N-CSR 1 dncsr.txt SUNAMERICA INCOME FUNDS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4708 --------------------------------------------- SunAmerica Income Funds -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent M. Marra Senior Vice President AIG SunAmerica Asset Management Corp. Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (201) 324-6464 ----------------------------- Date of fiscal year end: March 31 -------------------------- Date of reporting period: March 31, 2007 ------------------------- Item 1. Reports to Stockholders SunAmerica 2007 --------------- [PHOTO] Annual Report [GRAPHIC] Income Funds [LOGO] AIG SunAmerica Mutual Funds March 31, 2007 ANNUAL REPORT SUNAMERICA INCOME FUNDS SunAmerica U.S. Government Securities Fund (SGTAX) SunAmerica GNMA Fund (GNMAX) SunAmerica Strategic Bond Fund (SDIAX) SunAmerica High Yield Bond Fund (SHNAX) SunAmerica Tax Exempt Insured Fund (STEAX) Table of Contents SHAREHOLDER LETTER................................ 2 EXPENSE EXAMPLE................................... 3 STATEMENT OF ASSETS AND LIABILITIES............... 5 STATEMENT OF OPERATIONS........................... 7 STATEMENT OF CHANGES IN NET ASSETS................ 8 FINANCIAL HIGHLIGHTS.............................. 11 PORTFOLIO OF INVESTMENTS.......................... 17 NOTES TO FINANCIAL STATEMENTS..................... 63 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................... 78 TRUSTEE AND OFFICER INFORMATION................... 79 COMPARISONS: PORTFOLIO vs. INDEXES................ 84
Shareholder Letter Dear Shareholder, We are pleased to present the annual performance summary of the SunAmerica Income Funds for the 12-month period from April 1, 2006 to March 31, 2007. As always, we look forward to sharing the economic and market conditions that have shaped the Funds' investments during the period. After engaging in 17 consecutive Fed Funds rate increases beginning in June 2004, the Federal Reserve decided to leave rates unchanged at its August 2006 meeting. While the language accompanying this decision noted the Federal Reserve's continuing concern with inflation, this move buoyed the financial markets. Long-term bonds performed well while shorter-term issues, supported by a 5.25% Fed Funds rate, returned solid current income. Although the Federal Reserve left rates unchanged at its March 2007 meeting, it modified its language in a fashion that removed the bias toward further tightening--an acknowledgement that the risks of an economic slowdown or of increasing inflation simultaneously exist. The slowdown in the housing market and the issues in the sub-prime mortgage market, with their impact on consumer spending, have been counterbalanced by greater- than-expected Consumer Price Index numbers and solid job growth. All of our Funds provided positive returns over the period. The SunAmerica High Yield Bond Fund's, Tax-Exempt Insured Fund's and U.S. Government Securities Fund's Class A shares' total returns were all in the top half of their respective Lipper peer groups. The Strategic Bond Fund's and GNMA Fund's Class A shares' total returns narrowly missed this mark, but continue to provide solid long-term performance with both Funds' total return being in the top quintile of their respective peer groups for the five-year period ending March 31, 2007. In the uncertain economic environment ahead, your portfolio managers continue to work to build portfolios aimed at balancing risk and return. We remain committed to achieving solid total return while recognizing investors' growing demand for current income. Thank you for your continued investment in our Funds. A more detailed commentary on each Fund's performance is included at the end of the report. We also encourage you to visit or website, www.sunamericafunds.com, for more information. Sincerely, The SunAmerica Income Funds Investment Professionals AIG SunAmerica Asset Management Corp. AIG Global Investment Corp. ------------------------------------- - Michael Cheah Matthew Meyer Rob Vanden Assem Andrew Doulos J. Hutchison Bryan Bryan Petermann Raphael Davis Geoffrey Cornell John Yovanovic Anthony King Peter Stevenson Tim Lindvall Rajeev Mittal
-------- Past performance is no guarantee of future results. 2 SunAmerica Income Funds EXPENSE EXAMPLE -- March 31, 2007 -- (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 October 1, 2006 and held until March 31, 2007. Actual Expenses The "Actual" section of the table provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the column under the heading entitled "Expenses Paid During the Six Months Ended March 31, 2007" to estimate the expenses you paid on your account during this period. The "Expenses Paid During the Six Months Ended March 31, 2007" column does not include small account fees that may be charged if your account balance is below $500 ($250 for retirement plan accounts). In addition, the "Expenses Paid During the Six Months Ended March 31, 2007" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Trust's prospectus and/or your retirement plan document for a full description of these fees. Had these fees been included, the "Expenses Paid During the Six Months Ended March 31, 2007" 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 March 31, 2007" column does not include small account fees that may be charged if your account balance is below $500 ($250 for retirement plan accounts). In addition, the "Expenses Paid During the Six Months Ended March 31, 2007" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Fund's prospectus and/or your retirement plan document for a full description of these fees. Had these fees been included, the "Expenses Paid During the Six Months Ended March 31, 2007" column would have been higher and the "Ending Account Value" would have been lower. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, including sales charges on purchase payments, contingent deferred sales charges; small account fees and administrative fees, if applicable to your account. Please refer to your prospectus and/or qualified retirement plan document for more information. Therefore, the "Hypothetical" example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs and other fees were included, your costs would have been higher. 3 SunAmerica Income Funds EXPENSE EXAMPLE -- March 31, 2007 -- (unaudited) (continued)
Actual Hypothetical ------------------------------------------ ------------------------------------------ Ending Account Ending Account Expenses Paid Value Using Expenses Paid Value Using During the a Hypothetical During the Expense Beginning Actual Six Months Beginning 5% Assumed Six Months Ratio Account Value Return at Ended Account Value Return at Ended as of at October 1, March 31, March 31, at October 1, March 31, March 31, March 31, 2006 2007 2007* 2006 2007 2007* 2007* ------------- -------------- ------------- ------------- -------------- ------------- --------- U.S. Government Securities Fund Class A#........... $1,000.00 $1,020.17 $ 4.99 $1,000.00 $1,020.00 $ 4.99 0.99% Class B#........... $1,000.00 $1,015.79 $ 8.24 $1,000.00 $1,016.75 $ 8.25 1.64% Class C#........... $1,000.00 $1,016.88 $ 8.25 $1,000.00 $1,016.75 $ 8.25 1.64% GNMA Fund Class A#........... $1,000.00 $1,024.31 $ 5.00 $1,000.00 $1,020.00 $ 4.99 0.99% Class B#........... $1,000.00 $1,021.00 $ 8.26 $1,000.00 $1,016.75 $ 8.25 1.64% Class C#........... $1,000.00 $1,021.91 $ 8.27 $1,000.00 $1,016.75 $ 8.25 1.64% Strategic Bond Fund Class A............ $1,000.00 $1,044.28 $ 6.42 $1,000.00 $1,018.65 $ 6.34 1.26% Class B............ $1,000.00 $1,040.84 $ 9.87 $1,000.00 $1,015.26 $ 9.75 1.94% Class C............ $1,000.00 $1,040.86 $ 9.82 $1,000.00 $1,015.31 $ 9.70 1.93% High Yield Bond Fund Class A#........... $1,000.00 $1,051.26 $ 6.96 $1,000.00 $1,018.15 $ 6.84 1.36% Class B#........... $1,000.00 $1,047.85 $10.26 $1,000.00 $1,014.91 $10.10 2.01% Class C#........... $1,000.00 $1,047.78 $10.26 $1,000.00 $1,014.91 $10.10 2.01% Tax Exempt Insured Fund Class A............ $1,000.00 $1,016.13 $ 6.38 $1,000.00 $1,018.60 $ 6.39 1.27% Class B............ $1,000.00 $1,011.28 $10.58 $1,000.00 $1,014.41 $10.60 2.11% Class C#........... $1,000.00 $1,012.50 $ 9.78 $1,000.00 $1,015.21 $ 9.80 1.95%
-------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 182 days divided by 365 days. These ratios do not reflect transaction costs, including sales charges on purchase payments, contingent deferred sales charges, small account fees and administrative fees, if applicable to your account. Please refer to your Prospectus and/or qualified retirement plan document for more information. # During the stated period, the investment adviser either waived a portion of or all fees and assumed a portion of or all expenses for the Funds. As a result, if these fees and expenses had not been waived or assumed, the "Actual/Hypothetical Ending Account Value" would have been lower and the "Actual/Hypothetical Expenses Paid During the Six Months Ended March 31, 2007" and the "Expenses Ratios" would have been higher. 4 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2007
U.S. Government Strategic Securities GNMA Bond Fund Fund Fund --------------- ------------ ------------ ASSETS: Long-term investment securities, at value* (unaffiliated)............................ $155,876,497 $396,707,060 $673,736,595 Short-term investment securities, at value* (unaffiliated)........................... -- -- 12,055,168 Repurchase agreements (cost equals market)........................................... 41,132,000 18,288,000 19,710,000 ------------ ------------ ------------ Total Investments.................................................................. 197,008,497 414,995,060 705,501,763 ------------ ------------ ------------ Cash................................................................................. 411 483 47,992,335 Foreign cash*........................................................................ -- -- 1,014,662 Receivable for: Shares of beneficial interest sold................................................. 84,054 286,132 6,401,268 Dividends and interest............................................................. 1,024,509 2,176,026 10,828,060 Investments sold................................................................... -- -- 16,451,793 Prepaid Expenses and other assets.................................................... 4,033 5,230 4,890 Due from investment adviser for expense reimbursements/fee waivers................... 92,776 137,883 -- Unrealized appreciation on forward currency contracts................................ -- -- -- ------------ ------------ ------------ Total assets......................................................................... 198,214,280 417,600,814 788,194,771 ------------ ------------ ------------ LIABILITIES: Payable for: Shares of beneficial interest redeemed............................................. 307,522 782,647 1,124,081 Investments purchased.............................................................. 20,562,691 17,643,646 57,921,067 Interest on securities sold short.................................................. -- -- -- Investment advisory and management fees............................................ 96,763 156,158 373,001 Distribution and service maintenance fees.......................................... 65,801 168,201 353,109 Transfer agent fees and expenses................................................... 47,381 95,671 145,650 Trustees' fees and expenses........................................................ 90,951 54,315 29,255 Other accrued expenses............................................................. 95,878 147,499 117,294 Dividends payable.................................................................... 111,093 214,073 735,157 Due to custodian..................................................................... -- -- -- Due to broker........................................................................ -- -- -- Unrealized depreciation on forward currency contracts................................ -- -- 19,771 ------------ ------------ ------------ Total liabilities.................................................................... 21,378,080 19,262,210 60,818,385 ------------ ------------ ------------ Net assets........................................................................... $176,836,200 $398,338,604 $727,376,386 ============ ============ ============ NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value....................................... $ 191,475 $ 359,142 $ 2,003,173 Paid-in capital...................................................................... 189,835,293 404,579,767 735,317,184 ------------ ------------ ------------ 190,026,768 404,938,909 737,320,357 Accumulated undistributed net investment income (loss)............................... 56,621 327,903 (954,680) Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short and foreign exchange transactions............................. (11,664,927) (4,854,668) (24,085,451) Unrealized appreciation (depreciation) on investments................................ (1,582,262) (2,073,540) 15,016,052 Unrealized appreciation (depreciation) on foreign exchange transactions.............. -- -- 80,108 ------------ ------------ ------------ Net Assets......................................................................... $176,836,200 $398,338,604 $727,376,386 ============ ============ ============ *Cost Long-term investment securities (unaffiliated)..................................... $157,458,759 $398,780,600 $658,720,543 ============ ============ ============ Short-term investment securities (unaffiliated).................................... $ -- $ -- $ 12,055,168 ============ ============ ============ Foreign cash....................................................................... $ -- $ -- $ 998,213 ============ ============ ============
High Yield Tax Exempt Bond Insured Fund Fund ------------ ----------- ASSETS: Long-term investment securities, at value* (unaffiliated)............................ $359,323,802 $54,271,509 Short-term investment securities, at value* (unaffiliated)........................... -- 4,229,589 Repurchase agreements (cost equals market)........................................... 16,603,000 -- ------------ ----------- Total Investments.................................................................. 375,926,802 58,501,098 ------------ ----------- Cash................................................................................. -- -- Foreign cash*........................................................................ 158,476 -- Receivable for: Shares of beneficial interest sold................................................. 1,859,099 38,597 Dividends and interest............................................................. 6,988,874 804,375 Investments sold................................................................... 28,645,991 -- Prepaid Expenses and other assets.................................................... 47,097 3,550 Due from investment adviser for expense reimbursements/fee waivers................... 179,754 -- Unrealized appreciation on forward currency contracts................................ -- -- ------------ ----------- Total assets......................................................................... 413,806,093 59,347,620 ------------ ----------- LIABILITIES: Payable for: Shares of beneficial interest redeemed............................................. 890,894 6,100 Investments purchased.............................................................. 11,210,371 -- Interest on securities sold short.................................................. -- -- Investment advisory and management fees............................................ 242,662 25,243 Distribution and service maintenance fees.......................................... 193,996 22,775 Transfer agent fees and expenses................................................... 88,225 15,415 Trustees' fees and expenses........................................................ 48,720 28,449 Other accrued expenses............................................................. 128,058 76,162 Dividends payable.................................................................... 556,870 53,308 Due to custodian..................................................................... 20,589,488 -- Due to broker........................................................................ 45,613 -- Unrealized depreciation on forward currency contracts................................ -- -- ------------ ----------- Total liabilities.................................................................... 33,994,897 227,452 ------------ ----------- Net assets........................................................................... $379,811,196 $59,120,168 ============ =========== NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value....................................... $ 794,311 $ 46,734 Paid-in capital...................................................................... 451,662,065 56,219,020 ------------ ----------- 452,456,376 56,265,754 Accumulated undistributed net investment income (loss)............................... (2,773,841) (50,950) Accumulated undistributed net realized gain (loss) on investments, futures contracts, securities sold short and foreign exchange transactions............................. (86,811,392) 463,744 Unrealized appreciation (depreciation) on investments................................ 16,935,543 2,441,620 Unrealized appreciation (depreciation) on foreign exchange transactions.............. 4,510 -- ------------ ----------- Net Assets......................................................................... $379,811,196 $59,120,168 ============ =========== *Cost Long-term investment securities (unaffiliated)..................................... $342,388,259 $51,829,889 ============ =========== Short-term investment securities (unaffiliated).................................... $ -- $ 4,229,589 ============ =========== Foreign cash....................................................................... $ 153,966 $ -- ============ ===========
See Notes to Financial Statements 5 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2007 -- (continued)
U.S. Government Strategic Securities GNMA Bond Fund Fund Fund --------------- ------------ ------------ Class A (unlimited shares authorized): Net assets........................................................................ $152,239,216 $310,507,891 $453,893,034 Shares of beneficial interest issued and outstanding.............................. 16,483,896 28,013,598 125,141,916 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge)................................................ $ 9.24 $ 11.08 $ 3.63 Maximum sales charge (4.75% of offering price).................................... 0.46 0.55 0.18 ------------ ------------ ------------ Maximum offering price to public.................................................. $ 9.70 $ 11.63 $ 3.81 ============ ============ ============ Class B (unlimited shares authorized): Net assets........................................................................ $ 14,716,154 $ 57,224,413 $ 55,728,375 Shares of beneficial interest issued and outstanding.............................. 1,592,759 5,149,484 15,368,309 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge)................................................ $ 9.24 $ 11.11 $ 3.63 ============ ============ ============ Class C (unlimited shares authorized): Net assets........................................................................ $ 9,880,830 $ 30,606,300 $217,754,977 Shares of beneficial interest issued and outstanding.............................. 1,070,838 2,751,074 59,807,057 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge)................................................ $ 9.23 $ 11.13 $ 3.64 ============ ============ ============
High Yield Tax Exempt Bond Insured Fund Fund ------------ ----------- Class A (unlimited shares authorized): Net assets........................................................................ $241,554,439 $50,036,204 Shares of beneficial interest issued and outstanding.............................. 50,593,814 3,955,541 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge)................................................ $ 4.77 $ 12.65 Maximum sales charge (4.75% of offering price).................................... 0.24 0.63 ------------ ----------- Maximum offering price to public.................................................. $ 5.01 $ 13.28 ============ =========== Class B (unlimited shares authorized): Net assets........................................................................ $ 51,479,264 $ 5,093,187 Shares of beneficial interest issued and outstanding.............................. 10,764,041 402,636 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge)................................................ $ 4.78 $ 12.65 ============ =========== Class C (unlimited shares authorized): Net assets........................................................................ $ 86,777,493 $ 3,990,777 Shares of beneficial interest issued and outstanding.............................. 18,073,205 315,241 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge)................................................ $ 4.80 $ 12.66 ============ ===========
See Notes to Financial Statements 6 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the year ended March 31, 2007
U.S. Government Strategic High Yield Tax Exempt Securities GNMA Bond Bond Insured Fund Fund Fund Fund Fund ---------- ----------- ----------- ----------- ---------- INCOME: Dividends (unaffiliated).................................... $ -- $ -- $ 183,974 $ 441,330 $ -- Interest (unaffiliated)..................................... 8,711,396 21,020,970 33,952,223 25,097,136 2,877,460 ---------- ----------- ----------- ----------- ---------- Total investment income*.................................. 8,711,396 21,020,970 34,136,197 25,538,466 2,877,460 ---------- ----------- ----------- ----------- ---------- EXPENSES: Investment advisory and management fees..................... 1,122,507 1,861,785 3,528,616 2,414,284 315,937 Distribution and service maintenance fees: Class A................................................... 515,046 1,065,614 1,278,867 670,556 185,425 Class B................................................... 168,580 657,301 504,536 522,532 58,351 Class C................................................... 86,798 352,101 1,433,116 832,021 43,738 Transfer agent fees: Class A................................................... 367,820 702,772 837,830 448,312 119,420 Class B................................................... 43,049 159,423 122,994 124,663 15,208 Class C................................................... 22,953 83,151 327,833 194,040 11,154 Registration fees: Class A................................................... 17,640 19,074 34,425 27,037 23,773 Class B................................................... 9,671 17,574 12,478 11,867 11,669 Class C................................................... 4,422 10,089 32,090 17,900 6,030 Custodian and accounting fees............................... 81,781 154,163 328,761 114,482 33,500 Reports to shareholders..................................... 27,222 87,220 94,726 86,947 274 Audit and tax fees.......................................... 42,261 43,406 44,833 46,191 40,498 Legal fees.................................................. 12,493 33,614 27,702 23,029 12,462 Trustees' fees and expenses................................. 11,561 28,152 30,702 20,769 4,296 Interest expense............................................ 12,019 50,839 6,944 75,783 -- Interest expense on securities sold short................... -- -- -- 7,431 -- Other expenses.............................................. 15,354 21,057 18,290 18,988 4,356 ---------- ----------- ----------- ----------- ---------- Total expenses before fee waivers, expense reimbursement and custody credits...................................... 2,561,177 5,347,335 8,664,743 5,656,832 886,091 Fees waived and expenses reimbursed by investment advisor (Note 3)......................................... (669,714) (630,369) -- (313,242) (4,056) Custody credits earned on cash balances................... (8,112) (2,205) (305,101) (14,837) (713) ---------- ----------- ----------- ----------- ---------- Net expenses.............................................. 1,883,351 4,714,761 8,359,642 5,328,753 881,322 ---------- ----------- ----------- ----------- ---------- Net investment income (loss)................................. 6,828,045 16,306,209 25,776,555 20,209,713 1,996,138 ---------- ----------- ----------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated)....... (68,459) (171,039) 3,661,092 6,213,051 481,567 Net realized foreign exchange gain (loss) on other assets and liabilities............................................. -- -- 74,765 -- -- ---------- ----------- ----------- ----------- ---------- Net realized gain (loss) on investments and foreign currencies.................................................. (68,459) (171,039) 3,735,857 6,213,051 481,567 ---------- ----------- ----------- ----------- ---------- Change in unrealized appreciation (depreciation) on investments (unaffiliated).................................. 1,657,175 4,010,650 13,294,624 6,274,268 281,498 Change in unrealized foreign exchange gain (loss) on other assets and liabilities...................................... -- -- 3,625 14,688 -- ---------- ----------- ----------- ----------- ---------- Net unrealized gain (loss) on investments and foreign currencies.................................................. 1,657,175 4,010,650 13,298,249 6,288,956 281,498 ---------- ----------- ----------- ----------- ---------- Net realized and unrealized gain (loss) on investments and foreign currencies.......................................... 1,588,716 3,839,611 17,034,106 12,502,007 763,065 ---------- ----------- ----------- ----------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. $8,416,761 $20,145,820 $42,810,661 $32,711,720 $2,759,203 ========== =========== =========== =========== ========== *Net of foreign withholding taxes on interest and dividends of.............................................. $ -- $ -- $ 100,866 $ -- $ -- ========== =========== =========== =========== ==========
See Notes to Financial Statements 7 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS
U.S. Government Securities Fund -------------------------- For the year For the year ended ended March 31, March 31, 2007 2006 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 6,828,045 $ 7,348,908 Net realized gain (loss) on investments and foreign currencies........................ (68,459) (2,629,101) Net unrealized gain (loss) on investments and foreign currencies...................... 1,657,175 (1,138,951) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 8,416,761 3,580,856 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (6,264,372) (6,505,119) Net investment income (Class B)....................................................... (608,171) (786,554) Net investment income (Class C)....................................................... (312,901) (307,714) Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- -- Net realized gain on securities (Class B)............................................. -- -- Net realized gain on securities (Class C)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ------------ ------------ Total distributions to shareholders..................................................... (7,185,444) (7,599,387) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 7) (3,236,594) (29,003,495) ------------ ------------ Total increase (decrease) in net assets................................................. (2,005,277) (33,022,026) NET ASSETS: Beginning of period..................................................................... 178,841,477 211,863,503 ------------ ------------ End of period+.......................................................................... $176,836,200 $178,841,477 ============ ============ -------- +Includes accumulated undistributed net investment income (loss)........................ $ 56,621 $ 57,877 ============ ============
See Notes to Financial Statements 8 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund -------------------------- For the year For the year ended ended March 31, March 31, 2007 2006 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 16,306,209 $ 14,040,017 Net realized gain (loss) on investments and foreign currencies........................ (171,039) (1,409,187) Net unrealized gain (loss) on investments and foreign currencies...................... 4,010,650 (2,932,719) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 20,145,820 9,698,111 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (13,350,095) (11,887,262) Net investment income (Class B)....................................................... (2,448,583) (2,666,840) Net investment income (Class C)....................................................... (1,311,888) (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..................................................... (17,110,566) (17,744,508) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 7) (24,531,303) (68,594,450) ------------ ------------ Total increase (decrease) in net assets................................................. (21,496,049) (76,640,847) NET ASSETS: Beginning of period..................................................................... 419,834,653 496,475,500 ------------ ------------ End of period+.......................................................................... $398,338,604 $419,834,653 ============ ============ -------- +Includes accumulated undistributed net investment income (loss)........................ $ 327,903 $ 20,580 ============ ============
Strategic Bond Fund -------------------------- For the year For the year ended ended March 31, March 31, 2007 2006 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 25,776,555 $ 10,165,505 Net realized gain (loss) on investments and foreign currencies........................ 3,735,857 3,525,730 Net unrealized gain (loss) on investments and foreign currencies...................... 13,298,249 (1,597,716) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 42,810,661 12,093,519 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (18,128,377) (5,369,145) Net investment income (Class B)....................................................... (2,175,396) (1,942,089) Net investment income (Class C)....................................................... (6,149,737) (2,927,876) Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- -- Net realized gain on securities (Class B)............................................. -- -- Net realized gain on securities (Class C)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- ------------ ------------ Total distributions to shareholders..................................................... (26,453,510) (10,239,110) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 7) 400,002,265 175,766,449 ------------ ------------ Total increase (decrease) in net assets................................................. 416,359,416 177,620,858 NET ASSETS: Beginning of period..................................................................... 311,016,970 133,396,112 ------------ ------------ End of period+.......................................................................... $727,376,386 $311,016,970 ============ ============ -------- +Includes accumulated undistributed net investment income (loss)........................ $ (954,680) $ (225) ============ ============
