-----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, Q8eql74Uu/vQgA/zHdtKRS06WZ+oHSt0P4BbFBUMyk/TCVQ9e1KqVBegZPF1SCje d6Unpgimgc3xdBzYRAJiuA== 0001193125-06-249406.txt : 20061208 0001193125-06-249406.hdr.sgml : 20061208 20061208133340 ACCESSION NUMBER: 0001193125-06-249406 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061208 DATE AS OF CHANGE: 20061208 EFFECTIVENESS DATE: 20061208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNAMERICA INCOME FUNDS CENTRAL INDEX KEY: 0000795307 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04708 FILM NUMBER: 061265080 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 N-CSRS 1 dncsrs.txt SUNAMERICA INCOME FUNDS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4708 --------------------------------------------- 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 AIG SunAmerica Asset Management Corp. Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (201) 324-6464 ----------------------------- Date of fiscal year end: March 31 -------------------------- Date of reporting period: September 30, 2006 ------------------------- Item 1. Reports to Stockholders SunAmerica 2006 - --------------- [PHOTO] Semi-annual Report [GRAPHIC] Income Funds [LOGO] AIG SunAmerica Mutual Funds September 30, 2006 SEMIANNUAL REPORT SUNAMERICA INCOME FUNDS SunAmerica U.S. Government Securities Fund (SGTAX) SunAmerica GNMA Fund (GNMAX) SunAmerica Strategic Bond Fund (SDIAX) SunAmerica High Yield Bond Fund (SHNAX) SunAmerica Tax Exempt Insured Fund (STEAX) Table of Contents SHAREHOLDER LETTER................................ 2 EXPENSE EXAMPLE................................... 3 STATEMENT OF ASSETS AND LIABILITIES............... 5 STATEMENT OF OPERATIONS........................... 7 STATEMENT OF CHANGES IN NET ASSETS................ 9 FINANCIAL HIGHLIGHTS.............................. 12 PORTFOLIO OF INVESTMENTS.......................... 17 NOTES TO FINANCIAL STATEMENTS..................... 61 APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT.... 76 TRUSTEE AND OFFICER INFORMATION................... 80
Shareholder Letter Dear Shareholder, We are pleased to present the semi-annual report for the SunAmerica Income Funds for the period ended September 30, 2006. The six-month period will be best remembered for the Federal Reserve halting its policy of raising interest rates, following 17 consecutive quarter-point increases commencing in June 2004. Currently, the question overhanging the financial markets is whether the Federal Reserve's action is merely a pause toward higher interest rates or truly represents the end of the tightening cycle. The beginning of the semi-annual period was a rocky time for the fixed income markets. The first three months were marked by increased awareness of risk. This re-emergence of risk and the continued headwinds posed by increasing interest rates took its toll on most fixed income markets. The Lipper Emerging Market Debt category declined by 2.69% as aversion to risk increased. As one would expect, short-term maturities and Treasury-Inflation-Protected securities held up the best--delivering small positive returns. The Lipper U.S Government Money Market Fund category lead the way returning 1.02% for the quarter. The fixed income markets rallied upon the cessation of interest rate hikes at the August Federal Reserve meeting. The 10-year Treasury yield went from a high of 5.22% during the quarter to a yield of 4.63% at quarter's end. All major Lipper fixed income categories produced positive returns in the third calendar quarter with longer duration portfolios leading the way. High yield and municipal bonds also posted solid returns. Despite the challenging start to the period, six-month returns for major indices were positive. The Lehman Aggregate Bond Index returned 3.73%; the Lehman U.S. Government Bond Index rose 3.56%; and the Lehman Brothers Municipal Bond Index returned 3.44%. The high yield market continued its run of solid performance with the CSFB High Yield Index delivering a 3.93% return for the period. We are proud that the SunAmerica Income Funds' portfolio managers were able to add value for our investors. Each of the five SunAmerica Income Funds (A shares) were in the top half of their respective Lipper peer group for the six-month period. Of particular note is the SunAmerica High Yield Bond Fund which finished in the top 10% of its Lipper peer group during the period. We continue to recommend that investors construct a diversified portfolio with an asset allocation appropriate to their individual circumstances and risk profile. We urge you to sit down with your financial adviser to review your portfolio. Thank you for including AIG SunAmerica Mutual Funds in your investment plan. We value your ongoing confidence in us and look forward to serving your investment needs in the future. 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
- -------- The Lehman Aggregate Bond Index used by bond funds as a benchmark to measure their relative performance. The index comprises government securities, mortgage-backed securities, asset-backed securities and corporate securities to simulate the universe of bonds in the market. The maturity of the bonds in the index are over one year. Lehman Brothers U.S. Government Bond Index is a benchmark index made up of the Treasury Bond Index and the Agency Bond Index as well as the 1-3 Year Government Index and the 20+ Year Treasury Index. 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 CSFB High Yield Index is designed to mirror the investible universe of the $US-denominated high yield debt market. As of March 30, 2001, the index included $379 billion in tradable securities representing a universe of $704 billion. Indices are not managed and an investor cannot invest directly into an index. 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 investing. Funds distributed by AIG SunAmerica Capital Services, Inc. 2 SunAmerica Income Funds EXPENSE EXAMPLE -- September 30, 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 (loads) on purchase payments, contingent deferred sales charges and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. The example set forth below is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at April 1, 2006 and held until September 30, 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 September 30, 2006" to estimate the expenses you paid on your account during this period. The "Expenses Paid During the Six Months Ended September 30, 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 September 30, 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 September 30, 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. The "Expenses Paid During the Six Months Ended September 30, 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 September 30, 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 September 30, 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 -- September 30, 2006 -- (unaudited) (continued)
Actual Hypothetical ------------------------------------------ ------------------------------------------ Ending Account Ending Account Value Using Value Using Expenses Paid a Hypothetical Expenses Paid Beginning Actual During the Beginning 5% Assumed During the Account Value Return at Period Ended Account Value Return at Period Ended at April 1, September 30, September 30, at April 1, September 30, September 30, 2006 2006 2006* 2006 2006 2006* ------------- -------------- ------------- ------------- -------------- ------------- U.S. Government Securities Fund Class A#..................... $1,000.00 $1,031.67 $ 5.04 $1,000.00 $1,020.10 $ 5.01 Class B#..................... $1,000.00 $1,029.44 $ 8.34 $1,000.00 $1,016.85 $ 8.29 Class C#..................... $1,000.00 $1,028.34 $ 8.34 $1,000.00 $1,016.85 $ 8.29 GNMA Fund Class A#..................... $1,000.00 $1,027.32 $ 5.03 $1,000.00 $1,020.10 $ 5.01 Class B#..................... $1,000.00 $1,024.91 $ 8.32 $1,000.00 $1,016.85 $ 8.29 Class C#..................... $1,000.00 $1,023.97 $ 8.32 $1,000.00 $1,016.85 $ 8.29 Strategic Bond Fund Class A...................... $1,000.00 $1,034.87 $ 6.48 $1,000.00 $1,018.70 $ 6.43 Class B...................... $1,000.00 $1,031.44 $ 9.83 $1,000.00 $1,015.39 $ 9.75 Class C...................... $1,000.00 $1,031.48 $ 9.83 $1,000.00 $1,015.39 $ 9.75 High Yield Bond Fund Class A#..................... $1,000.00 $1,055.97 $ 7.01 $1,000.00 $1,018.25 $ 6.88 Class B#..................... $1,000.00 $1,052.52 $10.34 $1,000.00 $1,014.99 $10.15 Class C#..................... $1,000.00 $1,052.42 $10.34 $1,000.00 $1,014.99 $10.15 Tax Exempt Insured Fund Class A...................... $1,000.00 $1,029.65 $ 6.41 $1,000.00 $1,018.75 $ 6.38 Class B...................... $1,000.00 $1,024.83 $10.71 $1,000.00 $1,014.49 $10.66 Class C#..................... $1,000.00 $1,026.14 $ 9.90 $1,000.00 $1,015.29 $ 9.85
Expense Ratio as of September 30, 2006* ------------- 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...................... 1.27% Class B...................... 1.93% Class C...................... 1.93% High Yield Bond Fund Class A#..................... 1.36% Class B#..................... 2.01% Class C#..................... 2.01% Tax Exempt Insured Fund Class A...................... 1.26% Class B...................... 2.11% Class C#..................... 1.95%
- -------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 183 days divided by 365 days. These ratios do not reflect transaction costs, including sales charges on purchase payments, contingent deferred sales charges, small account fees and administrative fees, if applicable to your account. Please refer to your Prospectus and/or qualified retirement plan document for more information. # During the stated period, the investment adviser either waived a portion of or all fees and assumed a portion of or all expenses for the Funds. As a result, if these fees and expenses had not been waived or assumed, the "Actual/Hypothetical Ending Account Value" would have been lower and the "Actual/Hypothetical Expenses Paid During the Six Months Ended September 30, 2006" and the "Expenses Ratios" would have been higher. 4 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2006 -- (unaudited)
U.S. Government Strategic Securities GNMA Bond Fund Fund Fund --------------- ------------ ------------ ASSETS: Long-term investment securities, at value* (unaffiliated)................. $159,635,445 $409,845,619 $501,332,059 Short-term investment securities, at value* (unaffiliated)................ -- -- 28,214,000 Repurchase agreements (cost equals market)................................ 13,510,000 -- 12,365,000 ------------ ------------ ------------ Total investments....................................................... 173,145,445 409,845,619 541,911,059 ------------ ------------ ------------ Cash...................................................................... 958 -- 21,284,659 Foreign cash*............................................................. -- -- 927,381 Receivable for: Shares of beneficial interest sold...................................... 988,213 1,107,495 5,799,732 Dividends and interest.................................................. 1,176,366 2,284,313 7,636,590 Investments sold........................................................ -- -- 6,520,423 Prepaid expenses and other assets......................................... 1,660 3,969 2,107 Due from investment adviser for expense reimbursements/fee waivers........ 51,289 105,696 -- ------------ ------------ ------------ Total assets.............................................................. 175,363,931 413,347,092 584,081,951 ------------ ------------ ------------ LIABILITIES: Payable for: Shares of beneficial interest redeemed.................................. 166,764 716,966 928,616 Investments purchased................................................... -- -- 15,888,696 Investment advisory and management fees................................. 91,246 153,205 281,973 Distribution and service maintenance fees............................... 62,690 171,460 251,897 Transfer agent fees and expenses........................................ 46,217 120,636 85,168 Trustees' fees and expenses............................................. 96,711 56,433 23,132 Line of credit.......................................................... -- 1,312,708 -- Other accrued expenses.................................................. 63,047 91,266 90,656 Dividends payable......................................................... 110,072 215,581 517,289 Securities sold short, at value#.......................................... -- -- 646,196 ------------ ------------ ------------ Total liabilities......................................................... 636,747 2,838,255 18,713,623 ------------ ------------ ------------ Net Assets................................................................ $174,727,184 $410,508,837 $565,368,328 ============ ============ ============ NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value............................ $ 188,843 $ 370,804 $ 1,587,408 Paid-in capital........................................................... 188,359,871 417,477,982 585,339,113 ------------ ------------ ------------ 188,548,714 417,848,786 586,926,521 Accumulated undistributed net investment income (loss).................... 28,557 (366,643) 400,854 Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short and foreign exchange transactions....... (13,237,465) (5,105,381) (28,476,833) Unrealized appreciation (depreciation) on investments..................... (612,622) (1,867,925) 6,542,043 Unrealized appreciation (depreciation) on foreign exchange transactions... -- -- (24,257) ------------ ------------ ------------ Net Assets.............................................................. $174,727,184 $410,508,837 $565,368,328 ============ ============ ============ *Cost Long-term investment securities (unaffiliated).......................... $160,248,067 $411,713,544 $494,790,016 ============ ============ ============ Short-term investment securities (unaffiliated)......................... $ -- $ -- $ 28,214,000 ============ ============ ============ Foreign currency........................................................ $ -- $ -- $ 949,727 ============ ============ ============ #Proceeds from securities sold short...................................... $ -- $ -- $ 646,196 ============ ============ ============
High Yield Tax Exempt Bond Insured Fund Fund ------------ ----------- ASSETS: Long-term investment securities, at value* (unaffiliated)................. $265,831,247 $54,459,245 Short-term investment securities, at value* (unaffiliated)................ -- 9,900,215 Repurchase agreements (cost equals market)................................ 28,102,000 -- ------------ ----------- Total investments....................................................... 293,933,247 64,359,460 ------------ ----------- Cash...................................................................... 30,193 -- Foreign cash*............................................................. 150,189 -- Receivable for: Shares of beneficial interest sold...................................... 3,893,880 26,138 Dividends and interest.................................................. 5,070,303 785,922 Investments sold........................................................ 3,836,597 -- Prepaid expenses and other assets......................................... 44,248 607 Due from investment adviser for expense reimbursements/fee waivers........ 88,790 1,023 ------------ ----------- Total assets.............................................................. 307,047,447 65,173,150 ------------ ----------- LIABILITIES: Payable for: Shares of beneficial interest redeemed.................................. 325,623 22,563 Investments purchased................................................... 479,050 2,035,040 Investment advisory and management fees................................. 178,233 26,019 Distribution and service maintenance fees............................... 156,669 23,712 Transfer agent fees and expenses........................................ 57,841 19,686 Trustees' fees and expenses............................................. 49,943 30,322 Line of credit.......................................................... -- -- Other accrued expenses.................................................. 88,363 49,901 Dividends payable......................................................... 610,027 55,770 Securities sold short, at value#.......................................... -- -- ------------ ----------- Total liabilities......................................................... 1,945,749 2,263,013 ------------ ----------- Net Assets................................................................ $305,101,698 $62,910,137 ============ =========== NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value............................ $ 647,882 $ 49,335 Paid-in capital........................................................... 382,348,920 59,524,175 ------------ ----------- 382,996,802 59,573,510 Accumulated undistributed net investment income (loss).................... (1,328,534) (17,076) Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short and foreign exchange transactions....... (90,975,561) 420,787 Unrealized appreciation (depreciation) on investments..................... 14,412,519 2,932,916 Unrealized appreciation (depreciation) on foreign exchange transactions... (3,528) -- ------------ ----------- Net Assets.............................................................. $305,101,698 $62,910,137 ============ =========== *Cost Long-term investment securities (unaffiliated).......................... $251,418,728 $51,526,329 ============ =========== Short-term investment securities (unaffiliated)......................... $ -- $ 9,900,215 ============ =========== Foreign currency........................................................ $ 153,717 $ -- ============ =========== #Proceeds from securities sold short...................................... $ -- $ -- ============ ===========
See Notes to Financial Statements 5 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2006 -- (unaudited) (continued)
U.S. Government Strategic High Yield Tax Exempt Securities GNMA Bond Bond Insured Fund Fund Fund Fund Fund --------------- ------------ ------------ ------------ ----------- Class A (unlimited shares authorized): Net assets.................................................. $149,016,630 $308,835,825 $377,587,069 $166,187,155 $52,787,457 Shares of beneficial interest issued and outstanding........ 16,105,358 27,916,972 106,112,027 35,354,004 4,139,752 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge) $ 9.25 $ 11.06 $ 3.56 $ 4.70 $ 12.75 Maximum sales charge (4.75% of offering price).............. 0.46 0.55 0.18 0.23 0.64 ------------ ------------ ------------ ------------ ----------- Maximum offering price to public............................ $ 9.71 $ 11.61 $ 3.74 $ 4.93 $ 13.39 ============ ============ ============ ============ =========== Class B (unlimited shares authorized): Net assets.................................................. $ 17,076,645 $ 66,021,089 $ 50,373,492 $ 52,604,705 $ 5,819,680 Shares of beneficial interest issued and outstanding........ 1,844,868 5,952,561 14,157,821 11,173,487 456,289 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) $ 9.26 $ 11.09 $ 3.56 $ 4.71 $ 12.75 ============ ============ ============ ============ =========== Class C (unlimited shares authorized): Net assets.................................................. $ 8,633,909 $ 35,651,923 $137,407,767 $ 86,309,838 $ 4,303,000 Shares of beneficial interest issued and outstanding........ 934,042 3,210,863 38,470,923 18,260,686 337,473 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge) $ 9.24 $ 11.10 $ 3.57 $ 4.73 $ 12.75 ============ ============ ============ ============ ===========
See Notes to Financial Statements 6 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the six months ended September 30, 2006 -- (unaudited)
U.S. Government Strategic Securities Fund GNMA Fund Bond Fund --------------- ----------- ----------- INCOME: Dividends* (unaffiliated)......................... $ -- $ -- $ 85,514 Interest (unaffiliated)........................... 4,491,023 10,420,775 15,710,484 ---------- ----------- ----------- Total investment income......................... 4,491,023 10,420,775 15,795,998 ---------- ----------- ----------- EXPENSES: Investment advisory and management fees........... 557,316 937,804 1,522,158 Distribution and service maintenance fees: Class A......................................... 255,194 526,570 555,556 Class B......................................... 88,232 350,863 238,548 Class C......................................... 40,051 186,879 567,045 Transfer agent fees: Class A......................................... 181,727 356,790 351,293 Class B......................................... 22,293 92,379 52,481 Class C......................................... 10,687 47,518 124,823 Registration fees: Class A......................................... 3,203 7,054 23,469 Class B......................................... 2,928 7,094 7,416 Class C......................................... 293 5,580 17,283 Custodian and accounting fees..................... 39,060 77,781 217,604 Reports to shareholders........................... 11,026 44,150 51,237 Audit and tax fees................................ 16,699 17,248 16,287 Legal fees........................................ 2,955 13,878 21,330 Trustees' fees and expenses....................... 8,325 18,829 8,023 Interest expense.................................. 4,332 2,202 32 Other expenses.................................... 5,909 9,880 7,471 ---------- ----------- ----------- Total expenses before fee waivers, expense reimbursements and custody credits............. 1,250,230 2,702,499 3,782,056 Fees waived and expenses reimbursed by investment advisor (Note 3).................... (317,453) (330,871) -- Custody credits earned on cash balances......... (557) (343) (217,604) ---------- ----------- ----------- Net expenses.................................... 932,220 2,371,285 3,564,452 ---------- ----------- ----------- Net investment income (loss)....................... 3,558,803 8,049,490 12,231,546 ---------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... (999,304) (1,533,432) 105,289 Net realized foreign exchange gain (loss) on other assets and liabilities...................... -- -- (483,314) ---------- ----------- ----------- Net realized gain (loss) on investments and foreign currencies................................ (999,304) (1,533,432) (378,025) ---------- ----------- ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)..................... 2,626,815 4,216,265 4,820,615 Change in unrealized foreign exchange gain (loss) on other assets and liabilities................... -- -- (100,740) ---------- ----------- ----------- Net unrealized gain (loss) on investments and foreign currencies................................ 2,626,815 4,216,265 4,719,875 ---------- ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currencies................ 1,627,511 2,682,833 4,341,850 ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ $5,186,314 $10,732,323 $16,573,396 ========== =========== =========== *Net of foreign withholding taxes on interest and dividends of................................ $ -- $ -- $ 44,138 ========== =========== ===========
See Notes to Financial Statements 7 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the six months ended September 30, 2006 -- (unaudited) (continued)
HighYield Tax Exempt Bond Fund Insured Fund ----------- ------------ INCOME: Dividends* (unaffiliated)......................... $ 99,207 $ -- Interest (unaffiliated)........................... 12,458,935 1,480,533 ----------- ---------- Total investment income......................... 12,558,142 1,480,533 ----------- ---------- EXPENSES: Investment advisory and management fees........... 1,100,842 162,711 Distribution and service maintenance fees: Class A......................................... 299,757 95,272 Class B......................................... 257,537 31,143 Class C......................................... 373,180 22,075 Transfer agent fees: Class A......................................... 192,079 60,590 Class B......................................... 58,900 7,885 Class C......................................... 84,836 5,396 Registration fees: Class A......................................... 21,933 13,944 Class B......................................... 7,428 6,843 Class C......................................... 8,756 2,579 Custodian and accounting fees..................... 54,719 15,447 Reports to shareholders........................... 41,790 -- Audit and tax fees................................ 16,964 15,994 Legal fees........................................ 21,270 5,269 Trustees' fees and expenses....................... 11,485 3,073 Interest expense.................................. 68,909 -- Other expenses.................................... 9,411 4,318 ----------- ---------- Total expenses before fee waivers, expense reimbursements and custody credits............. 2,629,796 452,539 Fees waived and expenses reimbursed by investment advisor............................. (193,854) (1,023) Custody credits earned on cash balances (Note 3)............................................. (3,430) (166) ----------- ---------- Net expenses.................................... 2,432,512 451,350 ----------- ---------- Net investment income (loss)....................... 10,125,630 1,029,183 ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................... 1,503,496 2,208 Net realized foreign exchange gain (loss) on other assets and liabilities...................... -- -- ----------- ---------- Net realized gain (loss) on investments and foreign currencies................................ 1,503,496 2,208 ----------- ---------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)..................... 3,751,244 772,794 Change in unrealized foreign exchange gain (loss) on other assets and liabilities................... 6,650 -- ----------- ---------- Net unrealized gain (loss) on investments and foreign currencies................................ 3,757,894 772,794 ----------- ---------- Net realized and unrealized gain (loss) on investments and foreign currencies................ 5,261,390 775,002 ----------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ $15,387,020 $1,804,185 =========== ========== *Net of foreign withholding taxes on interest and dividends of................................ $ -- $ -- =========== ==========
See Notes to Financial Statements 8 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS
U.S. Government Securities Fund GNMA Fund -------------------------- -------------------------- For the For the six months six months ended For the year ended For the year September 30, ended September 30, ended 2006 March 31, 2006 March 31, (unaudited) 2006 (unaudited) 2006 ------------- ------------ ------------- ------------ Operations: Net investment income (loss)..................... $ 3,558,803 $ 7,348,908 $ 8,049,490 $ 14,040,017 Net realized gain (loss) on investments and foreign currencies............................. (999,304) (2,629,101) (1,533,432) (1,409,187) Net unrealized gain (loss) on investments and foreign currencies............................. 2,626,815 (1,138,951) 4,216,265 (2,932,719) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations.................................. 5,186,314 3,580,856 10,732,323 9,698,111 ------------ ------------ ------------ ------------ Distributions to shareholders from: Net investment income (Class A).................. (3,122,313) (6,505,119) (6,474,790) (11,887,262) Net investment income (Class B).................. (320,385) (786,554) (1,280,056) (2,666,840) Net investment income (Class C).................. (145,425) (307,714) (681,867) (1,429,033) Net investment income (Class Z).................. -- -- -- -- Net investment income (Class X).................. -- -- -- (10,305) 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 Z)........ -- -- -- -- Net realized gain on securities (Class X)........ -- -- -- -- ------------ ------------ ------------ ------------ Total distributions to shareholders............... (3,588,123) (7,599,387) (8,436,713) (17,744,508) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6)......... (5,712,484) (29,003,495) (11,621,426) (68,594,450) ------------ ------------ ------------ ------------ Total increase (decrease) in net assets........... (4,114,293) (33,022,026) (9,325,816) (76,640,847) NET ASSETS: Beginning of period............................... 178,841,477 211,863,503 419,834,653 496,475,500 ------------ ------------ ------------ ------------ End of period+.................................... $174,727,184 $178,841,477 $410,508,837 $419,834,653 ============ ============ ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)......................... $ 28,557 $ 57,877 $ (366,643) $ 20,580 ============ ============ ============ ============
See Notes to Financial Statements 9 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
Strategic Bond Fund High Yield Bond Fund -------------------------- -------------------------- For the For the six months six months ended For the year ended For the year September 30, ended September 30, ended 2006 March 31, 2006 March 31, (unaudited) 2006 (unaudited) 2006 ------------- ------------ ------------- ------------ Operations: Net investment income (loss)..................... $ 12,231,546 $ 10,165,505 $ 10,125,630 $ 21,938,661 Net realized gain (loss) on investments and foreign currencies............................. (378,025) 3,525,730 1,503,496 16,381,114 Net unrealized gain (loss) on investments and foreign currencies............................. 4,719,875 (1,597,716) 3,757,894 (3,300,370) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations.................................. 16,573,396 12,093,519 15,387,020 35,019,405 ------------ ------------ ------------ ------------ Distributions to shareholders from: Net investment income (Class A).................. (8,198,850) (5,369,145) (5,646,159) (11,905,182) Net investment income (Class B).................. (1,074,312) (1,942,089) (1,533,798) (3,703,477) Net investment income (Class C).................. (2,557,305) (2,927,876) (2,223,673) (4,398,206) Net investment income (Class Z).................. -- -- -- (1,686,486) 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 Z)........ -- -- -- -- Net realized gain on securities (Class X)........ -- -- -- -- ------------ ------------ ------------ ------------ Total distributions to shareholders............... (11,830,467) (10,239,110) (9,403,630) (21,693,351) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6)......... 249,608,429 175,766,449 (37,408,769) 5,307,491 ------------ ------------ ------------ ------------ Total increase (decrease) in net assets........... 254,351,358 177,620,858 (31,425,379) 18,633,545 NET ASSETS: Beginning of period............................... 311,016,970 133,396,112 336,527,077 317,893,532 ------------ ------------ ------------ ------------ End of period+.................................... $565,368,328 $311,016,970 $305,101,698 $336,527,077 ============ ============ ============ ============ - -------- +Includes accumulated undistributed net investment income (loss)......................... $ 400,854 $ (225) $ (1,328,534) $ (2,050,534) ============ ============ ============ ============
