114 828,946 ----------- ----------- ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (1,697,578) (3,234,937) (1,242,127) Change in unrealized appreciation (depreciation) on investments (affiliated).............. (5,738) (34,000) -- Change in unrealized appreciation (depreciation) on futures contracts and options contracts................................................................................ -- -- -- Change in unrealized appreciation (depreciation) on forward currency contracts............ -- -- -- Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... 95,428 (9,995) -- Change in unrealized appreciation (depreciation) on securities sold short................. 10,172 (21,438) -- ----------- ----------- ----------- Net unrealized gain (loss) on investments and foreign currencies.......................... (1,597,716) (3,300,370) (1,242,127) ----------- ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currencies............. 1,928,014 13,080,744 (413,181) ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $12,093,519 $35,019,405 $ 1,779,094 =========== =========== =========== *Net of foreign withholding taxes on interest and dividends of........................... $ 16,073 $ 3,942 $ -- =========== =========== ===========
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, 2006 2005 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 8,183,747 $ 8,309,014 Net realized gain (loss) on investments and foreign currencies........................ (2,156,726) (309,327) Net unrealized gain (loss) on investments and foreign currencies...................... (534,878) (4,282,289) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 5,492,143 3,717,398 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (7,135,577) (6,506,042) Net investment income (Class B)....................................................... (175,423) (181,405) Net investment income (Class C)....................................................... (147,433) (171,529) Net investment income (Class I)....................................................... (59,983) (90,049) Net investment income (Class Z)....................................................... (614,870) (1,999,235) 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..................................................... (8,133,286) (11,356,618) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (26,852,854) (14,834,404) ------------ ------------ Total increase (decrease) in net assets................................................. (29,493,997) (22,473,624) NET ASSETS: Beginning of period..................................................................... 204,574,019 227,047,643 ------------ ------------ End of period+.......................................................................... $175,080,022 $204,574,019 ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)........................ $ 409,784 $ 110,959 ============ ============
U.S. Government Securities Fund -------------------------- For the year For the year ended ended March 31, March 31, 2006 2005 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 7,348,908 $ 7,208,210 Net realized gain (loss) on investments and foreign currencies........................ (2,629,101) 498,065 Net unrealized gain (loss) on investments and foreign currencies...................... (1,138,951) (7,299,365) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 3,580,856 406,919 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (6,505,119) (6,470,275) Net investment income (Class B)....................................................... (786,554) (861,625) Net investment income (Class C)....................................................... (307,714) (338,902) 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..................................................... (7,599,387) (7,670,802) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (29,003,495) (37,234,269) ------------ ------------ Total increase (decrease) in net assets................................................. (33,022,026) (44,498,152) NET ASSETS: Beginning of period..................................................................... 211,863,503 256,361,655 ------------ ------------ End of period+.......................................................................... $178,841,477 $211,863,503 ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)........................ $ 57,877 $ (137,838) ============ ============
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, 2006 2005 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 14,040,017 $ 13,358,453 Net realized gain (loss) on investments and foreign currencies........................ (1,409,187) 3,461,416 Net unrealized gain (loss) on investments and foreign currencies...................... (2,932,719) (11,084,127) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 9,698,111 5,735,742 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (11,887,262) (10,096,979) Net investment income (Class B)....................................................... (2,666,840) (2,758,584) Net investment income (Class C)....................................................... (1,429,033) (1,598,731) Net investment income (Class I)....................................................... -- -- Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... (10,305) (262,529) Net realized gain on securities (Class A)............................................. (1,253,478) -- Net realized gain on securities (Class B)............................................. (327,987) -- Net realized gain on securities (Class C)............................................. (169,603) -- 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..................................................... (17,744,508) (14,716,823) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (68,594,450) (65,557,982) ------------ ------------ Total increase (decrease) in net assets................................................. (76,640,847) (74,539,063) NET ASSETS: Beginning of period..................................................................... 496,475,500 571,014,563 ------------ ------------ End of period+.......................................................................... $419,834,653 $496,475,500 ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)........................ $ 20,580 $ (12,374) ============ ============
Strategic Bond Fund -------------------------- For the year For the year ended ended March 31, March 31, 2006 2005 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 10,165,505 $ 6,136,237 Net realized gain (loss) on investments and foreign currencies........................ 3,525,730 5,304,488 Net unrealized gain (loss) on investments and foreign currencies...................... (1,597,716) (2,719,620) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 12,093,519 8,721,105 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (5,369,145) (3,082,007) Net investment income (Class B)....................................................... (1,942,089) (2,151,861) Net investment income (Class C)....................................................... (2,927,876) (1,452,318) Net investment income (Class I)....................................................... -- (116,760) 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..................................................... (10,239,110) (6,802,946) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 175,766,449 25,739,107 ------------ ------------ Total increase (decrease) in net assets................................................. 177,620,858 27,657,266 NET ASSETS: Beginning of period..................................................................... 133,396,112 105,738,846 ------------ ------------ End of period+.......................................................................... $311,016,970 $133,396,112 ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)........................ $ (225) $ 387,799 ============ ============
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, 2006 2005 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 21,938,661 $ 24,869,216 Net realized gain (loss) on investments and foreign currencies........................ 16,381,114 10,420,354 Net unrealized gain (loss) on investments and foreign currencies...................... (3,300,370) 6,067,124 ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 35,019,405 41,356,694 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (11,905,182) (9,494,138) Net investment income (Class B)....................................................... (3,703,477) (4,894,387) Net investment income (Class C)....................................................... (4,398,206) (4,060,550) Net investment income (Class I)....................................................... -- -- Net investment income (Class Z)....................................................... (1,686,486) (6,995,720) 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..................................................... (21,693,351) (25,444,795) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 5,307,491 3,593,907 ------------ ------------ Total increase (decrease) in net assets................................................. 18,633,545 19,505,806 NET ASSETS: Beginning of period..................................................................... 317,893,532 298,387,726 ------------ ------------ End of period+.......................................................................... $336,527,077 $317,893,532 ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)........................ $ (2,050,534) $ (1,879,694) ============ ============
Tax Exempt Insured Fund ------------------------- For the year For the year ended ended March 31, March 31, 2006 2005 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 2,192,275 $ 2,462,678 Net realized gain (loss) on investments and foreign currencies........................ 828,946 314,275 Net unrealized gain (loss) on investments and foreign currencies...................... (1,242,127) (1,499,351) ----------- ------------ Net increase (decrease) in net assets resulting from operations......................... 1,779,094 1,277,602 ----------- ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (1,839,250) (2,053,393) Net investment income (Class B)....................................................... (194,099) (297,218) Net investment income (Class C)....................................................... (132,474) (145,957) Net investment income (Class I)....................................................... -- -- Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. (587,815) (842,208) Net realized gain on securities (Class B)............................................. (75,670) (135,607) Net realized gain on securities (Class C)............................................. (52,856) (82,894) 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..................................................... (2,882,164) (3,557,277) ----------- ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (7,564,719) (12,519,717) ----------- ------------ Total increase (decrease) in net assets................................................. (8,667,789) (14,799,392) NET ASSETS: Beginning of period..................................................................... 76,733,044 91,532,436 ----------- ------------ End of period+.......................................................................... $68,065,255 $ 76,733,044 =========== ============ - -------- +Includes accumulated undistributed net investment income (loss)........................ $ (6,151) $ (34,061) =========== ============
See Notes to Financial Statements 11 SunAmerica Income Funds FINANCIAL HIGHLIGHTS
CORE BOND FUND -------------- Net gain (loss) on Net investments Distributions 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 gains on Distri- end of Total period Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) - ------------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- Class A - - 11/01/00-10/31/01 $ 9.60 $0.55 $ 0.65 $ 1.20 $(0.51) $ -- $(0.51) $10.29 12.85% $ 5,901 11/01/01-03/31/02# 10.29 0.20 (0.48) (0.28) (0.19) -- (0.19) 9.82 (2.77) 5,312 04/01/02-03/31/03 9.82 0.34 0.58 0.92 (0.42) -- (0.42) 10.32 9.58 21,260 04/01/03-03/31/04 10.32 0.24 0.20 0.44 (0.27) -- (0.27) 10.49 4.30 140,877 04/01/04-03/31/05 10.49 0.40 (0.20) 0.20 (0.43) (0.13) (0.56) 10.13 1.94 167,787 04/01/05-03/31/06 10.13 0.44 (0.14) 0.30 (0.44) -- (0.44) 9.99 2.96 157,087 Class B - - 11/01/00-10/31/01 $ 9.59 $0.48 $ 0.64 $ 1.12 $(0.45) $ -- $(0.45) $10.26 11.93% $ 6,444 11/01/01-03/31/02# 10.26 0.17 (0.49) (0.32) (0.16) -- (0.16) 9.78 (3.14) 3,220 04/01/02-03/31/03 9.78 0.31 0.55 0.86 (0.36) -- (0.36) 10.28 8.90 7,198 04/01/03-03/31/04 10.28 0.18 0.19 0.37 (0.19) -- (0.19) 10.46 3.68 5,683 04/01/04-03/31/05 10.46 0.33 (0.19) 0.14 (0.36) (0.13) (0.49) 10.11 1.37 4,977 04/01/05-03/31/06 10.11 0.38 (0.16) 0.22 (0.37) -- (0.37) 9.96 2.19 4,377 Class C* - - 11/01/00-10/31/01 $ 9.59 $0.48 $ 0.64 $ 1.12 $(0.45) $ -- $(0.45) $10.26 11.93% $ 4,541 11/01/01-03/31/02# 10.26 0.18 (0.49) (0.31) (0.16) -- (0.16) 9.79 (3.04) 3,772 04/01/02-03/31/03 9.79 0.31 0.56 0.87 (0.36) -- (0.36) 10.30 9.00 5,598 04/01/03-03/31/04 10.30 0.18 0.19 0.37 (0.19) -- (0.19) 10.48 3.68 5,352 04/01/04-03/31/05 10.48 0.33 (0.20) 0.13 (0.36) (0.13) (0.49) 10.12 1.27 4,780 04/01/05-03/31/06 10.12 0.38 (0.15) 0.23 (0.37) -- (0.37) 9.98 2.29 3,305 Class I - - 11/01/00-10/31/01 $ 9.62 $0.57 $ 0.65 $ 1.22 $(0.52) $ -- $(0.52) $10.32 13.01% $ 22,782 11/01/01-03/31/02# 10.32 0.21 (0.52) (0.31) (0.19) -- (0.19) 9.82 (3.01) 21,707 02/01/02-03/31/03 9.82 0.40 0.55 0.95 (0.44) -- (0.44) 10.33 9.80 20,617 04/01/03-03/31/04 10.33 0.20 0.24 0.44 (0.27) -- (0.27) 10.50 4.35 3,092 04/01/04-03/31/05 10.50 0.42 (0.20) 0.22 (0.44) (0.13) (0.57) 10.15 2.14 1,405 04/01/05-03/31/06 10.15 0.45 (0.15) 0.30 (0.45) -- (0.45) 10.00 2.96 1,296 Class Z* - - 11/01/00-10/31/01 $ 9.60 $0.59 $ 0.65 $ 1.24 $(0.55) $ -- $(0.55) $10.29 13.37% $323,570 11/01/01-03/31/02# 10.29 0.21 (0.47) (0.26) (0.21) -- (0.21) 9.82 (2.57) 297,081 04/01/02-03/31/03 9.82 0.47 0.53 1.00 (0.49) -- (0.49) 10.33 10.38 268,226 04/01/03-03/31/04 10.33 0.32 0.18 0.50 (0.33) -- (0.33) 10.50 4.92 72,043 04/01/04-03/31/05 10.50 0.50 (0.23) 0.27 (0.49) (0.13) (0.62) 10.15 2.62 25,626 04/01/05-03/31/06 10.15 0.53 (0.18) 0.35 (0.50) -- (0.50) 10.00 3.44 9,015
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 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 1.10(4) 4.34(4) 199 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 1.75(4) 3.69(4) 199 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 1.75(4) 3.68(4) 199 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 1.00(4) 4.44(4) 199 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 0.53(4) 4.87(4) 199
- -------- * 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. # 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, if applicable (based on average net assets):
10/31/01 03/31/02(3) 03/31/03 03/31/04 03/31/05 03/31/06 -------- ----------- -------- -------- -------- -------- Core Bond Fund Class A.................. 0.04% 0.19% 0.11% 0.10% 0.11% 0.14% Core Bond Fund Class B.................. 0.03 0.32 0.23 0.15 0.31 0.41 Core Bond Fund Class C.................. 0.04 0.32 0.18 0.14 0.38 0.61 Core Bond Fund Class I.................. 0.03 0.13 0.05 0.05 0.06 0.14 Core Bond Fund Class Z.................. 0.03 0.02 -- 0.02 0.05 0.14
See Notes to Financial Statements 12 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
U.S. GOVERNMENT SECURITIES FUND ------------------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expenses beginning investment and investment investment gains on Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets - ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- ---------- Class A ------- 03/31/02 $8.91 $0.37(4) $(0.08) $ 0.29 $(0.40) $-- $(0.40) $8.80 3.25% $187,615 1.42% 03/31/03 8.80 0.37 0.86 1.23 (0.40) -- (0.40) 9.63 14.14 210,848 1.12(3) 03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 0.99(3) 03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 0.99(3) 03/31/06 9.37 0.36 (0.20) 0.16 (0.37) -- (0.37) 9.16 1.68 151,284 0.99(3) Class B ------- 03/31/02 $8.91 $0.31(4) $(0.08) $ 0.23 $(0.34) $-- $(0.34) $8.80 2.55% $ 38,878 2.09%(3) 03/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595 1.76(3) 03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 1.64(3) 03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 1.64(3) 03/31/06 9.37 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.16 1.02 19,276 1.64(3) Class C* -------- 03/31/02 $8.91 $0.29(4) $(0.09) $ 0.20 $(0.32) $-- $(0.32) $8.79 2.40% $ 12,209 2.10%(3) 03/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322 1.75(3) 03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 1.64(3) 03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 1.64(3) 03/31/06 9.36 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.15 1.02 8,281 1.64(3)
Ratio of net investment income to average Portfolio net assets Turnover - ---------- --------- 4.12%(4) 579%(5) 3.88(3) 630(5) 3.14(3) 267(5) 3.26(3) 253(5) 3.80(3) 357 3.42%(3)(4) 579%(5) 3.20(3) 630(5) 2.45(3) 267(5) 2.61(3) 253(5) 3.14(3) 357 3.33%(3)(4) 579%(5) 3.18(3) 630(5) 2.45(3) 267(5) 2.61(3) 253(5) 3.14(3) 357
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06 -------- -------- -------- -------- -------- U.S. Government Securities Fund Class A. -- % 0.21% 0.37% 0.39% 0.36% U.S. Government Securities Fund Class B. 0.01 0.23 0.37 0.43 0.43 U.S. Government Securities Fund Class C. 0.16 0.27 0.38 0.48 0.57
(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. (5)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydowns on securities and was as follows:
2002 2003 2004 2005 ---- ---- ---- ---- U.S. Government Securities Fund......... 570% 614% 256% 246%
See Notes to Financial Statements 13 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND --------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expenses Period beginning investment and investment investment gains on Distri- end of Total period to average Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets - -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- ---------- Class A - - 03/31/02 $11.12 $0.51(5) $(0.03) $0.48 $(0.51) $(0.32) $(0.83) $10.77 4.45% $118,440 0.99%(3)(4) 03/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096 0.99(4) 03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467 0.99(4) 03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031 0.99(4) 03/31/06 11.20 0.35 (0.07) 0.28 (0.40) (0.08) (0.48) 11.00 2.18 303,343 0.99(4) Class B - - 03/31/02 $11.15 $0.44(5) $(0.03) $0.41 $(0.44) $(0.32) $(0.76) $10.80 3.78% $ 90,011 1.64%(3)(4) 03/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323 1.64(4) 03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923 1.64(4) 03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497 1.64(4) 03/31/06 11.23 0.28 (0.08) 0.20 (0.33) (0.08) (0.41) 11.02 1.43 76,304 1.64(4) Class C* - - 03/31/02 $11.16 $0.44(5) $(0.03) $0.41 $(0.44) $(0.32) $(0.76) $10.81 3.78% $ 36,258 1.64%(3)(4) 03/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173 1.64(4) 03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184 1.64(4) 03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936 1.64(4) 03/31/06 11.24 0.28 (0.07) 0.21 (0.33) (0.08) (0.41) 11.04 1.53 40,188 1.64(4)
Ratio of net investment income to average Portfolio net assets Turnover - ---------- --------- 4.61%(3)(4)(5) 544%(6) 3.36(4) 436(6) 2.51(4) 225(6) 2.73(4) 204(6) 3.17(4) 138 3.96%(3)(4)(5) 544%(6) 2.71(4) 436(6) 1.77(4) 225(6) 2.10(4) 204(6) 2.50(4) 138 3.96%(3)(4)(5) 544%(6) 2.59(4) 436(6) 1.74(4) 225(6) 2.11(4) 204(6) 2.49(4) 138
- -------- * 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 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. (4)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06 -------- -------- -------- -------- -------- GNMA Fund Class A............. 0.19% 0.13% 0.18% 0.17% 0.13% GNMA Fund Class B............. 0.19 0.14 0.16 0.18 0.17 GNMA Fund Class C............. 0.21 0.13 0.16 0.18 0.19
(5)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The per share effect of this change for the year ended March 31, 2002 on investment income and realized and unrealized gains and losses was less than $0.01 per share 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. (6)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydowns on securities and was as follows:
2002 2003 2004 2005 ---- ---- ---- ---- GNMA Fund............................... 537% 421% 213% 204%
See Notes to Financial Statements 14 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND** --------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Value, Net realized Total from from net realized Total Value, end of beginning investment and investment investment gains on Distri- end of Total period Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investments+ butions+ period+ Return(2) (000's) - ----------------- ---------- ---------- ------------ ----------- ---------- ------------- -------- ------- --------- -------- Class A - - 11/01/00-10/31/01 $3.13 $0.28 $(0.09) $0.19 $(0.28) $-- $(0.28) $3.04 6.48% $ 8,478 11/01/01-03/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- (0.12) 3.00 2.46 35,365 04/01/02-03/31/03 3.00 0.20 0.06 0.26 (0.18) -- (0.18) 3.08 9.07(7) 37,136 04/01/03-03/31/04 3.08 0.21 0.33 0.54 (0.21) -- (0.21) 3.41 18.04 43,840 04/01/04-03/31/05 3.41 0.20 0.11 0.31 (0.23) -- (0.23) 3.49 9.36 59,279 04/01/05-03/31/06 3.49 0.17 0.05 0.22 (0.18) -- (0.18) 3.53 6.54 167,072 Class B - - 11/01/00-10/31/01 $3.14 $0.26 $(0.09) $0.17 $(0.26) $-- $(0.26) $3.05 5.65% $ 9,964 11/01/01-03/31/02 3.05 0.10(6) (0.04) 0.06 (0.11) -- (0.11) 3.00 2.05 26,892 04/01/02-03/31/03 3.00 0.18 0.06 0.24 (0.16) -- (0.16) 3.08 8.36(7) 27,879 04/01/03-03/31/04 3.08 0.19 0.33 0.52 (0.19) -- (0.19) 3.41 17.29 36,110 04/01/04-03/31/05 3.41 0.18 0.10 0.28 (0.21) -- (0.21) 3.48 8.35 37,250 04/01/05-03/31/06 3.48 0.16 0.05 0.21 (0.16) -- (0.16) 3.53 6.14 46,294 Class C* - - 11/01/00-10/31/01 $3.14 $0.26 $(0.09) $0.17 $(0.26) $-- $(0.26) $3.05 5.65% $ 11,461 11/01/01-03/31/02 3.05 0.10(6) (0.03) 0.07 (0.11) -- (0.11) 3.01 2.25 14,289 04/01/02-03/31/03 3.01 0.19 0.05 0.24 (0.16) -- (0.16) 3.09 8.47(7) 14,423 04/01/03-03/31/04 3.09 0.19 0.34 0.53 (0.20) -- (0.20) 3.42 17.43 22,064 04/01/04-03/31/05 3.42 0.18 0.11 0.29 (0.21) -- (0.21) 3.50 8.65 36,867 04/01/05-03/31/06 3.50 0.15 0.05 0.20 (0.16) -- (0.16) 3.54 5.84 97,651
Ratio of net Ratio of investment expense income to to average average Portfolio net assets net assets Turnover ---------- ---------- --------- 1.57%(5) 9.07%(5) 49%(10) 1.52(3)(4)(5) 8.09(3)(4)(5)(6) 100(10) 1.62(8) 6.93(8) 67(10) 1.55(5)(9) 6.41(9) 71(10) 1.40(5)(8) 5.94(5)(8) 190(10) 1.34(5)(11) 5.19(5)(11) 119 2.21%(5) 8.41%(5) 49%(10) 2.19(3)(4)(5) 7.48(3)(4)(5)(6) 100(10) 2.28(8) 6.26(8) 67(10) 2.19(5)(9) 5.76(5)(9) 71(10) 2.05(5)(8) 5.32(5)(8) 190(10) 2.00(5)(11) 4.51(5)(11) 119 2.22%(5) 8.41%(5) 49%(10) 2.22(3)(4)(5) 7.34(3)(4)(5)(6) 100(10) 2.17(5)(8) 6.37(5)(8) 67(10) 2.16(5)(9) 5.78(5)(9) 71(10) 2.05(5)(8) 5.29(5)(8) 190(10) 1.99(5)(11) 4.54(5)(11) 119
- -------- * 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 reflects 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, if applicable (based on average net assets):
10/31/01 03/31/02(4) 03/31/03 03/31/04 03/31/05 03/31/06 -------- ----------- -------- -------- -------- -------- Strategic Bond Fund Class A............. 0.17% 0.01% -- % 0.02% 0.03% -- % Strategic Bond Fund Class B............. 0.18 0.01 -- 0.02 0.02 0.00 Strategic Bond Fund Class C............. 0.17 0.08 0.11 0.02 0.03 0.00
(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)Net custody credits of 0.02%. (10)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydowns on securities and was as follows:
2001 2002 2003 2004 2005 - ---- ---- ---- ---- ---- Strategic Bond Fund 49% 99% 65% 69% 188%
(11)Net of custody credits of 0.07%. See Notes to Financial Statements 15 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND** ---------------------- Net gain (loss) on Net investments Distributions Net Asset (both Dividends from net Asset Net Assets, Value, Net realized Total from from net realized Total Value, end of beginning investment and investment investment gains on Distri- end of Total period Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investment+ butions+ period+ Return(2) (000's) - ----------------- ---------- ---------- ------------ ----------- ---------- ------------- -------- ------- --------- ----------- Class A - - 11/01/00-10/31/01 $4.82 $0.44 $(0.55) $(0.11) $(0.46) $-- $(0.46) $4.25 (2.23)% $ 722 11/01/01-03/31/02 4.25 0.18(6) (0.11) 0.07 (0.19) -- (0.19) 4.13 1.67 59,075 04/01/02-03/31/03 4.13 0.37 (0.49) (0.12) (0.35) -- (0.35) 3.66 (2.45) 66,521 04/01/03-03/31/04 3.66 0.33 0.60 0.93 (0.36) -- (0.36) 4.23 26.05 93,818 04/01/04-03/31/05 4.23 0.33 0.21 0.54 (0.34) -- (0.34) 4.43 13.26 101,661 04/01/05-03/31/06 4.43 0.31 0.19 0.50 (0.33) -- (0.33) 4.60 11.61 214,041 Class B - - 11/01/00-10/31/01 $4.82 $0.41 $(0.54) $(0.13) $(0.43) $-- $(0.43) $4.26 (2.84)% $ 2,911 11/01/01-03/31/02 4.26 0.16(6) (0.11) 0.05 (0.18) -- (0.18) 4.13 1.23 67,599 04/01/02-03/31/03 4.13 0.35 (0.49) (0.14) (0.33) -- (0.33) 3.66 (3.06) 57,596 04/01/03-03/31/04 3.66 0.31 0.60 0.91 (0.33) -- (0.33) 4.24 25.55 73,751 04/01/04-03/31/05 4.24 0.31 0.20 0.51 (0.31) -- (0.31) 4.44 12.57 61,961 04/01/05-03/31/06 4.44 0.31 0.16 0.47 (0.30) -- (0.30) 4.61 10.88 52,346 Class C* - - 11/01/00-10/31/01 $4.83 $0.40 $(0.52) $(0.12) $(0.44) $-- $(0.44) $4.27 (2.84)% $ 2,274 11/01/01-03/31/02 4.27 0.17(6) (0.11) 0.06 (0.18) -- (0.18) 4.15 1.43 20,670 04/01/02-03/31/03 4.15 0.34 (0.48) (0.14) (0.33) -- (0.33) 3.68 (2.97) 27,814 04/01/03-03/31/04 3.68 0.30 0.60 0.90 (0.33) -- (0.33) 4.25 25.14 52,868 04/01/04-03/31/05 4.25 0.30 0.22 0.52 (0.31) -- (0.31) 4.46 12.77 65,385 04/01/05-03/31/06 4.46 0.30 0.17 0.47 (0.30) -- (0.30) 4.63 10.86 70,140
Ratio of net Ratio of investment expense income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 1.57%(5) 9.73%(5) 83%(7) 1.48(3)(4) 9.56(3)(4)(6) 61(7) 1.56 10.26 117(7) 1.49 8.15 126(7) 1.38(5) 7.59(5) 85(7) 1.36(5)(8) 7.20(5)(8) 91 2.21%(5) 9.17%(5) 83%(7) 2.12(3)(4) 8.91(3)(4)(6) 61(7) 2.18 9.63 117(7) 2.14 7.52 126(7) 2.03(5) 7.04(5) 85(7) 2.01(5)(8) 6.71(5)(8) 91 2.21%(5) 9.02%(5) 83%(7) 2.17(3)(4)(5) 8.86(3)(4)(5)(6) 61(7) 2.15(5) 9.67(5) 117(7) 2.11(5) 7.53(5) 126(7) 2.03(5) 6.97(5) 85(7) 2.01(5)(8) 6.67(5)(8) 91
- -------- * In conjunction with the reorganization on November 16, 2001, Class C was redesignated as Class II and Class II was redesignated as Class Z. Effective February 23, 2004, Class II was redesignated to Class C. ** The financial information for the fiscal periods prior to November 16, 2001 reflects 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. (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 custody credits of 0.01%. (4)Annualized (5)Net of the following expense reimbursements, if applicable (based on average net assets):
10/31/01 03/31/02(4) 03/31/03 03/31/04 03/31/05 03/31/06 -------- ----------- -------- -------- -------- -------- High Yield Bond Fund Class A............ 0.18% -- % -- % -- % 0.08% 0.11% High Yield Bond Fund Class B............ 0.18 -- -- -- 0.07 0.14 High Yield Bond Fund Class C............ 0.18 0.01 0.10 0.01 0.09 0.12
(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. (7)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydown on securities and was as follows:
2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- High Yield Bond Fund 83% 61% 117% 126% 85%
(8)Net of custody credits of 0.01%. See Notes to Financial Statements 16 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND ----------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expenses beginning investment and investment investment gains on Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets - ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ------- ---------- Class A - - 03/31/02 $13.02 $0.52(5) $(0.30) $0.22 $(0.52) $ -- $(0.52) $12.72 1.70% $75,071 1.29%(3) 03/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358 1.24 03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 1.26 03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 1.25 03/31/06 12.81 0.41 (0.10) 0.31 (0.40) (0.13) (0.53) 12.59 2.43 56,875 1.30 Class B - - 03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.95% $18,090 2.04%(3) 03/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031 1.97 03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 1.96 03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 1.94 03/31/06 12.82 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.60 1.77 6,694 1.95 Class C* - - 03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.99% $ 4,095 1.95%(3)(4) 03/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451 1.95(4) 03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 1.95(4) 03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 1.95(4) 03/31/06 12.81 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.59 1.81 4,497 1.95(4)
Ratio of net investment income to average Portfolio net assets Turnover - ---------- --------- 3.99%(3)(5) 140% 3.12 195 2.90 131 3.14 153 3.14 81 3.22%(3)(5) 140% 2.39 195 2.20 131 2.44 153 2.48 81 3.21%(3)(4)(5) 140% 2.40(4) 195 2.21(4) 131 2.44(4) 153 2.48(4) 81
- -------- * 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, if applicable (based on average net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06 -------- -------- -------- -------- -------- Tax Exempt Insured Fund Class C......... 0.56% 0.00% 0.12% 0.09% 0.20%
(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, 2006 -- (unaudited) Industry Allocation* Federal Home Loan Mortgage Corp......... 19.7% Federal National Mortgage Assoc......... 18.0% Financial Services...................... 15.7% Banks................................... 6.3% Utilities............................... 6.1% Foreign Government Agencies............. 5.3% Insurance............................... 3.6% Telecommunications...................... 3.1% Broadcasting & Media.................... 2.9% U.S. Treasury Notes..................... 2.3% Energy Sources.......................... 2.2% Leisure & Tourism....................... 1.8% Pharmaceuticals......................... 1.3% Repurchase Agreement.................... 1.1% Transportation.......................... 1.1% Business Services....................... 1.0% Chemicals............................... 0.9% Metals & Mining......................... 0.8% U.S. Treasury Bonds..................... 0.8% Conglomerate............................ 0.7% Real Estate Investment Trusts........... 0.7% Real Estate Companies................... 0.6% Aerospace & Military Technology......... 0.5% Health Services......................... 0.4% Medical Products........................ 0.4% Electronics............................. 0.3% Energy Services......................... 0.3% Forest Products......................... 0.3% Retail.................................. 0.3% Automotive.............................. 0.2% Computer Software....................... 0.2% Food, Beverage & Tobacco................ 0.2% Housing & Household Durables............ 0.2% Computers & Business Equipment.......... 0.1% Gas & Pipeline Utilities................ 0.1% Government National Mortgage Association 0.1% Machinery............................... 0.1% ---- 99.7% ====
Credit Quality+# Government -- Treasury 3.3% Government -- Agency.. 38.1% AAA................... 6.6% AA.................... 1.8% A..................... 14.9% BBB................... 19.3% BB.................... 6.5% B..................... 4.7% CCC................... 1.4% BELOW C............... 0.5% Not Rated@............ 2.9% ----- 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, 2006
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 8.6% Banks -- 1.0% Banc America Commercial Mtg., Inc. Series 2005-6, Class D 5.35% due 09/10/47(1)(12).................... $ 580,000 $ 555,962 Banc America Commercial Mtg., Inc. Series 2005-6, Class F 5.35% due 09/10/47(1)(12).................... 1,165,000 1,110,209 ---------- 1,666,171 ---------- Financial Services -- 7.6% Ameriquest Mtg. Securities, Inc. Series 2005-R3, Class A3A 4.91% due 05/25/35(2)........................ 211,130 211,140 Bear Stearns Asset-Backed Securities Series 2005-HE3, Class 1A1 4.90% due 03/25/35(2)........................ 61,475 61,483 Bear Stearns Commercial Mtg. Securities, Inc. Series 2005-PW10, Class F 5.63% due 12/11/40(1)(12).................... 1,080,000 1,057,281 Capital One Multi Asset Execution Trust, Series 2003-B2, Class B2 3.50% due 02/17/09........................... 120,000 119,897 Centex Home Equity Loan Trust Asset-Backed Certs., Series 2004-D, Class AV2 5.16% due 09/25/34(2)........................ 58,091 58,191 Chase Funding Mtg. Loan Asset-Backed Certs., Series 2003-6, Class 2A6 4.59% due 05/25/15........................... 550,000 528,108 Citigroup Mtg. Loan Trust, Inc. Series 2005-OPT1, Class A1B 5.03% due 02/25/35(2)........................ 189,279 189,427 Citigroup Mtg. Loan Trust, Inc. Series 2005-WF2, Class AF6B 5.55% due 08/25/35(1)........................ 450,000 423,148 Commerical Mtg. Pass-Through Certs., Series 2004-LB2A, Class A-3 4.22% due 03/10/39(1)........................ 4,510,000 4,295,469 CS First Boston Mtg. Securities Corp. Series 2005-TF3A, Class A-2 5.03% due 04/15/06*(1)(2).................... 1,548,000 1,549,914 Merrill Lynch Mtg. Investors, Inc. Series 2006-RM1W, Class A2D 5.51% due 02/25/37(3)........................ 1,500,000 1,476,585 Metris Master Trust Series 2004-2, Class A 4.93% due 10/20/10(2)........................ 250,000 250,084 Morgan Stanley Capital I Series 2005-HQ7, Class G 5.38% due 11/14/42*(1)(12)................... 700,000 667,059 Providian Master Note Trust Series 2006-C1A, Class C1 5.25% due 03/15/15*(2)(3).................... 1,350,000 1,350,000 Residential Funding Mtg. Securities II, Inc. Home Equity Loan Series 2005-HS2, Class AI4 5.66% due 12/25/35........................... 700,000 686,845