See Notes to Financial Statements 9 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund -------------------------- For the year For the year ended ended March 31, March 31, 2007 2006 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 20,209,713 $ 21,938,661 Net realized gain (loss) on investments and foreign currencies........................ 6,213,051 16,381,114 Net unrealized gain (loss) on investments and foreign currencies...................... 6,288,956 (3,300,370) ------------ ------------ Net increase (decrease) in net assets resulting from operations......................... 32,711,720 35,019,405 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (13,055,050) (11,905,182) Net investment income (Class B)....................................................... (3,241,816) (3,703,477) Net investment income (Class C)....................................................... (5,181,540) (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..................................................... (21,478,406) (21,693,351) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 7) 32,050,805 5,307,491 ------------ ------------ Total increase (decrease) in net assets................................................. 43,284,119 18,633,545 NET ASSETS: Beginning of period..................................................................... 336,527,077 317,893,532 ------------ ------------ End of period+.......................................................................... $379,811,196 $336,527,077 ============ ============ -------- +Includes accumulated undistributed net investment income (loss)........................ $ (2,773,841) $ (2,050,534) ============ ============
Tax Exempt Insured Fund ------------------------ For the year For the year ended ended March 31, March 31, 2007 2006 ------------ ------------ Operations: Net investment income (loss).......................................................... $ 1,996,138 $ 2,192,275 Net realized gain (loss) on investments and foreign currencies........................ 481,567 828,946 Net unrealized gain (loss) on investments and foreign currencies...................... 281,498 (1,242,127) ----------- ----------- Net increase (decrease) in net assets resulting from operations......................... 2,759,203 1,779,094 ----------- ----------- Distributions to shareholders from: Net investment income (Class A)....................................................... (1,775,224) (1,839,250) Net investment income (Class B)....................................................... (149,453) (194,099) Net investment income (Class C)....................................................... (115,967) (132,474) Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. (365,409) (587,815) Net realized gain on securities (Class B)............................................. (39,551) (75,670) Net realized gain on securities (Class C)............................................. (31,739) (52,856) Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ----------- ----------- Total distributions to shareholders..................................................... (2,477,343) (2,882,164) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7) (9,226,947) (7,564,719) ----------- ----------- Total increase (decrease) in net assets................................................. (8,945,087) (8,667,789) NET ASSETS: Beginning of period..................................................................... 68,065,255 76,733,044 ----------- ----------- End of period+.......................................................................... $59,120,168 $68,065,255 =========== =========== -------- +Includes accumulated undistributed net investment income (loss)........................ $ (50,950) $ (6,151) =========== ===========
See Notes to Financial Statements 10 SunAmerica Income Funds FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES FUND ------------------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expenses beginning investment and investment investment gains on Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets(3) ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- ------------- Class A - 03/31/03 $8.80 $0.37 $ 0.86 $ 1.23 $(0.40) $-- $(0.40) $9.63 14.14% $210,848 1.12% 03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 0.99 03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 0.99 03/31/06 9.37 0.36 (0.20) 0.16 (0.37) -- (0.37) 9.16 1.68 151,284 0.99 03/31/07 9.16 0.37 0.10 0.47 (0.39) -- (0.39) 9.24 5.25 152,239 0.99 Class B - 03/31/03 $8.80 $0.30 $ 0.87 $ 1.17 $(0.33) $-- $(0.33) $9.64 13.51% $ 62,595 1.76% 03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 1.64 03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 1.64 03/31/06 9.37 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.16 1.02 19,276 1.64 03/31/07 9.16 0.32 0.09 0.41 (0.33) -- (0.33) 9.24 4.57 14,716 1.64 Class C* - 03/31/03 $8.79 $0.30 $ 0.87 $ 1.17 $(0.33) $-- $(0.33) $9.63 13.52% $ 24,322 1.75% 03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 1.64 03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 1.64 03/31/06 9.36 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.15 1.02 8,281 1.64 03/31/07 9.15 0.31 0.10 0.41 (0.33) -- (0.33) 9.23 4.57 9,881 1.64
- Ratio of net investment income to average Portfolio net assets(3) Turnover ------------- --------- - - 3.88% 630%(4) 3.14 267(4) 3.26 253(4) 3.80 357 4.05 243 - 3.20% 630%(4) 2.45 267(4) 2.61 253(4) 3.14 357 3.40 243 - 3.18% 630%(4) 2.45 267(4) 2.61 253(4) 3.14 357 3.40 243
-------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 -------- -------- -------- -------- -------- U.S. Government Securities Fund Class A. 0.21% 0.37% 0.39% 0.36% 0.38% U.S. Government Securities Fund Class B. 0.23 0.37 0.43 0.43 0.43 U.S. Government Securities Fund Class C. 0.27 0.38 0.48 0.57 0.43
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydowns on securities and was as follows:
2003 2004 2005 ---- ---- ---- U.S. Government Securities Fund......... 614% 256% 246%
See Notes to Financial Statements 11 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND --------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expenses Period beginning investment and investment investment gains on Distri- end of Total period to average Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets(3) -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- ------------- Class A - 03/31/03 $10.77 $0.37 $ 0.93 $1.30 $(0.42) $(0.11) $(0.53) $11.54 $12.29 $255,096 0.99% 03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467 0.99 03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031 0.99 03/31/06 11.20 0.35 (0.07) 0.28 (0.40) (0.08) (0.48) 11.00 2.18 303,343 0.99 03/31/07 11.00 0.46 0.10 0.56 (0.48) -- (0.48) 11.08 5.23 310,508 0.99 Class B - 03/31/03 $10.80 $0.30 $ 0.93 $1.23 $(0.35) $(0.11) $(0.46) $11.57 $11.54 $189,323 1.64% 03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923 1.64 03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497 1.64 03/31/06 11.23 0.28 (0.08) 0.20 (0.33) (0.08) (0.41) 11.02 1.43 76,304 1.64 03/31/07 11.02 0.39 0.11 0.50 (0.41) -- (0.41) 11.11 4.64 57,224 1.64 Class C* - 03/31/03 $10.81 $0.29 $ 0.94 $1.23 $(0.35) $(0.11) $(0.46) $11.58 $11.53 $137,173 1.64% 03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184 1.64 03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936 1.64 03/31/06 11.24 0.28 (0.07) 0.21 (0.33) (0.08) (0.41) 11.04 1.53 40,188 1.64 03/31/07 11.04 0.40 0.10 0.50 (0.41) -- (0.41) 11.13 4.64 30,606 1.64
Ratio of net investment income to average Portfolio net assets(3) Turnover ------------- --------- 3.36% 436%(4) 2.51 225(4) 2.73 204(4) 3.17 138 4.19 142 2.71% 436%(4) 1.77 225(4) 2.10 204(4) 2.50 138 3.53 142 2.59% 436%(4) 1.74 225(4) 2.11 204(4) 2.49 138 3.53 142
-------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 -------- -------- -------- -------- -------- GNMA Fund Class A............. 0.13% 0.18% 0.17% 0.13% 0.15% GNMA Fund Class B............. 0.14 0.16 0.18 0.17 0.18 GNMA Fund Class C............. 0.13 0.16 0.18 0.19 0.17
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydowns on securities and was as follows:
2003 2004 2005 ---- ---- ---- GNMA Fund............................... 421% 213% 204%
See Notes to Financial Statements 12 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND ------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expense Period beginning investment and investment investment gains on Distri- end of Total period to average Ended of period income(1) unrealized) operations income investments butions period+ Return(2) (000's) net assets(5) -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------- --------- -------- ------------- Class A - 03/31/03 $3.00 $0.20 $0.06 $0.26 $(0.18) $-- $(0.18) $3.08 9.07%(4) $ 37,136 1.62% 03/31/04 3.08 0.21 0.33 0.54 (0.21) -- (0.21) 3.41 18.04 43,840 1.55(3) 03/31/05 3.41 0.20 0.11 0.31 (0.23) -- (0.23) 3.49 9.36 59,279 1.40(3) 03/31/06 3.49 0.17 0.05 0.22 (0.18) -- (0.18) 3.53 6.54 167,072 1.34 03/31/07 3.53 0.16 0.12 0.28 (0.18) -- (0.18) 3.63 8.07 453,893 1.26 Class B - 03/31/03 $3.00 $0.18 $0.06 $0.24 $(0.16) $-- $(0.16) $3.08 8.36%(4) $ 27,879 2.28% 03/31/04 3.08 0.19 0.33 0.52 (0.19) -- (0.19) 3.41 17.29 36,110 2.19(3) 03/31/05 3.41 0.18 0.10 0.28 (0.21) -- (0.21) 3.48 8.35 37,250 2.05(3) 03/31/06 3.48 0.16 0.05 0.21 (0.16) -- (0.16) 3.53 6.14 46,294 2.00(3) 03/31/07 3.53 0.15 0.10 0.25 (0.15) -- (0.15) 3.63 7.36 55,728 1.94 Class C* - 03/31/03 $3.01 $0.19 $0.05 $0.24 $(0.16) $-- $(0.16) $3.09 8.47%(4) $ 14,423 2.17%(3) 03/31/04 3.09 0.19 0.34 0.53 (0.20) -- (0.20) 3.42 17.43 22,064 2.16(3) 03/31/05 3.42 0.18 0.11 0.29 (0.21) -- (0.21) 3.50 8.65 36,867 2.05(3) 03/31/06 3.50 0.15 0.05 0.20 (0.16) -- (0.16) 3.54 5.84 97,651 1.99(3) 03/31/07 3.54 0.14 0.12 0.26 (0.16) -- (0.16) 3.64 7.36 217,755 1.93
Ratio of net investment income to average Portfolio net assets(5) Turnover ------------- --------- 6.93% 67%(6) 6.41(3) 71(6) 5.94(3) 190(6) 5.19 119 4.84 131 6.26% 67%(6) 5.76(3) 71(6) 5.32(3) 190(6) 4.51(3) 119 4.17 131 6.37%(3) 67%(6) 5.78(3) 71(6) 5.29(3) 190(6) 4.54(3) 119 4.17 131
-------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/03 03/31/04 03/31/05 03/31/06 -------- -------- -------- -------- Strategic Bond Fund Class A............. -- % 0.02% 0.03% -- % Strategic Bond Fund Class B............. -- 0.02 0.02 0.00 Strategic Bond Fund Class C............. 0.11 0.02 0.03 0.00
(4)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. (5)Net of custody credits of:
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 -------- -------- -------- -------- -------- Strategic Bond Fund..................... 0.01% 0.02% 0.01% 0.07% 0.05%
(6)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydowns on securities and was as follows:
2003 2004 2005 - ---- ---- ---- Strategic Bond Fund 65% 69% 188%
See Notes to Financial Statements 13 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND -------------------- Net gain (loss) on Net investments Distributions Net Asset (both Dividends from net Asset Net Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expense Period beginning investment and investment investment gains on Distri- end of Total period to average Ended of period income(1) unrealized) operations income investment butions period Return(2) (000's) net assets -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ----------- ---------- Class A - 03/31/03 $4.13 $0.37 $(0.49) $(0.12) $(0.35) $-- $(0.35) $3.66 (2.45)% $ 66,521 1.56% 03/31/04 3.66 0.33 0.60 0.93 (0.36) -- (0.36) 4.23 26.05 93,818 1.49 03/31/05 4.23 0.33 0.21 0.54 (0.34) -- (0.34) 4.43 13.26 101,661 1.38(3) 03/31/06 4.43 0.31 0.19 0.50 (0.33) -- (0.33) 4.60 11.61 214,041 1.36(3)(5) 03/31/07 4.60 0.30 0.19 0.49 (0.32) -- (0.32) 4.77 11.01 241,554 1.36(3) Class B - 03/31/03 $4.13 $0.35 $(0.49) $(0.14) $(0.33) $-- $(0.33) $3.66 (3.06)% $ 57,596 2.18% 03/31/04 3.66 0.31 0.60 0.91 (0.33) -- (0.33) 4.24 25.55 73,751 2.14 03/31/05 4.24 0.31 0.20 0.51 (0.31) -- (0.31) 4.44 12.57 61,961 2.03(3) 03/31/06 4.44 0.31 0.16 0.47 (0.30) -- (0.30) 4.61 10.88 52,346 2.01(3)(5) 03/31/07 4.61 0.27 0.19 0.46 (0.29) -- (0.29) 4.78 10.29 51,479 2.01(3) Class C* - 03/31/03 $4.15 $0.34 $(0.48) $(0.14) $(0.33) $-- $(0.33) $3.68 (2.97)% $ 27,814 2.15%(3) 03/31/04 3.68 0.30 0.60 0.90 (0.33) -- (0.33) 4.25 25.14 52,868 2.11(3) 03/31/05 4.25 0.30 0.22 0.52 (0.31) -- (0.31) 4.46 12.77 65,385 2.03(3) 03/31/06 4.46 0.30 0.17 0.47 (0.30) -- (0.30) 4.63 10.86 70,140 2.01(3)(5) 03/31/07 4.63 0.27 0.19 0.46 (0.29) -- (0.29) 4.80 10.27 86,777 2.01(3)
Ratio of net investment income to average Portfolio net assets Turnover ---------- --------- 10.26% 117%(4) 8.15 126(4) 7.59(3) 85(4) 7.20(3)(5) 91 6.44(3) 86 9.63% 117%(4) 7.52 126(4) 7.04(3) 85(4) 6.71(3)(5) 91 5.82(3) 86 9.67%(3) 117%(4) 7.53(3) 126(4) 6.97(3) 85(4) 6.67(3)(5) 91 5.80(3) 86
-------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 -------- -------- -------- -------- -------- High Yield Bond Fund Class A............ -- % -- % 0.08% 0.11% 0.09% High Yield Bond Fund Class B............ -- -- 0.07 0.14 0.11 High Yield Bond Fund Class C............ 0.10 0.01 0.09 0.12 0.10
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio turnover was calculated prior to including paydown on securities and was as follows:
2003 2004 2005 ---- ---- ---- High Yield Bond Fund 117% 126% 85%
(5)Net of custody credits of 0.01%. See Notes to Financial Statements 14 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND ----------------------- Net gain (loss) on Net investments Distributions Net Net Asset (both Dividends from net Asset Assets, Ratio of Value, Net realized Total from from net realized Total Value, end of expenses beginning investment and investment investment gains on Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ------- ---------- Class A - 03/31/03 $12.72 $0.41 $ 0.73 $1.14 $(0.43) $(0.09) $(0.52) $13.34 9.08% $78,358 1.24% 03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 1.26 03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 1.25 03/31/06 12.81 0.41 (0.10) 0.31 (0.40) (0.13) (0.53) 12.59 2.43 56,875 1.30 03/31/07 12.59 0.42 0.15 0.57 (0.42) (0.09) (0.51) 12.65 4.63 50,036 1.27 Class B - 03/31/03 $12.72 $0.32 $ 0.73 $1.05 $(0.34) $(0.09) $(0.43) $13.34 8.30% $19,031 1.97% 03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 1.96 03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 1.94 03/31/06 12.82 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.60 1.77 6,694 1.95 03/31/07 12.60 0.31 0.15 0.46 (0.32) (0.09) (0.41) 12.65 3.72 5,093 2.11 Class C* - 03/31/03 $12.72 $0.31 $ 0.74 $1.05 $(0.34) $(0.09) $(0.43) $13.34 8.32% $ 6,451 1.95%(3) 03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 1.95(3) 03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 1.95(3) 03/31/06 12.81 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.59 1.81 4,497 1.95(3) 03/31/07 12.59 0.33 0.17 0.50 (0.34) (0.09) (0.43) 12.66 3.98 3,991 1.95(3)
Ratio of net investment income to average Portfolio net assets Turnover ---------- --------- 3.12% 195% 2.90 131 3.14 153 3.14 81 3.28 84 2.39% 195% 2.20 131 2.44 153 2.48 81 2.44 84 2.40%(3) 195% 2.21(3) 131 2.44(3) 153 2.48(3) 81 2.60(3) 84
-------- * Effective February 23, 2004, Class II was redesignated to Class C. (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)Net of the following expense reimbursements, if applicable (based on average net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 -------- -------- -------- -------- -------- Tax Exempt Insured Fund Class C......... 0.00% 0.12% 0.09% 0.20% 0.09%
See Notes to Financial Statements 15 SunAmerica U.S. Government Securities Fund PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) Industry Allocation* Government National Mtg. Assoc. 47.5% Repurchase Agreement........... 23.3 United States Treasury Bonds... 16.5 United States Treasury Notes... 16.3 Private Export Funding......... 5.7 U.S. Government Agencies....... 1.0 Federal Farm Credit Bank....... 0.7 Federal National Mtg. Assoc.... 0.4 ----- 111.4% =====
Credit Quality+# Government -- Agency.. 56.2% Government -- Treasury 37.3 AA.................... 6.5 ----- 100.0% =====
-------- * Calculated as a percentage of net assets. + Source: Standard and Poors # Calculated as a percentage of total debt issues, excluding short-term securities. 16 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 55.3% Federal Farm Credit Bank -- 0.7% 5.64% due 04/04/11............. $ 500,000 $ 514,953 6.00% due 03/07/11............. 200,000 208,160 6.30% due 12/03/13............. 500,000 538,869 ----------- 1,261,982 ----------- Federal Home Loan Mtg. Corp. -- 0.0% 8.00% due 06/01/08............. 1,995 2,001 ----------- Federal National Mtg. Assoc. -- 0.4% 6.53% due 05/25/30(3).......... 669,833 671,337 8.00% due 01/01/23............. 34,003 35,946 11.00% due 02/01/15............ 32 36 11.50% due 09/01/19............ 10,048 11,024 ----------- 718,343 ----------- Private Export Funding Corp. -- 5.7% 5.87% due 07/31/08............. 10,000,000 10,117,520 ----------- Government National Mtg. Assoc. -- 47.5% 4.50% due 05/15/18............. 963,986 939,633 4.50% due 08/15/18............. 1,541,596 1,502,651 4.50% due 09/15/18............. 4,454,601 4,342,067 4.50% due 10/15/18............. 4,432,453 4,320,477 4.50% due 09/15/33............. 4,884,905 4,631,184 5.00% due 04/15/18............. 4,579,038 4,545,276 5.00% due 08/15/33............. 1,953,026 1,903,522 5.00% due 09/15/33............. 903,046 880,157 5.00% due 10/15/33............. 618,021 602,356 5.00% due 11/15/34............. 211,048 205,581 5.00% due April TBA............ 4,000,000 3,891,248 5.00% due May TBA.............. 17,000,000 16,537,804 5.50% due 11/15/32............. 15,844 15,781 5.50% due 03/15/33............. 464,445 462,508 5.50% due 04/15/33............. 594,397 591,918 5.50% due 05/15/33............. 1,314,618 1,309,136 5.50% due 06/15/33............. 6,328,135 6,301,745 5.50% due 07/15/33............. 1,722,451 1,715,269 5.50% due 10/15/33............. 1,782,427 1,774,994 5.50% due 12/15/33............. 356,932 355,443 5.50% due 01/15/34............. 3,577,382 3,561,456 5.50% due 02/15/34............. 2,080,516 2,071,253 6.00% due 01/15/28............. 2,443 2,485 6.00% due 04/15/28............. 1,345,764 1,368,937 6.00% due 05/15/28............. 2,998 3,049 6.00% due 10/15/28............. 3,606 3,668 6.00% due 03/15/29............. 77,879 79,178 6.00% due 04/15/29............. 48,032 48,833 6.00% due 05/15/29............. 74,131 75,367 6.00% due 06/15/29............. 28,126 28,595 6.00% due 04/15/31............. 29,302 29,770 6.00% due 05/15/31............. 49,065 49,850 6.00% due 11/15/31............. 173,561 176,336 6.00% due 12/15/31............. 409,590 416,140 6.00% due 01/15/32............. 179,217 182,006 6.00% due 02/15/32............. 43,998 44,683 6.00% due 03/15/32............. 10,340 10,501 6.00% due 08/15/32............. 286,200 290,653 6.00% due 11/15/32............. 41,618 42,265
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Government National Mtg. Assoc. (continued) 6.00% due 12/15/32....................... $ 9,523 $ 9,671 6.00% due 01/15/33....................... 19,534 19,831 6.00% due 02/15/33....................... 59,634 60,541 6.00% due 03/15/33....................... 89,132 90,488 6.00% due 04/15/33....................... 341,420 346,612 6.00% due 07/15/33....................... 249,002 252,789 6.00% due 08/15/33....................... 2,582,240 2,622,761 6.00% due 09/15/33....................... 363,530 369,060 6.00% due 10/15/33....................... 1,500,761 1,523,593 6.00% due 11/15/33....................... 175,279 177,945 6.00% due 12/15/33....................... 776,189 787,995 6.00% due 02/15/34....................... 325,268 329,833 6.00% due 05/15/34....................... 49,285 49,977 6.00% due 06/15/34....................... 44,671 45,298 6.00% due 07/15/34....................... 1,506,043 1,527,179 6.00% due 08/15/34....................... 187,973 190,611 6.00% due 09/15/34....................... 1,381,302 1,400,687 6.00% due 10/15/34....................... 4,779,861 4,846,943 6.00% due 12/15/34....................... 413,995 419,805 6.00% due 06/15/35....................... 302,727 306,778 6.00% due 08/15/35....................... 317,123 321,366 6.50% due 02/15/29....................... 16,421 16,910 6.50% due 05/15/31....................... 21,044 21,652 6.50% due 06/15/31....................... 64,766 66,635 6.50% due 07/15/31....................... 36,591 37,647 6.50% due 08/15/31....................... 76,946 79,167 6.50% due 09/15/31....................... 190,508 196,007 6.50% due 10/15/31....................... 322,788 332,105 6.50% due 11/15/31....................... 13,365 13,751 6.50% due 12/15/31....................... 22,474 23,123 6.50% due 01/15/32....................... 34,230 35,186 6.50% due 02/15/32....................... 558,107 573,699 6.50% due 06/15/32....................... 51,288 52,720 7.00% due 07/15/23....................... 36,217 37,862 7.00% due 10/15/23....................... 84,221 88,045 7.00% due 09/15/25....................... 239,551 250,688 7.00% due 03/20/29....................... 18,505 19,296 7.00% due 06/20/29....................... 2,968 3,095 7.00% due 11/20/30....................... 74,814 78,006 7.50% due 04/15/17....................... 10,613 11,013 7.50% due 08/15/23....................... 186,956 195,087 7.50% due 09/15/23....................... 573,377 598,315 7.50% due 10/15/23....................... 16,624 17,347 8.00% due 02/15/08....................... 167 169 9.00% due 12/15/16....................... 58,043 62,178 11.00% due 08/20/15...................... 223 246 11.00% due 09/20/15...................... 414 456 11.50% due 05/20/15...................... 3,709 4,148 12.50% due 09/15/14...................... 6,313 7,042 13.00% due 01/15/11...................... 1,889 2,100 13.00% due 02/15/11...................... 2,458 2,734 13.00% due 03/15/11...................... 192 213 13.00% due 04/15/11...................... 443 493 13.00% due 09/15/13...................... 4,775 5,342 13.00% due 10/20/14...................... 1,073 1,186 13.00% due 11/15/14...................... 705 791
17 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Government National Mtg. Assoc. (continued) 13.00% due 02/20/15...................... $ 643 $ 713 13.50% due 02/15/13...................... 10,478 11,812 15.00% due 01/15/12...................... 408 467 15.00% due 02/15/12...................... 1,008 1,154 15.00% due 06/15/12...................... 10,763 12,328 15.00% due 09/15/12...................... 604 692 15.50% due 09/15/11...................... 32,538 37,174 ------------ 83,912,332 ------------ Small Business Administration -- 1.0% 6.30% due 06/01/18....................... 1,769,302 1,820,176 ------------ Total U.S. Government Agencies (cost $98,899,113)...................... 97,832,354 ------------ U.S. GOVERNMENT TREASURIES -- 32.8% United States Treasury Bonds -- 16.5% 4.50% due 02/15/36....................... 14,000,000 13,199,368 5.38% due 02/15/31....................... 15,000,000 15,991,410 ------------ 29,190,778 ------------ United States Treasury Notes -- 16.3% 4.50% due 11/15/15....................... 8,000,000 7,918,440 4.63% due 11/15/16....................... 2,000,000 1,994,140 4.63% due 02/15/17....................... 9,000,000 8,981,721 4.75% due 02/15/37....................... 4,000,000 3,937,500 5.13% due 06/30/08....................... 6,000,000 6,021,564 ------------ 28,853,365 ------------ Total U.S. Government Treasuries (cost $58,559,646)...................... 58,044,143 ------------ Total Long-Term Investment Securities (cost $157,458,759)..................... 155,876,497 ------------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- REPURCHASE AGREEMENT -- 23.3% UBS Securities, LLC Joint Repurchase Agreement(1) (cost $41,132,000).................. $41,132,000 $ 41,132,000 ------------ TOTAL INVESTMENTS -- (cost $198,590,759)(2).............. 111.4% 197,008,497 Liabilities in excess of other assets.. (11.4) (20,172,297) ----------- ------------ NET ASSETS -- 100.0% $176,836,200 =========== ============
-------- (1) See Note 2 for details of Joint Repurchase Agreement (2) See Note 5 for cost of investment on tax basis (3) Collateralized Mortgage Obligation TBA --Securities purchased on a forward commitment basis with an approximate principle amount and no definite maturity date. The actual principal and maturity date will be determined upon settlement date. See Notes to Financial Statements 18 SunAmerica GNMA Fund PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) Industry Allocation* Government National Mtg. Assoc. 84.1% United States Treasury Notes... 13.5 Repurchase Agreement........... 4.6 Federal National Mtg. Assoc.... 1.1 United States Treasury Bonds... 0.7 U.S. Government Agencies....... 0.2 ----- 104.2% =====
Credit Quality+# Government -- Agency.. 85.6% Government -- Treasury 14.4 ----- 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. 19 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 85.4% Federal National Mtg. Assoc. -- 1.1% Federal National Mtg. Assoc. Series 2005 -- 20 5.00% due 01/25/18(1)................ $ 4,342,944 $ 4,321,406 ----------- Government National Mtg. Assoc. -- 84.1% 4.50% due 05/15/18.................... 1,927,972 1,879,267 4.50% due 08/15/18.................... 1,000,960 975,673 4.50% due 09/15/18.................... 3,331,257 3,247,102 4.50% due 10/15/18.................... 5,161,323 5,030,935 4.50% due 08/15/33.................... 3,035,894 2,878,210 4.50% due 09/15/33.................... 3,551,151 3,366,704 5.00% due 03/15/18.................... 566,942 562,762 5.00% due 04/15/18.................... 7,374,476 7,320,102 5.00% due 05/15/18.................... 9,973,272 9,899,738 5.00% due 01/15/33.................... 18,124 17,664 5.00% due 05/15/33.................... 13,076 12,745 5.00% due 08/15/33.................... 2,868,398 2,795,692 5.00% due 09/15/33.................... 2,802,628 2,731,590 5.00% due 10/15/33.................... 6,371,650 6,210,146 5.00% due 04/15/34.................... 57,002 55,526 5.00% due 05/15/34.................... 165,083 160,808 5.00% due 11/15/34.................... 722,087 703,384 5.00% due 12/15/34.................... 726,923 708,095 5.00% due April TBA................... 15,000,000 14,592,180 5.00% due May TBA..................... 3,000,000 2,918,436 5.50% due 06/15/29.................... 6,193 6,180 5.50% due 01/15/32.................... 48,249 48,057 5.50% due 12/15/32.................... 777,047 773,956 5.50% due 01/15/33.................... 513,741 511,598 5.50% due 02/15/33.................... 2,068,091 2,059,466 5.50% due 03/15/33.................... 1,142,212 1,137,449 5.50% due 04/15/33.................... 6,085,020 6,059,642 5.50% due 05/15/33.................... 7,285,968 7,255,584 5.50% due 06/15/33.................... 8,174,772 8,140,807 5.50% due 07/15/33.................... 410,089 408,378 5.50% due 08/15/33.................... 2,563,508 2,552,817 5.50% due 09/15/33.................... 408,370 406,667 5.50% due 10/15/33.................... 6,944,387 6,915,428 5.50% due 12/15/33.................... 7,580,314 7,548,702 5.50% due 01/15/34.................... 10,441,517 10,395,032 5.50% due 02/15/34.................... 1,373,972 1,367,856 5.50% due 04/15/35.................... 2,439,505 2,427,589 5.50% due 07/15/35.................... 2,690,587 2,677,445 5.50% due 09/15/35.................... 26,958,060 26,826,384 5.50% due 10/15/35.................... 16,737,010 16,655,257 5.50% due 11/15/35.................... 33,249,602 33,087,194 5.50% due 12/15/35.................... 20,126,149 20,027,841 5.50% due 02/15/36.................... 2,821,487 2,806,322 5.50% due 03/15/36.................... 10,546,734 10,490,048 5.50% due 04/15/36.................... 467,990 465,474 5.50% due 05/15/36.................... 3,530,482 3,511,506 6.00% due 11/15/23.................... 4,051 4,109 6.00% due 01/15/24.................... 7,316 7,423 6.00% due 07/15/28.................... 5,189 5,277 6.00% due 11/15/28.................... 319,226 324,640 6.00% due 12/15/28.................... 350,335 356,277 6.00% due 01/15/29.................... 684,506 695,917
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- Government National Mtg. Assoc. (continued) 6.00% due 02/15/29....................... $ 777,361 $ 790,323 6.00% due 03/15/29....................... 591,443 601,305 6.00% due 04/15/29....................... 1,580,694 1,607,104 6.00% due 05/15/29....................... 71,507 72,699 6.00% due 06/15/29....................... 635,435 646,056 6.00% due 07/15/29....................... 217,084 220,704 6.00% due 08/15/29....................... 20,483 20,824 6.00% due 10/15/29....................... 106,033 107,801 6.00% due 04/15/31....................... 20,709 21,040 6.00% due 07/15/31....................... 15,317 15,562 6.00% due 10/15/31....................... 84,983 86,342 6.00% due 11/15/31....................... 1,493,862 1,517,753 6.00% due 12/15/31....................... 624,998 634,993 6.00% due 01/15/32....................... 716,573 727,724 6.00% due 02/15/32....................... 57,423 58,317 6.00% due 03/15/32....................... 485,490 493,045 6.00% due 07/15/32....................... 117,869 119,703 6.00% due 08/15/32....................... 1,705,996 1,733,090 6.00% due 09/15/32....................... 1,160,764 1,178,825 6.00% due 10/15/32....................... 213,829 217,156 6.00% due 11/15/32....................... 8,377 8,507 6.00% due 12/15/32....................... 171,388 174,055 6.00% due 01/15/33....................... 1,590,288 1,614,478 6.00% due 02/15/33....................... 1,774,626 1,801,618 6.00% due 03/15/33....................... 1,291,075 1,310,712 6.00% due 04/15/33....................... 1,465,367 1,487,657 6.00% due 05/15/33....................... 1,465,854 1,488,152 6.00% due 06/15/33....................... 1,103,653 1,120,441 6.00% due 08/15/33....................... 1,715,150 1,741,401 6.00% due 10/15/33....................... 536,378 544,537 6.00% due 11/15/33....................... 1,740,632 1,767,112 6.00% due 12/15/33....................... 3,284,143 3,334,099 6.00% due 01/15/34....................... 1,750,577 1,775,144 6.00% due 02/15/34....................... 11,596,802 11,759,555 6.00% due 03/15/34....................... 348,889 353,785 6.00% due 04/15/34....................... 3,663,100 3,714,510 6.00% due 05/15/34....................... 322,268 326,791 6.00% due 06/15/34....................... 342,214 347,016 6.00% due 07/15/34....................... 3,909,035 3,963,896 6.00% due 08/15/34....................... 5,430,193 5,506,418 6.00% due 09/15/34....................... 289,303 293,364 6.00% due 10/15/34....................... 827,376 838,987 6.00% due 11/15/34....................... 1,812,274 1,837,708 6.00% due 12/15/34....................... 75,810 76,874 6.00% due 01/15/35....................... 113,750 115,272 6.00% due 02/15/35....................... 1,101,788 1,116,532 6.00% due 04/15/35....................... 63,888 64,743 6.00% due 05/15/35....................... 118,083 119,663 6.00% due 06/15/35....................... 487,537 494,061 6.00% due 11/15/35....................... 29,555 29,951 6.00% due 12/15/35....................... 1,572,223 1,593,186 6.00% due 01/15/36....................... 1,152,482 1,167,529 6.00% due 02/15/36....................... 1,937,709 1,963,004 6.00% due 03/15/36....................... 1,878,470 1,902,993 6.00% due 04/15/36....................... 5,672,375 5,746,427 6.00% due 05/15/36....................... 6,264,887 6,346,675