See Notes to Financial Statements 10 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
Tax Exempt Insured Fund ------------------------- For the six months ended For the year September 30, ended 2006 March 31, (unaudited) 2006 ------------- ------------ Operations: Net investment income (loss)..................... $ 1,029,183 $ 2,192,275 Net realized gain (loss) on investments and foreign currencies............................. 2,208 828,946 Net unrealized gain (loss) on investments and foreign currencies............................. 772,794 (1,242,127) ----------- ----------- Net increase (decrease) in net assets resulting from operations.................................. 1,804,185 1,779,094 ----------- ----------- Distributions to shareholders from: Net investment income (Class A).................. (902,877) (1,839,250) Net investment income (Class B).................. (79,061) (194,099) Net investment income (Class C).................. (58,170) (132,474) Net investment income (Class Z).................. -- -- Net investment income (Class X).................. -- -- Net realized gain on securities (Class A)........ -- (587,815) Net realized gain on securities (Class B)........ -- (75,670) Net realized gain on securities (Class C)........ -- (52,856) Net realized gain on securities (Class Z)........ -- -- Net realized gain on securities (Class X)........ -- -- ----------- ----------- Total distributions to shareholders............... (1,040,108) (2,882,164) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 6)......... (5,919,195) (7,564,719) ----------- ----------- Total increase (decrease) in net assets........... (5,155,118) (8,667,789) NET ASSETS: Beginning of period............................... 68,065,255 76,733,044 ----------- ----------- End of period+.................................... $62,910,137 $68,065,255 =========== =========== -------- +Includes accumulated undistributed net investment income (loss)......................... $ (17,076) $ (6,151) =========== ===========
See Notes to Financial Statements 11 SunAmerica Income Funds FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES FUND ------------------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, 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 ------- 03/31/02 $8.91 $0.37(4) $(0.08) $ 0.29 $(0.40) $-- $(0.40) $8.80 3.25% $187,615 03/31/03 8.80 0.37 0.86 1.23 (0.40) -- (0.40) 9.63 14.14 210,848 03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 03/31/06 9.37 0.36 (0.20) 0.16 (0.37) -- (0.37) 9.16 1.68 151,284 04/01/06-09/30/06+ 9.16 0.19 0.10 0.29 (0.20) -- (0.20) 9.25 3.17 149,016 Class B ------- 03/31/02 $8.91 $0.31(4) $(0.08) $ 0.23 $(0.34) $-- $(0.34) $8.80 2.55% $ 38,878 03/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595 03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 03/31/06 9.37 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.16 1.02 19,276 04/01/06-09/30/06+ 9.16 0.17 0.10 0.27 (0.17) -- (0.17) 9.26 2.94 17,077 Class C* -------- 03/31/02 $8.91 $0.29(4) $(0.09) $ 0.20 $(0.32) $-- $(0.32) $8.79 2.40% $ 12,209 03/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322 03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 03/31/06 9.36 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.15 1.02 8,281 04/01/06-09/30/06+ 9.15 0.16 0.10 0.26 (0.17) -- (0.17) 9.24 2.83 8,634
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 1.42% 4.12%(4) 579%(5) 1.12(3) 3.88(3) 630(5) 0.99(3) 3.14(3) 267(5) 0.99(3) 3.26(3) 253(5) 0.99(3) 3.80(3) 357 0.99(3)(6) 4.25(3)(6) 147 2.09%(3) 3.42%(3)(4) 579%(5) 1.76(3) 3.20(3) 630(5) 1.64(3) 2.45(3) 267(5) 1.64(3) 2.61(3) 253(5) 1.64(3) 3.14(3) 357 1.64(3)(6) 3.60(3)(6) 147 2.10%(3) 3.33%(3)(4) 579%(5) 1.75(3) 3.18(3) 630(5) 1.64(3) 2.45(3) 267(5) 1.64(3) 2.61(3) 253(5) 1.64(3) 3.14(3) 357 1.64(3)(6) 3.60(3)(6) 147
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. + Unaudited (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06 09/30/06(6)+ -------- -------- -------- -------- -------- ------------ U.S. Government Securities Fund Class A. -- % 0.21% 0.37% 0.39% 0.36% 0.37% U.S. Government Securities Fund Class B. 0.01 0.23 0.37 0.43 0.43 0.40 U.S. Government Securities Fund Class C. 0.16 0.27 0.38 0.48 0.57 0.39
(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%
(6)Annualized See Notes to Financial Statements 12 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
GNMA 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 - - 03/31/02 $11.12 $0.51(5) $(0.03) $0.48 $(0.51) $(0.32) $(0.83) $10.77 4.45% $118,440 03/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096 03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467 03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031 03/31/06 11.20 0.35 (0.07) 0.28 (0.40) (0.08) (0.48) 11.00 2.18 303,343 04/01/06-09/30/06+ 11.00 0.22 0.08 0.30 (0.24) -- (0.24) 11.06 2.73 308,836 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 03/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323 03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923 03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497 03/31/06 11.23 0.28 (0.08) 0.20 (0.33) (0.08) (0.41) 11.02 1.43 76,304 04/01/06-09/30/06+ 11.02 0.19 0.08 0.27 (0.20) -- (0.20) 11.09 2.49 66,021 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 03/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173 03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184 03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936 03/31/06 11.24 0.28 (0.07) 0.21 (0.33) (0.08) (0.41) 11.04 1.53 40,188 04/01/06-09/30/06+ 11.04 0.19 0.07 0.26 (0.20) -- (0.20) 11.10 2.40 35,652
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 0.99%(3)(4) 4.61%(3)(4)(5) 544%(6) 0.99(4) 3.36(4) 436(6) 0.99(4) 2.51(4) 225(6) 0.99(4) 2.73(4) 204(6) 0.99(4) 3.17(4) 138 0.99(4)(7) 4.11(4)(7) 59 1.64%(3)(4) 3.96%(3)(4)(5) 544%(6) 1.64(4) 2.71(4) 436(6) 1.64(4) 1.77(4) 225(6) 1.64(4) 2.10(4) 204(6) 1.64(4) 2.50(4) 138 1.64(4)(7) 3.46(4)(7) 59 1.64%(3)(4) 3.96%(3)(4)(5) 544%(6) 1.64(4) 2.59(4) 436(6) 1.64(4) 1.74(4) 225(6) 1.64(4) 2.11(4) 204(6) 1.64(4) 2.49(4) 138 1.64(4)(7) 3.46(4)(7) 59
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. + Unaudited (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)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. (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 09/30/06(7)+ -------- -------- -------- -------- -------- ------------ GNMA Fund Class A............. 0.19% 0.13% 0.18% 0.17% 0.13% 0.15% GNMA Fund Class B............. 0.19 0.14 0.16 0.18 0.17 0.19 GNMA Fund Class C............. 0.21 0.13 0.16 0.18 0.19 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%
(7)Annualized See Notes to Financial Statements 13 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 04/01/06-09/30/06++ 3.53 0.09 0.03 0.12 (0.09) -- (0.09) 3.56 3.49 377,587 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 04/01/06-09/30/06++ 3.53 0.08 0.03 0.11 (0.08) -- (0.08) 3.56 3.14 50,373 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 04/01/06-09/30/06++ 3.54 0.08 0.03 0.11 (0.08) -- (0.08) 3.57 3.15 137,408
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(5)(9) 71(10) 1.40(5)(8) 5.94(5)(8) 190(10) 1.34(5)(11) 5.19(5)(11) 119 1.27(4)(12) 5.34(4)(12) 68 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 1.93(4)(12) 4.67(4)(12) 68 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 1.93(4)(12) 4.67(4)(12) 68
- -------- * 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. ++ Unaudited (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)The ratios reflect an expense cap of 2.22%, for Class C, which is net of custody credits of 0.02% for Class C. Class A and Class B are gross of custody credits of 0.03% for the period ended March 31, 2002. (4)Annualized (5)Net of the following expense reimbursements, 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 of 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%. (12)Net of custody credits of 0.09% See Notes to Financial Statements 14 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD 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+ 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 04/01/06-09/30/06++ 4.60 0.17 0.08 0.25 (0.15) -- (0.15) 4.70 5.60 166,187 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 04/01/06-09/30/06++ 4.61 0.15 0.09 0.24 (0.14) -- (0.14) 4.71 5.25 52,605 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 04/01/06-09/30/06++ 4.63 0.15 0.09 0.24 (0.14) -- (0.14) 4.73 5.24 86,310
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 1.36(4)(5) 7.06(4)(5) 30 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 2.01(4)(5) 6.47(4)(5) 30 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 2.01(4)(5) 6.46(4)(5) 30
- -------- * 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. ++ Unaudited (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of 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 09/30/06(4)++ -------- ----------- -------- -------- -------- -------- ------------- High Yield Bond Fund Class A............ 0.18% -- % -- % -- % 0.08% 0.11% 0.13% High Yield Bond Fund Class B............ 0.18 -- -- -- 0.07 0.14 0.14 High Yield Bond Fund Class C............ 0.18 0.01 0.10 0.01 0.09 0.12 0.13
(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 15 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, 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 - - 03/31/02 $13.02 $0.52(5) $(0.30) $0.22 $(0.52) $ -- $(0.52) $12.72 1.70% $75,071 03/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358 03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 03/31/06 12.81 0.41 (0.10) 0.31 (0.40) (0.13) (0.53) 12.59 2.43 56,875 04/01/06-09/30/06+ 12.59 0.21 0.16 0.37 (0.21) -- (0.21) 12.75 2.96 52,787 Class B - - 03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.95% $18,090 03/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031 03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 03/31/06 12.82 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.60 1.77 6,694 04/01/06-09/30/06+ 12.60 0.16 0.15 0.31 (0.16) -- (0.16) 12.75 2.48 5,820 Class C* - - 03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.99% $ 4,095 03/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451 03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 03/31/06 12.81 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.59 1.81 4,497 04/01/06-09/30/06+ 12.59 0.16 0.17 0.33 (0.17) -- (0.17) 12.75 2.61 4,303
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 1.29%(3) 3.99%(3)(5) 140% 1.24 3.12 195 1.26 2.90 131 1.25 3.14 153 1.30 3.14 81 1.26(6) 3.29(6) 42 2.04%(3) 3.22%(3)(5) 140% 1.97 2.39 195 1.96 2.20 131 1.94 2.44 153 1.95 2.48 81 2.11(6) 2.44(6) 42 1.95%(3)(4) 3.21%(3)(4)(5) 140% 1.95(4) 2.40(4) 195 1.95(4) 2.21(4) 131 1.95(4) 2.44(4) 153 1.95(4) 2.48(4) 81 1.95(4)(6) 2.60(4)(6) 42
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. + Unaudited (1) Calculated based upon average shares outstanding. (2) Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3) 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 09/30/06(6)+ -------- -------- -------- -------- -------- ------------ Tax Exempt Insured Fund Class C......... 0.56% 0.00% 0.12% 0.09% 0.20% 0.05%
(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. (6)Annualized See Notes to Financial Statements 16 SunAmerica U.S. Government Securities Fund PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) Industry Allocation* Government National Mortgage Association 40.1% U.S. Treasury Notes..................... 25.0 U.S. Treasury Bonds..................... 18.0 Repurchase Agreements................... 7.7 Private Export Funding.................. 5.8 U.S. Government Agencies................ 1.3 Federal Farm Credit Bank................ 0.7 Federal National Mortgage Association... 0.5 Federal Home Loan Mortgage Corporation.. 0.0 ---- 99.1% ====
Credit Quality+# Government -- Treasury 47.1% Government -- Agency.. 46.5% AA.................... 6.4% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 17 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value Security Description Amount (Note 2) --------------------------------------------- U.S. GOVERNMENT AGENCIES -- 48.4% Federal Farm Credit Bank Consolidated -- 0.7% 5.64% due 04/04/11......................... $ 500,000 $ 514,493 6.00% due 03/07/11......................... 200,000 208,209 6.30% due 12/03/13, Series 1998 -- M4C(2).. 500,000 539,800 ----------- 1,262,502 ----------- Federal Home Loan Mtg. Corp. -- 0.0% 8.00% due 06/01/08......................... 4,762 4,755 8.50% due 05/01/08......................... 69 69 ----------- 4,824 ----------- Federal National Mtg. Assoc. -- 0.5% 6.53% due 05/25/30......................... 756,882 760,519 8.00% due 01/01/23......................... 34,690 36,645 11.00% due 02/01/15........................ 33 37 11.50% due 09/01/19........................ 10,623 11,631 ----------- 808,832 ----------- Private Export Funding Corp. -- 5.8% 5.87% due 07/31/08......................... 10,000,000 10,154,030 ----------- Government National Mtg. Assoc. -- 40.1% 4.50% due 05/15/18......................... 1,079,919 1,048,217 4.50% due 08/15/18......................... 1,756,758 1,705,187 4.50% due 09/15/18......................... 4,839,630 4,697,556 4.50% due 10/15/18......................... 4,805,520 4,664,448 4.50% due 09/15/33......................... 5,129,746 4,855,340 5.00% due 04/15/18......................... 5,113,034 5,058,159 5.00% due 08/15/33......................... 2,106,897 2,050,987 5.00% due 09/15/33......................... 964,892 939,287 5.00% due 10/15/33......................... 671,070 653,261 5.00% due 11/15/34......................... 227,989 221,691 5.50% due 11/15/32......................... 16,015 15,924 5.50% due 03/15/33......................... 517,114 514,165 5.50% due 04/15/33......................... 665,776 661,981 5.50% due 05/15/33......................... 1,458,819 1,450,506 5.50% due 06/15/33......................... 6,890,695 6,851,426 5.50% due 07/15/33......................... 1,909,021 1,898,142 5.50% due 10/15/33......................... 1,928,839 1,917,847 5.50% due 12/15/33......................... 388,061 385,849 5.50% due 01/15/34......................... 3,805,023 3,782,751 5.50% due 02/15/34......................... 2,291,592 2,278,177 6.00% due 01/15/28......................... 4,194 4,257 6.00% due 04/15/28......................... 1,459,184 1,480,495 6.00% due 05/15/28......................... 3,052 3,098 6.00% due 10/15/28......................... 16,432 16,678 6.00% due 03/15/29......................... 102,723 104,183 6.00% due 04/15/29......................... 52,758 53,508 6.00% due 05/15/29......................... 95,278 96,632 6.00% due 06/15/29......................... 29,961 30,387 6.00% due 04/15/31......................... 30,956 31,380 6.00% due 05/15/31......................... 59,019 59,828 6.00% due 11/15/31......................... 232,970 236,163 6.00% due 12/15/31......................... 415,464 421,159 6.00% due 01/15/32......................... 197,255 199,986 6.00% due 02/15/32......................... 46,538 47,182 6.00% due 03/15/32......................... 10,428 10,572 6.00% due 08/15/32......................... 320,405 324,840 6.00% due 11/15/32......................... 44,105 44,716
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Government National Mtg. Assoc. (continued) 6.00% due 12/15/32....................... $ 9,620 $ 9,753 6.00% due 01/15/33....................... 20,416 20,690 6.00% due 02/15/33....................... 64,047 64,906 6.00% due 03/15/33....................... 105,154 106,565 6.00% due 04/15/33....................... 413,279 418,822 6.00% due 07/15/33....................... 287,993 291,856 6.00% due 08/15/33....................... 2,863,804 2,903,304 6.00% due 09/15/33....................... 408,536 414,017 6.00% due 10/15/33....................... 1,746,452 1,769,885 6.00% due 11/15/33....................... 197,557 200,207 6.00% due 12/15/33....................... 989,495 1,002,770 6.00% due 02/15/34....................... 434,535 440,406 6.00% due 05/15/34....................... 55,769 56,522 6.00% due 06/15/34....................... 47,013 47,648 6.00% due 07/15/34....................... 1,567,066 1,588,237 6.00% due 08/15/34....................... 207,458 210,261 6.00% due 09/15/34....................... 1,409,221 1,428,260 6.00% due 10/15/34....................... 5,715,860 5,793,083 6.00% due 12/15/34....................... 492,628 499,283 6.00% due 06/15/35....................... 353,752 358,092 6.00% due 08/15/35....................... 423,494 428,690 6.50% due 02/15/29....................... 18,427 18,955 6.50% due 05/15/31....................... 21,233 21,816 6.50% due 06/15/31....................... 65,330 67,124 6.50% due 07/15/31....................... 56,268 57,813 6.50% due 08/15/31....................... 82,708 84,979 6.50% due 09/15/31....................... 192,509 197,796 6.50% due 10/15/31....................... 379,649 390,076 6.50% due 11/15/31....................... 13,833 14,213 6.50% due 12/15/31....................... 22,644 23,266 6.50% due 01/15/32....................... 34,547 35,481 6.50% due 02/15/32....................... 660,208 678,057 6.50% due 06/15/32....................... 51,678 53,076 7.00% due 07/15/23....................... 36,916 38,113 7.00% due 10/15/23....................... 88,041 90,897 7.00% due 09/15/25....................... 272,615 281,710 7.00% due 03/20/29....................... 20,275 20,870 7.00% due 06/20/29....................... 3,378 3,477 7.00% due 11/20/30....................... 87,109 89,665 7.50% due 04/15/17....................... 10,998 11,394 7.50% due 08/15/23....................... 208,719 217,343 7.50% due 09/15/23....................... 606,292 631,346 7.50% due 10/15/23....................... 16,872 17,570 8.00% due 02/15/08....................... 407 413 9.00% due 12/15/16....................... 82,475 88,225 11.00% due 08/20/15...................... 235 258 11.00% due 09/20/15...................... 547 602 11.50% due 05/20/15...................... 3,838 4,281 12.50% due 09/15/14...................... 6,834 7,604 13.00% due 01/15/11...................... 2,410 2,677 13.00% due 02/15/11...................... 2,793 3,102 13.00% due 03/15/11...................... 222 246 13.00% due 04/15/11...................... 496 551 13.00% due 09/15/13...................... 5,009 5,591 13.00% due 10/20/14...................... 1,122 1,237 13.00% due 11/15/14...................... 756 846 13.00% due 02/20/15...................... 675 747
18 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) 13.50% due 02/15/13................... $ 11,147 $ 12,536 15.00% due 01/15/12................... 445 508 15.00% due 02/15/12................... 1,080 1,235 15.00% due 06/15/12................... 11,569 13,224 15.00% due 09/15/12................... 643 735 15.50% due 09/15/11................... 34,918 39,826 ------------ 70,098,703 ------------ Small Business Administration -- 1.3% 6.30% due 06/01/18..................... 2,136,145 2,193,754 ------------ Total U.S. Government Agencies (cost $85,793,195)................... 84,522,645 ------------ U.S. GOVERNMENT TREASURIES -- 43.0% United States Treasury Bonds -- 18.0% 4.50% due 02/15/36................... 16,000,000 15,331,248 5.38% due 02/15/31................... 15,000,000 16,201,170 ------------ 31,532,418 ------------ United States Treasury Notes -- 25.0% 4.50% due 11/15/15................... 8,000,000 7,922,496 4.50% due 02/15/16................... 2,000,000 1,979,922 4.88% due 08/15/16................... 20,000,000 20,378,120 5.13% due 05/15/16................... 7,000,000 7,261,408 5.13% due 06/30/08................... 6,000,000 6,038,436 ------------ 43,580,382 ------------ Total U.S. Government Treasuries (cost $74,454,872)................... 75,112,800 ------------ Total Long-Term Investment Securities (cost $160,248,067).................. 159,635,445 ------------ REPURCHASE AGREEMENTS -- 7.7% UBS Securities, LLC Joint Repurchase Agreement Account (1) (cost $13,510,000)................... 13,510,000 13,510,000 ------------ TOTAL INVESTMENTS (cost $173,758,067) @................ 99.1% 173,145,445 Other assets less liabilities........... 0.9 1,581,739 ----------- ------------ NET ASSETS -- 100.0% $174,727,184 =========== ============
- -------- @ See Note 5 for cost of investment on a tax basis (1)See Note 2 for details of Joint Repurchase Agreements (2)Collateralized Mortgage Obligation See Note to Financial Statements 19 SunAmerica GNMA Fund PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) Industry Allocation* Government National Mortgage Association 80.7% U.S. Treasury Notes..................... 15.1 U.S. Treasury Bonds..................... 2.1 Federal National Mortgage Association... 1.7 Small Business Administration........... 0.2 ---- 99.8% ====
Credit Quality+# Government -- Agency.. 82.7% Government -- Treasury 17.3 ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 20 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 82.6% Federal National Mtg. Assoc. -- 1.7% 5.00% due 01/25/18(1)................. $ 7,145,761 $ 7,104,678 ----------- Government National Mtg. Assoc. -- 80.7% 4.50% due 05/15/18.................... 2,159,838 2,096,433 4.50% due 08/15/18.................... 1,177,474 1,142,908 4.50% due 09/15/18.................... 3,669,252 3,561,536 4.50% due 10/15/18.................... 5,470,473 5,309,880 4.50% due 08/15/33.................... 3,357,718 3,178,104 4.50% due 09/15/33.................... 3,616,733 3,423,263 5.00% due 03/15/18.................... 585,746 579,460 5.00% due 04/15/18.................... 8,144,655 8,057,245 5.00% due 05/15/18.................... 10,936,174 10,818,802 5.00% due 01/15/33.................... 18,439 17,950 5.00% due 05/15/33.................... 14,050 13,676 5.00% due 08/15/33.................... 3,058,169 2,977,014 5.00% due 09/15/33.................... 2,939,163 2,861,166 5.00% due 10/15/33.................... 6,856,349 6,674,401 5.00% due 04/15/34.................... 65,593 63,781 5.00% due 05/15/34.................... 176,688 171,808 5.00% due 11/15/34.................... 780,051 758,504 5.00% due 12/15/34.................... 772,648 751,305 5.50% due 06/15/29.................... 6,635 6,599 5.50% due 01/15/32.................... 54,516 54,208 5.50% due 12/15/32.................... 860,330 855,456 5.50% due 01/15/33.................... 564,008 560,794 5.50% due 02/15/33.................... 2,244,087 2,231,299 5.50% due 03/15/33.................... 1,269,972 1,262,736 5.50% due 04/15/33.................... 6,734,506 6,696,131 5.50% due 05/15/33.................... 8,010,392 7,964,739 5.50% due 06/15/33.................... 8,932,500 8,881,617 5.50% due 07/15/33.................... 455,060 452,466 5.50% due 08/15/33.................... 2,811,901 2,795,877 5.50% due 09/15/33.................... 498,323 495,483 5.50% due 10/15/33.................... 7,514,812 7,471,987 5.50% due 12/15/33.................... 8,221,438 8,174,585 5.50% due 01/15/34.................... 11,863,280 11,793,839 5.50% due 02/15/34.................... 1,519,171 1,510,280 5.50% due 04/15/35.................... 2,811,588 2,793,102 5.50% due 07/15/35.................... 2,886,811 2,867,830 5.50% due 09/15/35.................... 28,210,241 28,024,762 5.50% due 10/15/35.................... 18,042,241 17,923,615 5.50% due 11/15/35.................... 35,551,010 35,317,266 5.50% due 12/15/35.................... 20,951,215 20,813,462 5.50% due 02/15/36.................... 2,840,782 2,821,803 5.50% due 03/15/36.................... 11,000,562 10,927,067 5.50% due 04/15/36.................... 488,966 485,700 5.50% due 05/15/36.................... 3,562,211 3,538,411 6.00% due 11/15/23.................... 6,846 6,939 6.00% due 01/15/24.................... 7,437 7,541 6.00% due 07/15/28.................... 5,272 5,351 6.00% due 11/15/28.................... 342,970 348,114 6.00% due 12/15/28.................... 378,140 383,813 6.00% due 01/15/29.................... 811,525 823,061 6.00% due 02/15/29.................... 833,779 845,630 6.00% due 03/15/29.................... 633,887 642,897 6.00% due 04/15/29.................... 1,656,305 1,680,015 6.00% due 05/15/29.................... 75,144 76,212
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- Government National Mtg. Assoc. (continued) 6.00% due 06/15/29....................... $ 662,684 $ 672,169 6.00% due 07/15/29....................... 228,629 231,880 6.00% due 08/15/29....................... 20,771 21,067 6.00% due 10/15/29....................... 107,126 108,648 6.00% due 04/15/31....................... 24,212 24,544 6.00% due 07/15/31....................... 15,444 15,656 6.00% due 10/15/31....................... 86,012 87,191 6.00% due 11/15/31....................... 1,594,897 1,616,760 6.00% due 12/15/31....................... 667,199 676,346 6.00% due 01/15/32....................... 789,839 800,772 6.00% due 02/15/32....................... 60,950 61,793 6.00% due 03/15/32....................... 516,228 523,374 6.00% due 07/15/32....................... 125,335 127,070 6.00% due 08/15/32....................... 1,887,308 1,913,245 6.00% due 09/15/32....................... 1,335,503 1,353,989 6.00% due 10/15/32....................... 226,446 229,580 6.00% due 11/15/32....................... 9,796 9,932 6.00% due 12/15/32....................... 173,359 175,759 6.00% due 01/15/33....................... 1,732,620 1,755,863 6.00% due 02/15/33....................... 1,930,927 1,956,832 6.00% due 03/15/33....................... 1,389,906 1,408,551 6.00% due 04/15/33....................... 1,674,488 1,696,950 6.00% due 05/15/33....................... 1,573,625 1,594,735 6.00% due 06/15/33....................... 1,254,919 1,271,755 6.00% due 08/15/33....................... 1,807,448 1,831,851 6.00% due 10/15/33....................... 592,460 600,408 6.00% due 11/15/33....................... 1,937,193 1,963,188 6.00% due 12/15/33....................... 3,561,525 3,609,305 6.00% due 01/15/34....................... 1,956,892 1,983,330 6.00% due 02/15/34....................... 12,759,878 12,932,267 6.00% due 03/15/34....................... 427,432 433,207 6.00% due 04/15/34....................... 4,076,225 4,131,296 6.00% due 05/15/34....................... 349,403 354,123 6.00% due 06/15/34....................... 358,720 363,567 6.00% due 07/15/34....................... 4,260,477 4,318,038 6.00% due 08/15/34....................... 6,113,505 6,196,115 6.00% due 09/15/34....................... 301,144 305,214 6.00% due 10/15/34....................... 958,605 971,556 6.00% due 11/15/34....................... 1,994,664 2,021,612 6.00% due 12/15/34....................... 76,369 77,401 6.00% due 01/15/35....................... 95,355 96,525 6.00% due 02/15/35....................... 1,343,804 1,360,292 6.00% due 04/15/35....................... 66,627 67,444 6.00% due 05/15/35....................... 137,077 138,759 6.00% due 06/15/35....................... 516,749 523,089 6.00% due 12/15/35....................... 1,587,324 1,606,804 6.00% due 01/15/36....................... 426,370 431,599 6.00% due 02/15/36....................... 1,845,956 1,868,591 6.00% due 03/15/36....................... 2,120,105 2,146,102 6.00% due 04/15/36....................... 5,794,207 5,865,260 6.00% due 05/15/36....................... 5,646,439 5,715,682 6.00% due 06/15/36....................... 2,292,296 2,320,406 6.50% due 03/15/28....................... 29,032 29,856 6.50% due 08/15/28....................... 44,383 45,656 6.50% due 12/15/28....................... 1,721 1,770 6.50% due 01/15/29....................... 5,579 5,739 6.50% due 02/15/29....................... 1,798 1,849