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- Financial Services (continued) Residential Funding Mtg. Securities II, Inc. Home Equity Loan Note, Series 2005-HS2 Class AI5 5.47% due 12/25/35(12)...................... $ 200,000 $ 196,281 Structured Asset Investment Loan Trust Mtg. Pass-Through Certs., Series 2005-HE3 Class A3 4.94% due 09/25/35(2)....................... 195,968 195,980 ----------- 13,316,892 ----------- Total Asset-Backed Securities (cost $15,171,018).......................... 14,983,063 ----------- BONDS & NOTES -- 35.9% Aerospace & Military Technology -- 0.5% Raytheon Co. Notes 4.85% due 01/15/11.......................... 330,000 320,640 Raytheon Co. Notes 6.75% due 08/15/07.......................... 596,000 605,329 ----------- 925,969 ----------- Automotive -- 0.2% Cooper-Standard Automotive, Inc. Sr. Sub. Notes 8.38% due 12/15/14.......................... 60,000 46,800 DaimlerChrysler NA Holding Corp. Guaranteed Notes 7.30% due 01/15/12.......................... 165,000 174,351 Dura Operating Corp. Sr. Notes 8.63% due 04/15/12.......................... 137,000 112,683 Ford Motor Co. Bonds 6.63% due 10/01/28.......................... 100,000 67,000 ----------- 400,834 ----------- Banks -- 4.7% ABN Amro North America Holding Co. Bonds 6.52% due 11/08/12*(7)...................... 340,000 351,937 Bank One Corp. Sub. Notes 8.00% due 04/29/27.......................... 234,000 284,409 BankBoston Capital Trust IV Guaranteed Capital Securities 5.46% due 06/08/28(2)....................... 622,000 601,088 Charter One Bank NA Sub. Notes 6.38% due 05/15/12.......................... 1,024,000 1,073,687 Comerica Bank Sub. Notes 5.20% due 08/22/17.......................... 120,000 113,847 Compass Bank Sub. Notes 5.90% due 04/01/26.......................... 939,000 918,454 Downey Financial Corp. Notes 6.50% due 07/01/14.......................... 380,000 378,865
19 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- BONDS & NOTES (continued) Banks (continued) First Maryland Capital II Guaranteed Sub. Capital Income Securities 5.53% due 02/01/27(2)..................... $508,000 $ 497,648 HSBC Bank USA Sub. Notes 5.63% due 08/15/35........................ 250,000 232,242 Huntington National Bank Notes 5.50% due 02/15/16........................ 340,000 331,672 Independence Community Bank Corp. Sub. Notes 3.50% due 06/20/08(7)..................... 177,000 169,347 JPMorgan Chase Bank Sub. Notes 6.13% due 11/01/08........................ 359,000 364,522 National Westminster Bank Sub. Notes 7.75% due 10/16/07........................ 143,000 147,577 PNC Funding Corp. Guaranteed Notes 5.13% due 12/14/10........................ 330,000 325,909 PNC Funding Corp. Guaranteed Notes 5.75% due 08/01/06........................ 565,000 565,886 Popular North America, Inc. Guaranteed Notes 4.70% due 06/30/09........................ 248,000 241,528 Sovereign Bancorp, Inc. Sr. Notes 4.80% due 09/01/10*....................... 550,000 531,215 Wachovia Bank NA Sub. Notes 5.60% due 03/15/16........................ 300,000 297,065 Wachovia Corp. Sr. Unsec. Notes 5.35% due 03/15/11........................ 180,000 179,289 Wells Fargo & Co. Sub. Global Notes 6.38% due 08/01/11........................ 170,000 177,263 World Savings Bank FSB Notes 4.13% due 12/15/09........................ 440,000 422,081 ---------- 8,205,531 ---------- Broadcasting & Media -- 2.5% AMFM, Inc. Sr. Notes 8.00% due 11/01/08........................ 494,000 518,571 CBS Corp. Sr. Notes 6.63% due 05/15/11........................ 409,000 422,187 Charter Communications Holdings LLC Sr. Notes 11.13% due 01/15/11....................... 340,000 180,200 Comcast Corp. Guaranteed Notes 6.45% due 03/15/37........................ 266,000 255,946
Principal Value Security Description Amount (Note 2) ------------------------------------------------------- Broadcasting & Media (continued) COX Communications, Inc. Notes 7.13% due 10/01/12.............. $330,000 $ 346,191 COX Communications, Inc. Debentures 7.63% due 06/15/25.............. 232,000 247,402 Knight-Ridder, Inc. Debentures 6.88% due 03/15/29.............. 190,000 178,062 News America, Inc. Guaranteed Sr. Debentures 7.30% due 04/30/28.............. 220,000 228,674 Nexstar Finance, Inc. Sr. Sub. Notes 7.00% due 01/15/14.............. 115,000 108,675 Omnicom Group, Inc. Guaranteed Notes 5.90% due 04/15/16.............. 165,000 162,434 Paxson Communications Corp. 2nd Priority Sr. Sec. Notes 10.78% due 01/15/13*(2)......... 625,000 618,750 Time Warner Cos., Inc. Debentures 7.25% due 10/15/17.............. 157,000 167,998 Time Warner Entertainment Co. LP Sr. Debentures 8.38% due 03/15/23.............. 499,000 564,184 Univision Communications, Inc. Sr. Notes 3.50% due 10/15/07.............. 165,000 159,690 Young Broadcasting, Inc. Guaranteed Sr. Sec. Notes 10.00% due 03/01/11............. 275,000 253,687 ---------- 4,412,651 ---------- Business Services -- 1.0% Affinity Group, Inc. Sr. Sub. Notes 9.00% due 02/15/12.............. 155,000 155,775 Aramark Services, Inc. Notes 7.00% due 05/01/07.............. 402,000 407,041 Dun & Bradstreet Corp. Sr. Notes 5.50% due 03/15/11.............. 150,000 149,099 Erac USA Finance Co. Notes 7.95% due 12/15/09*............. 248,000 267,094 First Data Corp. Notes 3.38% due 08/01/08.............. 198,000 189,227 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 09/01/10............. 205,000 205,512 Pitney Bowes, Inc. Sr. Notes, Series MTN 4.75% due 01/15/16.............. 289,000 269,023
20 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- BONDS & NOTES (continued) Business Services (continued) Service Corp. International Sr. Notes 6.75% due 04/01/16................. $165,000 $ 163,350 ---------- 1,806,121 ---------- Chemicals -- 0.7% BCI US Finance Corp. Sr. Sec. Notes 10.10% due 07/15/10*(2)............ 475,000 484,500 ICI Wilmington, Inc. Guaranteed Notes 7.05% due 09/15/07................. 511,000 519,822 Lubrizol Corp. Sr. Notes 4.63% due 10/01/09................. 185,000 179,240 ---------- 1,183,562 ---------- Computer Software -- 0.2% Oracle Corp. Sr. Notes 5.00% due 01/15/11*................ 347,000 338,913 ---------- Computers & Business Equipment -- 0.1% Activant Solutions, Inc. Sr. Notes 10.99% due 04/01/10*(2)............ 80,000 81,600 Computer Sciences Corp. Notes 3.50% due 04/15/08................. 190,000 182,967 ---------- 264,567 ---------- Conglomerate -- 0.2% Honeywell International, Inc. Sr. Notes 5.40% due 03/15/16................. 150,000 148,067 Tyco International Group SA Unsec. Notes 4.44% due 06/15/07*................ 250,000 245,931 ---------- 393,998 ---------- Electronics -- 0.3% Arrow Electronics, Inc. Sr. Debentures 6.88% due 06/01/18................. 297,000 302,476 Corning, Inc. Notes 6.20% due 03/15/16................. 198,000 197,991 ---------- 500,467 ---------- Energy Services -- 0.3% Hanover Compressor Co. Guaranteed Sr. Notes 9.00% due 06/01/14................. 250,000 268,750 Seitel, Inc. Sr. Notes 11.75% due 07/15/11................ 250,000 284,375 ---------- 553,125 ----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ Energy Sources -- 1.4% Amerada Hess Corp. Notes 7.13% due 03/15/33........................ $ 215,000 $ 234,589 Amerada Hess Corp. Notes 7.88% due 10/01/29........................ 210,000 244,533 Calpine Corp. Sec. Notes 8.75% due 07/15/13*(5)(6)................. 950,000 871,625 Encore Acquisition Co. Sr. Sub. Notes 6.00% due 07/15/15........................ 117,000 109,102 Encore Acquisition Co. Sr. Sub. Notes 6.25% due 04/15/14........................ 68,000 65,110 Enterprise Products Operating LP Guaranteed Notes 6.88% due 03/01/33........................ 245,000 250,292 Hilcorp Energy Finance Co. Sr. Notes 10.50% due 09/01/10*...................... 170,000 187,212 Indiantown Cogeneration LP 1st Mtg., Series A-9 9.26% due 12/15/10........................ 189,543 199,483 The Premcor Refining Group, Inc. Sr. Notes 6.75% due 02/01/11........................ 347,000 361,598 ---------- 2,523,544 ---------- Financial Services -- 6.0% AMBAC Financial Group, Inc. Debentures 5.95% due 12/05/35........................ 205,000 197,795 Ameriprise Financial, Inc. Sr. Notes 5.35% due 11/15/10........................ 279,000 276,182 Ameriprise Financial, Inc. Sr. Notes 5.65% due 11/15/15........................ 330,000 325,297 BAE Systems Holdings, Inc. Guaranteed Notes 4.75% due 08/15/10*....................... 1,118,000 1,077,838 Capital One Bank Sr. Notes 5.13% due 02/15/14........................ 200,000 192,462 Consolidated Communications Holdings, Inc. Sr. Notes 9.75% due 04/01/12........................ 244,000 258,640 Countrywide Home Loans, Inc. Notes 4.13% due 09/15/09........................ 170,000 162,490 Ford Motor Credit Co. Sr. Notes 5.80% due 01/12/09........................ 378,000 345,211 Ford Motor Credit Co. Notes 7.00% due 10/01/13........................ 300,000 268,322
21 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) General Electric Capital Corp. Notes 2.80% due 01/15/07............... $579,000 $ 568,786 General Electric Capital Corp. Notes 4.38% due 03/03/12............... 330,000 312,383 General Electric Capital Corp. Notes 6.75% due 03/15/32............... 657,000 731,621 General Motors Acceptance Corp. Notes 6.75% due 12/01/14............... 50,000 45,010 General Motors Acceptance Corp. Notes 6.88% due 09/15/11............... 787,607 777,475 General Motors Acceptance Corp. Notes 6.88% due 08/28/12............... 29,520 29,840 General Motors Acceptance Corp. Notes 7.25% due 03/02/11............... 150,000 142,147 General Motors Acceptance Corp. Notes 7.75% due 01/19/10............... 400,000 390,004 Jefferies Group, Inc. Sr. Unsec. Notes 6.25% due 01/15/36............... 454,000 426,088 Lehman Brothers Holdings, Inc. Notes 5.50% due 04/04/16............... 582,000 570,564 Lehman Brothers Holdings, Inc., Notes 4.50% due 07/26/10............... 380,000 366,229 NGC Corp. Capital Trust, Series B Guaranteed Sub. Notes 8.32% due 06/01/27............... 375,000 330,000 Pricoa Global Funding I Notes 3.90% due 12/15/08*.............. 100,000 96,279 Pricoa Global Funding I Notes 4.63% due 06/25/12*.............. 190,000 180,437 Principal Life Global Funding I Sec. Notes 6.25% due 02/15/12*.............. 200,000 206,968 Residential Capital Corp. Notes 6.38% due 06/30/10............... 795,000 800,899 Residential Capital Corp. Notes 6.88% due 06/30/15............... 300,000 312,754 Sprint Capital Corp. Guaranteed Notes 6.88% due 11/15/28............... 403,000 415,789 Transamerica Finance Corp. Sr. Notes 6.40% due 09/15/08............... 205,000 209,313 Xlliac Global Funding Notes 4.80% due 08/10/10*.............. 400,000 387,733 ----------- 10,414,368 -----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Food, Beverage & Tobacco -- 0.2% Dole Food Co., Inc. Sr. Notes 8.88% due 03/15/11..................... $ 80,000 $ 79,200 Foster's Finance Corp. Notes 6.88% due 06/15/11*.................... 185,000 194,278 -------- 273,478 -------- Forest Products -- 0.2% Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23..................... 160,000 154,000 Pliant Corp. Sr. Sec. Notes 11.13% due 09/01/09(5)(6).............. 249,000 262,073 -------- 416,073 -------- Health Services -- 0.4% HCA, Inc. Sr. Notes 6.95% due 05/01/12..................... 390,000 393,767 Psychiatric Solutions, Inc. Guaranteed Notes 7.75% due 07/15/15..................... 250,000 254,375 -------- 648,142 -------- Household & Personal Products -- 0.0% AEP Industries, Inc. Sr. Notes 7.88% due 03/15/13..................... 32,000 32,160 -------- Housing & Household Durables -- 0.2% Stanley Works Capital Trust I Bonds 5.90% due 06/01/06*(7)................. 330,000 304,807 -------- Insurance -- 2.7% Aegon NV Sub. Notes 5.59% due 07/29/49..................... 425,000 374,000 Americo Life, Inc. Notes 7.88% due 05/01/13*.................... 318,000 320,532 Chubb Corp. Notes 6.00% due 11/15/11..................... 267,000 272,272 Genworth Financial, Inc. Notes 4.75% due 06/15/09..................... 340,000 333,641 ING Security Life Institutional Funding Notes 2.70% due 02/15/07*.................... 578,000 563,367 Kingsway America, Inc. Guaranteed Sr. Notes 7.50% due 02/01/14..................... 319,000 321,353 Markel Corp. Sr. Notes 7.35% due 08/15/34..................... 95,000 97,965
22 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- BONDS & NOTES (continued) Insurance (continued) Metropolitan Life Global Funding I Notes 4.25% due 07/30/09*............... $407,000 $ 396,267 Metropolitan Life Global Funding I Sr. Notes 4.63% due 08/19/10*............... 185,000 178,917 MIC Financing Trust I Pass-Through Certs., 8.38% due 02/01/27*............... 176,000 178,740 Ohio Casualty Corp. Notes 7.30% due 06/15/14................ 521,000 543,059 Selective Insurance Group Sr. Notes 6.70% due 11/01/35................ 220,000 211,789 Allstate Corp. Sr. Notes 5.95% due 04/01/36................ 867,000 844,503 ---------- 4,636,405 ---------- Leisure & Tourism -- 1.8% American Airlines, Inc. Series 2001-1, Class A-2 6.82% due 05/23/11................ 525,000 515,812 Atlas Air, Inc. Pass-Through Certs., Series 1999-1, Class A-1 7.20% due 01/02/19................ 139,949 141,348 Atlas Air, Inc. Series 1999-1, Class B 7.63% due 01/02/15................ 950,432 855,389 Atlas Air, Inc. Pass-Through Certs., Series 2000-1 8.71% due 01/02/19................ 127,982 132,781 Brunswick Corp. Notes 5.00% due 06/01/11................ 292,000 278,052 Continental Airlines, Inc. Pass-Through Certs., Series 1998-1, Class A 6.65% due 03/15/19................ 54,927 55,338 Continental Airlines, Inc. Pass-Through Certs., Series 1997-4, Class A 6.90% due 01/02/18................ 78,028 79,489 Continental Airlines, Inc. Series 1999-2, Class C-1 7.73% due 03/15/11................ 26,334 22,754 Delta Airlines, Inc. Notes 8.30% due 12/15/29(5)............. 175,000 46,813 Delta Airlines, Inc. Sr. Notes 10.00% due 08/15/08(5)............ 225,000 57,375 Hilton Hotels Corp. Sr. Notes 7.20% due 12/15/09................ 198,000 205,722 MGM Mirage, Inc. Sr. Notes 5.88% due 02/27/14................ 325,000 306,312
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Leisure & Tourism (continued) Riviera Holdings Corp. Guaranteed Notes 11.00% due 06/15/10#................. $125,000 $ 132,813 Royal Caribbean Cruises, Ltd. Sr. Notes 6.88% due 12/01/13................... 228,000 234,420 ---------- 3,064,418 ---------- Medical Products -- 0.4% Boston Scientific Corp. Bonds 6.25% due 11/15/35................... 418,000 427,090 MEDIQ/PRN Life Support Services, Inc. Sr. Notes 11.00% due 06/01/08+(3)(9)........... 10,000 0 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11.................. 185,000 191,938 ---------- 619,028 ---------- Metals & Mining -- 0.4% Barrick Gold Finance Co. Guaranteed Debentures 7.50% due 05/01/07................... 254,000 259,579 Newmont Mining Corp. Notes 8.63% due 05/15/11................... 190,000 214,458 Phelps Dodge Corp. Sr. Notes 6.13% due 03/15/34................... 267,000 249,296 ---------- 723,333 ---------- Pharmaceuticals -- 1.1% American Home Products Notes 6.95% due 03/15/11................... 320,000 339,269 AmerisourceBergen Corp. Sr. Notes 5.63% due 09/15/12*(13).............. 150,000 147,525 Genentech, Inc. Sr. Notes 5.25% due 07/15/35................... 939,000 844,704 Merck & Co., Inc. Notes 2.50% due 03/30/07................... 337,000 327,870 Teva Pharmaceutical Finance LLC Guaranteed Sr. Notes 6.15% due 02/01/36................... 228,000 214,896 ---------- 1,874,264 ---------- Real Estate Companies -- 0.3% EOP Operating LP Sr. Notes 7.00% due 07/15/11................... 330,000 347,217 ERP Operating LP Sr. Notes 5.38% due 08/01/16................... 196,000 189,366 ---------- 536,583 ----------
23 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- BONDS & NOTES (continued) Real Estate Investment Trusts -- 0.7% Brandywine Operating Partnership LP Guaranteed Notes 6.00% due 04/01/16...................... $182,000 $ 180,111 Commercial Net Lease Realty, Inc. Notes 6.15% due 12/15/15...................... 200,000 197,250 Duke Realty Corp. Sr. Notes 5.50% due 03/01/16...................... 165,000 160,098 Heritage Property Investment Trust, Inc. Notes 4.50% due 10/15/09...................... 165,000 158,214 Mack-Cali Realty LP Notes 5.80% due 01/15/16...................... 165,000 161,120 Reckson Operating Partnership LP Sr. Unsec. Notes 6.00% due 03/31/16...................... 165,000 163,677 Vornado Realty LP Sr. Notes 4.75% due 12/01/10...................... 165,000 157,900 ---------- 1,178,370 ---------- Retail -- 0.2% Rent-Way, Inc. Sr. Notes 11.88% due 06/15/10..................... 325,000 339,625 ---------- Telecommunications -- 2.4% Alltel Corp. Notes 4.66% due 05/17/07...................... 440,000 437,052 American Cellular Corp. Sr. Notes, Series B 10.00% due 08/01/11..................... 470,000 509,950 Dobson Communications Corp. Sr. Notes 8.85% due 10/15/12(2)................... 150,000 148,875 GTE Corp. Debentures 6.94% due 04/15/28...................... 304,000 305,289 GTE Northwest, Inc. Series D 5.55% due 10/15/08...................... 190,000 188,784 LCI International, Inc. Sr. Notes 7.25% due 06/15/07...................... 780,000 787,800 New England Telephone & Telegraph Co. Debentures 7.88% due 11/15/29...................... 220,000 232,778 Suncom Wireless, Inc. Sr. Notes 8.50% due 06/01/13...................... 75,000 71,250 U.S. West Communications, Inc. Guaranteed Notes 7.25% due 09/15/25...................... 225,000 230,625 Verizon New England, Inc. Debentures 6.50% due 09/15/11...................... 170,000 172,584
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Telecommunications (continued) Verizon New York, Inc., Debentures, Series A 6.88% due 04/01/12...................... $349,000 $ 358,495 Verizon New York, Inc., Debentures, Series B 7.38% due 04/01/32...................... 804,000 815,484 ---------- 4,258,966 ---------- Transportation -- 1.1% Burlington Northern Santa Fe Corp. Debentures 7.29% due 06/01/36...................... 422,000 489,285 Canadian National Railway Co. Notes 6.38% due 10/15/11...................... 330,000 344,618 CNF, Inc. Sr. Debentures 6.70% due 05/01/34...................... 317,000 311,084 Norfolk Southern Corp. Notes 5.59% due 05/17/25...................... 461,000 439,508 Ryder Systems, Inc. Notes 5.00% due 06/15/12...................... 391,000 370,119 ---------- 1,954,614 ---------- Utilities -- 5.7% American Electric Power Co., Inc. Sr. Notes 4.71% due 08/16/07(4)................... 198,000 196,090 CenterPoint Energy Houston Electric, LLC Series L-2 5.60% due 07/01/23...................... 252,000 238,598 CenterPoint Energy Resources Corp. Notes 7.75% due 02/15/11...................... 370,000 400,697 Centerpoint Energy, Inc. Sr. Notes 5.88% due 06/01/08...................... 410,000 412,092 Cleco Power LLC Sr. Notes 6.50% due 12/01/35...................... 245,000 238,797 Commonwealth Edison Co. 1st Mtg 5.90% due 03/15/36...................... 281,000 267,670 Consolidated Natural Gas Co. Sr. Notes 5.38% due 11/01/06...................... 215,000 214,965 Consumers Energy Co. Series C 4.25% due 04/15/08...................... 380,000 370,599 Dominion Resources, Inc. Sr. Unsec. Notes, Series A 5.69% due 05/15/08(4)................... 363,000 363,645 Duke Energy Corp. Sr. Notes 4.20% due 10/01/08...................... 330,000 320,175
24 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------ BONDS & NOTES (continued) Utilities (continued) Duquesne Light Holdings, Inc. Sr. Notes 6.25% due 08/15/35............... $ 99,000 $ 92,083 El Paso Production Holding Co. Guaranteed Notes 7.75% due 06/01/13............... 455,000 471,494 Entergy Louisiana LLC 1st Mtg. Bonds 5.83% due 11/01/10............... 555,000 548,221 Florida Power & Light Co. Notes 5.95% due 10/01/33............... 205,000 203,845 Indianapolis Power & Light Co. 1st Mtg. Bonds 6.60% due 01/01/34*.............. 228,000 235,301 KeySpan Corp. Sr. Notes 4.90% due 05/16/08............... 955,000 944,635 NRG Energy, Inc. Sr. Notes 7.25% due 02/01/14............... 100,000 101,625 NRG Energy, Inc. Sr. Notes 7.38% due 02/01/16............... 400,000 408,500 Old Dominion Electric Cooperative 1st Mtg. Bonds, Series A 5.68% due 12/01/28............... 276,958 273,593 Pepco Holdings, Inc. Notes 5.50% due 08/15/07............... 385,000 385,041 PSEG Power LLC Sr. Notes 7.75% due 04/15/11............... 190,000 206,419 PSI Energy, Inc. Debentures 6.12% due 10/15/35............... 215,000 208,660 PSI Energy, Inc. Debentures 7.85% due 10/15/07............... 593,000 612,735 Public Service Electric & Gas Co. Sec. Notes 5.00% due 08/15/14............... 180,000 172,716 Puget Sound Energy, Inc. Sr. Notes 5.20% due 10/01/15............... 591,000 565,184 Reliant Energy, Inc. Notes 9.50% due 07/15/13............... 275,000 275,344 Sempra Energy Sr. Notes 4.62% due 05/17/07............... 165,000 163,532 Southern California Edison Co. Series 2006-A 5.63% due 02/01/36............... 228,000 213,419 Southern California Gas Co. 1st Mtg. Bonds 5.75% due 11/15/35............... 235,000 228,412
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- Utilities (continued) Southern Energy, Inc. Sr. Notes 7.90% due 07/15/09+(3)(9)............ $425,000 $ 0 The AES Corp. Sr. Notes 7.75% due 03/01/14................... 300,000 315,000 Virginia Electric & Power Co. Notes 4.10% due 12/15/08................... 381,000 366,315 ----------- 10,015,402 ----------- Total Bonds & Notes (cost $63,865,342)................... 62,799,318 ----------- CONVERTIBLE BONDS -- 0.1% Telecommunications -- 0.1% ICO North America, Inc. Sr. Notes 7.50% due 08/15/09(3)(9)(13) (cost $65,000)....................... 65,000 82,550 ----------- FOREIGN BONDS & NOTES -- 12.1% Banks -- 0.6% Banco Continental de Panama SA Notes 6.63% due 12/01/10*.................. 226,000 224,125 Caisse Nationale Notes 6.52% due 11/08/12................... 298,000 263,358 Mizuho Finance Guaranteed Notes 8.38% due 12/29/49................... 375,000 399,375 UOB Cayman, Ltd. Guaranteed Notes 5.80% due 03/15/16*(11).............. 330,000 323,043 ----------- 1,209,901 ----------- Broadcasting & Media -- 0.4% Grupo Televisa SA Sr. Notes 6.63% due 03/18/25................... 380,000 372,877 Telenet Group Holding NV Disc. Notes 11.50% due 06/15/14*(4).............. 376,000 314,430 ----------- 687,307 ----------- Business Services -- 0.0% SCL Terminal Aereo Santiago SA Sr. Secured Notes 6.95% due 07/01/12*.................. 68,535 69,399 ----------- Chemicals -- 0.2% Sociedad Quimica y Minera de Chile SA Notes 6.13% due 04/15/16*(3)............... 370,000 369,826 ----------- Conglomerate -- 0.5% Tyco International Group SA Sr. Notes 6.75% due 02/15/11................... 756,000 786,298 ----------- Energy Sources -- 0.8% BHP Billiton Finance USA, Ltd. Guaranteed Notes 5.00% due 12/15/10................... 330,000 324,434
25 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Energy Sources (continued) Gazprom International SA Guaranteed Sr. Notes 7.20% due 02/01/20*............ $ 275,000 $ 287,787 Nexen, Inc Notes 5.88% due 03/10/35............. 457,000 425,999 PTT Public Co., Ltd Bonds 5.88% due 08/03/35*............ 261,000 236,197 Talisman Energy, Inc. Sr. Notes 5.85% due 02/01/37............. 190,000 178,611 ---------- 1,453,028 ---------- Financial Services -- 1.7% Aries Vermogensverwaltungs GmbH Bonds 9.60% due 10/25/14............. 1,000,000 1,249,400 Basell AF SCA Guaranteed Notes 8.38% due 08/15/15*............ 375,000 372,187 Canadian Oil Sands, Ltd. Notes 5.80% due 08/15/13*............ 198,000 197,609 FBG Finance, Ltd. Notes 5.88% due 06/15/35*............ 220,000 200,175 HBOS Capital Funding LP Notes 6.85% due 03/29/49............. 550,000 551,375 SovRisc BV Notes 4.63% due 10/31/08*............ 389,000 383,992 ---------- 2,954,738 ---------- Forest Products -- 0.1% Abitibi-Consolidated, Inc. Debentures 8.55% due 08/01/10............. 175,000 175,875 ---------- Gas & Pipeline Utilities -- 0.1% Kinder Morgan Finance Guaranteed Notes 5.70% due 01/05/16............. 198,000 192,902 ---------- Government Agencies -- 5.1% Federal Republic of Brazil Bonds 8.00% due 01/15/18............. 550,000 595,925 Federal Republic of Brazil Bonds 10.50% due 07/14/14............ 530,000 659,850 Republic of Argentina Bonds 4.89% due 08/03/12(2).......... 620,000 506,850 Republic of Argentina Bonds 8.28% due 12/31/33............. 980,123 962,971
Principal Value Security Description Amount (Note 2) -------------------------------------------------------- Government Agency (continued) Republic of Turkey Notes 9.00% due 06/30/11.............. $ 480,000 $ 537,000 Republic of Turkey Sr. Bonds 11.88% due 01/15/30............. 1,150,000 1,775,313 Republic of Venezuela Bonds 8.50% due 10/08/14.............. 260,000 291,200 Republic of Venezuela Bonds 9.25% due 09/15/27.............. 1,500,000 1,905,750 Russian Federation Bonds 5.00% due 03/31/30(4)........... 850,000 932,620 United Kingdom Notes 2.25% due 07/08/08*............. 749,000 708,279 United Mexican States, Series A Notes 7.50% due 04/08/33.............. 19,000 21,185 ---------- 8,896,943 ---------- Insurance -- 0.5% Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.............. 315,000 277,200 ING Groep NV Notes 5.78% due 12/08/15(11).......... 340,000 330,729 Montpelier Re Holdings, Ltd. Sr. Notes 6.13% due 08/15/13.............. 271,000 258,052 ---------- 865,981 ---------- Machinery -- 0.1% Atlas Copco AB Notes 6.50% due 04/01/08*............. 232,000 236,548 ---------- Metals & Mining -- 0.4% Falconbridge, Ltd. Notes 8.38% due 02/15/11.............. 198,000 217,674 Inco, Ltd. Debentures 7.20% due 09/15/32.............. 267,000 276,662 Teck Cominco, Ltd. Sr. Notes 6.13% due 10/01/35.............. 215,000 202,281 ---------- 696,617 ---------- Pharmaceuticals -- 0.2% Elan Finance PLC Guaranteed Notes 7.75% due 11/15/11.............. 288,000 272,880 ----------
26 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Real Estate Companies -- 0.3% Brookfield Asset Management, Inc. Sr. Notes 8.13% due 12/15/08............... $ 430,000 $ 457,016 ------------ Retail -- 0.1% Jean Coutu Group PJC, Inc. Sr. Sub. Notes 8.50% due 08/01/14............... 250,000 229,375 ------------ Telecommunications -- 0.6% America Movil SA de CV Sr. Notes 6.38% due 03/01/35............... 264,000 248,222 British Telecommunications PLC Bonds 8.63% due 12/15/30............... 190,000 243,063 TELUS Corp. Notes 7.50% due 06/01/07............... 383,000 391,655 TELUS Corp. Notes 8.00% due 06/01/11............... 161,000 177,579 ------------ 1,060,519 ------------ Utilities -- 0.4% Enersis SA Notes 7.40% due 12/01/16............... 600,000 631,454 ------------ Total Foreign Bonds & Notes (cost $20,232,185)............... 21,246,607 ------------ U.S. GOVERNMENT OBLIGATIONS -- 3.1% U.S Treasury Bonds -- 0.8% 5.38% due 02/15/31................ 1,173,000 1,234,766 6.88% due 08/15/25................ 134,000 163,574 ------------ 1,398,340 ------------ U.S. Treasury Notes -- 2.3% 2.00% due 01/15/14 TIPS........... 252,141 246,084 3.25% due 08/15/07................ 1,000,000 978,750 4.25% due 08/15/13................ 2,000 1,924 4.25% due 10/15/10................ 370,000 361,357 4.25% due 08/15/15................ 286,000 272,448 4.50% due 02/28/11................ 192,000 189,202 4.50% due 02/15/16................ 420,000 408,483 4.63% due 02/29/08................ 156,000 155,372 6.88% due 05/15/06................ 1,481,000 1,484,587 ------------ 4,098,207 ------------ Total U.S. Government Obligations (cost $5,596,345)................ 5,496,547 ------------ U.S. GOVERNMENT AGENCIES -- 37.8% Federal Home Loan Mortgage Corporation -- 19.7% 3.63% due 02/15/08............... 1,000,000 974,226 4.45% due 03/06/08............... 500,000 493,789 4.50% due 11/01/18............... 2,495,045 2,386,432 4.50% due 02/01/19............... 1,778,467 1,698,847 5.00% due 06/15/31............... 1,165,457 1,143,116
Principal Value Security Description Amount (Note 2) -------------------------------------------------- Federal Home Loan Mortgage Corporation (continued) 5.00% due 03/01/34..... $1,170,659 $ 1,115,905 5.00% due 05/01/34..... 82,075 78,236 5.00% due 06/01/34..... 3,061,312 2,918,128 5.00% due 04/01/36..... 2,025,000 1,926,703 5.13% due 12/15/13..... 2,386,396 2,366,156 5.50% due 02/01/18..... 617,518 613,730 5.50% due 12/15/18..... 992,459 984,132 5.50% due 10/01/33..... 1,371,706 1,341,936 5.50% due 01/01/35..... 2,924,332 2,856,093 6.00% due 11/01/33..... 8,021 8,030 6.00% due 12/01/35..... 1,828,466 1,829,661 6.00% due 01/01/36..... 3,136,701 3,138,750 6.50% due 08/01/16..... 10,473 10,698 6.50% due 06/01/32..... 177,058 180,979 6.50% due 08/01/32..... 1,157,946 1,182,892 6.50% due 02/01/33..... 114,307 116,770 6.50% due 02/01/36..... 3,500,002 3,568,023 6.50% due 03/01/36..... 1,175,117 1,197,885 6.88% due 09/15/10..... 925,000 987,734 7.00% due 03/01/12..... 8,680 8,936 7.00% due 11/01/16..... 55,618 57,195 7.50% due 04/01/31..... 297,550 310,894 7.50% due 12/01/31..... 750,547 784,205 8.00% due 10/01/29..... 13,342 14,216 8.00% due 07/01/30..... 4,638 4,937 8.00% due 08/01/30..... 13,112 13,959 8.00% due 10/01/30..... 15,928 16,957 8.00% due 11/01/30..... 34,601 36,835 8.00% due 12/01/30..... 81,032 86,263 8.00% due 01/01/31..... 81,854 87,139 ------------ 34,540,387 ------------ Federal National Mortgage Association -- 18.0% 3.88% due 05/15/07..... 1,000,000 986,474 4.50% due 06/01/18..... 694,819 665,715 5.00% due 06/01/18..... 1,814,452 1,772,547 5.00% due 09/01/18..... 606,836 592,821 5.00% due 10/01/18..... 1,223,899 1,195,633 5.00% due 11/01/18..... 971,939 949,492 5.00% due 11/01/20..... 492,308 480,167 5.00% due 11/01/33..... 46,591 44,481 5.00% due 03/01/34..... 5,636,734 5,375,798 5.50% due 06/01/20..... 1,062,396 1,056,272 5.50% due 12/01/33..... 2,639,405 2,581,520 5.50% due 03/01/34..... 697,266 681,617 5.50% due 07/01/34..... 1,955,402 1,911,516 5.50% due 09/01/34..... 835,363 816,614 5.50% due 12/01/35..... 2,350,000 2,294,545 5.50% due 02/01/36(2).. 1,173,704 1,173,438 6.00% due 12/01/16..... 743,620 754,025 6.00% due 05/01/17..... 140,856 142,816 6.00% due 12/01/33..... 2,766,274 2,767,755 6.00% due 08/01/34..... 2,187,950 2,189,573 6.00% due 10/01/34..... 972,380 972,789 6.31% due 02/01/08..... 84,311 84,782
27 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Federal National Mortgage Association (continued) 6.34% due 01/01/08...................... $ 16,800 $ 16,936 6.43% due 01/01/08...................... 17,867 18,034 6.50% due 03/01/17...................... 374,477 383,451 6.50% due 04/01/29...................... 52,217 53,533 6.50% due 02/01/32...................... 354,153 362,089 6.50% due 07/01/32...................... 174,130 178,032 6.98% due 06/01/07...................... 2,762 2,783 7.00% due 09/01/10...................... 1,631 1,672 7.00% due 11/01/11...................... 1,239 1,273 7.00% due 05/01/12...................... 1,993 2,048 7.00% due 06/01/12...................... 2,865 2,944 7.00% due 10/01/12...................... 512 526 7.00% due 07/01/13...................... 2,506 2,577 7.00% due 04/01/28...................... 10,362 10,691 7.00% due 10/01/28...................... 982 1,014 7.00% due 09/01/31...................... 738,247 761,100 7.50% due 10/01/10...................... 71,048 72,937 7.50% due 11/01/14...................... 5,505 5,651 7.50% due 05/01/15...................... 4,344 4,545 7.50% due 06/01/15...................... 63,224 66,149 7.50% due 07/01/15...................... 32,725 34,239 7.50% due 08/01/15...................... 11,494 12,026 7.00% due 09/01/12...................... 1,391 1,429 ------------ 31,486,069 ------------ Government National Mortgage Association -- 0.1% 6.50% due 06/15/29...................... 67,144 69,720 7.00% due 12/15/22...................... 51,686 53,824 7.00% due 08/15/29...................... 47,065 49,093 ------------ 172,637 ------------ Total U.S. Government Agencies (cost $67,540,262)...................... 66,199,093 ------------ COMMON STOCK -- 0.0% Machinery -- 0.0% Manitowoc Co., Inc. (cost $261)............................. 28 2,552 ------------ PREFERRED STOCK -- 1.0% Government Agencies -- 0.2% Federal National Mtg. Assoc. 7.00%(2).... 6,152 335,284 ------------ Financial Services -- 0.4% General Electric Capital Corp. 4.50%(10). 34,000 775,200 ------------ Insurance -- 0.4% Endurance Specialty Holdings, Ltd. 7.75%. 27,000 653,940 ------------ Machinery -- 0.0% Fairfield Manufacturing Co., Inc. 11.25%(3)(8)(9)......................... 28 0 ------------ Total Preferred Stock (cost $1,882,528)....................... 1,764,424 ------------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- WARRANTS -- 0.0%+ Communication Equipment -- 0.0% Concentric Network Corp.(3)(9) Expires 12/15/07 (strike price $5.43)....... $ 5 $ 0 ------------ Telecommunications -- 0.0% KMC Telecom Holdings, Inc.(3)(9) Expires 01/31/08 (strike price $0.01)....... 50 0 ------------ Total Warrants (cost $0)................................... 0 ------------ Total Long-Term Investment Securities -- 98.6% (cost $174,352,941)......................... 172,574,154 ------------ REPURCHASE AGREEMENT -- 1.1% Agreement with State Street Bank & Trust., bearing interest at 4.45% dated 03/31/06 to be repurchased 04/03/06 in the amount of $1,935,718 and collateralized by $2,070,000 of Federal National Mtg. Assoc., bearing interest at 3.25% due 08/15/08 having an approximate value of $1,994,180 (cost $1,935,000)........................... 1,935,000 1,935,000 ------------ TOTAL INVESTMENTS -- (cost $176,287,941)@........................ 99.7% 174,509,154 Other assets less liabilities.................. 0.3 570,868 ---------- ------------ NET ASSETS -- 100.0% $175,080,022 ========== ============