20 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Government National Mtg. Assoc. (continued) 6.00% due 06/15/36....................... $3,304,231 $ 3,347,367 6.00% due 07/15/36....................... 1,743,649 1,766,412 6.00% due 08/15/36....................... 25,319 25,679 6.00% due 09/15/36....................... 254,644 257,968 6.00% due 10/15/36....................... 1,841,875 1,866,949 6.00% due 11/15/36....................... 2,769,483 2,805,638 6.50% due 03/15/28....................... 26,787 27,586 6.50% due 08/15/28....................... 43,907 45,217 6.50% due 12/15/28....................... 1,344 1,385 6.50% due 01/15/29....................... 5,078 5,229 6.50% due 02/15/29....................... 1,651 1,700 6.50% due 03/15/29....................... 111,822 115,152 6.50% due 04/15/29....................... 1,951 2,009 6.50% due 05/15/29....................... 13,264 13,660 6.50% due 06/15/29....................... 38,637 39,787 6.50% due 07/15/29....................... 5,253 5,409 6.50% due 10/15/29....................... 3,523 3,628 6.50% due 08/15/31....................... 239,859 246,782 6.50% due 09/15/31....................... 17,653 18,162 6.50% due 10/15/31....................... 322,789 332,105 6.50% due 11/15/31....................... 167,838 172,683 6.50% due 12/15/31....................... 203,934 209,820 6.50% due 02/15/32....................... 272,715 280,333 6.50% due 05/15/32....................... 1,434,450 1,474,525 6.50% due 06/15/32....................... 122,700 126,128 7.00% due 03/15/23....................... 92,465 96,664 7.00% due 01/20/24....................... 721 751 7.00% due 03/20/24....................... 699 728 7.00% due 07/20/25....................... 4,130 4,308 7.00% due 09/15/25....................... 104,032 108,869 7.00% due 01/20/29....................... 41,541 43,316 7.00% due 02/20/29....................... 8,064 8,408 7.00% due 06/20/29....................... 14,720 15,349 7.00% due 07/20/29....................... 54,414 56,740 7.00% due 09/20/29....................... 5,505 5,740 7.00% due 10/20/29....................... 11,489 11,979 7.00% due 11/20/29....................... 3,676 3,833 7.00% due 03/20/30....................... 5,161 5,381 7.00% due 06/20/30....................... 8,476 8,837 7.00% due 08/20/30....................... 32,987 34,394 7.00% due 09/20/30....................... 27,707 28,889 7.00% due 10/20/30....................... 33,440 34,867 8.00% due 11/15/26....................... 190,705 202,419 8.00% due 12/15/29....................... 21,060 22,368 8.00% due 04/15/30....................... 43,775 46,451 8.00% due 05/15/30....................... 6,243 6,625 8.00% due 08/15/30....................... 42,980 45,608 8.50% due 03/15/17....................... 16,908 18,097 8.50% due 05/15/21....................... 51,895 55,884 8.50% due 12/15/22....................... 50,215 54,147 8.50% due 01/15/23....................... 116,664 125,949 8.50% due 09/15/24....................... 37,618 40,656 9.00% due 07/15/16....................... 66,519 71,257 9.00% due 10/15/16....................... 5,700 6,106 ------------ 335,096,233 ------------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- Small Business Administration -- 0.2% 6.30% due 06/01/18................... $ 589,767 $ 606,725 ------------ Total U.S. Government Agencies (cost $342,011,341)................. 340,024,364 ------------ U.S. GOVERNMENT TREASURIES -- 14.2% United States Treasury Bonds -- 1.9% 4.50% due 02/15/36................... 3,000,000 2,828,436 4.75% due 02/15/37................... 5,000,000 4,921,875 ------------ 7,750,311 ------------ United States Treasury Notes -- 12.3% 4.50% due 11/15/15................... 1,000,000 989,805 4.63% due 11/15/16................... 18,000,000 17,947,260 4.63% due 02/15/17................... 20,000,000 19,959,380 5.13% due 06/30/08................... 10,000,000 10,035,940 ------------ 48,932,385 ------------ Total U.S. Government Treasuries (cost $56,769,259).................. 56,682,696 ------------ Total Long-Term Investment Securities (cost $398,780,600)................. 396,707,060 ------------ REPURCHASE AGREEMENT -- 4.6% UBS Securities, LLC Joint Repurchase Agreement(2) (cost $18,288,000).................. 18,288,000 18,288,000 TOTAL INVESTMENTS -- (cost $417,068,600)(3).............. 104.2% 414,995,060 Liabilities in excess of other assets.. (4.2) (16,656,456) ----------- ------------ NET ASSETS -- 100.0% $398,338,604 =========== ============
-------- (1) Collateralized Mortgaged Obligation (2) See Note 2 for details of Joint Repurchase Agreement (3) See Note 5 for cost of investment on a tax basis TBA --Securities purchased on a forward commitment basis with an approximate principle amount and no definite maturity date. The actual principal and maturity date will be determined upon settlement date. See Notes to Financial Statements 21 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) Industry Allocation* Foreign Government Agencies.............. 33.2% United States Treasury Notes............. 6.1 Federal National Mtg. Assoc.............. 6.0 Federal Home Loan Mtg. Corp.............. 3.8 Diversified Financial Services........... 2.8 Repurchase Agreements.................... 2.7 Oil Companies -- Exploration & Production 2.1 Finance -- Auto Loans.................... 2.0 Telephone -- Integrated.................. 1.9 Cable TV................................. 1.7 Special Purpose Entities................. 1.6 Pipelines................................ 1.4 Cellular Telecom......................... 1.2 Independent Power Producers.............. 1.2 Electric -- Integrated................... 1.1 United States Treasury Bonds............. 1.1 Chemicals -- Specialty................... 1.0 Medical -- Hospitals..................... 1.0 Time Deposits............................ 1.0 Multimedia............................... 0.9 Telecom Services......................... 0.9 Casino Hotels............................ 0.8 Medical -- Drugs......................... 0.8 Transport -- Air Freight................. 0.8 Satellite Telecom........................ 0.7 Auto -- Cars/Light Trucks................ 0.6 Banks -- Commercial...................... 0.6 Electronic Components -- Semiconductors.. 0.6 Television............................... 0.6 Airlines................................. 0.5 Oil Companies -- Integrated.............. 0.5 Paper & Related Products................. 0.5 Real Estate Investment Trusts............ 0.5 Theaters................................. 0.5 Agricultural Chemicals................... 0.4 Containers -- Metal/Glass................ 0.4 Medical Products......................... 0.4 Metal -- Diversified..................... 0.4 Banks -- Money Center.................... 0.3 Banks -- Super Regional.................. 0.3 Broadcast Services/Program............... 0.3 Building & Construction Products -- Misc. 0.3 Computer Services........................ 0.3 Containers -- Paper/Plastic.............. 0.3 Diversified Manufactured Operations...... 0.3 Electric -- Generation................... 0.3 Finance -- Investment Banker/Broker...... 0.3 Finance -- Mortgage Loan/Banker.......... 0.3 Funeral Services & Related Items......... 0.3 Housewares............................... 0.3 Oil -- Field Services.................... 0.3 Recycling................................ 0.3 Steel -- Producers....................... 0.3 Auto/Truck Parts & Equipment -- Original. 0.2 Brewery.................................. 0.2 Cosmetics & Toiletries................... 0.2 Direct Marketing......................... 0.2 Electronics -- Military.................. 0.2 Federal Home Loan Bank................... 0.2 Finance -- Consumer Loans................ 0.2 Gambling (Non-Hotel)..................... 0.2
Insurance -- Multi-line............... 0.2 Insurance -- Property/Casualty........ 0.2 Medical -- HMO........................ 0.2 Printing -- Commercial................ 0.2 Rental Auto/Equipment................. 0.2 Retail -- Drug Store.................. 0.2 Savings & Loans/Thrifts............... 0.2 Specified Purpose Acquisitions........ 0.2 Transport -- Rail..................... 0.2 Transport -- Services................. 0.2 Aerospace/Defense..................... 0.1 Applications Software................. 0.1 Beverages -- Wine/Spirits............. 0.1 Building Products -- Wood............. 0.1 Chemicals -- Diversified.............. 0.1 Coal.................................. 0.1 Commercial Services................... 0.1 Computers -- Memory Devices........... 0.1 Consumer Products -- Misc............. 0.1 Cruise Lines.......................... 0.1 Diagnostic Kits....................... 0.1 Diversified Minerals.................. 0.1 Electronic Components -- Misc......... 0.1 Energy -- Alternate Sources........... 0.1 Financial Guarantee Insurance......... 0.1 Food -- Meat Products................. 0.1 Food -- Misc.......................... 0.1 Gas -- Distribution................... 0.1 Golf.................................. 0.1 Home Furnishings...................... 0.1 Hotels/Motels......................... 0.1 Insurance Brokers..................... 0.1 Insurance -- Life/Health.............. 0.1 Machinery -- Farming.................. 0.1 Medical -- Biomedical/Gene............ 0.1 Medical -- Generic Drugs.............. 0.1 Medical -- Nursing Homes.............. 0.1 Medical -- Wholesale Drug Distribution 0.1 Metal Processors & Fabrication........ 0.1 Metal -- Aluminum..................... 0.1 Non-Hazardous Waste Disposal.......... 0.1 Oil Refining & Marketing.............. 0.1 Publishing -- Newspapers.............. 0.1 Publishing -- Periodicals............. 0.1 Research & Development................ 0.1 Retail -- Building Products........... 0.1 Retail -- Discount.................... 0.1 Retail -- Major Department Stores..... 0.1 Retail -- Petroleum Products.......... 0.1 Retail -- Regional Department Stores.. 0.1 Retail -- Restaurants................. 0.1 Storage/Warehousing................... 0.1 Transactional Software................ 0.1 Transport -- Marine................... 0.1 Travel Services....................... 0.1 Wire & Cable Products................. 0.1 ---- 97.0% ====
-------- * Calculated as a percentage of net assets. 22 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) (continued) Country Allocation* United States... 56.1% Brazil.......... 5.7 United Kingdom.. 3.4 Switzerland..... 2.7 Canada.......... 2.4 Russia.......... 2.4 Sweden.......... 2.3 Mexico.......... 2.2 Norway.......... 2.0 Turkey.......... 1.9 Australia....... 1.6 Philippines..... 1.6 Germany......... 1.5 New Zealand..... 1.5 Venezuela....... 1.1 Argentina....... 1.0 Colombia........ 0.8 Bermuda......... 0.7 Denmark......... 0.7 Japan........... 0.6 Uruguay......... 0.6 Luxembourg...... 0.5 Peru............ 0.5 Netherlands..... 0.4 Belgium......... 0.3 Cayman Islands.. 0.3 France.......... 0.3 Ireland......... 0.3 Spain........... 0.3 Ukraine......... 0.3 Indonesia....... 0.2 Panama.......... 0.2 El Salvador..... 0.1 Greece.......... 0.1 Liberia......... 0.1 Marshall Islands 0.1 Singapore....... 0.1 South Africa.... 0.1 ---- 97.0% ====
Credit Quality+# Government -- Treasury 7.1% Government -- Agency.. 10.6 AAA................... 17.4 AA.................... 1.9 A..................... 4.6 BBB................... 11.6 BB.................... 21.3 B..................... 15.2 CCC................... 6.9 BELOW C............... 0.9 Not Rated@............ 2.5 ----- 100.0% =====
-------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source: Standard and Poors # Calculated as a percentage of total debt issues, excluding short-term securities. 23 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------------- ASSET BACKED SECURITIES -- 2.4% Diversified Financial Services -- 2.4% Bear Stearns Commercial Mtg. Securities, Inc., Series 2007-PW15, Class A2 5.21% due 02/11/44(1)......................... $ 825,000 $ 824,673 Bear Stearns Commercial Mtg. Securities, Inc., Series 2006-PW12, Class F 5.75% due 09/11/38*(1)(2)..................... 345,000 341,553 Bear Stearns Commercial Mtg. Securities, Inc., Series 2006-PW12, Class G 5.75% due 09/11/38(1)......................... 59,000 57,528 Bear Stearns Commercial Mtg. Securities, Inc., Series 2007-PW15, Class H 5.93% due 02/11/44*(1)........................ 1,250,000 1,223,986 Commercial Mtg. Pass Through Certs., Series 2004-LB4A, Class A3, 4.41% due 10/15/37(1)......................... 1,500,000 1,462,575 Commercial Mtg. Pass Through Certs. Series 2004-LB2A, Class A3 4.22% due 03/10/39(1)......................... 1,086,000 1,056,526 Countrywide Asset-Backed Certs. Series 2006-S6, Class A3 5.66% due 03/25/34............................ 1,596,000 1,597,755 Countrywide Asset-Backed Certs. Series 2006-S4, Class A3 5.80% due 10/25/36............................ 2,800,000 2,825,377 Deutsche ALT-A Securities, Inc. Alternate Loan Trust, Series 2006-AB2, Class A5A, 6.09% due 06/25/36(1)......................... 600,000 609,299 J.P. Morgan Chase Commercial Mtg. Securities Corp., Series 2006-CB16, Class E 5.84% due 05/12/45*(1)........................ 445,000 452,160 Merrill Lynch Mtg. Investors, Inc. Series 2004-A1, Class 3A 4.83% due 02/25/34(1)(2)...................... 1,137,979 1,126,955 Merrill Lynch/Countrywide Commercial Mtg. Trust, Series 2007-5, Class H 6.12% due 08/25/48(1)(4)...................... 595,000 554,140 Morgan Stanley Capital I, Series 2006-IQ12, Class AJ 5.40% due 12/15/43(1)......................... 1,350,000 1,342,094 Morgan Stanley Capital I, Series 2006-IQ12, Class D 5.53% due 12/15/43(1)......................... 715,000 712,725 Ocwen Advance Receivables Backed Notes Series 2006-1A 5.34% due 11/24/15*(4)........................ 830,000 827,925 Wachovia Bank Commercial Mtg. Trust, Series 2006-C27, Class A3 5.77% due 07/15/45(1)......................... 445,000 456,923 Wachovia Bank Commercial Mtg. Trust, Series 2006-WL7A, Class F 5.87% due 09/15/21*(1)(2)..................... 1,525,000 1,525,298 Washington Mutual, Inc., Series 2005-AR1, Class A2A2, 5.57% due 01/25/45(1)(2)...................... 86,724 86,743
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- Diversified Financial Services (continued) Wells Fargo Mtg. Backed Securities Trust Series 2006-AR12, Class 2A1 6.11% due 09/25/36(1)(2)................ $ 784,200 $ 793,858 ----------- 17,878,093 ----------- Total Asset Backed Securities (cost $17,953,760)...................... 17,878,093 ----------- CONVERTIBLE BONDS & NOTES -- 0.1% Medical Instruments -- 0.0% Kyphon, Inc. Senior Notes 1.25% due 02/01/14*..................... 75,000 73,969 ----------- Medical-Biomedical/Gene -- 0.0% Nektar Therapeutics Sub. Notes 3.25% due 09/28/12...................... 125,000 120,781 ----------- Medical-Nursing Homes -- 0.0% Genesis HealthCare Corp. Senior Sub. Debentures 2.50% due 03/15/25*..................... 75,000 97,312 ----------- Telecom Services -- 0.1% ICO North America, Inc. Notes 7.50% due 08/15/09(3)(4)(5)............. 265,000 270,300 ----------- Total Convertible Bonds & Notes (cost $555,037)......................... 562,362 ----------- CORPORATE BONDS & NOTES -- 33.3% Aerospace/Defense -- 0.1% Raytheon Co. Debentures 6.00% due 12/15/10...................... 135,000 139,775 Raytheon Co. Senior Notes 6.75% due 08/15/07...................... 335,000 336,433 Raytheon Co. Senior Notes 6.75% due 03/15/18...................... 474,000 522,704 ----------- 998,912 ----------- Agricultural Chemicals -- 0.4% Mosaic Global Holdings, Inc. Debentures 7.38% due 08/01/18...................... 320,000 318,400 Terra Capital, Inc. Senior Notes 7.00% due 02/01/17*..................... 745,000 741,275 The Mosaic Co. Senior Notes 7.38% due 12/01/14*..................... 1,695,000 1,767,037 The Mosaic Co. Senior Notes 7.63% due 12/01/16*..................... 405,000 427,275 ----------- 3,253,987 -----------
24 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Airlines -- 0.5% American Airlines, Inc. Pass Through Certs. Series 2001-1, Class A-2 6.82% due 05/23/11.............. $1,800,000 $1,840,500 Continental Airlines, Inc. Pass Through Certs., Series 1991, Class A 6.55% due 02/02/19.............. 662,408 688,905 Continental Airlines, Inc. Pass Through Certs. Series 1991-1, Class C 6.95% due 08/02/09.............. 89,125 88,679 Continental Airlines, Inc. Pass Through Certs. Series 1999, Class 2 7.73% due 03/15/11.............. 177,817 180,484 Continental Airlines, Inc. Pass Through Certs. Series 2000-2, Class B 8.31% due 04/02/18.............. 63,898 66,614 Delta Air Lines, Inc. Pass Through Certs. Class A-2 7.57% due 11/18/10(17).......... 250,000 260,079 Northwest Airlines, Inc. Pass Through Certs. Series 2001-1, Class A-1 7.04% due 04/01/22+(17)......... 425,247 425,778 United AirLines, Inc. Pass Through Certs. Series 2001-1, Class A-2 6.20% due 09/01/08.............. 114,353 115,211 ---------- 3,666,250 ---------- Applications Software -- 0.1% SS&C Technologies, Inc. Company Guar. Notes 11.75% due 12/01/13............. 875,000 977,812 ---------- Auto-Cars/Light Trucks -- 0.6% DaimlerChrysler NA Holding Corp. Company Guar. Notes 5.69% due 03/13/09(7)........... 240,000 240,418 DaimlerChrysler NA Holding Corp. Company Guar. Bonds 5.75% due 09/08/11.............. 145,000 147,310 Ford Motor Co. Debentures 6.38% due 02/01/29.............. 2,340,000 1,667,250 Ford Motor Co. Notes 7.45% due 07/16/31.............. 425,000 328,844 General Motors Corp. Debentures 8.25% due 07/15/23.............. 1,730,000 1,557,000 General Motors Corp. Senior Bonds 8.38% due 07/15/33.............. 106,000 95,135 ---------- 4,035,957 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ Auto/Truck Parts & Equipment-Original -- 0.2% ArvinMeritor, Inc. Senior Notes 8.13% due 09/15/15........................ $125,000 $ 124,062 TRW Automotive, Inc. Company Guar. Notes 7.00% due 03/15/14*....................... 75,000 73,500 TRW Automotive, Inc. Company Guar. Notes 7.25% due 03/15/17*....................... 500,000 490,000 Visteon Corp. Senior Notes 8.25% due 08/01/10........................ 410,000 418,200 ---------- 1,105,762 ---------- Auto/Truck Parts & Equipment-Replacement -- 0.0% Exide Corp. Notes 10.00% due 03/15/25+(3)(4)................ 225,000 0 ---------- Banks-Commercial -- 0.4% Colonial Bank NA Sub. Notes 6.38% due 12/01/15........................ 451,000 468,184 Compass Bank Notes 5.50% due 04/01/20........................ 430,000 422,936 Popular North America, Inc. Company Guar. Notes 5.65% due 04/15/09........................ 135,000 135,818 SouthTrust Bank Sub. Notes 4.75% due 03/01/13........................ 340,000 333,462 SouthTrust Corp. Sub. Notes 5.80% due 06/15/14........................ 470,000 480,641 UBS AG Sub. Notes 5.88% due 07/15/16........................ 470,000 489,423 Union Bank of California NA Sub. Notes 5.95% due 05/11/16........................ 330,000 339,522 ---------- 2,669,986 ---------- Banks-Money Center -- 0.1% Comerica Bank Senior Sub. Notes 5.75% due 11/21/16........................ 550,000 551,419 RBS Capital Trust I Bank 4.71% due 07/01/13(7)(8).................. 239,000 228,378 ---------- 779,797 ---------- Banks-Special Purpose -- 0.0% Rabobank Capital Funding II Bonds 5.26% due 12/31/13*(7)(8)................. 270,000 262,697
25 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Banks-Super Regional -- 0.3% Banc One Corp. Sub. Debentures 8.00% due 04/29/27......................... $ 135,000 $ 164,449 Bank of America Corp. Sub. Notes 5.42% due 03/15/17*........................ 440,000 435,431 Capital One Financial Corp. Senior Notes 5.70% due 09/15/11......................... 813,000 821,241 Huntington National Bank Sub. Notes 6.60% due 06/15/18......................... 470,000 499,358 JPMorgan Chase Bank NA Sub. Notes 6.13% due 11/01/08......................... 198,000 200,305 Wachovia Capital Trust III 5.80% due 03/15/11(7)(8)................... 340,000 344,055 ---------- 2,464,839 ---------- Beverages-Non-alcoholic -- 0.1% Cott Beverages, Inc. Company Guar. Notes 8.00% due 12/15/11......................... 350,000 357,000 ---------- Brewery -- 0.1% Anheuser-Busch Cos., Inc. Bonds 6.00% due 11/01/41......................... 871,000 849,887 ---------- Broadcast Services/Program -- 0.2% Fisher Communications, Inc. Senior Notes 8.63% due 09/15/14......................... 1,040,000 1,114,100 Nexstar Finance, Inc. Senior Sub. Notes 7.00% due 01/15/14......................... 450,000 432,000 Nexstar Finance, Inc. Senior Disc. Notes 11.38% due 04/01/13(9)..................... 165,000 159,637 ---------- 1,705,737 ---------- Building & Construction Products-Misc. -- 0.3% Associated Materials, Inc. Senior Sub. Notes 9.75% due 04/15/12......................... 765,000 795,600 Dayton Superior Corp. Senior Sec. Notes 10.75% due 09/15/08........................ 1,040,000 1,066,000 Interline Brands, Inc. Senior Sub. Notes 8.13% due 06/15/14......................... 645,000 665,962 ---------- 2,527,562 ---------- Building Products-Air & Heating -- 0.1% American Standard, Inc. Company Guar. Notes 7.38% due 02/01/08......................... 347,000 351,418 ----------
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Building Products-Wood -- 0.1% Masonite Corp. Senior Sub. Notes 11.00% due 04/06/15*................ $ 488,000 $ 453,840 ----------- Building-Residential/Commercial -- 0.0% Lennar Corp. Company Guar. Notes 5.95% due 10/17/11.................. 265,000 264,587 ----------- Cable TV -- 1.7% Cablevision Systems Corp. Senior Notes 8.00% due 04/15/12.................. 380,000 385,700 CCH I LLC Company Guar. Notes 11.00% due 10/01/15................. 2,202,000 2,273,565 CCH II LLC/CCH II Capital Corp. Senior Notes 10.25% due 09/15/10................. 115,000 121,181 CCH II LLC/CCH II Capital Corp. Senior Notes 10.25% due 09/15/10................. 445,000 469,475 CCH II LLC/CCH II Capital Corp. Company Guar. Notes 10.25% due 10/01/13................. 4,117,000 4,497,822 Comcast Corp. Company Guar. Notes 5.88% due 02/15/18.................. 1,074,000 1,076,903 Comcast Corp. Company Guar. Notes 6.50% due 01/15/15.................. 1,074,000 1,132,791 Cox Communications, Inc. Bonds 5.50% due 10/01/15.................. 1,070,000 1,052,219 CSC Holdings, Inc. Senior Notes 7.63% due 04/01/11.................. 350,000 358,750 Insight Communications Co., Inc. Senior Disc. Notes 12.25% due 02/15/11(9).............. 900,000 940,500 ----------- 12,308,906 ----------- Casino Hotels -- 0.8% Circus & Eldorado Joint Venture Mtg. Notes 10.13% due 03/01/12................. 575,000 602,312 Eldorado Casino Corp. (Shreveport) Sec. Bonds 10.00% due 08/01/12(3)(10).......... 946,489 908,629 Eldorado Resorts LLC Senior Notes 9.00% due 04/15/14(3)(4)............ 425,000 425,000 MGM Mirage, Inc. Senior Notes 5.88% due 02/27/14.................. 2,900,000 2,697,000 Riviera Holdings Corp. Company Guar. Notes 11.00% due 06/15/10................. 135,000 140,738
26 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Casino Hotels (continued) Seminole Hard Rock Entertainment, Inc. Sec. Notes 7.85% due 03/15/14*(7)................ $ 225,000 $ 229,500 Station Casinos, Inc. Senior Sub. Notes 6.63% due 03/15/18.................... 600,000 534,000 Station Casinos, Inc. Senior Sub. Notes 6.88% due 03/01/16.................... 155,000 142,019 Turning Stone Resort Casino Enterprise Senior Notes 9.13% due 12/15/10*................... 225,000 228,375 Turning Stone Resort Casino Enterprise Senior Notes 9.13% due 09/15/14*................... 200,000 205,500 ---------- 6,113,073 ---------- Cellular Telecom -- 0.6% American Cellular Corp. Senior Notes 10.00% due 08/01/11................... 296,000 313,390 Centennial Communications Corp. Senior Notes 10.00% due 01/01/13................... 536,000 578,210 Centennial Communications Corp. Senior Notes 11.11% due 01/01/13(7)................ 620,000 652,550 Cingular Wireless Services, Inc. Senior Notes 7.88% due 03/01/11.................... 1,406,000 1,538,469 Rural Cellular Corp. Senior Sub. Notes 9.75% due 01/15/10.................... 1,210,000 1,246,300 Rural Cellular Corp. Senior Sub. Notes 11.11% due 11/01/12(7)................ 200,000 208,000 ---------- 4,536,919 ---------- Chemicals-Diversified -- 0.1% Equistar Chemicals LP Senior Notes 10.63% due 05/01/11................... 275,000 290,125 ICI Wilmington, Inc. Company Guar. Notes 7.05% due 09/15/07.................... 268,000 269,630 ---------- 559,755 ---------- Chemicals-Specialty -- 0.8% Huntsman International LLC Company Guar. Notes 7.88% due 11/15/14*................... 1,055,000 1,090,606 JohnsonDiversey, Inc. Senior Sub. Guar. Notes 9.63% due 05/15/12.................... 100,000 104,500
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Chemicals-Specialty (continued) MacDermid, Inc. Senior Notes 9.50% due 04/15/17*.................. $ 175,000 $ 179,375 Momentive Performance Materials, Inc. Senior Sub. Notes 11.50% due 12/01/16*................. 1,870,000 1,916,750 Nalco Co. Senior Notes 7.75% due 11/15/11................... 280,000 287,000 Nalco Co. Senior Sub. Notes 8.88% due 11/15/13................... 400,000 425,000 Rockwood Specialties Group, Inc. Sub. Notes 7.50% due 11/15/14................... 625,000 634,375 Rockwood Specialties Group, Inc. Senior Sub. Notes 10.63% due 05/15/11.................. 55,000 58,025 Tronox Worldwide LLC Company Guar. Notes 9.50% due 12/01/12................... 1,210,000 1,282,600 ---------- 5,978,231 ---------- Coal -- 0.1% Massey Energy Co. Senior Notes 6.63% due 11/15/10................... 870,000 878,700 ---------- Commercial Services -- 0.1% DI Finance/DynCorp International Senior Sub. Notes 9.50% due 02/15/13................... 472,000 502,680 The ServiceMaster Co. Notes 7.88% due 08/15/09................... 108,000 113,603 ---------- 616,283 ---------- Computer Services -- 0.3% Compucom Systems, Inc. Senior Notes 12.00% due 11/01/14*................. 375,000 400,313 Computer Sciences Corp. Notes 3.50% due 04/15/08................... 150,000 146,449 Sungard Data Systems, Inc. Company Guar. Notes 9.13% due 08/15/13................... 1,210,000 1,297,725 ---------- 1,844,487 ---------- Computers-Integrated Systems -- 0.0% Activant Solutions, Inc. Company Guar. Notes 9.50% due 05/01/16................... 225,000 221,625 ---------- Consulting Services -- 0.0% FTI Consulting, Inc. Company Guar. Notes 7.63% due 06/15/13................... 225,000 233,438 ----------
27 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Consumer Products-Misc. -- 0.1% American Achievement Corp. Senior Sub. Notes 8.25% due 04/01/12....................... $ 286,000 $ 291,720 Jostens Holding Corp. Senior Disc. Notes 10.25% due 12/01/13(9)................... 458,000 423,650 Prestige Brands, Inc. Senior Sub. Notes 9.25% due 04/15/12....................... 225,000 232,875 Visant Holding Corp. Senior Notes 8.75% due 12/01/13....................... 75,000 78,187 ---------- 1,026,432 ---------- Containers-Metal/Glass -- 0.4% Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23....................... 1,310,000 1,283,800 Owens-Brockway Glass Container, Inc. Company Guar. Notes 8.25% due 05/15/13....................... 1,079,000 1,124,857 Owens Brockway Glass Container, Inc. Company Guar. Notes 8.88% due 02/15/09....................... 312,000 318,240 ---------- 2,726,897 ---------- Containers-Paper/Plastic -- 0.4% Jefferson Smurfit Corp. Company Guar. Notes 8.25% due 10/01/12....................... 695,000 695,000 Pliant Corp. Company Guar. Notes 11.13% due 09/01/09...................... 1,080,000 1,080,000 Smurfit-Stone Container Enterprises, Inc. Senior Notes 8.00% due 03/15/17*...................... 780,000 762,450 ---------- 2,537,450 ---------- Cosmetics & Toiletries -- 0.2% Procter & Gamble Co. Senior Notes 2.00% due 06/21/10....................... JPY 79,000,000 688,492 Procter & Gamble Co. Senior Notes 5.55% due 03/05/37....................... 1,142,000 1,111,091 ---------- 1,799,583 ---------- Diagnostic Kits -- 0.1% Inverness Medical Innovations, Inc. Senior Sub. Notes 8.75% due 02/15/12....................... 425,000 443,063 ---------- Direct Marketing -- 0.2% Affinity Group, Inc. Senior Sub. Notes 9.00% due 02/15/12....................... 1,114,000 1,144,635 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ Diversified Financial Services -- 0.3% AXA Financial, Inc. Senior Notes 6.50% due 04/01/08................. $ 210,000 $ 212,272 General Electric Capital Corp. Senior Notes 1.00% due 03/21/12................. JPY 105,000,000 869,041 General Electric Capital Corp. Senior Notes 5.65% due 06/09/14................. 470,000 478,767 General Electric Capital Corp. Notes 6.75% due 03/15/32................. 279,000 316,116 ---------- 1,876,196 ---------- Diversified Manufactured Operations -- 0.2% 3M Co. Notes 6.38% due 02/15/28.................. 308,000 332,068 Crane Co. Senior Notes 6.55% due 11/15/36.................. 518,000 516,611 Indalex Holding Corp. Sec. Notes 11.50% due 02/01/14................. 500,000 517,500 ---------- 1,366,179 ---------- Electric-Generation -- 0.3% Edison Mission Energy Senior Notes 7.50% due 06/15/13.................. 425,000 438,812 Edison Mission Energy Senior Notes 7.75% due 06/15/16.................. 225,000 234,563 Reliant Energy Mid-Atlantic Power Holdings, LLC Pass Through Certs. Series B 9.24% due 07/02/17.................. 200,890 222,988 The AES Corp. Sec. Notes 8.75% due 05/15/13*................. 1,310,000 1,395,150 ---------- 2,291,513 ---------- Electric-Integrated -- 1.1% American Electric Power Co., Inc. Senior Notes 4.71% due 08/16/07(9)............... 845,000 842,518 Appalachian Power Co. Senior Notes 5.00% due 06/01/17.................. 1,074,000 1,016,544 Centerpoint Energy, Inc. Senior Notes 5.88% due 06/01/08.................. 150,000 150,580 Commonwealth Edison Co. 1st Mtg. Bonds 5.90% due 03/15/36.................. 371,000 344,339
28 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Electric-Integrated (continued) Commonwealth Edison Co. 1st Mtg. Bonds 5.95% due 08/15/16....................... $ 280,000 $ 274,088 Consumers Energy Co. 1st Mtg. Bonds 4.25% due 04/15/08....................... 180,000 178,111 Dominion Resources, Inc. Senior Notes 5.69% due 05/15/08(9).................... 176,000 176,410 Dominion Resources, Inc. Junior Sub. Notes 6.30% due 09/30/11(11)................... 374,000 381,014 Duke Energy Corp. Senior Notes 4.20% due 10/01/08....................... 305,000 300,384 Duke Energy Indiana, Inc. Debentures 5.00% due 09/15/13....................... 200,000 194,627 Entergy Louisiana LLC 1st Mtg. Bonds 5.83% due 11/01/10....................... 195,000 196,820 Mirant Americas Generation LLC Senior Notes 8.30% due 05/01/11....................... 1,050,000 1,076,250 Mirant Americas Generation LLC Senior Notes 8.50% due 10/01/21....................... 505,000 512,575 Pepco Holdings, Inc. Notes 5.50% due 08/15/07....................... 278,000 277,891 Pepco Holdings, Inc. Notes 6.45% due 08/15/12....................... 140,000 146,497 PSEG Power LLC Company Guar. Notes 7.75% due 04/15/11....................... 50,000 54,225 Public Service Electric & Gas Co. Sec. Notes 5.00% due 08/15/14....................... 1,073,000 1,047,133 Puget Sound Energy, Inc. Senior Notes 5.20% due 10/01/15....................... 433,000 421,332 Southern California Edison Co. 1st Mtg. Bonds 5.75% due 04/01/35....................... 80,000 78,893 Southern Energy, Inc. Notes 7.90% due 07/15/09+(3)(4)(5)............. 1,550,000 0 ---------- 7,670,231 ---------- Electronic Components-Semiconductors -- 0.5% Advanced Micro Devices, Inc. Senior Notes 7.75% due 11/01/12....................... 344,000 347,870 Amkor Technology, Inc. Senior Notes 9.25% due 06/01/16....................... 1,190,000 1,240,575