21 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Government National Mtg. Assoc. (continued) 6.50% due 03/15/29....................... $ 120,347 $ 123,793 6.50% due 04/15/29....................... 2,059 2,118 6.50% due 05/15/29....................... 14,706 15,128 6.50% due 06/15/29....................... 43,548 44,795 6.50% due 07/15/29....................... 6,187 6,364 6.50% due 10/15/29....................... 6,468 6,654 6.50% due 08/15/31....................... 277,154 284,767 6.50% due 09/15/31....................... 17,787 18,276 6.50% due 10/15/31....................... 379,649 390,077 6.50% due 11/15/31....................... 182,978 188,004 6.50% due 12/15/31....................... 223,362 229,497 6.50% due 02/15/32....................... 309,917 318,296 6.50% due 05/15/32....................... 1,647,543 1,692,087 6.50% due 06/15/32....................... 125,820 129,220 7.00% due 03/15/23....................... 97,887 101,063 7.00% due 01/20/24....................... 739 761 7.00% due 03/20/24....................... 767 789 7.00% due 07/20/25....................... 4,203 4,328 7.00% due 09/15/25....................... 118,391 122,341 7.00% due 01/20/29....................... 47,695 49,094 7.00% due 02/20/29....................... 9,095 9,361 7.00% due 06/20/29....................... 16,752 17,243 7.00% due 07/20/29....................... 60,537 62,313 7.00% due 09/20/29....................... 6,113 6,293 7.00% due 10/20/29....................... 12,543 12,911 7.00% due 11/20/29....................... 4,175 4,297 7.00% due 03/20/30....................... 6,147 6,327 7.00% due 06/20/30....................... 10,681 10,994 7.00% due 08/20/30....................... 35,720 36,768 7.00% due 09/20/30....................... 29,996 30,876 7.00% due 10/20/30....................... 40,047 41,222 8.00% due 11/15/26....................... 214,319 227,172 8.00% due 12/15/29....................... 24,282 25,755 8.00% due 04/15/30....................... 44,092 46,719 8.00% due 05/15/30....................... 6,308 6,683 8.00% due 08/15/30....................... 43,325 45,906 8.50% due 03/15/17....................... 18,308 19,567 8.50% due 05/15/21....................... 53,697 57,744 8.50% due 12/15/22....................... 110,244 118,712 8.50% due 01/15/23....................... 118,963 128,255 8.50% due 09/15/24....................... 42,627 46,005 9.00% due 07/15/16....................... 81,526 87,210 9.00% due 10/15/16....................... 15,406 16,480 ------------ 331,442,550 ------------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Small Business Administration -- 0.2% 6.30% due 06/01/18.................... $ 712,048 $ 731,251 ------------ Total U.S. Government Agencies (cost $342,046,359).................. 339,278,479 ------------ U.S. GOVERNMENT TREASURIES -- 17.2% United States Treasury Bonds -- 2.1% 4.50% due 02/15/36................... 9,000,000 8,623,827 ------------ United States Treasury Notes -- 15.1% 4.50% due 11/15/15................... 1,000,000 990,312 4.50% due 02/15/16................... 7,000,000 6,929,727 4.88% due 08/15/16................... 25,000,000 25,472,650 5.13% due 06/30/08................... 16,000,000 16,102,496 5.13% due 05/15/16................... 12,000,000 12,448,128 ------------ 61,943,313 ------------ Total U.S. Government Treasuries (cost $69,667,185)................... 70,567,140 ------------ Total Long-Term Investment Securities (cost $411,713,544).................. 409,845,619 ------------ TOTAL INVESTMENTS (cost $411,713,544)@................. 99.8% 409,845,619 Other Assets Less Liabilities........... 0.2 663,218 ----------- ------------ NET ASSETS 100.0% $410,508,837 =========== ============
- -------- @ See Note 5 for cost of investment on a tax basis (1)Collateralized Mortgaged Obligation 22 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) Industry Allocation* Foreign Government Agencies........... 31.8% U.S. Treasury Notes................... 5.2 Federal Home Loan Mtg. Corp........... 5.1 Time Deposits......................... 5.0 Federal National Mtg. Assoc........... 4.7 Diversified Financial Services........ 3.5 Finance-Auto Loans.................... 2.2 Repurchase Agreements................. 2.2 Oil Companies-Exploration & Production 1.7 U.S. Treasury Bonds................... 1.7 Cable TV.............................. 1.6 Cellular Telecom...................... 1.5 Pipelines............................. 1.4 Independent Power Producers........... 1.1 Telephone-Integrated.................. 1.1 Casino Hotels......................... 1.0 Electric-Integrated................... 1.0 Foreign Government Treasury........... 1.0 Transport-Air Freight................. 1.0 Airlines.............................. 0.9 Special Purpose Entities.............. 0.9 Television............................ 0.9 Real Estate Investment Trusts......... 0.8 Paper & Related Products.............. 0.7 Chemicals-Specialty................... 0.6 Medical-Drugs......................... 0.6 Oil-Field Services.................... 0.6 Telecom Services...................... 0.6 Auto-Cars/Light Trucks................ 0.5 Banks-Commercial...................... 0.5 Building & Construction Products-Misc. 0.5 Funeral Services & Related Items...... 0.5 Broadcast Services/Program............ 0.4 Containers-Metal/Glass................ 0.4 Insurance-Multi-line.................. 0.4 Rental Auto/Equipment................. 0.4 Savings & Loans/Thrifts............... 0.4 Banks-Super Regional.................. 0.3 Diversified Manufactured Operations... 0.3 Electric-Generation................... 0.3 Electronic Components-Semiconductors.. 0.3 Federal Home Loan Bank................ 0.3 Finance-Investment Banker/Broker...... 0.3 Insurance-Life/Health................. 0.3 Multimedia............................ 0.3 Retail-Drug Store..................... 0.3 Satellite Telecom..................... 0.3 Specified Purpose Acquisitions........ 0.3 Theaters.............................. 0.3 Applications Software................. 0.2 Commercial Services................... 0.2 Consumer Products-Misc................ 0.2 Containers-Paper/Plastic.............. 0.2 Electronics-Military.................. 0.2 Finance-Consumer Loans................ 0.2 Finance-Mortgage Loan/Banker.......... 0.2 Food-Meat Products.................... 0.2 Gambling (Non-Hotel).................. 0.2 Non-Hazardous Waste Disposal.......... 0.2 Office Automation & Equipment......... 0.2 Oil Companies-Integrated.............. 0.2
Retail-Restaurants................. 0.2% Advertising Services............... 0.1 Aerospace/Defense.................. 0.1 Agricultural Chemicals............. 0.1 Agricultural Operations............ 0.1 Banks-Money Center................. 0.1 Beverages-Non-alcoholic............ 0.1 Beverages-Wine/Spirits............. 0.1 Brewery............................ 0.1 Building & Construction-Misc....... 0.1 Chemicals-Diversified.............. 0.1 Computer Services.................. 0.1 Cosmetics & Toiletries............. 0.1 Diagnostic Kits.................... 0.1 Direct Marketing................... 0.1 Electronic Components-Misc......... 0.1 Electronic Parts Distribution...... 0.1 Energy-Alternate Sources........... 0.1 Finance-Credit Card................ 0.1 Food-Misc.......................... 0.1 Gas-Distribution................... 0.1 Golf............................... 0.1 Hotels/Motels...................... 0.1 Housewares......................... 0.1 Insurance-Mutual................... 0.1 Machinery-Farming.................. 0.1 Medical Products................... 0.1 Medical-Generic Drugs.............. 0.1 Medical-HMO........................ 0.1 Medical-Hospitals.................. 0.1 Medical-Wholesale Drug Distribution 0.1 Metal Processors & Fabrication..... 0.1 Metal-Aluminum..................... 0.1 Metal-Diversified.................. 0.1 Music.............................. 0.1 Oil Refining & Marketing........... 0.1 Precious Metals.................... 0.1 Property Trust..................... 0.1 Protection/Safety.................. 0.1 Publishing-Newspapers.............. 0.1 Real Estate Management/Services.... 0.1 Retail-Major Department Stores..... 0.1 Retail-Petroleum Products.......... 0.1 Retail-Regional Deptment Stores.... 0.1 Seismic Data Collection............ 0.1 Steel-Producers.................... 0.1 Steel-Specialty.................... 0.1 Storage/Warehousing................ 0.1 Telecom Equipment-Fiber Optics..... 0.1 Textile-Products................... 0.1 Transport-Marine................... 0.1 Transport-Rail..................... 0.1 Transport-Services................. 0.1 Travel Services.................... 0.1 ---- 95.9% ====
- -------- * Calculated as a percentage of net assets. 23 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) (continued) Country Allocation* United States........................... 56.5% Brazil.................................. 5.1 Russia.................................. 3.0 Turkey.................................. 2.9 Sweden.................................. 2.6 Switzerland............................. 2.2 Japan................................... 2.1 Canada.................................. 2.1 United Kingdom.......................... 1.9 Germany................................. 1.9 Mexico.................................. 1.6 Argentina............................... 1.4 Philippines............................. 1.4 Australia............................... 1.3 Norway.................................. 1.3 Uruguay................................. 1.0 Colombia................................ 1.0 Venezuela............................... 1.0 Hungary................................. 0.7 Spain................................... 0.6 Peru.................................... 0.6 South Africa............................ 0.5 Netherlands............................. 0.5 Luxembourg.............................. 0.5 Belgium................................. 0.4 Bermuda................................. 0.3 Greece.................................. 0.3 Cayman Islands.......................... 0.3 Ireland................................. 0.3 Poland.................................. 0.3 France.................................. 0.3 ---- 95.9% ====
Credit Quality+# Government -- Agency.................... 11.3% Government -- Treasury.................. 8.0% AAA..................................... 13.8% AA...................................... 3.6% A....................................... 4.3% BBB..................................... 10.0% BB...................................... 21.9% B....................................... 15.5% CCC..................................... 6.9% Below C................................. 1.0% Not Rated @............................. 3.7% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 24 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------------ ASSET BACKED SECURITIES -- 3.1% Diversified Financial Services -- 3.1% Banc of America Commercial Mtg., Inc., Series 2006-4, Class AJ, 5.70% due 07/10/46(1)(2)......................... 2,140,000 $2,179,355 Bear Stearns Commercial Mtg. Securities, Inc., Series 2006-PW12, Class G, 5.75% due 09/11/38(1)(2)......................... 59,000 58,867 Bear Stearns Commercial Mtg. Securities, Inc., Series 2006-PW12, Class F, 5.93% due 09/11/38*(1)(2)........................ 345,000 347,227 Commercial Mtg. Pass Through Certificates, Series 2004-LB2A, Class A3, 4.22% due 03/10/39(1)............................ 1,586,000 1,533,519 Commercial Mtg. Pass Through Certificates, Series 2004-LB4A, Class A3, 4.41% due 10/15/37(1)............................ 1,500,000 1,451,469 Countrywide Asset-Backed Certificates, Series 2006-S6, Class A3, 5.66% due 03/25/34(2)(3)......................... 1,596,000 1,593,287 Countrywide Asset-Backed Certificates, Series 2006-S4, Class A3, 5.80% due 10/25/36............................... 2,800,000 2,821,000 Credit Suisse Mtg. Capital Certificates, Series 2006-TFLA, Class C, 5.59% due 04/15/08*(1)(10)....................... 550,000 550,169 Credit Suisse Mtg. Capital Certificates, Series 2006-TFLA, Class D, 5.61% due 04/15/08*(1)(10)....................... 550,000 550,168 Deutsche ALT-A Securities, Inc. Series 2006-AB2, Class A5A, 6.09% due 06/25/36(1)............................ 600,000 609,189 JP Morgan Chase Commercial Mtg. Securities Corp., Series 2006-CB16, Class E, 5.84% due 05/12/45*(1)(2)........................ 445,000 451,568 JP Morgan Chase Commercial Mtg. Securities Corp., Series 2006-LDP8, Class H, 5.99% due 05/15/45*(1)(2)(3)..................... 505,000 501,273 LB-UBS Commercial Mtg. Trust, Series 2004-C4, Class C, 5.30% due 06/15/36(1)(2)......................... 100,000 100,363 LB-UBS Commercial Mtg. Trust, Series 2006-C6, 6.06% due 09/15/39............................... 1,205,000 1,210,002 Merrill Lynch/Countrywide Commercial Mtg. Trust, Series 2006-3, Clas AJ, 5.49% due 07/12/46(1)(2)......................... 1,370,000 1,374,809 Morgan Stanley Capital I, Series 2004-IQ8, Class C, 5.30% due 06/15/40(1)(2)......................... 240,000 236,565 Wachovia Bank Commercial Mtg. Trust, Series 2006-WL7A, Class E, 5.60% due 08/11/18*(1)(3)........................ 350,000 350,000
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------- Diversified Financial Services (continued) Wachovia Bank Commercial Mtg. Trust, Series 2006-WL7A, Class F, 5.66% due 08/11/18*(1)(3).............. 1,525,000 $ 1,525,000 Washington Mutual, Inc., Series 2005-AR1, Class A2, 5.58% due 01/25/45(1).................. 316,346 316,833 ----------- Total Asset Backed Securities (cost $17,986,694)..................... 17,760,663 ----------- CONVERTIBLE BONDS & NOTES -- 0.1% Telecom Services -- 0.1% ICO North America, Inc. 7.50% due 08/15/09(3)(4)(5) (cost $280,925)........................ 265,000 323,300 ----------- CORPORATE BONDS & NOTES -- 29.1% Advertising Services -- 0.1% Vertis, Inc. Sec. Notes 9.75% due 04/01/09..................... 100,000 100,875 Vertis, Inc. Company Guar. Notes 10.88% due 06/15/09.................... 725,000 728,625 ----------- 829,500 ----------- Aerospace/Defense -- 0.1% Raytheon Co. Debentures 6.00% due 12/15/10..................... 135,000 138,561 Raytheon Co. Senior Notes 6.75% due 08/15/07..................... 335,000 338,627 ----------- 477,188 ----------- Aerospace/Defense-Equipment -- 0.0% DeCrane Aircraft Holdings, Inc. Company Guar. Series B 12.00% due 09/30/08.................... 175,000 130,813 ----------- Agricultural Chemicals -- 0.1% Freeport-McMoRan Resource Partners LP Senior Notes 7.00% due 02/15/08..................... 375,000 377,812 Terra Capital, Inc. Sec. Notes 11.50% due 06/01/10.................... 162,000 176,175 Terra Capital, Inc. Company Guar. Notes 12.88% due 10/15/08.................... 75,000 83,813 ----------- 637,800 ----------- Agricultural Operations -- 0.1% Bunge Ltd. Finance Corp Notes 5.35% due 04/15/14..................... 281,000 269,133 -----------
25 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Airlines -- 0.9% American Airlines, Inc. Pass Through Certs., Series 2001-1, Class A-2, 6.82% due 05/23/11........................ 1,800,000 $1,770,750 Continental Airlines, Inc. Pass Through Certs., Series 1991, Class A, 6.55% due 02/02/19........................ 679,766 691,522 Continental Airlines, Inc. Pass Through Certs., Series 1991-1, Class C, 6.95% due 08/02/09........................ 103,950 94,075 Continental Airlines, Inc. Pass Through Certs., Series 1999, Class 2, 7.73% due 03/15/11........................ 186,534 163,683 Continental Airlines, Inc. Pass Through Certs., Series 2000-2, 8.31% due 04/02/18........................ 64,786 62,842 Delta Air Lines, Inc. Pass Through Certs. 7.57% due 11/18/10(6)(7).................. 1,125,000 1,126,406 Delta Air Lines, Inc. Sec. Notes 9.50% due 11/18/08*(7).................... 375,000 414,375 Northwest Airlines, Inc. Pass Through Certs. 7.04% due 04/01/22(7)..................... 374,162 371,823 United AirLines, Inc. Pass Through Certs. 6.20% due 09/01/08........................ 131,839 131,839 ---------- 4,827,315 ---------- Applications Software -- 0.2% SS&C Technologies, Inc. Company Guar. Notes 11.75% due 12/01/13....................... 875,000 920,937 ---------- Auto-Cars/Light Trucks -- 0.5% DaimlerChrysler NA Holding Corp. Notes 5.75% due 09/08/11........................ 145,000 144,318 DaimlerChrysler NA Holding Corp. Company Guar. Notes 7.30% due 01/15/12........................ 160,000 170,061 General Motors Corp. Senior Notes 7.13% due 07/15/13........................ 1,900,000 1,669,625 General Motors Corp. Debentures 8.25% due 07/15/23........................ 1,100,000 952,875 ---------- 2,936,879 ---------- Auto/Truck Parts & Equipment-Original -- 0.0% BREED Technologies, Inc. Guar. Senior Sub. Notes 9.25% due 04/15/08+(3)(4)(6)(7)........... 500,000 0 ----------
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- Auto/Truck Parts & Equipment-Replacement -- 0.0% Exide Corp. Notes 10.00% due 03/15/25+(3)(4)......... 225,000 $ 0 ---------- Banks-Commercial -- 0.2% Bank of Tokyo-Mitsubishi UFJ, Ltd. Sub. Notes 7.40% due 06/15/11................. 100,000 108,030 Branch Banking & Trust Co. Sub. Notes 5.63% due 09/15/16................. 150,000 151,564 Popular North America, Inc. Company Guar. Notes 5.65% due 04/15/09................. 135,000 135,459 SouthTrust Bank Sub. Notes 4.75% due 03/01/13................. 340,000 329,873 UBS AG Sub. Notes 5.88% due 07/15/16................. 140,000 144,090 Union Bank of California NA Sub. Notes 5.95% due 05/11/16................. 330,000 340,293 ---------- 1,209,309 ---------- Banks-Super Regional -- 0.3% Banc One Corp. Sub. Debentures 8.00% due 04/29/27................. 135,000 166,284 Chemical Bank NA Sub. Notes 6.13% due 11/01/08................. 198,000 202,161 Comerica, Inc. Sub. Notes 4.80% due 05/01/15................. 168,000 158,607 Huntington National Bank Sub. Notes 6.60% due 06/15/18................. 177,000 188,097 Wells Fargo & Co. Notes 3.98% due 10/29/10................. 360,000 344,780 Wells Fargo Bank NA Sub. Notes 4.75% due 02/09/15................. 500,000 479,065 ---------- 1,538,994 ---------- Beverages-Non-alcoholic -- 0.1% Cott Beverages, Inc. Company Guar. Notes 8.00% due 12/15/11................. 350,000 357,000 Le-Natures, Inc. Sub. Notes 10.00% due 06/15/13*(15)........... 325,000 334,750 ---------- 691,750 ---------- Broadcast Services/Program -- 0.3% Clear Channel Communications, Inc. Bonds 4.90% due 05/15/15................. 329,000 290,631
26 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Broadcast Services/Program (continued) Fisher Communications, Inc. Senior Notes 8.63% due 09/15/14......................... 950,000 $ 985,625 Nexstar Finance Holdings LLC/Nexstar Finance Holdings, Inc. Senior Disc. Notes 11.38% due 04/01/13(8)..................... 175,000 146,125 Nexstar Finance, Inc. Senior Sub. Notes 7.00% due 01/15/14......................... 450,000 409,500 ---------- 1,831,881 ---------- Building & Construction Products-Misc. -- 0.5% Associated Materials, Inc. Senior Disc. Notes 11.25% due 03/01/14(8)..................... 250,000 137,500 Associated Materials, Inc. Senior Sub. Notes 9.75% due 04/15/12......................... 625,000 623,437 Dayton Superior Corp. Senior Sec. Notes 10.75% due 09/15/08........................ 648,000 667,440 Dayton Superior Corp. Company Guar. Notes 13.00% due 06/15/09........................ 932,000 876,080 Interline Brands, Inc. Senior Sub. Notes 8.13% due 06/15/14......................... 325,000 329,063 ---------- 2,633,520 ---------- Building Products-Air & Heating -- 0.0% American Standard, Inc. Company Guar. Notes 7.38% due 02/01/08......................... 152,000 154,899 ---------- Cable TV -- 1.6% Adelphia Communications Corp. Senior Notes 10.25% due 06/15/11+(6)(7)................. 50,000 32,375 Cablevision Systems Corp. Senior Notes 8.00% due 04/15/12......................... 240,000 243,000 CCH I Holdings LLC/CCH I Holdings Capital Corp. Bonds 11.00% due 10/01/15*....................... 3,180,506 2,870,407 CCH II LLC/CCH II Capital Corp. Senior Notes 10.25% due 09/15/10........................ 775,000 786,625 CCH II LLC/CCH II Capital Corp. Company Guar. Notes 10.25% due 10/01/13*....................... 3,267,690 3,324,875 COX Communications, Inc. Bonds 5.50% due 10/01/15......................... 290,000 279,449 CSC Holdings, Inc. Senior Notes 7.63% due 04/01/11......................... 350,000 359,187
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------- Cable TV (continued) CSC Holdings, Inc. Debentures 8.13% due 08/15/09........................... 250,000 $ 259,062 Insight Communications Co., Inc. Senior Disc. Notes 12.25% due 02/15/11(8)....................... 900,000 954,000 ---------- 9,108,980 ---------- Casino Hotels -- 1.0% Circus & Eldorado Joint Venture/Silver Legacy Capital Corp. Notes 10.13% due 03/01/12.......................... 575,000 604,469 Eldorado Casino Corp. (Shreveport) Sec. Bonds 10.00% due 08/01/12(4)(9).................... 946,489 894,432 Eldorado Resorts LLC Senior Notes 9.00% due 04/15/14(3)(4)..................... 425,000 425,000 Harrah's Operating Co., Inc. Notes 6.50% due 06/01/16........................... 642,000 629,346 MGM Mirage, Inc. Senior Notes 5.88% due 02/27/14........................... 1,800,000 1,667,250 Riviera Holdings Corp. Company Guar. Notes 11.00% due 06/15/10.......................... 135,000 142,425 Station Casinos, Inc. Senior Sub. Notes 6.63% due 03/15/18........................... 1,325,000 1,195,812 Turning Stone Resort Casino Enterprise Senior Notes 9.13% due 09/15/14*.......................... 125,000 126,250 ---------- 5,684,984 ---------- Cellular Telecom -- 0.9% American Cellular Corp. Senior Notes Series B 10.00% due 08/01/11.......................... 1,800,000 1,885,500 Centennial Cellular Operating Co./Centennial Communications Corp. Company Guar. Notes 10.13% due 06/15/13.......................... 200,000 212,500 Centennial Communications Corp. Senior Notes 10.00% due 01/01/13.......................... 61,000 61,763 Centennial Communications Corp. Senior Notes 11.12% due 01/01/13(10)...................... 525,000 542,062 New Cingular Wireless Services, Inc. Senior Notes 7.88% due 03/01/11........................... 841,000 920,973 Rural Cellular Corp. Sec. Notes 8.25% due 03/15/12........................... 350,000 360,500
27 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Cellular Telecom (continued) Rural Cellular Corp. Senior Sub. Notes 9.75% due 01/15/10.......................... 900,000 $ 905,625 Rural Cellular Corp. Senior Sub. Notes 11.12% due 11/01/12(10)..................... 200,000 206,250 ---------- 5,095,173 ---------- Chemicals-Diversified -- 0.1% Equistar Chemicals LP/Equistar Funding Corp. Senior Notes 10.63% due 05/01/11......................... 275,000 294,937 ICI Wilmington, Inc. Company Guar. Notes 7.05% due 09/15/07.......................... 268,000 271,513 Lyondell Chemical Co. Company Guar. Notes 8.00% due 09/15/14.......................... 225,000 227,813 ---------- 794,263 ---------- Chemicals-Plastics -- 0.0% BCI US Finance Corp. Sec. Notes 11.89% due 07/15/10*(10).................... 100,000 102,000 ---------- Chemicals-Specialty -- 0.4% Cytec Industries, Inc. Notes 6.00% due 10/01/15.......................... 270,000 266,683 Eastman Chemical Co. Debentures 7.63% due 06/15/24.......................... 180,000 197,280 Nalco Co. Senior Notes 7.75% due 11/15/11.......................... 250,000 255,000 Nalco Co. Senior Sub. Notes 8.88% due 11/15/13.......................... 350,000 364,875 Rockwood Specialties Group, Inc. Senior Sub. Notes 7.50% due 11/15/14.......................... 625,000 615,625 Rockwood Specialties Group, Inc. Senior Sub. Notes 10.63% due 05/15/11......................... 55,000 58,850 Tronox Worldwide LLC/Tronox Finance Corp. Company Guar. Notes 9.50% due 12/01/12.......................... 325,000 333,531 ---------- 2,091,844 ---------- Commercial Services -- 0.2% DI Finance/DynCorp International Senior Sub. Notes 9.50% due 02/15/13.......................... 817,000 845,595 The ServiceMaster Co. Notes 7.88% due 08/15/09.......................... 108,000 113,325 ---------- 958,920 ----------
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------- Computer Services -- 0.1% Computer Sciences Corp. Notes 3.50% due 04/15/08.................. 150,000 $ 145,624 Sungard Data Systems, Inc. Company Guar. Notes 9.13% due 08/15/13.................. 175,000 181,125 ---------- 326,749 ---------- Computers-Integrated Systems -- 0.0% Activant Solutions, Inc. Senior Sub. Notes 9.50% due 05/01/16*................. 225,000 208,125 ---------- Consulting Services -- 0.0% FTI Consulting, Inc. Company Guar. Notes 7.63% due 06/15/13.................. 225,000 227,250 ---------- Consumer Products-Misc. -- 0.2% American Achievement Corp. Senior Sub. Notes 8.25% due 04/01/12.................. 86,000 86,860 Jostens Holding Corp. Senior Disc. Notes 10.25% due 12/01/13(8).............. 323,000 266,475 Prestige Brands, Inc. Senior Sub. Notes 9.25% due 04/15/12.................. 100,000 100,500 Visant Holding Corp. Senior Notes 8.75% due 12/01/13*................. 525,000 528,281 ---------- 982,116 ---------- Containers-Metal/Glass -- 0.4% Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23.................. 1,110,000 1,060,050 Owens Brockway Glass Container, Inc. Company Guar. Notes 8.88% due 02/15/09.................. 593,000 609,307 Owens-Brockway Glass Container, Inc. Company Guar. Notes 8.25% due 05/15/13.................. 375,000 384,375 ---------- 2,053,732 ---------- Containers-Paper/Plastic -- 0.2% Pliant Corp. Sec. Notes 11.13% due 09/01/09................. 870,000 850,425 ---------- Cosmetics & Toiletries -- 0.1% Procter & Gamble Co. Senior Notes 2.00% due 06/21/10.................. JPY 79,000,000 691,016 ---------- Diagnostic Kits -- 0.1% Inverness Medical Innovations, Inc. Senior Sub. Notes 8.75% due 02/15/12.................. 425,000 418,625 ----------
28 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Direct Marketing -- 0.1% Affinity Group, Inc. Senior Sub. Notes 9.00% due 02/15/12...................... 814,000 $ 814,000 ---------- Diversified Financial Services -- 0.3% ANZ Capital Trust II Bonds 5.36% due 12/15/13*(12)................. 370,000 356,643 General Electric Capital Corp. Senior Notes Series E 5.13% due 03/21/12...................... JPY105,000,000 867,194 General Electric Capital Corp. Notes Series A 6.75% due 03/15/32...................... 279,000 318,908 ZFS Finance USA Trust I Bonds 6.45% due 06/15/16*(11)................. 310,000 306,604 ---------- 1,849,349 ---------- Diversified Manufactured Operations -- 0.2% Covalence Specialty Materials Corp. Senior Sub. Notes 10.25% due 03/01/16*.................... 325,000 315,250 Indalex Holding Corp. Sec. Notes 11.50% due 02/01/14*.................... 500,000 530,000 Park-Ohio Industries, Inc. Company Guar. Notes 8.38% due 11/15/14...................... 75,000 68,250 ---------- 913,500 ---------- Electric-Generation -- 0.3% Edison Mission Energy Senior Notes 7.50% due 06/15/13*..................... 425,000 429,250 Edison Mission Energy Senior Notes 7.75% due 06/15/16*..................... 225,000 227,812 The AES Corp. Sec. Notes 8.75% due 05/15/13*..................... 1,150,000 1,233,375 ---------- 1,890,437 ---------- Electric-Integrated -- 1.0% American Electric Power Co., Inc. Senior Notes 4.71% due 08/16/07(8)................... 370,000 367,473 Appalachian Power Co. Senior Notes 5.00% due 06/01/17...................... 186,000 174,236 CenterPoint Energy Houston Electric LLC Sec. Notes Series L2 5.60% due 07/01/23...................... 244,000 236,356 Centerpoint Energy, Inc. Senior Notes Series B 5.88% due 06/01/08...................... 150,000 150,704
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- Electric-Integrated (continued) Commonwealth Edison Co. 1st Mtg. Notes 5.95% due 08/15/16............... 280,000 $ 283,875 Consumers Energy Co. 1st Mtg. Bonds Series C 4.25% due 04/15/08............... 180,000 176,843 Dominion Resources, Inc. Senior Notes Series A 5.69% due 05/15/08(8)............ 176,000 176,720 Duke Energy Corp. Senior Notes 4.20% due 10/01/08............... 305,000 298,629 Energy East Corp. Notes 6.75% due 07/15/36............... 295,000 308,785 Entergy Louisiana LLC 1st Mtg. Bonds 5.83% due 11/01/10............... 195,000 194,499 Florida Power & Light Co. 1st Mtg. Bonds 5.95% due 10/01/33............... 100,000 103,199 Mirant Americas Generation LLC Senior Notes 8.30% due 05/01/11............... 900,000 901,125 Mission Energy Holding Co. Sec. Notes 13.50% due 07/15/08.............. 1,075,000 1,199,969 Pepco Holdings, Inc. Notes 5.50% due 08/15/07............... 278,000 277,935 Pepco Holdings, Inc. Notes 6.45% due 08/15/12............... 140,000 144,885 PSEG Power LLC Company Guar. Notes 7.75% due 04/15/11............... 50,000 54,250 Public Service Electric & Gas Co. Sec. Notes 5.00% due 08/15/14............... 96,000 93,482 Puget Sound Energy, Inc. Senior Notes 5.20% due 10/01/15............... 433,000 416,867 Southern California Edison Co. 1st Mtg. Bonds 5.75% due 04/01/35............... 80,000 79,050 Southern Energy, Inc. Notes 7.90% due 07/15/09+(3)(4)(5)..... 1,550,000 0 ---------- 5,638,882 ---------- Electronic Components-Misc. -- 0.0% Sanmina-SCI Corp. Company Guar. Notes 6.75% due 03/01/13............... 75,000 70,688 ----------
29 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Electronic Components-Semiconductors -- 0.1% Advanced Micro Devices, Inc. Senior Notes 7.75% due 11/01/12....................... 244,000 $ 247,660 Amkor Technology, Inc. Senior Notes 9.25% due 06/01/16....................... 550,000 515,625 ---------- 763,285 ---------- Electronic Parts Distribution -- 0.1% Arrow Electronics, Inc. Debentures 6.88% due 06/01/18....................... 279,000 285,139 ---------- Electronics-Military -- 0.2% L-3 Communications Corp. Company Guar. Notes 6.13% due 07/15/13....................... 750,000 729,375 L-3 Communications Corp. Senior Sub. Notes 6.38% due 10/15/15....................... 550,000 534,875 ---------- 1,264,250 ---------- Energy-Alternate Sources -- 0.1% VeraSun Energy Corp. Sec. Notes 9.88% due 12/15/12....................... 375,000 391,875 ---------- Enterprise Software/Service -- 0.0% Oracle Corp and Ozark Holding, Inc. Notes 5.00% due 01/15/11....................... 118,000 116,873 ---------- Finance-Auto Loans -- 2.2% Ford Motor Credit Co. Senior Notes 5.80% due 01/12/09....................... 2,117,000 2,015,418 Ford Motor Credit Co. Notes 6.38% due 11/05/08....................... 123,000 118,198 Ford Motor Credit Co. Notes 7.38% due 10/28/09....................... 1,150,000 1,117,575 Ford Motor Credit Co. Notes 9.96% due 04/15/12(10)................... 800,000 837,122 General Motors Acceptance Corp. Notes 6.75% due 12/01/14....................... 2,050,000 2,001,323 General Motors Acceptance Corp. Notes 6.88% due 09/15/11....................... 4,100,000 4,078,278 General Motors Acceptance Corp. Notes 6.88% due 08/28/12....................... 60,000 59,388 General Motors Acceptance Corp. Notes 7.25% due 03/02/11....................... 425,000 427,430 General Motors Acceptance Corp. Notes 9.82% due 12/01/14(10)................... 925,000 927,317
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Finance-Auto Loans (continued) General Motors Acceptance Corp. Notes 7.75% due 01/19/10................... 575,000 $ 589,170 ----------- 12,171,219 ----------- Finance-Commercial -- 0.0% CIT Group, Inc. Notes 5.85% due 09/15/16................... 150,000 151,772 Transamerica Finance Corp. Senior Notes 6.40% due 09/15/08................... 36,000 36,708 ----------- 188,480 ----------- Finance-Credit Card -- 0.1% Capital One Financial Corp. Senior Notes 5.70% due 09/15/11................... 290,000 292,043 Capital One Financial Corp. Sub. Notes 6.15% due 09/01/16................... 280,000 283,322 ----------- 575,365 ----------- Finance-Investment Banker/Broker -- 0.3% Citigroup, Inc. Sub. Notes 5.00% due 09/15/14................... 140,000 136,399 Goldman Sachs Group, Inc. Notes 6.13% due 02/15/33................... 320,000 318,775 JP Morgan Chase Capital XVIII Bonds Series R, 6.95% due 08/17/36................... 145,000 154,016 Lehman Brothers Holdings, Inc. Notes 4.50% due 07/26/10................... 120,000 116,710 Lehman Brothers Holdings, Inc. Notes 5.50% due 04/04/16................... 240,000 239,113 Lehman Brothers Holdings, Inc. Senior Notes 5.75% due 05/17/13................... 330,000 335,861 Merrill Lynch & Co., Inc. Sub. Notes 6.22% due 09/15/26................... 340,000 345,864 Morgan Stanley Senior Notes 5.63% due 01/09/12................... 150,000 151,944 Morgan Stanley Senior Notes 6.25% due 08/09/26................... 150,000 155,286 ----------- 1,953,968 ----------- Finance-Mortgage Loan/Banker -- 0.2% Countrywide Home Loans, Inc. Notes 4.13% due 09/15/09................... 90,000 87,187