- -------- + Non-income producing security # Security represents an investment in an affiliated company; see Note 7. * 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, 2006, the aggregate value of these securities was $15,938,336 representing 9.1% 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. TIPS Treasury Inflation Protected Security (1) Collateralized Mortgage Obligation (2) Floating rate security where the rate fluctuates. The rate moves up or down at each reset date. The rate reflected is as of March 31, 2006. (3) Fair valued security; see Note 1. (4) "Step-up" security where the rate increases ("steps up") at a predetermined rate. Rate shown reflects the interest rate. (5) Company has filed Chapter 11 bankruptcy protection. (6) Bond in default. (7) Variable rate security -- the rate reflected is as of March 31, 2006; maturity date reflects next reset date. (8) PIK ("Payment-in-Kind") payment made with additional securities in lieu of cash. (9) Illiquid security. (10) 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, 2006. (11) Security has a perpetual maturity date. The maturity date shown reflects the next call date. (12) Variable rate security -- the rate reflected is as of March 31, 2006; maturity date reflects stated maturity date. 28 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued) (13) To the extent permitted by the Statement of Additional Information, the Core 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, 2006, the Core Bond Fund held the following restricted securities:
Market Value % of Acquisition Principal/ Acquisition Market Per Net Name Date Shares Cost Value Share Assets ---- ----------- ---------- ----------- -------- ------ ------ ICO North America, Inc.............. 08/11/2005 $ 65,000 $ 65,000 $ 82,550 $127 0.05% AmerisourceBergen Corp............. 01/06/2006 $150,000 153,696 147,525 98 0.08% -------- ---- $230,075 0.13% ======== ====
See Notes to Financial Statements 29 SunAmerica U.S. Government Securities Fund PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited) Industry Allocation* Government National Mortgage Association 46.4% U.S. Treasury Notes..................... 26.1% Repurchase Agreements................... 9.8% U.S. Treasury Bonds..................... 8.8% U.S. Government Agencies................ 7.1% Federal Farm Credit Bank................ 0.7% Federal National Mortgage Association... 0.7% ---- 99.6% ====
Credit Quality+# Government -- Agency.. 61.0% Government -- Treasury 39.0% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. + Source: Standard and Poors # Calculated as a percentage of total debt issues, excluding short-term securities. 30 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value Security Description Amount (Note 2) --------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 34.9% U.S Treasury Bonds -- 8.8% 5.38% due 02/15/31......................... $15,000,000 $15,789,840 ----------- U.S. Treasury Notes -- 26.1% 4.50% due 02/28/11......................... 9,000,000 8,868,870 4.50% due 11/15/15......................... 22,000,000 21,348,602 4.50% due 02/15/16......................... 17,000,000 16,533,826 ----------- 46,751,298 ----------- Total U.S. Government Obligations (cost $64,031,828)........................ 62,541,138 ----------- U.S. GOVERNMENT AGENCIES -- 54.9% Federal Farm Credit Bank -- 0.7% 5.64% due 04/04/11........................ 500,000 511,131 6.00% due 03/07/11........................ 200,000 207,149 6.30% due 12/03/13........................ 500,000 534,874 ----------- 1,253,154 ----------- Federal Home Loan Mortgage Corporation -- 0.0% 8.00% due 06/01/08......................... 8,875 8,892 8.25% due 07/01/06......................... 189 189 8.50% due 05/01/08......................... 623 626 5,830.49% due 12/28/28(1).................. 77 77 ----------- 9,784 ----------- Federal National Mortgage Association -- 0.7% 6.53% due 05/25/30......................... 1,218,675 1,227,526 8.00% due 01/01/23......................... 22,116 23,507 8.00% due 01/01/23......................... 13,230 14,051 11.00% due 02/01/15........................ 34 38 11.50% due 09/01/19........................ 14,479 15,776 ----------- 1,280,898 ----------- Government National Mortgage Association -- 46.4% 4.50% due 05/15/18........................ 1,196,583 1,156,297 4.50% due 08/15/18........................ 1,912,992 1,848,587 4.50% due 09/15/18........................ 5,356,944 5,176,591 4.50% due 10/15/18........................ 5,194,610 5,019,723 4.50% due 09/15/33........................ 5,439,968 5,125,236 5.00% due 04/15/18........................ 5,557,781 5,468,560 5.00% due 08/15/33........................ 2,341,598 2,271,513 5.00% due 09/15/33........................ 1,055,193 1,023,611 5.00% due 10/15/33........................ 742,073 719,862 5.00% due 11/15/34........................ 249,617 242,054 5.50% due 11/15/32........................ 16,202 16,056 5.50% due 03/15/33........................ 561,876 556,751 5.50% due 04/15/33........................ 692,441 686,125 5.50% due 05/15/33........................ 1,630,065 1,615,196 5.50% due 06/15/33........................ 7,688,780 7,618,646 5.50% due 07/15/33........................ 2,136,997 2,117,504 5.50% due 10/15/33........................ 2,135,189 2,115,713 5.50% due 12/15/33........................ 427,228 423,331 5.50% due 01/15/34........................ 4,221,040 4,182,528 5.50% due 02/15/34........................ 2,571,241 2,547,782 6.00% due 01/15/28........................ 4,264 4,321 6.00% due 04/15/28........................ 1,643,363 1,666,151 6.00% due 05/15/28........................ 3,982 4,035 6.00% due 10/15/28........................ 18,477 18,726
Principal Value Security Description Amount (Note 2) ------------------------------------------- Government National Mortgage Association (continued) 6.00% due 03/15/29.. $ 104,239 $ 105,605 6.00% due 04/15/29.. 53,518 54,219 6.00% due 05/15/29.. 103,204 104,557 6.00% due 06/15/29.. 30,298 30,696 6.00% due 04/15/31.. 36,627 37,085 6.00% due 05/15/31.. 64,489 65,295 6.00% due 11/15/31.. 290,395 294,023 6.00% due 12/15/31.. 765,392 774,955 6.00% due 01/15/32.. 248,031 251,154 6.00% due 02/15/32.. 54,580 55,268 6.00% due 03/15/32.. 13,011 13,174 6.00% due 08/15/32.. 348,428 352,814 6.00% due 11/15/32.. 55,025 55,718 6.00% due 12/15/32.. 9,715 9,837 6.00% due 01/15/33.. 23,491 23,783 6.00% due 02/15/33.. 149,670 151,531 6.00% due 03/15/33.. 120,726 122,227 6.00% due 04/15/33.. 450,034 455,630 6.00% due 07/15/33.. 318,059 322,013 6.00% due 08/15/33.. 3,240,701 3,281,394 6.00% due 09/15/33.. 449,885 455,479 6.00% due 10/15/33.. 2,013,993 2,039,037 6.00% due 11/15/33.. 212,874 215,521 6.00% due 12/15/33.. 1,090,132 1,103,687 6.00% due 02/15/34.. 482,019 487,751 6.00% due 05/15/34.. 75,285 76,180 6.00% due 06/15/34.. 50,771 51,375 6.00% due 07/15/34.. 3,371,177 3,411,268 6.00% due 08/15/34.. 235,414 238,213 6.00% due 09/15/34.. 2,156,864 2,182,514 6.00% due 12/15/34.. 526,373 532,633 6.00% due 10/15/34.. 6,230,755 6,304,853 6.00% due 11/15/34.. 751,090 760,022 6.00% due 01/15/35.. 1,129,931 1,143,268 6.00% due 06/15/35.. 434,596 439,726 6.00% due 08/15/35.. 1,593,485 1,612,295 6.50% due 02/15/29.. 20,354 21,134 6.50% due 05/15/31.. 21,411 22,205 6.50% due 06/15/31.. 65,878 68,321 6.50% due 07/15/31.. 56,693 58,795 6.50% due 08/15/31.. 86,583 89,793 6.50% due 09/15/31.. 224,588 232,914 6.50% due 10/15/31.. 404,404 419,397 6.50% due 11/15/31.. 15,339 15,907 6.50% due 12/15/31.. 32,872 34,090 6.50% due 01/15/32.. 45,956 47,654 6.50% due 02/15/32.. 745,914 773,483 6.50% due 06/15/32.. 116,190 120,485 7.00% due 07/15/23.. 43,751 45,589 7.00% due 10/15/23.. 121,019 126,104 7.00% due 09/15/25.. 305,965 319,162 7.00% due 03/20/29.. 24,703 25,567 7.00% due 06/20/29.. 3,980 4,119 7.00% due 11/20/30.. 98,322 101,766 7.50% due 04/15/17.. 11,368 11,897 7.50% due 08/15/23.. 254,379 267,760
31 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Government National Mortgage Association (continued) 7.50% due 09/15/23................ $ 697,777 $ 734,483 7.50% due 10/15/23................ 17,106 18,006 8.00% due 11/15/06................ 348 349 8.00% due 02/15/08................ 872 891 9.00% due 12/15/16................ 105,005 112,721 11.00% due 08/20/15............... 295 322 11.00% due 09/20/15............... 644 705 11.50% due 06/15/13............... 5,174 5,681 11.50% due 05/20/15............... 3,960 4,397 12.50% due 09/15/14............... 7,323 8,097 13.00% due 01/15/11............... 2,898 3,206 13.00% due 02/15/11............... 4,488 4,965 13.00% due 03/15/11............... 249 276 13.00% due 04/15/11............... 546 604 13.00% due 09/15/13............... 5,227 5,803 13.00% due 10/20/14............... 1,160 1,270 13.00% due 11/15/14............... 804 894 13.00% due 02/20/15............... 706 777 13.50% due 02/15/13............... 11,770 13,164 15.00% due 01/15/12............... 479 545 15.00% due 02/15/12............... 1,147 1,305 15.00% due 06/15/12............... 12,316 14,011 15.00% due 09/15/12............... 678 772 15.50% due 09/15/11............... 37,117 42,241 ------------ 83,021,326 ------------ Private Export Funding -- 5.7% 5.87% due 07/31/08................ 10,000,000 10,174,750 ------------ Small Business Administration -- 1.4% 6.30% due 06/01/18................ 2,370,266 2,424,566 ------------ Total U.S. Government Agencies (cost $99,913,225)................ 98,164,478 ------------ Total Long-Term Investment Securities -- 89.8% (cost $163,945,053)............... 160,705,616 ------------
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- REPURCHASE AGREEMENTS -- 9.8% State Street Bank & Trust Co., Joint Repurchase Agreement(2)............. $ 487,000 $ 487,000 UBS Securities, LLC Joint Repurchase Agreement(2)........................ 17,000,000 17,000,000 ------------ Total Repurchase Agreements (cost $17,487,000).................. 17,487,000 ------------ TOTAL INVESTMENTS -- (cost $181,432,053)@................ 99.6% 178,192,616 Other assets less liabilities.......... 0.4 648,861 ----------- ------------ NET ASSETS -- 100.0% $178,841,477 =========== ============
- -------- @ See Note 5 for cost of investment on a tax basis. (1)Variable rate security -- the rate reflected is as of March 31, 2006; maturity date reflects stated maturity date. (2)See Note 2 for details of Joint Repurchase Agreement. See Notes to Financial Statements 32 SunAmerica GNMA Fund PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited) Industry Allocation* Government National Mortgage Association 85.2% Repurchase Agreements................... 35.7% United States Treasury Notes............ 12.1% Federal National Mortgage Association... 2.3% Small Business Administration........... 0.2% ----- 135.5% =====
Credit Quality+# Government -- Agency.. 87.9% Government -- Treasury 12.1% ----- 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. 33 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 87.7% Federal National Mortgage Association -- 2.3% 5.00% due 01/25/18(2)......... $ 9,627,828 $ 9,575,640 ------------ Government National Mortgage Association -- 85.2% 4.50% due 05/15/18............ 2,393,166 2,312,595 4.50% due 08/15/18............ 1,275,151 1,232,220 4.50% due 09/15/18............ 4,141,753 4,002,313 4.50% due 10/15/18............ 5,925,020 5,725,543 4.50% due 08/15/33............ 3,624,254 3,414,571 4.50% due 09/15/33............ 4,003,635 3,772,003 5.00% due 03/15/18............ 683,064 672,099 5.00% due 04/15/18............ 8,836,190 8,694,339 5.00% due 05/15/18............ 12,682,581 12,478,983 5.00% due 01/15/33............ 18,754 18,193 5.00% due 05/15/33............ 15,602 15,136 5.00% due 08/15/33............ 3,433,594 3,330,824 5.00% due 09/15/33............ 3,134,026 3,040,223 5.00% due 10/15/33............ 7,416,383 7,194,405 5.00% due 04/15/34............ 75,798 73,502 5.00% due 05/15/34............ 190,648 184,872 5.00% due 11/15/34............ 854,049 828,174 5.00% due 12/15/34............ 847,659 821,977 5.50% due 06/15/29............ 7,239 7,177 5.50% due 12/15/32............ 962,005 953,333 5.50% due 01/15/33............ 633,680 627,899 5.50% due 02/15/33............ 2,540,075 2,516,906 5.50% due 03/15/33............ 1,424,640 1,411,645 5.50% due 04/15/33............ 7,590,142 7,520,908 5.50% due 05/15/33............ 8,914,633 8,833,318 5.50% due 06/15/33............ 10,126,000 10,033,723 5.50% due 07/15/33............ 502,158 497,577 5.50% due 08/15/33............ 3,301,755 3,271,638 5.50% due 09/15/33............ 533,417 528,552 5.50% due 10/15/33............ 8,318,760 8,242,879 5.50% due 12/15/33............ 9,019,615 8,937,342 5.50% due 01/15/34............ 13,667,899 13,543,197 5.50% due 02/15/34............ 1,729,654 1,713,873 5.50% TBA due April........... 130,000,000 128,700,000 6.00% due 11/15/23............ 6,992 7,083 6.00% due 01/15/24............ 9,031 9,151 6.00% due 07/15/28............ 5,358 5,430 6.00% due 11/15/28............ 376,945 382,033 6.00% due 12/15/28............ 411,447 417,000 6.00% due 01/15/29............ 876,629 888,123 6.00% due 02/15/29............ 894,866 906,599 6.00% due 03/15/29............ 683,921 692,888 6.00% due 04/15/29............ 1,878,050 1,902,765 6.00% due 05/15/29............ 106,521 107,917 6.00% due 06/15/29............ 686,542 695,583 6.00% due 07/15/29............ 280,988 284,672 6.00% due 08/15/29............ 27,870 28,235 6.00% due 10/15/29............ 108,183 109,602 6.00% due 04/15/31............ 24,461 24,767 6.00% due 07/15/31............ 15,567 15,761 6.00% due 10/15/31............ 87,020 88,107 6.00% due 11/15/31............ 1,776,415 1,798,609 6.00% due 12/15/31............ 725,941 735,011
Principal Value Security Description Amount (Note 2) ---------------------------------------------- Government National Mortgage Association (continued) 6.00% due 01/15/32... $ 834,388 $ 844,893 6.00% due 02/15/32... 73,676 74,604 6.00% due 03/15/32... 569,151 576,316 6.00% due 07/15/32... 137,133 138,859 6.00% due 08/15/32... 2,134,487 2,161,208 6.00% due 09/15/32... 1,540,530 1,559,926 6.00% due 10/15/32... 247,722 250,841 6.00% due 11/15/32... 9,919 10,044 6.00% due 12/15/32... 221,719 224,511 6.00% due 01/15/33... 1,865,009 1,888,199 6.00% due 02/15/33... 2,628,654 2,661,339 6.00% due 03/15/33... 1,793,460 1,815,760 6.00% due 04/15/33... 1,864,503 1,887,686 6.00% due 05/15/33... 1,889,510 1,913,005 6.00% due 06/15/33... 1,426,071 1,443,803 6.00% due 08/15/33... 2,120,701 2,147,129 6.00% due 10/15/33... 681,526 690,000 6.00% due 11/15/33... 2,261,971 2,290,100 6.00% due 12/15/33... 3,946,942 3,996,019 6.00% due 01/15/34... 2,335,558 2,363,332 6.00% due 02/15/34... 13,809,292 13,973,514 6.00% due 03/15/34... 524,350 530,585 6.00% due 04/15/34... 5,050,347 5,110,407 6.00% due 05/15/34... 393,768 398,451 6.00% due 06/15/34... 526,421 532,682 6.00% due 07/15/34... 4,996,832 5,056,255 6.00% due 08/15/34... 7,031,010 7,116,147 6.00% due 09/15/34... 337,411 341,488 6.00% due 10/15/34... 1,085,020 1,097,923 6.00% due 11/15/34... 2,170,744 2,196,559 6.00% due 12/15/34... 115,559 116,933 6.00% due 01/15/35... 103,245 104,464 6.00% due 02/15/35... 1,405,651 1,422,243 6.00% due 04/15/35... 75,011 75,896 6.00% due 05/15/35... 137,981 139,609 6.00% due 06/15/35... 575,708 582,504 6.00% TBA due April.. 20,000,000 20,225,000 6.50% due 03/15/28... 32,566 33,791 6.50% due 08/15/28... 62,735 65,116 6.50% due 12/15/28... 1,739 1,805 6.50% due 01/15/29... 6,182 6,419 6.50% due 02/15/29... 2,055 2,134 6.50% due 03/15/29... 133,180 138,290 6.50% due 04/15/29... 2,244 2,330 6.50% due 05/15/29... 16,957 17,603 6.50% due 06/15/29... 49,633 51,537 6.50% due 07/15/29... 6,257 6,497 6.50% due 10/15/29... 6,525 6,776 6.50% due 08/15/31... 300,338 311,473 6.50% due 09/15/31... 34,002 35,263 6.50% due 10/15/31... 404,405 419,398 6.50% due 11/15/31... 249,903 259,168 6.50% due 12/15/31... 265,441 275,282 6.50% due 02/15/32... 313,655 325,248 6.50% due 05/15/32... 1,907,709 1,978,221 6.50% due 06/15/32... 144,426 149,764 7.00% due 03/15/23... 137,965 143,762
34 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ U.S. GOVERNMENT AGENCIES (continued) Government National Mortgage Association (continued) 7.00% due 01/20/24................ $ 832 $ 861 7.00% due 03/20/24................ 895 926 7.00% due 07/20/25................ 6,097 6,311 7.00% due 09/15/25................ 132,874 138,605 7.00% due 01/20/29................ 54,606 56,515 7.00% due 02/20/29................ 10,832 11,211 7.00% due 06/20/29................ 19,734 20,424 7.00% due 07/20/29................ 69,634 72,069 7.00% due 09/20/29................ 6,971 7,215 7.00% due 10/20/29................ 14,095 14,588 7.00% due 11/20/29................ 4,910 5,081 7.00% due 03/20/30................ 7,251 7,505 7.00% due 06/20/30................ 13,164 13,626 7.00% due 08/20/30................ 41,098 42,538 7.00% due 09/20/30................ 34,260 35,460 7.00% due 10/20/30................ 45,138 46,719 8.00% due 11/15/26................ 239,063 256,314 8.00% due 12/15/29................ 32,820 35,137 8.00% due 01/15/30................ 975 1,042 8.00% due 04/15/30................ 50,279 53,767 8.00% due 05/15/30................ 6,765 7,235 8.00% due 08/15/30................ 54,667 58,460 8.50% due 03/15/17................ 27,013 28,985 8.50% due 05/15/21................ 85,494 92,390 8.50% due 12/15/22................ 128,883 139,455 8.50% due 01/15/23................ 121,424 131,529 8.50% due 09/15/24................ 50,924 55,217 9.00% due 07/15/16................ 85,840 92,147 9.00% due 10/15/16................ 16,229 17,421 ------------ 357,888,139 ------------ Small Business Administration -- 0.2% 6.30% due 06/01/18................ 790,089 808,189 ------------ Total U.S. Government Agencies (cost $373,786,640)............... 368,271,968 ------------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS -- 12.1% U.S. Treasury Notes -- 12.1% 4.50% due 02/28/11.................... $18,000,000 $ 17,737,740 4.50% due 11/15/15.................... 5,000,000 4,851,955 4.50% due 02/15/16.................... 29,000,000 28,204,762 ------------- Total U.S. Government Obligations (cost $51,363,975).................... 50,794,457 ------------- Total Long-Term Investment Securities -- 99.8% (cost $425,150,615)................... 419,066,425 ------------- REPURCHASE AGREEMENTS -- 35.7% State Street Bank & Trust Co. Joint Repurchase Agreement(1).............. 57,767,000 57,767,000 UBS Securities, LLC Joint Repurchase Agreement(1)......................... 92,000,000 92,000,000 ------------- Total Repurchase Agreements (cost $149,767,000)................... 149,767,000 ------------- TOTAL INVESTMENTS -- (cost $574,917,615)@.................. 135.5% 568,833,425 Liabilities in excess of other assets.... (35.5) (148,998,772) ----------- ------------- NET ASSETS -- 100.0% $ 419,834,653 =========== =============
- -------- TBA --Securities purchased on a forward commitment basis with an approximate principle amount and no definitive maturity date. The mutual principal and maturity date will be determined upon settlement date. @ See Note 5 for cost of investments on a tax basis. (1) See Note 2 for details of Joint Repurchase Agreement. (2) Collateralized Mortgage Obligation. See Notes to Financial Statements 35 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited) Industry Allocation* Foreign Government Agencies..... 29.7% U.S. Treasury Notes............. 9.2% Financial Services.............. 8.0% Federal Home Loan Mortgage Corp. 5.5% Energy Services................. 4.9% Leisure & Tourism............... 4.3% Federal National Mortgage Assoc. 3.5% Telecommunications.............. 3.5% Utilities....................... 3.5% Broadcasting & Media............ 3.4% Repurchase Agreements........... 3.2% U.S Treasury Bonds.............. 2.8% Time Deposit.................... 1.7% Business Services............... 1.5% Banks........................... 1.2% Health Services................. 1.2% Forest Products................. 1.0% Insurance....................... 1.0% Metals & Mining................. 0.8% Pharmaceuticals................. 0.8% Retail Stores................... 0.8% Chemicals....................... 0.7% Federal Home Loan Bank.......... 0.6% Food, Beverage & Tobacco........ 0.6% Medical Products................ 0.6% Real Estate Investment Trusts... 0.6% Electronics..................... 0.5% Automotive...................... 0.4% Transportation.................. 0.4% Household & Personal Products... 0.3% Machinery....................... 0.3% Communication Equipment ........ 0.2% Computer Software............... 0.2% Conglomerate.................... 0.2% Restaurants..................... 0.2% Aerospace & Military Technology. 0.1% Building Materials.............. 0.1% Computers & Business Equipment.. 0.1% Real Estate Companies........... 0.1% Retail.......................... 0.1% ---- 97.8% ====
Country Allocation* United States. 63.4% Brazil........ 6.5% Canada........ 2.4% Venezuela..... 2.2% Argentina..... 2.1% Sweden........ 2.0% Russia........ 1.9% Turkey........ 1.8% United Kingdom 1.4% South Africa.. 1.4% Philippines... 1.2% Mexico........ 1.2% Peru.......... 1.0% Spain......... 0.8% Hungary....... 0.7% Germany....... 0.7% Colombia...... 0.7% Uruguay....... 0.6% Indonesia..... 0.6% Australia..... 0.6% Ukraine....... 0.5% Norway........ 0.5% New Zealand... 0.4% Netherlands... 0.4% Luxembourg.... 0.4% Japan......... 0.4% Ireland....... 0.4% Cayman Island. 0.4% Belgium....... 0.4% Poland........ 0.2% Italy......... 0.2% France........ 0.2% Greece........ 0.1% Bermuda....... 0.1% ---- 97.8% ====
Credit Quality+# Government -- Treasury 13.2% Government -- Agency.. 10.1% AAA................... 8.9% AA.................... 1.7% A..................... 5.7% BBB................... 7.1% BB.................... 24.3% B..................... 15.9% CCC................... 6.4% C..................... 0.1% Below C............... 1.0% Not Rated@............ 5.6% ----- 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. 36 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 1.5% Financial Services -- 1.5% Argent Securities, Inc. 2006 W2 Certs., Class A 2B 5.01% due 03/25/36(1)........................ $ 290,000 $ 289,997 Banc America Commercial Mtg., Inc. Series 2005-6, Class F 5.35% due 09/10/47(2)(3)..................... 615,000 587,221 Bear Stearns Commercial Mtg. Securities, Inc. Series 2005-PW10, Class F 5.63% due 12/11/40(2)........................ 381,000 372,985 Commerical Mtg. Asset Trust Series 2004-LB2A, Class A-3 4.22% due 03/10/39........................... 1,586,000 1,510,558 CS First Boston Mtg. Securities Corp. Series 2005-TF3A, Class A-2 5.18% due 04/17/06*(1)....................... 547,000 547,676 Merrill Lynch Mtg. Investors, Inc. 2005 Ar1 Mtg. Pass-Through Certs., Class B2 5.51% due 02/25/37(4)(5)..................... 290,000 285,473 Mid-State Trust Asset Backed Notes, Series 6, Class A1 7.34% due 07/01/35........................... 683,342 705,897 Morgan Stanley Capital I Series 2005-HQ7, Class G 5.21% due 11/14/42*(2)....................... 250,000 238,235 ---------- 4,538,042 ---------- Total Asset-Backed Securities (cost $4,852,340)............................ 4,538,042 ---------- BONDS & NOTES -- 32.7% Aerospace & Military Technology -- 0.1% DeCrane Aircraft Holdings Guaranteed Sr. Sub. Notes, Series B 12.00% due 09/30/08.......................... 175,000 125,125 Raytheon Co. Notes 4.85% due 01/15/11........................... 160,000 155,461 Raytheon Co. Notes 6.75% due 08/15/07........................... 113,000 114,769 ---------- 395,355 ---------- Automotive -- 0.4% BREED Technologies, Inc. Guaranteed Sr. Sub. Notes 9.25% due 04/15/08(4)(6)(7)(8)+.............. 500,000 0 Cooper-Standard Automotive, Inc. Sr. Sub. Notes 8.38% due 12/15/14........................... 155,000 120,900 DaimlerChrysler NA Holding Corp. Guaranteed Bonds 7.30% due 01/15/12........................... 80,000 84,534 Dura Operating Corp. Sr. Notes 8.63% due 04/15/12........................... 379,000 311,727 Exide Corp. Notes 10.00% due 03/15/25(4)(7)+................... 225,000 0 Ford Motor Co. Bonds 6.38% due 02/01/29........................... 44,000 29,260
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- Automotive (continued) Ford Motor Co. Bonds 6.63% due 10/01/28................ $725,000 $ 485,750 Nationsrent, Inc. Sr. Notes 9.50% due 05/01/15................ 275,000 297,000 Stanadyne Corp. Sr. Sub. Notes 10.00% due 08/15/14............... 50,000 47,875 ---------- 1,377,046 ---------- Banks -- 1.0% AAC Group Holding Corp. Sr. Notes 10.25% due 10/01/12(5)............ 325,000 251,875 ABN Amro North America Holding Co. Bonds 6.52% due 11/08/12*(2)............ 160,000 165,618 Bank One Corp. Sub. Notes 8.00% due 04/29/27................ 114,000 138,558 Charter One Bank NA Sub. Notes 6.38% due 05/15/12................ 318,000 333,430 Compass Bank Sub. Notes 5.90% due 04/01/26................ 509,000 497,863 Downey Financial Corp. Notes 6.50% due 07/01/14................ 180,000 179,462 HSBC Bank USA NA Sub. Notes 5.63% due 08/15/35................ 60,000 55,738 Huntington National Bank Notes 5.50% due 02/15/16................ 280,000 273,141 Independence Community Bank Corp. Sub. Notes 3.50% due 06/20/08(2)............. 86,000 82,282 JPMorgan Chase Bank NA Sub. Notes 6.13% due 11/01/08................ 63,000 63,969 PNC Funding Corp. Guaranteed Sr. Notes 5.13% due 12/14/10................ 150,000 148,140 PNC Funding Corp. Guaranteed Notes 5.75% due 08/01/06................ 85,000 85,134 Popular North America, Inc. Guaranteed Notes 4.70% due 06/30/09................ 135,000 131,477 Sovereign Bancorp, Inc. Sr. Notes 4.80% due 09/01/10*............... 186,000 179,647 US Bank NA Notes 3.90% due 08/15/08................ 85,000 82,514
37 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- BONDS & NOTES (continued) Banks (continued) Wachovia Bank NA Sub. Notes 5.60% due 03/15/16................. $ 150,000 $ 148,533 Wachovia Corp. Sr. Notes 5.35% due 03/15/11................. 90,000 89,644 Wells Fargo & Co. Sub. Global Notes 6.38% due 08/01/11................. 80,000 83,418 World Savings Bank FSB Notes 4.13% due 12/15/09................. 166,000 159,240 ---------- 3,149,683 ---------- Broadcasting & Media -- 2.7% Adelphia Communications Corp. Sr. Notes 10.25% due 06/15/11(6)(8)+......... 50,000 31,500 AMFM, Inc. Sr. Notes 8.00% due 11/01/08................. 148,000 155,361 Cablevision Systems Corp. Sr. Notes 9.62% due 04/01/09(1).............. 200,000 209,750 CBS Corp. Sr. Notes 6.63% due 05/15/11................. 72,000 74,321 CCH II LLC Sr. Notes, Series B 10.25% due 09/15/10*............... 375,000 367,500 Charter Communications Holdings LLC Sr. Notes 11.13% due 01/15/11................ 1,500,000 795,000 Charter Communications Holdings LLC Sr. Notes 9.63% due 11/15/09................. 1,200,000 804,000 Charter Communications Holdings LLC Sr. Notes 9.92% due 04/01/11(5).............. 200,000 103,000 Charter Communications Holdings LLC Sr. Notes 10.25% due 01/15/10................ 25,000 14,938 Charter Communications Holdings LLC Sr. Notes 10.75% due 10/01/09................ 450,000 306,000 Comcast Corp. Guaranteed Notes 6.45% due 03/15/37................. 126,000 121,237 COX Communications, Inc. Notes 7.13% due 10/01/12................. 150,000 157,359 COX Communications, Inc. Debentures 7.63% due 06/15/25................. 163,000 173,822 CSC Holdings, Inc. Sr. Debentures, Series B 8.13% due 08/15/09................. 250,000 258,125
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- Broadcasting & Media (continued) Fisher Communications, Inc. Sr. Notes 8.63% due 09/15/14.............. $ 450,000 $ 475,875 Haights Cross Operating Co. Sr. Notes 11.75% due 08/15/11............. 150,000 156,563 Insight Communications Co., Inc. Sr. Sub. Notes 12.25% due 02/15/11(5).......... 500,000 531,250 Knight-Ridder, Inc. Debentures 6.88% due 03/15/29.............. 90,000 84,345 Network Communications, Inc. Sr. Notes 10.75% due 12/01/13*............ 75,000 76,313 News America, Inc. Guaranteed Sr. Debentures 7.30% due 04/30/28.............. 65,000 67,563 Nexstar Finance, Inc. Sr. Sub. Notes 7.00% due 01/15/14.............. 450,000 425,250 Omnicom Group, Inc. Guaranteed Notes 5.90% due 04/15/16.............. 90,000 88,600 Paxson Communications Corp. 2nd Priority Sr. Sec. Notes 11.32% due 01/15/13*(1)......... 1,100,000 1,089,000 Time Warner Cos., Inc. Debentures 7.25% due 10/15/17.............. 76,000 81,324 Time Warner Entertainment Co. LP Sr. Debentures 8.38% due 03/15/23.............. 198,000 223,865 Univision Communications, Inc. Sr. Notes 3.50% due 10/15/07.............. 80,000 77,425 Vertis, Inc. Sr. Notes 10.88% due 06/15/09............. 150,000 147,375 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 8.75% due 01/15/14.............. 125,000 106,875 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 10.00% due 03/01/11............. 1,225,000 1,130,062 ---------- 8,333,598 ---------- Building Materials -- 0.1% Dayton Superior Corp. Sr. Sec. Notes 10.75% due 09/15/08............. 367,000 373,881 ---------- Business Services -- 1.5% Affinity Group, Inc. Sr. Sub. Notes 9.00% due 02/15/12.............. 364,000 365,820 Alderwoods Group, Inc. Sr. Notes 7.75% due 09/15/12.............. 50,000 51,375
38 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- BONDS & NOTES (continued) Business Services (continued) Allied Waste North America, Inc. Sr. Notes 8.50% due 12/01/08.............. $650,000 $ 683,312 AMR Holdco, Inc. Sr. Sub. Notes 10.00% due 02/15/15............. 125,000 133,438 Aramark Services, Inc. Notes 7.00% due 05/01/07.............. 195,000 197,445 Associated Materials, Inc. Sr. Sub. Notes 9.75% due 04/15/12.............. 625,000 648,438 Carriage Services, Inc. Sr. Notes 7.88% due 01/15/15.............. 287,000 292,023 Corrections Corp. America Sr. Notes 6.25% due 03/15/13.............. 200,000 196,750 Dun & Bradstreet Corp. Sr. Notes 5.50% due 03/15/11.............. 75,000 74,549 Erac USA Finance Co. Notes 7.95% due 12/15/09*............. 120,000 129,239 First Data Corp. Notes 3.38% due 08/01/08.............. 96,000 91,746 Mobile Mini, Inc. Sr. Notes 9.50% due 07/01/13.............. 150,000 164,250 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 09/01/10............. 360,000 360,900 Pitney Bowes, Inc. Sr. Notes 4.75% due 01/15/16.............. 136,000 126,599 Service Corp. International Notes 6.50% due 03/15/08.............. 325,000 326,625 Service Corp. International Sr. Notes 6.75% due 04/01/16.............. 75,000 74,250 Service Corp. International Sr. Notes 7.25% due 06/15/17*............. 400,000 407,000 Stewart Enterprises, Inc. Sr. Notes 7.25% due 02/15/13*............. 325,000 312,000 ---------- 4,635,759 ---------- Chemicals -- 0.5% BCI US Finance Corp. Sr. Sec. Notes 10.58% due 07/15/10*(1)......... 100,000 102,000 Equistar Chemicals LP Notes 8.75% due 02/15/09.............. 75,000 77,625
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- Chemicals (continued) Equistar Chemicals LP Sr. Notes 10.63% due 05/01/11................ $275,000 $ 297,688 ICI Wilmington, Inc. Guaranteed Notes 7.05% due 09/15/07................. 134,000 136,313 Lubrizol Corp. Sr. Notes 4.63% due 10/01/09................. 65,000 62,976 Lyondell Chemical Co. Guaranteed Sr. Sec. Notes 9.50% due 12/15/08................. 29,000 30,160 Phosphate Resource Partners LP Sr. Notes 7.00% due 02/15/08................. 125,000 126,563 Rockwood Specialties, Inc. Sr. Sub. Notes 7.50% due 11/15/14................. 325,000 326,625 Rockwood Specialties, Inc. Sr. Sub. Notes 10.63% due 05/15/11................ 55,000 60,362 Westlake Chemical Corp. Sr. Notes 6.63% due 01/15/16................. 375,000 370,781 ---------- 1,591,093 ---------- Communication Equipment -- 0.2% Cisco Systems, Inc. Sr. Notes 5.50% due 02/22/16................. 80,000 78,798 Rural Cellular Corp. Sr. Sub. Notes 9.75% due 01/15/10................. 400,000 406,000 Rural Cellular Corp. Sr. Sub. Notes 10.43% due 11/01/12*(1)............ 200,000 207,500 ---------- 692,298 ---------- Computer Software -- 0.2% Oracle Corp. Sr. Notes 5.00% due 01/15/11*................ 158,000 154,318 Solar Capital Corp. Sr. Notes 9.13% due 08/15/13*................ 175,000 185,062 SS&C Technologies, Inc. Sr. Sub. Notes 11.75% due 12/01/13*............... 175,000 187,250 ---------- 526,630 ---------- Computers & Business Equipment -- 0.1% Activant Solutions, Inc. Sr. Notes 10.99% due 04/01/10*(1)............ 100,000 102,000 Computer Sciences Corp. Notes 3.50% due 04/15/08................. 65,000 62,594
39 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- BONDS & NOTES (continued) Computers & Business Equipment (continued) Xerox Corp. Sr. Notes 7.63% due 06/15/13..................... $275,000 $289,437 -------- 454,031 -------- Conglomerate -- 0.2% Covalence Specialty Materials Corp. Sr. Sub. Notes 10.25% due 03/01/16*................... 130,000 136,500 Di Finance LLC Sr. Sub. Notes 9.50% due 02/15/13..................... 375,000 390,000 Honeywell International, Inc. Sr. Notes 5.40% due 03/15/16..................... 75,000 74,033 Park-Ohio Industries, Inc. Sr. Sub. Notes 8.38% due 11/15/14..................... 75,000 70,688 -------- 671,221 -------- Electronics -- 0.3% Advanced Micro Devices, Inc. Sr. Notes 7.75% due 11/01/12..................... 244,000 255,285 Arrow Electronics, Inc. Sr. Debentures 6.88% due 06/01/18..................... 144,000 146,655 Corning, Inc. Notes 6.20% due 03/15/16..................... 96,000 95,995 L-3 Communications Corp. Sr. Sub. Notes 6.13% due 07/15/13..................... 100,000 97,500 L-3 Communications Corp. Sr. Sub. Notes 6.38% due 10/15/15..................... 100,000 98,500 Sanmina-Sci Corp. Sr. Sub. Notes 6.75% due 03/01/13..................... 75,000 71,438 Telex Communications, Inc. Sr. Sec. Notes 11.50% due 10/15/08.................... 50,000 53,375 -------- 818,748 -------- Energy Services -- 0.4% Allis-Chalmers Energy, Inc. Sr. Notes 9.00% due 01/15/14*.................... 175,000 172,375 Grant Prideco, Inc. Sr. Notes 6.13% due 08/15/15..................... 50,000 48,750 Hanover Compressor Co. Sr. Notes 7.50% due 04/15/13..................... 25,000 25,000 Hanover Compressor Co. Sr. Notes 8.63% due 12/15/10..................... 75,000 78,656