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- Electronic Components-Semiconductors (continued) Freescale Semiconductor, Inc. Senior Notes 9.13% due 12/15/14*..................... $ 500,000 $ 496,250 Freescale Semiconductor, Inc. Senior Notes 9.23% due 12/15/14*(7).................. 100,000 99,750 Freescale Semiconductor, Inc. Senior Sub. Notes 10.13% due 12/15/16*.................... 910,000 912,275 Spansion, Inc. Senior Notes 11.25% due 01/15/16*.................... 175,000 180,687 ----------- 3,277,407 ----------- Electronics-Military -- 0.2% L-3 Communications Corp. Company Guar. Senior Sec. Notes 6.13% due 07/15/13...................... 995,000 980,075 L-3 Communications Corp. Company Guar. Notes 6.38% due 10/15/15...................... 550,000 545,187 ----------- 1,525,262 ----------- Energy-Alternate Sources -- 0.1% Aventine Renewable Energy Holdings, Inc. Senior Notes 10.00% due 04/01/17*.................... 590,000 609,912 VeraSun Energy Corp. Sec. Notes 9.88% due 12/15/12...................... 375,000 390,938 ----------- 1,000,850 ----------- Enterprise Software/Service -- 0.0% Oracle Corp. Notes 5.00% due 01/15/11...................... 270,000 269,007 ----------- Finance-Auto Loans -- 2.0% Ford Motor Credit Co. Senior Notes 5.80% due 01/12/09...................... 2,058,000 2,018,789 Ford Motor Credit Co. Notes 7.38% due 10/28/09...................... 6,400,000 6,388,237 General Motors Acceptance Corp. Notes 6.75% due 12/01/14...................... 2,340,000 2,300,435 General Motors Acceptance Corp. Notes 6.88% due 09/15/11...................... 2,580,000 2,582,500 General Motors Acceptance Corp. Notes 6.88% due 08/28/12...................... 60,000 59,758 General Motors Acceptance Corp. Notes 7.56% due 12/01/14(7)................... 1,215,000 1,228,821 ----------- 14,578,540 -----------
29 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------- CORPORATE BONDS & NOTES (continued) Finance-Commercial -- 0.0% Transamerica Finance Corp. Senior Notes 6.40% due 09/15/08............... $ 36,000 $ 36,585 ---------- Finance-Consumer Loans -- 0.2% HSBC Finance Corp. Notes 4.75% due 07/15/13............... 320,000 309,107 John Deere Capital Corp. Debentures 5.10% due 01/15/13............... 330,000 328,410 SLM Corp. Notes 1.53% due 09/15/11............... JPY 100,000,000 848,688 ---------- 1,486,205 ---------- Finance-Credit Card -- 0.1% Capital One Bank Senior Notes 6.50% due 06/13/13............... 341,000 356,818 ---------- Finance-Investment Banker/Broker -- 0.3% Lehman Brothers Holdings, Inc. Senior Notes 5.25% due 02/06/12............... 250,000 249,771 Lehman Brothers Holdings, Inc. Notes 5.50% due 04/04/16............... 240,000 238,645 Merrill Lynch & Co., Inc. Sub. Notes 6.11% due 01/29/37............... 670,000 649,542 Morgan Stanley Notes 5.45% due 01/09/17............... 470,000 462,269 Morgan Stanley Senior Notes 5.63% due 01/09/12............... 250,000 253,285 The Bear Stearns Cos., Inc. Sub. Notes 5.55% due 01/22/17............... 250,000 245,204 ---------- 2,098,716 ---------- Finance-Mortgage Loan/Banker -- 0.3% Countrywide Financial Corp. Sub. Notes 6.25% due 05/15/16............... 470,000 473,771 Countrywide Home Loans, Inc. Notes 4.13% due 09/15/09............... 90,000 87,529 Residential Capital LLC Company Guar. Notes 6.13% due 11/21/08............... 235,000 234,880 Residential Capital LLC Company Guar. Notes 6.38% due 06/30/10............... 156,000 155,958 Residential Capital LLC Company Guar. Notes 6.50% due 04/17/13............... 532,000 526,949
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- Finance-Mortgage Loan/Banker (continued) Residential Capital LLC Company Guar. Notes 6.88% due 06/30/15................... $ 364,000 $ 367,245 ---------- 1,846,332 ---------- Food-Misc. -- 0.1% Kraft Foods, Inc. Senior Bonds 5.63% due 11/01/11................... 480,000 485,853 Wornick Co. Sec. Notes 10.88% due 07/15/11.................. 425,000 377,719 ---------- 863,572 ---------- Funeral Services & Related Items -- 0.3% Service Corp. International Senior Notes 6.75% due 04/01/16................... 1,225,000 1,218,875 Service Corp. International Senior Notes 7.00% due 06/15/17................... 185,000 186,387 Service Corp. International Senior Notes 7.38% due 10/01/14................... 25,000 26,000 Service Corp. International Senior Notes 7.63% due 10/01/18................... 25,000 26,438 Stewart Enterprises, Inc. Senior Notes 6.25% due 02/15/13................... 725,000 703,250 ---------- 2,160,950 ---------- Gambling (Non-Hotel) -- 0.2% Greektown Holdings LLC Senior Notes 10.75% due 12/01/13*................. 860,000 920,200 Waterford Gaming LLC Senior Notes 8.63% due 09/15/12*.................. 160,000 169,600 ---------- 1,089,800 ---------- Gas-Distribution -- 0.1% Colorado Interstate Gas Co. Senior Debentures 6.85% due 06/15/37................... 150,000 157,482 Sempra Energy Senior Notes 4.62% due 05/17/07................... 432,000 431,523 ---------- 589,005 ---------- Golf -- 0.1% True Temper Sports, Inc. Company Guar. Notes 8.38% due 09/15/11................... 695,000 618,550 ---------- Home Furnishings -- 0.1% Simmons Co. Senior Disc. Notes 10.00% due 12/15/14(9)............... 1,185,000 974,663 ----------
30 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Hotels/Motels -- 0.1% Gaylord Entertainment Co. Company Guar. Notes 6.75% due 11/15/14................ $ 595,000 $ 579,381 Hilton Hotels Corp. Senior Notes 7.20% due 12/15/09................ 68,000 70,720 ---------- 650,101 ---------- Human Resources -- 0.0% TeamHealth, Inc. Company Guar. Notes 11.25% due 12/01/13............... 175,000 184,625 ---------- Independent Power Producers -- 1.2% Calpine Corp. Sec. Notes 8.75% due 07/15/13*(17)........... 5,378,000 5,727,570 NRG Energy, Inc. Company Guar. Notes 7.38% due 02/01/16................ 2,145,000 2,203,988 Orion Power Holdings, Inc. Senior Notes 12.00% due 05/01/10............... 100,000 115,500 Reliant Energy, Inc. Sec. Notes 9.50% due 07/15/13................ 551,000 599,901 ---------- 8,646,959 ---------- Insurance Brokers -- 0.1% Marsh & McLennan Cos., Inc. Senior Notes 5.15% due 09/15/10................ 200,000 198,255 Marsh & McLennan Cos., Inc. Senior Notes 7.13% due 06/15/09................ 170,000 176,326 ---------- 374,581 ---------- Insurance-Life/Health -- 0.1% Americo Life, Inc. Notes 7.88% due 05/01/13*............... 38,000 39,059 Monumental Global Funding II Notes 5.65% due 07/14/11*............... 174,000 177,496 Presidential Life Corp. Senior Notes 7.88% due 02/15/09................ 150,000 151,500 ---------- 368,055 ---------- Insurance-Multi-line -- 0.0% Metropolitan Life Global Funding I Sec. Notes 5.75% due 07/25/11*............... 140,000 143,492 ---------- Insurance-Property/Casualty -- 0.2% Crum & Forster Holdings Corp. Senior Notes 10.38% due 06/15/13............... 215,000 232,200
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Insurance-Property/Casualty (continued) Fidelity National Title Group, Inc. Notes 7.30% due 08/15/11.................. $ 447,000 $ 463,921 WR Berkley Corp. Senior Sub. Notes 6.25% due 02/15/37.................. 480,000 468,834 ---------- 1,164,955 ---------- Investment Management/Advisor Services -- 0.0% Ameriprise Financial, Inc. Senior Notes 5.35% due 11/15/10.................. 81,000 81,706 ---------- Leisure Products -- 0.0% Brunswick Corp. Notes 5.00% due 06/01/11.................. 103,000 100,653 K2, Inc. Company Guar. Senior Notes 7.38% due 07/01/14.................. 125,000 124,063 ---------- 224,716 ---------- Machinery-Farming -- 0.1% Case Corp. Notes 7.25% due 01/15/16.................. 480,000 501,600 Case New Holland, Inc. Senior Notes 6.00% due 06/01/09.................. 325,000 325,000 ---------- 826,600 ---------- Machinery-General Industrial -- 0.0% Stewart & Stevenson LLC Senior Notes 10.00% due 07/15/14*................ 175,000 183,313 ---------- Medical Information Systems -- 0.0% Spheris, Inc. Senior Sub. Notes 11.00% due 12/15/12................. 150,000 149,625 ---------- Medical Products -- 0.4% Baxter International, Inc. Senior Notes 5.90% due 09/01/16.................. 1,072,000 1,106,283 CDRV Investors, Inc. Senior Disc. Notes 9.63% due 01/01/15(9)............... 325,000 279,500 Encore Medical Finance LLC Senior Sub. Notes 11.75% due 11/15/14*................ 690,000 707,250 Universal Hospital Services, Inc. Senior Notes 10.13% due 11/01/11................. 975,000 1,035,937 ---------- 3,128,970 ---------- Medical-Biomedical/Gene -- 0.0% Bio-Rad Laboratories, Inc. Senior Sub. Notes 6.13% due 12/15/14.................. 349,000 338,530 ----------
31 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Medical-Drugs -- 0.3% Abbott Laboratories Notes 5.88% due 05/15/16.............. $ 275,000 $ 284,487 American Home Products Corp. Notes 6.95% due 03/15/11.............. 361,000 383,808 Eli Lilly & Co. Notes 5.50% due 03/15/27.............. 500,000 481,742 Wyeth Bonds 5.50% due 02/01/14.............. 1,074,000 1,080,542 Wyeth Notes 5.95% due 04/01/37.............. 260,000 256,061 ---------- 2,486,640 ---------- Medical-Generic Drugs -- 0.1% Mylan Labs, Inc. Company Guar. Notes 6.38% due 08/15/15.............. 375,000 370,313 ---------- Medical-HMO -- 0.2% Multiplan, Inc. Senior Sub. Notes 10.38% due 04/15/16*............ 1,055,000 1,081,375 WellPoint, Inc. Notes 3.75% due 12/14/07.............. 633,184 626,119 ---------- 1,707,494 ---------- Medical-Hospitals -- 1.0% Community Health Systems, Inc. Senior Sec. Notes 6.50% due 12/15/12.............. 616,000 634,480 HCA, Inc. Senior Notes 6.25% due 02/15/13.............. 520,000 472,550 HCA, Inc. Senior Notes 6.95% due 05/01/12.............. 600,000 579,000 HCA, Inc. Sec Notes. 9.13% due 11/15/14*............. 965,000 1,031,344 HCA, Inc. Sec. Notes 9.25% due 11/15/16*............. 3,865,000 4,169,368 HCA, Inc. Sec Notes. 9.63% due 11/15/16*............. 255,000 275,400 ---------- 7,162,142 ---------- Medical-Nursing Homes -- 0.1% Genesis HealthCare Corp. Senior Notes 8.00% due 10/15/13.............. 75,000 79,688 Sun Healthcare Group, Inc. Senior Sub. Notes 9.13% due 04/15/15*............. 675,000 691,875 ---------- 771,563 ----------
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- Medical-Wholesale Drug Distribution -- 0.1% Cardinal Health, Inc. Senior Notes 5.80% due 10/15/16*..................... $1,073,000 $1,069,093 ---------- Metal Processors & Fabrication -- 0.1% Metals USA, Inc. Secured Notes 11.13% due 12/01/15..................... 510,000 566,100 Timken Co. Notes 5.75% due 02/15/10...................... 162,000 161,846 ---------- 727,946 ---------- Metal-Aluminum -- 0.1% Alcoa, Inc. Bonds 5.90% due 02/01/27...................... 371,000 362,071 Alcoa, Inc. Bonds 6.50% due 06/15/18...................... 192,000 202,611 ---------- 564,682 ---------- Metal-Diversified -- 0.4% Freeport-McMoRan Copper & Gold, Inc. Senior Notes 8.25% due 04/01/15...................... 730,000 785,662 Freeport-McMoRan Copper & Gold, Inc. Senior Notes 8.38% due 04/01/17...................... 2,175,000 2,351,719 ---------- 3,137,381 ---------- Miscellaneous Manufacturing -- 0.0% American Railcar Industries, Inc. Senior Notes 7.50% due 03/01/14*..................... 175,000 180,250 ---------- Multimedia -- 0.9% Belo Corp. Senior Notes 6.75% due 05/30/13...................... 145,000 152,489 Cox Enterprises, Inc. Notes 7.88% due 09/15/10*..................... 578,000 620,991 Haights Cross Operating Co. Company Guar. Senior Notes 11.75% due 08/15/11..................... 150,000 157,875 News America, Inc. Company Guar. Bonds 7.30% due 04/30/28...................... 1,074,000 1,162,581 Time Warner Entertainment Co. LP Debentures 8.38% due 03/15/23...................... 2,168,000 2,562,724 Time Warner, Inc. Company Guar. Notes 6.75% due 04/15/11...................... 433,000 456,326 Viacom, Inc. Senior Notes 6.88% due 04/30/36...................... 1,074,000 1,082,575 ---------- 6,195,561 ----------
32 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Networking Products -- 0.0% Cisco Systems, Inc. Senior Notes 5.50% due 02/22/16......................... $ 347,000 $ 349,401 ---------- Non-Ferrous Metals -- 0.0% Renco Metals, Inc. Bonds 11.50% due 07/01/03+(3)(4)(12)(13)......... 500,000 0 ---------- Non-Hazardous Waste Disposal -- 0.1% Allied Waste North America, Inc. Company Guar. Notes 6.88% due 06/01/17......................... 915,000 917,288 ---------- Office Automation & Equipment -- 0.0% Pitney Bowes, Inc. Notes 5.25% due 01/15/37......................... 330,000 322,178 ---------- Oil & Gas Drilling -- 0.0% Pride International, Inc. Senior Notes 7.38% due 07/15/14......................... 50,000 51,250 ---------- Oil Companies-Exploration & Production -- 1.5% Belden & Blake Corp. Company Guar. Sec. Notes 8.75% due 07/15/12......................... 200,000 204,500 Brigham Exploration Co. Company Guar. Notes 9.63% due 05/01/14......................... 550,000 555,500 Brigham Exploration Co. Company Guar. Notes 9.63% due 05/01/14*........................ 150,000 149,250 Chaparral Energy, Inc. Company Guar. Notes 8.50% due 12/01/15......................... 1,670,000 1,649,125 Chesapeake Energy Corp. Senior Notes 6.25% due 01/15/18......................... 875,000 864,062 Chesapeake Energy Corp. Senior Notes 6.63% due 01/15/16......................... 1,150,000 1,158,625 Costilla Energy, Inc. Senior Notes 10.25% due 10/01/06+(3)(4)................. 500,000 0 Devon Energy Corp. Company Guar. Debentures 7.95% due 04/15/32......................... 1,005,000 1,205,231 El Paso Production Holding Co. Company Guar. Notes 7.75% due 06/01/13......................... 2,700,000 2,821,500 Encore Acquisition Co. Senior Sub. Notes 6.00% due 07/15/15......................... 175,000 155,750 Encore Acquisition Co. Senior Sub. Notes 6.25% due 04/15/14......................... 50,000 46,000
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Oil Companies-Exploration & Production (continued) Exco Resources, Inc. Company Guar. Notes 7.25% due 01/15/11................ $ 125,000 $ 125,313 Hilcorp Energy I LP Senior Notes 7.75% due 11/01/15*............... 790,000 776,175 Quicksilver Resources, Inc. Company Guar. Notes 7.13% due 04/01/16................ 100,000 98,500 Sabine Pass LNG LP Sec. Notes. 7.25% due 11/30/13*............... 200,000 201,500 Sabine Pass LNG LP Sec. Notes. 7.50% due 11/30/16*............... 930,000 936,975 Transmeridian Exploration, Inc. Company Guar. Notes 12.00% due 12/15/10............... 325,000 307,938 ----------- 11,255,944 ----------- Oil Companies-Integrated -- 0.3% Hess Corp. Notes 7.13% due 03/15/33................ 1,073,000 1,160,753 Hess Corp. Bonds 7.88% due 10/01/29................ 461,000 531,768 Phillips Petroleum Co. Debentures 7.00% due 03/30/29................ 286,000 319,544 ----------- 2,012,065 ----------- Oil Refining & Marketing -- 0.1% The Premcor Refining Group, Inc. Company Guar. Notes 6.75% due 05/01/14................ 666,000 693,825 ----------- Oil-Field Services -- 0.1% Allis-Chalmers Energy, Inc. Company Guar. Notes 9.00% due 01/15/14................ 190,000 191,425 Hanover Compressor Co. Company Guar. Senior Sec. Notes 8.63% due 12/15/10................ 175,000 183,750 Oslo Seismic Services, Inc. 1st Mtg. Bonds 8.28% due 06/01/11................ 160,552 164,422 ----------- 539,597 ----------- Paper & Related Products -- 0.3% Bowater, Inc. Notes 6.50% due 06/15/13................ 750,000 676,875 Caraustar Industries, Inc. Notes 7.38% due 06/01/09................ 525,000 511,875
33 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Paper & Related Products (continued) Georgia-Pacific Corp. Company Guar. Notes 7.00% due 01/15/15*............... $ 200,000 $ 201,000 Georgia-Pacific Corp. Company Guar. Notes 7.13% due 01/15/17*............... 325,000 325,813 Plum Creek Timberlands LP Company Guar. Notes 5.88% due 11/15/15................ 294,000 292,118 Temple-Inland, Inc. Bonds 6.63% due 01/15/18................ 235,000 247,045 ---------- 2,254,726 ---------- Pipelines -- 1.3% Atlas Pipeline Partners LP Company Guar. Notes 8.13% due 12/15/15................ 400,000 412,000 Centerpoint Energy Resources Corp. Notes 7.75% due 02/15/11................ 290,000 313,568 Copano Energy LLC Company Guar. Notes 8.13% due 03/01/16................ 390,000 403,650 Duke Energy Field Services LLC Notes 6.88% due 02/01/11................ 178,000 187,329 Dynegy Holdings, Inc. Senior Notes 8.75% due 02/15/12................ 890,000 945,625 Dynegy-Roseton Danskammer Pass Through Certs. Series B 7.67% due 11/08/16................ 520,000 551,200 El Paso Natural Gas Co. Senior Notes 5.95% due 04/15/17*............... 375,000 376,395 El Paso Natural Gas Co. Senior Notes 7.63% due 08/01/10................ 100,000 104,358 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22................ 1,035,000 1,256,089 Enbridge Energy Partners LP Senior Notes 5.88% due 12/15/16................ 118,000 118,551 MarkWest Energy Partners LP Senior Notes 6.88% due 11/01/14................ 280,000 271,600 MarkWest Energy Partners LP Company Guar. Notes 8.50% due 07/15/16................ 350,000 364,875 NGC Corp Capital Trust Guar. Bonds 8.32% due 06/01/27................ 1,720,000 1,651,200
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Pipelines (continued) ONEOK Partners LP Company Guar. Notes 6.15% due 10/01/16................... $ 155,000 $ 158,462 Southern Natural Gas Co. Notes 5.90% due 04/01/17*.................. 162,000 161,999 Tennessee Gas Pipeline Co. Debentures 7.00% due 10/15/28................... 905,000 968,953 Transcontinental Gas Pipe Line Corp. Notes 7.00% due 08/15/11................... 150,000 157,125 Williams Cos., Inc. Senior Notes 7.88% due 09/01/21................... 1,205,000 1,325,500 ---------- 9,728,479 ---------- Precious Metals -- 0.0% Barrick Gold Finance, Inc. Company Guar. Debentures 7.50% due 05/01/07................... 233,000 233,350 ---------- Printing-Commercial -- 0.1% Valassis Communications, Inc. Senior Notes 8.25% due 03/01/15*.................. 705,000 692,663 ---------- Private Corrections -- 0.0% Corrections Corp. of America Company Guar. Notes 6.25% due 03/15/13................... 200,000 200,000 ---------- Publishing-Newspapers -- 0.1% Knight Ridder, Inc. Debentures 6.88% due 03/15/29................... 205,000 190,470 Knight Ridder, Inc. Debentures 7.15% due 11/01/27................... 205,000 195,665 Medianews Group, Inc. Senior Sub. Notes 6.88% due 10/01/13................... 220,000 200,200 ---------- 586,335 ---------- Publishing-Periodicals -- 0.1% The Reader's Digest Association, Inc. Senior Sub. Notes 9.00% due 02/15/17*.................. 780,000 750,750 ---------- Radio -- 0.0% Chancellor Media Corp. Company Guar. Notes 8.00% due 11/01/08................... 148,000 153,346 ---------- Real Estate Investment Trusts -- 0.5% AvalonBay Communities, Inc. Senior Notes 5.75% due 09/15/16................... 310,000 314,093
34 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Real Estate Investment Trusts (continued) Health Care Property Investors, Inc. Senior Notes 5.65% due 12/15/13.................... $845,000 $ 839,274 Heritage Property Investment Trust Notes 4.50% due 10/15/09.................... 152,000 149,134 Mack-Cali Realty LP Bonds 5.80% due 01/15/16.................... 156,000 157,050 National Health Investors, Inc. Notes 7.30% due 07/16/07.................... 100,000 100,115 New Plan Excel Realty Trust Senior Notes 4.50% due 02/01/11.................... 484,000 467,746 Omega Healthcare Investors, Inc. Senior Notes 7.00% due 04/01/14.................... 400,000 404,000 Reckson Operating Partnership LP Senior Notes 6.00% due 03/31/16.................... 86,000 84,534 Simon Property Group LP Notes 5.00% due 03/01/12.................... 80,000 79,243 Simon Property Group LP Notes 5.38% due 08/28/08.................... 124,000 123,995 Trustreet Properties, Inc. Senior Notes 7.50% due 04/01/15.................... 500,000 544,635 Vornado Realty LP Notes 4.50% due 08/15/09.................... 210,000 205,803 ---------- 3,469,622 ---------- Recycling -- 0.3% Aleris International, Inc. Senior Notes 9.00% due 12/15/14*................... 840,000 886,200 Aleris International, Inc. Senior Sub. Notes 10.00% due 12/15/16*.................. 890,000 934,500 ---------- 1,820,700 ---------- Rental Auto/Equipment -- 0.2% H&E Equipment Services, Inc. Company Guar. Notes 8.38% due 07/15/16.................... 520,000 552,500 United Rentals North America, Inc. Senior Sub. Notes 7.75% due 11/15/13.................... 765,000 786,037 ---------- 1,338,537 ---------- Research & Development -- 0.1% Alion Science and Technology Corp. Senior Notes 10.25% due 02/01/15*.................. 565,000 581,950 ----------
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- Retail-Building Products -- 0.1% Home Depot, Inc. Senior Notes 5.88% due 12/16/36.................... $1,074,000 $1,023,980 ---------- Retail-Discount -- 0.1% Wal-Mart Stores, Inc. Senior Notes 5.88% due 04/05/27.................... 560,000 558,501 ---------- Retail-Drug Store -- 0.1% CVS Lease Pass Through Trust Pass Through Certs. 6.04% due 12/10/28*................... 368,119 372,319 General Nutrition Centers, Inc. Senior Notes 9.85% due 03/15/14*................... 250,000 245,000 Rite Aid Corp. Sec. Notes 8.13% due 05/01/10.................... 425,000 436,687 ---------- 1,054,006 ---------- Retail-Major Department Stores -- 0.1% Saks, Inc. Company Guar. Notes 9.88% due 10/01/11.................... 375,000 417,188 ---------- Retail-Petroleum Products -- 0.1% Ferrellgas LP Senior Notes 6.75% due 05/01/14.................... 940,000 921,200 ---------- Retail-Regional Department Stores -- 0.1% Neiman-Marcus Group, Inc. Company Guar. Notes 9.00% due 10/15/15.................... 400,000 438,000 ---------- Retail-Restaurants -- 0.1% Dave & Buster's, Inc. Company Guar. Notes 11.25% due 03/15/14................... 320,000 326,400 NPC International, Inc. Company Guar. Notes 9.50% due 05/01/14.................... 625,000 646,875 ---------- 973,275 ---------- Rubber/Plastic Products -- 0.0% Venture Holdings Co. LLC Company Guar. Notes 11.00% due 06/01/07+(3)(6)(14)........ 100,000 400 ---------- Savings & Loans/Thrifts -- 0.2% Independence Community Bank Corp. Notes 3.50% due 06/20/08(11)................ 172,000 168,387 Sovereign Bancorp, Inc. Senior Notes 4.80% due 09/01/10.................... 405,000 398,260 Washington Mutual Preferred Funding II 6.67% due 12/15/16*(7)(8)............. 607,000 595,711
35 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Savings & Loans/Thrifts (continued) Western Financial Bank Senior Debentures 9.63% due 05/15/12....................... $ 333,000 $ 362,216 ---------- 1,524,574 ---------- Soap & Cleaning Preparation -- 0.0% Johnsondiversey Holdings, Inc. Senior Disc. Notes 10.67% due 05/15/13(9)................... 75,000 77,438 ---------- Special Purpose Entities -- 1.2% AAC Group Holding Corp. Senior Disc. Notes 10.25% due 10/01/12(9)................... 565,000 507,088 AMR HoldCo, Inc./EmCare HoldCo, Inc. Senior Sub. Notes 10.00% due 02/15/15...................... 125,000 137,500 BAE Systems Holdings, Inc. Notes 5.20% due 08/15/15*...................... 1,065,000 1,043,036 Bluewater Finance, Ltd. Company Guar. Notes 10.25% due 02/15/12...................... 650,000 677,625 Capital One Capital IV Company Guar. Notes 6.75% due 02/17/37....................... 255,000 244,308 CCM Merger, Inc. Notes 8.00% due 08/01/13*...................... 500,000 502,500 Chukchansi Economic Development Authority Senior Notes 8.88% due 11/15/12*(7)................... 150,000 153,750 Consolidated Communications Illinois/Texas Holdings, Inc. Senior Notes 9.75% due 04/01/12....................... 632,000 669,130 Cyrus Reinsurance Holdings Senior Notes 6.36% due 09/01/08*(4)(7)................ 239,000 238,403 Hawker Beechcraft Acquisition Co. LLC / Hawker Beechcraft Notes Co. Senior Notes 8.88% due 04/01/15*...................... 295,000 304,956 Hawker Beechcraft Acquisition Co. LLC / Hawker Beechcraft Notes Co. Senior Sub. Notes 9.75% due 04/01/17*...................... 410,000 428,450 ING USA Global Funding Trust Notes 4.50% due 10/01/10....................... 268,000 263,246 MedCath Holdings Corp. Senior Notes 9.88% due 07/15/12....................... 129,000 139,643
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- Special Purpose Entities (continued) MXEnergy Holdings, Inc. Senior Notes 12.90% due 08/01/11*(7)............ $675,000 $ 621,000 Norbord Delaware GP I Company Guar. Notes 6.45% due 02/15/17*................ 193,000 195,367 PCA LLC/PCA Finance Corp. Senior Notes 11.88% due 08/01/09+(3)(6)......... 325,000 58,500 PNA Intermediate Holding Corp. Senior Notes 12.36% due 02/15/13*(7)............ 150,000 153,750 Pricoa Global Funding I Notes 5.30% due 09/27/13*................ 320,000 320,520 Principal Life Global Funding I Sec. Notes 5.25% due 01/15/13*................ 296,000 295,421 Seitel Acquisition Corp. Senior Notes 9.75% due 02/15/14*................ 510,000 516,375 Snoqualmie Entertainment Authority Notes 9.13% due 02/01/15*................ 570,000 587,812 Snoqualmie Entertainment Authority Senior Notes 9.15% due 02/01/14*(7)............. 75,000 76,313 Southern Star Central Corp. Senior Notes 6.75% due 03/01/16................. 150,000 150,000 Visant Corp. Company Guar. Notes 7.63% due 10/01/12................. 475,000 483,312 ---------- 8,768,005 ---------- Specified Purpose Acquisitions -- 0.0% ESI Tractebel Acquisition Corp. Company Guar. Bonds 7.99% due 12/30/11................. 202,000 206,409 ---------- Steel-Producers -- 0.3% Chaparral Steel Co. Company Guar. Notes 10.00% due 07/15/13................ 560,000 624,400 International Steel Group, Inc. Senior Notes 6.50% due 04/15/14................. 540,000 562,275 Steel Dynamics, Inc. Senior Notes 6.75% due 04/01/15*................ 700,000 700,875 ---------- 1,887,550 ----------
36 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Steel-Specialty -- 0.0% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11................ $ 75,000 $ 80,625 Tube City IMS Corp. Senior Sub. Notes 9.75% due 02/01/15*............... 225,000 234,000 ---------- 314,625 ---------- Storage/Warehousing -- 0.1% Mobile Mini, Inc. Senior Notes 9.50% due 07/01/13................ 178,000 190,460 Mobile Services Group, Inc. Senior Notes 9.75% due 08/01/14*............... 330,000 348,975 ---------- 539,435 ---------- Telecom Services -- 0.6% Bellsouth Telecommunications, Inc. Debentures 7.00% due 12/01/95................ 932,000 956,276 Cincinnati Bell Telephone Co. Company Guar. Notes 7.18% due 12/15/23................ 50,000 50,375 Cincinnati Bell Telephone Co. Company Guar. Notes 7.20% due 11/29/23................ 225,000 218,250 Insight Midwest LP Senior Notes 9.75% due 10/01/09................ 52,000 52,845 Mastec, Inc. Senior Notes 7.63% due 02/01/17*............... 400,000 405,000 Qwest Corp. Senior Notes 7.50% due 10/01/14................ 2,520,000 2,658,600 ---------- 4,341,346 ---------- Telephone-Integrated -- 1.1% AT&T Corp. Senior Notes 7.30% due 11/15/11................ 463,000 502,612 Cincinnati Bell, Inc. Senior Notes 7.25% due 06/15/23................ 25,000 24,250 Cincinnati Bell, Inc. Company Guar. Notes 8.38% due 01/15/14................ 1,140,000 1,165,650 Citizens Communications Co. Bonds 7.13% due 03/15/19*............... 575,000 569,250 Citizens Communications Co. Senior Notes 9.00% due 08/15/31................ 1,677,000 1,836,315
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Telephone-Integrated (continued) GTE Northwest, Inc. Debentures 5.55% due 10/15/08................... $ 55,000 $ 55,160 LCI International, Inc. Senior Notes 7.25% due 06/15/07................... 1,650,000 1,654,125 Level 3 Financing, Inc. Senior Notes 8.75% due 02/15/17*.................. 400,000 403,000 New England Telephone & Telegraph Co. Debentures 7.88% due 11/15/29................... 174,000 195,620 Sprint Capital Corp. Company Guar. Notes 6.88% due 11/15/28................... 787,000 783,763 Verizon Communications, Inc. Senior Notes 6.25% due 04/01/37................... 280,000 277,340 Verizon New York, Inc. Debentures 6.88% due 04/01/12................... 261,000 275,444 ---------- 7,742,529 ---------- Television -- 0.5% Allbritton Communications Co. Senior Sub. Notes 7.75% due 12/15/12................... 1,025,000 1,050,625 ION Media Networks, Inc. Sec. Notes 11.61% due 01/15/13*(7).............. 875,000 912,187 LIN Television Corp. Senior Sub. Notes 6.50% due 05/15/13................... 960,000 939,600 Univision Communications, Inc. Company Guar. Notes 3.50% due 10/15/07................... 80,000 78,800 Young Broadcasting, Inc. Senior Sub. Notes 8.75% due 01/15/14................... 180,000 167,850 Young Broadcasting, Inc. Company Guar. Notes 10.00% due 03/01/11.................. 725,000 714,125 ---------- 3,863,187 ---------- Textile-Products -- 0.0% Collins & Aikman Floorcoverings, Inc. Company Guar. Notes 9.75% due 02/15/10................... 248,000 252,340 ---------- Theaters -- 0.5% AMC Entertainment, Inc. Senior Sub. Notes 8.00% due 03/01/14................... 1,970,000 2,004,475 Cinemark, Inc. Senior Disc. Notes 9.75% due 03/15/14(9)................ 1,385,000 1,267,275 ---------- 3,271,750 ----------
37 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Transactional Software -- 0.1% Open Solutions, Inc. Senior Sub. Notes 9.75% due 02/01/15*............... $ 475,000 $ 489,250 ---------- Transport-Air Freight -- 0.8% Atlas Air, Inc. Pass Through Certs. Series 1991-1, Class A-2 6.88% due 01/02/11................ 210,101 211,677 Atlas Air, Inc. Pass Through Certs. Series 1991-1, Class A-1 7.20% due 01/02/19................ 1,596,775 1,640,687 Atlas Air, Inc. Pass Through Certs. Series 1991-1, Class B 7.63% due 01/02/15................ 1,701,936 1,884,894 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class A 8.71% due 01/02/20................ 342,189 358,015 Atlas Air, Inc. Pass Through Certs. Series 1991-1, Class C 8.77% due 01/02/11................ 62,428 60,555 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class B 9.06% due 07/02/17................ 1,346,314 1,575,187 ---------- 5,731,015 ---------- Transport-Rail -- 0.2% Burlington Northern Santa Fe Corp. Debentures 7.29% due 06/01/36................ 738,000 823,942 Norfolk Southern Corp. Senior Notes 7.70% due 05/15/17................ 510,000 568,369 ---------- 1,392,311 ---------- Transport-Services -- 0.2% FedEx Corp. Company Guar. Notes 5.50% due 08/15/09................ 135,000 136,031 PHI, Inc. Company Guar. Notes 7.13% due 04/15/13................ 550,000 525,250 Ryder System, Inc. Notes 5.85% due 03/01/14................ 125,000 124,778 Ryder System, Inc. Notes 5.85% due 11/01/16................ 330,000 327,169 ---------- 1,113,228 ----------
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ Travel Services -- 0.1% Travelport LLC Senior Notes 9.88% due 09/01/14*................ $220,000 $ 230,450 Travelport LLC Senior Notes 10.00% due 09/01/14*(7)............ 125,000 127,500 Travelport LLC Senior Sub. Notes 11.88% due 09/01/16*............... 50,000 54,813 ------------ 412,763 ------------ Wire & Cable Products -- 0.1% Belden CDT, Inc. Senior Sub. Notes 7.00% due 03/15/17*................ 400,000 408,009 ------------ Total Corporate Bonds & Notes (cost $237,813,345)................ 242,185,501 ------------ FOREIGN CORPORATE BONDS & NOTES -- 5.7% Banks-Commercial -- 0.2% Barclays Bank PLC Preferred Sub. Notes 5.93% due 12/15/16*(7)(8).......... 370,000 378,895 Caisse Nationale des Caisses d'Epargne et de Prevoyance Notes 4.96% due 12/30/09(8).............. 141,000 116,325 NIB Capital Bank Bonds 5.82% due 12/11/13*(7)(8).......... 95,000 94,314 Royal Bank of Scotland Group PLC Preferred Bonds 7.65% due 09/30/31(7)(8)........... 550,000 636,453 Societe Generale Sub. Notes 5.92% due 04/05/17*(7)(8).......... 570,000 569,658 ------------ 1,795,645 ------------ Banks-Money Center -- 0.1% HBOS Capital Funding LP Company Guar. Notes 6.85% due 03/23/09(8).............. 175,000 176,978 Mizuho Financial Group Cayman, Ltd. Bank Guar. Notes 8.38% due 04/27/09(8).............. 175,000 184,957 National Westminster Bank PLC Sub. Notes 7.75% due 10/16/07(8).............. 67,000 67,639 ------------ 429,574 ------------ Beverages-Wine/Spirits -- 0.1% Diageo Capital PLC Company Guar. Notes 5.13% due 01/30/13................. 732,000 728,438 ------------