30 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Finance-Mortgage Loan/Banker (continued) Residential Capital Corp. Senior Notes 6.38% due 06/30/10................... 750,000 $ 758,834 Residential Capital Corp. Senior Notes 6.50% due 04/17/13................... 155,000 157,409 ---------- 1,003,430 ---------- Financial Guarantee Insurance -- 0.0% The PMI Group, Inc. Notes 6.00% due 09/15/16................... 227,000 229,876 ---------- Food-Meat Products -- 0.1% Smithfield Foods, Inc. Senior Notes 7.75% due 05/15/13................... 550,000 566,500 ---------- Food-Misc. -- 0.1% Wornick Co. Sec. Notes 10.88% due 07/15/11.................. 800,000 796,000 ---------- Forestry -- 0.0% Weyerhaeuser Co. Debentures 6.88% due 12/15/33................... 160,000 157,138 ---------- Funeral Services & Related Items -- 0.5% Alderwoods Group, Inc. Company Guar. Notes 7.75% due 09/15/12................... 50,000 53,875 Carriage Services, Inc. Senior Notes 7.88% due 01/15/15................... 687,000 668,108 Service Corp. International Senior Notes 6.75% due 04/01/16................... 1,225,000 1,174,469 Service Corp. International Senior Notes 7.00% due 06/15/17*.................. 400,000 383,000 Service Corp. International Senior Notes 7.38% due 10/01/14*.................. 25,000 25,156 Service Corp. International Senior Notes 7.63% due 10/01/18*.................. 25,000 25,156 Stewart Enterprises, Inc. Senior Notes 6.25% due 02/15/13................... 725,000 670,625 ---------- 3,000,389 ---------- Gambling (Non-Hotel) -- 0.2% Greektown Holdings LLC Senior Notes 10.75% due 12/01/13*................. 750,000 791,250 Waterford Gaming LLC Senior Notes 8.63% due 09/15/12*.................. 172,000 181,890 ---------- 973,140 ----------
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Gas-Distribution -- 0.1% Colorado Interstate Gas Co. Senior Debentures 6.85% due 06/15/37.................... 150,000 $ 150,815 Sempra Energy Senior Notes 4.62% due 05/17/07.................... 432,000 429,906 Southern California Gas Co 1st Mtg. Bonds 5.75% due 11/15/35.................... 70,000 70,331 ---------- 651,052 ---------- Gold Mining -- 0.0% Newmont Mining Corp. Notes 8.63% due 05/15/11.................... 146,000 164,025 ---------- Golf -- 0.1% True Temper Sports, Inc. Company Guar. Notes 8.38% due 09/15/11.................... 600,000 537,000 ---------- Hotels/Motels -- 0.1% Gaylord Entertainment Co. Company Guar. Senior Notes 6.75% due 11/15/14.................... 500,000 478,125 Hilton Hotels Corp. Senior Notes 7.20% due 12/15/09.................... 68,000 70,295 ---------- 548,420 ---------- Independant Power Producers -- 1.1% Calpine Corp Sec. Notes 8.75% due 07/15/13*+(6)(7)............ 4,648,000 4,682,860 NRG Energy, Inc. Company Guar. Notes 7.38% due 02/01/16.................... 1,125,000 1,117,969 Reliant Energy, Inc. Sec. Notes 6.75% due 12/15/14.................... 50,000 47,562 Reliant Energy, Inc. Sec. Notes 9.50% due 07/15/13.................... 176,000 182,600 ---------- 6,030,991 ---------- Industrial Audio & Video Products -- 0.0% Telex Communications, Inc. Sec. Notes 11.50% due 10/15/08................... 50,000 53,000 ---------- Instruments-Scientific -- 0.0% Fisher Scientific International, Inc. Senior Sub. Notes 6.75% due 08/15/14.................... 250,000 254,375 ---------- Insurance-Life/Health -- 0.3% Americo Life, Inc. Notes 7.88% due 05/01/13*................... 38,000 38,212 AmerUs Group Co. Senior Notes 6.58% due 05/16/11.................... 310,000 322,408
31 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Insurance-Life/Health (continued) Great West Life & Annuity Insurance Co. Bonds 7.15% due 05/16/46*(11)................ 550,000 $ 571,227 MIC Financing Trust I Pass Through Certs. 8.38% due 02/01/27*.................... 123,000 123,688 Monumental Global Funding II Notes 5.65% due 07/14/11*.................... 174,000 176,941 Nationwide Life Global Funding I Notes 5.35% due 03/15/11*.................... 200,000 201,077 Presidential Life Corp. Senior Notes 7.88% due 02/15/09..................... 150,000 144,000 ---------- 1,577,553 ---------- Insurance-Multi-line -- 0.1% MetLife, Inc. Senior Notes 5.00% due 11/24/13..................... 203,000 197,365 Metropolitan Life Global Funding I Sec. Notes 5.75% due 07/25/11*.................... 140,000 143,015 ---------- 340,380 ---------- Insurance-Mutual -- 0.0% Liberty Mutual Group, Inc. Bonds 7.50% due 08/15/36*.................... 200,000 214,540 ---------- Insurance-Property/Casualty -- 0.0% Crum & Forster Holdings Corp. Senior Notes 10.38% due 06/15/13.................... 125,000 128,125 ---------- Invest Management/Advisor Services -- 0.0% Ameriprise Financial, Inc. Senior Notes 5.35% due 11/15/10..................... 81,000 81,279 ---------- Leisure Products -- 0.0% Brunswick Corp. Notes 5.00% due 06/01/11..................... 103,000 98,497 K2, Inc. Guar. Senior Notes 7.38% due 07/01/14..................... 125,000 121,719 ---------- 220,216 ---------- Machinery-Farming -- 0.1% Case New Holland, Inc. Senior Notes 6.00% due 06/01/09..................... 325,000 320,531 ---------- Machinery-General Industrial -- 0.0% Stewart & Stevenson LLC/Stewart & Stevenson Corp. Senior Notes 10.00% due 07/15/14.................... 175,000 177,187 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------ Medical Information Systems -- 0.0% Spheris, Inc. Senior Sub. Notes 11.00% due 12/15/12.............. 150,000 $140,625 -------- Medical Products -- 0.1% Baxter International, Inc. Senior Bonds 5.90% due 09/01/16............... 135,000 138,649 CDRV Investors, Inc. Senior Disc. Notes 9.63% due 01/01/15(8)............ 325,000 240,500 Encore Medical IHC, Inc. Company Guar. Notes 9.75% due 10/01/12............... 75,000 82,500 Universal Hospital Services, Inc. Senior Notes 10.13% due 11/01/11.............. 250,000 262,500 -------- 724,149 -------- Medical-Biomedical/Gene -- 0.0% Bio-Rad Laboratories, Inc. Senior Sub. Notes 6.13% due 12/15/14............... 27,000 25,515 -------- Medical-Drugs -- 0.2% Abbott Laboratories Notes 5.88% due 05/15/16............... 348,000 360,510 American Home Products Corp. Notes 6.95% due 03/15/11............... 158,000 168,010 Merck & Co., Inc. Notes 2.50% due 03/30/07............... 40,000 39,466 Wyeth Bonds 5.50% due 02/01/14............... 250,000 250,474 Wyeth Notes 6.00% due 02/15/36............... 168,000 169,846 -------- 988,306 -------- Medical-Generic Drugs -- 0.1% Mylan Laboratories, Inc. Company Guar. Notes 5.75% due 08/15/10............... 25,000 24,719 Mylan Laboratories, Inc. Company Guar. Notes 6.38% due 08/15/15............... 450,000 435,937 -------- 460,656 -------- Medical-HMO -- 0.1% Multiplan, Inc. Senior Sub. Notes 10.38% due 04/15/16.............. 450,000 452,250 -------- Medical-Hospitals -- 0.1% Community Health Systems, Inc. Senior Sec. Notes 6.50% due 12/15/12............... 616,000 589,050 --------
32 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Medical-Nursing Homes -- 0.0% Genesis HealthCare Corp. Senior Sub. Debentures 2.50% due 03/15/25*..................... 75,000 $ 79,875 Genesis HealthCare Corp. Senior Notes 8.00% due 10/15/13...................... 75,000 77,813 ---------- 157,688 ---------- Medical-Wholesale Drug Distribution -- 0.1% Cardinal Health, Inc. Notes 5.80% due 10/15/16*..................... 330,000 329,545 ---------- Metal Processors & Fabrication -- 0.1% Metals USA, Inc. Secured Notes 11.13% due 12/01/15..................... 450,000 492,750 Timken Co. Notes 5.75% due 02/15/10...................... 162,000 161,350 ---------- 654,100 ---------- Multimedia -- 0.3% Belo Corp. Senior Notes 6.75% due 05/30/13...................... 145,000 148,644 Haights Cross Operating Co. Guar. Senior Notes 11.75% due 08/15/11..................... 150,000 153,750 News America, Inc. Company Guar. Bonds 7.30% due 04/30/28...................... 173,000 184,526 Time Warner Cos., Inc. Company Guar. Notes 7.25% due 10/15/17...................... 151,000 162,989 Time Warner Entertainment Co. LP Senior Notes 8.38% due 07/15/33...................... 160,000 188,703 Time Warner Entertainment Co. LP Senior Debentures 8.38% due 03/15/23...................... 458,000 528,932 Time Warner, Inc. Company Guar. Notes 6.75% due 04/15/11...................... 190,000 198,717 Viacom, Inc. Senior Notes 6.88% due 04/30/36*..................... 137,000 135,437 ---------- 1,701,698 ---------- Networking Products -- 0.0% Cisco Systems, Inc. Senior Notes 5.50% due 02/22/16...................... 152,000 153,209 ---------- Non-Ferrous Metals -- 0.0% Renco Metals, Inc. Local Government Guar. Notes 11.50% due 07/01/03+(3)(4)(7)(16)....... 500,000 0 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------- Non-hazardous Waste Disposal -- 0.2% Allied Waste North America, Inc. Senior Notes Series B 8.50% due 12/01/08......................... 1,250,000 $1,309,375 ---------- Office Automation & Equipment -- 0.2% Pitney Bowes, Inc. Senior Notes 4.75% due 01/15/16......................... 256,000 243,599 Xerox Corp. Senior Notes 6.75% due 02/01/17......................... 500,000 507,500 Xerox Corp. Senior Notes 7.63% due 06/15/13......................... 275,000 288,750 ---------- 1,039,849 ---------- Office Supplies & Forms -- 0.0% Acco Brands Corp. Company Guar. Notes 7.63% due 08/15/15......................... 75,000 72,563 ---------- Oil & Gas Drilling -- 0.0% Pride International, Inc. Senior Notes 7.38% due 07/15/14......................... 50,000 51,500 ---------- Oil Comp-Integrated -- 0.1% Hess Corp. Bonds 7.88% due 10/01/29......................... 202,000 238,710 Phillips Petroleum Co. Debentures 7.00% due 03/30/29......................... 125,000 143,367 ---------- 382,077 ---------- Oil Companies-Exploration & Production -- 1.5% Anadarko Petroleum Corp. Senior Notes 5.95% due 09/15/16......................... 290,000 293,465 Belden & Blake Corp. Company Guar. Sec. Notes 8.75% due 07/15/12......................... 200,000 205,500 Brigham Exploration Co. Senior Notes 9.63% due 05/01/14*........................ 550,000 536,250 Chaparral Energy, Inc. Company Guar. Notes 8.50% due 12/01/15......................... 1,550,000 1,538,375 Chesapeake Energy Corp. Senior Notes 6.25% due 01/15/18......................... 875,000 811,562 Chesapeake Energy Corp. Senior Notes 6.63% due 01/15/16......................... 925,000 892,625 Costilla Energy, Inc. Senior Notes 10.25% due 10/01/06+(3)(4)................. 500,000 0 El Paso Production Holding Co. Company Guar. Notes 7.75% due 06/01/13......................... 2,375,000 2,428,437
33 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Oil Companies-Exploration & Production (continued) Encore Acquisition Co. Senior Sub. Notes 6.00% due 07/15/15................... 175,000 $ 160,125 Encore Acquisition Co. Senior Sub. Notes 6.25% due 04/15/14................... 50,000 46,750 Exco Resources, Inc. Company Guar. Notes 7.25% due 01/15/11................... 125,000 122,188 Hilcorp Energy LP Senior Notes 7.75% due 11/01/15*.................. 425,000 411,187 Hilcorp Energy I LP Senior Notes 10.50% due 09/01/10*................. 170,000 182,963 Newfield Exploration Co. Senior Sub. Notes 6.63% due 09/01/14................... 150,000 146,813 Quicksilver Resources, Inc. Company Guar. 7.13% due 04/01/16................... 200,000 189,500 Transmeridian Exploration, Inc. Company Guar. 12.00% due 12/15/10(3)............... 325,000 325,000 ---------- 8,290,740 ---------- Oil Field Machinery & Equipment -- 0.0% Dresser-Rand Group, Inc. Company Guar. 7.38% due 11/01/14................... 188,000 184,710 ---------- Oil Refining & Marketing -- 0.1% The Premcor Refining Group, Inc. Senior Notes 6.75% due 02/01/11................... 335,000 349,761 ---------- Oil-Field Services -- 0.1% Allis-Chalmers Energy, Inc. Senior Notes 9.00% due 01/15/14*.................. 350,000 350,875 Hanover Compressor Co. Guar. Senior Sub. Notes 8.63% due 12/15/10................... 175,000 182,000 Oslo Seismic Services, Inc. 1st Mtg. Bonds 8.28% due 06/01/11................... 173,564 177,914 ---------- 710,789 ---------- Paper & Related Products -- 0.4% Bowater, Inc. Notes 6.50% due 06/15/13................... 1,500,000 1,331,250 Caraustar Industries, Inc. Notes 7.38% due 06/01/09................... 425,000 399,500 Plum Creek Timberlands LP Company Guar. Notes 5.88% due 11/15/15................... 294,000 290,818 ---------- 2,021,568 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------------ Pipelines -- 1.4% Atlas Pipeline Partners LP Company Guar. Notes 8.13% due 12/15/15............................... 300,000 $ 305,250 Consolidated Natural Gas Co. Senior Notes Series B 5.38% due 11/01/06............................... 114,000 113,981 Copano Energy LLC Senior Notes 8.13% due 03/01/16............................... 250,000 253,125 Duke Energy Field Services LLC Notes 6.88% due 02/01/11............................... 178,000 187,087 Dynegy-Roseton Danskammer Company Guar. Bonds Series B 7.67% due 11/08/16............................... 425,000 433,500 El Paso Natural Gas Co. Senior Notes Series A 7.63% due 08/01/10............................... 100,000 103,000 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22............................... 875,000 1,001,082 MarkWest Energy Partners LP/MarkWest Energy Finance Corp. Senior Notes 6.88% due 11/01/14............................... 200,000 188,000 NGC Corp Capital Trust Company Guar. Bonds Series B 8.32% due 06/01/27............................... 1,875,000 1,706,250 ONEOK Partners LP Bonds 6.15% due 10/01/16............................... 155,000 156,461 Pacific Energy Partners LP Senior Notes 7.13% due 06/15/14............................... 332,000 338,640 Pacific Energy Partners LP/Pacific Energy Finance Corp. Company Guar. Notes 6.25% due 09/15/15............................... 218,000 214,730 Reliant Energy, Inc. Notes 7.75% due 02/15/11............................... 290,000 314,526 Tennessee Gas Pipeline Co. Debentures 7.00% due 10/15/28............................... 800,000 796,771 Transcontinental Gas Pipe Line Corp. Notes 7.00% due 08/15/11............................... 150,000 153,750 Transcontinental Gas Pipe Line Corp. Senior Notes Series B 8.88% due 07/15/12............................... 425,000 470,156 Williams Cos., Inc. Notes 7.88% due 09/01/21............................... 975,000 1,018,875 ---------- 7,755,184 ----------
34 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Precious Metals -- 0.1% Barrick Gold Finance Co. Bonds 5.80% due 11/15/34................ 175,000 $162,847 Barrick Gold Finance Co. Company Guar. Bonds 7.50% due 05/01/07................ 233,000 235,758 -------- 398,605 -------- Private Corrections -- 0.0% Corrections Corp. of America Company Guar. Notes 6.25% due 03/15/13................ 200,000 196,000 -------- Protection/Safety -- 0.1% Monitronics International, Inc. Senior Sub. Notes 11.75% due 09/01/10............... 335,000 324,112 -------- Publishing-Newspapers -- 0.1% Knight Ridder, Inc. Debentures 6.88% due 03/15/29................ 90,000 85,898 Knight Ridder, Inc. Debentures 7.15% due 11/01/27................ 205,000 197,653 Medianews Group, Inc. Senior Sub. Notes 6.38% due 04/01/14................ 20,000 17,650 Medianews Group, Inc. Senior Sub. Notes 6.88% due 10/01/13................ 255,000 235,875 -------- 537,076 -------- Radio -- 0.0% Chancellor Media Corp. Company Guar. Notes 8.00% due 11/01/08................ 148,000 154,749 -------- Real Estate Investment Trusts -- 0.8% AvalonBay Communities, Inc. Senior Notes 5.75% due 09/15/16................ 310,000 313,092 Equity One, Inc. Senior Notes 6.25% due 01/15/17................ 126,000 128,895 Heritage Property Investment Trust Notes 4.50% due 10/15/09................ 152,000 148,348 Mack-Cali Realty LP Bonds 5.80% due 01/15/16................ 156,000 156,317 National Health Investors, Inc. Notes 7.30% due 07/16/07................ 100,000 100,233 Omega Healthcare Investors, Inc. Senior Notes 7.00% due 04/01/14................ 200,000 198,000 Reckson Operating Partnership LP Senior Notes 6.00% due 03/31/16................ 86,000 86,770
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Real Estate Investment Trusts (continued) Senior Housing Properties Trust Senior Notes 8.63% due 01/15/12.................... 2,027,000 $2,176,491 Simon Property Group LP Notes 5.38% due 08/28/08.................... 124,000 123,928 Simon Property Group LP Notes 5.60% due 09/01/11.................... 140,000 141,042 Trustreet Properties, Inc. Senior Notes 7.50% due 04/01/15.................... 775,000 769,187 ---------- 4,342,303 ---------- Real Estate Management/Services -- 0.1% AMB Property LP Company Guar. Notes 5.90% due 08/15/13.................... 112,000 113,753 EOP Operating LP Senior Notes 7.00% due 07/15/11.................... 321,000 339,797 ---------- 453,550 ---------- Rental Auto/Equipment -- 0.4% Avis Budget Car Rental LLC/Avis Budget Finance, Inc. Senior Notes 7.63% due 05/15/14*................... 100,000 97,000 Avis Budget Car Rental LLC/Avis Budget Finance, Inc. Senior Notes 7.91% due 05/15/14*(10)............... 150,000 147,000 H&E Equipment Services, Inc. Senior Notes 8.38% due 07/15/16*................... 450,000 461,250 Rent-Way, Inc. Sec. Notes 11.88% due 06/15/10................... 758,000 879,280 United Rentals North America, Inc. Senior Sub. Notes 7.75% due 11/15/13.................... 650,000 640,250 ---------- 2,224,780 ---------- Retail-Drug Store -- 0.3% General Nutrition Centers, Inc. Senior Sub. Notes 8.50% due 12/01/10.................... 1,050,000 1,018,500 Rite Aid Corp. Sec. Notes 8.13% due 05/01/10.................... 425,000 426,062 ---------- 1,444,562 ---------- Retail-Major Department Stores -- 0.1% Saks, Inc. Company Guar. Notes 9.88% due 10/01/11.................... 375,000 409,219 ---------- Retail-Petroleum Products -- 0.1% Ferrellgas LP Senior Notes 6.75% due 05/01/14.................... 850,000 830,875 ----------
35 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Retail-Regional Deptment Stores -- 0.1% Neiman-Marcus Group, Inc. Company Guar. Notes 9.00% due 10/15/15.................. 400,000 $ 425,000 ---------- Retail-Restaurants -- 0.2% Dave & Buster's, Inc. Senior Notes 11.25% due 03/15/14................. 250,000 237,500 NPC International, Inc. Senior Sub. Notes 9.50% due 05/01/14*................. 950,000 935,750 The Restaurant Co. Senior Notes 10.00% due 10/01/13................. 100,000 92,375 ---------- 1,265,625 ---------- Rubber-Tires -- 0.0% Cooper-Standard Automotive, Inc. Company Guar. Notes 8.38% due 12/15/14.................. 64,000 47,040 ---------- Rubber/Plastic Products -- 0.0% Venture Holdings Co. LLC Company Guar. Notes 11.00% due 06/01/07+(4)(6)(17)...... 100,000 400 ---------- Savings & Loans/Thrifts -- 0.3% Downey Financial Corp. Notes 6.50% due 07/01/14.................. 180,000 180,482 Golden West Financial Corp. Senior Notes 4.75% due 10/01/12.................. 354,000 344,623 Independence Community Bank Corp. Notes 3.50% due 06/20/13(11).............. 172,000 166,801 Sovereign Bancorp, Inc. Senior Notes 4.80% due 09/01/10*................. 405,000 396,535 Washington Mutual Bank Sub. Notes 5.95% due 05/20/13.................. 330,000 336,859 Western Financial Bank Senior Debentures 9.63% due 05/15/12.................. 333,000 367,973 ---------- 1,793,273 ---------- Seismic Data Collection -- 0.1% Seitel, Inc. Senior Notes 11.75% due 07/15/11................. 475,000 564,062 ---------- Special Purpose Entities -- 0.7% AAC Group Holding Corp. Senior Disc. Notes 10.25% due 10/01/12(8).............. 450,000 373,500 AMR HoldCo, Inc./EmCare HoldCo, Inc. Senior Sub. Notes 10.00% due 02/15/15................. 125,000 133,125
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------- Special Purpose Entities (continued) BAE Systems Holdings, Inc. Notes 5.20% due 08/15/15*...................... 465,000 $ 444,910 Chukchansi Economic Development Authority Senior Notes 8.78% due 11/15/12*(10).................. 150,000 154,500 Consolidated Communications Illinois/Texas Holdings, Inc. Senior Notes 9.75% due 04/01/12....................... 347,000 366,085 Hexion US Finance Corp/Hexion Nova Scotia Finance ULC Sec. Notes 9.00% due 07/15/14....................... 645,000 657,900 ING USA Global Funding Trust Notes 4.25% due 10/01/10....................... 268,000 260,844 MedCath Holdings Corp. Senior Notes 9.88% due 07/15/12....................... 175,000 186,375 MXEnergy Holdings, Inc. Senior Notes 13.02% due 08/01/11*(10)................. 675,000 658,125 PCA LLC/PCA Finance Corp. Senior Notes 11.88% due 08/01/09(4)................... 325,000 78,000 Pricoa Global Funding I Notes 5.30% due 09/27/13*...................... 320,000 319,811 Principal Life Global Funding I Sec. Notes 5.25% due 01/15/13*...................... 296,000 294,586 Southern Star Central Corp. Senior Notes 6.75% due 03/01/16....................... 150,000 147,375 Swiss Re Capital I LP Company Guar. Notes 6.85% due 05/25/16*(12).................. 149,000 153,461 ---------- 4,228,597 ---------- Specified Purpose Acquisitions -- 0.0% ESI Tractebel Acquisition Corp. Company Guar. Notes Series B 7.99% due 12/30/11....................... 210,000 216,600 ---------- Steel-Producer -- 0.1% Chaparral Steel Co. Company Guar. Notes 10.00% due 07/15/13...................... 300,000 334,500 ---------- Steel-Specialty -- 0.0% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11....................... 75,000 78,938 ---------- Storage/Warehousing -- 0.1% Mobile Mini, Inc. Senior Notes 9.50% due 07/01/13....................... 98,000 104,860
36 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Storage/Warehousing (continued) Mobile Services Group, Inc. Senior Notes 9.75% due 08/01/14*.................. 250,000 $ 256,250 ---------- 361,110 ---------- Telecom Equipment-Fiber Optics -- 0.1% Corning, Inc. Bonds 7.25% due 08/15/36................... 288,000 306,729 ---------- Telecom Services -- 0.1% Cincinnati Bell Telephone Co. Company Guar. Series MTN 7.18% due 12/15/23................... 50,000 50,250 Cincinnati Bell Telephone Co. Company Guar. Series MTN 7.20% due 11/29/23................... 225,000 218,250 Embarq Corp. Notes 7.08% due 06/01/16................... 8,000 8,161 Insight Midwest LP Senior Notes 9.75% due 10/01/09................... 100,000 101,750 Qwest Corp. Senior Notes 7.50% due 10/01/14*.................. 375,000 387,187 ---------- 765,598 ---------- Telephone-Integrated -- 0.9% Cincinnati Bell, Inc. Senior Notes 7.00% due 02/15/15................... 150,000 147,000 Cincinnati Bell, Inc. Senior Notes 7.25% due 06/15/23................... 25,000 24,000 GTE Northwest, Inc. Debentures Series D 5.55% due 10/15/08................... 55,000 55,031 GTE Southwest, Inc. 1st Mtg. Bonds 8.50% due 11/15/31................... 230,000 275,291 LCI International, Inc. Senior Notes 7.25% due 06/15/07................... 2,550,000 2,556,375 New England Telephone & Telegraph Co. Debentures 7.88% due 11/15/29................... 174,000 188,851 Verizon New York, Inc. Debentures Series A 6.88% due 04/01/12................... 117,000 122,012 Windstream Corp. Senior Notes 8.63% due 08/01/16*.................. 1,450,000 1,551,500 ---------- 4,920,060 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ Television -- 0.8% Allbritton Communications Co Senior Sub. Notes 7.75% due 12/15/12................... 875,000 $ 881,562 CBS Corp. Company Guar. Notes 6.63% due 05/15/11................... 320,000 332,492 LIN Television Corp. Senior Sub. Notes 6.50% due 05/15/13................... 810,000 755,325 Paxson Communications, Inc. Sec. Notes 11.62% due 01/15/13*(10)............. 1,550,000 1,561,625 Univision Communications, Inc. Company Guar. Notes 3.50% due 10/15/07................... 80,000 77,815 Young Broadcasting, Inc. Senior Sub. Notes 8.75% due 01/15/14................... 100,000 85,000 Young Broadcasting, Inc. Company Guar. Bonds 10.00% due 03/01/11.................. 725,000 676,969 ---------- 4,370,788 ---------- Textile-Products -- 0.1% Collins & Aikman Floorcoverings, Inc. Company Guar. Series B 9.75% due 02/15/10................... 273,000 271,635 ---------- Theaters -- 0.3% AMC Entertainment, Inc. Senior Sub. Notes 8.00% due 03/01/14................... 450,000 423,000 AMC Entertainment, Inc. Senior Sub. Notes 9.88% due 02/01/12................... 475,000 488,062 Cinemark, Inc. Senior Disc. Notes 9.75% due 03/15/14(8)................ 1,200,000 957,000 ---------- 1,868,062 ---------- Transport-Air Freight -- 1.0% Atlas Air, Inc. Pass Through Certs. Series 1991 Class A 6.88% due 01/02/11................... 225,771 218,998 Atlas Air, Inc. Pass Through Certs. Series 1991 Class A 7.20% due 01/02/19................... 1,713,503 1,700,651 Atlas Air, Inc. Pass Through Certs. Series 1991 Class B 7.63% due 01/02/15................... 1,701,936 1,770,014
37 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Transport-Air Freight (continued) Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class A 8.71% due 01/02/19.......................... 363,674 $ 376,402 Atlas Air, Inc. Pass Through Certs. Series 1991 Class C 8.77% due 01/02/11.......................... 62,428 54,001 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class B 9.06% due 07/02/17.......................... 1,346,314 1,494,408 ------------ 5,614,474 ------------ Transport-Rail -- 0.1% Burlington Northern Santa Fe Corp. Debentures 7.29% due 06/01/36.......................... 323,000 382,777 ------------ Transport-Services -- 0.1% FedEx Corp. Company Guar. Notes 5.50% due 08/15/09.......................... 135,000 135,867 PHI, Inc. Senior Notes 7.13% due 04/15/13*......................... 325,000 307,938 Ryder System, Inc. Notes 5.00% due 06/15/12.......................... 131,000 126,069 ------------ 569,874 ------------ Travel Services -- 0.1% Travelport, Inc. Senior Notes 9.88% due 09/01/14*......................... 125,000 120,625 Travelport, Inc. Senior Notes 10.02% due 09/01/14*(10).................... 125,000 120,000 Travelport, Inc. Senior Sub. Notes 11.88% due 09/01/16*........................ 500,000 480,000 ------------ 720,625 ------------ Total Corporate Bonds & Notes (cost $162,537,343)......................... 164,563,082 ------------ FOREIGN CORPORATE BONDS & NOTES -- 5.2% Banks-Commercial -- 0.2% Barclays Bank PLC Notes 5.93% due 12/15/16*(12)..................... 370,000 369,430 Caisse Nationale des Caisses d'Epargne et de Prevoyance Notes 4.90% due 12/30/49(10)...................... 141,000 113,505 Glitnir Banki HF Sub. Notes 6.69% due 06/15/11*(11)..................... 144,000 147,255
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- Banks-Commercial (continued) Landsbanki Islands HF Notes 6.10% due 08/25/11*................. 145,000 $ 146,518 NIBC Bank NV Bonds 5.82% due 12/11/13*(12)............. 95,000 92,474 Standard Bank PLC Sub. Bonds 8.01% due 07/27/16(12).............. 495,000 511,899 ---------- 1,381,081 ---------- Banks-Money Center -- 0.1% HBOS Capital Funding LP Bank Guar. Bonds 6.85% due 03/23/09(12).............. 175,000 175,437 Mizuho Financial Group Cayman, Ltd. Bank Guar. Notes 8.38% due 12/29/49.................. 175,000 185,395 National Westminster Bank PLC Sub. Notes 7.75% due 10/16/07(12).............. 67,000 68,396 ---------- 429,228 ---------- Beverages-Wine/Spirits -- 0.1% Diageo Capital PLC Company Guar. Notes 5.13% due 01/30/13.................. 320,000 316,922 ---------- Brewery -- 0.1% SABMiller PLC Notes 6.50% due 07/01/16*................. 315,000 329,057 ---------- Broadcast Services/Program -- 0.1% Grupo Televisa SA Senior Notes 6.63% due 03/18/25.................. 496,000 506,020 ---------- Building & Construction-Misc. -- 0.1% North American Energy Partners, Inc. Senior Notes 8.75% due 12/01/11.................. 310,000 309,225 North American Energy Partners, Inc. Sec. Notes 9.00% due 06/01/10.................. 175,000 189,000 ---------- 498,225 ---------- Cellular Telecom -- 0.0% Rogers Wireless, Inc. Sec. Notes 7.25% due 12/15/12.................. 125,000 130,781 ---------- Chemicals-Specialty -- 0.2% Rhodia SA Senior Notes 8.88% due 06/01/11.................. 1,325,000 1,368,062 ---------- Coal -- 0.0% Adaro Finance B.V. Company Guar. 8.50% due 12/08/10*................. 200,000 203,250 ----------
38 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Computers-Memory Devices -- 0.0% Seagate Technology HDD Holdings Company Guar. Bonds 6.80% due 10/01/16........................ 200,000 $199,000 -------- Cruise Lines -- 0.0% Royal Caribbean Cruises, Ltd. Senior Notes 7.00% due 06/15/13........................ 175,000 176,918 -------- Diversified Manufactured Operations -- 0.1% Siemens Financieringsmaatschappij NV Notes 5.75% due 10/17/16*....................... 145,000 147,172 Tyco International Group SA Company Guar. Notes 6.00% due 11/15/13........................ 310,000 320,797 -------- 467,969 -------- Electronic Components-Misc. -- 0.0% Celestica, Inc. Senior Sub. Notes 7.63% due 07/01/13........................ 50,000 49,625 Solectron Global Finance, Ltd. Company Guar. 8.00% due 03/15/16........................ 175,000 173,250 -------- 222,875 -------- Electronic Components-Semiconductors -- 0.2% Avago Technologies Finance PTE. Ltd./Avago Technologies US/Avago Technologies Wireless Senior Notes 10.13% due 12/01/13*...................... 500,000 530,000 STATS ChipPAC, Ltd. Company Guar. Notes 6.75% due 11/15/11........................ 475,000 456,000 -------- 986,000 -------- Finance-Consumer Loans -- 0.2% Aiful Corp. Notes 4.45% due 02/16/10*....................... 140,000 134,166 SLM Corp. Notes 1.53% due 09/15/11........................ JPY 100,000,000 846,863 -------- 981,029 -------- Finance-Mortgage Loan/Banker -- 0.0% Nationwide Building Society Senior Notes 2.63% due 01/30/07*....................... 219,000 217,085 -------- Food-Meat Products -- 0.1% JBS SA Company Guar. Bonds 10.50% due 08/04/16*...................... 550,000 556,875 --------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ Hotel/Motel -- 0.0% Grupo Posadas SA de CV Senior Notes 8.75% due 10/04/11*............. 100,000 $ 104,500 ---------- Housewares -- 0.1% Vitro Envases Norteamerica SA Sec. Notes 10.75% due 07/23/11*............ 350,000 372,750 ---------- Independant Power Producer -- 0.0% AES Drax Energy, Ltd. Sec. Notes, Series B, 11.50% due 08/30/10+(4)(6)...... 725,000 73 ---------- Insurance-Multi-line -- 0.4% Aegon NV Sub. Notes 5.80% due 07/15/14(12).......... 201,000 166,931 Fairfax Financial Holdings, Ltd. Notes 7.75% due 04/26/12.............. 169,000 157,170 Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.............. 1,350,000 1,250,437 ING Groep NV Bonds 5.78% due 12/08/15(12).......... 470,000 463,786 ---------- 2,038,324 ---------- Insurance-Reinsurance -- 0.0% Montpelier Re Holdings, Ltd. Senior Notes 6.13% due 08/15/13.............. 128,000 123,655 ---------- Investment Companies -- 0.0% Canadian Oil Sands, Ltd. Notes 5.80% due 08/15/13*............. 207,000 208,461 ---------- Medical-Drugs -- 0.4% Abbott Japan Co., Ltd. Company Guar. Bonds 1.05% due 11/06/08.............. JPY 76,000,000 644,578 Elan Finance PLC Company Guar. Senior Notes 7.75% due 11/15/11.............. 800,000 779,000 Elan Finance PLC Company Guar. Senior Notes 9.41% due 11/15/11(10).......... 700,000 707,000 ---------- 2,130,578 ---------- Metal-Aluminum -- 0.1% Novelis, Inc. Senior Notes 8.00% due 02/15/15*............. 350,000 332,500 ---------- Metal-Diversified -- 0.1% Inco Ltd Bonds 5.70% due 10/15/15.............. 290,000 279,499 Inco, Ltd. Bonds 7.20% due 09/15/32.............. 160,000 163,408