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------ Energy Services (continued) Oslo Seismic Services, Inc. 1st Mtg. Notes 8.28% due 06/01/11............ $ 185,730 $ 188,589 Pride International, Inc. Sr. Notes 7.38% due 07/15/14............ 50,000 52,500 Seitel, Inc. Sr. Notes 11.75% due 07/15/11........... 475,000 540,313 ---------- 1,106,183 ---------- Energy Sources -- 3.0% Alpha Natural Resources LLC Sr. Notes 10.00% due 06/01/08........... 42,000 46,200 Amerada Hess Corp. Notes 7.13% due 03/15/33............ 99,000 108,020 Amerada Hess Corp. Notes 7.88% due 10/01/29............ 95,000 110,622 Belden & Blake Corp. Sec. Notes 8.75% due 07/15/12............ 200,000 206,000 Calpine Corp. Sec. Notes 8.75% due 07/15/13(6)(8)*..... 2,698,000 2,475,415 Chaparral Energy, Inc. Sr. Notes 8.50% due 12/01/15*........... 700,000 728,000 Chesapeake Energy Corp. Sr. Notes 6.25% due 01/15/18............ 475,000 464,312 Chesapeake Energy Corp. Sr. Notes 6.63% due 01/15/16............ 925,000 922,687 Chesapeake Energy Corp. Sr. Notes 6.88% due 11/15/20*........... 125,000 125,938 Colorado Interstate Gas Co. Debentures 6.85% due 06/15/37............ 150,000 151,715 ConocoPhillips Sr. Notes 7.00% due 03/30/29............ 125,000 141,837 Copano Energy LLC Sr. Notes 8.13% due 03/01/16*........... 250,000 258,750 Costilla Energy, Inc. Sr. Notes 10.25% due 10/01/06(4)(6)(7)+. 500,000 0 Drummond Co., Inc. Sr. Notes 7.38% due 02/15/16*........... 250,000 249,375 Encore Acquisition Co. Sr. Sub. Notes 6.00% due 07/15/15............ 175,000 163,188
40 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- BONDS & NOTES (continued) Energy Sources (continued) Encore Acquisition Co. Sr. Sub. Notes 6.25% due 04/15/14....................... $ 50,000 $ 47,875 Enterprise Products Operating LP Guaranteed Notes 6.88% due 03/01/33....................... 90,000 91,944 EXCO Resources, Inc. Guaranteed Notes 7.25% due 01/15/11....................... 125,000 124,375 Hilcorp Energy I LP Sr. Notes 10.50% due 09/01/10*..................... 170,000 187,213 Hilcorp Energy I LP Sr. Notes 7.75% due 11/01/15*...................... 275,000 274,312 Markwest Energy Partners LP Sr. Notes 6.88% due 11/01/14....................... 155,000 146,475 Mission Energy Holding Co. Sr. Sec. Notes 13.50% due 07/15/08...................... 1,075,000 1,233,562 Newfield Exploration Co. Sr. Sub. Notes 6.63% due 09/01/14....................... 150,000 150,375 Quicksilver Resources, Inc. Sr. Sub. Notes 7.13% due 04/01/16....................... 200,000 197,500 Roseton Danskammer Guaranteed Pass-Through Certs., Series B 7.67% due 11/08/16....................... 425,000 434,200 The Premcor Refining Group, Inc. Sr. Notes 6.75% due 02/01/11....................... 158,000 164,647 Transmeridian Exploration, Inc. Sr. Notes 12.00% due 12/15/10(4)(12)*.............. 200,000 200,000 ---------- 9,404,537 ---------- Financial Services -- 5.4% AMBAC Financial Group, Inc. Debentures 5.95% due 12/05/35....................... 80,000 77,188 Ameriprise Financial, Inc. Sr. Notes 5.35% due 11/15/10....................... 93,000 92,061 Ameriprise Financial, Inc. Sr. Notes 5.65% due 11/15/15....................... 150,000 147,862 BAE Systems Holdings, Inc. Guaranteed Notes 4.75% due 08/15/10*...................... 405,000 390,451 BAE Systems Holdings, Inc. Guaranteed Notes 6.40% due 12/15/11*...................... 237,000 243,821 Capital One Bank Sr. Notes 5.13% due 02/15/14....................... 100,000 96,231
Principal Value Security Description Amount** (Note 2) -------------------------------------------------- Financial Services (continued) Chukchansi Economic Development Authority Sr. Notes 8.06% due 05/15/06*(1)......... $ 150,000 $ 153,375 Consolidated Communications Holdings, Inc. Sr. Notes 9.75% due 04/01/12............. 347,000 367,820 Countrywide Home Loans, Inc. Notes 4.13% due 09/15/09............. 80,000 76,466 Countrywide Home Loans, Inc. Guaranteed Notes 5.50% due 08/01/06............. 101,000 101,137 Eircom Funding Sr. Sub. Notes 8.25% due 08/15/13............. 125,000 134,531 ESI Tractebel Acquisition Corp. Guaranteed Bonds 7.99% due 12/30/11............. 218,000 225,724 Ford Motor Credit Co. Notes 5.70% due 01/15/10............. 58,000 51,471 Ford Motor Credit Co. Sr. Notes 5.80% due 01/12/09............. 1,317,000 1,202,759 Ford Motor Credit Co. Notes 6.38% due 11/05/08............. 123,000 114,808 Ford Motor Credit Co. Notes 7.00% due 10/01/13............. 1,300,000 1,162,728 Ford Motor Credit Co. Notes 8.63% due 11/01/10............. 75,000 71,854 FTI Consulting, Inc. Sr. Notes 7.63% due 06/15/13............. 225,000 236,812 General Electric Capital Corp. Notes 1.00% due 03/21/12............. JPY 105,000,000 852,714 General Electric Capital Corp. Notes, Series A 4.38% due 03/03/12............. 150,000 141,992 General Electric Capital Corp. Bonds 6.75% due 03/15/32............. 201,000 223,830 General Motors Acceptance Corp. Notes 6.75% due 12/01/14............. 50,000 45,010 General Motors Acceptance Corp. Notes 6.88% due 09/15/11............. 2,400,000 2,236,990 General Motors Acceptance Corp. Notes 6.88% due 08/28/12............. 60,000 55,351
41 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) General Motors Acceptance Corp. Sr. Notes 7.00% due 02/01/12.............. $ 145,000 $ 135,012 General Motors Acceptance Corp. Notes 7.02% due 12/01/14(1)........... 925,000 842,316 General Motors Acceptance Corp. Bonds 7.25% due 03/02/11.............. 425,000 402,749 General Motors Acceptance Corp. Notes 7.75% due 01/19/10.............. 1,075,000 1,048,137 General Motors Acceptance Corp. Bonds 8.00% due 11/01/31.............. 864,000 816,568 H & E Equipment Services LLC Guaranteed Sr. Sec. Notes 11.13% due 06/15/12............. 250,000 276,875 Hexion U.S. Finance Corp. Sr. Notes 9.00% due 07/15/14.............. 420,000 432,600 ING USA Global Funding Trust Notes 4.50% due 10/01/10.............. 120,000 115,468 Jefferies Group, Inc. Sr. Debentures 6.25% due 01/15/36.............. 218,000 204,598 Lehman Brothers Holdings, Inc. Notes 5.50% due 04/04/16.............. 321,000 314,692 Lehman Brothers Holdings, Inc. Notes, Series H 4.50% due 07/26/10.............. 120,000 115,651 MedCath Holdings Corp. Sr. Notes 9.88% due 07/15/12.............. 175,000 182,000 Nexstar Finance Holdings LLC Guaranteed Sr. Disc. Notes 11.38% due 04/01/13(5).......... 625,000 512,500 NGC Corp. Capital Trust, Guaranteed Sub. Notes, Series B 8.32% due 06/01/27.............. 1,725,000 1,518,000 PCA LLC Sr. Notes 11.88% due 08/01/09(7).......... 325,000 65,000 Pricoa Global Funding I Notes 3.90% due 12/15/08*............. 100,000 96,279 Pricoa Global Funding I Notes 4.63% due 06/25/12*............. 50,000 47,483 Principal Life Global Funding I Sec. Notes 6.25% due 02/15/12*............. 100,000 103,484 Residential Capital Corp. Notes 6.38% due 06/30/10.............. 234,000 235,736
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- Financial Services (continued) Residential Capital Corp. Notes 6.88% due 06/30/15.............. $219,000 $ 228,311 Solectron Global Finance Ltd. Sr. Sub. Notes 8.00% due 03/15/16*............. 175,000 175,438 Sprint Capital Corp. Sr. Notes 6.88% due 11/15/28.............. 48,000 49,523 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 11.50% due 06/01/10............. 162,000 179,010 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 12.88% due 10/15/08............. 75,000 86,531 Transamerica Finance Corp. Sr. Notes 6.40% due 09/15/08.............. 36,000 36,757 Xlliac Global Funding Notes 4.80% due 08/10/10*............. 100,000 96,933 ----------- 16,820,637 ----------- Food, Beverage & Tobacco -- 0.6% Doane Pet Care Co. Sr. Sub. Notes 10.63% due 11/15/15............. 150,000 159,000 Doane Pet Care Co. Guaranteed Sr. Notes 10.75% due 03/01/10............. 100,000 108,250 Dole Food Co., Inc. Sr. Notes 8.88% due 03/15/11.............. 175,000 173,250 Foster's Finance Corp. Notes 6.88% due 06/15/11*............. 65,000 68,260 Le Natures, Inc. Sr. Sub. Notes 10.00% due 06/15/13*............ 275,000 288,750 North Atlantic Holding Co., Inc. Sr. Notes 12.25% due 03/01/14(5)(7)....... 50,000 12,250 Smithfield Foods, Inc. Sr. Notes, Series B 7.75% due 05/15/13.............. 250,000 257,500 Wornick Co. Sr. Notes 10.88% due 07/15/11............. 800,000 824,000 ----------- 1,891,260 ----------- Forest Products -- 0.7% Boise Cascade LLC Sr. Notes 7.94% due 04/15/06(1)........... 325,000 329,063 Caraustar Industries, Inc. Notes 7.38% due 06/01/09.............. 425,000 405,875
42 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------- BONDS & NOTES (continued) Forest Products (continued) Caraustar Industries, Inc. Guaranteed Sr. Sub. Notes 9.88% due 04/01/11................ $ 50,000 $ 52,563 Crown Cork & Seal Co., Inc. Debentures 7.38% due 12/15/26................ 375,000 348,750 Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23................ 350,000 336,875 Pliant Corp. Sr. Sec. Notes 11.13% due 09/01/09(6)(8)......... 545,000 573,612 ---------- 2,046,738 ---------- Health Services -- 1.2% Concentra Operating Corp. Sr. Sub. Notes 9.13% due 06/01/12................ 180,000 188,550 Concentra Operating Corp. Sr. Sub. Notes 9.50% due 08/15/10................ 30,000 31,500 Genesis Healthcare Corp. Sr. Sub. Notes 8.00% due 10/15/13................ 75,000 79,313 HCA, Inc. Notes 6.38% due 01/15/15................ 1,914,000 1,862,848 HCA, Inc. Notes 6.75% due 07/15/13................ 600,000 597,810 Psychiatric Solutions, Inc. Sr. Sub. Notes 7.75% due 07/15/15................ 217,000 220,797 Tenet Healthcare Corp. Notes 7.38% due 02/01/13................ 125,000 114,062 Tenet Healthcare Corp. Sr. Notes 9.25% due 02/01/15*............... 250,000 250,625 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13................ 150,000 147,750 US Oncology, Inc. Sr. Sub. Notes 10.75% due 08/15/14............... 125,000 136,563 ---------- 3,629,818 ---------- Household & Personal Products -- 0.2% AEP Industries, Inc. Sr. Notes 7.88% due 03/15/13................ 43,000 43,215 Procter & Gamble Co. Bonds 2.00% due 06/21/10................ JPY 79,000,000 687,506 ---------- 730,721 ---------- Housing & Household Durables -- 0.0% Stanley Works Capital Trust I Bonds 5.90% due 12/01/10*(2)............ 160,000 147,786 ----------
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------------- Insurance -- 0.5% Americo Life, Inc. Notes 7.88% due 05/01/13*........................... $ 38,000 $ 38,303 Chubb Corp. Notes 6.00% due 11/15/11............................ 84,000 85,659 Crum & Forster Holdings Corp. Sr. Notes 10.38% due 06/15/13........................... 125,000 128,125 Genworth Financial, Inc. Notes 4.75% due 06/15/09............................ 160,000 157,007 Markel Corp. Sr. Notes 7.35% due 08/15/34............................ 45,000 46,405 Metropolitan Life Global Funding I Notes 4.25% due 07/30/09*........................... 132,000 128,519 Metropolitan Life Global Funding I Sr. Notes 4.63% due 08/19/10*........................... 60,000 58,027 MIC Financing Trust I Pass-Through Certs. 8.38% due 02/01/27*........................... 123,000 124,915 Ohio Casualty Corp. Notes 7.30% due 06/15/14............................ 100,000 104,234 Selective Insurance Group Sr. Notes 6.70% due 11/01/35............................ 70,000 67,387 The Allstate Corp. Sr. Notes 5.95% due 04/01/36............................ 475,000 462,675 ---------- 1,401,256 ---------- Internet Content -- 0.0% Spheris, Inc. Sr. Sub. Notes 11.00% due 12/15/12*.......................... 150,000 138,000 ---------- Leisure & Tourism -- 4.2% AMC Entertainment, Inc. Sr. Sub. Notes 9.88% due 02/01/12............................ 225,000 221,625 American Airlines, Inc. Series 2001-1, Class A-2 6.82% due 05/23/11............................ 1,400,000 1,375,500 Atlas Air, Inc. Pass-Through Certs., Series 1999-1, Class A-2 6.88% due 07/02/09............................ 241,397 235,362 Atlas Air, Inc. Pass-Through Certs., Series 1999-1, Class A-1 7.20% due 01/02/19............................ 1,707,373 1,724,447 Atlas Air, Inc. Series 1999-1, Class B 7.63% due 01/02/15............................ 751,504 676,354
43 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ BONDS & NOTES (continued) Leisure & Tourism (continued) Atlas Air, Inc. Pass-Through Certs., Series 2000-1 8.71% due 01/02/19........................... $292,530 $303,500 Atlas Air, Inc. Pass-Through Certs., Series 1999-1, Class C 8.77% due 01/02/11........................... 62,428 41,827 Atlas Air, Inc. Pass-Through Certs., Series 2000-1, Class B 9.06% due 07/02/17........................... 552,091 530,007 Brunswick Corp. Notes 5.00% due 06/01/11........................... 103,000 98,080 Cinemark, Inc. Sr. Disc. Notes 9.75% due 03/15/14(5)........................ 225,000 172,125 Circus & Eldorado Silver Legacy Capital Corp. Mtg. Notes 10.13% due 03/01/12.......................... 575,000 618,125 Continental Airlines, Inc. Pass-Through Certs., Series 1999 1, Class A 6.55% due 08/02/20........................... 682,452 691,472 Continental Airlines, Inc. Pass-Through Certs., Series 1999-1, Class C 6.95% due 08/02/09........................... 108,267 99,844 Continental Airlines, Inc. Pass-Through Certs., Series 1999-2, Class C-1 7.73% due 03/15/11........................... 186,534 161,178 Continental Airlines, Inc. Pass-Through Certs., Series 2000-2, Class B 8.31% due 10/02/19........................... 66,447 63,942 Delta Airlines, Inc. Pass-Through Certs., Class 2A Series 2000 1 7.57% due 05/18/12(8)........................ 425,000 425,000 Delta Airlines, Inc. Notes 8.30% due 12/15/29(6)(8)..................... 500,000 133,750 Delta Airlines, Inc. Sr. Notes 9.50% due 11/18/08(8)*....................... 175,000 170,187 Delta Airlines, Inc. Sr. Notes 10.00% due 08/15/08(6)(8).................... 975,000 248,625 Eldorado Casino Shreveport 1st Mtg. Notes 10.00% due 08/01/12(7)(9).................... 620,813 495,098 Eldorado Resorts LLC Sr. Notes 9.00% due 04/15/14(4)(7)..................... 425,000 425,000 Gaylord Entertainment Co. Sr. Notes 6.75% due 11/15/14........................... 450,000 438,750 Hilton Hotels Corp. Sr. Notes 7.20% due 12/15/09........................... 68,000 70,652 K2, Inc. Sr. Notes 7.38% due 07/01/14........................... 200,000 199,500
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Leisure & Tourism (continued) MGM Mirage, Inc. Sr. Notes 5.88% due 02/27/14.................. $1,550,000 $ 1,460,875 Northwest Airlines, Inc. Pass-Through Certs., Series 2001-1, Class 1A1 7.04% due 04/01/22(8)............... 417,984 417,984 Riviera Holdings Corp. Guaranteed Notes 11.00% due 06/15/10#................ 135,000 143,437 Royal Caribbean Cruises, Ltd. Sr. Notes 6.88% due 12/01/13.................. 108,000 111,041 Starwood Hotels & Resorts Worldwide Sr. Notes 7.88% due 05/01/12.................. 250,000 271,875 Station Casinos, Inc. Sr. Sub. Notes 6.63% due 03/15/18*................. 125,000 122,188 True Temper Sports, Inc. Guaranteed Sr. Sub. Notes 8.38% due 09/15/11.................. 350,000 320,250 United Air Lines, Inc. Certs., Series 2001-1, Class A2 6.20% due 03/01/10.................. 157,153 155,582 Waterford Gaming LLC Sr. Notes 8.63% due 09/15/12*................. 181,000 191,634 Worldspan LP/WS Financing Corp. Guaranteed Notes 11.00% due 02/15/11(1).............. 450,000 389,250 ----------- 13,204,066 ----------- Machinery -- 0.2% Case New Holland, Inc. Sr. Notes 6.00% due 06/01/09.................. 325,000 316,875 Dresser Rand Group, Inc. Sr. Sub. Notes 7.63% due 11/01/14*................. 188,000 191,760 Indalex Holding Corp. Sr. Notes 11.50% due 02/01/14*................ 200,000 195,500 Magnachip Semiconductor SA 2nd Priority Sr. Sec. Notes 6.88% due 12/15/11.................. 50,000 48,000 Venture Holdings Co. LLC Guaranteed Sr. Sec. Notes 11.00% due 06/01/07(6)(7)(8)+....... 100,000 125 ----------- 752,260 ----------- Medical Products -- 0.6% AmerisourceBergen Corp. Sr. Notes 5.88% due 09/15/15*................. 525,000 516,369 Boston Scientific Corp. Bonds 6.25% due 11/15/35.................. 198,000 202,306
44 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Medical Products (continued) CDRV Investors, Inc. Sr. Notes 9.63% due 01/01/15(5)................ $325,000 $ 221,000 Encore Med IHC, Inc. Sr. Sub. Notes 9.75% due 10/01/12................... 75,000 75,750 Inverness Medical Innovations, Inc. Sr. Sub. Notes 8.75% due 02/15/12................... 425,000 418,625 Mylan Labs, Inc. Sr. Notes 5.75% due 08/15/10................... 25,000 24,687 Mylan Labs, Inc. Sr. Notes 6.38% due 08/15/15................... 75,000 75,375 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11.................. 250,000 259,375 ---------- 1,793,487 ---------- Metals & Mining -- 0.5% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11................... 75,000 81,000 Associated Materials, Inc. Sr. Disc. Notes 11.25% due 03/01/14.................. 250,000 143,750 Barrick Gold Finance Co. Guaranteed Debentures 7.50% due 05/01/07................... 120,000 122,636 Chaparral Steel Co. Sr. Notes 10.00% due 07/15/13.................. 300,000 334,500 Metals USA, Inc. Sr. Notes 11.13% due 12/01/15*................. 150,000 165,000 Newmont Mining Corp. Notes 8.63% due 05/15/11................... 60,000 67,723 Owens Brockway Glass Container, Inc. Sr. Notes 8.25% due 05/15/13................... 175,000 182,875 Owens-Brockway Glass Container, Inc. Guaranteed Sr. Sec. Notes 8.88% due 02/15/09................... 375,000 390,469 Phelps Dodge Corp. Sr. Notes 6.13% due 03/15/34................... 59,000 55,088 Renco Metals, Inc. Guaranteed Notes 11.50% due 07/01/03(4)(6)(7)(8)(15)+. 500,000 0 ---------- 1,543,041 ---------- Pharmaceuticals -- 0.2% American Home Products Notes 6.95% due 03/15/11................... 58,000 61,492
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Pharmaceuticals (continued) AmerisourceBergen Corp. Sr. Notes 5.63% due 09/15/12*(12)................. $150,000 $147,525 Curative Health Services, Inc. Sr. Notes 10.75% due 05/01/11(6)(8)............... 100,000 58,875 Genentech, Inc. Sr. Notes 5.25% due 07/15/35...................... 287,000 258,179 Merck & Co., Inc. Notes 2.50% due 03/30/07...................... 40,000 38,916 Teva Pharmaceutical Finance LLC Guaranteed Sr. Notes 6.15% due 02/01/36...................... 108,000 101,793 Wyeth Notes 6.00% due 02/15/36...................... 80,000 78,148 -------- 744,928 -------- Real Estate Companies -- 0.1% EOP Operating LP Sr. Notes 7.00% due 07/15/11...................... 160,000 168,348 ERP Operating LP Sr. Notes 5.38% due 08/01/16...................... 92,000 88,886 -------- 257,234 -------- Real Estate Investment Trusts -- 0.6% Brandywine Operating Partnership LP Guaranteed Notes 6.00% due 04/01/16...................... 99,000 97,973 Commercial Net Lease Realty, Inc. Notes 6.15% due 12/15/15...................... 55,000 54,244 Duke Realty Corp. Sr. Notes 5.50% due 03/01/16...................... 80,000 77,623 Heritage Property Investment Trust, Inc. Notes 4.50% due 10/15/09...................... 80,000 76,710 Mack-Cali Realty LP Notes 5.80% due 01/15/16...................... 90,000 87,884 National Health Investors, Inc. Notes 7.30% due 07/16/07...................... 100,000 101,236 Omega Healthcare Investors, Inc. Sr. Notes 7.00% due 04/01/14...................... 200,000 202,000 Reckson Operating Partnership LP Notes 6.00% due 03/31/16...................... 90,000 89,278 Senior Housing Properties Trust Sr. Notes 8.63% due 01/15/12...................... 527,000 579,700
45 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- BONDS & NOTES (continued) Real Estate Investment Trusts (continued) Trustreet Properties, Inc. Sr. Notes 7.50% due 04/01/15.................... $325,000 $ 325,813 Vornado Realty LP Sr. Notes 4.75% due 12/01/10.................... 80,000 76,557 ---------- 1,769,018 ---------- Restaurants -- 0.2% Dave & Busters, Inc. Sr. Notes 11.25% due 03/15/14*.................. 225,000 227,813 Restaurant Co. Sr. Notes 10.00% due 10/01/13................... 75,000 71,625 Sbarro, Inc. Sr. Notes 11.00% due 09/15/09................... 194,000 197,395 ---------- 496,833 ---------- Retail Stores -- 0.7% Acco Brands Corp. Sr. Sub. Notes 7.63% due 08/15/15.................... 75,000 71,250 Collins & Aikman Floor Cover Guaranteed Notes 9.75% due 02/15/10.................... 273,000 257,985 Jostens Holding Corp. Sr. Disc. Notes 10.25% due 12/01/13(5)................ 273,000 208,845 Neiman Marcus Group, Inc. Sr. Sub. Notes 10.38% due 10/15/15*.................. 200,000 212,500 Prestige Brands, Inc. Sr. Sub. Notes, Series B 9.25% due 04/15/12.................... 100,000 101,000 Rent-Way, Inc. Sr. Notes 11.88% due 06/15/10................... 283,000 295,735 Rite Aid Corp. Guaranteed Notes 8.13% due 05/01/10.................... 200,000 204,250 Saks, Inc. Guaranteed Notes 9.88% due 10/01/11.................... 375,000 414,375 Visant Holding Corp. Sr. Notes 8.75% due 12/01/13*................... 325,000 312,016 ---------- 2,077,956 ---------- Telecommunications -- 2.3% Alltel Corp. Notes 4.66% due 05/17/07.................... 53,000 52,645 American Cellular Corp. Sr. Notes 10.00% due 08/01/11................... 950,000 1,030,750
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Telecommunications (continued) Centennial Communications Corp. Sr. Notes 10.00% due 01/01/13.................. $ 61,000 $ 63,364 Centennial Communications Corp. Guaranteed Sr. Notes 10.13% due 06/15/13.................. 200,000 218,500 Centennial Communications Corp. Sr. Notes 10.25% due 01/01/13(1)............... 175,000 181,125 Cincinnati Bell, Inc. Sr. Notes 7.00% due 02/15/15................... 150,000 148,500 Cincinnati Bell, Inc. Notes 7.25% due 06/15/23................... 25,000 24,000 Cingular Wireless Services, Inc. Sr. Notes 7.88% due 03/01/11................... 371,000 406,640 GTE Corp. Debentures 6.94% due 04/15/28................... 144,000 144,611 GTE Northwest, Inc. Debentures, Series D 5.55% due 10/15/08................... 55,000 54,648 Insight Midwest LP Sr. Notes 9.75% due 10/01/09................... 100,000 103,000 LCI International, Inc. Sr. Notes 7.25% due 06/15/07................... 2,600,000 2,626,000 New England Telephone & Telegraph Co. Debentures 7.88% due 11/15/29................... 70,000 74,066 Qwest Corp. Debentures 7.13% due 11/15/43................... 25,000 24,250 Qwest Corp. Debentures 7.25% due 10/15/35................... 100,000 99,875 Suncom Wireless, Inc. Guaranteed Sr. Notes 8.50% due 06/01/13................... 400,000 380,000 Suncom Wireless, Inc. Guaranteed Sr. Sub. Notes 8.75% due 11/15/11................... 150,000 101,812 US West Communications, Inc. Debentures 7.25% due 09/15/25................... 50,000 51,250 US West Communications, Inc. Debentures 7.50% due 06/15/23................... 16,000 16,260 Valor Telecommunications Enterprises Sr. Notes 7.75% due 02/15/15................... 950,000 995,125 Verizon New England, Inc. Debentures 6.50% due 09/15/11................... 80,000 81,216
46 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- BONDS & NOTES (continued) Telecommunications (continued) Verizon New York, Inc., Debentures, Series A 6.88% due 04/01/12..................... $ 22,000 $ 22,598 Verizon New York, Inc., Debentures, Series B 7.38% due 04/01/32..................... 202,000 204,885 ---------- 7,105,120 ---------- Transportation -- 0.2% Burlington Northern Santa Fe Corp. Debentures 7.29% due 06/01/36..................... 134,000 155,365 CNF, Inc. Sr. Debentures 6.70% due 05/01/34..................... 150,000 147,201 Norfolk Southern Corp. Notes 5.59% due 05/17/25..................... 168,000 160,168 Ryder Systems, Inc. Notes 5.00% due 06/15/12..................... 131,000 124,004 ---------- 586,738 ---------- Utilities -- 3.5% AES Corp. Sr. Notes 8.75% due 05/15/13*.................... 850,000 918,000 American Electric Power Co., Inc. Sr. Notes 4.71% due 12/15/15(5).................. 180,000 178,264 Atlas Pipeline Partners LP Sr. Notes 8.13% due 12/15/15*.................... 175,000 182,437 CenterPoint Energy Houston Electric LLC Series L-2 5.60% due 07/01/23..................... 119,000 112,671 CenterPoint Energy Resources Corp. Notes 7.75% due 02/15/11..................... 120,000 129,956 Centerpoint Energy, Inc. Sr. Notes 5.88% due 06/01/08..................... 150,000 150,765 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..................... 225,000 217,125 Cleco Power LLC Sr. Notes 6.50% due 12/01/35..................... 65,000 63,354 Commonwealth Edison Co. 1st Mtg. Bond, Series 103 5.90% due 03/15/36..................... 133,000 126,691 Consolidated Natural Gas Co. Sr. Notes 5.38% due 11/01/06..................... 40,000 39,994
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------ Utilities (continued) Consumers Energy Co. Series C 4.25% due 04/15/08............ $ 180,000 $ 175,547 Dominion Resources, Inc. Sr. Notes 5.69% due 05/15/08(5)......... 176,000 176,313 Duke Energy Corp. Sr. Notes 4.20% due 10/01/08............ 150,000 145,534 Duquesne Light Holdings, Inc. Sr. Notes 6.25% due 08/15/35............ 48,000 44,646 Edison Mission Energy Sr. Notes 9.88% due 04/15/11............ 200,000 226,000 El Paso Natural Gas Co. Sr. Notes 7.63% due 08/01/10............ 250,000 260,625 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22............ 575,000 654,240 El Paso Production Holding Co. Guaranteed Notes 7.75% due 06/01/13............ 1,125,000 1,165,781 Entergy Louisiana LLC 1st Mtg. Bonds 5.83% due 11/01/10............ 195,000 192,618 Ferrellgas LP Sr. Notes 6.75% due 05/01/14............ 550,000 529,375 Florida Power & Light Co. Notes 5.95% due 10/01/33............ 100,000 99,436 KeySpan Corp. Sr. Notes 4.90% due 05/16/08............ 239,000 236,406 NRG Energy, Inc. Sr. Notes 7.25% due 02/01/14............ 475,000 482,719 NRG Energy, Inc. Sr. Notes 7.38% due 02/01/16............ 725,000 740,406 Pacific Energy Partners LP Sr. Notes 6.25% due 09/15/15............ 218,000 212,550 Pacific Energy Partners LP Sr. Notes 7.13% due 06/15/14............ 332,000 337,810 Pepco Holdings, Inc. Notes 5.50% due 08/15/07............ 111,000 111,012 PSEG Power LLC Sr. Notes 7.75% due 04/15/11............ 50,000 54,321 PSI Energy, Inc. Debentures 6.12% due 10/15/35............ 75,000 72,788
47 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- BONDS & NOTES (continued) Utilities (continued) PSI Energy, Inc. Debentures 7.85% due 10/15/07.................. $ 179,000 $ 184,958 Public Service Electric & Gas Co. Sec. Notes 5.00% due 08/15/14.................. 96,000 92,115 Puget Sound Energy, Inc. Sr. Notes 5.20% due 10/01/15.................. 197,000 188,395 Reliant Energy, Inc. Sr. Sec. Notes 6.75% due 12/15/14.................. 50,000 44,125 Reliant Energy, Inc. Notes 9.50% due 07/15/13.................. 50,000 50,063 Sempra Energy Sr. Notes 4.62% due 05/17/07.................. 203,000 201,193 Southern California Edison Co. Series 2006-A 5.63% due 02/01/36.................. 108,000 101,093 Southern California Gas Co. 1st Mtg. Bonds 5.75% due 11/15/35.................. 70,000 68,038 Southern Energy, Inc. Notes 7.90% due 07/15/09(4)(7)+........... 1,125,000 0 Tennessee Gas Pipeline Co. Debentures 7.00% due 10/15/28.................. 400,000 395,435 Tiverton/Rumford Power Assoc., Ltd. Guaranteed Notes 9.00% due 07/15/18(6)(8)*........... 298,012 257,781 Transcontinental Gas Pipe Line Corp. Sr. Notes 8.88% due 07/15/12.................. 25,000 28,500 VeraSun Energy Corp. Sr. Notes 9.88% due 12/15/12*................. 375,000 397,500 Williams Cos., Inc. Notes 7.88% due 09/01/21............ 700,000 752,500 ------------ 10,849,080 ------------ Total Bonds & Notes (cost $102,398,292)................. 101,516,040 ------------ CONVERTIBLE BONDS -- 0.1% Health Services -- 0.0% Genesis Healthcare Corp. Sr. Sub. Debentures 2.50% due 03/15/25*................. 75,000 75,844 ------------ Telecommunications -- 0.1% ICO North America, Inc. Sr. Notes 7.50% due 08/15/09(4)(7)(12)........ 200,000 254,000 ------------ Total Convertible Bonds (cost $275,000)..................... 329,844 ------------
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- FOREIGN BONDS & NOTES -- 34.2% Banks -- 0.2% Caisse Nationale des Caisses d'Epargne et de Prevoyance Bonds 5.09% due 12/30/49(1)..................... $141,000 $ 124,609 Mizuho Finance Bonds 8.38% due 12/29/49........................ 175,000 186,375 National Westminster Bank PLC Sub. Notes 7.75% due 10/16/07(2)..................... 67,000 69,145 UOB Cayman, Ltd. Guaranteed Notes 5.80% due 03/15/16*(2)(10)................ 150,000 146,837 ---------- 526,966 ---------- Broadcasting & Media -- 0.4% Corp. Interamericana De Entretenimiento SA Sr. Notes 8.88% due 06/14/15*....................... 300,000 297,000 Grupo Televisa SA Sr. Notes 6.63% due 03/18/25........................ 181,000 177,607 Telenet Group Holding NV Sr. Notes 11.50% due 06/15/14*(5)................... 956,000 799,455 ---------- 1,274,062 ---------- Chemicals -- 0.2% Rhodia SA Sr. Sub. Notes 8.88% due 06/01/11........................ 725,000 746,750 ---------- Conglomerate -- 0.0% Tyco International Group SA Sr. Notes 6.75% due 02/15/11........................ 150,000 156,012 ---------- Electronics -- 0.2% Avago Technologies Wireless Sr. Notes 10.13% due 12/01/13*...................... 350,000 375,813 Celestica, Inc. Sr. Sub. Notes 7.63% due 07/01/13........................ 50,000 50,125 STATS ChipPAC, Ltd. Sr. Notes 6.75% due 11/15/11........................ 75,000 73,500 ---------- 499,438 ---------- Energy Services -- 0.2% ENI Coordination Center Guaranteed Notes 5.25% due 12/27/07........................ GBP 205,000 358,191 Weatherford International, Inc. Sr. Notes 5.50% due 02/15/16........................ 112,000 109,825 ---------- 468,016 ----------
48 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Energy Sources -- 0.3% BHP Billiton Finance, Ltd. Guaranteed Notes 5.00% due 12/15/10................. $ 150,000 $ 147,470 Nexen, Inc Notes 5.88% due 03/10/35................. 80,000 74,573 North America Energy Partners, Inc. Sr. Notes 8.75% due 12/01/11................. 310,000 302,250 North America Energy Partners, Inc. Sr. Notes 9.00% due 06/01/10................. 175,000 183,312 Talisman Energy, Inc. Sr. Notes 5.85% due 02/01/37................. 180,000 169,210 ---------- 876,815 ---------- Financial Services -- 1.0% Aries Vermogensverwaltungs GmbH Bonds 9.60% due 10/25/14................. 1,000,000 1,249,400 Basell AF SCA Sr. Notes 8.38% due 08/15/15*................ 750,000 744,375 Bluewater Finance, Ltd. Guaranteed Sr. Notes 10.25% due 02/15/12................ 350,000 367,500 Canadian Oil Sands, Ltd. Notes 5.80% due 08/15/13*................ 96,000 95,810 Compton Petroleum Finance Corp. Sr. Notes 7.63% due 12/01/13*................ 250,000 250,000 FBG Finance, Ltd. Notes 5.88% due 06/15/35*................ 60,000 54,593 HBOS Capital Funding LP Notes 6.85% due 3/23/09(10).............. 175,000 175,438 Nationwide Building Society Sr. Notes 2.63% due 01/30/07*................ 85,000 83,248 SovRisc BV Notes 4.63% due 10/31/08*................ 133,000 131,288 ---------- 3,151,652 ---------- Food, Beverage & Tobacco -- 0.0% Diageo Capital PLC Guaranteed Notes 4.38% due 05/03/10................. 88,000 84,480 ---------- Forest Products -- 0.3% Abitibi-Consolidated, Inc. Debentures 8.55% due 08/01/10................. 575,000 577,875
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- Forest Products (continued) Abitibi-Consolidated, Inc. Debentures 8.85% due 08/01/30........... $ 225,000 $ 201,938 Tembec Industries, Inc. Sr. Notes 8.63% due 06/30/09........... 50,000 30,125 ---------- 809,938 ---------- Gas & Pipeline Utilities -- 0.0% Kinder Morgan Finance Co. ULC Guaranteed Notes 5.70% due 01/05/16........... 96,000 93,528 ---------- Government Agencies -- 29.4% Canadian Government Bonds 4.25% due 09/01/08........... CAD 1,032,000 887,811 Canadian Government Debentures 5.00% due 06/01/14........... CAD 890,000 800,775 Canadian Government Bonds 5.75% due 09/01/06........... CAD 2,555,000 2,203,139 Commonwealth of Australia Bonds 7.50% due 09/15/09........... AUD 2,360,000 1,801,306 Dominican Republic Bonds 8.63% due 04/20/27*.......... 330,000 339,075 Federal Republic of Brazil Bonds 5.49% due 07/05/06........... BRL 7,824,000 3,633,604 Federal Republic of Brazil Notes 7.88% due 03/07/15........... 910,000 982,345 Federal Republic of Brazil Bonds 8.00% due 01/15/18........... 2,700,000 2,925,450 Federal Republic of Brazil Bonds 8.25% due 01/20/34........... 2,400,000 2,644,800 Federal Republic of Brazil Bonds 8.75% due 02/04/25........... 1,200,000 1,374,000 Federal Republic of Brazil Bonds 8.88% due 10/14/19........... 680,000 785,400 Federal Republic of Brazil Bonds 8.88% due 04/15/24........... 145,000 167,620 Federal Republic of Brazil Notes 10.25% due 06/17/13.......... 580,000 704,120 Federal Republic of Brazil Bonds 10.50% due 07/14/14.......... 485,000 603,825 Federal Republic of Brazil Notes 11.00% due 01/11/12.......... 240,000 293,400
49 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Government Agencies (continued) Federal Republic of Brazil Bonds 11.00% due 08/17/40............. $ 4,840,000 $6,209,720 Government of Germany Notes 4.75% due 07/04/34.............. EUR 605,000 825,109 Gobierno De La Republica Bolivia Notes 6.00% due 12/09/20.............. 690,000 634,110 Government of Hungary Bonds 9.25% due 10/12/07.............. HUF 114,000,000 537,846 Government of Japan Bonds 0.50% due 06/20/06.............. JPY 68,000,000 578,515 Government of Japan Bonds 0.90% due 12/22/08.............. JPY 300,000 2,553 Kingdom of Netherlands Bonds 5.25% due 07/15/08.............. EUR 355,000 447,831 Kingdom Of Norway Notes 6.50% due 05/15/13.............. NOK 9,020,000 1,600,011 Kingdom of Spain Notes 5.75% due 07/30/32.............. EUR 535,000 826,654 Kingdom of Spain Bonds 6.15% due 01/31/13.............. EUR 1,199,000 1,663,877 Kingdom of Sweden Bonds 4.00% due 12/01/09.............. SEK 2,900,000 381,019 Kingdom of Sweden Bonds 4.50% due 08/12/15.............. SEK 17,310,000 2,368,749 Kingdom of Sweden Bonds 5.00% due 01/28/09.............. SEK 17,800,000 2,397,406 Kingdom of Sweden Bonds 5.50% due 10/08/12.............. SEK 8,200,000 1,169,699 Government of New Zealand Bonds 6.00% due 07/15/08.............. NZD 2,100,000 1,291,256 Peru Government International Bonds 8.75% due 11/21/33.............. 1,050,000 1,170,750 Government of Poland Bonds 5.75% due 03/24/10.............. PLN 1,520,000 486,068 Republic of Argentina Bonds 4.89% due 08/03/12(1)........... 4,270,000 3,490,725 Republic of Argentina Bonds 8.28% due 12/31/38.............. 1,494,761 565,767