38 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Brewery -- 0.1% SABMiller PLC Notes 6.50% due 07/01/16*..................... $ 470,000 $ 496,671 ---------- Broadcast Services/Program -- 0.1% Grupo Televisa SA Senior Notes 6.63% due 03/18/25...................... 496,000 517,468 ---------- Building & Construction-Misc. -- 0.0% North American Energy Partners, Inc. Senior Notes 8.75% due 12/01/11...................... 310,000 316,200 ---------- Building Products-Doors & Windows -- 0.0% Masonite International Corp. Senior Sub. Notes 11.00% due 04/06/15*.................... 117,000 108,810 ---------- Cellular Telecom -- 0.1% Vodafone Group PLC Bonds 6.15% due 02/27/37...................... 1,152,000 1,112,119 ---------- Chemicals-Specialty -- 0.2% Rhodia SA Senior Notes 8.88% due 06/01/11...................... 1,550,000 1,615,875 ---------- Computers-Memory Devices -- 0.1% Seagate Technology HDD Holdings Company Guar. Notes 6.80% due 10/01/16...................... 450,000 452,250 ---------- Cruise Lines -- 0.1% Royal Caribbean Cruises, Ltd. Senior Notes 7.00% due 06/15/13...................... 400,000 413,326 ---------- Diversified Manufactured Operations -- 0.1% Bombardier, Inc. Senior Notes 8.00% due 11/15/14*..................... 330,000 341,550 Tyco International Group SA Company Guar. Notes 6.00% due 11/15/13...................... 310,000 325,870 ---------- 667,420 ---------- Diversified Minerals -- 0.1% BHP Billiton Finance, Ltd. Company Guar. Notes 5.40% due 03/29/17...................... 550,000 545,815 ---------- Electronic Components-Misc. -- 0.1% NXP BV/NXP Funding LLC Senior Notes 9.50% due 10/15/15*..................... 630,000 650,475 ----------
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------- Electronic Components-Semiconductors -- 0.1% Avago Technologies Finance Pte/Avago Technologies US/Avago Technologies Wireless Company Guar. 10.13% due 12/01/13......................... $ 590,000 $ 638,675 STATS ChipPAC, Ltd. Company Guar. Notes 6.75% due 11/15/11.......................... 475,000 490,437 ---------- 1,129,112 ---------- Financial Guarantee Insurance -- 0.1% Security Capital Assurance, Ltd. Bonds 6.88% due 09/30/17*(4)(7)(8)................ 570,000 570,000 ---------- Food-Meat Products -- 0.1% JBS SA Senior Notes 10.50% due 08/04/16*........................ 550,000 625,625 ---------- Housewares -- 0.3% Vitro SA de CV Senior Notes 9.13% due 02/01/17*......................... 1,840,000 1,886,000 ---------- Independent Power Producer -- 0.0% AES Drax Energy, Ltd. Sec. Notes 11.50% due 08/30/10+(3)(6).................. 725,000 725 ---------- Insurance-Multi-line -- 0.2% Aegon NV Sub. Notes 5.31% due 07/15/14(8)....................... 201,000 171,071 AXA SA Sub. Notes 6.38% due 12/14/36*(7)(8)................... 285,000 273,558 ING Groep NV Bonds 5.78% due 12/08/15(7)(8).................... 765,000 761,079 ---------- 1,205,708 ---------- Investment Companies -- 0.0% Canadian Oil Sands, Ltd. Notes 5.80% due 08/15/13*......................... 207,000 207,747 ---------- Medical-Drugs -- 0.4% Angiotech Pharmaceuticals, Inc. Company Guar. Notes 7.75% due 04/01/14.......................... 475,000 438,188 Angiotech Pharmaceuticals, Inc. Senior Notes 9.11% due 12/01/13*(7)...................... 590,000 602,537 Elan Finance PLC Company Guar. Bonds 7.75% due 11/15/11.......................... 805,000 790,912
39 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Medical-Drugs (continued) Elan Finance PLC Senior Notes 8.88% due 12/01/13*................. $590,000 $ 599,588 Elan Finance PLC Company Guar. Senior Notes 9.36% due 11/15/11(7)............... 790,000 803,825 ---------- 3,235,050 ---------- Music -- 0.0% Corporacion Interamericana de Entretenimiento SA de CV Senior Notes 8.88% due 06/14/15*................. 300,000 306,750 ---------- Oil Companies-Exploration & Production -- 0.3% Compton Petroleum Finance Corp. Company Guar. Notes 7.63% due 12/01/13.................. 365,000 356,787 Nexen, Inc. Bonds 5.88% due 03/10/35.................. 274,000 257,031 Nexen, Inc. Notes 7.88% due 03/15/32.................. 219,000 259,254 OPTI Canada, Inc. Company Guar. Notes 8.25% due 12/15/14*................. 375,000 390,000 Paramount Resources, Ltd. Senior Notes 8.50% due 01/31/13.................. 750,000 748,125 ---------- 2,011,197 ---------- Oil Companies-Integrated -- 0.2% ConocoPhillips Canada Funding Co. Company Guar. Notes 5.95% due 10/15/36.................. 358,000 361,986 ENI Coordination Center Company Guar. Notes 5.25% due 12/27/07.................. GBP 205,000 401,046 Petro-Canada Notes 5.95% due 05/15/35.................. 585,000 558,061 ---------- 1,321,093 ---------- Oil-Field Services -- 0.0% Weatherford International, Ltd. Senior Notes 5.50% due 02/15/16.................. 214,000 209,873 ---------- Paper & Related Products -- 0.2% Abitibi-Consolidated, Inc. Notes 6.00% due 06/20/13.................. 570,000 484,500 Abitibi-Consolidated, Inc. Notes 8.55% due 08/01/10.................. 705,000 713,812
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ Paper & Related Products (continued) Abitibi-Consolidated, Inc. Debentures 8.85% due 08/01/30....................... $ 270,000 $ 240,300 ---------- 1,438,612 ---------- Pipelines -- 0.0% Kinder Morgan Finance Co. ULC Company Guar. Notes 5.70% due 01/05/16....................... 183,000 171,582 ---------- Printing-Commercial -- 0.1% Quebecor World Capital Corp. Senior Notes 8.75% due 03/15/16*...................... 545,000 551,813 ---------- Real Estate Operations & Development -- 0.0% Brookfield Asset Management, Inc. Notes 8.13% due 12/15/08....................... 76,000 79,535 ---------- Retail-Drug Store -- 0.1% Jean Coutu Group (PJC), Inc. Senior Sub. Notes 8.50% due 08/01/14....................... 575,000 623,875 ---------- Satellite Telecom -- 0.7% Intelsat Bermuda, Ltd. Senior Notes 8.87% due 01/15/15(7).................... 1,055,000 1,076,100 Intelsat Bermuda, Ltd. Guar. Senior Notes 11.25% due 06/15/16...................... 1,210,000 1,373,350 Intelsat Intermediate Holding Co., Ltd. Company Guar. Notes 9.25% due 02/01/15(9).................... 1,475,000 1,224,250 Intelsat, Ltd. Senior Notes 6.50% due 11/01/13....................... 1,360,000 1,200,200 ---------- 4,873,900 ---------- Special Purpose Entities -- 0.3% Hellas Telecommunications Luxembourg II Sub. Notes 11.12% due 01/15/15*(7).................. 955,000 981,262 Hybrid Capital Funding I LP Sub. Notes 8.00% due 06/30/11(8).................... 338,000 354,998 Rio Tinto Finance USA, Ltd. Notes 2.63% due 09/30/08....................... 165,000 159,055 SMFG Preferred Capital, Ltd. Bonds 6.08% due 01/25/17*(7)(8)................ 373,000 373,724 SovRisc BV Notes 4.63% due 10/31/08*...................... 133,000 132,088 ---------- 2,001,127 ----------
40 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Specified Purpose Acquisitions -- 0.1% Basell AF SCA Company Guar. Bonds 8.38% due 08/15/15*................ $ 925,000 $ 964,312 ----------- Telecom Services -- 0.3% Digicel Group, Ltd. Senior Notes 8.88% due 01/15/15*................ 100,000 97,000 Global Crossing UK Finance PLC Company Guar. Notes 10.75% due 12/15/14................ 300,000 325,500 Telenet Group Holdings NV Disc. Notes 11.50% due 06/15/14*(9)............ 1,706,000 1,599,375 TELUS Corp. Notes 7.50% due 06/01/07................. 110,000 110,348 ----------- 2,132,223 ----------- Telephone-Integrated -- 0.7% British Telecommunications PLC Bonds 8.63% due 12/15/30................. 1,812,000 2,487,900 Telecom Italia Capital SA Company Guar. Notes 4.00% due 01/15/10................. 697,000 673,394 Telecom Italia Capital SA Company Guar. Bonds 5.25% due 10/01/15................. 1,074,000 1,018,953 Telefonica Emisones SAU Company Guar. Notes 6.42% due 06/20/16................. 685,000 714,951 ----------- 4,895,198 ----------- Transport-Marine -- 0.1% Navios Maritime Holdings, Inc. Senior Notes 9.50% due 12/15/14*................ 375,000 390,469 Ultrapetrol Bahamas, Ltd. 1st Mtg. Bonds 9.00% due 11/24/14................. 350,000 355,250 ----------- 745,719 ----------- Transport-Rail -- 0.0% Canadian National Railway Co. Notes 6.38% due 10/15/11................. 315,000 329,001 ----------- Total Foreign Corporate Bonds & Notes (cost $40,704,294)................. 41,365,863 -----------
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------- FOREIGN GOVERNMENT AGENCIES -- 30.8% Sovereign -- 30.8% Bundesrepublik Deutschland Bonds 4.13% due 07/04/08........ EUR 1,845,000 $2,466,911 Bundesrepublik Deutschland Bonds 4.50% due 01/04/13........ EUR 3,895,000 5,325,670 Bundesrepublik Deutschland Bonds 4.75% due 07/04/34........ EUR 1,710,000 2,462,114 Bundesrepublik Deutschland Bonds 5.50% due 01/04/31........ EUR 500,000 788,045 Federal Republic of Brazil Bonds 6.00% due 01/17/17........ 3,390,000 3,423,900 Federal Republic of Brazil Notes 7.88% due 03/07/15........ 2,440,000 2,777,940 Federal Republic of Brazil Notes 8.00% due 01/15/18........ 5,330,000 6,020,235 Federal Republic of Brazil Bonds 8.25% due 01/20/34........ 1,340,000 1,681,700 Federal Republic of Brazil Notes 8.75% due 02/04/25........ 2,825,000 3,630,125 Federal Republic of Brazil Bonds 8.88% due 10/14/19........ 2,560,000 3,233,280 Federal Republic of Brazil Notes 8.88% due 04/15/24........ 145,000 188,500 Federal Republic of Brazil Notes 10.25% due 06/17/13....... 2,480,000 3,091,320 Federal Republic of Brazil Bonds 10.25% due 01/10/28....... BRL 3,100,000 1,500,874 Federal Republic of Brazil Bonds 10.50% due 07/14/14....... 1,115,000 1,432,775 Federal Republic of Brazil Notes 11.00% due 01/11/12....... 2,240,000 2,759,680 Federal Republic of Brazil Notes 11.00% due 08/17/40....... 7,310,000 9,861,190
41 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------- FOREIGN GOVERNMENT AGENCIES (continued) Sovereign (continued) Federal Republic of Brazil Bonds 12.50% due 01/05/16....... $ 2,474,000 $1,380,315 France Government Bond Bonds 3.00% due 10/25/15........ EUR 500,000 616,889 Government of Australia Bonds 5.75% due 06/15/11........ AUD 9,180,000 7,330,119 Government of Australia Bonds 7.50% due 09/15/09........ AUD 3,925,000 3,267,696 Government of Canada Bonds 4.00% due 09/01/10........ CAD 2,684,000 2,324,560 Government of Canada Bonds 5.00% due 06/01/14........ CAD 6,230,000 5,708,018 Government of Canada Bonds 5.25% due 06/01/13........ CAD 2,920,000 2,693,836 Government of Japan Bonds 1.00% due 12/20/12........ JPY 485,800,000 4,060,961 Government of New Zealand Bonds 7.00% due 07/15/09........ NZD 7,900,000 5,650,216 Kingdom of Denmark Bonds 7.00% due 11/15/07........ DKK 29,310,000 5,341,317 Kingdom of Netherlands Bonds 3.00% due 07/15/07........ EUR 1,085,000 1,445,426 Kingdom of Norway Bonds 5.50% due 05/15/09........ NOK 51,050,000 8,523,543 Kingdom of Norway Bonds 6.50% due 05/15/13........ NOK 34,480,000 6,228,654 Kingdom of Spain Bonds 5.75% due 07/30/32........ EUR 925,000 1,506,605 Kingdom of Sweden Bonds 4.00% due 12/01/09........ SEK 28,200,000 4,051,418 Kingdom of Sweden Bonds 4.50% due 08/12/15........ SEK 40,010,000 6,013,418 Kingdom of Sweden Bonds 5.00% due 01/28/09........ SEK 10,500,000 1,535,122 Kingdom of Sweden Bonds 5.50% due 10/08/12........ SEK 32,870,000 5,062,210 New Zealand Government Bonds 6.00% due 07/15/08........ NZD 7,330,000 5,164,146
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------- Sovereign (continued) Peru Government Bonds 6.55% due 03/14/37..... $ 145,000 $ 150,510 Republic of Argentina Bonds 5.25% due 12/31/38(9).. 2,144,761 1,109,914 Republic of Argentina Bonds 5.59% due 08/03/12..... 2,300,000 1,652,550 Republic of Argentina Bonds 7.00% due 03/28/11..... 3,255,000 3,233,842 Republic of Argentina Bonds 7.00% due 09/12/13..... 1,690,000 1,630,005 Republic of Colombia Notes 7.38% due 01/27/17..... 1,500,000 1,632,750 Republic of Colombia Bonds 7.38% due 09/18/37..... 520,000 566,020 Republic of Colombia Notes 12.00% due 10/22/15.... COP 2,147,000,000 1,101,451 Republic of Columbia Bonds 8.13% due 05/21/24..... 710,000 827,150 Republic of Columbia Notes 8.25% due 12/22/14..... 1,190,000 1,351,245 Republic of El Salvador Bonds 7.65% due 06/15/35*.... 525,000 599,812 Republic of El Salvador Bonds 8.25% due 04/10/32..... 360,000 434,700 Republic of Greece Bonds 5.25% due 05/18/12..... EUR 611,000 857,162 Republic of Indonesia Notes 8.50% due 10/12/35..... 1,300,000 1,590,607 Republic of Panama Bonds 6.70% due 01/26/36..... 1,460,000 1,515,480 Republic of Peru Notes 7.35% due 07/21/25..... 1,910,000 2,173,580 Republic of Peru Bonds 8.75% due 11/21/33..... 720,000 946,800 Republic of Philippines Bonds 7.75% due 01/14/31..... 580,000 653,950
42 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------- FOREIGN GOVERNMENT AGENCIES (continued) Sovereign (continued) Republic of Philippines Notes 8.00% due 01/15/16..... $1,180,000 $1,328,975 Republic of Philippines Notes 8.25% due 01/15/14..... 2,320,000 2,601,300 Republic of Philippines Notes 8.88% due 03/17/15..... 1,210,000 1,417,212 Republic of Philippines Senior Notes 9.50% due 02/02/30..... 2,410,000 3,199,275 Republic of Philippines Bonds 9.88% due 01/15/19..... 1,020,000 1,314,525 Republic of Philippines Notes 10.63% due 03/16/25.... 1,000,000 1,417,500 Republic of Turkey Bonds 7.00% due 09/26/16..... 2,100,000 2,136,750 Republic of Turkey Notes 7.00% due 06/05/20..... 2,800,000 2,817,500 Republic of Turkey Notes 7.25% due 03/15/15..... 3,330,000 3,454,875 Republic of Turkey Notes 7.38% due 02/05/25..... 3,170,000 3,257,175 Republic of Turkey Notes 8.00% due 02/14/34..... 820,000 892,775 Republic of Turkey Notes 9.50% due 01/15/14..... 1,310,000 1,521,958 Republic of Uruguay Bonds 7.50% due 03/15/15..... 750,000 810,000 Republic of Uruguay Bonds 8.00% due 11/18/22..... 3,005,000 3,410,675 Republic of Uruguay Notes 9.25% due 05/17/17..... 400,000 490,000 Republic of Venezuela Bonds 5.75% due 02/26/16..... 810,000 761,805 Republic of Venezuela Bonds 6.00% due 12/09/20..... 2,210,000 2,044,250 Republic of Venezuela Bonds 7.00% due 12/01/18..... 700,000 712,600 Republic of Venezuela Bonds 7.65% due 04/21/25..... 1,540,000 1,633,170
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------ Sovereign (continued) Republic of Venezuela Notes 8.50% due 10/08/14................. $ 1,060,000 $ 1,180,310 Republic of Venezuela Bonds 9.25% due 09/15/27................. 660,000 829,950 Republic of Venezuela Bonds 9.38% due 01/13/34................. 520,000 670,540 Russian Federation Bonds 7.50% due 03/31/30(9).............. 13,980,000 15,865,902 Russian Federation Bonds 7.50% due 03/31/30*(9)............. 650,000 737,750 Russian Federation Notes 12.75% due 06/24/28................ 500,000 907,300 South Africa Government Bonds 13.00% due 08/31/10................ ZAR 4,350,000 683,456 Ukraine Soviet Socialist Republic Senior Notes 6.58% due 11/21/16................. 600,000 608,820 Ukrainian Soviet Socialist Republic Senior Bonds 6.58% due 11/21/16*................ 1,580,000 1,601,330 Ukrainian Soviet Socialist Republic Notes 7.65% due 06/11/13................. 1,270,000 1,376,045 United Mexican States Notes 5.63% due 01/15/17................. 1,620,000 1,632,960 United Mexican States Notes 6.63% due 03/03/15................. 1,520,000 1,641,600 United Mexican States Notes 7.50% due 04/08/33................. 1,885,000 2,243,150 United Mexican States Bonds 8.00% due 12/24/08................. MXN 18,300,000 1,675,279 United Mexican States Bonds 8.00% due 09/24/22................. 1,170,000 1,442,025 United Mexican States Notes 8.13% due 12/30/19................. 2,380,000 2,921,450 United Mexican States Bonds 8.30% due 08/15/31................. 1,530,000 1,971,405 ------------ Total Foreign Government Agencies (cost $216,521,157) 223,787,848 ------------
43 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------- FOREIGN GOVERNMENT TREASURIES -- 2.5% Sovereign -- 2.5% Government of United Kingdom Bonds 4.00% due 03/07/09............... GBP660,000 $ 1,265,337 Government of United Kingdom Bonds 4.00% due 09/07/16............... GBP 3,280,000 6,126,645 Government of United Kingdom Bonds 4.25% due 03/07/11............... GBP 4,430,000 8,401,064 Government of United Kingdom Bonds 5.00% due 03/07/08............... GBP 1,115,000 2,185,046 ----------- Total Foreign Government Treasuries (cost $17,743,746)............... 17,978,092 ----------- U.S. GOVERNMENT AGENCIES -- 9.9% Federal Home Loan Bank -- 0.2% 3.50% due 05/15/07................ 600,000 598,711 4.50% due 09/08/08................ 600,000 596,483 ----------- 1,195,194 ----------- Federal Home Loan Mtg. Corp. -- 3.7% 4.13% due 07/12/10................ 300,000 293,857 4.35% due 06/02/08................ 600,000 595,661 4.45% due 03/06/08................ 600,000 596,646 4.50% due 02/01/20................ 219,997 213,019 4.50% due 08/01/20................ 425,042 411,560 4.75% due 01/18/11................ 310,000 309,146 5.00% due 09/01/18................ 513,808 508,015 5.00% due 07/01/20................ 829,187 818,093 5.00% due 02/01/34................ 475,040 460,306 5.00% due 05/01/34................ 297,284 287,852 5.00% due 02/01/35................ 685,496 663,747 5.00% due 08/01/35................ 2,701,918 2,613,903 5.00% due 04/01/36................ 582,341 563,371 5.00% due 05/01/36................ 115,724 111,842 5.00% due 05/01/36................ 290,766 281,013 5.00% due 08/01/36................ 489,131 472,724 5.00% due 11/01/36................ 609,059 588,629 5.00% due 01/01/37................ 1,096,661 1,059,876 5.33% due 12/01/35(7)............. 445,621 445,832 5.46% due 03/01/36(7)............. 300,000 299,555 5.50% due 07/01/35................ 2,605,394 2,580,722 5.71% due 08/01/36(7)............. 2,635,788 2,648,148 5.81% due 01/01/37(7)............. 196,858 198,052 5.85% due 01/01/37(7)............. 899,650 908,639 6.00% due 07/01/35................ 193,614 195,296 6.00% due 06/01/36................ 4,063,194 4,095,929 6.20% due 09/01/36(7)............. 846,223 859,558 6.50% due 05/01/29................ 8,143 8,394 6.50% due 02/01/35................ 655,751 671,843 6.50% due April TBA............... 2,298,000 2,343,243 6.88% due 09/15/10................ 1,156,000 1,231,102 7.00% due 06/01/29................ 13,835 14,397 8.50% due 05/01/08................ 4,481 4,546
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- Federal Home Loan Mtg. Corp. (continued) 10.00% due 05/15/20(1)................ $ 17,248 $ 17,201 Series 1103, Class N 11.57% due 06/15/21(1)(15)............. 9,974 107 ----------- 27,371,824 ----------- Federal National Mtg. Assoc. -- 6.0% 4.47% due 02/01/34(7)................. 507,010 500,213 4.50% due 06/01/19.................... 540,286 523,769 4.66% due 10/01/35(7)................. 250,000 247,151 4.75% due 12/15/10.................... 375,000 374,060 4.88% due 01/01/35(7)................. 1,000,000 999,941 5.00% due 06/01/19.................... 277,480 274,064 5.00% due 04/01/21.................... 3,617,671 3,567,788 5.00% due 03/01/34.................... 323,962 313,560 5.00% due 11/01/34.................... 579,381 560,777 5.00% due 05/01/35.................... 1,337,291 1,293,331 5.00% due 01/01/37.................... 2,993,174 2,891,562 5.25% due 08/01/12.................... 300,000 303,447 5.50% due 06/01/19.................... 363,636 365,017 5.50% due 11/01/19.................... 1,639,657 1,645,883 5.50% due 08/01/20.................... 365,008 366,024 5.50% due 01/01/29.................... 8,817 8,774 5.50% due 06/01/29.................... 168,441 167,508 5.50% due 06/01/34.................... 381,746 378,397 5.50% due 02/01/35.................... 583,878 578,367 5.50% due 12/01/35.................... 786,960 779,532 5.50% due 02/01/36(7)................. 385,906 388,469 5.50% due 05/01/36.................... 4,739,350 4,691,217 5.50% due 11/01/36.................... 1,776,166 1,757,642 5.50% due 12/01/36.................... 4,140,378 4,085,710 5.50% due April TBA................... 5,457,000 5,399,019 6.00% due 02/01/32.................... 129,404 131,158 6.00% due 05/01/34.................... 21,812 22,032 6.00% due 10/01/34.................... 1,294,073 1,307,115 6.00% due 04/01/35.................... 724,352 731,653 6.00% due 06/01/35.................... 204,735 206,396 6.00% due 11/01/36.................... 2,596,131 2,605,650 6.00% due April TBA................... 4,645,000 4,678,388 6.50% due 04/01/34.................... 296,662 304,096 6.50% due 02/01/35.................... 79,512 81,161 6.50% due 07/01/36.................... 784,208 799,991 7.50% due 01/01/30.................... 19,717 20,668 7.50% due 09/01/30.................... 3,460 3,621 8.00% due 11/01/28.................... 25,997 27,539 8.80% due 01/25/19(1)................. 42,523 45,699 10.40% due 04/25/19(1)................ 6,981 7,463 13.00% due 11/01/15................... 6,717 7,453 ----------- 43,441,305 ----------- Government National Mtg. Assoc. -- 0.0% 7.50% due 07/15/27.................... 16,570 17,315 7.50% due 10/15/27.................... 66,573 69,566 ----------- 86,881 ----------- Total U.S. Government Agencies (cost $71,963,064)................... 72,095,204 -----------
44 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Shares/ Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------- U.S. GOVERNMENT TREASURIES -- 6.5% United States Treasury Bonds -- 1.1% 6.25% due 08/15/23......................... $ 166,000 $ 190,576 8.00% due 11/15/21......................... 6,000,000 7,929,372 ----------- 8,119,948 ----------- United States Treasury Notes -- 5.4% 3.63% due 01/15/10......................... 803,000 783,710 3.88% due 05/15/10......................... 175,000 171,671 3.88% due 09/15/10......................... 7,000 6,855 4.00% due 08/31/07......................... 3,000,000 2,987,577 4.00% due 09/30/07......................... 15,000,000 14,924,415 4.00% due 02/15/........................... 6,701,000 6,424,061 4.25% due 01/15/11......................... 2,000,000 1,980,234 4.38% due 12/31/07......................... 1,400,000 1,393,547 4.38% due 12/15/10......................... 101,000 100,479 4.50% due 02/15/09......................... 240,000 239,363 4.50% due 11/15/10......................... 70,000 69,945 4.50% due 11/15/15......................... 270,000 267,247 4.63% due 02/29/08......................... 63,000 62,828 4.63% due 12/31/11......................... 500,000 501,660 4.63% due 11/15/16......................... 410,000 408,799 4.88% due 05/31/08......................... 3,500,000 3,501,642 4.88% due 05/31/11......................... 4,000,000 4,049,688 5.13% due 05/15/16......................... 1,579,000 1,632,599 ----------- 39,506,320 ----------- Total U.S. Government Treasuries (cost $47,538,887)........................ 47,626,268 ----------- COMMON STOCK -- 0.6% Casino Services -- 0.0% Shreveport Gaming Holdings, Inc.+(3)(4)(5). 2,441 56,199 ----------- Cellular Telecom -- 0.4% iPCS, Inc.+(3)(5).......................... 60,413 2,959,633 ----------- 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 15,327 ----------- Oil-Field Services -- 0.2% Trico Marine Services, Inc.+............... 40,529 1,510,110 ----------- Total Common Stock (cost $2,206,622)......................... 4,570,018 ----------- PREFERRED STOCK -- 0.8% Banks-Money Center -- 0.1% Santander Finance Preferred SA* 5.88%(7).................................. 32,800 808,727 ----------- Diversified Financial Services -- 0.1% General Electric Capital Corp. 4.50%(9).................................. 16,000 383,360 ----------- Finance-Mortgage Loan/Banker -- 0.0% Fannie Mae Series O, 7.00%(7)........................ 1,080 57,434 -----------
Shares/ Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------------- Oil Companies-Exploration & Production -- 0.3% EXCO Resources, Inc. 11.00%, Series A-2(4)(5).................. 153 $ 1,530,000 EXCO Resources, Inc. Convertible 7.00%, Series A-1(4)(5)................... 37 370,000 Transmeridian Exploration, Inc. 15.00%(4)................................. 3,255 302,715 ------------ 2,202,715 ------------ Special Purpose Entity -- 0.1% Structured Repackaged Asset-Backed Trust Securities 3.00%..................................... 29,200 686,200 ------------ Telephone-Integrated -- 0.1% AT&T, Inc. 6.38%..................................... 35,400 887,832 ------------ Television -- 0.1% ION Media Networks, Inc. 13.75%(10)................................ 81 631,800 ------------ Total Preferred Stock (cost $5,674,195)......................... 5,658,068 ------------ RIGHTS -- 0.0% Sovereign -- 0.0% United Mexican States, Series E Expires 06/30/07 VRR+(4) (cost $0)................................. 1,400,000 20,300 ------------ WARRANTS -- 0.0% Oil Companies-Exploration & Production -- 0.0% Transmeridian Exploration, Inc. Expires 12/15/10 (strike price $4.31)+(4). 13,811 8,977 ------------ Telecom Services -- 0.0% Leap Wireless International, Inc. Expires 04/15/10 (strike price $96.80)+*(3)(4)........................... 500 0 ------------ Telephone-Integrated -- 0.0% GT Group Telecom, Inc. Expires 02/01/10 (strike price $0.00)+*(3)(4)............................ 150 1 ------------ Total Warrants (cost $46,436)............................ 8,978 ------------ Total Long-Term Investment Securities (cost $658,720,543)....................... 673,736,595 ------------ SHORT-TERM INVESTMENT SECURITIES -- 1.0% Time Deposits -- 1.0% Euro Time Deposit with State Street Bank & Trust Co. 2.80% due 04/02/07........................ 1,796,000 1,796,000 Euro Time Deposit with State Street Bank & Trust Co. 4.05% due 04/02/07........................ 5,301,000 5,301,000 ------------ 7,097,000 ------------
45 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------- U.S. GOVERNMENT TREASURIES -- 0.7% United States Treasury Notes -- 0.7% United States Treasury Notes 2.75% due 08/15/07................. $ 5,000,000 $ 4,958,168 ------------ Total Short-Term Investment Securities (cost $12,055,168)................. 12,055,168 ------------ REPURCHASE AGREEMENT -- 2.7% UBS Securities, LLC Joint Repurchase Agreement (cost $19,710,000)(18)............. 19,710,000 19,710,000 ------------ TOTAL INVESTMENTS (cost $690,485,711)(16)............ 97.0 % 705,501,763 Other assets less liabilities......... 3.0 21,874,623 ----------- ------------ NET ASSETS -- 100.0% $727,376,386 =========== ============
-------- * 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 March 31, 2007, the aggregate value of these securities was $70,532,410 representing 9.7% of net assets. Unless otherwise indicated these securities are not considered to be illiquid. ** Denominated in United States dollars unless otherwise indicated. VRR --Value Recovery Right TBA --Securities purchased on a forward commitment basis with an approximate principal amount due and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. + Non-income producing security (1) Collateralized Mortgaged Obligation (2) Variable Rate Security -- the rate reflected is as of March 31, 2007, maturity date reflects the stated maturity date. (3) Illiquid security (4) Fair valued security; see Note 2 (5) To the extent permitted by the Statement of Additional Information, the Strategic Bond Fund may invest in restricted securities. The Fund has no right to demand registration of these securities. The securities are valued pursuant to Note 2. Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of March 31, 2007, the Strategic Bond Fund held the following restricted securities:
Market % of Acquisition Principal/ Acquisition Market Value 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 $ 7.00 0.00% EXCO Resources, Inc. 7.00%, Series A-1 Preferred Stock......... 3/29/2007 37 370,000 370,000 10,000.00 0.05 EXCO Resources, Inc. 11.00%, Series A-2 Preferred Stock......... 3/29/2007 153 1,530,000 1,530,000 10,000.00 0.21
Market Value % of Acquisition Principal/ Acquisition Market per Net Name Date Shares Cost Value Share Assets ---- ----------- ---------- ----------- ---------- ------ ------ 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 $ 270,300 $ 1.02 0.04% iPCS, Inc. Common Stock....... 7/28/2005 1,283 0 7/20/2004 59,130 916,515 --------- -------- 60,413 916,515 2,959,633 48.99 0.41 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 23.02 0.01 Southern Energy, Inc. 7.90% due 07/15/09.... 1/25/2006 1,125,000 0 6/6/2006 425,000 0 --------- -------- 1,550,000 0 0 0.00 0.00 ---------- ---- $5,214,881 0.72% ========== ====
(6) Bond in default (7) Floating rate security where the rate fluctuates. The rate moves up or down at each reset date. The rate reflected is as of March 31, 2007 (8) Perpetual maturity -- maturity date reflects the next call date. (9) "Step-up" security where the rate increases ("steps-up") at a predetermined rate. Rate shown reflects the increased rate. (10) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays interest/dividends in the form of additional bonds or preferred stocks. (11) Variable Rate Security -- the rate reflected is as of March 31, 2007, maturity date reflects next reset date. (12) Company has filed Chapter 11 bankruptcy protection. (13) Bond is in default and did not pay principal at maturity (14) Company has filed Chapter 7 bankruptcy. (15) Interest Only (16) See Note 5 for cost of investments on a tax basis. (17) Company emerged from bankruptcy subsequent to March 31, 2007. (18) See Note 2 for details of Joint Repurchase Agreement. AUD --Australian Dollar BRL --Brazilian Real CAD --Canadian Dollar COP --Colombian Peso DKK --Danish Krone EUR --Euro Dollar GBP --British Pound JPY --Japanese Yen MXN --Mexican Peso NOK --Norwegian Krone SEK --Swedish Krona USD --United States Dollar ZAR --South African Rand Open Forward Foreign Currency Contracts
Gross Contract In Delivery Unrealized to Deliver Exchange For Date Depreciation ------------------- JPY 622,855,573 NZD 7,353,233 04/02/2007 $(19,771) ========
-------- JPY --Japanese Yen NZD --New Zealand Dollar See Notes to Financials Statements 46 SunAmerica High Yield Bond Fund PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) Industry Allocation* Finance -- Auto Loans.................... 5.9% Oil Companies -- Exploration & Production 5.7 Cellular Telecom......................... 5.5 Repurchase Agreements.................... 4.4 Pipelines................................ 4.0 Cable TV................................. 3.7 Special Purpose Entities................. 3.4 Independent Power Producers.............. 3.3 Chemicals -- Specialty................... 3.0 Medical -- Hospitals..................... 3.0 Casino Hotels............................ 2.8 Telecom Services......................... 2.6 Transport -- Air Freight................. 2.4 Airlines................................. 2.3 Electronic Components -- Semiconductors.. 1.9 Satellite Telecom........................ 1.9 Telephone -- Integrated.................. 1.8 Agricultural Chemicals................... 1.7 Television............................... 1.7 Auto -- Cars/Light Trucks................ 1.6 Medical -- Drugs......................... 1.5 Paper & Related Products................. 1.4 Theaters................................. 1.2 Containers -- Metal/Glass................ 1.1 Containers -- Paper/Plastic.............. 1.1 Metal -- Diversified..................... 1.1 Oil -- Field Services.................... 1.1 Building & Construction Products -- Misc. 1.0 Medical Products......................... 0.9 Non-Hazardous Waste Disposal............. 0.9 Computer Services........................ 0.8 Funeral Services & Related Items......... 0.8 Recycling................................ 0.8 Travel Services.......................... 0.8 Broadcast Services/Program............... 0.7 Electric -- Generation................... 0.7 Electric -- Integrated................... 0.7 Electronics -- Military.................. 0.7 Housewares............................... 0.7 Real Estate Investment Trusts............ 0.7 Applications Software.................... 0.6 Consumer Products -- Misc................ 0.6 Direct Marketing......................... 0.6 Rental Auto/Equipment.................... 0.6 Retail -- Drug Store..................... 0.6 Steel -- Producers....................... 0.6 Auto/Truck Parts & Equipment -- Original. 0.5 Chemicals -- Plastics.................... 0.5 Gambling (Non-Hotel)..................... 0.5 Medical -- HMO........................... 0.5 Printing -- Commercial................... 0.5 Storage/Warehousing...................... 0.5 Beverages -- Non-alcoholic............... 0.4 Coal..................................... 0.4 Diversified Manufactured Operations...... 0.4 Energy -- Alternate Sources.............. 0.4 Home Furnishings......................... 0.4 Machinery -- Farming..................... 0.4 Medical -- Nursing Homes................. 0.4 Transactional Software................... 0.4 Building & Construction -- Misc.......... 0.3 Building Products -- Wood................ 0.3