39 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Metal-Diversified (continued) Inco, Ltd. Notes 7.75% due 05/15/12.......................... 310,000 $ 334,931 ---------- 777,838 ---------- Music -- 0.1% Corporacion Interamericana de Entetenimiento SA de CV Senior Notes 8.88% due 06/14/15*......................... 300,000 291,000 ---------- Oil Comp-Integrated -- 0.1% ENI Coordination Center Company Guar. Notes 5.25% due 12/27/07.......................... GBP 205,000 383,329 Petro-Canada Notes 5.95% due 05/15/35.......................... 71,000 67,754 Shell International Finance BV Company Guar. Notes 5.63% due 06/27/11.......................... 280,000 286,688 ---------- 737,771 ---------- Oil Companies-Exploration & Production -- 0.2% Compton Petroleum Finance Corp. Company Guar. Notes 7.63% due 12/01/13.......................... 250,000 241,250 Nexen, Inc. Bonds 5.88% due 03/10/35.......................... 155,000 147,782 Paramount Resources, Ltd. Senior Notes 8.50% due 01/31/13.......................... 650,000 651,625 ---------- 1,040,657 ---------- Oil-Field Services -- 0.0% Weatherford International, Ltd. Senior Notes 5.50% due 02/15/16.......................... 214,000 210,759 ---------- Paper & Related Products -- 0.3% Abitibi-Consolidated, Inc. Notes 8.55% due 08/01/10.......................... 1,425,000 1,414,313 Abitibi-Consolidated, Inc. Debentures 8.85% due 08/01/30.......................... 225,000 189,000 Stora Enso Oyj Bonds 7.25% due 04/15/36*......................... 200,000 207,067 ---------- 1,810,380 ---------- Pipelines -- 0.0% Kinder Morgan Finance Co. ULC Company Guar. Notes 5.70% due 01/05/16.......................... 183,000 168,930 ---------- Property Trust -- 0.1% WEA Finance LLC/WCI Finance LLC Senior Notes 5.70% due 10/01/16*......................... 320,000 319,575 ----------
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- Real Estate Operations & Development -- 0.0% Brookfield Asset Management, Inc. Notes 8.13% due 12/15/08........................ 76,000 $ 80,015 ---------- Retail-Drug Store -- 0.0% Jean Coutu Group (PJC), Inc. Senior Sub. Notes 8.50% due 08/01/14........................ 200,000 192,500 Jean Coutu Group, Inc. Senior Notes 7.63% due 08/01/12........................ 2,000 2,102 ---------- 194,602 ---------- Satellite Telecom -- 0.3% Intelsat Bermuda, Ltd. Company Guar. Notes 9.25% due 06/15/16*....................... 750,000 788,437 Intelsat Bermuda, Ltd. Senior Notes 11.25% due 06/15/16*...................... 400,000 425,000 Intelsat Intermediate Holding Co., Ltd. Company Guar. Notes 9.25% due 02/01/15(8)..................... 775,000 561,875 ---------- 1,775,312 ---------- Savings & Loans/Thrifts -- 0.1% Washington Mutual Preferred Funding Cayman Bonds 7.25% due 03/15/11(12)*................... 310,000 309,994 ---------- Semiconductor Equipment -- 0.0% MagnaChip Semiconductor SA Sec. Notes 6.88% due 12/15/11........................ 75,000 60,000 MagnaChip Semiconductor SA Senior Sub. Notes 8.00% due 12/15/14........................ 25,000 15,188 ---------- 75,188 ---------- Special Purpose Entities -- 0.2% Bluewater Finance, Ltd. Company Guar. Notes 10.25% due 02/15/12....................... 650,000 658,125 Hybrid Capital Funding I LP Sub. Notes 8.00% due 06/30/11(12).................... 338,000 349,320 SovRisc BV Notes 4.63% due 10/31/08*....................... 133,000 131,937 ---------- 1,139,382 ---------- Specified Purpose Acquisitions -- 0.2% Nell AF SARL Guar. Bonds 8.38% due 08/15/15*....................... 1,225,000 1,215,812 ---------- Steel-Specialty -- 0.1% CSN Islands IX Corp. Company Guar. Notes 10.00% due 01/15/15*...................... 250,000 290,000
40 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Steel-Specialty (continued) CSN Islands VIII Corp. Company Guar. Notes 9.75% due 12/16/13*........................... 275,000 $ 314,187 ----------- 604,187 ----------- Telecom Services -- 0.4% Nordic Telephone Co. Holdings Senior Notes 8.88% due 05/01/16*........................... 425,000 446,781 Telenet Group Holdings NV Disc. Notes 11.50% due 06/15/14*(8)....................... 2,106,000 1,842,750 TELUS Corp. Notes 7.50% due 06/01/07............................ 110,000 111,435 ----------- 2,400,966 ----------- Telephone-Integrated -- 0.3% British Telecommunications PLC Bonds 8.63% due 12/15/30............................ 392,000 522,956 Telecom Italia Capital Company Guar. Notes 5.25% due 11/15/13............................ 14,000 13,257 Telecom Italia Capital SA Company Guar. Notes 4.00% due 01/15/10............................ 465,000 440,592 Telecom Italia Capital SA Notes 5.25% due 10/01/15............................ 155,000 143,624 Telecom Italia Capital SA Company Guar. Bonds 6.38% due 11/15/33............................ 367,000 343,224 ----------- 1,463,653 ----------- Transport-Marine -- 0.1% Ultrapetrol Bahamas, Ltd. 1st Mtg. Bonds 9.00% due 11/24/14............................ 425,000 391,000 ----------- Transport-Rail -- 0.1% Canadian National Railway Co. Notes 6.38% due 10/15/11............................ 315,000 330,072 ----------- Total Foreign Corporate Bonds & Notes (cost $29,805,262)............................ 29,618,311 ----------- FOREIGN GOVERNMENT AGENCIES -- 31.8% Sovereign -- 31.8% Canadian Government Bonds 4.00% due 09/01/10............................ CAD 2,684,000 2,410,809 CS First Boston International for City of Kiev Ukraine Loan Participation Notes 8.00% due 11/06/15............................ 1,270,000 1,276,045 Federal Republic of Brazil Bonds 5.78% due 01/05/16............................ BRL 2,474,000 1,119,405
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- Sovereign (continued) Federal Republic of Brazil Notes 7.88% due 03/07/15.......... 960,000 $1,052,160 Federal Republic of Brazil Notes 8.00% due 01/15/18.......... 8,330,000 9,150,505 Federal Republic of Brazil Notes 8.75% due 02/04/25.......... 2,200,000 2,620,200 Federal Republic of Brazil Bonds 10.50% due 07/14/14......... 485,000 609,403 Federal Republic of Germany Bonds 3.50% due 10/09/09.......... EUR 1,888,000 2,388,142 Federal Republic of Germany Bonds 3.50% due 01/04/16.......... EUR 500,000 624,642 Federal Republic of Germany Bonds 3.75% due 07/04/13.......... EUR 2,915,000 3,717,289 Federal Republic of Germany Bonds 4.75% due 07/04/34.......... EUR 1,710,000 2,469,921 Federal Republic of Germany Bonds 5.50% due 01/04/31.......... EUR 500,000 787,707 Government of Australia Bonds 6.25% due 04/15/15.......... AUD 3,313,000 2,586,970 Government of Australia Bonds 7.50% due 09/15/09.......... AUD 5,765,000 4,496,112 Government of Canada Bonds 4.25% due 09/01/08.......... CAD 2,157,000 1,941,252 Government of Japan Bonds 0.70% due 05/15/08.......... JPY 258,500,000 2,193,467 Government of Japan Bonds 0.90% due 12/22/08.......... JPY 399,200,000 3,396,203 Government of Japan Bonds 1.00% due 12/20/12.......... JPY 354,800,000 2,953,618 Government of Japan Bonds 1.80% due 03/22/10.......... JPY 280,000,000 2,443,077 Government of Poland Bonds 4.25% due 05/24/11.......... PLN 5,000,000 1,522,656 Government of Ukraine Notes 7.65% due 06/11/13.......... 820,000 865,838 Government of United Kingdom Bonds 5.00% due 03/07/08.......... GBP 1,115,000 2,090,594
41 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------- FOREIGN GOVERNMENT AGENCIES (continued) Sovereign (continued) Kingdom of Norway Bonds 5.50% due 05/15/09..... NOK 8,920,000 $1,418,688 Kingdom of Norway Bonds NOK 6.50% due 05/15/13..... 34,480,000 6,030,603 Kingdom of Spain Bonds 5.75% due 07/30/32..... EUR 925,000 1,508,445 Kingdom of Spain Bonds 6.15% due 01/31/13..... EUR 1,199,000 1,729,614 Kingdom of Sweden Bonds SEK 4.00% due 12/01/09..... 14,100,000 1,951,987 Kingdom of Sweden Bonds Series 1049 SEK 4.50% due 08/12/15..... 26,210,000 3,808,741 Kingdom of Sweden Bonds SEK 5.00% due 01/28/09..... 26,640,000 3,759,624 Kingdom of Sweden Bonds SEK 5.50% due 10/08/12..... 32,870,000 4,939,819 Kingdom of Netherlands Bonds 5.25% due 07/15/08..... EUR 1,045,000 1,362,110 Republic of Argentina Bonds 5.59% due 08/03/12(10). 1,930,000 1,350,035 Republic of Argentina Notes 5.25% due 12/31/38(8).. 2,144,761 932,971 Republic of Argentina Bonds 7.00% due 03/28/11..... 3,255,000 3,124,800 Republic of Argentina Notes 8.28% due 12/31/33..... 2,789,886 2,685,265 Republic of Brazil Bonds 8.25% due 01/20/34..... 2,060,000 2,369,000 Republic of Brazil Bonds 8.88% due 10/14/19..... 2,560,000 3,036,160 Republic of Brazil Notes 8.88% due 04/15/24..... 145,000 174,363 Republic of Brazil Notes 10.25% due 06/17/13.... 580,000 708,180 Republic of Brazil Notes 11.00% due 01/11/12.... 240,000 293,880
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- Sovereign (continued) Republic of Brazil Notes 11.00% due 08/17/40..... 5,865,000 $7,639,162 Republic of Colombia Notes 7.38% due 01/27/17...... 1,100,000 1,146,750 Republic of Colombia Notes 12.00% due 10/22/15(3).. COP 6,497,000,000 3,099,243 Republic of Columbia Notes 8.25% due 12/22/14...... 1,190,000 1,313,760 Republic of El Salvador Bonds 7.65% due 06/15/35...... 525,000 564,375 Republic of El Salvador Bonds 8.25% due 04/10/32*..... 360,000 412,560 Republic of Greece Bonds 5.25% due 05/18/12...... EUR 1,421,000 1,931,529 Republic of Hungary Bonds 6.25% due 04/24/09...... HUF 569,000,000 2,507,597 Republic of Hungary Bonds 6.50% due 08/12/08...... HUF 275,000,000 1,234,009 Republic of Indonesia Bonds 7.50% due 01/15/16...... 550,000 585,770 Republic of Peru Bonds 5.00% due 03/07/17(11).. 152,000 149,910 Republic of Peru Notes 7.35% due 07/21/25...... 1,910,000 2,036,060 Republic of Peru Bonds 8.75% due 11/21/33...... 720,000 882,000 Republic of Philippines Senior Notes 6.25% due 03/15/16...... EUR 800,000 1,028,440 Republic of Philippines Bonds 7.75% due 01/14/31...... 580,000 605,375 Republic of Philippines Notes 8.00% due 01/15/16...... 1,180,000 1,295,050 Republic of Philippines Notes 8.25% due 01/15/14...... 2,320,000 2,525,900 Republic of Philippines Bonds 9.88% due 01/15/19...... 1,020,000 1,258,425 Republic of Philippines Notes 10.63% due 03/16/25..... 850,000 1,132,625 Republic of South Africa Bonds 8.75% due 12/21/14...... ZAR 6,830,000 887,315
42 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- FOREIGN GOVERNMENT AGENCIES (continued) Sovereign (continued) Republic of South Africa Bonds, 13.00% due 08/31/10..... ZAR 7,520,000 $ 1,102,789 Republic of South Africa Bonds 13.50% due 09/15/15..... ZAR 5,575,000 934,202 Republic of Turkey Notes 6.88% due 03/17/36...... 2,650,000 2,404,875 Republic of Turkey Bonds 7.00% due 09/26/16...... 2,620,000 2,567,600 Republic of Turkey Notes 7.00% due 06/05/20...... 700,000 677,250 Republic of Turkey Notes 7.25% due 03/15/15...... 5,220,000 5,246,100 Republic of Turkey Notes 8.00% due 02/14/34...... 1,870,000 1,930,775 Republic of Turkey Notes 9.50% due 01/15/14...... 1,310,000 1,490,125 Republic of Turkey Senior Notes 11.88% due 01/15/30..... 1,285,000 1,893,769 Republic of Uruguay Bonds 7.50% due 03/15/15...... 750,000 779,250 Republic of Uruguay Bonds 8.00% due 11/18/22...... 4,155,000 4,383,525 Republic of Uruguay Notes 9.25% due 05/17/17...... 400,000 465,000 Republic of Venezuela Bonds 6.00% due 12/09/20...... 1,290,000 1,154,550 Republic of Venezuela Notes 8.50% due 10/08/14...... 1,340,000 1,484,050 Republic of Venezuela Bonds 9.25% due 09/15/27...... 945,000 1,157,153 Republic of Venezuela Bonds 9.38% due 01/13/34...... 1,340,000 1,656,240 Russian Federation Bonds 7.50% due 03/31/30*(8).. 650,000 724,347 Russian Federation Bonds 7.50% due 03/31/30(8)... 13,460,000 15,022,706 Russian Federation Notes 12.75% due 06/24/28..... 500,000 897,250 United Mexican States Notes 6.63% due 03/03/15...... 1,120,000 1,190,000
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- Sovereign (continued) United Mexican States Notes Series A 7.50% due 04/08/33............... 1,485,000 $ 1,712,947 United Mexican States Notes 8.13% due 12/30/19............... 2,380,000 2,856,000 United Mexican States Bonds 8.30% due 08/15/31............... 1,530,000 1,907,910 ------------ 179,774,568 ------------ Total Foreign Government Agencies (cost $178,141,247).............. 179,774,568 ------------ FOREIGN GOVERNMENT TREASURIES -- 1.0% Sovereign -- 1.0% United Kingdom Treasury Bonds 4.00% due 03/07/09............... GBP 660,000 1,212,471 United Kingdom Treasury Bonds 4.25% due 03/07/11............... GBP 2,405,000 4,418,451 ------------ 5,630,922 ------------ Total Foreign Government Treasuries (cost $5,584,528)................ 5,630,922 ------------ U.S. GOVERNMENT AGENCIES -- 10.1% Federal Home Loan Bank -- 0.3% Federal Home Loan Bank 3.50% due 05/15/07............... 600,000 593,566 3.88% due 12/20/06............... 600,000 598,094 4.50% due 09/08/08............... 600,000 594,504 ------------ 1,786,164 ------------ Federal Home Loan Mtg. Corp. -- 5.0% Federal Home Loan Mtg. Corp. 3.63% due 02/15/07............... 624,000 620,156 4.13% due 07/12/10............... 300,000 291,921 4.35% due 06/02/08............... 600,000 592,738 4.45% due 03/06/08............... 600,000 594,931 4.50% due 02/01/20............... 246,347 237,404 4.50% due 08/01/20............... 437,341 421,465 4.75% due 01/18/11............... 310,000 308,125 5.00% due 09/01/18............... 566,063 557,679 5.00% due 07/01/20............... 864,374 849,411 5.00% due 02/01/34............... 498,603 481,153 5.00% due 05/01/34............... 308,038 296,838 5.00% due 02/01/35............... 721,083 694,867 5.00% due 08/01/35............... 1,036,180 997,107 5.00% due 08/01/35............... 1,799,324 1,731,473 5.00% due 05/01/36............... 180,539 173,642 5.50% due 07/01/35............... 2,738,977 2,702,474 5.74% due 08/01/36(10)........... 2,816,000 2,824,785 6.00% due 07/01/35............... 232,937 234,216 6.00% due 06/01/36............... 8,900,477 8,947,090 6.00% due 06/01/36............... 977,422 982,540 6.00% due October TBA............ 634,400 637,175 6.50% due 05/01/29............... 9,103 9,329
43 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Federal Home Loan Mtg. Corp. (continued) 6.50% due 02/01/35................... 1,160,749 $ 1,183,574 6.50% due 03/01/36................... 386,494 393,712 6.88% due 09/15/10................... 1,156,000 1,237,008 7.00% due 06/01/29................... 18,346 18,916 8.50% due 05/01/08................... 9,526 9,673 10.00% due 05/15/20(13).............. 18,893 18,851 11.57% due 06/15/21 Series 1103, Class N(13)(14)........ 12,254 242 ----------- 28,048,495 ----------- Federal Home Loan Mtg. Corp. Reference REMIC -- 0.1% Series R004, Class AL 5.13% due 12/15/13(13)............. 330,196 327,436 Series R005, Class AB 5.50% due 12/15/18(13)............. 419,541 418,630 ----------- 746,066 ----------- Federal National Mtg. Assoc. -- 4.6% 3.00% due 03/02/07................... 600,000 594,340 4.50% due 06/01/19................... 589,143 569,222 4.75% due 12/15/10................... 375,000 372,831 5.00% due 06/01/19................... 312,213 307,220 5.00% due 04/01/21................... 3,858,115 3,791,263 5.00% due 03/01/34................... 346,397 333,538 5.00% due 11/01/34................... 611,540 588,840 5.00% due 05/01/35................... 1,763,786 1,695,910 5.00% due 05/01/36................... 983,929 945,611 5.25% due 08/01/12................... 576,000 579,011 5.50% due 06/01/19................... 406,031 406,363 5.50% due 11/01/19................... 1,801,540 1,803,013 5.50% due 08/01/20................... 422,554 422,514 5.50% due 01/01/29................... 10,163 10,067 5.50% due 06/01/29................... 170,465 168,834 5.50% due 06/01/34................... 405,395 400,164 5.50% due 02/01/35................... 627,108 618,133 5.50% due 12/01/35................... 833,712 821,781 5.50% due 05/01/36................... 4,933,664 4,860,430 5.82% due 02/01/36(10)............... 408,597 408,553 6.00% due 02/01/32................... 152,541 153,813 6.00% due 05/01/34................... 24,039 24,187 6.00% due 10/01/34................... 748,351 752,950 6.00% due 10/01/34................... 694,049 698,314 6.00% due 04/01/35................... 802,185 807,116 6.00% due 06/01/35................... 631,784 634,858 6.00% due 03/01/36................... 2,453,420 2,464,735 6.50% due 04/01/34................... 370,689 377,881 6.50% due 02/01/35................... 105,374 107,325 7.50% due 01/01/30................... 19,897 20,650 7.50% due 09/01/30................... 3,485 3,608 8.00% due 11/01/28................... 29,342 31,052 8.80% due 01/25/19(13)............... 46,695 49,995 10.40% due 04/25/19(13).............. 7,671 8,254 13.00% due 11/01/15.................. 9,014 9,987 ----------- 25,842,363 -----------
Principal Amount/ Value Security Description Shares** (Note 2) --------------------------------------------------------------------- Federal National Mtg. Assoc. Benchmark REMIC -- 0.1% Series 2006-B1, Class AB 6.00% due 06/25/16(13)................... 329,762 331,822 ----------- Government National Mtg. Assoc. -- 0.0% 7.50% due 07/15/27......................... 16,730 $ 17,453 7.50% due 10/15/27......................... 67,436 70,350 ----------- 87,803 ----------- Total U.S. Government Agencies (cost $56,801,837)........................... 56,842,713 ----------- U.S. GOVERNMENT TREASURIES -- 6.9% United States Treasury Bonds -- 1.7% 4.50% due 02/15/36......................... 4,277,000 4,098,234 6.25% due 08/15/23......................... 166,000 192,729 7.88% due 02/15/21......................... 4,000,000 5,256,564 ----------- 9,547,527 ----------- United States Treasury Notes -- 5.2% 3.63% due 01/15/10......................... 803,000 779,193 3.88% due 05/15/10......................... 175,000 170,878 3.88% due 09/15/10......................... 7,000 6,821 4.00% due 02/15/15......................... 3,201,000 3,064,084 4.25% due 01/15/11......................... 2,000,000 1,972,734 4.25% due 08/15/15......................... 2,262,000 2,200,412 4.38% due 12/31/07......................... 1,400,000 1,391,743 4.38% due 12/15/10......................... 101,000 100,164 4.50% due 02/15/09......................... 240,000 239,147 4.50% due 11/15/10......................... 70,000 69,759 4.50% due 11/15/15......................... 270,000 267,384 4.63% due 02/29/08......................... 63,000 62,847 4.88% due 05/31/08......................... 3,500,000 3,506,562 4.88% due 05/31/11......................... 4,000,000 4,045,936 4.88% due 02/15/12......................... 10,000,000 10,139,450 5.13% due 05/15/16......................... 1,579,000 1,637,966 ----------- 29,655,080 ----------- Total U.S. Government Treasuries (cost $38,880,413)......................... 39,202,607 ----------- COMMON STOCK -- 1.1% Cable TV -- 0.0% Ono Finance PLC*(3)(4)...................... 100 0 ----------- Casino Services -- 0.0% Shreveport Gaming Holdings, Inc.+(3)(4)(5).. 2,441 56,199 ----------- Cellular Telecom -- 0.6% iPCS, Inc.+(4)(5)........................... 60,413 3,235,116 ----------- Independant Power Producer -- 0.1% Mirant Corp.+............................... 16,019 437,479 ----------- Medical-Outpatient/Home Medical -- 0.0% Critical Care Systems International, Inc.(3)(4)(5).............................. 4,107 28,749 ----------- Oil Companies-Exploration & Production -- 0.0% Transmeridian Exploration, Inc.+............ 5,359 21,168 ----------- Oil-Field Services -- 0.4% Trico Marine Services, Inc.+................ 68,333 2,306,239 ----------- Total Common Stock (cost $3,303,737).......................... 6,084,950 -----------
44 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Amount/ Value Security Description Shares** (Note 2) ---------------------------------------------------------------------- PREFERRED STOCKS -- 0.3% Diversified Financial Services -- 0.1% General Electric Capital Corp. 8.00% (8)...... 16,000 $ 368,000 ------------ Finance-Mortgage Loan/Banker -- 0.0% Federal National Mtg. Assoc., 7.01% (10)...... 1,080 57,174 ------------ Food-Dairy Products -- 0.0% TCR Holdings, Class B (3)(4).................. 570 6 TCR Holdings, Class C (3)(4).................. 314 3 TCR Holdings, Class D (3)(4).................. 827 8 TCR Holdings, Class E (3)(4).................. 1,711 17 ------------ 34 ------------ Rental Auto/Equipment -- 0.0% Rent-Way, Inc. 8.00% (3)(4)(5).............................. 4 62,412 ------------ Retail-Drug Store -- 0.0% GNC Corp. Series A, 12.00% (4)(9)................................ 100 110,000 ------------ Television -- 0.2% Ion Media Networks, Inc. 14.25% (9)........... 106 879,800 ------------ Total Preferred Stocks (cost $1,421,594)............................ 1,477,420 ------------ RIGHTS+ -- 0.0% Sovereign -- 0.0% United Mexican States, Series E Expires 06/30/07 VRR (cost $0).................................... 1,400,000 25,900 ------------ WARRANTS+ -- 0.0% Oil Companies-Exploration & Production -- 0.0% Transmeridian Exploration, Inc. Expires 12/15/10 (Strike Price $4.31)........ 13,811 27,622 ------------ Telecom Services -- 0.0% Leap Wireless International, Inc. Expires 04/15/10 (Strike Price $96.80) (4)... 500 0 ------------ Telephone-Integrated -- 0.0% GT Group Telecom, Inc. Expires 04/15/10 (Strike Price $0.00) (3)(4). 150 1 ------------ Total Warrants (cost $46,436)............................... 27,623 ------------ Total Long-Term Investment Securities (cost $494,790,016).......................... 501,332,059 ------------
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------------- SHORT-TERM INVESTMENT SECURITIES -- 5.0% Time Deposits -- 5.0% Time Deposit with State Street Bank & Trust 2.80% due 10/02/06......................... 2,007,000 $ 2,007,000 Time Deposit with State Street Bank & Trust 4.05% due 10/02/06......................... 26,207,000 26,207,000 ------------ Total Short-term Investment Securities (cost $28,214,000)........................... 28,214,000 ------------ REPURCHASE AGREEMENTS -- 2.2% UBS Securities, LLC Joint Repurchase Agreement Account (Note 2) (cost $12,365,000)......................... 12,365,000 12,365,000 ------------ TOTAL INVESTMENTS (cost $535,369,016)@....................... 95.9% 541,911,059 Other assets less liabilities................. 4.1 23,457,269 ---------- ------------ NET ASSETS -- 100.0% $565,368,328 ========== ============ BONDS & NOTES SOLD SHORT -- (0.1%) Government Agencies -- (0.1%) Federal Home Loan Mtg. Corp. 6.50% due October TBA (Proceeds $(646,196))...................... (634,400) (646,196) ------------
- -------- REMIC--RealEstate Mortgage Investment Conduits VRR--ValueRecovery Right TBA--Securitiespurchased on a forward commitment basis with an approximate principal amount due and no definative maturity date. The actual principal and maturity date will be determined upon settlement date. + Non-income producing security * Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no rights to demand registration of these securities. At September 30, 2006, the aggregate value of these securities was $46,407,798 representing 8.2% of net assets. Unless otherwise indicated these securities are not considered to be illiquid. ** Denominated in United States dollars unless otherwise indicated. @ See Note 5 for cost of investments on a tax basis. (1) Commercial Mortgaged Back Security (2) Variable Rate Security -- the rate reflected is as of September 30, 2006; maturity date reflects the stated maturity date. (3) Fair valued security; see Note 2 (4) Illiquid security 45 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued) (5) To the extent permitted by the Statement of Additional Information, the Strategic Bond Fund may invest in restricted securities. These restricted securities are valued pursuant to Note 2 . Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of September 30, 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 ---- ----------- ---------- ----------- ---------- ------- ------ Critical Care Systems International, Inc. Common Stock.......... 7/20/2006 4,107 $ 37,181 $ 28,749 $ 7 0.01% ICO North America, Inc. 7.50% due 08/15/09....... 8/11/2005 200,000 200,000 4/19/2006 65,000 81,805 ---------------------- 265,000 281,805 323,300 1 0.06 iPCS, Inc. Common Stock.......... 7/28/2005 1,283 0 7/20/2004 59,130 916,515 ---------------------- 60,413 916,515 3,235,116 54 0.60 Rent-Way 8.00% Preferred Stock.......... 5/29/2003 3 25,000 5/19/2004 1 10,000 ---------------------- 4 35,000 62,412 15,603 0.01 Shreveport Gaming Holdings, Inc. Common Stock.......... 7/29/2005 2,047 47,128 7/21/2005 394 9,073 ---------------------- 2,441 56,201 56,199 23 0.01 Southern Energy, Inc. 7.90% due 07/15/09....... 1/25/2006 1,125,000 0 6/6/2006 425,000 0 ---------------------- 1,550,000 0 0 0 0.00 ---------- ---- $3,705,776 0.69% ========== ====
(6) Bond in default (7) Company has filed Chapter 11 bankruptcy protection. (8) "Step-up" security where the rate increases ("steps-up") at a predetermined rate. Rate shown reflects the increased rate. (9) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays interest/dividends in the form of additional bonds or preferred stocks. (10) Floating rate security where the rate fluctuates. The rate moves us or down at each reset date. The rate reflected is as of September 30, 2006. (11) Variable Rate Security -- the rate reflected is as of September 30, 2006, maturity date reflects next reset date. (12) Perpetual maturity -- maturity date reflects the next call date. (13) Collateralized Mortgaged Obligation (14) Interest Only (15) Company filed for Chapter 11 bankruptcy protection subsequent to September 30, 2006. (16) Bond is in default and did not pay principal at maturity. Security is subject to litigation, the outcome of which is still to be determined. (17) Company has filed for Chapter 7 bankruptcy protection. AUD -- AustralianDollar BRL -- BrazilianReal CAD -- CanadianDollar COP -- ColombianPeso EUR -- Euro GBP -- PoundSterling HUF -- HungarianForint JPY -- JapaneseYen MXN -- MexicanPeso NOK -- NorwegianKrone PLN -- PolishZloty SEK -- SwedishKrone ZAR -- SouthAfrican Rand See Notes to Financial Statements 46 SunAmerica High Yield Bond Fund PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) Industry Allocation* Repurchase Agreements................. 9.2% Cellular Telecom...................... 8.1 Finance-Auto Loans.................... 6.0 Oil Companies-Exploration & Production 4.3 Pipelines............................. 4.1 Cable TV.............................. 4.0 Independant Power Producers........... 3.4 Telecom Services...................... 2.8 Special Purpose Entities.............. 2.7 Transport-Air Freight................. 2.6 Airlines.............................. 2.5 Television............................ 2.4 Casino Hotels......................... 2.1 Chemicals-Specialty................... 1.8 Oil-Field Services.................... 1.6 Paper & Related Products.............. 1.6 Auto-Cars/Light Trucks................ 1.4 Building & Construction Products-Misc. 1.4 Real Estate Investment Trusts......... 1.4 Rental Auto/Equipment................. 1.3 Electric-Integrated................... 1.2 Funeral Services & Related Items...... 1.2 Containers-Metal/Glass................ 1.1 Electronic Components-Semiconductors.. 1.0 Retail-Drug Store..................... 1.0 Satellite Telecom..................... 1.0 Telephone-Integrated.................. 1.0 Theaters.............................. 1.0 Beverages-Non-alcoholic............... 0.9 Electric-Generation................... 0.8 Medical Products...................... 0.8 Broadcast Services/Program............ 0.7 Advertising Services.................. 0.6 Auto/Truck Parts & Equipment-Original. 0.6 Building & Construction-Misc.......... 0.6 Chemicals-Plastics.................... 0.6 Consumer Products-Misc................ 0.6 Electronics-Military.................. 0.6 Non-hazardous Waste Disposal.......... 0.6 Applications Software................. 0.5 Containers-Paper/Plastic.............. 0.5 Diagnostic Kits....................... 0.5 Food-Meat Products.................... 0.5 Retail-Restaurants.................... 0.5 Aerospace/Defense-Equipment........... 0.4 Commercial Services................... 0.4 Direct Marketing...................... 0.4 Diversified Manufactured Operations... 0.4 Gambling (Non-Hotel).................. 0.4 Housewares............................ 0.4 Insurance-Multi-line.................. 0.4 Medical-Drugs......................... 0.4 Office Automation & Equipment......... 0.4 Travel Services....................... 0.4 Coal.................................. 0.3 Computer Services..................... 0.3 Golf.................................. 0.3 Hotels/Motels......................... 0.3 Insurance-Property/Casualty........... 0.3 Medical Information Systems........... 0.3