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Government Agencies (continued) Republic of Argentina Bonds 8.28% due 12/31/33.......... $ 1,500,432 $1,474,174 Republic of Colombia Bonds 12.00% due 10/22/15(4)...... COP 3,137,000,000 1,724,477 Republic of Greece Bonds 5.25% due 05/18/12.......... 310,000 404,683 Republic of Hungary Notes 9.00% due 04/12/07.......... HUF 346,000,000 1,619,078 Republic of Indonesia Notes 7.25% due 04/20/15.......... 500,000 510,349 Republic of Indonesia Bonds 8.50% due 10/12/35*......... 1,205,000 1,343,575 Republic of Italy Bonds 5.25% due 11/01/29.......... EUR 538,000 741,918 Republic of Peru Bonds 5.00% due 03/07/07(2)....... 158,000 150,100 Republic of Peru Notes 7.35% due 07/21/25.......... 1,740,000 1,709,550 Republic of Philippines Bonds 7.75% due 01/14/31.......... 550,000 554,125 Republic of Philippines Bonds 8.25% due 01/15/14.......... 1,460,000 1,582,275 Republic of Philippines Bonds 9.88% due 01/15/19.......... 470,000 565,763 Republic of Philippines Bonds 10.63% due 03/16/25......... 820,000 1,062,925 Republic of South Africa Bonds 8.75% due 12/21/14.......... ZAR 6,830,000 1,194,317 Republic of South Africa Bonds 13.00% due 08/31/10......... ZAR 13,820,000 2,713,566 Republic of South Africa Bonds 13.50% due 09/15/15......... ZAR 1,925,000 436,791 Republic of Turkey Notes 6.88% due 03/17/36.......... 280,000 270,200 Republic of Turkey Notes 7.25% due 03/15/15.......... 2,100,000 2,186,625 Republic of Turkey Sr. Notes 11.88% due 01/15/30......... 2,030,000 3,133,813
50 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Government Agencies (continued) Republic of Ukraine Sr. Notes 7.65% due 06/11/13................ $ 1,390,000 $ 1,458,666 Republic of Uruguay Bonds 7.50% due 03/15/15................ 225,000 234,000 Republic of Uruguay Bonds 8.00% due 11/18/22................ 1,115,000 1,165,175 Republic of Venezuela Bonds 8.50% due 10/08/14................ 2,020,000 2,262,400 Republic of Venezuela Bonds 9.25% due 09/15/27................ 2,105,000 2,674,402 Republic of Venezuela Bonds 9.38% due 01/13/34................ 910,000 1,162,525 Republic of Uruguay Bonds 9.25% due 05/17/17................ 400,000 464,000 Russian Federation Bonds 5.00% due 03/31/07................ 4,330,000 4,750,876 Russian Federation Bonds 7.50% due 03/31/07*(5)............ 650,000 710,938 Russian Federation Bonds 12.75% due 06/24/28............... 200,000 356,760 United Kingdom Treasury Notes 4.00% due 03/07/09................ GBP 660,000 1,131,673 United Kingdom Treasury Notes 5.00% due 03/07/08................ GBP 605,000 1,061,743 United Kingdom Treasury Bonds 5.00% due 09/07/14................ GBP 580,000 1,048,402 United Mexican States Bonds 8.30% due 08/15/31................ 555,000 670,718 United Mexican States Notes 9.50% due 12/18/14................ MXN 12,355,000 1,206,803 United Mexican States, Notes, Series A 6.75% due 09/27/34................ 310,000 320,075 United Mexican States, Notes, Series A 7.50% due 04/08/33................ 590,000 657,850 ----------- 91,509,645 ----------- Household & Personal Products -- 0.1% Vitro Envases Norteamerica SA Sr. Sec. Notes 10.75% due 07/23/11*.............. 350,000 367,500 ----------- Insurance -- 0.4% Aegon NV Bonds 5.02% due 04/15/06................ 201,000 176,880
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Insurance (continued) Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15............... $ 850,000 $ 748,000 ING Groep NV Notes 5.78% due 12/08/15(2)(10)........ 160,000 155,637 Montpelier Re Holdings, Ltd. Sr. Notes 6.13% due 08/15/13............... 128,000 121,884 ---------- 1,202,401 ---------- Leisure & Tourism -- 0.1% Grupo Posadas SA de CV Sr. Notes 8.75% due 10/04/11*.............. 175,000 181,563 ---------- Machinery -- 0.0% Magnachip Semiconductor SA Sr. Sub. Notes 8.00% due 12/15/14............... 50,000 46,750 ---------- Metals & Mining -- 0.3% Adaro Finance BV Notes 8.50% due 12/08/10*.............. 200,000 205,500 CSN Islands IX Corp. Guaranteed Notes 10.00% due 01/15/15*............. 250,000 290,625 CSN Islands VIII Corp. Guaranteed Sr. Notes 9.75% due 12/16/13*.............. 275,000 310,062 Falconbridge, Ltd. Notes 8.38% due 02/15/11............... 96,000 105,539 Inco, Ltd. Debentures 7.20% due 09/15/32............... 100,000 103,619 Teck Cominco, Ltd. Sr. Notes 6.13% due 10/01/35............... 60,000 56,450 ---------- 1,071,795 ---------- Pharmaceuticals -- 0.6% Abbott Japan Co. Ltd. Guaranteed Bonds 1.05% due 11/06/08............... JPY 76,000,000 644,813 Elan Corp. PLC Sr. Notes 8.75% due 11/15/11(1)............ 350,000 344,750 Elan Finance PLC Sr. Notes 7.75% due 11/15/11............... 800,000 758,000 ---------- 1,747,563 ---------- Real Estate Companies -- 0.0% Brookfield Asset Management, Inc. Sr. Notes 8.13% due 12/15/08............... 76,000 80,775 ----------
51 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ FOREIGN BONDS & NOTES (continued) Retail -- 0.1% Jean Coutu Group, Inc. Sr. Sub. Notes 8.50% due 08/01/14............... $ 350,000 $ 321,125 ------------ Telecommunications -- 0.2% British Telecommunications PLC Bonds 8.63% due 12/15/30............... 180,000 230,270 Rogers Wireless, Inc. Sr. Notes 7.25% due 12/15/12............... 125,000 131,719 Telecom Italia Capital SA Guaranteed Sr. Notes, Series B 5.25% due 11/15/13............... 14,000 13,265 Telecom Italia Capital SA Guaranteed Sr. Notes, Series C 6.38% due 11/15/33............... 111,000 104,596 TELUS Corp. Notes 7.50% due 06/01/07............... 38,000 38,859 ------------ 518,709 ------------ Transportation -- 0.2% Canadian National Railway Co. Notes 6.38% due 10/15/11............... 150,000 156,644 Ultrapetrol Bahamas, Ltd. 1st Mtg. Notes 9.00% due 11/24/14............... 425,000 399,500 ------------ 556,144 ------------ Utilities -- 0.0% AES Chivor Notes 9.75% due 12/30/14*.............. 100,000 112,000 AES Drax Energy, Ltd. Notes 11.50% due 08/30/10(6)(7)+....... 725,000 725 ------------ 112,725 ------------ Total Foreign Bonds & Notes (cost $105,729,036).............. 106,404,352 ------------ U.S. GOVERNMENT OBLIGATIONS -- 11.9% U.S Treasury Bonds -- 2.7% 5.38% due 02/15/31................ 8,005,000 8,426,511 6.25% due 08/15/23................ 166,000 188,268 ------------ 8,614,779 ------------ U.S. Treasury Notes -- 9.2% 3.63% due 01/15/10................ 803,000 769,814 3.88% due 05/15/10................ 175,000 168,793 3.88% due 09/15/10................ 7,000 6,733 4.00% due 02/15/15................ 1,501,000 1,406,659 4.25% due 10/15/10................ 130,000 126,963 4.25% due 01/15/11................ 2,000,000 1,950,390 4.25% due 08/15/15................ 2,662,000 2,535,866 4.38% due 12/31/07................ 1,500,000 1,488,047 4.38% due 12/15/10................ 101,000 99,071 4.50% due 11/15/10................ 70,000 69,059
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- U.S. Treasury Notes (continued) 4.50% due 11/15/15......................... $ 1,970,000 $ 1,911,670 4.63% due 02/29/08......................... 63,000 62,747 6.88% due 05/15/06......................... 17,900,000 17,943,354 ----------- 28,539,166 ----------- Total U.S. Government Obligations (cost $37,719,137)........................ 37,153,945 ----------- U.S. GOVERNMENT AGENCIES -- 9.6% Federal Home Loan Bank -- 0.6% 3.50% due 05/15/07......................... 600,000 589,475 3.88% due 12/20/06......................... 600,000 594,710 4.50% due 09/08/08......................... 600,000 592,489 ----------- 1,776,674 ----------- Federal Home Loan Mortgage Corporation -- 5.5% 3.63% due 02/15/07......................... 624,000 616,058 4.13% due 07/12/10......................... 300,000 288,364 4.35% due 06/02/08......................... 600,000 589,745 4.45% due 03/06/08......................... 600,000 592,546 4.50% due 02/01/20......................... 266,917 254,840 4.50% due 08/01/20......................... 453,486 432,967 4.75% due 01/18/11......................... 310,000 304,693 5.00% due 09/01/18......................... 610,801 596,426 5.00% due 07/01/20......................... 926,344 903,082 5.00% due 06/15/31(3)...................... 421,548 413,467 5.00% due 02/01/34......................... 522,965 498,912 5.00% due 05/01/34......................... 332,378 316,832 5.00% due 02/01/35......................... 758,923 723,427 5.00% due 08/01/35......................... 1,072,936 1,021,116 5.00% due 11/01/35......................... 1,740,238 1,656,189 5.00% due 04/01/36......................... 750,000 713,594 5.13% due 12/15/13(3)...................... 381,823 378,585 5.50% due 12/15/18(3)...................... 545,853 541,273 5.50% due 07/01/35......................... 2,874,467 2,807,392 6.00% due 07/01/35......................... 279,957 280,140 6.50% due 05/01/29......................... 10,145 10,391 6.50% due 02/01/35......................... 1,500,000 1,529,190 6.50% due 03/01/36......................... 425,042 433,277 6.88% due 09/15/10......................... 1,156,000 1,234,401 7.00% due 06/01/29......................... 18,512 19,067 8.50% due 05/01/08......................... 17,972 18,398 10.00% due 05/15/20(3)..................... 23,819 23,757 11.57% due 06/15/21(3)(11)................. 14,210 264 ----------- 17,198,393 ----------- Federal National Mortgage Association -- 3.5% 3.00% due 03/02/07......................... 600,000 588,662 4.50% due 06/01/19......................... 642,911 615,292 4.75% due 12/15/10......................... 375,000 368,609 5.00% due 06/01/19......................... 350,898 342,406 5.00% due 03/01/34......................... 386,023 368,153 5.00% due 11/01/34......................... 644,377 614,547 5.25% due 08/01/12......................... 576,000 570,161 5.50% due 02/01/36(1)...................... 424,531 424,435 5.50% due 07/01/19......................... 442,928 440,390 5.50% due 09/01/20......................... 465,308 462,626 5.50% due 01/01/29......................... 10,367 10,162 5.50% due 06/01/29......................... 172,448 169,016
52 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Amount/ Value Security Description Shares** (Note 2) ------------------------------------------------------------ U.S. GOVERNMENT AGENCIES (continued) Federal National Mortgage Association (continued) 5.50% due 06/01/34.................. $427,485 $ 417,891 5.50% due 03/01/35.................. 678,262 662,256 5.50% due 12/01/35.................. 849,999 829,941 6.00% due 02/01/32.................. 154,681 154,887 6.00% due 05/01/34.................. 27,614 27,626 6.00% due 10/01/34.................. 827,398 827,746 6.00% due 10/01/34.................. 754,268 754,586 6.00% due 04/01/35.................. 901,988 902,368 6.00% due 06/01/35.................. 657,551 657,784 6.50% due 04/01/34.................. 373,267 380,857 6.50% due 02/01/35.................. 105,970 108,124 7.50% due 01/01/30.................. 20,149 21,074 7.50% due 09/01/30.................. 3,508 3,667 8.00% due 11/01/28.................. 33,107 35,238 8.80% due 01/25/19(3)............... 50,531 53,505 10.40% due 04/25/19(3).............. 8,810 9,468 13.00% due 11/15/15................. 10,154 11,199 ----------- 10,832,676 ----------- Government National Mortgage Association -- 0.0% 7.50% due 07/15/27.................. 21,423 22,511 7.50% due 10/15/27.................. 60,838 63,930 7.50% due 10/15/27.................. 7,464 7,843 ----------- 94,284 ----------- U.S. Government Agencies -- 0.0% Tennessee Valley Authority Bonds 4.65% due 06/15/35.................. 105,000 94,024 ----------- Total U.S. Government Agencies (cost $30,610,778)................. 29,996,051 ----------- COMMON STOCK -- 2.0% Broadcasting & Media -- 0.0% Charter Communications, Inc......... 41,072 44,768 Ono Finance, PLC(4)(7)+*............ 100 0 ----------- 44,768 ----------- Energy Services -- 1.0% Mirant Corp......................... 46,719 1,167,975 Trico Marine Services, Inc.+........ 54,957 1,775,111 ----------- 2,943,086 ----------- Leisure & Tourism -- 0.0% Shreveport Gaming Holdings, Inc.(4)(7)(12)+.......... 2,441 56,199 ----------- Machinery -- 0.1% NES Rentals Holding, Inc.(7)+....... 19,435 355,855 ----------- Telecommunications -- 0.9% iPCS, Inc.(7)+...................... 60,413 2,839,411 ----------- Total Common Stock (cost $3,369,087).................. 6,239,319 ----------- PREFERRED STOCK -- 0.6% Broadcasting & Media -- 0.3% Paxson Communications Corp. 14.25%(9).......................... 99 863,775 ----------- Government Agencies -- 0.0% Federal National Mortgage Association 7.00%(1)............... 1,080 58,860 -----------
Principal Amount/ Value Security Description Shares** (Note 2) ------------------------------------------------------------------------ Financial Services -- 0.1% General Electric Capital Corp. 4.50%(5)........ $ 16,000 $ 364,800 TCR Holdings, Class B(4)(7).................... 570 6 TCR Holdings, Class C(4)(7).................... 314 3 TCR Holdings, Class D(4)(7).................... 827 8 TCR Holdings, Class E(4)(7).................... 1,711 17 ------------ 364,834 ------------ Insurance -- 0.1% Endurance Specialty Holdings, Ltd. 7.75%......................................... 13,000 314,860 ------------ Retail Stores -- 0.1% GNC Corp. 12.00%(9)(7).................................. 100 92,500 Rent-Way, Inc. 8.00%(4)(7)(12)............................... 4 42,888 ------------ 135,388 ------------ Total Preferred Stock (cost $1,686,745)............................. 1,737,717 ------------ RIGHTS+ -- 0.3% Government Agencies -- 0.3% Republic of Argentina, Expires 12/15/35(2)(14)....................... 9,142,161 845,650 United Mexican States, Series D Expires 06/30/06 VRR(4)....................... 1,400,000 18,900 United Mexico States, Series E Expires 06/30/07 VRR(4)....................... 1,400,000 35,000 ------------ Total Rights (cost $433,879)............................... 899,550 ------------ WARRANTS+ -- 0.0% Energy Sources -- 0.0% Transmeridian Exploration, Inc. Expires 12/15/10 (Strike Price $4.31)(4)(12)................................. 13,811 27,622 ------------ Telecommunications -- 0.0% GT Group Telecom, Inc. Expires 02/01/10 (Strike Price $0.00)(4)(7)*.. 150 1 Leap Wireless International, Inc. Expires 04/15/10 (Strike Price $96.80)(4)(7)*. 500 0 Leap Wireless International, Inc. Expires 04/15/10 (Strike Price $96.80)(4)(7)*. 350 0 ------------ 1 ------------ Total Warrants (cost $46,761)................................ 27,623 ------------ Total Long-Term Investment Securities -- 92.4% (cost $287,121,055)........................... 288,842,483 ------------ SHORT-TERM INVESTMENT SECURITIES -- 1.8% Time Deposit with State Street Bank & Trust Co. 2.50% due 04/03/06 (cost $5,393,000)............................. 5,393,000 5,393,000 ------------
53 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 3.2% State Street Bank & Trust Co. Joint Repurchase Agreement(13)... $ 34,000 $ 34,000 UBS Securities, LLC Joint Repurchase Agreement Account(13). 10,000,000 10,000,000 ------------ Total Repurchase Agreements (cost $10,034,000)............... 10,034,000 ------------ TOTAL INVESTMENTS -- (cost $302,548,055)@............. 97.8% 304,269,483 Other assets less liabilities....... 2.2 6,747,487 ----------- ------------ NET ASSETS -- 100.0% $311,016,970 =========== ============
- -------- # Security represents an investment in an affiliated company; see Note 7. + 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, 2006, the aggregate value of these securities was $22,931,997 representing 7.4% of net assets. Unless otherwise indicated, these securities are not considered to be illiquid. ** Denominated in United States dollars unless otherwise indicated. AUD -- Australian Dollar BRL -- Brazilian Real CAD -- Canadian Dollar COP -- Colombian Peso EUR -- Euro GBP -- Pound Sterling HUF -- Hungarian Forint JPY -- Japanese Yen MXN -- Mexican Peso NOK -- Norwegian Krone NZD -- NewZealand Dollar PLN -- Polish Zloty SEK -- Swedish Krone ZAR -- SouthAfrican Rand @ See Note 5 for cost of investments on a tax basis. (1) Floating rate security where the rate fluctuates. The rate moves up or down at each reset date. The rate reflected is as of March 31, 2006. (2) Variable rate security -- the rate reflected is as of March 31, 2006; maturity date reflects next reset date. (3) Collateralized Mortgage Obligation (4) Fair valued security; see Note 1. (5) "Step-up" security where the rate increases ("steps up") at a predetermined rate. Rate shown reflects the increased rate. (6) Bond in default. (7) Illiquid Security (8) Company has filed for Chapter 11 bankruptcy protection. (9) PIK ("Payment-in-Kind") Security. Payment made with additional securities in lieu of cash. (10) Security has a perpetual maturity date. The maturity date shown reflects the next call date. (11) Interest only (12) To the extent permitted by the Statement of Additional Information, the Strategic Bond Fund may invest in restricted securities. The Fund has no right to demand registration of these securities. The securities are valued pursuant to Note 2. Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of March 31, 2006, the Strategic Bond Fund held the following restricted securities:
Market Value % of Acquisition Principal/ Acquisition Market per Net Name Date Shares Cost Value Share Assets ---- ----------- ---------- ----------- -------- ------- ------ Rent-Way 8.00% Preferred Stock............ 05/29/2003 3 $ 25,000 $ 32,166 $10,722 0.01% Rent-Way 8.00% Preferred Stock............ 05/19/2004 1 10,000 10,722 10,722 0.00% Shreveport Gaming Holdings, Inc.... 07/29/2005 2,047 47,128 47,128 23 0.02% Shreveport Gaming Holdings, Inc.... 07/21/2005 394 9,073 9,071 23 0.00% ICO North America, Inc..... 08/11/2005 $200,000 200,000 254,000 127 0.08% Transmeridian Exploration, Inc. 12/08/2005 13,811 37,980 27,622 2 0.01% Transmeridian Exploration, Inc. 12/08/2005 $200,000 163,586 200,000 100 0.06% AmerisourceBergen Corp............. 01/06/2006 $150,000 150,906 147,525 98 0.05% -------- ---- $728,234 0.23% ======== ====
(13) See Note 2 for details of Joint Repurchase Agreement. (14) Gross Domestic Product ("GDP") linked security. Income is linked to the growth of Argentina's GDP. (15) Security is subject to litigation, the outcome of which is still to be determined. Open Forward Foreign Currency Contracts
Gross Contract In Delivery Unrealized to Deliver Exchange For Date Appreciation ------------------ CAD* 3,090,000 USD 2,726,912 05/03/06 $78,612 USD 771,278 EUR 638,000 04/07/06 2,207 USD 1,085,000 GBP 625,000 04/07/06 951 ------- $81,770 =======
Gross Contract In Delivery Unrealized to Deliver Exchange For Date Depreciation ------------------ USD* 2,667,311 CAD 3,090,000 05/03/06 $(19,011) USD 355,177 CAD 413,000 04/07/06 (1,468) -------- (20,479) -------- Net Unrealized Appreciation..... $ 61,291 ========
* 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 -- Canadian Dollar EUR -- Euro GBP -- Pound Sterling USD -- United States Dollar VRR -- Value Recovery Right See Notes to Financial Statements 54 SunAmerica High Yield Bond Fund PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited) Industry Allocation* Leisure & Tourism.............. 11.7% Financial Services............. 11.5% Telecommunications............. 9.8% Energy Sources................. 9.2% Broadcasting & Media........... 9.1% Utilities...................... 7.8% Energy Services................ 3.8% Business Services.............. 3.6% Health Services................ 3.4% Forest Products................ 2.8% Chemicals...................... 2.7% Medical Products............... 2.7% Automotive..................... 2.2% Metals & Mining................ 2.0% Repurchase Agreements.......... 2.0% Retail Stores.................. 1.8% Food, Beverage & Tobacco....... 1.7% Machinery...................... 1.6% Real Estate Investment Trusts.. 1.4% Electronics.................... 0.9% Retail......................... 0.9% Conglomerate................... 0.8% Household & Personal Products.. 0.7% Communication Equipment........ 0.6% Insurance...................... 0.6% Computers & Business Equipment. 0.5% Restaurants.................... 0.5% Transportation................. 0.5% Building Materials............. 0.4% Computer Software.............. 0.4% Aerospace & Military Technology 0.3% Internet Content............... 0.3% Banks.......................... 0.2% Entertainment Products......... 0.2% Pharmaceuticals................ 0.1% ---- 98.7% ====
Credit Quality+# BBB....... 0.5% BB........ 27.8% B......... 37.5% CCC....... 19.3% C......... 0.7% Below C... 2.9% Not Rated@ 11.3% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or, the rating is unavailable from the data source. + Source: Standard and Poors # Calculated as a percentage of total debt issues, excluding short-term securities. 55 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- BONDS & NOTES -- 78.9% Aerospace & Military Technology -- 0.3% DeCrane Aircraft Holdings Guaranteed Sr. Sec. Notes, Series B 12.00% due 09/30/08................... $1,700,000 $1,215,500 ---------- Automotive -- 1.4% Cooper-Standard Automotive, Inc. Sr. Sub. Notes 8.38% due 12/15/14.................... 830,000 647,400 Dura Operating Corp. Sr. Notes 8.63% due 04/15/12.................... 1,261,000 1,037,172 Exide Corp. 10.00% due 03/15/25+(1)(8)............ 1,650,000 0 Ford Motor Co. Bonds 6.63% due 10/01/28.................... 2,525,000 1,691,750 Nationsrent, Inc. Guaranteed Unsec. Notes 9.50% due 05/01/15.................... 900,000 972,000 Stanadyne Corp. Sr. Sub. Notes 10.00% due 08/15/14................... 475,000 454,813 ---------- 4,803,135 ---------- Banks -- 0.2% AAC Group Holding Corp. Sr. Notes 10.25% due 10/01/12(2)................ 1,025,000 794,375 ---------- Broadcasting & Media -- 7.6% Adelphia Communications Corp. Sr. Notes 10.25% due 06/15/11+(3)(4)............ 825,000 519,750 AMC Entertainment, Inc. Sr. Sub. Notes 9.88% due 02/01/12.................... 700,000 689,500 Cablevision Systems Corp. Sr. Notes 8.72% due 04/01/09(5)................. 650,000 681,688 Charter Communications Holdings II LLC Sr. Notes Series B 10.25% due 09/15/10*.................. 1,975,000 1,935,500 Charter Communications Holdings LLC Sr. Notes 11.13% due 01/15/11................... 775,000 410,750 Charter Communications Holdings LLC Sr. Notes 9.63% due 11/15/09.................... 2,525,000 1,691,750 Charter Communications Holdings LLC Sr. Notes 9.92% due 04/01/11(2)................. 3,825,000 1,969,875 Charter Communications Holdings LLC Sr. Notes 10.25% due 01/15/10................... 375,000 224,062 Charter Communications Holdings LLC Sr. Notes 10.75% due 10/01/09................... 2,075,000 1,411,000
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- Broadcasting & Media (continued) Cinemark, Inc. Sr. Disc. Notes 9.75% due 03/15/14(2)........... $ 875,000 $ 669,375 CSC Holdings, Inc. Sr. Debentures, Series B 8.13% due 08/15/09.............. 825,000 851,813 Fisher Communications, Inc. Sr. Notes 8.63% due 09/15/14.............. 1,650,000 1,744,875 Haights Cross Operating Co. Sr. Notes 11.75% due 08/15/11............. 475,000 495,781 Insight Communications Co., Inc. Sr. Disc. Notes 12.25% due 02/15/11(2).......... 1,665,000 1,769,062 Network Communications, Inc. Sr. Notes 10.75% due 12/01/13*............ 250,000 254,375 Nexstar Finance, Inc. Sr. Sub. Notes 7.00% due 01/15/14.............. 2,100,000 1,984,500 Paxson Communications Corp. Sec. Notes 10.78% due 01/15/13*(5)......... 3,350,000 3,316,500 Rogers Wireless, Inc. Sr. Notes 7.25% due 12/15/12.............. 500,000 526,875 Telex Communications, Inc. Sr. Sec. Notes 11.50% due 10/15/08............. 300,000 320,250 Vertis, Inc. Sr. Notes 10.88% due 06/15/09............. 575,000 564,938 Young Broadcasting, Inc. Guaranteed Sr. Sec. Notes 8.75% due 01/15/14.............. 1,050,000 897,750 Young Broadcasting, Inc. Guaranteed Sub. Notes 10.00% due 03/01/11............. 2,900,000 2,675,250 ----------- 25,605,219 ----------- Building Materials -- 0.4% Dayton Superior Corp. Sr. Sec. Notes 10.75% due 09/15/08............. 1,366,000 1,391,613 ----------- Business Services -- 3.6% Affinity Group, Inc. Sr. Sub. Notes 9.00% due 02/15/12.............. 1,325,000 1,331,625 Alderwoods Group, Inc. Sr. Notes 7.75% due 09/15/12.............. 425,000 436,688 Allied Waste North America, Inc. Sr. Notes 8.50% due 12/01/08.............. 1,700,000 1,787,125
56 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------- BONDS & NOTES (continued) Business Services (continued) AMR Holdco, Inc. Sr. Sub. Notes 10.00% due 02/15/15............ $ 450,000 $ 480,375 Associated Materials, Inc. Sr. Sub. Notes 9.75% due 04/15/12............. 1,675,000 1,737,812 Corrections Corp. America Sr. Notes 6.25% due 03/15/13............. 725,000 713,219 Mobile Mini, Inc. Sr. Notes 9.50% due 07/01/13............. 575,000 629,625 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 09/01/10............ 1,200,000 1,203,000 Service Corp. International Sr. Notes 6.75% due 04/01/16............. 400,000 396,000 Service Corp. International Sr. Notes 7.25% due 06/15/17*............ 2,250,000 2,289,375 Stewart Enterprises, Inc. Sr. Notes 7.25% due 02/15/13*............ 1,150,000 1,104,000 ----------- 12,108,844 ----------- Chemicals -- 1.9% BCI US Finance Corp. Sr. Sec. Notes 10.10% due 07/15/10*(5)........ 700,000 714,000 Equistar Chemicals LP Notes 8.75% due 02/15/09............. 375,000 388,125 Equistar Chemicals LP Sr. Notes 10.63% due 05/01/11............ 625,000 676,562 Montell Financial Co. BV Guaranteed Notes 8.10% due 03/15/27*............ 1,875,000 1,818,750 Phosphate Resource Partners LP Sr. Notes 7.00% due 02/15/08............. 725,000 734,063 Rockwood Specialties Group Sr. Sub. Notes 7.50% due 11/15/14............. 925,000 929,625 Rockwood Specialties Group Sr. Sub. Notes 10.63% due 05/15/11............ 292,000 320,470 Westlake Chemical Corp. Sr. Notes 6.63% due 01/15/16............. 750,000 741,562 ----------- 6,323,157 ----------- Communication Equipment -- 0.6% Rural Cellular Corp. Sr. Sub. Notes 9.75% due 01/15/10............. 1,875,000 1,903,125 -----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Computer Software -- 0.4% Solar Capital Corp. Sr. Notes 9.13% due 08/15/13*................ $ 825,000 $ 872,438 SS&C Technologies, Inc. Sr. Sub. Notes 11.75% due 12/01/13*............... 550,000 588,500 ---------- 1,460,938 ---------- Computers & Business Equipment -- 0.5% Activant Solutions, Inc. Sr. Notes 10.53% due 04/01/10*(5)............ 550,000 561,000 Xerox Corp. Sr. Notes 7.63% due 06/15/13................. 975,000 1,026,188 ---------- 1,587,188 ---------- Conglomerate -- 0.8% Carriage Services, Inc. Sr. Notes 7.88% due 01/15/15................. 684,000 695,970 Covalence Specialty Materials Corp. Sr. Sub. Notes 10.25% due 03/01/16*............... 375,000 393,750 Di Finance Subordinated LLC Sr. Sub. Notes 9.50% due 02/15/13................. 1,450,000 1,508,000 ---------- 2,597,720 ---------- Electronics -- 0.8% Advanced Micro Devices, Inc. Sr. Notes 7.75% due 11/01/12................. 1,024,000 1,071,360 Avago Technologies Finance Sr. Notes 10.13% due 12/01/13*............... 675,000 724,781 L-3 Communications Corp. Sr. Sub. Notes 6.13% due 07/15/13................. 275,000 268,125 L-3 Communications Corp. Sr. Sub. Notes 6.38% due 10/15/15................. 375,000 369,375 Sanmina-Sci Corp. Sr. Sub. Notes 6.75% due 03/01/13................. 350,000 333,375 ---------- 2,767,016 ---------- Energy Services -- 1.2% Allis-Chalmers Energy, Inc. Sr. Notes 9.00% due 01/15/14*................ 675,000 664,875 Grant Prideco, Inc. Sr. Notes 6.13% due 08/15/15................. 275,000 268,125 Hanover Compressor Co. Sr. Notes 7.50% due 04/15/13................. 75,000 75,000
57 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------- BONDS & NOTES (continued) Energy Services (continued) Hanover Compressor Co. Sr. Notes 8.63% due 12/15/10......... $ 275,000 $ 288,406 Oslo Seismic Services, Inc. 1st Mtg. Notes 8.28% due 06/01/11......... 636,789 646,590 Pride International, Inc. Sr. Notes 7.38% due 07/15/14......... 350,000 367,500 Seitel, Inc. Sr. Notes 11.75% due 07/15/11........ 1,450,000 1,649,375 ---------- 3,959,871 ---------- Energy Sources -- 8.7% Alpha Natural Resources LLC Sr. Notes 10.00% due 06/01/08........ 159,000 174,900 Belden & Blake Corp. Sec. Notes 8.75% due 07/15/12......... 450,000 463,500 Calpine Corp. Sec. Notes 8.75% due 07/15/13*(3)(4).. 8,685,000 7,968,487 Chaparral Energy, Inc. Sr. Notes 8.50% due 12/01/15*........ 2,100,000 2,184,000 Chesapeake Energy Corp. Sr. Notes 6.25% due 01/15/18......... 350,000 342,125 Chesapeake Energy Corp. Sr. Notes 6.63% due 01/15/16......... 3,675,000 3,665,812 Colorado Interstate Gas Co. Debentures 6.85% due 06/15/37......... 1,000,000 1,011,432 Copano Energy LLC Sr. Notes 8.13% due 03/01/16*........ 875,000 905,625 Drummond Co., Inc. Sr. Notes 7.38% due 02/15/16*........ 825,000 822,938 Encore Acquisition Co. Sr. Sub. Notes 6.00% due 07/15/15......... 550,000 512,875 Encore Acquisition Co. Sr. Sub. Notes 6.25% due 04/15/14......... 300,000 287,250 EXCO Resources, Inc. Guaranteed Notes 7.25% due 01/15/11......... 650,000 646,750 Hilcorp Energy I LP Sr. Notes 10.50% due 09/01/10*....... 791,000 871,089
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- Energy Sources (continued) Hilcorp Energy I LP Sr. Notes 7.75% due 11/01/15*....................... $1,125,000 $ 1,122,188 Markwest Energy Partners LP Sr. Notes 6.88% due 11/01/14........................ 615,000 581,175 Mission Energy Holding Co. Sr. Sec. Notes 13.50% due 07/15/08....................... 4,125,000 4,733,437 Newfield Exploration Co. Sr. Sub. Notes 6.63% due 09/01/14........................ 675,000 676,688 Quicksilver Resources, Inc. Sr. Sub. Notes 7.13% due 04/01/16........................ 600,000 592,500 Roseton Danskammer Guaranteed Pass-Through Certs., Series B 7.67% due 11/08/16........................ 1,075,000 1,098,270 Transmeridian Exploration, Inc. Sr. Notes 12.00% due 12/15/10*(1)(9)................ 650,000 650,000 ----------- 29,311,041 ----------- Entertainment Products -- 0.2% K2, Inc. Notes 7.38% due 07/01/14........................ 500,000 498,750 ----------- Financial Services -- 11.0% Compton Petroleum Finance Corp. Sr. Notes 7.63% due 12/01/13*....................... 800,000 800,000 Consolidated Communications Holdings, Inc. Sr. Notes 9.75% due 04/01/12........................ 910,000 964,600 EIRCOM Funding Sr. Sub. Notes 8.25% due 08/15/13........................ 425,000 457,406 ESI Tractebel Acquisition Corp. Guaranteed Bonds 7.99% due 12/30/11........................ 745,000 771,395 Ford Motor Credit Co. Sr. Notes 5.80% due 01/12/09........................ 3,975,000 3,630,196 Ford Motor Credit Co. Notes 7.00% due 10/01/13........................ 600,000 536,644 FTI Consulting, Inc. Sr. Notes 7.63% due 06/15/13........................ 425,000 447,313 General Motors Acceptance Corp. Debentures zero coupon due 06/15/15.................. 10,000 4,365 General Motors Acceptance Corp. Notes 6.75% due 12/01/14........................ 210,000 189,043
58 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) General Motors Acceptance Corp. Notes 6.88% due 09/15/11.............. $6,300,000 $ 5,872,098 General Motors Acceptance Corp. Notes 6.88% due 08/28/12.............. 269,000 248,155 General Motors Acceptance Corp. Notes 7.02% due 12/01/14(5)........... 3,375,000 3,073,315 General Motors Acceptance Corp. Notes 7.25% due 03/02/11.............. 1,900,000 1,800,524 General Motors Acceptance Corp. Notes 7.75% due 01/19/10.............. 4,250,000 4,143,797 General Motors Acceptance Corp. Bonds 8.00% due 11/01/31.............. 2,903,000 2,743,631 Hexion U.S. Finance Corp. Sr. Notes 9.00% due 07/15/14.............. 2,010,000 2,070,300 MedCath Holdings Corp. Sr. Notes 9.88% due 07/15/12.............. 875,000 910,000 Nexstar Finance Holdings, LLC Guaranteed Sr. Disc. Notes 11.38% due 04/01/13(2).......... 2,150,000 1,763,000 NGC Corp. Capital Trust Guaranteed Sub. Notes 8.32% due 06/01/27.............. 5,400,000 4,752,000 PCA, LLC Sr. Notes 11.88% due 08/01/09(8).......... 2,000,000 400,000 Solectron Global Finance Ltd. Sr. Sub. Notes 8.00% due 03/15/16*............. 650,000 651,625 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 11.50% due 06/01/10............. 671,000 741,455 ----------- 36,970,862 ----------- Food, Beverage & Tobacco -- 1.7% Doane Pet Care Co. Sr. Sub. Notes 10.63% due 11/15/15............. 600,000 636,000 Doane Pet Care Co. Guaranteed Sr. Notes 10.75% due 03/01/10............. 350,000 378,875 Dole Food Co., Inc. Sr. Notes 8.88% due 03/15/11.............. 500,000 495,000 Le Natures, Inc. Sr. Sub. Notes 10.00% due 06/15/13*............ 850,000 892,500 North Atlantic Holding Co., Inc. Sr. Disc Notes 12.25% due 03/01/14(2)(8)....... 425,000 104,125