Diagnostic Kits..................... 0.3% Publishing -- Periodicals........... 0.3 Diversified Financial Services...... 0.3 Research & Development.............. 0.3 Retail -- Petroleum Products........ 0.3 Retail -- Restaurants............... 0.3 Transport -- Marine................. 0.3 Transport -- Services............... 0.3 Commercial Services................. 0.2 Computers -- Memory Devices......... 0.2 Electronic Components -- Misc....... 0.2 Food -- Meat Products............... 0.2 Food -- Misc........................ 0.2 Golf................................ 0.2 Hotels/Motels....................... 0.2 Insurance -- Property/Casualty...... 0.2 Medical Information Systems......... 0.2 Medical -- Biomedical/Gene.......... 0.2 Medical -- Generic Drugs............ 0.2 Metal Processors & Fabrication...... 0.2 Music............................... 0.2 Private Corrections................. 0.2 Retail -- Regional Department Stores 0.2 Specified Purpose Acquisitions...... 0.2 Building Products -- Doors & Windows 0.1 Casino Services..................... 0.1 Consulting Services................. 0.1 Gas -- Distribution................. 0.1 Human Resources..................... 0.1 Insurance -- Life/Health............ 0.1 Machinery -- General Industrial..... 0.1 Medical -- Outpatient/Home Medical.. 0.1 Miscellaneous Manufacturing......... 0.1 Multimedia.......................... 0.1 Oil & Gas Drilling.................. 0.1 Publishing -- Newspapers............ 0.1 Retail -- Major Department Stores... 0.1 Steel -- Specialty.................. 0.1 Textile -- Products................. 0.1 Transport -- Rail................... 0.1 Wire & Cable Products............... 0.1 ---- 99.0% ====
Credit Quality+# A......... 0.3% BBB....... 0.3 BB........ 25.8 B......... 43.4 CCC....... 21.2 BELOW C... 2.2 Not Rated@ 6.8 ----- 100.0% =====
-------- * Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or, the rating is unavailable from the data source. + Source: Standard and Poors # Calculated as a percentage of total debt issues, excluding short-term securities. 47 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value Security Description Amount (Note 2) ------------------------------------------------------- CONVERTIBLE BONDS & NOTES -- 0.0% Telecom Services -- 0.0% ICO North America, Inc. Notes 7.50% due 08/15/09(1)(2)(3) (cost $75,000)................ $ 75,000 $ 76,500 ---------- CORPORATE BONDS & NOTES -- 76.9% Agricultural Chemicals -- 1.7% Mosaic Global Holdings, Inc. Debentures 7.38% due 08/01/18............ 600,000 597,000 Terra Capital, Inc. Senior Notes 7.00% due 02/01/17*........... 1,835,000 1,825,825 The Mosaic Co. Senior Notes 7.38% due 12/01/14*........... 2,425,000 2,528,062 The Mosaic Co. Senior Notes 7.63% due 12/01/16*........... 1,425,000 1,503,375 ---------- 6,454,262 ---------- Airlines -- 2.3% American Airlines, Inc. Pass Through Certs. Series 2001-1, Class A-2 6.82% due 05/23/11............ 5,525,000 5,649,312 Continental Airlines, Inc. Pass Through Certs. Series 1991-1, Class C 6.95% due 08/02/09............ 461,731 459,423 Continental Airlines, Inc. Pass Through Certs. Series 1999, Class 2 7.73% due 03/15/11............ 700,808 711,320 Delta Air Lines, Inc. Pass Through Certs. Class A-2 7.57% due 11/18/10(14)........ 475,000 494,150 Northwest Airlines, Inc. Pass Through Certs. Series 1A-1 7.04% due 04/01/22(14)........ 1,142,192 1,143,620 United AirLines, Inc. Pass Through Certs. Series 2001-1, Class A-2 6.20% due 09/01/08............ 371,649 374,436 ---------- 8,832,261 ---------- Applications Software -- 0.6% SS&C Technologies, Inc. Company Guar. Notes 11.75% due 12/01/13........... 2,050,000 2,290,875 ---------- Auto-Cars/Light Trucks -- 1.6% Ford Motor Co. Debentures 6.38% due 02/01/29............ 3,905,000 2,782,313
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------- Auto-Cars/Light Trucks (continued) Ford Motor Co. Notes 7.45% due 07/16/31.............. $ 675,000 $ 522,281 General Motors Corp. Debentures 8.25% due 07/15/23.............. 2,865,000 2,578,500 General Motors Corp. Debentures 8.38% due 07/15/33.............. 202,000 181,295 ---------- 6,064,389 ---------- Auto/Truck Parts & Equipment-Original -- 0.5% ArvinMeritor, Inc. Senior Notes 8.13% due 09/15/15.............. 200,000 198,500 TRW Automotive, Inc. Company Guar. Notes 7.00% due 03/15/14*............. 125,000 122,500 TRW Automotive, Inc. Company Guar. Notes 7.25% due 03/15/17*............. 925,000 906,500 Visteon Corp. Senior Notes 8.25% due 08/01/10.............. 550,000 561,000 ---------- 1,788,500 ---------- Auto/Truck Parts & Equipment-Replacement -- 0.0% Exide Corp. Notes 10.00% due 03/15/25+(1)(2)....... 1,650,000 0 ---------- Beverages-Non-alcoholic -- 0.2% Cott Beverages, Inc. Company Guar. Notes 8.00% due 12/15/11............... 600,000 612,000 ---------- Broadcast Services/Program -- 0.7% Fisher Communications, Inc. Senior Notes 8.63% due 09/15/14............... 1,376,000 1,474,040 Nexstar Finance, Inc. Senior Sub. Notes 7.00% due 01/15/14............... 500,000 480,000 Nexstar Finance, Inc. Senior Disc. Notes 11.38% due 04/01/13(6)........... 700,000 677,250 ---------- 2,631,290 ---------- Building & Construction Products-Misc. -- 1.0% Associated Materials, Inc. Senior Sub. Notes 9.75% due 04/15/12............... 1,375,000 1,430,000 Dayton Superior Corp. Senior Sec. Notes 10.75% due 09/15/08.............. 1,299,000 1,331,475
48 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Building & Construction Products-Misc. (continued) Interline Brands, Inc. Senior Sub. Notes 8.13% due 06/15/14.................... $ 925,000 $ 955,062 ----------- 3,716,537 ----------- Building Products-Wood -- 0.3% Masonite Corp. Senior Sub. Notes 11.00% due 04/06/15*.................. 1,092,000 1,015,560 ----------- Cable TV -- 3.7% Cablevision Systems Corp. Senior Notes 8.00% due 04/15/12.................... 1,800,000 1,827,000 CCH I LLC Company Guar. Notes 11.00% due 10/01/15................... 3,021,000 3,119,183 CCH II LLC/CCH II Capital Corp. Senior Notes, Series B 10.25% due 09/15/10................... 1,000,000 1,053,750 CCH II LLC/CCH II Capital Corp. Senior Notes 10.25% due 09/15/10................... 900,000 949,500 CCH II LLC/CCH II Capital Corp. Company Guar. 10.25% due 10/01/13................... 5,027,000 5,491,997 CSC Holdings, Inc. Senior Notes 7.63% due 04/01/11.................... 360,000 369,000 Insight Communications Co., Inc. Senior Disc. Notes 12.25% due 02/15/11(6)................ 1,165,000 1,217,425 ----------- 14,027,855 ----------- Casino Hotels -- 2.8% Eldorado Casino Corp. (Shreveport) Sec. Bonds 10.00% due 08/01/12(2)(7)............. 1,721,177 1,652,330 Eldorado Resorts LLC Senior Notes 9.00% due 04/15/14(1)(2).............. 2,675,000 2,675,000 MGM Mirage, Inc. Senior Notes 5.88% due 02/27/14.................... 2,875,000 2,673,750 Riviera Holdings Corp. Company Guar. Notes 11.00% due 06/15/10................... 800,000 834,000 Seminole Hard Rock Entertainment, Inc. Sec. Notes 7.85% due 03/15/14*(8)................ 400,000 408,000 Station Casinos, Inc. Senior Sub. Notes 6.88% due 03/01/16.................... 1,625,000 1,488,906 Turning Stone Resort Casino Enterprise Senior Notes 9.13% due 12/15/10*................... 450,000 456,750
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Casino Hotels (continued) Turning Stone Resort Casino Enterprise Senior Notes 9.13% due 09/15/14*................... $ 425,000 $ 436,688 ----------- 10,625,424 ----------- Cellular Telecom -- 1.1% American Cellular Corp. Senior Notes 10.00% due 08/01/11................... 280,000 296,450 Centennial Communications Corp. Senior Notes 10.00% due 01/01/13................... 834,000 899,677 Centennial Communications Corp. Senior Notes 11.11% due 01/01/13(8)................ 825,000 868,313 Rural Cellular Corp. Senior Sub. Notes 9.75% due 01/15/10.................... 2,085,000 2,147,550 ----------- 4,211,990 ----------- Chemicals-Specialty -- 2.3% Huntsman International LLC Company Guar. Notes 7.88% due 11/15/14*................... 1,500,000 1,550,625 JohnsonDiversey, Inc. Company Guar. Notes 9.63% due 05/15/12.................... 200,000 209,000 MacDermid, Inc. Senior Notes 9.50% due 04/15/17*................... 325,000 333,125 Momentive Performance Materials, Inc. Senior Sub. Notes 11.50% due 12/01/16*.................. 2,725,000 2,793,125 Nalco Co. Senior Notes 7.75% due 11/15/11.................... 325,000 333,125 Nalco Co. Senior Sub. Notes 8.88% due 11/15/13.................... 465,000 494,062 Rockwood Specialties Group, Inc. Sub. Notes 7.50% due 11/15/14.................... 925,000 938,875 Rockwood Specialties Group, Inc. Senior Sub. Notes 10.63% due 05/15/11................... 292,000 308,060 Tronox Worldwide LLC Company Guar. Notes 9.50% due 12/01/12.................... 1,825,000 1,934,500 ----------- 8,894,497 ----------- Coal -- 0.4% Massey Energy Co. Senior Notes 6.63% due 11/15/10.................... 1,384,000 1,397,840 -----------
49 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Commercial Services -- 0.2% DI Finance/DynCorp International Senior Sub. Notes 9.50% due 02/15/13.................. $ 573,000 $ 610,245 ---------- Computer Services -- 0.8% Compucom Systems, Inc. Senior Notes 12.00% due 11/01/14*................ 650,000 693,875 Sungard Data Systems, Inc. Company Guar. Notes 9.13% due 08/15/13.................. 2,100,000 2,252,250 ---------- 2,946,125 ---------- Consulting Services -- 0.1% FTI Consulting, Inc. Company Guar. Notes 7.63% due 06/15/13.................. 425,000 440,938 ---------- Consumer Products-Misc. -- 0.6% American Achievement Corp. Senior Sub. Notes 8.25% due 04/01/12.................. 407,000 415,140 Jostens Holding Corp. Senior Disc. Notes 10.25% due 12/01/13(6).............. 1,600,000 1,480,000 Prestige Brands, Inc. Senior Sub. Notes 9.25% due 04/15/12.................. 250,000 258,750 Visant Holding Corp. Senior Notes 8.75% due 12/01/13.................. 100,000 104,250 ---------- 2,258,140 ---------- Containers-Metal/Glass -- 1.1% Crown Cork & Seal Co., Inc. Debentures 7.38% due 12/15/26.................. 75,000 70,875 Crown Cork & Seal Co., Inc. Debentures 8.00% due 04/15/23.................. 2,125,000 2,082,500 Owens Brockway Glass Container, Inc. Company Guar. Notes 8.25% due 05/15/13.................. 1,580,000 1,647,150 Owens Brockway Glass Container, Inc. Company Guar. Notes 8.88% due 02/15/09.................. 440,000 448,800 ---------- 4,249,325 ---------- Containers-Paper/Plastic -- 1.1% Jefferson Smurfit Corp. Senior Guar. Notes 8.25% due 10/01/12.................. 950,000 950,000 Pliant Corp. Company Guar. Notes 11.13% due 09/01/09................. 2,190,000 2,190,000
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- Containers-Paper/Plastic (continued) Smurfit-Stone Container Enterprises, Inc. Senior Notes 8.00% due 03/15/17*............................ $1,100,000 $1,075,250 ---------- 4,215,250 ---------- Diagnostic Kits -- 0.3% Inverness Medical Innovations, Inc. Senior Sub. Notes 8.75% due 02/15/12............................. 1,189,000 1,239,532 ---------- Direct Marketing -- 0.6% Affinity Group, Inc. Senior Sub. Notes 9.00% due 02/15/12............................. 2,100,000 2,157,750 ---------- Diversified Manufactured Operations -- 0.2% Indalex Holding Corp. Sec. Notes 11.50% due 02/01/14............................ 925,000 957,375 ---------- Electric-Generation -- 0.7% Edison Mission Energy Senior Notes 7.75% due 06/15/16............................. 375,000 390,938 Reliant Energy Mid-Atlantic Power Holdings, LLC Pass Through Certs. Series B 9.24% due 07/02/17............................. 401,780 445,976 The AES Corp. Sec. Notes 8.75% due 05/15/13*............................ 1,875,000 1,996,875 ---------- 2,833,789 ---------- Electric-Integrated -- 0.7% Mirant Americas Generation LLC Senior Notes 8.30% due 05/01/11............................. 1,725,000 1,768,125 Mirant Americas Generation LLC Senior Notes 8.50% due 10/01/21............................. 725,000 735,875 Southern Energy, Inc. Notes 7.90% due 07/15/09+(1)(2)(3)................... 3,525,000 0 ---------- 2,504,000 ---------- Electronic Components-Semiconductors -- 1.5% Advanced Micro Devices, Inc. Senior Notes 7.75% due 11/01/12............................. 804,000 813,045 Amkor Technology, Inc. Senior Notes 9.25% due 06/01/16............................. 1,780,000 1,855,650 Freescale Semiconductor, Inc. Senior Notes 9.13% due 12/15/14*............................ 1,300,000 1,290,250 Freescale Semiconductor, Inc. Senior Notes 9.23% due 12/15/14*(8)......................... 175,000 174,562
50 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ CORPORATE BONDS & NOTES (continued) Electronic Components-Semiconductors (continued) Freescale Semiconductor, Inc. Senior Sub. Notes 10.13% due 12/15/16*.................... $ 1,250,000 $ 1,253,125 Spansion, Inc. Senior Notes 11.25% due 01/15/16*.................... 320,000 330,400 ----------- 5,717,032 ----------- Electronics-Military -- 0.7% L-3 Communications Corp. Company Guar. Senior Sec. Notes 6.13% due 07/15/13...................... 2,725,000 2,684,125 ----------- Energy-Alternate Sources -- 0.4% Aventine Renewable Energy Holdings, Inc. Senior Notes 10.00% due 04/01/17*.................... 775,000 801,156 VeraSun Energy Corp. Sec. Notes 9.88% due 12/15/12...................... 625,000 651,563 ----------- 1,452,719 ----------- Finance-Auto Loans -- 5.9% Ford Motor Credit Co. Notes 7.38% due 10/28/09...................... 13,625,000 13,599,957 General Motors Acceptance Corp. Notes 6.75% due 12/01/14...................... 2,910,000 2,860,798 General Motors Acceptance Corp. Notes 6.88% due 09/15/11...................... 2,475,000 2,477,398 General Motors Acceptance Corp. Notes 6.88% due 08/28/12...................... 269,000 267,916 General Motors Acceptance Corp. Notes 7.56% due 12/01/14(8)................... 3,025,000 3,059,410 ----------- 22,265,479 ----------- Food-Misc. -- 0.2% Wornick Co. Sec. Notes 10.88% due 07/15/11..................... 700,000 622,125 ----------- Funeral Services & Related Items -- 0.8% Service Corp. International Senior Notes 7.00% due 06/15/17...................... 2,075,000 2,090,562 Service Corp. International Senior Notes 7.38% due 10/01/14...................... 155,000 161,200 Service Corp. International Senior Notes 7.63% due 10/01/18...................... 155,000 163,913
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- Funeral Services & Related Items (continued) Stewart Enterprises, Inc. Senior Notes 6.25% due 02/15/13....................... $ 850,000 $ 824,500 ----------- 3,240,175 ----------- Gambling (Non-Hotel) -- 0.5% Greektown Holdings LLC Senior Notes 10.75% due 12/01/13*..................... 975,000 1,043,250 Waterford Gaming LLC Senior Notes 8.63% due 09/15/12*...................... 938,000 994,280 ----------- 2,037,530 ----------- Gas-Distribution -- 0.1% Colorado Interstate Gas Co. Senior Debentures 6.85% due 06/15/37....................... 500,000 524,940 ----------- Golf -- 0.2% True Temper Sports, Inc. Company Guar. Notes 8.38% due 09/15/11....................... 1,000,000 890,000 ----------- Home Furnishings -- 0.4% Simmons Co. Senior Disc. Notes 10.00% due 12/15/14(6)................... 1,726,000 1,419,635 ----------- Hotel/Motel -- 0.2% Gaylord Entertainment Co. Company Guar. Notes 6.75% due 11/15/14....................... 775,000 754,656 ----------- Human Resources -- 0.1% TeamHealth, Inc. Company Guar. Notes 11.25% due 12/01/13...................... 325,000 342,875 ----------- Independent Power Producers -- 3.3% Calpine Corp. Sec. Notes 8.75% due 07/15/13*(14).................. 7,085,000 7,545,525 NRG Energy, Inc. Company Guar. Notes 7.38% due 02/01/16....................... 3,700,000 3,801,750 Orion Power Holdings, Inc. Senior Notes 12.00% due 05/01/10...................... 200,000 231,000 Reliant Energy, Inc. Sec. Notes 9.50% due 07/15/13....................... 1,002,000 1,090,927 ----------- 12,669,202 ----------- Insurance-Life/Health -- 0.1% Presidential Life Corp. Senior Notes 7.88% due 02/15/09....................... 275,000 277,750 -----------
51 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Insurance-Property/Casualty -- 0.2% Crum & Forster Holdings Corp. Senior Notes 10.38% due 06/15/13.............. $ 850,000 $ 918,000 ---------- Machinery-Farming -- 0.4% Case Corp. Notes 7.25% due 01/15/16............... 900,000 940,500 Case New Holland, Inc. Senior Notes 6.00% due 06/01/09............... 500,000 500,000 ---------- 1,440,500 ---------- Machinery-General Industrial -- 0.1% Stewart & Stevenson LLC Senior Notes 10.00% due 07/15/14*............. 250,000 261,875 ---------- Medical Information Systems -- 0.3% Spheris, Inc. Senior Sub. Notes 11.00% due 12/15/12.............. 975,000 972,563 ---------- Medical Instruments -- 0.0% Kyphon, Inc. Senior Notes 1.25% due 02/01/14*.............. 125,000 123,281 ---------- Medical Products -- 0.9% CDRV Investors, Inc. Senior Disc. Notes 9.63% due 01/01/15(6)............ 875,000 752,500 Encore Medical Finance LLC Senior Sub. Notes 11.75% due 11/15/14*............. 950,000 973,750 Universal Hospital Services, Inc. Senior Notes 10.13% due 11/01/11.............. 1,455,000 1,545,937 ---------- 3,272,187 ---------- Medical-Biomedical/Gene -- 0.2% Bio-Rad Laboratories, Inc. Senior Sub. Notes 6.13% due 12/15/14............... 600,000 582,000 Nektar Therapeutics Sub. Notes 3.25% due 09/28/12............... 250,000 241,563 ---------- 823,563 ---------- Medical-Generic Drugs -- 0.2% Mylan Labs, Inc. Company Guar. Notes 6.38% due 08/15/15............... 775,000 765,313 ---------- Medical-HMO -- 0.5% Multiplan, Inc. Senior Sub. Notes 10.38% due 04/15/16*............. 1,900,000 1,947,500 ----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- Medical-Hospitals -- 3.0% Community Health Systems, Inc. Senior Sec. Notes 6.50% due 12/15/12.................. $ 988,000 $ 1,017,640 HCA, Inc. Senior Notes 6.25% due 02/15/13.................. 900,000 817,875 HCA, Inc. Senior Notes 6.95% due 05/01/12.................. 820,000 791,300 HCA, Inc. Sec. Notes 9.13% due 11/15/14*................. 1,325,000 1,416,094 HCA, Inc. Sec. Notes 9.25% due 11/15/16*................. 5,275,000 5,690,406 HCA, Inc. Sec Notes 9.63% due 11/15/16*................. 1,450,000 1,566,000 ----------- 11,299,315 ----------- Medical-Nursing Homes -- 0.4% Genesis HealthCare Corp. Senior Notes 8.00% due 10/15/13.................. 475,000 504,687 Sun Healthcare Group, Inc. Sr Sub. Notes 9.13% due 04/15/15*................. 1,175,000 1,204,375 ----------- 1,709,062 ----------- Metal Processors & Fabrication -- 0.2% Metals USA, Inc. Sec. Notes 11.13% due 12/01/15................. 725,000 804,750 ----------- Metal-Diversified -- 1.2% Freeport-McMoRan Copper & Gold, Inc. Senior Notes 8.25% due 04/01/15.................. 1,015,000 1,092,394 Freeport-McMoRan Copper & Gold, Inc. Senior Notes 8.38% due 04/01/17.................. 3,045,000 3,292,406 ----------- 4,384,800 ----------- Miscellaneous Manufacturing -- 0.1% American Railcar Industries, Inc. Senior Notes 7.50% due 03/01/14*................. 325,000 334,750 ----------- Multimedia -- 0.1% Haights Cross Operating Co. Company Guar. Senior Notes 11.75% due 08/15/11................. 475,000 499,938 ----------- Non-Ferrous Metals -- 0.0% Renco Metals, Inc. Bonds 11.50% due 07/01/03+(1)(2)(4)(11)... 2,150,000 0 -----------
52 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Non-Hazardous Waste Disposal -- 0.9% Allied Waste North America, Inc. Company Guar. 6.88% due 06/01/17............... $3,575,000 $ 3,583,937 ----------- Oil & Gas Drilling -- 0.1% Pride International, Inc. Senior Notes 7.38% due 07/15/14............... 350,000 358,750 ----------- Oil Companies-Exploration & Production -- 3.7% Belden & Blake Corp. Company Guar. Sec. Notes 8.75% due 07/15/12............... 450,000 460,125 Brigham Exploration Co. Senior Notes 9.63% due 05/01/14............... 775,000 782,750 Brigham Exploration Co. Company Guar. Notes 9.63% due 05/01/14*.............. 225,000 223,875 Chaparral Energy, Inc. Company Guar. Notes 8.50% due 12/01/15............... 850,000 839,375 Chesapeake Energy Corp. Senior Notes 6.63% due 01/15/16............... 2,975,000 2,997,312 El Paso Production Holding Co. Company Guar. Notes 7.75% due 06/01/13............... 3,525,000 3,683,625 Encore Acquisition Co. Senior Sub. Notes 6.00% due 07/15/15............... 550,000 489,500 Encore Acquisition Co. Senior Sub. Notes 6.25% due 04/15/14............... 300,000 276,000 Hilcorp Energy I LP Senior Notes 7.75% due 11/01/15*.............. 1,150,000 1,129,875 Quicksilver Resources, Inc. Company Guar. Notes 7.13% due 04/01/16............... 300,000 295,500 Sabine Pass LNG LP Sec. Notes 7.25% due 11/30/13*.............. 400,000 403,000 Sabine Pass LNG LP Sec. Notes 7.50% due 11/30/16*.............. 1,825,000 1,838,688 Transmeridian Exploration, Inc. Company Guar. Notes 12.00% due 12/15/10.............. 650,000 615,875 ----------- 14,035,500 ----------- Oil-Field Services -- 0.3% Allis-Chalmers Energy, Inc. Company Guar. Notes 9.00% due 01/15/14............... 465,000 468,487 Hanover Compressor Co. Company Guar. Senior Sec. Notes 8.63% due 12/15/10............... 275,000 288,750
Principal Value Security Description Amount (Note 2) ------------------------------------------------------- Oil-Field Services (continued) Oslo Seismic Services, Inc. 1st Mtg. Bonds 8.28% due 06/01/11........... $ 550,465 $ 563,734 ----------- 1,320,971 ----------- Paper & Related Products -- 0.9% Bowater, Inc. Notes 6.50% due 06/15/13........... 1,325,000 1,195,812 Caraustar Industries, Inc. Notes 7.38% due 06/01/09........... 1,125,000 1,096,875 Georgia-Pacific Corp. Company Guar. Notes 7.00% due 01/15/15*.......... 400,000 402,000 Georgia-Pacific Corp. Company Guar. Notes 7.13% due 01/15/17*.......... 600,000 601,500 ----------- 3,296,187 ----------- Pipelines -- 4.0% Atlas Pipeline Partners LP Company Guar. Notes 8.13% due 12/15/15........... 1,050,000 1,081,500 Copano Energy LLC Senior Notes 8.13% due 03/01/16........... 1,750,000 1,811,250 Dynegy Holdings, Inc. Senior Notes 8.75% due 02/15/12........... 1,250,000 1,328,125 Dynegy-Roseton Danskammer Pass Through Certs. Series B 7.67% due 11/08/16........... 975,000 1,033,500 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22........... 1,775,000 2,154,163 MarkWest Energy Partners LP Senior Notes 6.88% due 11/01/14........... 1,125,000 1,091,250 MarkWest Energy Partners LP Company Guar. Notes 8.50% due 07/15/16........... 250,000 260,625 NGC Corp Capital Trust Guar. Bonds 8.32% due 06/01/27........... 2,300,000 2,208,000 Tennessee Gas Pipeline Co. Debentures 7.00% due 10/15/28........... 1,175,000 1,258,033 The Williams Cos., Inc. Notes 7.88% due 09/01/21........... 2,650,000 2,915,000 ----------- 15,141,446 ----------- Printing-Commercial -- 0.3% Valassis Communications, Inc. Senior Notes 8.25% due 03/01/15*.......... 1,000,000 982,500 -----------
53 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Private Corrections -- 0.2% Corrections Corp. of America Company Guar. Notes 6.25% due 03/15/13................... $ 725,000 $ 725,000 ---------- Publishing-Newspapers -- 0.1% Medianews Group, Inc. Senior Sub. Notes 6.88% due 10/01/13................... 620,000 564,200 ---------- Publishing-Periodicals -- 0.3% The Reader's Digest Association, Inc. Senior Sub. Notes 9.00% due 02/15/17*.................. 1,075,000 1,034,688 ---------- Real Estate Investment Trusts -- 0.7% National Health Investors, Inc. Notes 7.30% due 07/16/07................... 1,120,000 1,121,291 Omega Healthcare Investors, Inc. Senior Notes 7.00% due 04/01/14................... 700,000 707,000 Trustreet Properties, Inc. Senior Notes 7.50% due 04/01/15................... 725,000 789,720 ---------- 2,618,011 ---------- Recycling -- 0.8% Aleris International, Inc. Senior Notes 9.00% due 12/15/14*.................. 1,450,000 1,529,750 Aleris International, Inc. Senior Sub. Notes 10.00% due 12/15/16*................. 1,375,000 1,443,750 ---------- 2,973,500 ---------- Rental Auto/Equipment -- 0.6% H&E Equipment Services, Inc. Company Guar. Notes 8.38% due 07/15/16................... 775,000 823,438 United Rentals North America, Inc. Senior Sub. Notes 7.75% due 11/15/13................... 1,425,000 1,464,187 ---------- 2,287,625 ---------- Research & Development -- 0.3% Alion Science and Technology Corp. Senior Notes 10.25% due 02/01/15*................. 950,000 978,500 ---------- Retail-Drug Store -- 0.3% General Nutrition Centers, Inc. Senior Notes 9.85% due 03/15/14*.................. 450,000 441,000 Rite Aid Corp. Sec. Notes 8.13% due 05/01/10................... 750,000 770,625 ---------- 1,211,625 ----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ Retail-Major Department Stores -- 0.1% Saks, Inc. Company Guar. Notes 9.88% due 10/01/11........................ $ 225,000 $ 250,313 ---------- Retail-Petroleum Products -- 0.3% Ferrellgas LP Senior Notes 6.75% due 05/01/14........................ 1,125,000 1,102,500 ---------- Retail-Regional Department Stores -- 0.2% Neiman-Marcus Group, Inc. Company Guar. Notes 9.00% due 10/15/15........................ 700,000 766,500 ---------- Retail-Restaurants -- 0.3% Dave & Buster's, Inc. Company Guar. Notes 11.25% due 03/15/14....................... 750,000 765,000 NPC International, Inc. Company Guar. 9.50% due 05/01/14........................ 550,000 569,250 ---------- 1,334,250 ---------- Rubber/Plastic Products -- 0.0% Venture Holdings Co. LLC Company Guar. Notes 11.00% due 06/01/07+(2)(5)(12)............ 550,000 2,200 ---------- Soap & Cleaning Preparation -- 0.0% Johnsondiversey Holdings, Inc. Disc. Notes 10.67% due 05/15/13(6).................... 125,000 129,063 ---------- Special Purpose Entities -- 3.4% AAC Group Holding Corp. Senior Disc. Notes 10.25% due 10/01/12(6).................... 1,200,000 1,077,000 AMR HoldCo, Inc./EmCare HoldCo, Inc. Senior Sub. Notes 10.00% due 02/15/15....................... 450,000 495,000 Bluewater Finance, Ltd. Company Guar. Notes 10.25% due 02/15/12....................... 1,125,000 1,172,813 CCM Merger, Inc. Notes 8.00% due 08/01/13*....................... 900,000 904,500 Chukchansi Economic Development Authority Senior Notes 8.88% due 11/15/12*(8).................... 500,000 512,500 Consolidated Communications Holdings, Inc. Senior Notes 9.75% due 04/01/12........................ 810,000 857,588 Hawker Beechcraft Acquisition Co. LLC/ Hawker Beechcraft Notes Co. Senior Notes 8.88% due 04/01/15*....................... 375,000 387,656
54 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Special Purpose Entities (continued) Hawker Beechcraft Acquisition Co. LLC/ Hawker Beechcraft Notes Co. Sr. Sub. Notes 9.75% due 04/01/17*.................... $ 575,000 $ 600,875 Hellas Telecommunications Luxembourg II Sub. Notes 11.12% due 01/15/15*(8)................ 1,375,000 1,412,812 Jostens IH Corp. Company Guar. Notes 7.63% due 10/01/12..................... 700,000 712,250 MedCath Holdings Corp. Senior Notes 9.88% due 07/15/12..................... 646,000 699,295 MXEnergy Holdings, Inc. Senior Notes 12.90% due 08/01/11*(8)................ 1,050,000 966,000 PCA LLC/PCA Finance Corp. Senior Notes 11.88% due 08/01/09+(2)(5)............. 2,000,000 360,000 PNA Intermediate Holding Corp. Senior Notes 12.36% due 02/15/13*(8)................ 300,000 307,500 Seitel Acquisition Corp. Senior Notes 9.75% due 02/15/14*.................... 750,000 759,375 Snoqualmie Entertainment Authority Notes 9.13% due 02/01/15*.................... 1,200,000 1,237,500 Snoqualmie Entertainment Authority Senior Notes 9.15% due 02/01/14*(8)................. 150,000 152,625 Southern Star Central Corp. Senior Notes 6.75% due 03/01/16..................... 500,000 500,000 ----------- 13,115,289 ----------- Specified Purpose Acquisitions -- 0.2% ESI Tractebel Acquisition Corp. Company Guar. Bonds 7.99% due 12/30/11..................... 691,000 706,082 ----------- Steel-Producers -- 0.6% Chaparral Steel Co. Guar. Notes 10.00% due 07/15/13.................... 925,000 1,031,375 Steel Dynamics, Inc. Senior Notes 6.75% due 04/01/15*.................... 1,200,000 1,201,500 ----------- 2,232,875 ----------- Steel-Specialty -- 0.1% Tube City IMS Corp. Senior Sub. Notes 9.75% due 02/01/15*.................... 450,000 468,000 -----------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------- Storage/Warehousing -- 0.5% Mobile Mini, Inc. Senior Notes 9.50% due 07/01/13........... $ 847,000 $ 906,290 Mobile Services Group, Inc. Senior Notes 9.75% due 08/01/14*.......... 850,000 898,875 ---------- 1,805,165 ---------- Telecom Services -- 1.7% Cincinnati Bell Telephone Co. Company Guar. Notes 7.18% due 12/15/23........... 375,000 377,813 Cincinnati Bell Telephone Co. Company Guar. Notes 7.20% due 11/29/23........... 1,525,000 1,479,250 Mastec, Inc. Senior Notes 7.63% due 02/01/17*.......... 775,000 784,687 Qwest Corp. Senior Notes 7.50% due 10/01/14........... 3,675,000 3,877,125 ---------- 6,518,875 ---------- Telephone-Integrated -- 1.8% Cincinnati Bell, Inc. Senior Notes 7.25% due 06/15/23........... 225,000 218,250 Cincinnati Bell, Inc. Company Guar. Notes 8.38% due 01/15/14........... 1,750,000 1,789,375 Citizens Communications Co. Bonds 7.13% due 03/15/19*.......... 1,025,000 1,014,750 Citizens Communications Co. Senior Notes 9.00% due 08/15/31........... 2,356,000 2,579,820 LCI International, Inc. Senior Notes 7.25% due 06/15/07........... 425,000 426,062 Level 3 Financing, Inc. Senior Notes 8.75% due 02/15/17*.......... 750,000 755,625 ---------- 6,783,882 ---------- Television -- 1.4% Allbritton Communications Co. Senior Sub. Notes 7.75% due 12/15/12........... 1,525,000 1,563,125 LIN Television Corp. Senior Sub. Notes 6.50% due 05/15/13........... 1,525,000 1,492,594 Paxson Communication Corp. Sec. Senior Notes 11.61% due 01/15/13*(8)...... 975,000 1,016,437
55 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- CORPORATE BONDS & NOTES (continued) Television (continued) Young Broadcasting, Inc. Senior Sub. Notes 8.75% due 01/15/14................... $ 725,000 $ 676,063 Young Broadcasting, Inc. Company Guar. Notes 10.00% due 03/01/11.................. 600,000 591,000 ---------- 5,339,219 ---------- Textile-Products -- 0.1% Collins & Aikman Floorcoverings, Inc. Company Guar. Notes 9.75% due 02/15/10................... 280,000 284,900 ---------- Theaters -- 1.2% AMC Entertainment, Inc. Senior Sub. Notes 8.00% due 03/01/14................... 2,750,000 2,798,125 Cinemark, Inc. Senior Disc. Notes 9.75% due 03/15/14(6)................ 1,925,000 1,761,375 ---------- 4,559,500 ---------- Transactional Software -- 0.4% Open Solutions, Inc. Senior Sub. Notes 9.75% due 02/01/15*.................. 1,350,000 1,390,500 ---------- Transport-Air Freight -- 2.4% Atlas Air, Inc. Pass Through Certs. Series 1991-1, Class B 7.63% due 01/02/15................... 5,437,354 6,021,870 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class A 8.71% due 01/02/19*.................. 845,713 884,827 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class A 8.71% due 01/02/19................... 258,268 270,213 Atlas Air, Inc. Pass Through Certs. Series 1991-1, Class C 8.77% due 01/02/11................... 574,341 557,111 Atlas Air, Inc. Pass Through Certs. Series 2000-1, Class B 9.06% due 07/02/17................... 1,301,358 1,522,589 ---------- 9,256,610 ---------- Transport-Services -- 0.3% PHI, Inc. Company Guar. Notes 7.13% due 04/15/13................... 1,225,000 1,169,875 ---------- Travel Services -- 0.5% TDS Investor Corp. Senior Notes 9.88% due 09/01/14*.................. 1,375,000 1,440,312