Medical-Generic Drugs............ 0.3% Medical-Hospitals................ 0.3 Music............................ 0.3 Protection/Safety................ 0.3 Seismic Data Collection.......... 0.3 Steel-Producers.................. 0.3 Steel-Specialty.................. 0.3 Transport-Marine................. 0.3 Transport-Services............... 0.3 Energy-Alternate Sources......... 0.2 Food-Misc........................ 0.2 Gas-Distribution................. 0.2 Machinery-Farming................ 0.2 Medical-HMO...................... 0.2 Medical-Nursing Homes............ 0.2 Medical-Outpatient/Home Medical.. 0.2 Metal Processors & Fabrication... 0.2 Metal-Aluminum................... 0.2 Multimedia....................... 0.2 Oil Field Machinery & Equipment.. 0.2 Private Corrections.............. 0.2 Publishing-Newspapers............ 0.2 Retail-Regional Deptment Stores.. 0.2 Specified Purpose Acquisitions... 0.2 Storage/Warehousing.............. 0.2 Casino Services.................. 0.1 Chemicals-Diversified............ 0.1 Computers-Memory Devices......... 0.1 Consulting Services.............. 0.1 Electronic Components-Misc....... 0.1 Industrial Audio & Video Products 0.1 Insurance-Life/Health............ 0.1 Machinery-General Industrial..... 0.1 Office Supplies & Forms.......... 0.1 Oil & Gas Drilling............... 0.1 Retail-Major Department Stores... 0.1 Rubber-Tires..................... 0.1 Semiconductor Equipment.......... 0.1 Textile-Products................. 0.1 Transport-Rail................... 0.1 ---- 96.3% ====
Credit Quality+# BBB........ 0.6% BB......... 25.2% B.......... 43.6% CCC........ 22.0% Below C.... 2.9% Not Rated @ 5.7% ----- 100.0% =====
- -------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 47 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- CORPORATE BONDS & NOTES -- 68.4% Advertising Services -- 0.6% Vertis, Inc. Sec. Notes 9.75% due 04/01/09.............. $ 200,000 $ 201,750 Vertis, Inc. Company Guar. Notes 10.88% due 06/15/09............. 1,575,000 1,582,875 ---------- 1,784,625 ---------- Aerospace/Defense-Equipment -- 0.4% DeCrane Aircraft Holdings, Inc. Company Guar. Series B 12.00% due 09/30/08............. 1,700,000 1,270,750 ---------- Airlines -- 2.5% American Airlines, Inc. Pass Through Certs., Series 2001-1, Class A-2, 6.82% due 05/23/11.............. 4,125,000 4,057,969 Continental Airlines, Inc. Pass Through Certs., Series 1991-1, Class C, 6.95% due 08/02/09.............. 538,536 487,375 Continental Airlines, Inc. Pass Through Certs., Series 1999, Class 2, 7.73% due 03/15/11.............. 735,162 645,104 Delta Air Lines, Inc. Pass Through Certs. 7.57% due 11/18/10(1)........... 150,000 150,188 Delta Air Lines, Inc. Sec. Notes 9.50% due 11/18/08*(1)(2)....... 500,000 552,500 Northwest Airlines, Inc. Pass Through Certs. 7.04% due 04/01/22(1)........... 1,309,566 1,301,381 United AirLines, Inc. Pass Through Certs. 6.20% due 09/01/08.............. 428,477 428,477 ---------- 7,622,994 ---------- Applications Software -- 0.5% SS&C Technologies, Inc. Company Guar. Notes 11.75% due 12/01/13............. 1,400,000 1,473,500 ---------- Auto-Cars/Light Trucks -- 1.4% General Motors Corp. Senior Notes 7.13% due 07/15/13.............. 3,200,000 2,812,000 General Motors Corp. Debentures 8.25% due 07/15/23.............. 1,750,000 1,515,937 ---------- 4,327,937 ---------- Auto/Truck Parts & Equipment-Replacement -- 0.0% Exide Corp. Notes 10.00% due 03/15/25+(3)(4)........ 1,650,000 0 ----------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- Beverages-Non-alcoholic -- 0.5% Cott Beverages, Inc. Company Guar. Notes 8.00% due 12/15/11............................. $ 600,000 $ 612,000 Le-Natures, Inc. Sub. Notes 10.00% due 06/15/13*(5)........................ 850,000 875,500 ---------- 1,487,500 ---------- Broadcast Services/Program -- 0.7% Fisher Communications, Inc. Senior Notes 8.63% due 09/15/14............................. 1,100,000 1,141,250 Nexstar Finance Holdings LLC/Nexstar Finance Holdings, Inc. Senior Disc. Notes 11.38% due 04/01/13(6)......................... 750,000 626,250 Nexstar Finance, Inc. Senior Sub. Notes 7.00% due 01/15/14............................. 500,000 455,000 ---------- 2,222,500 ---------- Building & Construction Products-Misc. -- 1.4% Associated Materials, Inc. Senior Sub. Notes 9.75% due 04/15/12............................. 875,000 872,812 Associated Materials, Inc. Senior Disc. Notes 11.25% due 03/01/14(6)......................... 1,000,000 550,000 Dayton Superior Corp. Senior Sec. Notes 10.75% due 09/15/08............................ 1,074,000 1,106,220 Dayton Superior Corp. Company Guar. Notes 13.00% due 06/15/09............................ 1,150,000 1,081,000 Interline Brands, Inc. Senior Sub. Notes 8.13% due 06/15/14............................. 525,000 531,563 ---------- 4,141,595 ---------- Cable TV -- 4.0% Cablevision Systems Corp. Senior Notes 8.00% due 04/15/12............................. 250,000 253,125 CCH I Holdings LLC/CCH I Holdings Capital Corp. Bonds 11.00% due 10/01/15*........................... 4,573,529 4,127,610 CCH II LLC/CCH II Capital Corp. Senior Notes 10.25% due 09/15/10............................ 1,125,000 1,141,875 CCH II LLC/CCH II Capital Corp. Company Guar. Notes 10.25% due 10/01/13*........................... 4,077,765 4,149,126 CSC Holdings, Inc. Senior Notes 7.63% due 04/01/11............................. 360,000 369,450 CSC Holdings, Inc. Debentures 8.13% due 08/15/09............................. 825,000 854,906
48 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Cable TV (continued) Insight Communications Co., Inc. Senior Disc. Notes 12.25% due 02/15/11(6)..................... $1,165,000 $ 1,234,900 ----------- 12,130,992 ----------- Casino Hotels -- 2.1% Eldorado Casino Corp. (Shreveport) Sec. Bonds 10.00% due 08/01/12(4)(7).................. 1,721,177 1,626,512 Eldorado Resorts LLC Senior Notes 9.00% due 04/15/14(3)(4)................... 2,675,000 2,675,000 MGM Mirage, Inc. Senior Notes 5.88% due 02/27/14......................... 1,200,000 1,111,500 Riviera Holdings Corp. Company Guar. Notes 11.00% due 06/15/10........................ 800,000 844,000 Turning Stone Resort Casino Enterprise Senior Notes 9.13% due 09/15/14*........................ 175,000 176,750 ----------- 6,433,762 ----------- Cellular Telecom -- 2.0% American Cellular Corp. Senior Notes/Series B 10.00% due 08/01/11........................ 1,700,000 1,780,750 Centennial Cellular Operating Co/Centennial Communications Corp. Company Guar. Notes 10.13% due 06/15/13........................ 725,000 770,312 Centennial Communications Corp. Senior Notes 10.00% due 01/01/13........................ 209,000 211,613 Centennial Communications Corp. Senior Notes 11.12% due 01/01/13(8)..................... 925,000 955,062 Rural Cellular Corp. Sec. Notes 8.25% due 03/15/12......................... 1,050,000 1,081,500 Rural Cellular Corp. Senior Sub. Notes 9.75% due 01/15/10......................... 1,375,000 1,383,594 ----------- 6,182,831 ----------- Chemicals-Diversified -- 0.1% Lyondell Chemical Co. Company Guar. 8.00% due 09/15/14......................... 400,000 405,000 ----------- Chemicals-Specialty -- 0.9% Nalco Co. Senior Notes 7.75% due 11/15/11......................... 350,000 357,000 Nalco Co. Senior Sub. Notes 8.88% due 11/15/13......................... 515,000 536,887
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Chemicals-Specialty (continued) Rockwood Specialties Group, Inc. Senior Sub. Notes 7.50% due 11/15/14....................... $ 925,000 $ 911,125 Rockwood Specialties Group, Inc. Senior Sub. Notes 10.63% due 05/15/11...................... 292,000 312,440 Tronox Worldwide LLC/Tronox Finance Corp. Company Guar. Notes 9.50% due 12/01/12....................... 600,000 615,750 ---------- 2,733,202 ---------- Commercial Services -- 0.4% DI Finance/DynCorp International Senior Sub. Notes 9.50% due 02/15/13....................... 1,273,000 1,317,555 ---------- Computer Services -- 0.3% Sungard Data Systems, Inc. Company Guar. Notes 9.13% due 08/15/13....................... 825,000 853,875 ---------- Consulting Services -- 0.1% FTI Consulting, Inc. Company Guar. Notes 7.63% due 06/15/13....................... 425,000 429,250 ---------- Consumer Products-Misc. -- 0.6% American Achievement Corp. Senior Sub. Notes 8.25% due 04/01/12....................... 67,000 67,670 Jostens Holding Corp. Senior Disc. Notes 10.25% due 12/01/13(6)................... 1,000,000 825,000 Visant Holding Corp. Senior Notes 8.75% due 12/01/13*...................... 775,000 779,844 ---------- 1,672,514 ---------- Containers-Metal/Glass -- 1.1% Crown Cork & Seal Co., Inc. Debentures 7.38% due 12/15/26....................... 75,000 68,250 Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23....................... 1,750,000 1,671,250 Owens Brockway Glass Container, Inc. Company Guar. Notes 8.88% due 02/15/09....................... 835,000 857,962 Owens-Brockway Glass Container, Inc. Guar. Notes 8.25% due 05/15/13....................... 600,000 615,000 ---------- 3,212,462 ---------- Containers-Paper/Plastic -- 0.5% Pliant Corp. Sec. Notes 11.13% due 09/01/09...................... 1,540,000 1,505,350 ----------
49 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Diagnostic Kits -- 0.5% Inverness Medical Innovations, Inc. Senior Sub. Notes 8.75% due 02/15/12....................... $1,400,000 $1,379,000 ---------- Direct Marketing -- 0.4% Affinity Group, Inc. Senior Sub. Notes 9.00% due 02/15/12....................... 1,325,000 1,325,000 ---------- Diversified Manufactured Operations -- 0.4% Covalence Specialty Materials Corp. Senior Sub. Notes 10.25% due 03/01/16*..................... 450,000 436,500 Indalex Holding Corp. Sec. Notes 11.50% due 02/01/14*..................... 700,000 742,000 ---------- 1,178,500 ---------- Electric-Generation -- 0.8% Edison Mission Energy Senior Notes 7.50% due 06/15/13*...................... 900,000 909,000 Edison Mission Energy Senior Notes 7.75% due 06/15/16*...................... 375,000 379,688 The AES Corp. Sec. Notes 8.75% due 05/15/13*...................... 1,150,000 1,233,375 ---------- 2,522,063 ---------- Electric-Integrated -- 1.2% Mirant Americas Generation LLC Senior Notes 8.30% due 05/01/11....................... 1,325,000 1,326,656 Mission Energy Holding Co. Sec. Notes 13.50% due 07/15/08...................... 2,125,000 2,372,031 Southern Energy, Inc. Notes 7.90% due 07/15/09+(3)(4)(9)............. 3,525,000 0 ---------- 3,698,687 ---------- Electronic Components-Misc. -- 0.1% Sanmina-SCI Corp. Company Guar. Notes 6.75% due 03/01/13....................... 350,000 329,875 ---------- Electronic Components-Semiconductors -- 0.6% Advanced Micro Devices, Inc. Senior Notes 7.75% due 11/01/12....................... 1,024,000 1,039,360 Amkor Technology, Inc. Senior Notes 9.25% due 06/01/16....................... 975,000 914,063 ---------- 1,953,423 ---------- Electronics-Military -- 0.6% L-3 Communications Corp. Company Guar. Notes 6.13% due 07/15/13....................... 1,925,000 1,872,063 ----------
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Energy-Alternate Sources -- 0.2% VeraSun Energy Corp. Sec. Notes 9.88% due 12/15/12................... $ 625,000 $ 653,125 ----------- Finance-Auto Loans -- 6.0% Ford Motor Credit Co. Notes 7.38% due 10/28/09................... 4,350,000 4,227,347 Ford Motor Credit Co. Notes 9.82% due 04/15/12(8)................ 1,375,000 1,438,803 General Motors Acceptance Corp. Notes 6.75% due 12/01/14................... 3,235,000 3,158,185 General Motors Acceptance Corp. Notes 6.88% due 09/15/11................... 5,950,000 5,918,477 General Motors Acceptance Corp. Notes 6.88% due 08/28/12................... 269,000 266,257 General Motors Acceptance Corp. Notes 7.60% due 12/01/14(8)................ 3,375,000 3,383,454 ----------- 18,392,523 ----------- Food-Meat Products -- 0.3% Smithfield Foods, Inc. Senior Notes 7.75% due 05/15/13................... 825,000 849,750 ----------- Food-Misc. -- 0.2% Wornick Co. Sec. Notes 10.88% due 07/15/11.................. 700,000 696,500 ----------- Funeral Services & Related Items -- 1.2% Carriage Services, Inc. Senior Notes 7.88% due 01/15/15................... 1,134,000 1,102,815 Service Corp. International Senior Notes 7.38% due 10/01/14*.................. 155,000 155,968 Service Corp. International Senior Notes 7.63% due 10/01/18*.................. 155,000 155,969 Service Corp. International Senior Notes 8.00% due 06/15/17*.................. 2,300,000 2,202,250 ----------- 3,617,002 ----------- Gambling (Non-Hotel) -- 0.4% Waterford Gaming LLC Senior Notes 8.63% due 09/15/12*.................. 1,011,000 1,069,133 ----------- Gas-Distribution -- 0.2% Colorado Interstate Gas Co. Senior Debentures 6.85% due 06/15/37................... 500,000 502,719 -----------
50 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Golf -- 0.3% True Temper Sports, Inc. Company Guar. Notes 8.38% due 09/15/11.................... $1,100,000 $ 984,500 ---------- Hotel/Motel -- 0.3% Gaylord Entertainment Co. Company Guar. Senior Notes 6.75% due 11/15/14.................... 875,000 836,719 ---------- Independent Power Producers -- 3.2% Calpine Corp Sec. Notes 8.75% due 07/15/13*+(1)(2)............ 6,985,000 7,037,387 NRG Energy, Inc. Company Company Guar. Notes 7.38% due 02/01/16.................... 2,025,000 2,012,344 Reliant Energy, Inc. Sec. Notes 9.50% due 07/15/13.................... 652,000 676,450 ---------- 9,726,181 ---------- Industrial Audio & Video Products -- 0.1% Telex Communications, Inc. Sec. Notes 11.50% due 10/15/08................... 300,000 318,000 ---------- Insurance-Life/Health -- 0.1% Presidential Life Corp. Senior Notes 7.88% due 02/15/09.................... 275,000 264,000 ---------- Insurance-Property/Casualty -- 0.3% Crum & Forster Holdings Corp. Senior Notes 10.38% due 06/15/13................... 775,000 794,375 ---------- Machinery-Farming -- 0.2% Case New Holland, Inc. Senior Notes 6.00% due 06/01/09.................... 500,000 493,125 ---------- Machinery-General Industrial -- 0.1% Stewart & Stevenson LLC/Stewart & Stevenson Corp. Senior Notes 10.00% due 07/15/14*.................. 250,000 253,125 ---------- Medical Information Systems -- 0.3% Spheris, Inc. Senior Sub. Notes 11.00% due 12/15/12................... 975,000 914,063 ---------- Medical Products -- 0.8% CDRV Investors, Inc. Senior Disc. Notes 9.63% due 01/01/15(6)................. 875,000 647,500 Encore Medical IHC, Inc. Company Guar. Notes 9.75% due 10/01/12.................... 625,000 687,500 Universal Hospital Services, Inc. Senior Notes 10.13% due 11/01/11................... 1,150,000 1,207,500 ---------- 2,542,500 ----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Medical-Generic Drugs -- 0.3% Mylan Laboratories, Inc. Company Guar. Notes 5.75% due 08/15/10................. $ 200,000 $ 197,750 Mylan Laboratories, Inc. Company Guar. Notes 6.38% due 08/15/15................. 875,000 847,656 ---------- 1,045,406 ---------- Medical-HMO -- 0.2% Multiplan, Inc. Senior Sub. Notes 10.38% due 04/15/16*............... 600,000 603,000 ---------- Medical-Hospitals -- 0.3% Community Health Systems, Inc. Senior Sec. Notes 6.50% due 12/15/12................. 988,000 944,775 ---------- Medical-Nursing Homes -- 0.2% Genesis HealthCare Corp. Senior Notes 8.00% due 10/15/13................. 475,000 492,813 ---------- Metal Processors & Fabrication -- 0.2% Metals USA, Inc. Secured Notes 11.13% due 12/01/15................ 500,000 547,500 ---------- Multimedia -- 0.2% Haights Cross Operating Co. Guar. Senior Notes 11.75% due 08/15/11................ 475,000 486,875 ---------- Non-Ferrous Metals -- 0.0% Renco Metals, Inc. Local Government Guar. Notes 11.50% due 07/01/03+ (1)(2)(3)(4).. 2,150,000 0 ---------- Non-hazardous Waste Disposal -- 0.6% Allied Waste North America, Inc. Senior Notes Series B 8.50% due 12/01/08................. 1,700,000 1,780,750 ---------- Office Automation & Equipment -- 0.4% Xerox Corp. Senior Notes 6.75% due 02/01/17................. 975,000 989,625 Xerox Corp. Senior Notes 7.63% due 06/15/13................. 275,000 288,750 ---------- 1,278,375 ---------- Office Supplies & Forms -- 0.1% Acco Brands Corp. Company Guar. Notes 7.63% due 08/15/15................. 225,000 217,688 ---------- Oil & Gas Drilling -- 0.1% Pride International, Inc. Senior Notes 7.38% due 07/15/14................. 350,000 360,500 ----------
51 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Oil Companies-Exploration & Production -- 3.6% Belden & Blake Corp. Company Guar. Sec. Notes 8.75% due 07/15/12......................... $ 450,000 $ 462,375 Brigham Exploration Co. Senior Notes 9.63% due 05/01/14*........................ 775,000 755,625 Chaparral Energy, Inc. Company Guar. Notes 8.50% due 12/01/15......................... 950,000 942,875 Chesapeake Energy Corp. Senior Notes 6.63% due 01/15/16......................... 3,075,000 2,967,375 El Paso Production Holding Co. Company Guar. Notes 7.75% due 06/01/13......................... 1,525,000 1,559,312 Encore Acquisition Co. Senior Sub. Notes 6.00% due 07/15/15......................... 550,000 503,250 Encore Acquisition Co. Senior Sub. Notes 6.25% due 04/15/14......................... 300,000 280,500 Hilcorp Energy LP Senior Notes 7.75% due 11/01/15*........................ 800,000 774,000 Hilcorp Energy I LP Senior Notes 10.50% due 09/01/10*....................... 791,000 851,314 Newfield Exploration Co. Senior Sub. Notes 6.63% due 09/01/14......................... 675,000 660,656 Quicksilver Resources, Inc. Company Guar. Bonds 7.13% due 04/01/16......................... 600,000 568,500 Transmeridian Exploration, Inc. Company Guar. Notes 12.00% due 12/15/10........................ 650,000 650,000 ----------- 10,975,782 ----------- Oil Field Machinery & Equipment -- 0.2% Dresser-Rand Group, Inc. Company Guar. Notes 7.38% due 11/01/14......................... 683,000 671,048 ----------- Oil-Field Services -- 0.6% Allis-Chalmers Energy, Inc. Senior Notes 9.00% due 01/15/14*........................ 975,000 977,437 Hanover Compressor Co. Company Guar. Senior Sub. Notes 8.63% due 12/15/10......................... 275,000 286,000 Oslo Seismic Services, Inc. 1st Mtg. Bonds 8.28% due 06/01/11......................... 595,075 609,991 ----------- 1,873,428 -----------
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------------- Paper & Related Products -- 0.9% Bowater, Inc. Notes 6.50% due 06/15/13......................... $1,750,000 $ 1,553,125 Caraustar Industries, Inc. Notes 7.38% due 06/01/09......................... 1,250,000 1,175,000 ----------- 2,728,125 ----------- Pipelines -- 4.1% Atlas Pipeline Partners LP Company Guar. Notes 8.13% due 12/15/15......................... 950,000 966,625 Copano Energy LLC Senior Notes 8.13% due 03/01/16......................... 875,000 885,938 Dynegy-Roseton Danskammer Company Guar. Bonds Series B 7.67% due 11/08/16......................... 1,075,000 1,096,500 El Paso Natural Gas Co. Senior Notes, Series A 7.63% due 08/01/10......................... 300,000 309,000 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22......................... 1,225,000 1,401,514 MarkWest Energy Partners LP / MarkWest Energy Finance Corp. Senior Notes 6.88% due 11/01/14......................... 750,000 705,000 NGC Corp Capital Trust Company Guar. Bonds Series B 8.32% due 06/01/27......................... 2,900,000 2,639,000 Pacific Energy Partners LP Senior Notes 7.13% due 06/15/14......................... 1,151,000 1,174,020 Pacific Energy Partners LP / Pacific Energy Finance Corp. Company Guar. Notes 6.25% due 09/15/15......................... 624,000 614,640 Tennessee Gas Pipeline Co. Debentures 7.00% due 10/15/28......................... 1,300,000 1,294,753 Williams Cos., Inc. Notes 7.88% due 09/01/21......................... 1,275,000 1,332,375 ----------- 12,419,365 ----------- Private Corrections -- 0.2% Corrections Corp. of America Company Guar. Notes 6.25% due 03/15/13......................... 725,000 710,500 ----------- Protection/Safety -- 0.3% Monitronics International, Inc. Senior Sub. Notes 11.75% due 09/01/10........................ 1,000,000 967,500 -----------
52 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Publishing-Newspapers -- 0.2% Medianews Group, Inc. Senior Sub. Notes 6.38% due 04/01/14................. $ 60,000 $ 52,950 Medianews Group, Inc. Senior Sub. Notes 6.88% due 10/01/13................. 710,000 656,750 ---------- 709,700 ---------- Real Estate Investment Trusts -- 1.4% National Health Investors, Inc. Notes 7.30% due 07/16/07................. 1,120,000 1,122,607 Omega Healthcare Investors, Inc. Senior Notes 7.00% due 04/01/14................. 700,000 693,000 Senior Housing Properties Trust Senior Notes 8.63% due 01/15/12................. 1,600,000 1,718,000 Trustreet Properties, Inc. Senior Notes 7.50% due 04/01/15................. 725,000 719,563 ---------- 4,253,170 ---------- Rental Auto/Equipment -- 1.2% Avis Budget Car Rental LLC/Avis Budget Finance, Inc. Senior Notes 7.63% due 05/15/14*................ 325,000 315,250 Avis Budget Car Rental LLC/Avis Budget Finance, Inc. Senior Notes 7.91% due 05/15/14*(8)............. 450,000 441,000 H&E Equipment Services, Inc. Senior Notes 8.38% due 07/15/16*................ 850,000 871,250 Rent-Way, Inc. Sec. Notes 11.88% due 06/15/10................ 1,000,000 1,160,000 United Rentals North America, Inc. Senior Sub. Notes 7.75% due 11/15/13................. 1,000,000 985,000 ---------- 3,772,500 ---------- Retail-Drug Store -- 0.7% General Nutrition Centers, Inc. Senior Sub. Notes 8.50% due 12/01/10................. 1,250,000 1,212,500 Rite Aid Corp. Sec. Notes 8.13% due 05/01/10................. 750,000 751,875 ---------- 1,964,375 ---------- Retail-Major Department Stores -- 0.1% Saks, Inc. Company Guar. Notes 9.88% due 10/01/11................. 225,000 245,531 ----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ Retail-Regional Department Stores -- 0.2% Neiman-Marcus Group, Inc. Company Guar. Notes 9.00% due 10/15/15........................ $ 700,000 $ 743,750 ---------- Retail-Restaurants -- 0.5% Dave & Buster's, Inc. Senior Notes 11.25% due 03/15/14....................... 850,000 807,500 NPC International, Inc. Senior Sub. Notes 9.50% due 05/01/14*....................... 825,000 812,625 ---------- 1,620,125 ---------- Rubber-Tires -- 0.1% Cooper-Standard Automotive, Inc. Company Guar. Notes 8.38% due 12/15/14........................ 354,000 260,190 ---------- Rubber/Plastic Products -- 0.0% Venture Holdings Co. LLC Company Guar. Notes 11.00% due 06/01/07+(2)(4)(10)............ 550,000 2,200 ---------- Seismic Data Collection -- 0.3% Seitel, Inc. Senior Notes 11.75% due 07/15/11....................... 850,000 1,009,375 ---------- Special Purpose Entities -- 2.3% AAC Group Holding Corp. Senior Disc. Notes 10.25% due 10/01/12(6).................... 1,350,000 1,120,500 AMR HoldCo, Inc./EmCare HoldCo, Inc. Senior Sub. Notes 10.00% due 02/15/15....................... 450,000 479,250 Chukchansi Economic Development Authority Senior Notes 8.78% due 11/15/12*(8).................... 500,000 515,000 Consolidated Communications Illinois/Texas Holdings, Inc. Senior Notes 9.75% due 04/01/12........................ 910,000 960,050 Hexion US Finance Corp/Hexion Nova Scotia Finance ULC Sec. Notes 9.00% due 07/15/14........................ 960,000 979,200 MedCath Holdings Corp. Senior Notes 9.88% due 07/15/12........................ 875,000 931,875 MXEnergy Holdings, Inc. Senior Notes 13.02% due 08/01/11*(8)................... 1,050,000 1,023,750 PCA LLC/PCA Finance Corp. Senior Notes 11.88% due 08/01/09(2)(4)................. 2,000,000 480,000 Southern Star Central Corp. Senior Notes 6.75% due 03/01/16........................ 500,000 491,250 ---------- 6,980,875 ----------
53 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Specified Purpose Acquisitions -- 0.2% ESI Tractebel Acquisition Corp. Company Guar. Notes Series B 7.99% due 12/30/11................. $ 718,000 $ 740,566 ---------- Steel-Producer -- 0.3% Chaparral Steel Co. Company Guar. Notes 10.00% due 07/15/13................ 875,000 975,625 ---------- Storage/Warehousing -- 0.2% Mobile Mini, Inc. Senior Notes 9.50% due 07/01/13................. 274,000 293,180 Mobile Services Group, Inc. Senior Notes 9.75% due 08/01/14*................ 400,000 410,000 ---------- 703,180 ---------- Telecom Services -- 1.4% Cincinnati Bell Telephone Co. Company Guar. Notes 7.18% due 12/15/23................. 375,000 376,875 Cincinnati Bell Telephone Co. Company Guar. Notes 7.20% due 11/29/23................. 1,525,000 1,479,250 Qwest Corp. Senior Notes 7.50% due 10/01/14*................ 2,275,000 2,348,937 ---------- 4,205,062 ---------- Telephone-Integrated -- 1.0% Cincinnati Bell, Inc. Senior Notes 7.25% due 06/15/23................. 225,000 216,000 LCI International, Inc. Senior Notes 7.25% due 06/15/07................. 425,000 426,062 Windstream Corp. Senior Notes 8.63% due 08/01/16*................ 2,325,000 2,487,750 ---------- 3,129,812 ---------- Television -- 2.0% Allbritton Communications Co Senior Sub. Notes 7.75% due 12/15/12................. 1,700,000 1,712,750 LIN Television Corp. Senior Sub. Notes 6.50% due 05/15/13................. 1,700,000 1,585,250 Paxson Communications, Inc. Sec. Notes 11.76% due 01/15/13*(8)............ 1,450,000 1,460,875 Young Broadcasting, Inc. Senior Sub. Notes 8.75% due 01/15/14................. 800,000 680,000 Young Broadcasting, Inc. Company Guar. Bonds 10.00% due 03/01/11................ 600,000 560,250 ---------- 5,999,125 ----------
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Textile-Products -- 0.1% Collins & Aikman Floorcoverings, Inc. Company Guar. Notes Series B 9.75% due 02/15/10................... $ 305,000 $ 303,475 ------------ Theaters -- 1.0% AMC Entertainment, Inc. Senior Sub. Notes 8.00% due 03/01/14................... 775,000 728,500 AMC Entertainment, Inc. Senior Sub. Notes 9.88% due 02/01/12................... 700,000 719,250 Cinemark, Inc. Senior Disc. Notes 9.75% due 03/15/14(6)................ 2,150,000 1,714,625 ------------ 3,162,375 ------------ Transport-Air Freight -- 2.6% Atlas Air, Inc. Pass Through Certs. Series 1991, Class B 7.63% due 01/02/15................... 5,437,354 5,654,848 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class A 8.71% due 01/02/19................... 274,484 284,091 Atlas Air, Inc. Pass Through Certs. Series 1991, Class C 8.77% due 01/02/11................... 574,341 496,805 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class B 9.06% due 07/02/17................... 1,301,358 1,444,507 ------------ 7,880,251 ------------ Transport-Services -- 0.3% PHI, Inc. Senior Notes 7.13% due 04/15/13*.................. 925,000 876,438 ------------ Travel Services -- 0.4% Travelport, Inc. Senior Notes 9.88% due 09/01/14*.................. 200,000 193,000 Travelport, Inc. Senior Notes 10.02% due 09/01/14*(8).............. 200,000 192,000 Travelport, Inc. Senior Sub. Notes 11.88% due 09/01/16*................. 825,000 792,000 ------------ 1,177,000 ------------ Total Corporate Bonds & Notes (cost $203,003,711).................. 207,192,275 ------------
54 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ FOREIGN CORPORATE BONDS & NOTES -- 9.5% Chemicals -- 1.4% Montell Finance Co BV Company Guar. Bonds 8.10% due 03/15/27.................. $1,875,000 $1,734,375 Rhodia SA Senior Notes 8.88% due 06/01/11.................. 2,548,000 2,630,810 ---------- 4,365,185 ---------- Coal -- 0.3% Adaro Finance B.V. Company Guar. Notes 8.50% due 12/08/10.................. 775,000 787,594 ---------- Computers -- 0.1% Seagate Technology HDD Holdings Company Guar. Bonds 6.80% due 10/01/16.................. 350,000 348,250 ---------- Diversified Financial Services -- 0.4% Bluewater Finance, Ltd. Company Guar. Notes 10.25% due 02/15/12................. 1,125,000 1,139,062 ---------- Electric -- 0.0% AES Drax Energy, Ltd. Sec. Notes, Series B, 11.50% due 08/30/10+(2)(4).......... 4,460,000 446 ---------- Engineering & Construction -- 0.6% North American Energy Partners, Inc. Sec. Notes 9.00% due 06/01/10.................. 700,000 756,000 North American Energy Partners, Inc. Senior Notes 8.75% due 12/01/11.................. 1,010,000 1,007,475 ---------- 1,763,475 ---------- Entertainment -- 0.3% Corporacion Interamericana de Entetenimiento SA de CV Senior Notes 8.88% due 06/14/15.................. 795,000 771,150 ---------- Food -- 0.2% JBS SA Company Guar. Notes 10.50% due 08/04/16*................ 625,000 632,813 ---------- Forest Products & Paper -- 0.7% Abitibi-Consolidated, Inc. Notes 8.55% due 08/01/10.................. 1,525,000 1,513,562 Abitibi-Consolidated, Inc. Debs. 8.85% due 08/01/30.................. 650,000 546,000 ---------- 2,059,562 ----------
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- Housewares -- 0.1% Vitro Envases Norteamerica SA Sec. Notes 10.75% due 07/23/11................... $ 225,000 $ 239,625 ---------- 1,213,542 ---------- Insurance -- 0.4% Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.................... 1,150,000 1,065,187 Fairfax Financial Holdings, Ltd. Notes 7.75% due 04/26/12.................... 243,000 225,990 ---------- 1,291,177 ---------- Iron/Steel -- 0.3% CSN Islands IX Corp. Company Guar. Notes 10.00% due 01/15/15................... 900,000 1,044,000 ---------- Lodging -- 0.0% Grupo Posadas SA DE CV Senior Notes 8.75% due 10/04/11.................... 100,000 104,500 ---------- Metal Fabrication/Hardware -- 0.0% International Utility Structures, Inc. Senior Sub. Notes 10.75% due 02/01/08+(3)(4)............ 2,150,000 43,000 ---------- Mining -- 0.2% Novelis, Inc. Senior Notes 8.00% due 02/15/15.................... 575,000 546,250 ---------- Oil & Gas -- 0.6% Paramount Resources, Ltd. Senior Notes 8.50% due 01/31/13.................... 1,150,000 1,152,875 Compton Petroleum Finance Corp. Company Guar. Notes 7.63% due 12/01/13.................... 800,000 772,000 ---------- 1,924,875 ---------- Pharmaceuticals -- 0.4% Elan Finance PLC Company Guar. Senior Notes 7.75% due 11/15/11.................... 1,300,000 1,265,875 ---------- Retail -- 0.1% Jean Coutu Group (PJC), Inc. Senior Sub. Notes 8.50% due 08/01/14.................... 350,000 336,875 Jean Coutu Group, Inc. Senior Notes 7.63% due 08/01/12.................... 23,000 24,179 ---------- 361,054 ---------- Semiconductors -- 0.5% MagnaChip Semiconductor SA Senior Sub. Notes 8.00% due 12/15/14.................... 50,000 30,375