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------- Food, Beverage & Tobacco (continued) Smithfield Foods, Inc. Sr. Notes, Series B 7.75% due 05/15/13............... $ 825,000 $ 849,750 Wornick Co. Sec. Notes 10.88% due 07/15/11.............. 2,200,000 2,266,000 ---------- 5,622,250 ---------- Forest Products -- 2.0% Boise Cascade, LLC Sr. Notes 7.48% due 10/15/12(5)............ 1,225,000 1,240,312 Caraustar Industries, Inc. Notes 7.38% due 06/01/09............... 1,250,000 1,193,750 Caraustar Industries, Inc. Guaranteed Sr. Sec. Notes 9.88% due 04/01/11............... 300,000 315,375 Crown Cork & Seal Co., Inc. Debentures 7.38% due 12/15/26............... 1,425,000 1,325,250 Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23............... 1,150,000 1,106,875 Pliant Corp. Sr. Sec. Notes 11.13% due 09/01/09(3)(4)........ 1,540,000 1,620,850 ---------- 6,802,412 ---------- Health Services -- 3.4% Concentra Operating Corp. Sr. Sub. Notes 9.13% due 06/01/12............... 675,000 707,062 Concentra Operating Corp. Sr. Sub. Notes 9.50% due 08/15/10............... 250,000 262,500 Genesis Healthcare Corp. Sr. Sub. Notes 8.00% due 10/15/13............... 475,000 502,313 HCA, Inc. Notes 6.38% due 01/15/15............... 7,545,000 7,343,360 Psychiatric Solutions, Inc. Sr. Sub. Notes 7.75% due 07/15/15............... 433,000 440,578 Tenet Healthcare Corp. Sr. Notes 6.50% due 06/01/12............... 25,000 22,500 Tenet Healthcare Corp. Notes 7.38% due 02/01/13............... 500,000 456,250 Tenet Healthcare Corp. Sr. Notes 9.25% due 02/01/15*.............. 750,000 751,875 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13............... 575,000 566,375
59 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ BONDS & NOTES (continued) Health Services (continued) US Oncology, Inc. Sr. Sub. Notes 10.75% due 08/15/14...................... $ 475,000 $ 518,937 ----------- 11,571,750 ----------- Household & Personal Products -- 0.3% AEP Industries, Inc. Sr. Notes 7.88% due 03/15/13....................... 131,000 131,655 Visant Holding Corp. Sr. Note 8.75% due 12/01/13*...................... 975,000 936,049 ----------- 1,067,704 ----------- Insurance -- 0.2% Crum & Forster Holdings Corp. Sr. Notes 10.38% due 06/15/13...................... 775,000 794,375 ----------- Internet Content -- 0.3% Spheris, Inc. Sr. Sub. Notes 11.00% due 12/15/12*..................... 975,000 897,000 ----------- Leisure & Tourism -- 11.5% American Airlines, Inc. Series 2001-1, Class A-2 6.82% due 05/23/11....................... 5,625,000 5,526,562 Atlas Air, Inc. Pass-Through Certs., Series 1999-1, Class A-1 7.20% due 01/02/19....................... 2,834,856 2,863,205 Atlas Air, Inc. Series 1999-1, Class B 7.63% due 01/02/15....................... 5,437,354 4,893,619 Atlas Air, Inc. Pass-Through Certs., Series 2000-1 8.71% due 01/02/19....................... 1,005,572 1,043,281 Atlas Air, Inc. Pass-Through Certs., Series 1999-1, Class C 8.77% due 01/02/11+...................... 574,341 384,808 Atlas Air, Inc. Pass-Through Certs., Series 2000-1, Class B 9.06% due 07/02/17....................... 1,301,358 1,249,303 Chukchansi Economic Development Authority Sr. Notes 8.06% due 11/15/12*(5)................... 500,000 511,250 Continental Airlines, Inc. Pass-Through Certs., Series 1999-1, Class C 6.95% due 08/02/09....................... 560,902 517,266 Continental Airlines, Inc. Series 1999-2, Class C-1 7.73% due 03/15/11....................... 735,162 635,231 Delta Airlines, Inc. Pass-Through Certs., Series 2000-1, Class 2A 7.57% due 05/18/12(4).................... 1,450,000 1,450,000
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Leisure & Tourism (continued) Delta Airlines, Inc. Notes 8.30% due 12/15/29(3)(4)........... $2,450,000 $ 655,375 Delta Airlines, Inc. Sr. Notes 9.50% due 11/18/08*(4)............. 500,000 486,250 Delta Airlines, Inc. Sr. Notes 10.00% due 08/15/08(3)(4).......... 3,000,000 765,000 Eldorado Casino Shreveport 1st Mtg. Notes 10.00% due 08/01/12(6)(8).......... 1,853,502 1,478,168 Eldorado Resorts, LLC Sr. Notes 9.00% due 04/15/14(1)(8)........... 2,675,000 2,675,000 Gaylord Entertainment Co. Sr. Notes 6.75% due 11/15/14................. 1,175,000 1,145,625 MGM Mirage, Inc. Sr. Notes 5.88% due 02/27/14................. 5,250,000 4,948,125 Northwest Airlines Pass-through Certs., Series 2001-1, Class 1A1 7.04% due 04/01/22(4).............. 1,462,944 1,462,944 Riviera Holdings Corp. Guaranteed Notes 11.00% due 06/15/10#............... 800,000 850,000 Starwood Hotels & Resorts Worldwide Sr. Notes 7.88% due 05/01/12................. 950,000 1,033,125 Station Casinos, Inc. Sr. Sub. Notes 6.63% due 03/15/18*................ 450,000 439,875 True Temper Sports, Inc. Guaranteed Notes 8.38% due 09/15/11................. 1,100,000 1,006,500 United Airlines, Inc. Series 2001-1, Class A-2 6.20% due 03/01/10................. 510,748 505,641 Waterford Gaming, LLC Sr. Notes 8.63% due 09/15/12*................ 1,064,000 1,126,510 Worldspan LP & WS Financing Corp. Guaranteed Notes 11.00% due 02/15/11(5)............. 1,175,000 1,016,375 ----------- 38,669,038 ----------- Machinery -- 0.7% Case New Holland, Inc. Sr. Notes 6.00% due 06/01/09................. 1,100,000 1,072,500 Dresser Rand Group, Inc. Sr. Sub. Notes 7.38% due 11/01/14*................ 683,000 696,660 Indalex Holding Corp. Sr. Notes 11.50% due 02/01/14*............... 700,000 684,250
60 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Machinery (continued) Venture Holdings Co., LLC Guaranteed Sr. Sec. Notes 11.00% due 06/01/07+(3)(4)(8)....... $ 550,000 $ 687 ---------- 2,454,097 ---------- Medical Products -- 1.7% AmerisourceBergen Corp. Sr. Notes 5.88% due 09/15/15*................. 1,375,000 1,352,395 CDRV Investors, Inc. Sr. Notes 9.63% due 01/01/15(2)............... 875,000 595,000 Encore Med IHC, Inc. Sr. Sub. Notes 9.75% due 10/01/12.................. 625,000 631,250 Inverness Medical Innovations, Inc. Sr. Sub. Notes 8.75% due 02/15/12.................. 1,400,000 1,379,000 Mylan Labs, Inc. Sr. Notes 5.75% due 08/15/10.................. 200,000 197,500 Mylan Labs, Inc. Sr. Notes 6.38% due 08/15/15.................. 500,000 502,500 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11................. 1,150,000 1,193,125 ---------- 5,850,770 ---------- Metals & Mining -- 1.4% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11.................. 600,000 648,000 Associated Materials, Inc. Sr. Disc. Notes 11.25% due 03/01/14................. 900,000 517,500 Chaparral Steel Co. Guaranteed Sr. Notes 10.00% due 07/15/13................. 875,000 975,625 Metals USA, Inc. Sr. Notes 11.13% due 12/01/15*................ 500,000 550,000 Owens-Brockway Glass Container Sr. Notes 8.25% due 05/15/13.................. 600,000 627,000 Owens-Brockway Glass Container Guaranteed Sr. Secured Notes 8.88% due 02/15/09.................. 1,300,000 1,353,625 Renco Metals, Inc. Guaranteed Notes 11.50% due 07/01/03+(1)(3)(4)(7)(8). 2,150,000 0 ---------- 4,671,750 ---------- Pharmaceuticals -- 0.1% Curative Health Services, Inc. Sr. Notes 10.75% due 05/01/11(3)(4)........... 825,000 485,719 ----------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- Real Estate Investment Trusts -- 1.4% National Health Investors, Inc. Notes 7.30% due 07/16/07................ $1,120,000 $1,133,844 Omega Healthcare Investors, Inc. Sr. Notes 7.00% due 04/01/14................ 700,000 707,000 Senior Housing Properties Trust Sr. Notes 8.63% due 01/15/12................ 1,600,000 1,760,000 Trustreet Properties, Inc. Sr. Notes 7.50% due 04/01/15................ 925,000 927,313 ---------- 4,528,157 ---------- Restaurants -- 0.5% Dave & Busters, Inc. Sr. Notes 11.25% due 03/15/14*.............. 725,000 734,062 Restaurant Co. Sr. Unsec. Notes 10.00% due 10/01/13............... 350,000 334,250 Sbarro, Inc. Sr. Notes 11.00% due 09/15/09............... 600,000 610,500 ---------- 1,678,812 ---------- Retail -- 0.5% Rent-Way, Inc. Sr. Notes 11.88% due 06/15/10............... 1,500,000 1,567,500 ---------- Retail Stores -- 1.5% Acco Brands Corp. Guaranteed Sub. Notes 7.63% due 08/15/15................ 425,000 403,750 Collins & Aikman Floor Cover Guaranteed Notes 9.75% due 02/15/10................ 905,000 855,225 Jostens Holding Corp. Sr. Disc. Notes 10.25% due 12/01/13(2)............ 800,000 612,000 Neiman Marcus Group, Inc. Sr. Sub. Notes 10.38% due 10/15/15*.............. 1,000,000 1,062,500 Prestige Brands, Inc. Sr. Sub. Notes, Series B 9.25% due 04/15/12*............... 475,000 479,750 Rite Aid Corp. Guaranteed Notes 8.13% due 05/01/10................ 750,000 765,937 Saks, Inc. Guaranteed Notes 9.88% due 10/01/11................ 725,000 801,125 ---------- 4,980,287 ----------
61 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- BONDS & NOTES (continued) Telecommunications -- 4.6% American Cellular Corp. Sr. Notes, Series B 10.00% due 08/01/11................. $3,200,000 $ 3,472,000 Centennial Communications Corp. Sr. Notes 10.00% due 01/01/13................. 209,000 217,099 Centennial Communications Corp. Guaranteed Sr. Notes 10.13% due 06/15/13................. 725,000 792,062 Centennial Communications Corp. Sr. Notes 10.25% due 01/01/13(5).............. 550,000 569,250 Cincinnati Bell, Inc. Notes 7.25% due 06/15/23.................. 225,000 216,000 LCI International, Inc. Sr. Notes 7.25% due 06/15/07.................. 8,375,000 8,458,750 Suncom Wireless, Inc. Guaranteed Sr. Notes 8.50% due 06/01/13.................. 650,000 617,500 US West Communications, Inc. Debentures 7.50% due 06/15/23.................. 170,000 172,763 Valor Telecommunications Enterprises Sr. Notes 7.75% due 02/15/15.................. 900,000 942,750 ----------- 15,458,174 ----------- Utilities -- 7.5% AES Corp. Sr. Secured Notes 8.75% due 05/15/13*................. 2,400,000 2,592,000 Atlas Pipeline Partners LP Sr. Notes 8.13% due 12/15/15*................. 650,000 677,625 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 1,471,625 El Paso Natural Gas Co. Sr. Notes 7.63% due 08/01/10.................. 725,000 755,812 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22.................. 1,725,000 1,962,719 El Paso Production Holding Co. Guaranteed Notes 7.75% due 06/01/13.................. 3,125,000 3,238,281 Ferrellgas LP Sr. Notes 6.75% due 05/01/14.................. 1,550,000 1,491,875 NRG Energy, Inc. Sr. Notes 7.25% due 02/01/14.................. 675,000 685,969
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------------- Utilities (continued) NRG Energy, Inc. Sr. Notes 7.38% due 02/01/16.......................... $2,725,000 $ 2,782,906 Pacific Energy Partners LP Sr. Notes 6.25% due 09/15/15.......................... 624,000 608,400 Pacific Energy Partners LP Sr. Notes 7.13% due 06/15/14.......................... 1,151,000 1,171,143 Reliant Energy, Inc. Notes 9.50% due 07/15/13.......................... 500,000 500,625 Southern Energy, Inc. 7.90% due 07/15/09+(1)(8)................... 3,525,000 0 Tennessee Gas Pipeline Co. Debentures 7.00% due 10/15/28.......................... 1,300,000 1,285,163 Tiverton/Rumford Power Assoc., Ltd. Guaranteed Notes 9.00% due 07/15/18*(3)(4)................... 1,067,877 923,714 Transcontinental Gas Pipe Line Corp. Sr. Notes 8.88% due 07/15/12.......................... 725,000 826,500 VeraSun Energy Corp. Sr. Notes 9.88% due 12/15/12*......................... 1,325,000 1,404,500 Williams Cos, Inc. Notes 7.88% due 09/01/21.......................... 2,275,000 2,445,625 ------------ 25,199,482 ------------ Total Bonds & Notes (cost $266,697,611)......................... 265,597,631 ------------ CONVERTIBLE BONDS -- 0.4% Telecommunications -- 0.4% ICO North America, Inc. Sr. Notes 7.50% due 08/15/09(1)(8)(9) (cost $1,075,000)........................... 1,075,000 1,365,250 ------------ FOREIGN BONDS & NOTES -- 7.2% Broadcasting & Media -- 1.0% Corp. Interamericana De Entretenimiento S.A. Sr. Notes 8.88% due 06/14/15*......................... 1,195,000 1,183,050 Telenet Group Holding NV Sr. Notes 11.50% due 06/15/14*(2)..................... 2,764,000 2,311,395 ------------ 3,494,445 ------------ Chemicals -- 0.8% Rhodia SA Sr. Sub. Notes 8.88% due 06/01/11.......................... 2,548,000 2,624,440 ------------ Electronics -- 0.1% STATS ChipPAC, Ltd. Sr. Notes 6.75% due 11/15/11.......................... 325,000 318,500 ------------
62 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Energy Sources -- 0.5% North America Energy Partners, Inc. Sr. Notes 8.75% due 12/01/11................. $1,010,000 $ 984,750 North America Energy Partners, Inc. Sr. Notes 9.00% due 06/01/10................. 700,000 733,250 ---------- 1,718,000 ---------- Financial Services -- 0.5% Basell AF SCA Sr. Notes 8.38% due 08/15/15*................ 650,000 645,125 Bluewater Finance, Ltd. Guaranteed Notes 10.25% due 02/15/12................ 1,125,000 1,181,250 ---------- 1,826,375 ---------- Forest Products -- 0.8% Abitibi-Consolidated, Inc. Debentures 8.55% due 08/01/10................. 1,975,000 1,984,875 Abitibi-Consolidated, Inc. Debentures 8.85% due 08/01/30................. 650,000 583,375 Tembec Industries, Inc. Sr. Notes 8.63% due 06/30/09................. 250,000 150,625 ---------- 2,718,875 ---------- Household & Personal Products -- 0.1% Vitro Envases Norteamerica SA Sr. Sec. Notes 10.75% due 07/23/11*............... 225,000 236,250 ---------- Insurance -- 0.4% Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15................. 1,750,000 1,540,000 ---------- Leisure & Tourism -- 0.1% Grupo Posadas SA de CV Sr. Notes 8.75% due 10/04/11*................ 200,000 207,500 ---------- Machinery -- 0.1% Magnachip Semiconductor SA Sr. Sub. Notes 8.00% due 12/15/14................. 525,000 490,875 ---------- Medical Products -- 1.0% Elan Corp., PLC Sr. Notes 8.75% due 11/15/11(5).............. 3,375,000 3,324,375 ---------- Metals & Mining -- 0.6% Adaro Finance BV Notes 8.50% due 12/08/10*................ 775,000 796,312 CSN Islands IX Corp. Guaranteed Notes 10.00% due 01/15/15*............... 900,000 1,046,250
Principal Amount/ Value Security Description Shares (Note 2) --------------------------------------------------------------- Metals & Mining (continued) International Utility Structures, Inc. Sr. Sub. Notes 10.75% due 02/01/08+(1)(3)(4)(8)...... $2,150,000 $ 43,000 ----------- 1,885,562 ----------- Retail -- 0.4% Jean Coutu Group PJC, Inc. Sr. Sub. Notes 8.50% due 08/01/14.................... 1,325,000 1,215,688 ----------- Transportation -- 0.5% TFM SA De CV Sr. Notes 9.38% due 05/01/12.................... 475,000 522,500 Ultrapetrol Bahamas, Ltd. 1st Mtg. Notes 9.00% due 11/24/14.................... 1,100,000 1,034,000 ----------- 1,556,500 ----------- Utilities -- 0.3% AES Chivor Notes 9.75% due 12/30/14*................... 875,000 980,000 AES Drax Energy, Ltd. Sec. Notes 11.50% due 08/30/10+(3)(8)............ 4,460,000 4,460 ----------- 984,460 ----------- Total Foreign Bonds & Notes (cost $28,088,831).................... 24,141,845 ----------- LOAN AGREEMENTS -- 1.1% Automotive -- 0.8% AutoCam Corp. 13.05% due 01/23/12................... 1,004,129 984,046 Delphi Corp. 11.45% due 04/03/06................... 1,745,625 1,814,359 ----------- 2,798,405 ----------- Household & Personal Products -- 0.3% Vitro Envases Norteamerica SA 11.20% due 05/24/06(9)................ 966,667 937,667 ----------- Total Loan Agreements (cost $2,755,201)..................... 3,736,072 ----------- COMMON STOCK -- 8.4% Broadcasting & Media -- 0.1% Charter Communications, Inc.+.......... 151,786 165,447 Ono Finance, PLC*+(1)(8)............... 500 0 ----------- 165,447 ----------- Energy Services -- 2.6% Mirant Corp.+.......................... 135,255 3,381,375 Trico Marine Services, Inc.+........... 163,442 5,279,177 ----------- 8,660,552 ----------- Energy Sources -- 0.0% Tri-Union Development Corp.+(1)(8)..... 1,061 11 -----------
63 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Shares/ Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------ COMMON STOCK (continued) Leisure & Tourism -- 0.1% Capital Gaming International, Inc.+(1)(8)..... 77 $ 0 Shreveport Gaming Holdings, Inc.+(1)(8)(9)............................... 14,150 325,775 ------------ 325,775 ------------ Machinery -- 0.8% NES Rentals Holding, Inc.+(8)................. 150,124 2,748,770 ------------ Telecommunications -- 4.8% iPCS, Inc.+(8)................................ 344,285 16,181,395 ------------ Total Common Stock (cost $12,292,828)........................... 28,081,950 ------------ PREFERRED STOCK -- 0.7% Broadcasting & Media -- 0.4% Paxson Communications Corp. 14.25%(6)......... 165 1,439,625 ------------ Retail Stores -- 0.3% GNC Corp. 12.00%(6)(8)........................ 725 670,625 Rent-Way, Inc. 8.00%(1)(8)(9)................. 13 159,298 ------------ 829,923 ------------ Total Preferred Stock (cost $2,256,908)............................ 2,269,548 ------------ WARRANTS+ -- 0.0% Business Services -- 0.0% Maxim Crane Works Holdings, Inc. Expires 01/20/10 (strike price $30.05)(1)(8). 1,587 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (strike price $33.04)(1)(8). 1,619 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (strike price $31.58)(1)(8). 1,182 0 ------------ 0 ------------ Energy Sources -- 0.0% Transmeridian Exploration, Inc. Expires 12/10/15 (strike price $4.31)(1)(9)................................. 44,885 89,770 ------------ Telecommunications -- 0.0% GT Group Telecom, Inc. Expires 02/01/10 (strike price $0.00)*(1)(8)................................ 2,650 27 KMC Telecom Holdings, Inc. Expires 01/31/08 (strike price $0.01)(1)(8).. 3,650 0 Leap Wireless International, Inc. Expires 04/15/10 (strike price $96.80)*(1)(8)............................... 2,250 0 Leap Wireless International, Inc. Expires 04/15/10 (strike price $96.80)*(1)(8)............................... 1,950 0 ------------ 27 ------------ Total Warrants (cost $1,454,439)............................ 89,797 ------------ Total Long-Term Investment Securities -- 96.7% (cost $314,620,818).......................... 325,282,093 ------------ REPURCHASE AGREEMENTS -- 2.0% State Street Bank & Trust Co. Joint Repurchase Agreement(10)..................... $ 779,000 $ 779,000 UBS Securities, LLC Joint Repurchase Agreement Account(10)........................ 6,000,000 6,000,000 ------------ Total Repurchase Agreements (cost $6,779,000)............................ 6,779,000 ------------ TOTAL INVESTMENTS -- (cost $321,399,818)@......................... 98.7% 332,061,093 Other assets less liabilities................... 1.3 4,465,984 ---------- ------------ NET ASSETS -- 100.0% $336,527,077 ========== ============
+ Non-income producing security # Security represents an investment in an affiliated company; see Note 7. * 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, 2006, the aggregate value of these securities was $55,818,470 representing 16.6% 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)Security is a "step-up" bond where the coupon rate increases or steps up at a predetermined rate. Rate shown reflects the increased rate. (3)Bond in default. (4)Company has filed Chapter 11 bankruptcy protection. (5)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, 2006. (6)PIK ("Payment-in-Kind") payment made with additional securities in lieu of cash. (7)Security is subject to litigation, the outcome of which is still to be determined. (8)Illiquid security. (9)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, 2006, the High Yield Bond Fund held the following restricted securities:
Market Value % of Acquisition Principal/ Acquisition Market Per Net Name Date Shares Cost Value Share Assets ---- ----------- ---------- ----------- ---------- ------- ------ Rent-Way, Inc. 8.00% Preferred Stock........ 05/29/2003 10 $ 100,000 $ 122,537 $12,254 0.04% Rent-Way, Inc. 8.00% Preferred Stock........ 05/19/2004 3 30,000 36,761 12,254 0.01% Shreveport Gaming Holdings, Inc.......... 07/29/2005 11,829 272,336 272,339 23 0.08% Shreveport Gaming Holdings, Inc.......... 07/21/2005 2,321 53,448 53,436 23 0.02% ICO North America, Inc.......... 08/11/2005 $1,075,000 1,075,000 1,365,250 127 0.41% Transmeridian Exploration, Inc.......... 12/08/2005 $ 650,000 526,566 650,000 100 0.19% Transmeridian Exploration, Inc.......... 12/08/2005 44,885 123,434 89,770 2 0.03% Vitro Envases Norteamerica SA........... 02/24/2005 $ 316,311 314,493 306,822 97 0.09% Vitro Envases Norteamerica SA........... 03/31/2005 $ 650,356 650,356 630,845 97 0.19% ---------- ---- $3,527,760 0.87% ========== ====
(10)See Note 2 for details of Joint Repurchase Agreement See Notes to Financial Statements 64 SunAmerica Tax Exempt Insured Fund PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited) Industry Allocation* Ohio........................... 19.2% California..................... 13.2% New York....................... 11.1% Massachusetts.................. 10.7% Indiana........................ 5.5% Alabama........................ 4.8% Connecticut.................... 4.7% New Jersey..................... 4.2% Missouri....................... 3.9% New Mexico..................... 3.9% South Dakota................... 3.4% Arizona........................ 3.1% Idaho.......................... 3.1% Michigan....................... 2.5% South Carolina................. 2.0% Florida........................ 1.9% Pennsylvania................... 1.3% Tennessee...................... 0.9% Georgia........................ 0.2% Registered Investment Companies 0.1% ---- 99.7% ====
Credit Quality+# AAA 82.3% AA. 5.5% A.. 12.2% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. + Source: Standard and Poors # Calculated as a percentage of total debt issues, excluding short-term securities. 65 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- MUNICIPAL BONDS -- 85.7% Alabama -- 4.8% Jefferson County, Alabama Sewer, Capital Improvement, Series D, 5.25% due 02/01/26(1)......................... $3,000,000 $ 3,233,520 ----------- Arizona -- 3.1% Phoenix, Arizona Civic Improvement Corp. Wastewater Systems Revenue, Junior Lien, 5.00% due 07/01/28(1)......................... 2,000,000 2,075,040 ----------- California -- 13.2% California State, Variable Purpose, 5.50% due 04/01/28............................ 2,500,000 2,732,825 Fremont California Unified School District Alameda County Election 2002, Series B, 5.00% due 08/01/30(1)......................... 2,000,000 2,084,620 Los Angeles California Department Water And Power Revenue Power Systems, Subseries A2, 4.75% due 07/01/30(1)......................... 2,000,000 2,034,300 Los Angeles California Unified School District Refunding, Series A, 5.00% due 07/01/18(1)......................... 2,000,000 2,138,780 ----------- 8,990,525 ----------- Connecticut -- 4.7% Connecticut State, Refunding, Series D, 5.00% due 08/01/10(1)......................... 3,025,000 3,185,537 ----------- Florida -- 1.9% Florida State Board of Education, Refunding Capital Outlay, Series A, 5.00% due 06/01/11(1)......................... 1,250,000 1,323,775 ----------- Georgia -- 0.2% Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/09(1)......................... 60,000 64,292 Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/13(1)......................... 85,000 95,381 ----------- 159,673 ----------- Indiana -- 5.5% Indiana Transportation Finance Authority Highway Revenue, Series A, 5.25% due 06/01/26(1)......................... 3,500,000 3,741,395 ----------- Massachusetts -- 10.7% Massachusetts State Water Resources Authority, Series A, 5.00% due 08/01/24(1)......................... 3,910,000 4,096,781 University Massachusetts Building Authority Project Revenue, Series 4, 5.25% due 11/01/27(1)......................... 3,000,000 3,204,660 ----------- 7,301,441 ----------- New Jersey -- 4.2% Garden State New Jersey Preservation Trust, Open Space And Farmland Preservation 2005, Series A, 5.80% due 11/01/17(1)......................... 2,500,000 2,833,600 -----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------- New Mexico -- 3.9% New Mexico Finance Authority Transportation, Sr. Lien, Series A, 5.25% due 06/15/21(1)........................... $2,500,000 $ 2,687,425 ----------- New York -- 9.6% Metropolitan Transportation, Series B, 5.00% due 11/15/15(1)........................... 3,000,000 3,224,910 New York, New York, Series D, 5.00% due 11/01/28.............................. 2,000,000 2,057,500 Niagara Falls, New York Public Improvement, General Obligation, 7.50% due 03/01/13(1)........................... 445,000 536,657 Niagara Falls, New York, Public Improvement, General Obligation, 7.50% due 03/01/14(1)........................... 555,000 682,555 ----------- 6,501,622 ----------- Ohio -- 19.2% Cincinnati, Ohio City School District, Classroom Facilities Construction & Improvement, 5.00% due 12/01/24(1)........................... 3,000,000 3,133,590 Cuyahoga County, Ohio Revenue, Cleveland Clinic Health Systems, Series A, 5.75% due 01/01/24.............................. 2,000,000 2,169,560 Franklin County, Ohio Hospital Revenue, OhioHealth Corp., Series C, 5.25% due 05/15/23.............................. 3,000,000 3,167,250 Olentangy Local School District Ohio, School Facilities Construction & Improvement, Series A, 5.25% due 12/01/27(1)........................... 3,250,000 3,474,152 Woodridge, Ohio Local School District, General Obligation, 6.80% due 12/01/14(1)........................... 1,000,000 1,141,560 ----------- 13,086,112 ----------- Pennsylvania -- 1.3% Lehigh County Pennsylvania General Purpose Authority Revenues, Lehigh Valley Hospital, Series A, 3.15% due 07/01/08(1)(2)........................ 890,000 890,000 ----------- South Dakota -- 3.4% South Dakota State Health & Educational Facilities Revenue, McKennan Hospital,.......... 6.25% due 07/01/10(1)........................... 2,120,000 2,312,772 ----------- Total Long-Term Investment Securities -- 85.7% (cost $56,162,315).............................. 58,322,437 -----------
66 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------- SHORT-TERM INVESTMENT SECURITIES -- 14.0% Idaho -- 3.1% Idaho Health Facilities Authority Revenue, St. Lukes Regional Medical Center Project , 3.15% due 04/03/06(1)(2)......................... $2,100,000 $2,100,000 ---------- Michigan -- 2.5% Detroit Michigan Water Supply Systems Revenue, Refunding Second Lien, Series A, 3.15% due 04/06/06(1)(2)......................... 1,700,000 1,700,000 ---------- Missouri -- 3.9% Missouri State Health & Educational Facilities Authority Revenue, Washington University, Series C, 3.17% due 04/03/06(2)............................ 300,000 300,000 Missouri State Health & Educational Facilities Authority, Health Facilities Revenue, Cox Health Systems, 3.17% due 04/03/06(1)(2)......................... 2,400,000 2,400,000 ---------- 2,700,000 ---------- New York -- 1.5% New York City Municipal Water Finance Authority, Water & Sewer Systems Revenue, Subseries F-2, 3.14% due 04/03/06(2)............................ 1,000,000 1,000,000 ---------- South Carolina -- 2.0% Piedmont Municipal Power Agency South Carolina Electric Revenue, Refunding, Subseries B-3, 3.15% due 04/05/06(1)(2)......................... 250,000 250,000 Piedmont Municipal Power Agency South Carolina Electric Revenue, Refunding, Subseries B6, 3.15% due 04/05/06(1)(2)......................... 1,150,000 1,150,000 ---------- 1,400,000 ----------
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- Tennessee -- 0.9% Jackson Tennessee Energy Authority Wastewater Systems Revenue, 3.18% due 04/06/06(1)(2)..................... $600,000 $ 600,000 ----------- Registered Investment Companies -- 0.1% SSGA Tax Free Money Market Fund,.............. 59,427 59,427 ----------- Total Short-Term Investment Securities (cost $9,559,427)............................ 9,559,427 ----------- TOTAL INVESTMENTS -- (cost $65,721,742)@.......................... 99.7% 67,881,864 Other assets less liabilities................... 0.3 183,391 -------- ----------- NET ASSETS -- 100.0% $68,065,255 ======== ===========
- -------- @ See Note 5 for cost of investments on a tax basis. (1)All or part of this security is insured by the Financial Security Assurance ("FSA"), Financial Guaranteed Insurance Corp. ("FGIC"), Municipal Bond Insurance Association ("MBIA"), or American Municipal Bond Assurance Corp. ("AMBAC"). The aggregate value is $56,395,302 or 82.9% of Net Assets. (2)Variable rate security -- the rate reflected is as of March 31, 2006; maturity date reflects next reset date. See Notes to Financial Statements 67 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 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. 68 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (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. Certain Class C shares of particular Funds issued in connection with particular reorganizations or mergers will convert automatically to Class A shares approximately ten years after purchase and at such time will be subject to the lower distribution fee applicable to Class A shares. Effective February 23, 2004, Class II shares were redesignated as Class C shares. Class I and Class Z are offered at net asset value per share. These classes are offered exclusively to participants in certain employee retirement plans and other programs. Effective September 24, 2004, Class I shares of the Strategic Bond Fund are no longer being offered for sale. Effective July 11, 2005, Class X shares of the GNMA Fund are no longer being offered for sale. Effective December 29, 2005, Class Z shares of the High Yield Bond Fund are no longer being offered for sale. Each class of shares bears the same voting, dividend, liquidation and other rights and conditions except as may otherwise be provided in the Trust's registration statement. Class A, Class B and Class C shares each makes distribution and account maintenance and service fee payments under 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, and no distribution or service fee payments applicable to 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 may contain the obligation to indemnify others. The Funds' maximum exposure under these arrangements is unknown. Currently, however, the Funds expect the risk of loss to be remote. Note 2. Significant Accounting Policies The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements: Security Valuations: Stocks are generally valued based upon closing sales prices reported on recognized securities exchanges. Stocks listed on the NASDAQ are valued using the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the last sale price unless the reported trade for the stock is outside the range of the bid/ask price. In such cases, the NOCP will be normalized to the nearer of the bid or ask price. For listed securities having no sales reported and for unlisted securities, such securities will be valued based upon the last reported bid price. As of the close of regular trading on the New York Stock Exchange, securities traded primarily on security exchanges outside the United States are valued at the last sale price on such exchanges on the day of valuation, or if there is no sale on the day of valuation, at the last-reported bid price. If a security's price is available from more than one exchange, a portfolio uses the exchange that is the primary market for the security. However, depending on the foreign market, closing prices may be up to 15 hours old when they are used to price 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 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. The 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. Non-convertible bonds and debentures, other long-term debt securities, and short term debt securities with maturities in excess of 60 days, are valued at bid prices obtained for the day of valuation from a bond pricing service, when such prices are available. If a vendor quote is unavailable the securities may be priced at the mean of two independent quotes obtained from brokers. Securities for which market quotations are not readily available are valued as determined pursuant to procedures adopted in good faith by the Board of Trustees. 69 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) Senior Secured Floating Rate Loans ("Loans") for which an active secondary market exists to a reliable degree, will be valued at the mean of the last available bid and ask prices in the market for such Loans, as provided by a third party pricing service. Short-term securities with 60 days or less to maturity are amortized to maturity based on their cost to 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 market quotations are not readily available or if a development/significant event occurs that may significantly impact the value of the security, then these securities are valued, as determined pursuant to procedures adopted in good faith by the Board of Trustees. Repurchase Agreements: The Funds, along with other affiliated registered investment companies, pursuant to exemptive relief granted by the Securities and Exchange Commission, may transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by U.S. Treasury or federal agency obligations. For repurchase agreements and joint repurchase agreements, the Funds' custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark to market basis to ensure that the value, at the time the agreement is entered into, is equal to at least 102% of the repurchase price, including accrued interest. In the event of default of the obligation to repurchase, a Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At March 31, 2006, the following Funds held an undivided interest in a joint repurchase agreement with State Street Bank & Trust Co.:
Percentage Principal Fund Interest Amount - ---- ---------- ----------- U.S. Government Securities 0.48% $ 487,000 GNMA...................... 56.94 57,767,000 Strategic Bond............ 0.03 34,000 High Yield Bond........... 0.77 779,000
As of that date, the repurchase agreement in that joint account and the collateral therefore were as follows: State Street Bank & Trust Co., dated March 31, 2006, bearing interest at a rate of 4.00% per annum, with a principal amount of $101,454,000, a repurchase price of $101,487,818, and a maturity date of April 3, 2006. The repurchase agreement is collateralized by the following:
Interest Maturity Principal Market Type of Collateral Rate Date Amount Value - ------------------ -------- -------- ----------- ----------- U.S. Treasury Notes 2.25% 04/30/06 $89,725,000 $90,397,938 U.S. Treasury Notes 4.63 05/15/06 12,865,000 13,086,522
In addition, at March 31, 2006, the following Funds held an undivided interest in a joint repurchase agreement with UBS Securities, LLC.