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------- Travel Services (continued) TDS Investor Corp. Senior Notes 9.99% due 09/01/14*(8).................. $ 200,000 $ 204,000 TDS Investor Corp. Senior Sub. Notes 11.88% due 09/01/16*.................... 100,000 109,625 ------------ 1,753,937 ------------ Wire & Cable Products -- 0.1% Belden CDT, Inc. Sr. Sub. Notes 7.00% due 03/15/17*..................... 525,000 535,512 ------------ Total Corporate Bonds & Notes (cost $283,229,495)..................... 292,048,876 ------------ FOREIGN CORPORATE BONDS & NOTES -- 10.1% Building & Construction-Misc. -- 0.3% North American Energy Partners, Inc. Company Guar. Notes 8.75% due 12/01/11...................... 1,010,000 1,030,200 ------------ Building Products-Doors & Windows -- 0.1% Masonite International Corp. Senior Sub. Notes 11.00% due 04/06/15*.................... 233,000 216,690 ------------ Chemicals-Plastics -- 0.5% Montell Finance Co. BV Company Guar. Notes 8.10% due 03/15/27*..................... 1,875,000 1,875,000 ------------ Chemicals-Specialty -- 0.6% Rhodia SA Senior Notes 8.88% due 06/01/11...................... 2,273,000 2,369,602 ------------ Computers-Memory Devices -- 0.2% Seagate Technology HDD Holdings Company Guar. Notes 6.80% due 10/01/16...................... 850,000 854,250 ------------ Diversified Manufactured Operations -- 0.1% Bombardier, Inc. Senior Notes 8.00% due 11/15/14*..................... 500,000 517,500 ------------ Electronic Components-Misc. -- 0.2% NXP BV/NXP Funding LLC Senior Notes 9.50% due 10/15/15*..................... 885,000 913,763 ------------ Electronic Components-Semiconductors -- 0.3% Avago Technologies Finance, Ltd. Company Guar. Notes 10.13% due 12/01/13..................... 925,000 1,001,312 STATS ChipPAC, Ltd. Company Guar. Notes 6.75% due 11/15/11...................... 325,000 335,563 ------------ 1,336,875 ------------
56 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Food-Meat Products -- 0.2% JBS SA Company Guar. Notes 10.50% due 08/04/16*....................... $ 625,000 $ 710,938 ---------- Housewares -- 0.8% Vitro SA de CV Senior Notes 9.13% due 02/01/17*........................ 2,800,000 2,870,000 ---------- Independent Power Producer -- 0.0% AES Drax Energy, Ltd. Series B Sec. Notes 11.50% due 08/30/10+(2)(5)................. 4,460,000 4,460 ---------- Medical-Drugs -- 1.5% Angiotech Pharmaceuticals, Inc. Company Guar. 7.75% due 04/01/14......................... 700,000 645,750 Angiotech Pharmaceuticals, Inc. Senior Notes 9.11% due 12/01/13*(8)..................... 850,000 868,063 Elan Finance PLC Company Guar. Bonds 7.75% due 11/15/11......................... 1,875,000 1,842,187 Elan Finance PLC Senior Notes 8.88% due 12/01/13*........................ 825,000 838,406 Elan Finance PLC Company Guar. Senior Notes 9.36% due 11/15/11(8)...................... 1,350,000 1,373,625 ---------- 5,568,031 ---------- Metal Processors & Fabrication -- 0.0% International Utility Structures, Inc. Senior Sub. Notes 10.75% due 02/01/08+(1)(2)(5)(13).......... 2,150,000 43,000 ---------- Music -- 0.2% Corporacion Interamericana de Entetenimiento SA de CV Senior Notes 8.88% due 06/14/15*........................ 795,000 812,888 ---------- Oil Companies-Exploration & Production -- 0.8% Compton Petroleum Finance Corp. Company Guar. Notes 7.63% due 12/01/13......................... 1,400,000 1,368,500 OPTI Canada, Inc. Company Guar. Notes 8.25% due 12/15/14*........................ 675,000 702,000 Paramount Resources, Ltd. Senior Notes 8.50% due 01/31/13......................... 1,025,000 1,022,437 ---------- 3,092,937 ----------
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- Paper & Related Products -- 0.6% Abitibi-Consolidated, Inc. Notes 6.00% due 06/20/13..................... $ 780,000 $ 663,000 Abitibi-Consolidated, Inc. Notes 8.55% due 08/01/10..................... 1,000,000 1,012,500 Abitibi-Consolidated, Inc. Debentures 8.85% due 08/01/30..................... 490,000 436,100 ---------- 2,111,600 ---------- Printing-Commercial -- 0.2% Quebecor World Capital Corp. Senior Notes 8.75% due 03/15/16*.................... 775,000 784,688 ---------- Retail-Drug Store -- 0.3% Jean Coutu Group (PJC), Inc. Senior Sub. Notes 8.50% due 08/01/14..................... 1,025,000 1,112,125 ---------- Satellite Telecom -- 1.9% Intelsat Bermuda, Ltd. Senior Notes 8.87% due 01/15/15*(8)................. 1,670,000 1,703,400 Intelsat Bermuda, Ltd. Senior Notes 11.25% due 06/15/16*................... 1,650,000 1,872,750 Intelsat Intermediate Holding Co., Ltd. Company Guar. Notes 9.25% due 02/01/15(6).................. 2,160,000 1,792,800 Intelsat, Ltd. Senior Notes 6.50% due 11/01/13..................... 1,975,000 1,742,937 ---------- 7,111,887 ---------- Telecom Services -- 0.9% Digicel Group, Ltd. Senior Notes 8.88% due 01/15/15*.................... 175,000 169,750 Global Crossing UK Finance PLC Company Guar. 10.75% due 12/15/14.................... 575,000 623,875 Telenet Group Holdings NV Disc. Notes 11.50% due 06/15/14*(6)................ 2,714,000 2,544,375 ---------- 3,338,000 ---------- Transport-Marine -- 0.3% Navios Maritime Holdings, Inc. Senior Notes 9.50% due 12/15/14*.................... 650,000 676,812 Ultrapetrol Bahamas, Ltd. 1st Mtg. Bonds 9.00% due 11/24/14..................... 625,000 634,375 ---------- 1,311,187 ----------
57 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Amount/ Value Security Description Shares (Note 2) ------------------------------------------------------------------- FOREIGN CORPORATE BONDS & NOTES (continued) Transport-Rail -- 0.1% Grupo Transportacion Ferroviaria Mexicana SA de CV Senior Notes 9.38% due 05/01/12........................ $ 325,000 $ 349,374 ----------- Total Foreign Corporate Bonds & Notes (cost $41,248,450)........................ 38,334,995 ----------- LOAN AGREEMENTS -- 1.0% Beverages-Non-alcoholic -- 0.2% Le-Natures, Inc. 9.39% due 01/01/11(4)(5).................. 1,200,000 751,200 ----------- Diversified Financial Services -- 0.3% Wind Acquisition Holdings Finance S.A. 12.61% due 12/21/11....................... 1,200,000 1,231,750 ----------- Oil Companies-Exploration & Production -- 0.2% Sandridge Energy, Inc. 8.63% due 04/01/15(2)..................... 600,000 610,500 ----------- Travel Services -- 0.3% Travelport Holdings, Ltd................... 1,000,000 970,000 ----------- Total Loan Agreements (cost $4,001,750)......................... 3,563,450 ----------- COMMON STOCK -- 5.4% Casino Services -- 0.1% Capital Gaming International, Inc.+(1)(2).. 77 0 Shreveport Gaming Holdings, Inc.+(1)(2)(3). 14,150 325,776 ----------- 325,776 ----------- Cellular Telecom -- 4.5% iPCS, Inc.+(2)(3).......................... 344,285 16,866,522 ----------- Medical-Outpatient/Home Medical -- 0.1% Critical Care Systems International, Inc.+(1)(2)(3)............................ 69,700 487,900 ----------- Oil-Field Services -- 0.7% Trico Marine Services, Inc.+............... 74,859 2,789,246 ----------- Total Common Stock (cost $7,461,978)......................... 20,469,444 ----------- PREFERRED STOCK -- 1.2% Oil Companies-Exploration & Production -- 1.0% EXCO Resources, Inc. Convertible 7.00%, Series A-1(1)(3)................... 62 620,000 EXCO Resources, Inc. 11.00%, Series A-2(1)(3).................. 256 2,560,000 Transmeridian Exploration, Inc. 15.00%..... 6,195 576,135 ----------- 3,756,135 ----------- Television -- 0.2% ION Media Networks, Inc. 13.25%(7)......... 129 1,045,200 ----------- Total Preferred Stock (cost $4,935,366)......................... 4,801,335 ----------- WARRANTS -- 0.0% Oil Companies-Exploration & Production -- 0.0% Transmeridian Exploration, Inc. Expires 12/15/10 (strike price $4.31)+(1).................. 44,885 29,175 -----------
Shares/ Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- WARRANTS (continued) Telecom Services -- 0.0% KMC Telecom Holdings, Inc Expires 01/31/08 (strike price $0.01)+(1)(2)......... 3,650 $ 0 Leap Wireless International, Inc. Expires 04/15/10 (strike price $96.80)+*(1)(2)....... 2,250 0 ------------ 0 ------------ Telephone-Integrated -- 0.0% GT Group Telecom, Inc. Expires 02/01/10 (Strike Price $0.00)+*(1)(2)........ 2,650 27 ------------ Transport-Equipment & Leasing -- 0.0% Maxim Crane Works Holdings, Inc. Expires 01/20/10 (Strike Price $30.05)+(1)(2)(3)..... 1,587 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (Strike Price $31.58)+(1)(2)(3)..... 1,619 0 Maxim Crane Works Holdings, Inc. Expires 01/20/10 (Strike Price $33.04)+(1)(2)(3)..... 1,182 0 ------------ 0 ------------ Total Warrants (cost $1,436,220)................... 29,202 ------------ Total Long-Term Investment Securities (cost $342,388,259)................. 359,323,802 ------------ REPURCHASE AGREEMENT -- 4.4% UBS Securities, LLC Joint Repurchase Agreement (cost $16,603,000)(10).............. $16,603,000 16,603,000 ------------ TOTAL INVESTMENTS (cost $358,991,259)(9).............. 99.0% 375,926,802 Other assets less liabilities.......... 1.0 3,884,394 ----------- ------------ NET ASSETS -- 100.0% $379,811,196 =========== ============
-------- + 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 March 31, 2007, the aggregate value of these securities was $91,628,883 representing 24.5% of net assets. Unless otherwise indicated these securities are not considered to be illiquid. (1) Fair valued security; see Note 2 (2) Illiquid security (3) To the extent permitted by the Statement of Additional Information, the High Yield Bond Fund may invest in restricted securities. The Fund has no right to demand registration of these securities. The securities are valued pursuant to Note 2. Restricted securities held by a Fund may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely 58 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued) held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of a Fund to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist. As of March 31, 2007, 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 Systems 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 0.13% EXCO Resources, Inc. 7.00%, Series A-1 Preferred Stock......... 3/29/2007 62 620,000 620,000 10,000 0.16% EXCO Resources, Inc. 11.00%, Series A-2 Preferred Stock......... 3/29/2007 256 2,560,000 2,560,000 10,000 0.67% ICO North America, Inc. 7.50% due 08/15/09...... 8/11/2005 $ 75,000 75,000 76,500 1 0.02% iPCS, Inc. Common Stock......... 7/28/2005 7,313 0 7/20/2004 336,972 5,223,066 -------- ---------- 344,285 5,223,066 16,866,522 49 4.44% Maxim Crane Works Holdings, Inc. Warrants (Strike Price $30.05)....... 1/28/2005 1,587 432,280 0 0 0.00% Maxim Crane Works Holdings, Inc. Warrants (Strike Price $31.58)....... 1/28/2005 1,619 441,126 0 0 0.00% Maxim Crane Works Holdings, Inc. Warrants (Strike Price $33.04)....... 1/28/2005 1,182 322,058 0 0 0.00%
Market Value % of Acquisition Principal/ Acquisition Market per Net Name Date Shares Cost Value Share Assets ---- ----------- ---------- ----------- ----------- ------ ------ Sandridge Energy, Inc. 8.63% due 04/01/15...... 03/07/2007 $ 600,000 $600,000 $ 610,500 1 0.16% 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 0.09% Southern Energy, Inc. 7.90% due 07/15/09...... 1/25/2006 3,525,000 0 0 0.00 0.00% ----------- ---- $21,547,197 5.67% =========== ====
(4) Company has filed Chapter 11 bankruptcy protection. (5) Security in default (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 up or down at each reset date. The rate reflected is as of March 31, 2007. (9) See Note 5 for cost of investments on a tax basis (10) See Note 2 for details of Joint Repurchase Agreement. (11) Bond is in default and did not pay principal at maturity (12) Company has filed for Chapter 7 bankruptcy protection. (13) Company has filed bankruptcy in country of issuance. (14) Company emerged from bankruptcy subsequent to March 31, 2007. ADR --America Depository Receipt See Notes to Financials Statements 59 SunAmerica Tax Exempt Insured Fund PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) Allocation by States* Ohio......................... 22.5% New York..................... 15.2 Massachusetts................ 12.6 New Jersey................... 10.5 Indiana...................... 6.5 Connecticut.................. 4.6 New Mexico................... 4.6 Texas........................ 4.4 Michigan..................... 4.2 South Dakota................. 3.8 Illinois..................... 2.9 Alabama...................... 2.7 South Carolina............... 2.7 Tennessee.................... 1.2 California................... 0.2 Georgia...................... 0.3 Registered Investment Company 0.1 ---- 99.0% ====
Credit Quality Allocation+# AAA....... 87.6% AA........ 5.9 A......... 4.3 Not Rated@ 2.2 ----- 100.0% =====
-------- * Calculate 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. 60 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------ MUNICIPAL BONDS & NOTES -- 91.8% Alabama -- 2.7% Auburn University Series A 5.00% due 06/01/32(1)........................... $1,500,000 $1,589,205 ---------- California -- 0.2% State of California 5.50% due 04/01/28.............................. 115,000 126,239 ---------- Connecticut -- 4.6% State of Connecticut, Refunded, Series B, 5.00% due 06/01/14(1)........................... 2,500,000 2,705,900 ---------- Georgia -- 0.3% Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/09(1)........................... 60,000 62,808 Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/13(1)........................... 85,000 93,759 ---------- 156,567 ---------- Illinois -- 2.9% Chicago Metropolitan Water Reclamation District- Greater Chicago Series C 5.25% due 12/01/33.............................. 1,500,000 1,737,825 ---------- Indiana -- 6.5% Indiana Transportation Finance Authority Highway Revenue, Series A, 5.25% due 06/01/26(1)........................... 3,500,000 3,829,035 ---------- Massachusetts -- 12.6% Massachusetts State Water Resources Authority, Revenue Bonds, Series A, 5.00% due 08/01/24(1)........................... 3,910,000 4,133,026 University Massachusetts Building Authority Project Revenue, Series 04-1, 5.25% due 11/01/27(1)........................... 3,000,000 3,302,580 ---------- 7,435,606 ---------- Michigan -- 4.2% Detroit Michigan Sewage Disposal Revenue 4.19% due 07/01/32(1)(3)........................ 2,500,000 2,500,000 ---------- New Jersey -- 10.5% Garden State New Jersey Preservation Trust Open Space And Farmland Preservation, Series A, 5.80% due 11/01/17(1)........................... 2,500,000 2,857,000 Tobacco Settlement Financing Corp. 6.13% due 06/01/42(1)........................... 3,000,000 3,343,080 ---------- 6,200,080 ----------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- New Mexico -- 4.6% New Mexico Finance Authority Transportation, Series A, 5.25% due 06/15/21(1)......................... $2,500,000 $ 2,693,600 ----------- New York -- 12.0% City of Niagara Falls New York Unrefunded 7.50% due 03/01/13(1)......................... 410,000 490,065 City of Niagara Falls New York Prerefunded 7.50% due 03/01/13(1)......................... 35,000 42,143 City of Niagara Falls New York Unrefunded 7.50% due 03/01/14(1)......................... 510,000 622,990 City of Niagara Falls New York Prerefunded 7.50% due 03/01/14(1)......................... 45,000 55,462 New York State Environmental Facilities Corp., Series A, 4.75% due 06/15/31............................ 2,000,000 2,072,280 New York State Thruway Authority, Series G, 5.25% due 01/01/27(1)......................... 1,500,000 1,632,645 Sales Tax Asset Receivables Corp., Series A, 5.25% due 10/15/27(1)......................... 2,000,000 2,170,620 ----------- 7,086,205 ----------- Ohio -- 22.5% Cincinnati, Ohio City School District Classroom Facilities, General Obligation, 5.00% due 12/01/24(1)......................... 3,000,000 3,231,840 Cuyahoga County, Ohio Revenue, Series A, 5.75% due 01/01/24............................ 2,000,000 2,176,520 Franklin County, Ohio Hospital Revenue, Series C, 5.25% due 05/15/23............................ 3,000,000 3,198,120 Olentangy Local School District Ohio, Series A, 5.25% due 12/01/27(1)......................... 3,250,000 3,561,967 Woodridge, Ohio, Woodmore Local School District, 6.80% due 12/01/14(1)......................... 1,000,000 1,124,880 ----------- 13,293,327 ----------- South Dakota -- 3.8% South Dakota State Health & Educational Facilities Revenue, Refunding, 6.25% due 07/01/10(1)......................... 2,120,000 2,274,845 -----------
61 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Shares/ Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- MUNICIPAL BONDS & NOTES (continued) Texas -- 4.4% Dallas Area Rapid Transit Revenue 5.00% due 12/01/32(1).............. $2,500,000 $ 2,643,075 ----------- Total Long-Term Investment Securities (cost $51,829,889)................. 54,271,509 ----------- SHORT-TERM INVESTMENT SECURITIES -- 7.2% New York -- 3.2% City of New York NY Series A7 3.76% due 04/23/07(1)(2)........... 900,000 900,000 Long Island Power Authority, Sub. Series 7-A, 3.59% due 04/23/07(1)(2)........... 1,000,000 1,000,000 ----------- 1,900,000 ----------- South Carolina -- 2.7% Piedmont Municipal Power Agency, South Carolina, Electric Revenue, 3.65% due 04/25/07(1)(2)........... 600,000 600,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue, Sub. Series B-1, 3.65% due 04/25/07(1)(2)........... 1,000,000 1,000,000 ----------- 1,600,000 ----------- Tennessee -- 1.2% Jackson Tennessee Energy Authority 3.66% due 04/19/07(1)(2)........... 100,000 100,000 Jackson Tennessee Energy Authority 3.66% due 04/19/07(1)(2)........... 600,000 600,000 ----------- 700,000 ----------- Registered Investment Company -- 0.1% SSGA Tax Free Money Market Fund..... 29,589 29,589 ----------- Total Short-Term Investment Securities (cost $4,229,589).................. 4,229,589 ----------- TOTAL INVESTMENTS -- (cost $56,059,478)@................ 99.0% 58,501,098 Other assets less liabilities......... 1.0 619,070 ---------- ----------- NET ASSETS -- 100.0 % $59,120,168 ========== ===========
-------- @ 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 $49,160,525 or 83.2% of Net Assets. (2)Variable rate security -- the rate reflected is as of March 31, 2007; maturity date reflects next reset date. (3)Floating rate security where the rate fluctuates. The rate moves up or down at each reset date. The rate reflected is as of March 31, 2007. See Notes to Financial Statements 62 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 Note 1. Organization The Trust 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, as a series of the Trust, 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 U.S. government 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 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 Fund's 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 63 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (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 the distribution plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") except that Class B and Class C shares are subject to higher distribution fees. 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 contain the obligation to indemnify others. The Funds' maximum exposure under these arrangements is unknown. Currently, however, the Funds expect the risk of loss to be remote. Note 2. Significant Accounting Policies The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements: Security Valuations: Stocks are generally valued based upon closing sales prices reported on recognized securities exchanges. Stocks listed on the NASDAQ are valued using the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the last sale price unless the reported trade for the stock is outside the range of the bid/ask price. In such cases, the NOCP will be normalized to the nearer of the bid or ask price. For listed securities having no sales reported and for unlisted securities, such securities will be valued based upon the last reported bid price. As of the close of regular trading on the New York Stock Exchange ("NYSE"), securities traded primarily on security exchanges outside the United States are valued at the last sale price on such exchanges on the day of valuation, or if there is no sale on the day of valuation, at the last-reported bid price. If a security's price is available from more than one exchange, a portfolio uses the exchange that is the primary market for the security. However, depending on the foreign market, closing prices may be up to 15 hours old when they are used to price a Fund's shares, and the Fund may determine that certain closing prices are unreliable. This determination will be based on review of a number of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. If a Fund determines that closing prices do not reflect the fair value of the securities, the Fund will adjust the previous closing prices in accordance with pricing procedures approved by the Board to reflect what it believes to be the fair value of the securities as of the close of regular trading on the NYSE. The Funds may also fair value securities in other situations, for example, when a particular foreign market is closed but the Funds are open. For foreign equity securities, the Funds use an outside pricing service to provide it with closing market prices and information used for adjusting those prices. Non-convertible bonds and debentures, other long-term debt securities, and short term debt securities with maturities in excess of 60 days, are valued at bid prices obtained for the day of valuation from a bond pricing service, when such prices are available. If a vendor quote is unavailable the securities may be priced 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. Forward contracts are valued at the 4:00 p.m. eastern time forward rate. Other securities are valued on the basis of last sale or bid price (if a last sale price is not available) in what is, in the opinion of the Adviser, the broadest and most representative market, that may be either a securities exchange or over-the-counter market. Senior Secured Floating Rate Loans ("Loans") for which an active secondary market exists to a reliable degree, will be valued at the mean of the last available bid and ask prices in the market for such Loans, as provided by a third party pricing service. 64 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (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. Repurchase Agreements: The Funds, along with other affiliated registered investment companies, pursuant to exemptive relief granted by the Securities and Exchange Commission, may transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by U.S. Treasury or federal agency obligations. For repurchase agreements and joint repurchase agreements, the Funds' custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark to market basis to ensure that the value, at the time the agreement is entered into, is equal to at least 102% of the repurchase price, including accrued interest. In the event of default of the obligation to repurchase, a Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. As of March 31, 2007, 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 18.28% $41,132,000 GNMA...................... 8.13 18,288,000 Strategic Bond............ 8.76 19,710,000 High Yield Bond........... 7.38 16,603,000
As of such date, the repurchase agreement in that joint account and the collateral therefore were as follows: UBS Securities LLC, dated March 31, 2007, bearing interest at a rate of 5.12% per annum, with a principal amount of $225,000,000 a repurchase price of $225,096,000, and a maturity date of April 2, 2007. The repurchase agreement is is collateralized by the following:
Interest Maturity Principal Market Type of Collateral Rate Date Amount Value ------------------ -------- -------- ------------ ------------ U.S. Treasury Inflation Index Notes 1.63% 01/15/15 $225,000,000 $229,500,000
Securities Transactions, Investment Income, Expenses, Dividends and Distributions to Shareholders: Security transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are calculated on the identified cost basis. Interest income, is accrued daily except when collection is not expected. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. For financial statement purposes, the Funds amortize all premiums and accrete all discounts on fixed income securities. Funds which earn foreign income and capital gains may be subject to foreign withholding taxes at various rates. Under applicable foreign law, a withholding tax may be imposed on interest, dividends, and capital gains at various rates. Net investment income, other than class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend-eligible shares, as appropriate) of each class of shares at the beginning of the day (after adjusting for the current capital share activity of the respective class). Expenses common to all Funds, not directly related to individual Funds are allocated among the Funds based on relative net assets or other appropriate methods. In all other respects, expenses are charged to each Fund as incurred on a specific identification basis. Interest earned on cash balances held at the custodian are shown as custody credits on the Statement of Operations. 65 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) Dividends from net investment income are accrued daily and paid monthly. Capital gain distributions, if any, are paid annually. The Funds record dividends and distributions to their shareholders on the ex-dividend date. The Funds reserve the right to declare and pay dividends less frequently than disclosed above, provided that the net realized capital gains and net investment income, if any, are paid at least annually. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts at fiscal year end based on their federal tax-basis treatment; temporary differences do not require reclassification. Net investment income/loss, net realized gain/loss and net assets are not affected by these reclassifications. Each Fund intends to comply with the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all of their net income (taxable and tax exempt) to their shareholders. Therefore, no federal tax provision is required. Each Fund is considered a separate entity for tax purposes. 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. However, Registered Investment Companies are not required to implement FIN 48 until their last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. 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 March 31, 2007, the Trust does 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. Investment Securities Loaned: During the year ended March 31, 2007, U.S. Government Securities Fund and GNMA Fund participated in securities lending with qualified brokers. In lending portfolio securities to brokers the Funds receive cash as collateral against the loaned securities, which must be maintained at not less than 102% of the market value of the loaned securities during the period of the loan. The Funds may use the cash collateral received to invest in short-term investments which earn interest income or to cover bank overdrafts. Any interest earned from the investment of the collateral is recorded by the Funds net of the portion of interest that is rebated to the borrowing broker. If the amounts are used to cover bank overdrafts, the broker rebates incurred are reflected as interest expense on the Statement of Operations. During the period ended March 31, 2007, $7,687 and $45,198 of broker rebates were reclassified to interest expense for the U.S. Government Securities Fund and GNMA Fund, respectively. As with other extensions of credit, should the borrower of the securities fail financially, the Funds may bear the risk of delay in recovery or may be subject to replacing the loaned securities by purchasing them with the cash collateral held, which may be less than 100% of the market value of such securities at the time of replacement. At March 31, 2007, there were no loaned securities outstanding in the U.S. Government Securities Fund or the GNMA Fund. Forward Foreign Currency Contracts: Certain Funds may enter into forward foreign currency contracts ("forward contracts") to attempt to protect securities and related receivables and payables against changes in future foreign exchange rates or to enhance return. A forward contract is an agreement between two parties to buy or sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily using the forward rate and the change in market value is recorded by the Fund as unrealized gain or loss. On the settlement date, the Fund records either realized gains or losses when the contract is closed equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks may arise upon entering into these contracts from the potential inability of counterparties 66 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Forward contracts involve elements of risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Trust bears the risk of an unfavorable change in the foreign exchange rate underlying the forward contract. Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Assets and liabilities denominated in foreign currencies and commitments under forward foreign currency contracts are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Funds do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of securities held at the end of the period. Similarly, the Funds do not isolate the effect of changes in foreign exchange rates from the changes in the market prices of portfolio securities sold during the year. Realized foreign exchange gains and losses on other assets and liabilities and change in unrealized foreign exchange gains and losses on other assets and liabilities include foreign exchange gains and losses from currency gains or losses realized between the trade and settlement dates of securities transactions, the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid and changes in the unrealized foreign exchange gains and losses relating to other assets and liabilities arising as a result of changes in the exchange rate. Short Sales: Each Fund may engage in "short sales against the box." A short sale is against the box to the extent that the Fund contemporaneously owns, or has the right to obtain without payment, securities identical to those sold short. In addition, the High Yield Bond Fund ("Fund") may sell a security it does not own in anticipation of a decline in the market value of that security "short sales." To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing it at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. Until the Fund replaces a borrowed security, the Fund will maintain daily a segregated account, containing cash or liquid securities, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short. Liabilities for securities sold short are reported at market value in the financial statements. Such liabilities are subject to off balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short could exceed the liabilities recorded in the Statement of Assets and Liabilities. The Fund bears the risk of potential inability of the broker to meet their obligation to perform. At March 31, 2007, none of the Funds had short sales outstanding. Mortgage-Backed Dollar Rolls: Certain Funds may enter into dollar roll transactions using "to be announced" ("TBA") mortgage-backed securities ("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as purchase/sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the date the transaction is entered into. During the period ended March 31, 2007 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 67 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) 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. 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 Trustees, including a majority of the Disinterested Trustees.
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 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. The voluntary fee waivers and/or expense reimbursements will continue indefinitely but may be terminated at any time at the option of AIG SunAmerica.