55 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Semiconductors (continued) MagnaChip Semiconductor SA Sec. Notes 6.88% due 12/15/11..................... $ 475,000 $ 380,000 STATS ChipPAC, Ltd. Company Guar. Notes 6.75% due 11/15/11..................... 325,000 312,000 Avago Technologies Finance Pte/Avago Technologies US/Avago Technologies Wireless Senior Notes 10.13% due 12/01/13*................... 675,000 715,500 ----------- 1,437,875 ----------- Telecommunications -- 2.4% Telenet Group Holdings NV Disc. Notes 11.50% due 06/15/14(6)*................ 3,389,000 2,965,375 Intelsat Intermediate Holding Co., Ltd. Company Guar. Notes 9.25% due 02/01/15(6).................. 1,350,000 978,750 Intelsat Bermuda, Ltd. Company Guar. Notes 9.25% due 06/15/16*.................... 1,275,000 1,340,344 Nordic Telephone Co. Holdings Senior Notes 8.88% due 05/01/16*.................... 1,250,000 1,314,062 Intelsat Bermuda, Ltd. Senior Notes 11.25% due 06/15/16*................... 725,000 770,313 ----------- 7,368,844 ----------- Transportation -- 0.5% Ultrapetrol Bahamas, Ltd. 1st Mtg. Bonds 9.00% due 11/24/14..................... 1,100,000 1,012,000 Grupo Transportacion Ferroviaria Mexicana SA de CV Senior Notes 9.38% due 05/01/12..................... 325,000 344,500 ----------- 1,356,500 ----------- Total Foreign Corporate Bonds & Notes (cost $32,512,123)..................... 28,851,112 ----------- LOAN AGREEMENTS -- 1.3% Auto Parts & Equipment -- 0.6% Delphi Corp. Notes 13.75% due 06/14/11(4)................. 1,745,625 1,808,249 Beverages -- 0.4% Le-Natures, Inc. Notes 9.36% due 03/01/11(5).................. 1,200,000 1,218,750 ----------- Housewares -- 0.3% Vitro Envases Norteamerica SA Term Loan 11.64% due 02/26/10(4)(9).............. 966,667 973,917 ----------- Total Loan Agreements (cost $3,952,555)...................... 4,000,916 -----------
Shares/ Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ CONVERTIBLE BONDS & NOTES -- 0.0% Telecommunications -- 0.0% ICO North America, Inc. Senior Notes 7.50% due 08/15/09(3)(4)(9) (cost $75,000)............................ $ 75,000 $ 91,500 ----------- COMMON STOCK -- 7.6% Cable TV -- 0.0% Ono Finance PLC*(3)(4)..................... 500 0 ----------- Casino Services -- 0.1% Capital Gaming International, Inc.+(3)(4).. 77 0 Shreveport Gaming Holdings, Inc.+(3)(4)(9). 14,150 325,775 ----------- 325,775 ----------- Cellular Telecom -- 6.1% iPCS, Inc.+(4)(9).......................... 344,285 18,436,462 ----------- Independent Power Producer -- 0.2% Mirant Corp.+.............................. 26,255 717,024 ----------- Medical-Outpatient/Home Medical -- 0.2% Critical Care Systems International, Inc.(3)(4)(9)............................. 69,700 487,900 ----------- Oil-Field Services -- 1.0% Trico Marine Services, Inc.+............... 93,285 3,148,369 ----------- Total Common Stock (cost $8,088,161)......................... 23,115,530 ----------- PREFERRED STOCKS -- 0.8% Rental Auto/Equipment -- 0.1% Rent-Way, Inc. 8.00%(3)(4)(9)............................ 13 231,817 ----------- Retail-Drug Store -- 0.2% GNC Corp., Series A, 12.00%(4)................................. 725 797,500 ----------- Television -- 0.5% ION Media Networks, Inc. 14.25%(7)................................. 176 1,460,800 ----------- Total Preferred Stocks (cost $2,350,958)......................... 2,490,117 ----------- WARRANTS+ -- 0.0% Oil Companies-Exploration & Production -- 0.0% Transmeridian Exploration, Inc. Expires 12/15/10 (Strike Price $4.31)(3)................... 44,885 89,770 ----------- Telecom Services -- 0.0% KMC Telecom Holdings, Inc. Expires 01/31/08 (Strike Price $0.01)(3)(4)................ 3,650 0 Leap Wireless International, Inc. Expires 04/15/10 (Strike Price $96.80)*(3)(4).............. 2,250 0 ----------- 0 ----------- Telephone-Integrated -- 0.0% GT Group Telecom, Inc. Expires 02/01/10 (Strike Price $0.00)*(3).................. 2,650 27 ----------- Transport-Equipment & Leasing -- 0.0% Maxim Crane Works Holdings, Inc. Expires 01/20/10 (Strike Price $30.05)(3)(4)(9)............ 1,587 0
56 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Shares/ Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- WARRANTS (continued) Transport-Equipment & Leasing (continued) Maxim Crane Works Holdings, Inc. Expires 01/20/10 (Strike Price $33.04)(3)(4)(9)........ 1,619 $ 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (Strike Price $31.58)(3)(4)(9)........ 1,182 0 ------------ 0 ------------ Total Warrants (cost $1,436,220)..................... 89,797 ------------ Total Long-Term Investment Securities (cost $251,418,728)................... 265,831,247 ------------ REPURCHASE AGREEMENTS -- 9.2% UBS Securities, LLC Joint Repurchase Agreement Account (Note 2) (cost $28,102,000).................... $28,102,000 28,102,000 ------------ TOTAL INVESTMENTS -- (cost $279,520,728)@.................. 96.3% 293,933,247 Other assets less liabilities............ 3.7 11,168,451 ----------- ------------ NET ASSETS -- 100.0% $305,101,698 =========== ============
- -------- * Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no rights to demand registration of these securities. At September 30, 2006, the aggregate value of these securities was $54,903,922 representing 18.0% of net assets. Unless otherwise indicated these securities are not considered to be illiquid. + Non-income producing security @ See Note 5 for cost of investments on a tax basis. (1)Company has filed Chapter 11 bankruptcy protection. (2)Bond in default (3)Fair valued security; see Note 2 (4)Illiquid security (5)Company has filed Chapter 11 bankruptcy protection subsequent to September 30, 2006. (6)"Step-up" security where the rate increases ("steps-up") at a predetermined rate. Rate shown reflects the increased rate. (7)PIK ("Payment-in-Kind") security. Bond or preferred stock that pays interest/dividends in the form of additional bonds or preferred stocks. (8)Floating rate security where the rate fluctuates. The rate moves us or down at each reset date. The rate reflected is as of September 30, 2006. (9)To the extent permitted by the Statement of Additional Information, the High Yield Bond Fund may invest in restricted securities. These restricted securities are valued pursuant to Note 2. Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of September 30, 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 ---- ----------- ---------- ----------- ----------- ------- ------ Critical Care System International, Inc. Common Stock......... 7/20/2006 11,842 $ 92,960 7/20/2006 28,420 247,254 7/20/2006 7,105 64,300 7/20/2006 18,951 171,507 7/20/2006 3,382 30,607 ---------- ---------- 69,700 606,628 $ 487,900 $ 7 0.16% ICO North America, Inc. 7.50% due 08/15/09...... 8/11/2005 $ 75,000 75,000 91,500 1 0.03 iPCS, Inc. Common Stock......... 7/28/2005 7,313 0 7/20/2004 336,972 5,223,066 ---------- ---------- 344,285 5,223,066 18,436,462 54 6.10 Rent-Way 8.00% Preferred Stock......... 5/29/2003 10 $ 100,000 5/19/2004 3 30,000 ---------- ---------- 13 130,000 231,817 17,832 0.08 Maxim Crane Works Holdings, Inc. Warrants...... 1/28/2005 1,587 432,280 0 0 0.00 Maxim Crane Works Holdings, Inc. Warrants...... 1/28/2005 1,619 441,126 0 0 0.00 Maxim Crane Works Holdings, Inc. Warrants...... 1/28/2005 1,182 322,058 0 0 0.00 Shreveport Gaming Holdings, Inc. Common Stock......... 7/29/2005 11,829 272,336 7/21/2005 2,321 53,448 ---------- ---------- 14,150 325,784 325,775 23 0.11 Southern Energy, Inc. 7.90% due 07/15/09...... 1/25/2006 3,525,000 0 0 0 0.00 Vitro Envases Norteamerica SA 11.64% due 02/26/10...... 3/31/2005 650,356 650,356 2/24/2005 316,311 314,493 ---------- ---------- 966,667 964,849 973,917 101 0.32 ----------- ---- $20,547,370 6.80% =========== ====
(10)Company has filed for Chapter 7 bankruptcy protection. See Notes to Financial Statements 57 SunAmerica Tax Exempt Insured Fund PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) Industry Allocation* Ohio........................... 21.0% New York....................... 16.1 Massachusetts.................. 11.9 California..................... 7.6 Indiana........................ 6.0 South Carolina................. 5.7 Alabama........................ 5.2 New Jersey..................... 4.6 Connecticut.................... 4.3 New Mexico..................... 4.3 South Dakota................... 3.7 Florida........................ 3.2 Arizona........................ 3.2 Kentucky....................... 2.4 Illinois....................... 1.3 Tennessee...................... 0.9 Georgia........................ 0.3 Missouri....................... 0.3 Kansas......................... 0.2 Registered Investment Companies 0.1 ----- 102.3% =====
Credit Quality+# AAA 85.0% AA. 5.9% A.. 9.1% ----- 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. 58 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- MUNICIPAL BONDS & NOTES -- 86.6% Alabama -- 5.2% Jefferson County, Alabama Sewer Revenue, Series D, 5.25% due 02/01/26(1).......................... $3,000,000 $3,259,500 ---------- California -- 7.6% Los Angeles County Metropolitan Transportation Authority, Series C, Class 2A, 4.50% due 07/01/29(1).......................... 2,000,000 2,009,280 State of California, Unrefunded, 5.50% due 04/01/28............................. 2,230,000 2,450,748 State of California, Prefunded, 5.50% due 04/01/28............................. 270,000 303,234 ---------- 4,763,262 ---------- Connecticut -- 4.3% State of Connecticut, Refunded, Series B, 5.00% due 06/01/14(1).......................... 2,500,000 2,725,350 ---------- Florida -- 3.2% Tampa Bay Water Regional Water Supply Authority, 4.75% due 10/01/33(1).......................... 2,000,000 2,046,340 ---------- Georgia -- 0.3% Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/09(1).......................... 60,000 63,689 Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/13(1).......................... 85,000 95,073 ---------- 158,762 ---------- Indiana -- 6.0% Indiana Transportation Finance Authority Highway Revenue, Series A, 5.25% due 06/01/26(1).......................... 3,500,000 3,771,600 ---------- Massachusetts -- 11.9% Massachusetts State Water Resources Authority, Revenue Bonds, Series A, 5.00% due 08/01/24(1).......................... 3,910,000 4,151,364 University Massachusetts Building Authority, Project Revenue, Series 04-1, 5.25% due 11/01/27(1).......................... 3,000,000 3,330,780 ---------- 7,482,144 ---------- New Jersey -- 4.6% Garden State New Jersey Preservation Trust Open Space and Farmland Preservation, Series A, 5.80% due 11/01/17(1).......................... 2,500,000 2,884,825 ----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------ New Mexico -- 4.3% New Mexico Finance Authority Transportation, Series A, 5.25% due 06/15/21(1).......................... $2,500,000 $ 2,708,575 ----------- New York -- 11.3% New York State Environmental Facilities Corp., Series A, 4.75% due 06/15/31............................. 2,000,000 2,070,640 New York State Thruway Authority, Series G, 5.25% due 01/01/27(1).......................... 1,500,000 1,637,085 Niagara Falls, New York, Public Improvement, 7.50% due 03/01/13(1).......................... 445,000 539,540 Niagara Falls, New York, Public Improvement, 7.50% due 03/01/14(1).......................... 555,000 687,295 Sales Tax Asset Receivables Corp., Series A, 5.25% due 10/15/27(1).......................... 2,000,000 2,170,240 ----------- 7,104,800 ----------- Ohio -- 21.0% Cincinnati, Ohio City School District Classroom Facilities, General Obligation, 5.00% due 12/01/24(1).......................... 3,000,000 3,169,680 Cuyahoga County, Ohio Revenue, Series A, 5.75% due 01/01/24............................. 2,000,000 2,185,140 Franklin County, Ohio Hospital, Revenue, Series C, 5.25% due 05/15/23............................. 3,000,000 3,206,910 Olentangy Local School District Ohio, Series A, 5.25% due 12/01/27(1).......................... 3,250,000 3,515,525 Woodridge, Ohio, Local School District 6.80% due 12/01/14(1).......................... 1,000,000 1,141,690 ----------- 13,218,945 ----------- South Carolina -- 3.2% Horry County School District, Series A, 4.50% due 03/01/28(1).......................... 2,000,000 2,030,320 ----------- South Dakota -- 3.7% South Dakota State Health & Educational Facilities Revenue, Refunding, 6.25% due 07/01/10(1).......................... 2,120,000 2,304,822 ----------- Total Long-Term Investment Securities (cost $51,526,329)............................. 54,459,245 ----------- SHORT-TERM INVESTMENT SECURITIES -- 15.7% Arizona -- 3.2% Mesa Arizona Industrial Development Auth. Revenue, Series B, 3.71% due 10/03/06(2).......................... 2,000,000 2,000,000 -----------
59 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------------- SHORT-TERM INVESTMENT SECURITIES (continued) Illinois -- 1.3% Chicago O'Hare International Airport, 2nd Lien, Series B, 3.69% due 10/03/06(2)......................... $ 800,000 $ 800,000 ---------- Kansas -- 0.2% Shawnee Industrial Revenue, Shawnee, Kansas, Series B, 3.75% due 10/03/06(2)......................... 105,000 105,000 ---------- Kentucky -- 2.4% Breckinridge County, Kentucky, Breckinridge Lease, 3.75% due 10/03/06(2)......................... 1,500,000 1,500,000 ---------- Missouri -- 0.3% Missouri State Health & Educational Facilities Authority, Refunding, 3.78% due 10/03/06(2)......................... 200,000 200,000 ---------- New York -- 4.8% Long Island Power Authority, Sub. Series 7-A, 3.62% due 10/03/06(1)(2)...................... 900,000 900,000 Metropolitan Transportation Authority, Series G2, 3.66% due 10/03/06(1)(2)...................... 2,100,000 2,100,000 ---------- 3,000,000 ---------- South Carolina -- 2.5% Piedmont Municipal Power Agency, South Carolina, Electric Revenue, 3.73% due 10/02/06(1)(2)...................... 950,000 950,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue, Sub. Series B-1 3.73% due 10/03/06(1)(2)...................... 650,000 650,000 ---------- 1,600,000 ----------
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------------- Tennessee -- 0.9% Jackson Energy Authority, Jackson, Tennessee, Adjustable, 3.75% due 10/03/06(1)(2)..................... $600,000 $ 600,000 ----------- Registered Investment Companies -- 0.1% SSGA Tax Free Money Market Fund............... 95,215 95,215 ----------- Total Short-Term Investment Securities (cost $9,900,215)............................ 9,900,215 ----------- TOTAL INVESTMENTS (cost $61,426,544)@.......................... 102.3% 64,359,460 Liabilities in Excess of Other Assets......... (2.3) (1,449,323) -------- ----------- NET ASSETS -- 100.0% $62,910,137 ======== ===========
- -------- @ 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 $51,642,573 or 82.1% of Net Assets. (2) Variable rate security -- the rate reflected is as of September 30, 2006; maturity date reflects next reset date. See Notes to Financial Statements 60 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) Note 1. Organization SunAmerica Income Funds is an open-end diversified management investment company organized as a Massachusetts business trust (the "Trust"). It currently consists of five different series (each, a "Fund" and collectively, the "Funds"). Each Fund is a separate series of the Trust with distinct investment objectives and/or strategies. Each Fund is managed by AIG SunAmerica Asset Management Corp. (the "Adviser" or "AIG SunAmerica"), an indirect wholly-owned subsidiary of American International Group, Inc. ("AIG"). An investor may invest in one or more of the following Funds: SunAmerica U.S. Government Securities Fund, SunAmerica GNMA Fund, SunAmerica Strategic Bond Fund, SunAmerica High Yield Bond Fund and SunAmerica Tax Exempt Insured Fund. The Funds are considered to be separate entities for financial and tax reporting purposes. On May 31, 2006, the SunAmerica Core Bond Fund of the SunAmerica Income Funds was liquidated. The investment objectives and principal investment techniques for each of the Funds are as follows: U.S. Government Securities Fund seeks high current income consistent with relative safety of capital by the active trading of 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 in tax-exempt municipal bonds that, in addition to having income exempt from federal income taxes, also 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. Under normal market conditions, at least 80% of Fund's assets plus any borrowing for investment purposes will be invested in such securities. Each Fund offers multiple classes of shares. The classes within each Fund are presented in the Statement of Assets and Liabilities. The cost structure for each class is as follows: Class A shares are offered at net asset value per share plus an initial sales charge. Additionally, purchases of Class A shares in 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. 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 61 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) 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 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 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, as amended (the "1940 Act") except that Class B and Class C shares are subject to higher distribution fee rates. There are 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 material loss from such claims to be remote. Note 2. Significant Accounting Policies The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements: Security Valuations: Stocks are generally valued based upon closing sales prices reported on recognized securities exchanges. Stocks listed on the NASDAQ are valued using the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the last sale price unless the reported trade for the stock is outside the range of the bid/ask price. In such cases, the NOCP will be normalized to the nearer of the bid or ask price. For listed securities having no sales reported and for unlisted securities, such securities will be valued based upon the last reported bid price. As of the close of regular trading on the New York Stock Exchange ("NYSE"), securities traded primarily on security exchanges outside the United States are valued at the last sale price on such exchanges on the day of valuation, or if there is no sale on the day of valuation, at the last-reported bid price. If a security's price is available from more than one exchange, a portfolio uses the exchange that is the primary market for the security. However, depending on the foreign market, closing prices may be up to 15 hours old when they are used to price a Fund's shares, and the Fund may determine that certain closing prices are unreliable. This determination will be based on review of a number of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. If a Fund determines that closing prices do not reflect the fair value of the securities, the Fund will adjust the previous closing prices in accordance with pricing procedures approved by the Board to reflect what it believes to be the fair value of the securities as of the close of regular trading on the NYSE. The Funds may also fair value securities in other situations, for example, when a particular foreign market is closed but the Fund is open. For foreign equity securities, the Funds use an outside pricing service to provide it with closing market prices and information used for adjusting those prices. Non-convertible bonds and debentures, other long-term debt securities, and short term debt securities with maturities in excess of 60 days, are valued at bid prices obtained for the day of valuation from a bond pricing service, when such prices are available. If a vendor quote is unavailable the securities may be priced 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. 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. 62 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) Short-term securities with 60 days or less to maturity are amortized to maturity based on their cost to a Fund if acquired within 60 days of maturity or, if already held by the Fund on the 60th day, are amortized to maturity based on the value determined on the 61st day. Securities for which market quotations are not readily available or where a development/significant event occurs that may significantly impact the value of the security, are fair valued, as determined pursuant to procedures adopted in good faith by the Board of Trustees. On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements, if any, has not yet been determined. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of September 30, 2006, the Funds do not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value. Repurchase Agreements: The Funds, along with other affiliated registered investment companies, pursuant to exemptive relief granted by the Securities and Exchange Commission, may transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by U.S. Treasury or federal agency obligations. For repurchase agreements and joint repurchase agreements, the Funds' custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark to market basis to ensure that the value, at the time the agreement is entered into, is equal to at least 102% of the repurchase price, including accrued interest. In the event of default of the obligation to repurchase, a Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. As of September 30, 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 6.76% $13,510,000 Strategic Bond............ 6.18 12,365,000 High Yield Bond........... 14.05 28,102,000
As of such date, the repurchase agreement in that joint account and the collateral therefore were as follows: UBS Securities LLC, dated September 30, 2006, bearing interest at a rate of 5.00% per annum, with a principal amount of $200,000,000 a repurchase price of $200,083,333, and a maturity date of October 2, 2006. The repurchase agreement is collateralized by the following:
Interest Maturity Principal Market Type of Collateral Rate Date Amount Value - ------------------ -------- -------- ------------ ------------ U.S. Treasury Inflation Index Bonds 2.38% 01/15/25 $161,580,000 $164,812,500 U.S. Treasury Inflation Index Bonds 3.38 04/15/32 38,420,000 39,188,673
63 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) Securities Transactions, Investment Income, Expenses, Dividends and Distributions to Shareholders: Security transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are calculated on the identified cost basis. Interest income, is accrued daily except when collection is not expected. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. For financial statement purposes, the Funds amortize all premiums and accrete all discounts on fixed income securities. Funds which earn foreign income and capital gains may be subject to foreign withholding taxes at various rates. Under applicable foreign law, a withholding tax may be imposed on interest, dividends, and capital gains at various rates. Net investment income, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend-eligible shares, as appropriate) of each class of shares at the beginning of the day (after adjusting for the current capital share activity of the respective class). Expenses common to all Funds, not directly related to individual Funds are allocated among the Funds based on relative net assets or other appropriate methods. In all other respects, expenses are charged to each Fund as incurred on a specific identification basis. Interest earned on cash balances held at the custodian are shown as custody credits on the Statement of Operations. Dividends from net investment income are accrued daily and paid monthly. Capital gain distributions, if any, are paid annually. The Funds record dividends and distributions to their shareholders on the ex-dividend date. The Funds reserve the right to declare and pay dividends less frequently than disclosed above, provided that the net realized capital gains and net investment income, if any, are paid at least annually. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts at fiscal year end based on their federal tax-basis treatment; temporary differences do not require reclassification. Net investment income/loss, net realized gain/loss and net assets are not affected by these reclassifications. Each Fund intends to comply with the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all of their net income (taxable and tax exempt) to their shareholders. Therefore, no federal tax provision is required. Each Fund is considered a separate entity for tax purposes. Investment Securities Loaned: During the period ended September 30, 2006, none of the Funds participated in securities lending with qualified brokers. In lending portfolio securities to brokers the Funds receive cash as collateral against the loaned securities, which must be maintained at not less than 102% of the market value of the loaned securities during the period of the loan. The Funds may use the cash collateral received to invest in short-term investments which earn interest income or to cover bank overdrafts. Any interest earned from the investment of the collateral is recorded by the Funds net of the portion of interest that is rebated to the borrowing broker. If the amounts are used to cover bank overdrafts, the broker rebates incurred are reflected as interest expense on the Statement of Operations. During the period ended September 30, 2006, no broker rebates were reclassified to interest expense for any of the Funds. As with other extensions of credit, should the borrower of the securities fail financially, the Funds may bear the risk of delay in recovery or may be subject to replacing the loaned securities by purchasing them with the cash collateral held, which may be less than 100% of the market value of such securities at the time of replacement. 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. 64 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Assets and liabilities denominated in foreign currencies and commitments under forward foreign currency contracts are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the changes in the market prices of portfolio securities sold during the year. Realized foreign exchange gains and losses on other assets and liabilities and change in unrealized foreign exchange gains and losses on other assets and liabilities include foreign exchange gains and losses from currency gains or losses realized between the trade and settlement dates of securities transactions, the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid and changes in the unrealized foreign exchange gains and losses relating to other assets and liabilities arising as a result of changes in the exchange rate. Short Sales: Each Fund may engage in "short sales against the box." A short sale is against the box to the extent that the Fund contemporaneously owns, or has the right to obtain without payment, securities identical to those sold short. In addition, the High Yield Bond Fund ("Fund") may sell a security it does not own in anticipation of a decline in the market value of that security "short sales." To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing it at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. Until the Fund replaces a borrowed security, the Fund will maintain daily a segregated account, containing cash or liquid securities, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short. Liabilities for securities sold short are reported at market value in the financial statements. Such liabilities are subject to off balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short could exceed the liabilities recorded in the Statement of Assets and Liabilities. The Fund bears the risk of potential inability of the broker to meet their obligation to perform. Mortgage-Backed Dollar Rolls: 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 period ended September 30, 2006, none of the Funds entered in dollar roll transactions. Dollar roll transactions involve the risk that the market value of the securities held by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event that the buyer of securities in a dollar roll transaction files bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. The return earned by the Fund with the proceeds of the dollar roll transaction may not exceed transaction costs. Note 3. Investment Advisory and Management Agreement, Distribution Agreement and Service Agreement The Trust, on behalf of each Fund, has an Investment Advisory and Management Agreement (the "Agreement") with AIG SunAmerica. Under the Agreement, AIG SunAmerica provides continuous supervision of a Fund's portfolio and administers its corporate affairs, subject to general review by the Trustees. In connection therewith, AIG SunAmerica furnishes the Funds with office facilities, maintains certain of the Funds' books and records, and pays the salaries and expenses of all personnel, including officers of the Funds, who are employees of AIG SunAmerica and its affiliates. 65 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) The Funds pay AIG SunAmerica a monthly investment advisory and management fee calculated daily at the following annual percentages of each Fund's average daily net assets:
Management Assets Fees --------------------------- ---------- U.S. Government Securities Fund $0 -$200 million 0.650% (greater than) $200 million 0.620 (greater than) $400 million 0.550 GNMA Fund...................... $0 - $25 million 0.550 (greater than) $25 million 0.500 (greater than) $50 million 0.450 Strategic Bond Fund............ $0 -$350 million 0.650 (greater than) $350 million 0.600 High Yield Bond Fund........... $0 -$200 million 0.750 (greater than) $200 million 0.720 (greater than) $400 million 0.550 Tax Exempt Insured Fund........ $0 -$350 million 0.500 (greater than) $350 million 0.450
The Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund are subadvised by AIG Global Investment Corp. ("AIGGIC") pursuant to a subadvisory agreement with AIG SunAmerica. AIGGIC is an indirect wholly-owned subsidiary of AIG and an affiliate of AIG SunAmerica. AIGGIC receives the following fees from AIG SunAmerica, based upon each Fund's average daily net assets:
Sub-advisory Fees ------------------------------------- Strategic Bond High Yield Tax Exempt Assets Fund Bond Fund Insured Fund - ------ -------------- ---------- ------------ $0 - $200 million............ 0.35% 0.45% 0.25% (greater than) $200 million 0.25 0.35 0.22 (greater than) $500 million 0.20 0.30 0.15
AIG SunAmerica has contractually agreed to waive fees and/or reimburse expenses, 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 - ---- ---------- 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
AIG SunAmerica is voluntarily waiving fees and/or reimbursing expenses, if necessary, so that the total net expense ratios for the following classes do not exceed the amounts set forth below.