Percentage Principal Fund Interest Amount - ---- ---------- ----------- U.S. Government Securities 3.58% $17,000,000 GNMA...................... 19.37 92,000,000 Strategic Bond............ 2.11 10,000,000 High Yield Bond........... 1.26 6,000,000
70 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) As of that date, the repurchase agreement in that joint account and the collateral therefore were as follows: UBS Securities, LLC, dated March 31, 2006, bearing interest at a rate of 4.53% per annum, with a principal amount of $475,000,000, a repurchase price of $475,179,313, and a maturity date of April 3, 2005. The repurchase agreement is collateralized by the following:
Interest Maturity Principal Type of Collateral Rate Date Amount Market Value - ------------------ -------- -------- ------------ ------------ U.S. Treasury Inflation Index Bonds 2.00% 01/15/28 $ 50,000,000 $ 47,500,000 U.S. Treasury Inflation Index Bonds 3.63 04/15/28 183,239,000 280,126,621 U.S. Treasury Inflation Index Bonds 3.88 04/15/29 100,000,000 156,875,000
Securities Transactions, Investment Income, Expenses, Dividends and Distributions to Shareholders: Security transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are calculated on the identified cost basis. Interest income, is accrued daily except when collection is not expected. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. For financial statement purposes, the Funds amortize all premiums and accrete all discounts on fixed income securities. Funds which earn foreign income and capital gains may be subject to foreign withholding taxes at various rates. Under applicable foreign law, a withholding tax may be imposed on interest, dividends, and capital gains at various rates. Net investment income, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend-eligible shares, as appropriate) of each class of shares at the beginning of the day (after adjusting for the current capital share activity of the respective class). Expenses common to all Funds, not directly related to individual Funds are allocated among the Funds based on relative net assets or other appropriate methods. In all other respects, expenses are charged to each Fund as incurred on a specific identification basis. Interest earned on cash balances held at the custodian are shown as custody credits on the Statement of Operations. Dividends from net investment income are accrued daily and paid monthly. Capital gain distributions, if any, are paid annually. The Funds record dividends and distributions to their shareholders on the ex-dividend date. The Funds reserve the right to declare and pay dividends less frequently than disclosed above, provided that the net realized capital gains and net investment income, if any, are paid at least annually. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts at fiscal year end based on their federal tax-basis treatment; temporary differences do not require reclassification. Net investment income/loss, net realized gain/loss and net assets are not affected by these reclassifications. Each Fund intends to comply with the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all of their net income (taxable and tax exempt) to their shareholders. Therefore, no federal tax provision is required. Each Fund is considered a separate entity for tax purposes. Investment Securities Loaned: During the year ended March 31, 2006, 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, 2006, $25,860 of broker rebates were reclassified to interest expense for the U.S. Government Securities Fund. 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 71 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) 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, 2006 there were no loaned securities outstanding in the U.S. Government Securities Fund or the GNMA Fund. Forward Foreign Currency Contracts: Certain Funds may enter into forward foreign currency contracts ("forward contracts") to attempt to protect securities and related receivables and payables against changes in future foreign exchange rates or to enhance return. A forward contract is an agreement between two parties to buy or sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily using the forward rate and the change in market value is recorded by the 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. 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. At March 31, 2006, none of the Funds had short sales outstanding. Mortgage-Backed Dollar Rolls: Certain Funds may enter into dollar roll transactions using "to be announced" ("TBA") mortgage-backed securities ("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as purchase/sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the date the transaction is entered into. During the year ended March 31, 2006, none of the Funds entered in dollar roll transactions. 72 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) 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. 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
73 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) 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. The expense reimbursements and fee waivers will continue indefinitely, subject to termination by the Directors, including a majority of the Independent Directors.
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 High Yield Bond Class A 1.36 High Yield Bond Class B 2.01 High Yield Bond Class C 2.01
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 Tax Exempt Insured Fund Class C........ 1.95
For the year ended March 31, 2006, SAAMCo has agreed to reimburse expenses as follows:
Fund Amount ---- -------- Core Bond Class A................. $235,936 Core Bond Class B................. 19,562 Core Bond Class C................. 24,756 Core Bond Class I................. 1,853 Core Bond Class Z................. 17,295 U.S. Government Securities Class A 595,573 U.S. Government Securities Class B 104,389 U.S. Government Securities Class C 53,175 GNMA Class A...................... 440,575 GNMA Class B...................... 151,836 GNMA Class C...................... 94,364 Strategic Bond Class A............ -- Strategic Bond Class B............ 179 Strategic Bond Class C............ 528 High Yield Bond Class A........... 188,065 High Yield Bond Class B........... 76,745 High Yield Bond Class C........... 82,836 High Yield Bond Class Z........... 23,168 Tax Exempt Insured Class A........ -- Tax Exempt Insured Class B........ -- Tax Exempt Insured Class C........ 10,386
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 74 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) provisions of Rule 12b-1 under the 1940 Act. Rule 12b-1 under the 1940 Act permits an investment company directly or indirectly to pay expenses associated with the distribution of its shares ("distribution expenses") in accordance with a plan adopted by the investment company's board of trustees and approved by its shareholders. Pursuant to such rule, the Trustees and the shareholders of each class of shares of each Fund have adopted Distribution Plans, hereinafter referred to as the "Class A Plan," the "Class B Plan" and the "Class C Plan." In adopting the Class A Plan, the Class B Plan and the Class C Plan, the Trustees determined that there was a reasonable likelihood that each Plan would benefit the Trust and the shareholders of the respective class. The sales charge and distribution fees of a particular class will not be used to subsidize the sale of shares of any other class. Under the Class A Plan, Class B Plan and Class C Plan, the Distributor receives payments from the Funds at an annual rate of up to 0.10%, 0.75% and 0.75%, respectively, of average daily net assets of such Fund's Class A, Class B and Class C shares to compensate the Distributor and certain securities firms for providing sales and promotional activities for distributing that class of shares. The distribution costs for which the Distributor may be compensated for, include fees paid to broker-dealers that have sold Fund shares, commissions, and other expenses such as those incurred for sales literature, prospectus printing and distribution and compensation to wholesalers. It is possible that in any given year the amount paid to the Distributor under the Class A Plan, Class B Plan or Class C Plan may exceed the Distributor's distribution costs as described above. The Distribution Plans provide that each class of shares of each Fund may also pay the Distributor an account maintenance and service fee at the annual rate of up to 0.25% of the aggregate average daily net assets of such class of shares for payments to broker-dealers for providing continuing account maintenance. Accordingly, for the year ended March 31, 2006, SACS received fees (see the Statement of Operations) based upon the aforementioned rates. In addition, SACS 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, 2006, 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, 2006, 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 Contingent Sales Affiliated Non-affiliated Deferred Sales Deferred Sales Fund Charges Broker-dealers Broker-dealers Charges Charges - ---- -------- -------------- -------------- -------------- -------------- U.S. Government Securities $ 38,080 $ 11,285 $ 21,043 $2,078 $ 84,365 GNMA...................... 146,386 41,234 80,524 4,322 395,770 Strategic Bond............ 864,484 120,066 596,077 511 102,979 High Yield Bond........... 644,473 60,955 474,883 9,066 214,471 Core Bond................. 17,390 6,036 8,357 2,002 12,733 Tax Exempt Insured........ 33,877 14,698 13,341 -- 26,034
Class C -------------- Contingent Deferred Sales Fund Charges - ---- -------------- U.S. Government Securities $ 1,057 GNMA...................... 13,247 Strategic Bond............ 20,178 High Yield Bond........... 36,537 Core Bond................. 433 Tax Exempt Insured........ 153
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 75 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) 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, 2006, 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, 2006 -------- -------------- Core Bond Class A............... $364,207 $29,339 Core Bond Class B............... 10,299 839 Core Bond Class C............... 8,757 627 Core Bond Class I............... 2,991 240 US Government Securities Class A 362,921 28,152 US Government Securities Class B 52,670 3,671 US Government Securities Class C 20,454 1,587 GNMA Fund Class A............... 729,321 57,409 GNMA Fund Class B............... 200,655 14,653 GNMA Fund Class C............... 107,824 7,666 Strategic Bond Class A.......... 225,234 30,193 Strategic Bond Class B.......... 93,578 8,736 Strategic Bond Class C.......... 140,964 17,302 High Yield Bond Fund Class A.... 364,477 39,901 High Yield Bond Fund Class B.... 123,134 9,866 High Yield Bond Fund Class C.... 147,105 13,245 Tax Exempt Insured Class A...... 129,945 10,746 Tax Exempt Insured Class B...... 17,404 1,300 Tax Exempt Insured Class C...... 11,725 861
At March 31, 2006, affiliate funds of the SunAmerica Focused Series, Inc. owned 96%, 11%, 49% and 10% 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, 2006, SAAMCo, an indirect wholly-owned subsidiary of AIG, owned 6% of the outstanding Class C shares of the Tax Exempt Insured Fund. At March 31, 2006, AIGGIC, an indirect wholly owned subsidiary of AIG, owned 100% of the outstanding Class Z shares of the Core Bond Fund. During the year ended March 31, 2006, the Strategic Bond and High Yield Bond Funds received a payment from AIGGIC, the subadvisor for the Funds, of $34,151 and $203,640, respectively. These amounts represent a reimbursement of the amount that the funds paid to certain other creditors of Fibermark, Inc. (certain bonds of which were previously held by the Fund) in connection with the resolution of the bankruptcy of Fibermark, Inc. 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, 2006 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)......... $252,280,493 $ -- $ -- $303,024,439 $271,165,008 $53,298,176 Sales (excluding U.S. government securities).................... 232,605,048 -- -- 173,277,133 249,889,480 63,641,913 Purchases of U.S. government securities..................... 122,844,576 672,797,541 613,353,260 110,038,562 -- -- Sales of U.S. government securities..................... 131,478,699 682,620,859 683,900,638 57,566,112 -- --
76 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) Note 5. Federal Income Taxes The following details the tax basis of distributions as well as the components of distributable earnings. The tax basis components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences primarily arising from wash sales, Fund mergers, treatment of defaulted securities, deferred directors compensation, amortization of premium/discount and derivative transactions.
Distributable Earnings Tax Distributions For the year ended March 31, 2006 For the year ended March 31, 2006 ------------------------------------- ------------------------------------ Long-term Gains/Capital Unrealized Ordinary Loss Appreciation Ordinary Long-term Fund Income CarryForward (Depreciation) Income Capital Gains Tax Exempt - ---- -------- ------------- -------------- ----------- ------------- ---------- Core Bond Fund................. $438,490 $ (1,649,562) $(1,985,827) $ 8,133,286 $ -- $ -- U.S. Government Securities Fund 314,426 (8,532,661) (4,556,713) 7,599,387 -- -- GNMA Fund...................... 407,397 (1,498,599) (6,985,389) 17,568,716 175,792 -- Strategic Bond Fund............ 668,211 (27,636,027) 1,173,974 10,239,110 -- -- High Yield Bond Fund........... 24,077 (90,167,900) 10,778,425 21,693,351 -- -- Tax Exempt Insured Fund........ 50,185* 418,577 2,160,766 -- 716,341 2,165,823
- -------- * Tax exempt distributable earnings
Tax Distributions For the year ended March 31, 2005 ----------------------------------- Ordinary Long-Term Fund Income Capital Gain Tax Exempt - ---- ----------- ------------ ---------- Core Bond................. $ 8,948,407 $2,408,211 $ -- U.S. Government Securities 7,670,802 -- -- GNMA...................... 14,716,823 -- -- Strategic Bond............ 6,802,946 -- -- High Yield Bond........... 25,444,795 -- -- Tax Exempt Insured........ 543,743 516,966 2,496,568
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......................................... $176,494,981 $182,749,329 $575,818,814 $303,110,701 $321,272,490 $65,721,098 ============ ============ ============ ============ ============ =========== Appreciation................................. 1,998,832 405,397 490,962 8,461,986 25,499,243 2,242,714 Depreciation................................. (3,984,659) (4,962,110) (7,476,351) (7,303,204) (14,710,640) (81,948) ------------ ------------ ------------ ------------ ------------ ----------- Unrealized appreciation (depreciation) -- net $ (1,985,827) $ (4,556,713) $ (6,985,389) $ 1,158,782 $ 10,788,603 $ 2,160,766 ============ ============ ============ ============ ============ ===========
As of March 31, 2006, for Federal income tax purposes, the Funds indicated below have capital loss carryforwards, which expire in the year indicated, which are available to offset future capital gains, if any:
Capital Loss Carryforward ------------------------------------------------------------------------------- Fund 2007 2008 2009 2010 2011 2012 2013 2014 - ---- -------- ---------- ---------- ----------- ----------- ---- -------- ---------- Core Bond................. $ -- $ -- $ -- $ -- $ -- $-- $829,951 $ 819,611 U.S. Government Securities 997,836 7,263,249 -- -- -- -- -- 271,576 GNMA...................... -- -- -- -- -- -- -- 1,498,599 Strategic Bond............ 721,003 4,808,434 5,601,470 6,464,175 10,040,945 -- -- -- High Yield Bond........... -- -- 8,923,368 32,249,552 48,994,980 -- -- --
Included in the capital loss carryforward amounts at March 31, 2006 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.......... 2,727,955
77 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) As a result of reorganizations into some of these portfolios during the period ended March 31, 2002, certain capital loss carryforwards may be subject to limitations on use pursuant to applicable U.S. Federal Income Tax Law. Therefore, it is possible not all of these capital losses will be available for use. The Fund's indicated below utilized capital loss carryforwards, which offset net taxable gains realized in the year ended March 31, 2006:
Capital Loss Carryforward Fund Utilized - ---- ------------ Strategic Bond Fund. $ 4,022,796 High Yield Bond Fund 18,815,390
Under the current law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund's fiscal year end may be deferred as occurring the first day of the following year. For the fiscal year ended March 31, 2006, the Funds elected to defer capital losses as follows:
Deferred Deferred Post-October Post-October Fund Capital Loss Currency Loss - ---- ------------ ------------- Core Bond Fund................. $1,907,274 $-- U.S. Government Securities Fund 2,498,303 -- GNMA Fund...................... 1,422,349 -- Strategic Bond Fund............ 34,802 -- High Yield Bond Fund........... 2,172,571 -- Tax Exempt Insured Fund........ -- --
For the period ended March 31, 2006, the reclassifications arising from book/tax differences resulted in increases (decreases) that were primarily due to net paydown adjustments, amortization of premium/discount and treatment of foreign currency to the components of net assets as follows:
Accumulated Accumulated Undistributed Net Undistributed Net Investment Income Realized Gain Fund (Loss) (Loss) Capital Paid-in - ---- ----------------- ----------------- --------------- Core Bond Fund................. $ 248,364 $ (248,364) $-- U.S. Government Securities Fund 446,194 (446,194) -- GNMA Fund...................... 1,986,376 (1,986,376) -- Strategic Bond Fund............ (314,419) 314,419 -- High Yield Bond Fund........... (416,150) 416,150 -- Tax Exempt Insured Fund........ 1,458 (1,458) --
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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 ------------------------ ------------------------ --------------------- --------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- -------- ----------- Shares sold(1)(2)(3)... 1,748,062 $ 17,733,242 4,080,810 $ 41,782,506 92,365 $ 937,854 75,896 $ 777,468 Reinvested shares 696,578 7,070,484 820,201 8,427,158 11,448 115,912 16,776 171,948 Shares redeemed(1)(2).. (3,274,876) (33,123,195) (1,771,439) (18,067,712) (156,895) (1,586,906) (143,212) (1,463,512) ---------- ------------ ---------- ------------ -------- ----------- -------- ----------- Net increase (decrease)...... (830,236) $ (8,319,469) 3,129,572 $ 32,141,952 (53,082) $ (533,140) (50,540) $ (514,096) ========== ============ ========== ============ ======== =========== ======== ===========
78 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 --------------------- --------------------- ------------------ --------------------- Shares Amount Shares Amount Shares Amount Shares Amount -------- ----------- -------- ----------- ------- --------- -------- ----------- Shares sold............ 70,417 $ 713,978 92,653 $ 949,365 32,099 $ 325,572 51,056 $ 524,372 Reinvested shares...... 10,651 108,034 19,166 196,692 5,923 60,179 10,987 112,886 Shares redeemed(3)..... (222,046) (2,250,537) (150,429) (1,541,314) (46,817) (474,822) (217,983) (2,213,708) -------- ----------- -------- ----------- ------- --------- -------- ----------- Net increase (decrease) (140,978) $(1,428,525) (38,610) $ (395,257) (8,795) $ (89,071) (155,940) $(1,576,450) ======== =========== ======== =========== ======= ========= ======== ===========
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. (1)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. (2)Includes automatic conversion of 9,062 shares of Class B shares in the amount of $90,626 to 9,042 shares of Class A shares in the amount of $90,626. (3)Includes automatic conversion of 9,653 shares of Class C shares in the amount of $97,292 to 9,643 shares of Class A shares in the amount of $97,292.
Core Bond Fund -------------------------------------------------- Class Z -------------------------------------------------- For the For the year ended year ended March 31, 2006 March 31, 2005 ------------------------ ------------------------ Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold...... 8 $ 81 -- $ -- Reinvested shares 60,692 617,407 225,039 2,309,447 Shares redeemed.. (1,684,510) (17,100,137) (4,558,155) (46,800,000) ---------- ------------ ---------- ------------ Net increase (decrease)...... (1,623,810) $(16,482,649) (4,333,116) $(44,490,553) ========== ============ ========== ============ 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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 ------------------------ ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(1)(2)(3)... 3,833,993 $ 35,900,779 1,851,870 $ 17,318,940 308,662 $ 2,907,116 270,431 $ 2,539,712 Reinvested shares 525,900 4,936,255 517,015 4,852,956 63,611 597,394 68,488 642,865 Shares redeemed(1)(2).. (6,513,774) (61,084,959) (4,914,341) (46,091,272) (1,150,867) (10,789,192) (1,250,517) (11,737,869) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)...... (2,153,881) $(20,247,925) (2,545,456) $(23,919,376) (778,594) $ (7,284,682) (911,568) $ (8,555,292) ========== ============ ========== ============ ========== ============ ========== ============ U.S. Government Securities Fund -------------------------------------------------- Class C+ -------------------------------------------------- For the For the year ended year ended March 31, 2006 March 31, 2005 ------------------------ ------------------------ Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold...... 290,146 $ 2,736,476 225,967 $ 2,132,586 Reinvested shares 26,443 247,808 27,763 260,245 Shares redeemed(3)..... (474,314) (4,455,172) (762,001) (7,152,432) ---------- ------------ ---------- ------------ Net increase (decrease)...... (157,725) $ (1,470,888) (508,271) $ (4,759,601) ========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. (1)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. (2)Includes automatic conversion of 255,677 shares of Class B shares in the amount of $2,072,021 to 255,775 shares of Class A shares in the amount of $2,072,021. (3)Includes automatic conversion of 11,098 shares of Class C shares in the amount of $103,548 to 11,086 shares of Class A shares in the amount of $103,548. 79 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 ------------------------ ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(1)(3)(5) 3,679,546 $ 41,272,893 6,894,773 $ 77,011,294 404,406 $ 4,553,528 508,758 $ 5,716,800 Reinvested shares............. 1,003,485 11,219,648 796,791 8,909,301 198,444 2,224,433 173,434 1,942,448 Shares redeemed(1)(3)..... (7,280,453) (81,346,189) (7,168,924) (80,162,014) (2,809,670) (31,520,044) (3,556,936) (39,827,017) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)......... (2,597,422) $(28,853,648) 522,640 $ 5,758,581 (2,206,820) $(24,742,083) (2,874,744) $(32,167,769) ========== ============ ========== ============ ========== ============ ========== ============ GNMA Fund ------------------------------------------------------------------------------------------------------ Class C+ Class X -------------------------------------------------- -------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005 ------------------------ ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold......... 602,279 $ 6,796,898 853,099 $ 9,604,217 2,510 $ 28,279 273,192 $ 3,065,920 Reinvested shares............. 104,533 1,173,387 101,604 1,138,268 821 9,297 22,436 251,259 Shares redeemed(5)........ (1,952,806) (21,948,681) (3,789,770) (42,453,144) (93,618) (1,057,899) (946,348) (10,755,314) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)......... (1,245,994) $(13,978,396) (2,835,067) $(31,710,659) (90,287) $ (1,020,323) (650,720) $ (7,438,135) ========== ============ ========== ============ ========== ============ ========== ============ 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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 ------------------------ ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(2)(4)(6) 37,513,168 $132,293,432 6,957,950 $ 24,096,113 5,688,635 $ 20,006,461 3,302,013 $ 11,307,598 Reinvested shares............. 1,059,222 3,741,901 532,965 1,826,684 326,591 1,152,376 359,941 1,230,161 Shares redeemed(2)(4)..... (8,234,142) (29,041,992) (3,331,876) (11,327,054) (3,586,213) (12,634,437) (3,556,677) (12,132,722) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)......... 30,338,248 $106,993,341 4,159,039 $ 14,595,743 2,429,013 $ 8,524,400 105,277 405,037 ========== ============ ========== ============ ========== ============ ========== ============ Strategic Bond Fund ---------------------------------------------------------------------------- Class C+ Class I -------------------------------------------------- ------------------------ For the For the For the year ended year ended year ended March 31, 2006 March 31, 2005 March 31, 2005 ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ Shares sold......... 20,236,121 $ 71,570,743 5,570,700 $ 19,497,879 -- $ -- Reinvested shares............. 417,085 1,477,074 243,819 839,417 29,881 99,113 Shares redeemed(6)........ (3,618,681) (12,799,109) (1,723,947) (5,880,680) (1,122,765) (3,817,402) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)......... 17,034,525 $ 60,248,708 4,090,572 $ 14,456,616 (1,092,884) $ (3,718,289) ========== ============ ========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. (1)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. (2)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. (3)Includes automatic conversion of 312,753 shares of Class B shares in the amount of $3,254,695 to 313,548 shares of Class A shares in the amount of $3,254,695. (4)Includes automatic conversion of 853,201 shares of Class B shares in the amount of $2,990,264 to 853,082 shares of Class A shares in the amount of $2,990,264. (5)Includes automatic conversion of 115 shares of Class C shares in the amount of $1,284 to 115 shares of Class A shares in the amount of $1,284. (6)Includes automatic conversion of 1,485 shares of Class C shares in the amount of $5,269 to 1,489 shares of Class A shares in the amount of $5,269. 80 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 -------------------------- -------------------------- ------------------------- ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Shares sold(1)(3).... 60,157,451 $ 269,492,069 33,645,561 $ 144,289,277 2,657,600 $ 12,034,094 2,940,030 $ 12,724,157 Reinvested shares........ 1,245,496 5,639,708 1,222,912 5,293,782 363,347 1,644,185 485,730 2,096,352 Shares redeemed(1)(3) (37,827,675) (171,886,729) (34,116,411) (147,909,905) (5,617,900) (25,321,387) (6,876,355) (29,724,616) ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Net increase (decrease).... 23,575,272 $ 103,245,048 752,062 $ 1,673,154 (2,596,953) $(11,643,108) (3,450,595) $(14,904,107) =========== ============= =========== ============= =========== ============ ========== ============ High Yield Bond Fund ----------------------------------------------------------------------------------------------------------- Class C+ Class Z ------------------------------------------------------ --------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005 -------------------------- -------------------------- ------------------------- ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Shares sold.... 9,135,786 $ 41,520,484 7,504,054 $ 32,828,182 -- $ (1,745) -- $ -- Reinvested shares........ 456,958 2,077,622 475,915 2,070,792 380,489 1,688,457 1,616,351 6,993,860 Shares redeemed...... (9,102,263) (41,384,506) (5,742,182) (25,067,974) (20,406,473) (90,194,761) -- -- ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Net increase (decrease).... 490,481 $ 2,213,600 2,237,787 $ 9,831,000 (20,025,984) $(88,508,049) 1,616,351 $ 6,993,860 =========== ============= =========== ============= =========== ============ ========== ============
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, 2006 March 31, 2005 March 31, 2006 March 31, 2005 --------------------- ---------------------- --------------------- --------------------- Shares Amount Shares Amount Shares Amount Shares Amount -------- ----------- -------- ------------ -------- ----------- -------- ----------- Shares sold(2)(4)(5). 238,472 $ 3,042,167 224,481 $ 2,913,673 27,050 $ 345,577 31,978 $ 416,668 Reinvested shares........ 120,617 1,542,466 143,521 1,856,004 12,879 164,760 19,131 247,355 Shares redeemed(2)(4) (686,079) (8,829,065) (777,009) (10,040,254) (210,933) (2,709,988) (612,542) (7,956,706) -------- ----------- -------- ------------ -------- ----------- -------- ----------- Net increase (decrease).... (326,990) $(4,244,432) (409,007) $ (5,270,577) (171,004) $(2,199,651) (561,433) $(7,292,683) ======== =========== ======== ============ ======== =========== ======== =========== Tax Exempt Insured Fund --------------------------------------------- Class C+ --------------------------------------------- For the For the year ended year ended March 31, 2006 March 31, 2005 --------------------- ---------------------- Shares Amount Shares Amount -------- ----------- -------- ------------ Shares sold.... 63,887 $ 822,552 104,291 $ 1,344,350 Reinvested shares........ 8,147 104,235 9,966 128,971 Shares redeemed(5)... (159,889) (2,047,423) (110,179) (1,429,778) -------- ----------- -------- ------------ Net increase (decrease).... (87,855) $(1,120,636) 4,078 $ 43,543 ======== =========== ======== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. (1)Includes automatic conversion of 949,983 shares of Class B shares in the amount of $4,158,286 to 951,789 shares of Class A shares in the amount of $4,158,286. (2)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. (3)Includes automatic conversion of 1,641,545 shares of Class B shares in the amount of $6,887,072 to 1,643,704 shares of Class A shares in the amount of $6,887,072. (4)Includes automatic conversion of 58,150 shares of Class B shares in the amount of $713,143 to 58,187 shares of Class A shares in the amount of $713,143. (5)Includes automatic conversion of 40,574 shares of Class C shares in the amount of $514,904 to 40,574 shares of Class A shares in the amount of $514,904. 81 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) Note 7. Transactions with Affiliates: As disclosed in the Investment Portfolios, certain funds own securities issued by American International Group, Inc. ("AIG") or an affiliate thereof. During the year ended March 31, 2006, the following funds recorded realized gains (losses) and income on security transactions of affiliates of AIG as follows:
Market Value Cost of Proceeds of Realized Change in Market Value Fund Security Income at March 31, Purchases Sales Gain/(Loss) Unrealized at March 31, Core Bond. Riviera Holdings Corp. 11.00% due 06/15/10 $13,750 $138,125 $-- $-- $-- $ (5,312) $132,813 Strategic Bond..... Riviera Holdings Corp. 11.00% due 06/15/10 14,850 149,175 -- -- -- (5,738) 143,437 High Yield Bond..... Riviera Holdings Corp. 11.00% due 06/15/10 88,000 884,000 -- -- -- (34,000) 850,000
Note 8. 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, 2006, the following Funds had borrowings:
Weighted Days Interest Average Average Fund Outstanding Charges Debt Utilized Interest - ---- ----------- -------- ------------- -------- Core Bond................. 1 $ 425 $ 3,018,775 5.06% U.S. Government Securities 10 3,295 2,732,275 4.34 High Yield Bond........... 82 147,788 15,602,141 4.03
Note 9. Interfund Lending Agreement Pursuant to exemptive relief granted by the Securities and Exchange Commission, the Portfolios are permitted to participate in an interfund lending program among investment companies advised by 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, 2006 none of the Funds participated in this program. Note 10. 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 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 82 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued) 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, 2006 - ---- -------------------------------- Core Bond................. $23,000 $2,019 $ 952 U.S. Government Securities 96,995 2,253 10,027 GNMA...................... 48,523 5,320 2,525 Strategic Bond............ 24,699 1,535 2,322 High Yield Bond........... 46,446 3,638 3,598 Tax Exempt Insured........ 29,851 812 2,824
Note 11. Other Information On February 9, 2006, American International Group, Inc. ("AIG"), the parent company and an affiliated person of the Adviser, the Distributor and AIGGIC (the "Subadviser"), announced that it had consented to the settlement of an injunctive action instituted by the Securities and Exchange Commission ("SEC"). In its complaint, the SEC alleged that AIG violated Section 17(a) of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Securities Exchange Act of 1934, as amended, and Rules 10b-5, 12b-20, 13a-1 and 13b2-1 promulgated thereunder, in connection with AIG's accounting and public reporting practices. The conduct described in the complaint did not involve any conduct of AIG or its subsidiaries related to their investment advisory or distribution activities with respect to the assets of the Trust. AIG, without admitting or denying the allegations in the complaint except as to jurisdiction, consented to the entry of an injunction against further violations of the statues referred to above. Absent exemptive relief granted by the SEC, the entry of such an injunction would prohibit AIG and its affiliated persons from, among other things, serving as an investment adviser of any registered investment management company or principal underwriter for any registered open-end investment company pursuant to Section 9(a) of the Investment Company Act of 1940, as amended ("1940 Act"). Certain affiliated persons of AIG, including the Adviser, the Distributor and the Subadviser received a temporary order from the SEC pursuant to Section 9(c) of the 1940 Act with respect to the entry of the injunction, granting exemptive relief from the provisions of Section 9(a) of the 1940 Act. The temporary order permits AIG and its affiliated persons, including the Adviser, the Subadviser and the Distributor, to continue to serve as investment adviser, sub-adviser, and principal underwriter of the Funds. The Adviser, the Distributor and the Subadvisor expects that a permanent exemptive order will be granted, although there is no assurance the SEC will issue the order. Additionally, AIG and its subsidiaries reached a resolution of claims and matters under investigation with the United State Department of Justice ("DOJ"), the Attorney General of the State of New York ("NYAG") and the New York State Department of Insurance ("DOI"), regarding accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers compensation premium taxes and other assessments. As a result of the settlements with the SEC, the DOJ, the NYAG and the DOI, AIG will make payments totaling approximately $1.64 billion. In addition, as part of its settlements, AIG has agreed to retain for a period of three years an Independent Consultant who will conduct a review that will include the adequacy of AIG's internal controls over financial reporting and the remediation plan that AIG has implemented as a result of its own internal review. Subject to receipt of permanent relief, the Adviser, the Subadviser and the Distributor believe that the settlements are not likely to have a material adverse effect on their ability to perform investment advisory and underwriting services, respectively, relating to the Funds. Note 12. Subsequent Event On February 21, 2006, the Board of Trustees of the SunAmerica Income Funds approved the liquidation of the SunAmerica Core Bond Fund. Accordingly, the Fund will be liquidated on or about May 31, 2006. In anticipation of the liquidation, as of April 1, 2006, the SunAmerica Core Bond Fund ceased offering new shares (other than purchases of shares pursuant to a dividend reinvestment plan and certain group and/or retirement plans) and the Distributor discontinued the collection of Distribution and/or Service (Rule 12b-1) Fees. 83 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, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. As described in Note 12, the Board of Trustees has approved a plan of liquidation of the SunAmerica Core Bond Fund (the "Portfolio"). This liquidation is expected to take place following the approval by the Funds' shareholders, at which the portfolio will cease to operate. PricewaterhouseCoopers LLP Houston, Texas May 23, 2006 84 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- March 31, 2006 -- (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 Other Directorships Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) Held by Trustee(2) - ---------------------- ---------- -------------- -------------------------------- ------------ ------------------------------- TRUSTEE Jeffrey S. Burum Trustee 2004-present Founder and CEO of National 43 None DOB: February 27, 1963 Housing Development Corp; Founder, Owner and Partner of Colonies Crossroads, Inc. (January 2000 to present); Owner and Managing Member of Diversified Pacific Development Group, LLC (June 1990 to present). Dr. Judith L. Craven Trustee 2001-present Retired. 92 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 Trustee 2001-present Retired. 92 Member of the Board of DOB: December 30, Governors, Boston Stock 1938 Exchange (1985-Present). Samuel M. Eisenstat Chairman 1986-present Attorney, solo practitioner. 53 Director, North European Oil DOB: March 7, 1940 of the Royalty Trust. Board Stephen J. Gutman Trustee 1986-present Associate, Corcoran Group (Real 53 None DOB: May 10, 1943 Estate) (October 2003-present); Partner and Member of Managing Directors, Beau Brummell-Soho, LLC (licensing of menswear specialty retailing and other activities) (June 1988 to present). Peter A. Harbeck(3) Trustee 1995-present President, CEO and Director, 101 None DOB: January 23, 1954 AIG SunAmerica Asset Management Corp. ("SAAMCo") (August 1995 to present); Director, AIG SunAmerica Capital Services, Inc. ("SACS") (August 1993 to present); President and CEO, AIG Advisor Group, Inc. (June 2004 to present)
85 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- March 31, 2006 -- (unaudited)
Number of Position Term of Funds in Name, Held With Office and Fund Complex Address and SunAmerica Length of Principal Occupations Overseen by Other Directorships Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) Held by Trustee(2) - --------------------- ---------- -------------- -------------------------------- ------------ ----------------------------- William J. Shea Trustee 2004-present President and CEO, Conseco, 53 Chairman of the Board, Royal DOB: February 9, 1948 Inc. (2001 to 2004); Chairman of and SunAlliance, U.S.A., Inc. the Board of Centennial (March 2005 to present); Technologies, Inc. (1998 to Director, Boston Private 2001); Vice Chairman, Bank Holdings (October 2004 to Boston Corporation (1993 to present). 1998) OFFICERS Vincent M. Marra President 2004-present Senior Vice President and Chief N/A N/A DOB: May 28, 1950 Operating Officer, SAAMCo (February 2003-present); Chief Administrative Officer, Chief Operating Officer and Chief Financial Officer, Carret & Co., LLC (June 2002 to February 2003); President and Chief Operating Officer, Bowne Digital Solutions (1999 to May 2002) Donna M. Handel Treasurer 2002-present Senior Vice President, SAAMCo N/A N/A DOB: June 25, 1966 (December 2004 to present); Vice President, SAAMCo (1997 to December 2004); Assistant Treasurer (1993 to 2002). Gregory N. Bressler Secretary September Senior Vice President and N/A N/A DOB: November 17, and Chief 2005-present General Counsel, SAAMCo 1966 Legal (June 2005 to Present); Vice Officer President and Director of U.S. Asset Management Compliance, Goldman Sachs Asset Management, L.P. (June 2004 to June 2005); Deputy General Counsel, Credit Suisse Asset Management, LLC. (June 2002- June 2004); Counsel, Credit Suisse Asset Management, LLC (January 2000-June 2002).
- -------- * 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 administrator. The "Fund Complex" includes the SunAmerica Money Market Funds (2 funds), SunAmerica Equity Funds (10 funds), The Trust (6 funds), SunAmerica Focused Series, Inc. (17 portfolios), Anchor Series Trust (9 portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1 fund), SunAmerica Series Trust (32 portfolios), VALIC Company I (33 portfolios), VALIC Company II (15 funds), Seasons Series Trust (24 portfolios), AIG Series Trust (6 funds), SunAmerica Focused Alpha Growth Fund, Inc. (1 fund) and SunAmerica Focused Alpha Large-Cap Fund, Inc. (1 fund). (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 10 of the financial statements. Additional information concerning the Trustees is contained in the Statement of Additional Information and is available without charge by calling (800) 858-8850. 86 SunAmerica Income Funds SHAREHOLDER TAX INFORMATION -- March 31, 2006 -- (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, 2006. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2006. 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 2007. During the year ended March 31, 2006 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 Fund Class A................. $0.44 $0.44 $ -- $ -- -- % Core Bond Fund Class B................. 0.37 0.37 -- -- -- Core Bond Fund Class C................. 0.37 0.37 -- -- -- Core Bond Fund Class I................. 0.45 0.45 -- -- -- Core Bond Fund Class Z................. 0.50 0.50 -- -- -- U.S. Government Securities Fund Class A 0.37 0.37 -- -- -- U.S. Government Securities Fund Class B 0.31 0.31 -- -- -- U.S. Government Securities Fund Class C 0.31 0.31 -- -- -- GNMA Fund Class A...................... 0.48 0.40 0.04 0.04 -- GNMA Fund Class B...................... 0.41 0.33 0.04 0.04 -- GNMA Fund Class C...................... 0.41 0.33 0.04 0.04 -- Strategic Bond Fund Class A............ 0.18 0.18 -- -- 1.19 Strategic Bond Fund Class B............ 0.16 0.16 -- -- 1.19 Strategic Bond Fund Class C............ 0.16 0.16 -- -- 1.19 High Yield Bond Fund Class A........... 0.33 0.33 -- -- 0.80 High Yield Bond Fund Class B........... 0.30 0.30 -- -- 0.80 High Yield Bond Fund Class C........... 0.30 0.30 -- -- 0.80 High Yield Bond Fund Class Z........... 0.27 0.27 -- -- 0.80 Tax-Exempt Insured Fund Class A........ 0.53 0.40* -- 0.13 -- Tax-Exempt Insured Fund Class B........ 0.45 0.32* -- 0.13 -- Tax-Exempt Insured Fund Class C........ 0.45 0.32* -- 0.13 --
- -------- * Tax exempt interest dividends For the year ended March 31, 2006, 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. $129,179 High Yield Bond Fund 188,311
87 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 largest class of that particular Fund. The performance of the other classes will vary based upon the difference in sales charges and fees assessed to shareholders of that class. 88 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) Core Bond Fund For the annual period ended March 31, 2006, the SunAmerica Core Bond Fund Class A returned 2.96% at net asset value (before maximum sales charge). The Fund's benchmark, the Lehman Brothers U.S. Aggregate Bond Index*, returned 2.26% for the same period. During the fiscal year ended March 31, 2006, the credit market posted a solid performance sustained by favorable macroeconomic conditions and strong technical dynamics. Strong new issuance volume supported activity in the fixed income market as a whole. Robust demand from both domestic and foreign investors supported primary and secondary market activity. In addition, synthetic market activity continued to provide support. Leveraged Buy Out and shareholder friendly activity continued to affect investor sentiment. Nevertheless, during the later half of the period the overall effect of this type of activity garnered a more muted reaction from market participants. The market environment provided both challenges and opportunities during the period. Secondary activity in the portfolio included trades which looked to take advantage of volatility in specific credits. In addition, positions were added to take advantage of the steep slope of the credit curve in many names as the U.S. Treasury curve flattened 90 basis points during the fiscal year. Emerging market and high yield bonds were the top performing asset classes within the portfolio. High yield bonds performed well as fundamentals remained solid and volatility muted as evidenced by the performance of the airline industry. Emerging market bonds posted strong performance as the economic backdrop of emerging economies improved and commodity prices increased. Security selection was the main contributor to the Fund's yearly performance followed by the overall yield of the portfolio. Longer dated emerging market bonds and short maturity high yield bonds were among the top contributors to the portfolio's performance. Intermediate high yield bonds and sovereign risk bonds in non-U.S. dollar currencies were among the major detractors to performance for the annual period. In the emerging markets, credits issued by Venezuela, Turkey, Russia and Argentina were among the top contributors. Calpine due 2013 and American Cellular due 2011 were two high yield credits that contributed significantly to the portfolio. - -------- * The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. 89 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Lehman Brothers Core Bond Fund Class A/#/ U.S. Aggregate Bond Index+ ------------------------ ------------------------- 3/96 $ 9,521 $10,000.00 3/97 9,882 10,491.05 3/98 11,102 11,749.85 3/99 11,615 12,511.07 3/00 11,675 12,745.85 3/01 12,707 14,342.34 3/02 13,095 15,108.36 3/03 14,349 16,873.91 3/04 14,966 17,785.96 3/05 15,256 17,990.15 3/06 15,707 18,396.22
Class A Class B Class C Class I Class Z ------------------ ------------------ ------------------ ------------------ ------------------ 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 -1.98% 2.96% -1.75% 2.19% 1.31% 2.29% 2.96% 2.96% 3.44% 3.44% - --------------------------------------------------------------------------------------------------------------- 5 Year Return 3.32% 23.61% 3.26% 19.41% 3.65% 19.65% 4.38% 23.92% 4.91% 27.07% - --------------------------------------------------------------------------------------------------------------- 10 Year Return 4.62% 64.97% 4.62% 57.07% 4.48% 55.04% N/A N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Since Inception* 5.69% 139.60% 5.02% 80.07% 4.82% 75.83% 5.30% 34.38% 5.78% 37.90% - ---------------------------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 05/1/91; Class B: 04/1/94; Class C: 04/1/94; Class I: 07/10/00; Class Z: 07/10/00 # 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, 2006, the SunAmerica Core Bond Fund Class A returned (1.98%), compared to 2.26% for the Lehman Brothers U.S. Aggregate Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. 90 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) U.S. Government Securities Fund For the annual period ended March 31, 2006, the SunAmerica U.S. Government Securities Fund Class A returned 1.68% at net asset value (before maximum sales charge). The Fund's benchmark, the Lehman Brothers Government Index**, returned 2.14% over the same period. The period began with rates dropping sharply for Treasury securities. Rates then rose steadily with some pullbacks intermittently to end the year higher. In general, for most of the year, the Fund was managed with a bullish bias, expecting an end of the Federal rate hike cycle that was earlier than the market anticipated. This portfolio stance was based on early signs of weakness in the housing sector and a subdued core personal consumption expenditure deflator. However, as it turned out, the policy makers seemed to err on the side of being pre-emptive against inflation by focusing on the tightening labor condition, rising capacity utilization rates and the fear that higher oil price could eventually be inflationary. As a result, the Fund underperformed as rates rose higher over the second half of the year and the Federal Reserve took Federal Funds rate from 2.75% in March 2005 to 4.75% a year later. The Fund maintained its strategy of holding minimal exposure to Freddie Mac and Fannie Mae securities. This benefited the Fund as spreads continued to move in favor of Treasury and GNMA securities. [CHART] U.S. Government Lehman Brothers U.S. Securities Fund Class A#@ Government Bond Index** ------------------------- ----------------------- 3/96 $9,529 $10,000.00 3/97 9,908 10,429.21 3/98 10,861 11,696.57 3/99 11,394 12,477.48 3/00 11,495 12,789.57 3/01 12,999 14,366.76 3/02 13,446 14,933.03 3/03 15,346 16,934.83 3/04 15,851 17,653.65 3/05 15,948 17,672.85 3/06 16,215 18,050.97
Class A Class B Class C U.S. ------------------ ------------------ ------------------ Government Average Average Average Securities Annual Cumulative Annual Cumulative Annual Cumulative Fund Return Return+ Return Return+ Return Return+ - ---------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return -3.18% 1.68% -2.89% 1.02% 0.04% 1.02% - ------------------------------------------------------------------------- 5 Year Return 3.52% 24.74% 3.49% 20.69% 3.80% 20.53% - ------------------------------------------------------------------------- 10 Year Return 4.95% 70.16% 4.91% 61.44% N/A N/A - ------------------------------------------------------------------------- Since Inception* 4.97% 92.46% 5.94% 218.55% 4.70% 36.89% - -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 10/1/93; Class B: 03/3/86; Class C: 06/1/99. # For the purpose of the graph, it has been assumed that the maximum sales charge of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. @ Beginning with the fiscal year ended March 31, 2006, the average annual total return displayed in the Line Graph is for Class A shares. Returns of Class A shares have replaced the returns of Class B shares in the Line Graph because Class A currently has the largest amount of assets of any Class of the Fund. For the 12-month period ending March 31, 2006, the SunAmerica U.S. Government Securities Fund Class A returned (3.18)%, compared to 2.14% 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. ** The Lehman Brothers U.S. Government Index is a broad index composed solely of U.S. Treasury Securities maturing from 1-30 years. 91 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) GNMA Fund For the annual period ended March 31,2006, the SunAmerica GNMA Fund Class A returned 2.18% at net asset value (before maximum sales charge). The Fund's benchmark, the Citigroup Mortgage GNMA Index**, returned 3.11% over the same period. The period began with rates dropping sharply for both mortgage-backed securities and Treasury securities, rates then rose steadily with some pullbacks intermittently to end the period higher. In general, for most part of the year, the Fund was managed with a bullish bias expecting an earlier than consensus ending of the Federal rate hike cycle. This portfolio stance was based on early signs of weakness in the housing sector and a subdued core personal consumption expenditure deflator. However, as it turned out, the policy makers seemed to err on the side of being pre-emptive against inflation by focusing on the tightening labor market, rising capacity utilization rates and the fear that higher oil price could eventually be inflationary. As a result, the Fund underperformed as rates rose higher over the second half of the year and the Federal Reserve took the Federal Funds rate from 2.75% in March 2005 to 4.75% a year later. The Fund maintained its strategy of holding minimal exposure to Freddie Mac and Fannie Mae securities. This benefited the Fund as spreads continued to move in favor of GNMA securities. [CHART] GNMA Fund Salomon Brothers Class A#@ GNMA Index** ---------- ---------------- 3/96 $9,525 $10,000 3/97 10,039 10,597 3/98 11,262 11,749 3/99 11,973 12,487 3/00 12,259 12,856 3/01 13,867 14,390 3/02 14,511 15,336 3/03 16,293 16,628 3/04 16,792 17,257 3/05 17,028 17,768 3/06 17,400 18,321
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average GNMA Annual Cumulative Annual Cumulative Annual Cumulative Fund Return Return+ Return Return+ Return Return+ - ---------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return -2.68% 2.18% -2.49% 1.43% 0.54% 1.53% - ------------------------------------------------------------------------- 5 Year Return 3.64% 25.47% 3.60% 21.32% 3.96% 21.42% - ------------------------------------------------------------------------- 10 Year Return 5.69% 82.67% 5.52% 71.10% N/A N/A - ------------------------------------------------------------------------- Since Inception* 5.66% 108.72% 7.44% 418.31% 5.06% 40.13% - -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 10/11/93; Class B: 04/25/83; Class C: 06/1/99. # For the purpose of the graph, it has been assumed that the maximum sales charge of 4.75% of offering, was deducted from the initial $10,000 investment in the Fund. @ Beginning with the fiscal year ended March 31, 2006, the average annual total return displayed in the Line Graph is for Class A shares. Returns of Class A shares have replaced the returns of Class B shares in the Line Graph because Class A currently has the largest amount of assets of any Class of the Fund. For the 12-month period ending March 31, 2006, the SunAmerica GNMA Fund Class A returned (2.68)%, compared to 3.11% for the Citigroup Mortgage GNMA Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. **The Citigroup Mortgage GNMA Index is comprised of 15 and 30-year fixed-rate pass-through mortgage-backed securities. 92 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) Strategic Bond Fund For the annual period ended March 31, 2006, the SunAmerica Strategic Bond Fund Class A returned 6.54% at net asset value (before maximum sales charge). The Fund's benchmark, the Lehman Brothers U.S. Aggregate Bond Index*, returned 2.26% over the same period. During the fiscal year ended March 31, 2006, the credit market posted a solid performance sustained by favorable macroeconomic conditions and strong technical dynamics. Strong new issuance volume supported activity in the fixed income market as a whole. Robust demand from both domestic and foreign investors supported primary and secondary market activity. In addition, synthetic market activity continued to provide support. Leveraged buyout and shareholder friendly activity continued to impact investor sentiment. Nevertheless, during the later half of the period the overall effect of this type of activity garnered a more muted reaction from market participants. The market environment provided both challenges and opportunities during the period. Secondary activity in the portfolio included trades which looked to take advantage of volatility in specific credits. In addition, positions were added to take advantage of the steep slope of the credit curve for many names relative to the U.S. Treasury curve which flattened 90 basis points during the fiscal year. Emerging market and high yield bonds were the top-performing asset classes. High yield bonds performed well as fundamentals remained solid and volatility muted as evidenced by the performance of the airline industry. Emerging market bonds posted strong performance as the economic backdrop of emerging economies improved and commodity prices increased. Security selection was the main contributor to yearly performance followed by the overall yield of the portfolio. Long-dated sovereign bonds of Venezuela and Brazil were among the top contributors to the performance. The main detractor were investments in non-U.S. Dollar currencies and intermediate high yield bonds. Specifically, short-dated Swedish sovereign bonds and intermediate term holdings in Charter Communication and Precession Cable Assemblies, were among the poorest contributors to portfolio performance. - -------- * The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. 93 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Strategic Bond Lehman Brothers U.S. Fund Class A# Aggregate Bond Index+ -------------- -------------------- 3/96 $9,524 $10,000 3/97 10,703 10,491 3/98 12,061 11,750 3/99 11,926 12,511 3/00 12,184 12,746 3/01 12,814 14,342 3/02 13,382 15,108 3/03 14,596 16,874 3/04 17,229 17,786 3/05 18,788 17,990 3/06 20,074 18,396
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average Strategic Annual Cumulative Annual Cumulative Annual Cumulative Bond Fund Return Return+ Return Return+ Return Return+ - ------------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 1.59% 6.54% 2.14% 6.14% 4.84% 5.84% - ---------------------------------------------------------------------------------------- 5 Year Return 8.34% 56.65% 8.34% 51.24% 8.72% 51.88% - ---------------------------------------------------------------------------------------- 10 Year Return 7.22% 110.77% 7.17% 99.89% 7.07% 98.10% - ---------------------------------------------------------------------------------------- Since Inception* 6.97% 142.44% 7.59% 140.62% 7.40% 135.46% - ----------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 11/1/93; Class B: 04/1/94; Class C: 04/1/94. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2006, the SunAmerica Strategic Bond Fund Class A returned 1.59%, compared to 2.26% for the Lehman Brothers U.S. Aggregate Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. 94 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) High Yield Bond Fund For the annual period ended March 31, 2006, the SunAmerica High Yield Bond Fund Class A returned 11.61% at net asset value (before maximum sales charge). The Fund's benchmark, the Citigroup High Yield Market Index*, returned 6.53% for the same period. We have seen continued spread tightening in the high yield market over the past year as measured by the Citigroup High Yield Market Index. During the annual period, spread on the overall index tightened from 368 basis points (bp) over treasuries to 314 bp. Spreads by credit rating at March 31, 2005 to March 31, 2006 were as follows: BBs from 256 bp to 258 bp, single B from 347 bp to 296 bp, and CCC from 777 bp to 672 bp. A big driver of this compression was the decline in default rates as measured by Moody's from 2.30% to 1.70% for the trailing 12-month periods ending March 31, 2005 and March 31, 2006, respectively. The stronger tightening of spreads in lower rated securities positively affected fund performance due to the portfolio's overweight in these securities. Sector selection was a minor contributor to outperformance versus the benchmark during the year. Among the sectors which contributed positively were wireless, due to an overweight versus the benchmark, airlines, also due to an overweight, and automotive, due to an underweight position. Finally, our cash position detracted from performance given the strong return on the benchmark versus returns available on cash. Security selection was the main performance driver. Positive contributors included our stock holdings in IWO Holdings and IPCS in the wireless sector, Southern Energy/Mirant in the utility sector and our stock holding in Trico Marine, a provider of marine support services to the oil and gas industry. Additionally, our holdings in GMAC in the automotive sector and Elan in the pharmaceutical sector contributed positively to performance. On the negative side, our positions in Charter Communications in the cable sector, and Pliant in the container sector detracted from returns. - -------- * The Citigroup High Yield Market Index is a broad-based unmanaged index composed of high yield securities. 95 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 10,828.18 3/03 9,454 11,360.56 3/04 11,917 13,904.34 3/05 13,497 14,906.18 3/06 15,064 15,879.32
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average High Yield Annual Cumulative Annual Cumulative Annual Cumulative Bond Fund Return Return+ Return Return+ Return Return+ - ---------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 6.33% 11.61% 6.88% 10.88% 9.86% 10.86% - ------------------------------------------------------------------------- 5 Year Return 7.77% 52.52% 7.84% 47.85% 8.11% 47.71% - ------------------------------------------------------------------------- 10 Year Return N/A N/A N/A N/A N/A N/A - ------------------------------------------------------------------------- Since Inception* 5.69% 58.18% 5.67% 50.44% 6.77% 44.37% - -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 11/2/98; Class B: 11/2/98; Class C: 08/21/00. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2006, the SunAmerica High Yield Bond Fund Class A returned 6.33%, compared to 6.53% for the Citigroup High Yield Market Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Citigroup High Yield Market Index is a broad-based unmanaged index composed of high yield securities. 96 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) Tax Exempt Insured Fund For the annual period ended March 31, 2006, the SunAmerica Tax Exempt Bond Fund Class A returned 2.43% at net asset value (before maximum sales charge). The Fund's benchmark, the Lehman Brothers Municipal Bond Index*, returned 3.81% over the same period. During the last three quarters of 2005, the Treasury market experienced a flattening yield curve. Short-term yields rose more than longer yields as the Federal Reserve increased the benchmark Federal Funds rate, and longer-term rates remaining range bound as the 10-year Treasury Note yielded between 4.00% and 4.40%. As mentioned, the Federal Reserve continued their inflation fighting campaign, raising the Federal Funds rate by a total of 1.25% to 4.25% at the end of 2005. Since mid-January, fixed income yields have risen substantially in response to solid first quarter growth, higher oil prices and renewed inflation concerns. However, housing demand weakened and supply increased as mortgage rates rose. The Federal Reserve continued to increase its Federal Funds rate by an additional 50 basis points to 4.75% during the quarter, a total of 3.75% since they began raising rates in June 2004. After record municipal new issuance in 2005, the first quarter's new issuance had a sharp decline from the same period last year. The decline in new issuance was led by a 55% reduction in refunding issuance. However, municipals have outperformed taxable product over the past 12 months as strong demand from Property & Casualty Insurance companies, hedge funds, mutual funds, and individual investors met record supply in 2005. More recently, municipals have outperformed taxable product based on lighter new issuance and a rising interest rate environment. The Fund was helped during the period by bonds maturing 20 years and beyond as the municipal yield curve continued its flattening bias. In addition, the Fund was helped by executing a few relative value swaps whereby bonds were sold, and replaced with either higher yielding bonds of like quality, or better structured bonds. In particular, Los Angeles, CA Department of Water and Power 4.75% due 7/01/2030 outperformed as its spread tightened to the municipal yield curve. Two of the Fund's best performing bonds have been State of California General Obligation 5.50% due 4/1/28 and New York City, NY General Obligation 5.00% due 11/1/28. Both issuers have benefited from positive credit trends, and their bond prices have risen as spreads have tightened to the municipal generic yield curve. Some bonds that negatively affected the Fund include Jefferson Co., AL Sewer 5.25% pre-refunded due 8/1/12, Sikeston, MO 6.20% due 6/1/10 and South Dakota Health and Education 6.25% due 7/1/10. The maturity ranges of these securities underperformed and the high coupons also underperformed in a flattening rate environment in which short rates rose more than longer-term rates. - -------- * The Lehman Brothers Municipal Bond Index is a broad market performance benchmark for the tax-exempt bond market. It is currently derived from approximately 40,000 issues. 97 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Tax Exempt Lehman Brothers Insured Fund Class A/#/ Municipal Bond Index+ ----------------------- -------------------- 3/96 $ 9,525 $10,000.00 3/97 9,928 10,544.86 3/98 10,949 11,674.61 3/99 11,447 12,398.57 3/00 11,309 12,388.68 3/01 12,450 13,741.64 3/02 12,684 14,265.65 3/03 13,835 15,675.88 3/04 14,518 16,595.09 3/05 14,772 17,037.64 3/06 15,131 17,686.07
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average Annual Cumulative Annual Cumulative Annual Cumulative Tax Exempt Insured Fund Return Return+ Return Return+ Return Return+ - ----------------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return -2.45% 2.43% -2.17% 1.77% 0.83% 1.81% - -------------------------------------------------------------------------------- 5 Year Return 2.97% 21.53% 2.91% 17.38% 3.28% 17.54% - -------------------------------------------------------------------------------- 10 Year Return 4.23% 58.86% 4.16% 50.33% N/A N/A - -------------------------------------------------------------------------------- Since Inception* 5.54% 214.77% 4.07% 64.65% 3.62% 27.49% - --------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, return would be lower. * Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 06/1/99. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2006, SunAmerica Tax Exempt Insured Fund Class A returned (2.45)%, compared to 3.81% for the Lehman Brothers Municipal Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) - -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Lehman Brothers Municipal Bond Index is a broad market performance benchmark for the tax-exempt bond market. It is currently derived from approximately 40,000 issues. 98 [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. Once filed, Vincent M. Marra, AIG SunAmerica Capital the Trust's Form N-Q will President Services, Inc. be available without Donna M. Handel, Harborside Financial charge on the Treasurer Center U.S. Securities and Michael Cheah, Vice 3200 Plaza 5 Exchange Commission President Jersey City, NJ website at www.sec.gov. Timothy P. Pettee, Vice 07311-4992 You can also obtain President cop-ies of Form N-Q by Cynthia Gibbons, Vice Shareholder Servicing (i) visiting the U.S. President and Chief Agent Securities and Exchange Compliance Officer AIG SunAmerica Fund Commis-sion Public J. Steven Neamtz, Vice Services, Inc. Reference Room in President Harborside Financial Wash-ington DC Gregory N. Bressler, Center (information on the Chief Legal Officer 3200 Plaza 5 operation of the Public and Secretary Jersey City, NJ Reference Room may be Nori L. Gabert, Vice 07311-4992 obtained by calling President and 1-800-SEC-0330); (ii) Assistant Secretary Custodian and Transfer sending your re-quest and Corey A. Issing, Agent a duplicating fee to the Assistant Secretary State Street Bank and U.S. Securities and Gregory R. Kingston, Trust Company Exchange Commission Vice President and P.O. Box 419572 Public Reference Room, Assistant Treasurer Kansas City, MO Washington, DC 20549-0102 64141-6572 or (iii) sending your request electronically to VOTING PROXIES ON TRUST www.publicinfo.sec.gov. PORTFOLIO SECURITIES A description of the PROXY VOTING RECORD ON policies and proce-dures SUNAMERICA INCOME FUNDS that the Trust uses to Information regarding how determine how to vote the SunAmerica Income proxies relating to Funds voted proxies secu-rities held in the related to securities Fund's portfolio which is held in the SunAmerica available in the Trust's Income Funds' during the State-ment of Additional twelve month period ended Information, may be June 30, 2005 is obtained without charge available without charge, upon re-quest, by calling upon request, by calling (800) 858-8850. The (800) 858-8850 or on the information is also U.S. Securities and available from the EDGAR Exchange Commission database on the U.S. website at Secu-rities and Exchange http://www.sec.gov. Commission's website at 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.
99 [LOGO] Distributed by: AIG SunAmerica Capital Services, Inc. Harborside Financial Center 3200 Plaza 5 Jersey City, NJ 07311-4992 Investors should carefully consider the investment objectives, risks, charges and expenses of any mutual fund before investing. This and other important information is contained in the prospectus, which can be obtained from your financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext. 6003. Read the prospectus carefully before you invest. Funds distributed by AIG SunAmerica Capital Services, Inc. www.sunamericafunds.com INANN-3/06 Item 2. Code of Ethics The SunAmerica Income Funds ("the registrant") has adopted a Code of Ethics applicable to its Principal Executive and Principal Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. Item 3. Audit Committee Financial Expert. The registrant's Board of Trustees has determined that William J. Shea, the Chairman of the Registrant's Audit Committee, qualifies as an audit committee financial expert, as defined in the instructions to Item 3(a) of Form N-CSR. Mr. Shea is considered to be "independent" for purposes of Item 3(a)(2) of Form N-CSR. Item 4. Principal Accountant Fees and Services. (a)--(d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant's principal accountant were as follows: 2005 2006 -------- -------- Audit Fees................................. $151,621 $151,472 Audit-Related Fees......................... $ 48,006 $ 49,316 Tax Fees................................... $ 57,188 $ 56,470 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 2006 and 2005 were $607,911 and $1,574,866, 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. Included in Item 1 to the Form. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. 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. Item 12. Exhibits. (a) (1) Code of Ethics applicable to its Principal Executive and Principle Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406. Code of Ethics. (2) 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, 2006 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, 2006 By: /s/ Donna M. Handel ------------------------- Donna M. Handel Treasurer Date: June 9, 2006 EX-99.CODE ETH 2 dex99codeeth.txt CODE OF ETHICS EXH 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. SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC. SUNAMERICA FOCUSED ALPHA LARGE-CAP 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. 4 VII. Confidentiality 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 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 control 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 19, 2006 /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 control 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 19, 2006 /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 19, 2006 /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-----