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
66 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) For the six months ended September 30, 2006, AIG SunAmerica has agreed to reimburse expenses as follows:
Fund Amount ---- -------- U.S. Government Securities Class A $266,853 U.S. Government Securities Class B 35,123 U.S. Government Securities Class C 15,477 GNMA Class A...................... 227,183 GNMA Class B...................... 67,577 GNMA Class C...................... 36,111 High Yield Bond Class A........... 110,038 High Yield Bond Class B........... 35,506 High Yield Bond Class C........... 48,310 Tax Exempt Insured Class C........ 1,023
The Trust, on behalf of each Fund, has entered into a Distribution Agreement with AIG SunAmerica Capital Services, Inc. ("SACS" or "Distributor"), an affiliate of the Adviser. Each Fund has adopted a Distribution Plan on behalf of each Class (each a "Plan" and collectively the "Plans") in accordance with the provisions of Rule 12b-1 under the 1940 Act, 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 Plans provide that each class of shares of each Fund will 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 six months ended September 30, 2006, SACS received fees (see the Statement of Operations) based upon the aforementioned rates. SACS receives sales charges on each Fund's Class A shares, portions of which are reallowed to affiliated broker-dealers and non-affiliated broker-dealers. SACS also receives the proceeds of contingent deferred sales charges paid by investors in connection with certain redemptions of Class A, Class B and Class C shares. SACS has advised the Funds that for the six months ended September 30, 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 $ 47,093 $ 6,465 $ 32,188 $1,260 $ 38,594 GNMA...................... 63,898 17,284 35,606 4,627 137,924 Strategic Bond............ 485,375 54,050 348,580 2,886 64,447 High Yield Bond........... 520,537 51,659 384,506 5,591 67,638 Tax Exempt Insured........ 15,359 7,115 5,533 -- 10,252
67 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued)
Class C -------------- Contingent Deferred Sales Fund Charges - ---- -------------- U.S. Government Securities $ 296 GNMA...................... 1,522 Strategic Bond............ 23,737 High Yield Bond........... 12,488 Tax Exempt Insured........ 99
The Trust has entered into a Service Agreement with AIG SunAmerica Fund Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service Agreement, SAFS performs certain shareholder account functions by assisting the Funds' transfer agent in connection with the services that it offers to the shareholders of the Funds. The Service Agreement permits the Funds to compensate SAFS for services rendered, based upon an annual rate of 0.22% of average daily net assets, which is approved annually by the Trustees. For the six months ended September 30, 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 Fund Expenses September 30, 2006 - ---- -------- ------------------ US Government Securities Class A $160,408 $26,293 US Government Securities Class B 19,411 3,068 US Government Securities Class C 8,811 1,521 GNMA Fund Class A............... 330,987 54,864 GNMA Fund Class B............... 77,190 12,050 GNMA Fund Class C............... 41,113 6,469 Strategic Bond Class A.......... 349,207 65,690 Strategic Bond Class B.......... 52,481 8,938 Strategic Bond Class C.......... 124,750 23,487 High Yield Bond Fund Class A.... 188,419 28,439 High Yield Bond Fund Class B.... 56,658 9,371 High Yield Bond Fund Class C.... 82,100 15,144 Tax Exempt Insured Class A...... 59,885 9,587 Tax Exempt Insured Class B...... 6,851 1,070 Tax Exempt Insured Class C...... 4,856 791
At September 30, 2006, affiliate funds of the SunAmerica Focused Series, Inc. owned 11%, 51% and 42% of the outstanding Class A Shares of U.S. Government Securities Fund, GNMA Fund, and Strategic Bond Fund, respectively. At September 30, 2006, AIG SunAmerica, an indirect wholly-owned subsidiary of AIG, owned 6% of the outstanding Class C shares of the Tax Exempt Insured Fund. Note 4. Purchases and Sales of Investment Securities The aggregate cost of purchases and proceeds from sales and maturities of long-term investments during the six months ended September 30, 2006 were as follows:
U.S. Government High Tax Exempt Securities GNMA Strategic Yield Bond Insured Fund Fund Bond Fund Fund Fund --------------- ------------ ------------ ------------ ----------- Purchases (excluding U.S. government securities)........................... $ -- $ -- $395,185,353 $ 85,318,935 $22,728,923 Sales (excluding U.S. government securities)........................... -- -- 229,096,792 145,004,914 27,320,457 Purchases of U.S. government securities 234,108,440 376,460,698 125,111,596 -- -- Sales of U.S. government securities.... 236,798,858 239,624,262 63,975,359 -- --
68 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) Note 5. Federal Income Taxes The following details the tax basis of distributions as well as the components of distributable earnings. The tax basis components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences primarily arising from wash sales, 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 - ---- -------- ------------- -------------- ----------- ------------- ---------- U.S. Government Securities $314,426 $ (8,532,661) $(4,556,713) $ 7,599,387 $ -- $ -- GNMA...................... 407,397 (1,498,599) (6,985,389) 17,568,716 175,792 -- Strategic Bond............ 668,211 (27,636,027) 1,173,974 10,239,110 -- -- High Yield Bond........... 24,077 (90,167,900) 10,778,425 21,693,351 -- -- Tax Exempt Insured........ 50,185* 418,577 2,160,766 -- 716,341 2,165,823
- -------- * Tax exempt distributable earnings The amounts of aggregate unrealized gain (loss) and the cost of investment securities for federal tax purposes, including short-term securities and repurchase agreements, were as follows:
U.S. Government Tax Exempt Securities GNMA Strategic High Yield Insured Fund Fund Bond Fund Bond Fund Fund ------------ ------------ ------------ ------------ ----------- Cost......................................... $175,089,345 $412,624,024 $535,333,522 $279,075,455 $61,425,785 ============ ============ ============ ============ =========== Appreciation................................. 1,311,841 2,719,950 12,814,403 25,410,410 2,933,675 Depreciation................................. (3,255,741) (5,498,355) (6,883,062) (10,522,619) -- ------------ ------------ ------------ ------------ ----------- Unrealized appreciation (depreciation) -- net $ (1,943,900) $ (2,778,405) $ 5,931,341 $ 14,857,791 $ 2,933,675 ============ ============ ============ ============ ===========
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 - ---- -------- ---------- ---------- ----------- ----------- ---- ---- ---------- 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
As a result of reorganizations into some of these portfolios during the period ended March 31, 2002, certain capital loss carryforwards may be subject to limitations on use pursuant to applicable U.S. Federal Income Tax Law. Therefore, it is possible not all of these capital losses will be available for use. 69 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) 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 - ---- ------------ ------------- U.S. Government Securities $2,498,303 $-- GNMA...................... 1,422,349 -- Strategic Bond............ 34,802 -- High Yield Bond........... 2,172,571 -- Tax Exempt Insured........ -- --
70 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (continued) Note 6. Capital Share Transactions Transactions in capital shares of each class of each series were as follows:
U.S. Government Securities Fund --------------------------------------------------------------------------------------------------- Class A Class B -------------------------------------------------- ----------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 ------------------------ ------------------------ --------------------- ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Shares sold(1)(2)(3)(4) 1,324,670 $ 12,109,597 3,833,993 $ 35,900,779 154,527 $ 1,407,590 308,662 $ 2,907,116 Reinvested shares...... 265,075 2,412,482 525,900 4,936,255 26,571 241,940 63,611 597,394 Shares redeemed(1)(3).. (2,001,677) (18,170,731) (6,513,774) (61,084,959) (439,887) (3,990,215) (1,150,867) (10,789,192) ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Net increase (decrease) (411,932) $ (3,648,652) (2,153,881) $(20,247,925) (258,789) $(2,340,685) (778,594) $ (7,284,682) ========== ============ ========== ============ ======== =========== ========== ============ U.S. Government Securities Fund -------------------------------------------------- Class C -------------------------------------------------- For the six months ended For the September 30, 2006 year ended (unaudited) March 31, 2006 ------------------------ ------------------------ Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold............ 204,415 $ 1,863,215 290,146 $ 2,736,476 Reinvested shares...... 13,384 121,710 26,443 247,808 Shares redeemed(2)(4).. (188,744) (1,708,072) (474,314) (4,455,172) ---------- ------------ ---------- ------------ Net increase (decrease) 29,055 $ 276,853 (157,725) $ (1,470,888) ========== ============ ========== ============
(1)For the year ended March 31, 2006, 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. (2)For the year ended March 31, 2006, 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. (3)For the six months ended September 30, 2006, includes automatic conversion of 81,119 shares of Class B shares in the amount of $663,527 to 81,166 shares of Class A shares in the amount of $663,527. (4)For the six months ended September 30, 2006, includes automatic conversion of 13,953 shares of Class C shares in the amount of $127,108 to 13,938 shares of Class A shares in the amount of $127,108. 71 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (continued)
GNMA Fund ------------------------------------------------------------------------------------------------------- Class A Class B --------------------------------------------------- -------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 ------------------------- ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(1)(3)(5)(7) 2,597,103 $ 28,492,182 3,679,546 $ 41,272,893 116,078 $ 1,270,925 404,406 $ 4,553,528 Reinvested shares................ 490,316 5,355,296 1,003,485 11,219,648 86,065 942,287 198,444 2,224,433 Shares redeemed(1)(5)........ (2,758,351) (30,168,453) (7,280,453) (81,346,189) (1,171,274) (12,813,803) (2,809,670) (31,520,044) ----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)............ 329,068 $ 3,679,025 (2,597,422) $(28,853,648) (969,131) $(10,600,591) (2,206,820) $(24,742,083) =========== ============ ========== ============ ========== ============ ========== ============ GNMA Fund ------------------------------------------------------------------------------------------------------- Class C Class X --------------------------------------------------- -------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 ------------------------- ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold............ 225,101 $ 2,470,509 602,279 $ 6,796,898 -- $ -- 2,510 $ 28,279 Reinvested shares................ 45,956 503,716 104,533 1,173,387 -- -- 821 9,297 Shares redeemed(3)(7)........ (701,770) (7,674,085) (1,952,806) (21,948,681) -- -- (93,618) (1,057,899) ----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)............ (430,713) $ (4,699,860) (1,245,994) $(13,978,396) -- $ -- (90,287) $ (1,020,323) =========== ============ ========== ============ ========== ============ ========== ============ Strategic Bond Fund ------------------------------------------------------------------------------------------------------- Class A Class B --------------------------------------------------- -------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 ------------------------- ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(2)(4)(6)(8) 68,927,367 $243,053,521 37,513,168 $132,293,432 2,974,229 $ 10,471,678 5,688,635 $ 20,006,461 Reinvested shares................ 1,919,073 6,751,721 1,059,222 3,741,901 196,841 692,740 326,591 1,152,376 Shares redeemed(2)(6)........ (12,080,642) (42,422,206) (8,234,142) (29,041,992) (2,135,040) (7,496,450) (3,586,213) (12,634,437) ----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)............ 58,765,798 $207,383,036 30,338,248 $106,993,341 1,036,030 $ 3,667,968 2,429,013 $ 8,524,400 =========== ============ ========== ============ ========== ============ ========== ============ Strategic Bond Fund --------------------------------------------------- Class C --------------------------------------------------- For the six months ended For the September 30, 2006 year ended (unaudited) March 31, 2006 ------------------------- ------------------------ Shares Amount Shares Amount ----------- ------------ ---------- ------------ Shares sold............ 14,169,526 $ 50,085,599 20,236,121 $ 71,570,743 Reinvested shares................ 357,562 1,263,155 417,085 1,477,074 Shares redeemed(4)(8)........ (3,630,122) (12,791,329) (3,618,681) (12,799,109) ----------- ------------ ---------- ------------ Net increase (decrease)............ 10,896,966 $ 38,557,425 17,034,525 $ 60,248,708 =========== ============ ========== ============
(1)For the year ended March 31, 2006, 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. (2)For the year ended March 31, 2006, 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. (3)For the year ended March 31, 2006, 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. (4)For the year ended March 31, 2006, 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. (5)For the six months ended September 30, 2006, includes automatic conversion of 117,524 shares of Class B shares in the amount of $1,267,703 to 117,832 shares of Class A shares in the amount of $1,267,703. (6)For the six months ended September 30, 2006, includes automatic conversion of 562,555 shares of Class B shares in the amount of $1,885,764 to 562,555 shares of Class A shares in the amount of $1,885,764. (7)For the six months ended September 30, 2006, includes automatic conversion of 6,016 shares of Class C shares in the amount of $65,467 to 6,037 shares of Class A shares in the amount of $65,467. (8)Includes automatic conversion of 838 shares of Class C shares in the amount of $2,936 to 841 shares of Class A shares in the amount of $2,936. 72 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (continued)
High Yield Bond Fund ---------------------------------------------------------------------------------------------------------- Class A Class B ------------------------------------------------------ -------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 -------------------------- -------------------------- ----------------------- ------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------ Shares sold(1)(4)...... 12,742,073 $ 58,963,016 60,157,451 $ 269,492,069 1,663,617 $ 7,694,726 2,657,600 $ 12,034,094 Reinvested shares.......... 634,304 2,939,278 1,245,496 5,639,708 153,975 713,992 363,347 1,644,185 Shares redeemed(1)(4).. (24,541,010) (112,836,389) (37,827,675) (171,886,729) (2,004,798) (9,271,309) (5,617,900) (25,321,387) ----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------ Net increase (decrease)...... (11,164,633) $ (50,934,095) 23,575,272 $ 103,245,048 (187,206) $ (862,591) (2,596,953) $(11,643,108) =========== ============= =========== ============= ========== =========== =========== ============ High Yield Bond Fund ---------------------------------------------------------------------------------------------------------- Class C Class Z ------------------------------------------------------ -------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 -------------------------- -------------------------- ----------------------- ------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------ Shares sold...... 5,193,785 $ 24,126,598 9,135,786 $ 41,520,484 -- $ -- -- $ (1,745) Reinvested shares.......... 231,464 1,078,548 456,958 2,077,622 -- -- 380,489 1,688,457 Shares redeemed........ (2,326,085) (10,817,229) (9,102,263) (41,384,506) -- -- (20,406,473) (90,194,761) ----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------ Net increase (decrease)...... 3,099,164 $ 14,387,917 490,481 $ 2,213,600 -- $ -- (20,025,984) $(88,508,049) =========== ============= =========== ============= ========== =========== =========== ============ Tax Exempt Insured Fund ---------------------------------------------------------------------------------------------------------- Class A Class B ------------------------------------------------------ -------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2006 year ended September 30, 2006 year ended (unaudited) March 31, 2006 (unaudited) March 31, 2006 -------------------------- -------------------------- ----------------------- ------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------ Shares sold(2)(3)(5)(6) 75,844 $ 957,886 238,472 $ 3,042,167 10,130 $ 128,377 27,050 $ 345,577 Reinvested shares.......... 42,083 529,647 120,617 1,542,466 3,562 44,846 12,879 164,760 Shares redeemed(2)(5).. (494,153) (6,217,121) (686,079) (8,829,065) (88,573) (1,114,296) (210,933) (2,709,988) ----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------ Net increase (decrease)...... (376,226) $ (4,729,588) (326,990) $ (4,244,432) (74,881) $ (941,073) (171,004) $ (2,199,651) =========== ============= =========== ============= ========== =========== =========== ============ Tax Exempt Insured Fund ------------------------------------------------------ Class C ------------------------------------------------------ For the six months ended For the September 30, 2006 year ended (unaudited) March 31, 2006 -------------------------- -------------------------- Shares Amount Shares Amount ----------- ------------- ----------- ------------- Shares sold...... 15,247 $ 190,579 63,887 $ 822,552 Reinvested shares.......... 2,558 32,222 8,147 104,235 Shares redeemed(3)(6).. (37,373) (471,335) (159,889) (2,047,423) ----------- ------------- ----------- ------------- Net increase (decrease)...... (19,568) $ (248,534) (87,855) $ (1,120,636) =========== ============= =========== =============
(1)For the year ended March 31, 2006, 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. (2)For the year ended March 31, 2006, 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. (3)For the year ended March 31, 2006, 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. (4)For the six months ended September 30, 2006, includes automatic conversion of 586,565 shares of Class B shares in the amount of $2,604,749 to 587,484 shares of Class A shares in the amount of $2,604,749. (5)For the six months ended September 30, 2006, includes automatic conversion of 20,573 shares of Class B shares in the amount of $57,078 to 20,589 shares of Class A shares in the amount of $57,078. (6)For the six months ended September 30, 2006, includes automatic conversion of 751 shares of Class C shares in the amount of $9,445 to 751 shares of Class A shares in the amount of $9,445. 73 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) Note 7. Lines of Credit The AIG SunAmerica Family of Mutual Funds has established $75 million committed and $50 million uncommitted lines of credit with State Street Bank and Trust Company, the Funds' custodian. Interest is currently payable at the Federal Funds rate plus 50 basis points on the committed line and State Street's discretionary bid rate on the uncommitted line of credit. There is also a commitment fee of 10 basis points per annum on the daily unused portion of the $75 million committed line of credit, which is included in other expenses on the Statement of Operations. Borrowings under the line of credit will commence when the Fund's cash shortfall exceeds $100,000. For the six months ended September 30, 2006, the following Funds had borrowings:
Weighted Days Interest Average Average Fund Outstanding Charges Debt Utilized Interest - ---- ----------- -------- ------------- -------- U.S. Government Securities 17 $ 4,332 $1,592,172 5.74% GNMA...................... 18 2,202 760,700 5.78 Strategic Bond............ 1 32 199,009 5.75 High Yield Bond........... 53 68,909 8,237,529 5.59
At September 30, 2006, the GNMA Fund had a balance open under the line of credit agreement of $1,312,708. Note 8. 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 AIG SunAmerica or an affiliate. The interfund lending program allows the participating Funds to borrow money from and loan money to each other for temporary or emergency purposes. An interfund loan will be made under this facility only if the participating Funds receive a more favorable interest rate than would otherwise be available from a typical bank for a comparable transaction. For the six months ended September 30, 2006 none of the Funds participated in this program. Note 9. Trustees Retirement Plan The Trustees of the SunAmerica Income Funds have adopted the AIG SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the "Retirement Plan") effective January 1, 1993 for the unaffiliated Trustees. The Retirement Plan provides generally that if an unaffiliated Trustee who has at least 10 years of consecutive service as a Disinterested Trustee of any of the AIG SunAmerica mutual funds (an "Eligible Trustee") retires after reaching age 60 but before age 70, or who has at least 5 years of consecutive service after reaching age 65 but before age 70, or dies while a Trustee, such person will be eligible to receive a retirement or death benefit from each AIG SunAmerica mutual fund with respect to which he or she is an Eligible Trustee. As of each birthday, prior to the 70th birthday, but in no event for a period greater than 10 years, each Eligible Trustee will be credited with an amount equal to 50% of his or her regular fees (excluding committee fees) for services as a Disinterested Trustee of each AIG SunAmerica mutual fund for the calendar year in which such birthday occurs. In addition, an amount equal to 8.5% of any amounts credited under the preceding clause during prior years is added to each Eligible Trustee's Account until such Eligible Trustee reaches his or her 70th birthday. An Eligible Trustee may receive any benefits payable under the Retirement Plan, at his or her election, either in one lump sum or in up to fifteen annual installments. Any undistributed amounts shall continue to accrue interest at 8.50%. The following amounts of the Retirement Plan liability are included in the Trustees fees and expenses line on the Statement of Assets and Liabilities and the amount for the Retirement Plan expenses are included in the Trustees' fees and expenses line on the Statement of Operations.
Retirement Retirement Retirement Plan Plan Plan Liability Expense Payments ---------- ---------- ---------- Fund As of September 30, 2006 - ---- -------------------------------- U.S. Government Securities $93,286 $1,053 $4,762 GNMA...................... 49,737 2,507 1,293 Strategic Bond............ 24,955 1,371 1,115 High Yield Bond........... 46,459 1,775 1,762 Tax Exempt Insured........ 28,892 384 1,343
74 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited) (continued) Note 10. 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. 75 SunAmerica Income Funds APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) The Board of Trustees (the "Board"), including the Trustees that are not interested persons of SunAmerica Income Funds (the "Trust"), AIG SunAmerica Asset Management Corp. ("AIG SunAmerica" or the "Adviser") or AIG Global Investment Corp. ("AIGGIC" or the "Subadviser"), within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act") (the "Disinterested Trustees"), approved the continuation of the Investment Advisory and Management Agreement between the Trust on behalf of each of its series (each a "Fund" and collectively, the "Funds"), and AIG SunAmerica (the "Advisory Agreement") for a one-year period ending August 31, 2007, at a meeting held on August 29, 2006. At this same meeting, the Board also approved the continuation of the Subadvisory Agreements between AIG SunAmerica and AIGGIC with respect to the SunAmerica Strategic Bond Fund ("Strategic Bond Fund"), SunAmerica High Yield Bond Fund ("High Yield Bond Fund") and SunAmerica Tax Exempt Insured Fund ("Tax Exempt Insured Fund") for a one-year period ending August 31, 2007. In accordance with Section 15(c) of the 1940 Act, the Board requested and the Adviser provided materials relating to the Board's consideration of whether to approve the continuation of the Advisory Agreement and Subadvisory Agreements. In determining whether to approve the continuation of the Advisory Agreement and Subadvisory Agreements, the Board, including the Disinterested Trustees, considered the following information: Nature, Extent and Quality of Services Provided by the Adviser and Subadviser The Board, including the Disinterested Trustees, considered the nature, quality and extent of services to be provided by AIG SunAmerica and AIGGIC. The Board noted that the services include acting as investment manager and adviser to the Funds, managing the daily business affairs of the Funds, and obtaining and evaluating economic, statistical and financial information to formulate and implement investment policies. Additionally, the Board observed that AIG SunAmerica provides office space, accounting, legal, compliance, clerical and administrative services (exclusive of, and in addition to, overseeing any such service provided by any others retained by the Funds, including the Subadviser), and has authorized any of its officers and employees, if elected, to serve as officers or trustees of the Funds without compensation. Finally, the Board noted that AIG SunAmerica is responsible for monitoring and reviewing the activities of affiliated and unaffiliated third-party service providers, including the Subadviser. In connection with the services provided by AIG SunAmerica, the Board analyzed the structure and duties of AIG SunAmerica's fund administration, accounting, legal and compliance departments and concluded that they were adequate to meet the needs of the Funds. The Board further noted that AIG SunAmerica provides and compensates a Chief Compliance Officer for the Funds and reviewed information concerning AIG SunAmerica's compliance staff. The Board also reviewed the personnel responsible for providing advisory services to the Funds, and the level and process of monitoring the portfolio managers, and concluded, based on their experience and interaction with the Adviser, that (i) the Adviser was able to retain quality portfolio managers and other personnel; (ii) the Adviser exhibited a high level of diligence and attention to detail in carrying out its advisory responsibilities under the Advisory Agreement; (iii) the Adviser was responsive to requests of the Board; and (iv) the Adviser had kept the Board apprised of developments relating to the Funds and the industry in general. The Board concluded that the nature and extent of services provided under the Advisory Agreement were reasonable and appropriate in relation to the management fee and that the quality of services continues to be high. The Board also considered AIG SunAmerica's reputation and long-standing relationship with the Funds and considered the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of types of mutual fund and shareholder services. The Board considered AIG SunAmerica's experience in providing management and investment advisory and administrative services to advisory clients, including approximately 130 registered mutual funds and the fact that as of June 30, 2006 AIG SunAmerica managed, advised an/or administered approximately $44.7 billion of assets. With respect to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund, for which AIG SunAmerica has delegated daily investment management responsibilities to AIGGIC, the Board also considered the nature, quality and extent of services provided by AIGGIC. The Board observed that AIGGIC is responsible for providing investment management services, including investment research, advice and supervision, and determining which securities will be purchased or sold by the Funds for which it serves as Subadviser. The Board reviewed AIGGIC's history, structure, size, visibility and resources, which are needed to attract and retain highly qualified investment professionals. The Board reviewed the personnel responsible for providing subadvisory 76 SunAmerica Income Funds APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) (continued) services to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund and concluded, based on their experience with AIGGIC, that (i) AIGGIC was able to retain high quality portfolio managers and other investment personnel; (ii) AIGGIC exhibited a high level of diligence and attention to detail in carrying out its responsibilities under the Subadvisory Agreement; and (iii) AIGGIC was responsive to requests of the Board and of AIG SunAmerica. With respect to the administrative services provided by AIGGIC, the Board considered that AIGGIC provides general marketing assistance and has developed internal policies and procedures for monitoring compliance with the investment objectives, policies and restrictions of the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund as set forth in each Fund's prospectus. The Board concluded that the nature and extent of services provided by AIGGIC under the Subadvisory Agreements were reasonable and appropriate in relation to the subadvisory fee and that the quality of services continues to be high. The Board also considered AIG SunAmerica's and AIGGIC's compliance and regulatory history, and noted that neither AIG SunAmerica nor AIGGIC had been the target of any regulatory actions or investigations that could potentially affect its ability to provide investment management and advisory services to the Funds. Investment Performance of the Funds and the Adviser and Subadviser The Board also reviewed and considered the performance of the Funds. In preparation for the August 29, 2006 meeting, the Board was provided with reports independently prepared by Lipper, Inc. ("Lipper"). In connection with its review, the Board received and reviewed information regarding the investment performance of the Funds as compared to each Fund's peer group ("Peer Group") and peer universe ("Peer Universe"), as determined by Lipper, and to an appropriate index or combination of indices. The Board also noted that it regularly reviews the performance of the Funds periodically throughout the year. Based on the Lipper reports, the Board reviewed each Fund's annualized total return, as applicable, for the prior one-, two-, three-, four-, five- and ten-year periods ended June 30, 2006. The Board also received a report prepared by AIG SunAmerica that detailed the Funds performance for the one-, three-, six-, and nine-month periods ended July 31, 2006. Specifically, the Board noted that while the SunAmerica GNMA Fund ("GNMA Fund") and the SunAmerica U.S. Government Securities Fund ("U.S. Government Fund") ranked in the fourth quintile of each Fund's respective Performance Universe during the past one-year period, that each Fund had strong performance over longer periods and that more recently, for the one- and three- month periods ended July 31, 2006, each Fund ranked in the top quintile of its respective performance universe. In considering the performance of AIGGIC, the Board noted that the Strategic Bond Fund ranked in the first quintile of its Peer Group in each of the one-, three-, five-, and ten-year periods and the Fund also ranked in the first quintile for the one- and three-month period ended July 31, 2006. With respect to the High Yield Bond Fund, the Board considered that the Fund's performance had also ranked in the first quintile of its Peer Group in each of the one-, three-, five-, and ten-year periods and that the Fund also had first quintile performance for the one- and three-month period ended July 31, 2006. The Board also considered that the Tax Exempt Insured Fund's performance ranked in the fifth quintile of its Peer Group in each of the last one-, three-, five, and ten-year periods and while performance had improved during the one- and three-month periods ending July 31, 2006, the Board noted its concern with the Tax Exempt Insured Fund's continued underperformance. In considering AIG SunAmerica's performance as investment adviser, the Board was provided with a presentation that compared the present and historical staffing levels and annual budget of the Investments Department. Based on this presentation, the Board noted that AIG SunAmerica had made significant enhancements to the Investments Department in an effort to improve Fund performance; with respect to the performance of the Tax Exempt Insured Fund, the Board asked AIG SunAmerica to meet with AIGGIC to discuss and consider other strategic plans to improve Fund performance and to report back to the Board at a later date. In considering the performance of AIG SunAmerica and AIGGIC, the Board did not rely upon comparisons of AIG SunAmerica's performance with respect to its other advisory clients. Consideration of the Management Fee and Subadvisory Fee and the Cost of the Services and Profits Realized by the Investment Adviser, Subadviser and their Affiliates from the Relationship with the Funds The Board, including the Disinterested Trustees, received and reviewed information regarding the fees paid by the Funds to AIG SunAmerica for investment advisory and management services and the fees paid by AIG SunAmerica to AIGGIC pursuant to the 77 SunAmerica Income Funds APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) (continued) Subadvisory Agreements. The Board examined this information in order to determine the reasonableness of the fees in light of the nature and quality of services provided and any potential additional benefits received by AIG SunAmerica, the Subadviser or their affiliates in connection with providing such services to the Funds. To assist in analyzing the reasonableness of the fees, the Board received reports prepared independently by Lipper. The reports showed comparative fee information of the Funds' Peer Groups, including rankings within the Peer Groups, as well as reports prepared by AIG SunAmerica. In considering the reasonableness of the management fee, the Board reviewed a number of expense comparisons, including: (i) contractual advisory and subadvisory fees; and (ii) actual total operating expenses. The Board also received information on fees charged by the Subadviser for management of funds similar to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund. This information assisted the Board in considering what other clients pay AIGGIC for similar services. The Board did not rely upon comparisons of the fees earned by AIG SunAmerica with respect to other investment advisory contracts. In considering the Funds' total operating expenses, the Board analyzed the level of fee waivers and expense reimbursements and the net expense caps contractually agreed upon by AIG SunAmerica with respect to the Strategic Bond Fund and High Yield Bond Fund. The Board compared the Funds' net expense ratios to those of other funds within the Funds' respective Peer Groups as a guide to help assess the reasonableness of the Fund's management fee. The Board acknowledged that it was difficult to make precise comparisons with other funds in the Peer Groups since the exact nature of services provided under the Peer Groups' fund agreements is often not apparent. The Board noted that the Peer Group fee information as a whole was useful in assessing whether the Adviser was providing services at a cost that was competitive with other, similar funds. The Board also took into account that the management fee arrangements included breakpoints that will adjust the fee downward as the size of Funds increase, thereby allowing the shareholders to participate in economies of scale. In considering the subadvisory fees, the Board, including the Disinterested Trustees, considered that the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund each pay a fee to AIG SunAmerica pursuant to the Advisory Agreement, and that, in turn, AIG SunAmerica and not the Funds, pay a fee to AIGGIC. Therefore, the Board considered the amount of the advisory fee retained by AIG SunAmerica and the fee paid to AIGGIC in connection with the services provided. The Board also considered that the Subadvisory Agreement contained breakpoints in the fee schedule that would adjust the subadvisory fee downward if each of the funds for which AIGGIC serves as subadviser increased its assets to certain levels. The Board noted that such breakpoints would not directly benefit the shareholders, but would result in AIG SunAmerica retaining a larger portion of the advisory fee. The Board also considered AIG SunAmerica's profitability and the benefits AIG SunAmerica and its affiliates received from its relationship with the Funds. The Board reviewed financial statements relating to AIG SunAmerica's profitability and financial condition with respect to the services it provided the Funds and considered how profit margins could affect AIG SunAmerica's ability to attract and retain high quality investment professionals. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred on a fund by fund basis by AIG SunAmerica and its affiliates in providing services to the Funds. Based on this information, the Board considered the revenues received by AIG SunAmerica under the Advisory Agreement, and where applicable, the Administrative Agreement. The Board also considered revenues received by AIG SunAmerica's affiliates under the Rule 12b-1 Plans, Service Agreements, and Administrative and Shareholder Service Agreements. Additionally, the Board reviewed AIGGIC's financial statements and considered whether AIGGIC had the financial resources necessary to attract and retain high quality investment management personnel, continue to perform its obligations under the Subadvisory Agreement and to continue to provide the high quality of services that it had provided to Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund to date. With respect to indirect costs and benefits, the Board considered that (1) any indirect costs incurred by AIG SunAmerica in connection with rendering investment advisory services to the Funds are inconsequential based on management's judgment on the analysis of the adequacy of the advisory fees, and (2) any collateral benefits derived as a result of providing advisory services to the Funds are de minimis according to management and do not impact upon the reasonableness of the advisory fee. The Board did, however, consider the reputational value to AIG SunAmerica from serving as investment adviser. The Board concluded that AIG SunAmerica had the financial resources necessary to perform its obligations under the Advisory Agreement and to continue to provide the high quality of services that it had provided to the Funds to date and that the profitability of the Adviser and its affiliates as a result of their relationships with the Funds was reasonable. The Board also concluded that the level of the management fee was reasonable in light of the factors discussed above. 78 SunAmerica Income Funds APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) (continued) Economies of Scale The Board, including the Disinterested Trustees, considered whether the Funds have benefited from economies of scale and whether there is potential for future realization of economies with respect to the Funds. Based on the current management fee levels, the Board concluded that any potential economies of scale will be shared between shareholders and AIG SunAmerica in an appropriate manner. The Board considered that the funds in the AIG SunAmerica complex share common resources and as a result, an increase in the overall size of the complex could permit each fund to incur lower expenses than they otherwise would achieve as stand-alone entities. The Board also considered the anticipated efficiencies in the processes of AIG SunAmerica as it adds labor and capital to expand the scale of operations. The Board concluded that the management fee structure was reasonable and that no changes were currently necessary to further reflect economies of scale. The Board noted that it will continue to review fees, including breakpoints and expense caps in connection with contract renewals. Other Factors The Board also reviewed the reports from the past year on soft dollar commissions. These reports included information on brokers and total commissions paid for each Fund. The reports also detailed the types of research and services AIG SunAmerica obtained in connection with soft dollar commissions. The Board also considered the potential benefits the Adviser derived from the Fund's soft dollar arrangements whereby brokers provide research to the Adviser in return for allocating fund brokerage. Conclusion After a full and complete discussion, the Board approved the continuation of the Advisory Agreement for each of the Funds, and the Subadvisory Agreement with respect to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund, for a one-year period ending August 31, 2007. Based upon their evaluation of all these factors in their totality, the Board, including the Disinterested Trustees, was satisfied that the terms of the Advisory Agreement and Subadvisory Agreement were fair and reasonable and in the best interests of the Funds and the Funds' shareholders. In arriving at a decision to approve the continuation of the Advisory Agreement and Subadvisory Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together. The Disinterested Trustees were also assisted by the advice of independent counsel in making this determination. 79 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- September 30, 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 Principal Funds in Name, Held With Office and Occupations Fund Complex Other Directorships Address and SunAmerica Length of During Past 5 Overseen by Held by Date of Birth* Complex Time Served(4) Years Trustee(1) Trustee(2) - ---------------------- ---------- -------------- -------------- ------------ ------------------- Disinterested Trustees Jeffrey S. Burum Trustee 2004-present Founder and 42 None DOB: February 27, 1963 CEO of National 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. 90 Director, DOB: October 6, 1945 A.G. Belo Corporation (1992 to present); Director, Sysco Corporation (1996 to present); Director, Luby's Inc. (1998 to present); Director, University of Texas Board of Regents (2001-Present). William F. Devin Trustee 2001-present Retired. 90 Member of DOB: December 30, 1938 the Board of Governors, Boston Stock Exchange (1985-Present). Samuel M. Eisenstat Chairman 1986-present Attorney, solo 52 Director, DOB: March 7, 1940 of the practitioner. North Board European Oil Royalty Trust. Stephen J. Gutman Trustee 1986-present Senior 52 None DOB: May 10, 1943 Associate, Corcoran Group (Real 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). William J. Shea Trustee 2004-present President and 52 Chairman DOB: February 9, 1948 CEO, Conseco, of the Inc. (2001 to Board, 2004); Royal and Chairman of SunAlliance, the Board of U.S.A., Centennial Inc. Technologies, (March Inc. (1998 to 2005 to 2001); Vice present); Chairman, Bank Director, Boston Boston Corporation Private (1993 to 1998) Holdings (October 2004 to present). Interested Trustee Peter A. Harbeck(3) Trustee 1995-present President, CEO 99 None DOB: January 23, 1954 and Director, AIG SunAmerica Asset Management Corp. ("AIG SunAmerica") (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)
80 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- September 30, 2006 -- (unaudited) (continued)
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) - ---------------------- ---------- -------------- ------------------------------ ------------ ------------------- OFFICERS Vincent M. Marra President 2004-present Senior Vice President, AIG N/A N/A DOB: May 28, 1950 and CEO SunAmerica (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, AIG N/A N/A DOB: June 25, 1966 SunAmerica (December 2004 to present); Vice President, AIG SunAmerica (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, 1966 and Chief 2005-present General Counsel, AIG Legal SunAmerica (June 2005 to Officer Present); Vice 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 AIG SunAmerica serves as investment adviser or administrator. The "Fund Complex" includes the SunAmerica Money Market Funds (2 funds), SunAmerica Equity Funds (10 funds), The Trust (5 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 (32 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. (3) Interested trustee, as defined within 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. (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. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his/her successor is duly elected and qualifies. Additional information concerning the Trustees is contained in the Statement of Additional Information which is available; without charge, by calling (800) 858-8850. 81 [LOGO] AIG SunAmerica 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. The Trust's Vincent M. Marra, AIG SunAmerica Capital Forms N-Q are available President and Services, Inc. on the U.S. Securities Chief Executive Officer Harborside Financial and Exchange Commis-sion Donna M. Handel, Center website at www.sec.gov. Treasurer 3200 Plaza 5 You can also review and Michael Cheah, Vice Jersey City, NJ obtain copies of the President 07311-4992 Forms N-Q at the U.S. Timothy P. Pettee, Vice Securities and Exchange President Shareholder Servicing Commission Public Cynthia Gibbons, Vice Agent Refer-ence Room in President and Chief AIG SunAmerica Fund Washington DC Compliance Officer Services, Inc. (information on the James Nichols, Vice Harborside Financial operation of the Public President Center Reference Room may be Gregory N. Bressler, 3200 Plaza 5 ob-tained by calling Chief Legal Officer Jersey City, NJ 1-800-SEC-0330). and Secretary 07311-4992 Nori L. Gabert, Vice PROXY VOTING RECORD ON President and Custodian and Transfer SUNAMERICA INCOME FUNDS Assistant Secretary Agent Information regarding how Corey A. Issing, State Street Bank and the SunAmerica Income Assistant Secretary Trust Company Funds voted proxies Gregory R. Kingston, P.O. Box 419572 related to securities Vice President and Kansas City, MO held in the SunAmerica Assistant Treasurer 64141-6572 Income Funds during the Kathleen Fuentes, most recent twelve month Assistant Secretary VOTING PROXIES ON TRUST period ended June 30 is PORTFOLIO SECURITIES available, once filed A description of the with the U.S. Securities policies and proce-dures and Exchange Commission, that the Trust uses to without charge, upon determine how to vote request, by calling proxies relating to (800) 858-8850 or on the secu-rities held in a U.S. Securities and Fund's portfolio which is Exchange Commission's available in the Trust's website at Statement of Additional http://www.sec.gov. Information, may be ob-tained without charge This report is submitted upon request, by calling solely for the general (800) 858-8850. The information of in-formation is also shareholders of the available from the EDGAR Funds. Distribution of database on the U.S. this report to persons Secu-rities and Exchange other than shareholders Commission's website at of the Funds is http://www.sec.gov. authorized only in con-nection with a currently effective pro-spectus, setting forth details of the Funds, which must precede or accom-pany this report. The accompanying report has not been audited by independent accountants and accordingly no opinion has been expressed thereon.
82 [LOGO] AIG SunAmerica Mutual Funds 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 INSAN-9/06 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert. Not applicable. Item 4. Principal Accountant Fees and Services. Not applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Included in Item 1 to the Form Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant's board of trustees that were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a- 101), or this Item 10. Item 11. Controls and Procedures. (a) An evaluation was performed within 90 days of the filing of this report, under the supervision and with the participation of the registrant's management, including the President and Treasurer, of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as defined under Rule 30a- 3(c) under the Investment Company Act of 1940 (17 CFR 270. 30a- 3(c)). Based on that evaluation, the registrant's management, including the President and Treasurer, concluded that the registrant's disclosure controls and procedures are effective. (b) There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d))) that occurred during the 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 contro1 over financial reporting. Item 12. Exhibits. (a) (1) Not applicable. (2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (3) Not applicable. (b) Certifications pursuant to Rule 30a- 2(b) under the Investment Company Act of 1940 (17 CFR 270. 30a- 2(a)) and Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SunAmerica Income Funds By: /s/ Vincent M. Marra ------------------- Vincent M. Marra President Date: December 8, 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: December 8, 2006 By: /s/ Donna M. Handel ------------------- Donna M. Handel Treasurer Date: December 8, 2006 EX-99.CERT 2 dex99cert.txt CERTIFICATIONS PURSUANT TO SECTION 302 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: November 16, 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: November 16, 2006 /s/ Donna M. Handel ------------------- Donna M. Handel Treasurer EX-99.906CERT 3 dex99906cert.txt CERTIFICATIONS PURSUANT TO SECTION 906 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: November 16, 2006 /s/ Vincent M. Marra --------------- Vincent M. Marra President /s/ Donna M. Handel --------------- Donna M. Handel Treasurer -----END PRIVACY-ENHANCED MESSAGE-----