Fund Percentage ---- ---------- Tax Exempt Insured Fund Class C 1.95%
68 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) For the year ended March 31, 2007, AIG SunAmerica has agreed to reimburse expenses as follows:
Fund Amount ---- -------- U.S. Government Securities Class A $559,429 U.S. Government Securities Class B 72,674 U.S. Government Securities Class C 37,611 GNMA Class A...................... 451,371 GNMA Class B...................... 117,582 GNMA Class C...................... 61,416 High Yield Bond Class A........... 177,537 High Yield Bond Class B........... 55,370 High Yield Bond Class C........... 80,335 Tax Exempt Insured Class C........ 4,056
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 in accordance with the provisions of Rule 12b-1 under the 1940 Act (each a "Plan" and collectively the "Plans"). Hereinafter referred to as the "Class A Plan," the "Class B Plan" and the "Class C Plan." In adopting the Class A Plan, the Class B Plan and the Class C Plan, the Trustees determined that there was a reasonable likelihood that each such Plan would benefit the Trust and the shareholders of the respective class. The sales charge and distribution fees of a particular class will not be used to subsidize the sale of shares of any other class. The Class A, Class B and Class C Plans, provide that the Trust, on behalf of the respective classes, shall pay the Distributor a distribution fee at an annual rate of up to 0.10%, 0.75% and 0.75%, of average daily net assets of such Fund's Class A, Class B and Class C shares respectively, to compensate the Distributor and certain securities firms for providing sales and promotional activities for distributing that class of shares. The distribution costs for which the Distributor may be compensated for, include fees paid to broker-dealers that have sold Fund shares, commissions, and other expenses such as those incurred for sales literature, prospectus printing and distribution and compensation to wholesalers. It is possible that in any given year the amount paid to the Distributor under the Class A Plan, Class B Plan or Class C Plan may exceed the Distributor's distribution costs as described above. The Plans also provide that each class of shares of the Trust will also pay the Distributor an account maintenance and service fee at the annual rate of up to 0.25% of the aggregate average daily net assets of such class of shares to compensate the Distributor and securities firms for account maintenance activities. Accordingly, for the year ended March 31, 2007, 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 year ended March 31, 2007, the proceeds received from Class A sales (and paid out to affiliated and non-affiliated broker-dealers) and Class A, Class B and Class C redemptions were as follows:
Class A Class B Class C ------------------------------------------------------- -------------- -------------- Contingent Contingent Contingent Sales Affiliated Non-affiliated Deferred Sales Deferred Sales Deferred Sales Fund Charges Broker-dealers Broker-dealers Charges Charges Charges ---- ---------- -------------- -------------- -------------- -------------- -------------- U.S. Government Securities $ 121,989 $ 9,990 $ 90,771 $1,288 $ 63,849 $ 1,243 GNMA...................... 91,347 28,278 47,210 4,796 230,339 3,138 Strategic Bond............ 1,110,696 137,002 787,540 2,889 100,970 45,025 High Yield Bond........... 1,016,367 95,124 748,659 5,594 121,825 23,953 Tax Exempt Insured........ 35,371 11,753 17,310 -- 16,691 209
69 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) The Trust has entered into a Service Agreement with AIG SunAmerica Fund Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service Agreement, SAFS performs certain shareholder account functions by assisting the Funds' transfer agent in connection with the services that it offers to the shareholders of the Funds. The Service Agreement permits the Funds to compensate SAFS for services rendered, based upon an annual rate of 0.22% of average daily net assets, which is approved annually by the Trustees. For the year ended March 31, 2007, 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 March 31, 2007 ---- -------- -------------- US Government Securities Fund Class A $323,743 $28,115 US Government Securities Fund Class B 37,088 2,806 US Government Securities Fund Class C 19,095 1,831 GNMA Fund Class A.................... 669,814 58,127 GNMA Fund Class B.................... 144,606 10,853 GNMA Fund Class C.................... 77,462 5,807 Strategic Bond Fund Class A.......... 803,859 82,513 Strategic Bond Fund Class B.......... 110,998 10,368 Strategic Bond Fund Class C.......... 315,285 38,436 High Yield Bond Fund Class A......... 421,492 46,029 High Yield Bond Fund Class B......... 114,957 9,704 High Yield Bond Fund Class C......... 183,044 16,865 Tax Exempt Insured Fund Class A...... 116,553 9,379 Tax Exempt Insured Fund Class B...... 12,837 960 Tax Exempt Insured Fund Class C...... 9,622 768
At March 31, 2007, affiliate funds of the SunAmerica Focused Series, Inc. owned 10%, 53% and 35% of the outstanding Class A Shares of U.S. Government Securities Fund, GNMA Fund, and Strategic Bond Fund, respectively. At March 31, 2007, AIG SunAmerica owned 7% 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 year ended March 31, 2007 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)........................... $ -- $ -- $837,118,313 $298,100,255 $45,884,492 Sales (excluding U.S. government securities)........................... -- -- 516,960,398 263,195,679 50,604,149 Purchases of U.S. government securities 376,359,525 673,391,602 205,648,006 -- -- Sales of U.S. government securities.... 402,905,344 567,930,880 145,097,073 -- --
70 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (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, 2007 For the year ended March 31, 2007 --------------------------------------- ------------------------------------ Long-term Gains/Capital Unrealized Ordinary Loss Appreciation Ordinary Long-term Fund Income CarryForward (Depreciation) Income Capital Gains Tax Exempt ---- ---------- ------------- -------------- ----------- ------------- ---------- U.S. Government Securities $ 405,476 $(11,218,496) $(2,060,965) $ 7,185,444 $ -- $ -- GNMA...................... 864,272 (4,166,987) (2,662,397) 17,110,566 -- -- Strategic Bond............ 1,153,693 (23,321,409) 13,789,453 26,453,510 -- -- High Yield Bond........... 585,040 (86,646,972) 16,787,099 21,478,406 -- -- Tax Exempt Insured........ 133,027* 360,488 2,442,373 -- 436,699 2,040,644 Tax Distributions For the year ended March 31, 2006 ------------------------------------ Ordinary Long-term Fund Income Capital Gains Tax Exempt ---- ----------- ------------- ---------- U.S. Government Securities......................................... $ 7,599,387 $ -- $ -- GNMA............................................................... 17,568,716 175,792 -- Strategic Bond..................................................... 10,239,110 -- -- High Yield Bond.................................................... 21,693,351 -- -- Tax Exempt Insured................................................. -- 716,341 2,165,823
-------- * Includes tax exempt distributable earnings of $29,773. 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......................................... $199,069,462 $417,657,458 $691,808,607 $359,144,213 $56,058,725 ============ ============ ============ ============ =========== Appreciation................................. 457,607 2,136,267 18,353,961 27,210,739 2,495,421 Depreciation................................. (2,518,572) (4,798,665) (4,660,805) (10,428,150) (53,048) ------------ ------------ ------------ ------------ ----------- Unrealized appreciation (depreciation) -- net $ (2,060,965) $ (2,662,398) $ 13,693,156 $ 16,782,589) $ 2,442,373 ============ ============ ============ ============ ===========
As of March 31, 2007, 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 2008 2009 2010 2011 2012 2013 2014 2015 ---- ---------- ---------- ----------- ----------- ---- ---- ---------- ---------- U.S. Government Securities $7,263,249 $ -- $ -- $ -- $-- $-- $ 271,576 $3,683,671 GNMA...................... -- -- -- -- -- -- 1,498,599 2,668,388 Strategic Bond............ 1,214,819 5,601,470 6,464,175 10,040,945 -- -- -- -- High Yield Bond........... -- 5,402,440 32,249,552 48,994,980 -- -- -- --
Included in the capital loss carryforward amounts at March 31, 2007 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 Strategic Income Fund $2,727,955
71 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) As a result of reorganizations into some of these portfolios during the period ended March 31, 2002, certain capital loss carryforwards may be subject to limitations on use pursuant to applicable U.S. Federal Income Tax Law. Therefore, it is possible not all of these capital losses will be available for use. The Funds indicated below utilized capital loss carryforwards, which offset net taxable gains realized in the year ended March 31, 2007:
Capital Loss Carryforward Fund Utilized ---- ------------ Strategic Bond Fund. $4,314,618 High Yield Bond Fund 3,520,928
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, 2007, the Funds elected to defer capital losses as follows:
Deferred Deferred Post-October Post-October Fund Capital Loss Currency Loss ---- ------------ ------------- U.S. Government Securities $115,204 $-- GNMA...................... 368,974 -- Strategic Bond............ 218,219 -- High Yield Bond........... -- -- Tax Exempt Insured........ -- --
For the period ended March 31, 2007, the reclassifications arising from book/tax differences resulted in increases (decreases) that were primarily due to net paydown adjustments, expiration of capital loss carry forward amounts and treatment of foreign currency to the components of net assets as follows:
Accumulated Accumulated Undistributed Undistributed Net Investment Net Realized Capital Fund Income (Loss) Gain (Loss) Paid-in ---- -------------- ------------- --------- U.S. Government Securities $ 356,143 $ 641,693 $(997,836) GNMA...................... 1,111,679 (1,111,679) -- Strategic Bond............ (277,500) 277,500 -- High Yield Bond........... 545,386 (545,386) -- Tax Exempt Insured........ (293) 297 (4)
Note 6. Security Transactions with Affiliated Funds The Funds are permitted to purchase or sell securities from or to certain other affiliated funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment adviser), common directors or trustees and/or common officers complies with Rule 17a-7 under the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. For the period ended March 31, 2007, the following Funds engaged in security transactions with affiliated funds:
Cost of Proceeds Realized Fund Purchases from sales Gain\Loss ---- ----------- ----------- ---------- Strategic Bond. $21,272,941 $ -- $ -- High Yield Bond -- 25,413,697 1,042,601
72 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) Note 7. 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 For the For the year ended year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006 ------------------------ ------------------------ --------------------- ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Shares sold(1)(2)(3)(4) 3,646,252 $ 33,613,249 3,833,993 $ 35,900,779 282,251 $ 2,588,038 308,662 $ 2,907,116 Reinvested shares...... 526,641 4,833,737 525,900 4,936,255 49,844 457,468 63,611 597,394 Shares redeemed(1)(3).. (4,206,287) (38,554,728) (6,513,774) (61,084,959) (842,993) (7,715,872) (1,150,867) (10,789,192) ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Net increase (decrease) (33,394) $ (107,742) (2,153,881) $(20,247,925) (510,898) $(4,670,366) (778,594) $ (7,284,682) ========== ============ ========== ============ ======== =========== ========== ============ U.S. Government Securities Fund -------------------------------------------------- Class C -------------------------------------------------- For the For the year ended year ended March 31, 2007 March 31, 2006 ------------------------ ------------------------ Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold............ 496,953 $ 4,562,238 290,146 $ 2,736,476 Reinvested shares...... 27,739 254,466 26,443 247,808 Shares redeemed(2)(4).. (358,841) (3,275,190) (474,314) (4,455,172) ---------- ------------ ---------- ------------ Net increase (decrease) 165,851 $ 1,541,514 (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 year ended March 31, 2007, includes automatic conversion of 219,512 shares of Class B shares in the amount of $1,837,805 to 219,626 shares of Class A shares in the amount of $1,837,805. (4)For the year ended March 31, 2007, includes automatic conversion of 14,969 shares of Class C shares in the amount of $136,518 to 14,953 shares of Class A shares in the amount of $136,518. 73 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
GNMA Fund -------------------------------------------------------------------------------------------------------- Class A Class B ---------------------------------------------------- -------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006 -------------------------- ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(1)(3)(5)(7) 5,070,934 $ 55,936,052 3,679,546 $ 41,272,893 202,312 $ 2,228,911 404,406 $ 4,553,528 Reinvested shares.......... 1,007,246 11,085,707 1,003,485 11,219,648 164,211 1,810,798 198,444 2,224,433 Shares redeemed(1)(5).. (5,652,486) (62,223,827) (7,280,453) (81,346,189) (2,138,731) (23,557,708) (2,809,670) (31,520,044) ----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)...... 425,694 $ 4,797,932 (2,597,422) $(28,853,648) (1,772,208) $(19,517,999) (2,206,820) $(24,742,083) =========== ============= ========== ============ ========== ============ ========== ============ GNMA Fund ------------------------------------------------------------------------------ Class C Class X ---------------------------------------------------- ------------------------ For the For the For the year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2006 -------------------------- ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount ----------- ------------- ---------- ------------ ---------- ------------ Shares sold...... 360,698 $ 3,979,813 602,279 $ 6,796,898 2,510 $ 28,279 Reinvested shares.......... 88,961 982,412 104,533 1,173,387 821 9,297 Shares redeemed(3)(7).. (1,340,161) (14,773,461) (1,952,806) (21,948,681) (93,618) (1,057,899) ----------- ------------- ---------- ------------ ---------- ------------ Net increase (decrease)...... (890,502) $ (9,811,236) (1,245,994) $(13,978,396) (90,287) $ (1,020,323) =========== ============= ========== ============ ========== ============ Strategic Bond Fund -------------------------------------------------------------------------------------------------------- Class A Class B ---------------------------------------------------- -------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006 -------------------------- ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------ Shares sold(2)(4)(6)(8) 102,882,348 $ 365,610,133 37,513,168 $132,293,432 5,637,811 $ 20,072,310 5,688,635 $ 20,006,461 Reinvested shares.......... 4,121,411 14,717,371 1,059,222 3,741,901 390,832 1,394,386 326,591 1,152,376 Shares redeemed(2)(6).. (29,208,072) (104,210,772) (8,234,142) (29,041,992) (3,782,125) (13,433,833) (3,586,213) (12,634,437) ----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease)...... 77,795,687 $ 276,116,732 30,338,248 $106,993,341 2,246,518 $ 8,032,863 2,429,013 $ 8,524,400 =========== ============= ========== ============ ========== ============ ========== ============ Strategic Bond Fund ---------------------------------------------------- Class C ---------------------------------------------------- For the For the year ended year ended March 31, 2007 March 31, 2006 -------------------------- ------------------------ Shares Amount Shares Amount ----------- ------------- ---------- ------------ Shares sold...... 38,346,566 $ 137,670,076 20,236,121 $ 71,570,743 Reinvested shares.......... 848,064 3,043,431 417,085 1,477,074 Shares redeemed(4)(8).. (6,961,530) (24,860,837) (3,618,681) (12,799,109) ----------- ------------- ---------- ------------ Net increase (decrease)...... 32,233,100 $ 115,852,670 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 year ended March 31, 2007, includes automatic conversion of 305,255 shares of Class B shares in the amount of $3,280,252 to 306,071 shares of Class A shares in the amount of $3,280,252. (6)For the year ended March 31, 2007, includes automatic conversion of 1,075,478 shares of Class B shares in the amount of $3,665,333 to 1,075,184 shares of Class A shares in the amount of $3,665,333. (7)For the year ended March 31, 2007, includes automatic conversion of 6,088 shares of Class C shares in the amount of $66,265 to 6,110 shares of Class A shares in the amount of $66,265. (8)Includes automatic conversion of $1,181 shares of Class C shares in the amount of $4,180 to 1,185 shares of Class A shares in the amount of $4,180. 74 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
High Yield Bond Fund ----------------------------------------------------------------------------------------------------------- Class A Class B ------------------------------------------------------ --------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006 -------------------------- -------------------------- ------------------------- ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Shares sold(1)(4)...... 38,615,170 $ 182,039,488 60,157,451 $ 269,492,069 2,939,699 $ 13,768,068 2,657,600 $ 12,034,094 Reinvested shares.......... 1,677,533 7,908,201 1,245,496 5,639,708 333,914 1,571,933 363,347 1,644,185 Shares redeemed(1)(4).. (36,217,526) (168,508,994) (37,827,675) (171,886,729) (3,870,265) (18,168,508) (5,617,900) (25,321,387) ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Net increase (decrease)...... 4,075,177 $ 21,438,695 23,575,272 $ 103,245,048 (596,652) $ (2,828,507) (2,596,953) $(11,643,108) =========== ============= =========== ============= =========== ============ ========== ============ High Yield Bond Fund --------------------------------------------------------------------------------- Class C Class Z ------------------------------------------------------ ------------------------- For the For the For the year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2006 -------------------------- -------------------------- ------------------------- Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ----------- ------------ Shares sold...... 8,874,645 $ 41,729,495 9,135,786 $ 41,520,484 -- $ (1,745) Reinvested shares.......... 542,788 2,569,206 456,958 2,077,622 380,489 1,688,457 Shares redeemed........ (6,505,750) (30,858,084) (9,102,263) (41,384,506) (20,406,473) (90,194,761) ----------- ------------- ----------- ------------- ----------- ------------ Net increase (decrease)...... 2,911,683 $ 13,440,617 490,481 $ 2,213,600 (20,025,984) $(88,508,049) =========== ============= =========== ============= =========== ============ Tax Exempt Insured Fund ----------------------------------------------------------------------------------------------------------- Class A Class B ------------------------------------------------------ --------------------------------------------------- For the For the For the For the year ended year ended year ended year ended March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006 -------------------------- -------------------------- ------------------------- ------------------------ Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Shares sold(2)(3)(5)(6) 181,928 $ 2,305,652 238,472 $ 3,042,167 26,325 $ 335,141 27,050 $ 345,577 Reinvested shares.......... 104,191 1,320,929 120,617 1,542,466 8,813 111,816 12,879 164,760 Shares redeemed(2)(5).. (846,556) (10,699,293) (686,079) (8,829,065) (163,672) (2,069,946) (210,933) (2,709,988) ----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------ Net increase (decrease)...... (560,437) $ (7,072,712) (326,990) $ (4,244,432) (128,534) $ (1,622,989) (171,004) $ (2,199,651) =========== ============= =========== ============= =========== ============ ========== ============ Tax Exempt Insured Fund ------------------------------------------------------ Class C ------------------------------------------------------ For the For the year ended year ended March 31, 2007 March 31, 2006 -------------------------- -------------------------- Shares Amount Shares Amount ----------- ------------- ----------- ------------- Shares sold...... 51,686 $ 654,807 63,887 $ 822,552 Reinvested shares.......... 6,918 87,817 8,147 104,235 Shares redeemed(3)(6).. (100,404) (1,273,870) (159,889) (2,047,423) ----------- ------------- ----------- ------------- Net increase (decrease)...... (41,800) $ (531,246) (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 year ended March 31, 2007, includes automatic conversion of 1,213,503 shares of Class B shares in the amount of $5,313,435 to 1,215,237 shares of Class A shares in the amount of $5,313,435. (5)For the year ended March 31, 2007, includes automatic conversion of 71,186 shares of Class B shares in the amount of $494,110 to 71,233 shares of Class A shares in the amount of $494,110. (6)For the year ended March 31, 2007, 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. 75 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) Note 8. Lines of Credit The AIG SunAmerica Family of Mutual Funds has established $75 million committed and $50 million uncommitted lines of credit with State Street Bank and Trust Company, the Funds' custodian. Interest is currently payable at the Federal Funds rate plus 50 basis points on the committed line and State Street's discretionary bid rate on the uncommitted line of credit. There is also a commitment fee of 10 basis points per annum on the daily unused portion of the $75 million committed line of credit, which is included in other expenses on the Statement of Operations. Borrowings under the line of credit will commence when the Fund's cash shortfall exceeds $100,000. For the year ended March 31, 2007, the following Funds had borrowings:
Average Weighted Days Interest Debt Average Fund Outstanding Charges Utilized Interest ---- ----------- -------- ---------- -------- U.S. Government Securities 17 $ 4,332 $1,592,173 5.74% GNMA...................... 28 5,641 1,254,787 5.78 Strategic Bond............ 8 6,944 5,434,080 5.77 High Yield Bond........... 61 75,783 7,996,708 5.62
At March 31, 2007, there were no borrowings outstanding. Note 9. Interfund Lending Agreement Pursuant to exemptive relief granted by the Securities and Exchange Commission, the Portfolios are permitted to participate in an interfund lending program among investment companies advised by 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 year ended March 31, 2007 none of the Funds participated in this program. Note 10. Trustees Retirement Plan The Trustees have adopted the AIG SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the "Retirement Plan") effective January 1, 1993, as amended December 9, 2006 for the unaffiliated Trustees. The Retirement Plan provides generally that an unaffiliated Trustee may become a participant ("Participant") in the Retirement Plan if he or she has at least 10 years of consecutive service as a Disinterested Trustee of any of the adopting AIG SunAmerica mutual funds (the "Adopting Fund"), or has attained the age of 60 while a Trustee and completed five (5) consecutive years of service as a Trustee of any Adopting Fund (an "Eligible Trustee"). Pursuant to the Retirement Plan, an Eligible Trustee may receive benefits upon (i) his or her death or disability while a Trustee or (ii) the termination or his or her tenure as a Trustee, other than removal for cause from each of the Adopting Funds with respect to which he or she is an Eligible Trustee. As of each of the first ten birthdays after becoming a Participant and on which he or she is both a Trustee and a Participant, each Eligible Trustee will be credited with an amount equal to 50% of his or her regular fees (excluding committee fees) for services as a Disinterested Trustee of each Adopting Fund for the calendar year in which such birthday occurs. In addition, an amount equal to 8.50% of any amounts credited under the preceding clause during prior years is added to each Eligible Trustee's Account. The rights of any Participant to benefits under the Retirement Plan shall be an unsecured claim against the assets of the Adopting Funds. An Eligible Trustee may receive any benefits payable under the Retirement Plan, at his or her election, either in one lump sum or in up to 15 annual installments. Any undistributed amounts shall continue to accrue interest at 8.50%. 76 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued) The following amounts of the Retirement Plan liabilities are included in the Trustees fees and expenses line on the Statement of Assets and Liabilities and the amount for the Retirement Plan expenses are included in the Trustees' fees and expenses line on the Statement of Operations.
Retirement Plan Retirement Plan Retirement Plan Liability Expense Payments --------------- --------------- --------------- Fund As of March 31, 2007 ---- ----------------------------------------------- U.S. Government Securities $90,403 $2,638 $9,348 GNMA...................... 52,427 6,219 2,596 Strategic Bond............ 27,601 4,962 2,218 High Yield Bond........... 47,765 4,611 3,495 Tax Exempt Insured........ 28,211 956 2,639
Note 11. Other Information On February 9, 2006, AIG, the parent company and an affiliated person of AIG SunAmerica, SACS and AIGGIC, 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 Funds. 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 statutes 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 "1940 Act". Certain affiliated persons of AIG, including the Adviser, 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 AIG's investment management subsidiaries, to serve as investment adviser, sub-adviser, principal underwriter or sponsor of the Funds. The Adviser 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 made 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, AIG SunAmerica, SACS and AIGGIC believe that the settlements are not likely to have a material adverse effect on their ability to perform their respective investment advisory or distribution services relating to the Funds. 77 SunAmerica Income Funds REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of SunAmerica Income Funds: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the five funds constituting SunAmerica Income Funds (the "Funds") at March 31, 2007, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Houston, Texas May 24, 2007 78 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- March 31, 2007 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, 41 None DOB: February 27, 1963 Chairman and CEO of Southern California Development Corporation/ National Housing Development Corp; (1992 to present) Founder, Owner and Partner of Colonies Crossroads, Inc. (1999 to present); Owner and Managing Member of Diversified Pacific Development Group, LLC (1998 to present). Dr. Judith L. Craven Trustee 2001-present Retired. 89 Director, DOB: October 6, 1945 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. 89 Director, DOB: December 30, 1938 Boston Options Exchange (1985-Present). Samuel M. Eisenstat Chairman 1986-present Attorney, solo 51 Director, DOB: March 7, 1940 of the practitioner. North Board European Oil Royalty Trust. Stephen J. Gutman Trustee 1986-present Senior 51 None DOB: May 10, 1943 Associate, Corcoran Group (Real Estate) (2003 to present); President 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 Managing 51 Director, DOB: February 9, 1948 Partner, DLB Boston Capital, LLC Private (Private Financial Equity) Holdings (2006-present) (2004 to President and present) CEO, Conseco, Inc. (Financial Services) (2001 to 2004); Chairman of the Board of Centennial Technologies, Inc. (1998 to 2001) Interested Trustee Peter A. Harbeck(3) Trustee 1995-present President, CEO 98 None DOB: January 23, 1954 and Director, 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)
79 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- March 31, 2007 -- (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). Gregory R. Kingston Vice 2002-present Vice President, SAAMCo N/A N/A DOB: January 18, 1966 President (2001-present); Formerly, and Vice President, American Assistant General Investment Treasurer Management, L.P. (1999- 2001) Nori L. Gabert Vice 2002-present Vice President and Deputy N/A N/A DOB: August 15, 1953 President General Counsel, AIG and SunAmerica (2001-present); Assistant Vice President and Secretary, Secretary VALIC Company I and VALIC Company II (2000- present) Formerly, Associate General Counsel, American General Corporation, (1997 to 2001).
80 SunAmerica Income Funds TRUSTEE AND OFFICER INFORMATION -- March 31, 2007 -- (continued)
Number of Position Held Term of Funds in Name, 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) ---------------------- ------------- -------------- --------------------------------- ------------ ------------------- Matthew J. Hackethal Anti- 2006- Senior Compliance Manager, N/A N/A DOB: December 31, 1971 Money present AIG SunAmerica (November Laundering 2006 to present); Vice President, Compliance Credit Suisse Asset Management Officer (May, 2001 to October 2006); CCO, Credit Suisse Altemative Funds (November 2005 to October 2006); CCO, Credit Suisse Asset Management Securities, Inc. (April 2004 to August 2005) James Nichols Vice 2006- Director, President and CEO; N/A N/A DOB: April 7, 1966 President Present AIG SACS (July 2006 to present); Senior Vice President, AIG SACS (March 2002 to July 2006); Vice President, AIG SunAmerica (1995 to March 2002) Cynthia Gibbons Vice 2002- Vice President, AIG N/A N/A DOB: December 6, 1967 President present SunAmerica (August 2002- and Chief present); Securities Compliance Compliance Manager, Officer American General Investment Management (June 2000 - August 2002). Timothy Pettee Vice August Chief Investment Officer AIG N/A N/A DOB: April 7, 1958 President 2004- SunAmerica (January 2003- Present present); Executive Vice president and Global Director of Research Schroder Investment Management (2000-2002); Director of Research U.S. Trust Co. (1998-2000). Michael Cheah Vice November Senior Vice President, AIG N/A N/A DOB: January 4, 1960 President 2000- SunAmerica (July 1999-present). Present
-------- * The business address for each Trustee is the Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311-4992. (1) The "Fund Complex" means two or more registered investment companies that hold themselves out to investors as related companies for purposes of investment services or have a common investment adviser or an investment adviser that is an affiliated person of the Adviser. The "Fund Complex" includes The Trust (5 Funds), SunAmerica Money Market Funds (2 funds), SunAmerica Equity Funds (10 funds), SunAmerica Focused Series, Inc. (18 portfolios), Anchor Series Trust (9 portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1 fund), SunAmerica Series Trust (35 portfolios), VALIC Company I (32 portfolios), VALIC Company II (15 funds), Seasons Series Trust (24 portfolios), AIG Series Trust (5 funds), SunAmerica Focused Alpha Growth Fund, Inc. (1 fund), SunAmerica Focused Alpha Large-Cap Fund, Inc. (1 fund), AIG Strategic Hedge Fund of Funds (1 Fund) and Brazos Mutual Funds (4 funds). (2) Directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e. "public companies") or other investment companies registered under the Investment Company Act of 1940. (3) Interested trustee, as defined within the Investment Company Act of 1940 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 SunAmerica Income Funds SHAREHOLDER TAX INFORMATION -- March 31, 2007 -- (unaudited) Certain tax information regarding the SunAmerica Income Funds is required to be provided to shareholders based upon each Fund's income and distributions for the taxable periods ended March 31, 2007. The information and distributions reported herein may differ from the information and distributions taxable to the shareholders for the calendar year ending December 31, 2007. The information necessary to complete your income tax returns will be included with your Form 1099-DIV to be received under separate cover in January 2008. During the year ended March 31, 2007 the Funds paid the following dividends per share along with the percentage of ordinary income dividends that qualified for the 70% dividends received deductions for corporations.
Net Net Net Long- Qualifying % for the Total Investment Short-Term Term 70% Dividends Dividends Income Capital Gains Capital Gains Received Deduction --------- ---------- ------------- ------------- -------------------- U.S. Government Securities Fund Class A $0.39 $0.39 $-- $ -- -- % U.S. Government Securities Fund Class B 0.33 0.33 -- -- -- U.S. Government Securities Fund Class C 0.33 0.33 -- -- -- GNMA Fund Class A...................... 0.48 0.48 -- -- -- GNMA Fund Class B...................... 0.41 0.41 -- -- -- GNMA Fund Class C...................... 0.41 0.41 -- -- -- Strategic Bond Fund Class A............ 0.18 0.18 -- -- 0.71 Strategic Bond Fund Class B............ 0.15 0.15 -- -- 0.71 Strategic Bond Fund Class C............ 0.16 0.16 -- -- 0.71 High Yield Bond Fund Class A........... 0.32 0.32 -- -- 1.99 High Yield Bond Fund Class B........... 0.29 0.29 -- -- 1.99 High Yield Bond Fund Class C........... 0.29 0.29 -- -- 1.99 Tax-Exempt Insured Fund Class A........ 0.51 0.42* -- 0.09 -- Tax-Exempt Insured Fund Class B........ 0.41 0.32* -- 0.09 -- Tax-Exempt Insured Fund Class C........ 0.43 0.34* -- 0.09 --
-------- * Tax exempt interest dividends For the year ended March 31, 2007, certain dividends paid by the Strategic Bond Fund and High Yield Bond Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, the following represents the maximum amount that may be considered qualified dividend income:
Portfolio Amount --------- -------- Strategic Bond Fund. $183,974 High Yield Bond Fund 441,330
82 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) As required by the Securities and Exchange Commission, the following graphs compare the performance of a $10,000 investment in the SunAmerica Income Funds' portfolios to a similar investment in an index. Please note that "inception" as used herein reflects the date on which a specific class of shares commenced operations. It is important to note that the SunAmerica Income Funds are professionally managed mutual funds while the indices are not available for investment and are unmanaged. The comparison is shown for illustrative purposes only. The graphs present the performance of the largest class of that particular Fund. The performance of the other classes will vary based upon the difference in sales charges and fees assessed to shareholders of that class. 83 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) U.S. Government Securities Fund For the one-year period ended March 31, 2007, the SunAmerica U.S. Government Securities Fund Class A shares returned 5.25% at net asset value (NAV) (before maximum sales charge). The Fund's benchmark, the Lehman Brothers U.S. Government Bond Index*, returned 5.93% over the same period. As a result of sharply rising yields on mortgage-backed bonds and Treasury securities, the one-year period began on a challenging note. After initially indicating that future Federal Funds rate increases would be data-dependent, Federal Reserve Chairman Bernanke said that inflationary pressures were present and that further rate increases might be necessary. Following the implementation of 17 consecutive 25-basis point increases, the central bank left monetary rates unchanged at its August meeting. The Federal Open Market Committee maintained its monetary target at its regularly scheduled meetings in September, October, December, and January, but its assessment continued to focus on inflation risk. The threat of potential downgrades of a number of corporate debt issuers provided additional pressure in the fixed income market. Although the Federal Reserve elected to keep rates steady in March, it adopted language interpreted by certain investors as placing inflation risk and the risk of an economic slowdown on equal footing. The Fund was positioned for an economic slowdown and subsequent Treasury rally which contributed to the Fund's underperformance of its benchmark. -------- Past performance is no guarantee of future results. U.S. Government guarantee applies only to the underlying securities of the Fund's portfolio and not to the Fund shares. * The Lehman Brothers U.S. Government Bond Index is a broad index composed solely of U.S. Treasury Securities maturing from 1-30 years. 84 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] U.S. Government Securities Lehman Brothers U.S.Government Fund Class A/#/ Bond Index** -------------------------- -------------------------- 3/31/1997 $ 9,521.00 $10,000.00 4/30/1997 9,643.00 10,144.34 5/31/1997 9,697.00 10,231.84 6/30/1997 9,800.00 10,346.69 7/31/1997 10,007.00 10,640.41 8/31/1997 9,948.00 10,535.15 9/30/1997 10,077.00 10,693.60 10/31/1997 10,205.00 10,878.60 11/30/1997 10,253.00 10,934.30 12/31/1997 10,353.00 11,048.61 1/31/1998 10,438.00 11,213.93 2/28/1998 10,440.00 11,183.49 3/31/1998 10,437.00 11,215.20 4/30/1998 10,472.00 11,265.62 5/31/1998 10,569.00 11,381.30 6/30/1998 10,639.00 11,510.77 7/31/1998 10,643.00 11,528.56 8/31/1998 10,833.00 11,828.49 9/30/1998 11,023.00 12,147.32 10/31/1998 10,977.00 12,105.91 11/30/1998 11,035.00 12,110.01 12/31/1998 11,063.00 12,137.03 1/31/1999 11,087.00 12,207.55 2/28/1999 10,932.00 11,917.24 3/31/1999 10,949.00 11,963.98 4/30/1999 10,981.00 11,991.08 5/31/1999 10,886.00 11,885.96 6/30/1999 10,803.00 11,861.71 7/31/1999 10,782.00 11,844.47 8/31/1999 10,826.00 11,844.36 9/30/1999 10,920.00 11,940.55 10/31/1999 10,951.00 11,959.70 11/30/1999 10,944.00 11,943.21 12/31/1999 10,932.00 11,865.91 1/31/2000 10,849.00 11,882.52 2/29/2000 10,935.00 12,051.64 3/31/2000 11,047.00 12,263.22 4/30/2000 11,055.00 12,229.29 5/31/2000 11,061.00 12,237.17 6/30/2000 11,230.00 12,455.39 7/31/2000 11,306.00 12,576.04 8/31/2000 11,449.00 12,761.95 9/30/2000 11,539.00 12,798.32 10/31/2000 11,675.00 12,920.75 11/30/2000 11,881.00 13,174.84 12/31/2000 12,196.00 13,437.02 1/31/2001 12,272.00 13,572.73 2/28/2001 12,382.00 13,727.46 3/31/2001 12,491.00 13,775.51 4/30/2001 12,369.00 13,635.00 5/31/2001 12,391.00 13,679.99 6/30/2001 12,479.00 13,742.92 7/31/2001 12,786.00 14,072.75 8/31/2001 12,921.00 14,247.25 9/30/2001 13,140.00 14,495.16 10/31/2001 13,390.00 14,869.13 11/30/2001 13,071.00 14,536.06 12/31/2001 12,904.00 14,409.64 1/31/2002 13,028.00 14,502.93 2/28/2002 13,196.00 14,636.82 3/31/2002 12,921.00 14,318.47 4/30/2002 13,246.00 14,659.65 5/31/2002 13,356.00 14,747.52 6/30/2002 13,553.00 14,953.90 7/31/2002 13,812.00 15,282.21 8/31/2002 14,086.00 15,585.03 9/30/2002 14,420.00 15,950.45 10/31/2002 14,397.00 15,822.24 11/30/2002 14,311.00 15,685.99 12/31/2002 14,623.00 16,066.05 1/31/2003 14,596.00 16,025.77 2/28/2003 14,789.00 16,284.33 3/31/2003 14,747.00 16,237.89 4/30/2003 14,803.00 16,313.14 5/31/2003 15,168.00 16,736.56 6/30/2003 15,070.00 16,648.93 7/31/2003 14,240.00 15,960.73 8/31/2003 14,379.00 16,050.01 9/30/2003 14,890.00 16,516.57 10/31/2003 14,672.00 16,281.44 11/30/2003 14,687.00 16,300.19 12/31/2003 14,821.00 16,444.61 1/31/2004 14,952.00 16,580.81 2/29/2004 15,116.00 16,779.40 3/31/2004 15,232.00 16,927.12 4/30/2004 14,736.00 16,417.77 5/31/2004 14,676.00 16,357.06 6/30/2004 14,769.00 16,423.40 7/31/2004 14,911.00 16,576.38 8/31/2004 15,194.00 16,899.21 9/30/2004 15,218.00 16,933.57 10/31/2004 15,340.00 17,068.39 11/30/2004 15,219.00 16,865.55 12/31/2004 15,341.00 17,016.41 1/31/2005 15,464.00 17,123.14 2/28/2005 15,390.00 17,002.18 3/31/2005 15,325.00 16,945.53 4/30/2005 15,605.00 17,217.47 5/31/2005 15,739.00 17,416.88 6/30/2005 15,785.00 17,515.01 7/31/2005 15,615.00 17,303.66 8/31/2005 15,844.00 17,558.85 9/30/2005 15,643.00 17,351.10 10/31/2005 15,474.00 17,229.08 11/30/2005 15,546.00 17,306.99 12/31/2005 15,754.00 17,467.53 1/31/2006 15,744.00 17,437.66 2/28/2006 15,779.00 17,465.37 3/31/2006 15,582.00 17,308.10 4/30/2006 15,466.00 17,259.86 5/31/2006 15,436.00 17,263.33 6/30/2006 15,473.00 17,311.49 7/31/2006 15,685.00 17,518.16 8/31/2006 15,933.00 17,765.57 9/30/2006 16,076.00 17,923.71 10/31/2006 16,168.00 18,017.37 11/30/2006 16,346.00 18,200.22 12/31/2006 16,212.00 18,074.58 1/31/2007 16,164.00 18,052.37 2/28/2007 16,447.00 18,330.19 3/31/2007 16,400.00 18,334.97 U.S. Government Securities Fund
Class A Class B Class C U.S. ------------------ ------------------ ------------------ Government Average Average Average Securities Annual Cumulative Annual Cumulative Annual Cumulative Fund Return Return+ Return Return+ Return Return+ ---------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 0.22% 5.25% 0.57% 4.57% 3.57% 4.57% ------------------------------------------------------------------------- 5 Year Return 3.87% 26.93% 3.86% 22.87% 4.21% 22.88% ------------------------------------------------------------------------- 10 Year Return 5.07% 75.25% 5.02% 63.23% N/A N/A ------------------------------------------------------------------------- Since Inception* 4.99% 102.57% 5.91% 235.27% 4.69% 43.14% -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 10/1/93; Class B: 03/3/86; Class C: 06/1/99. # For the purpose of the graph, it has been assumed that the maximum sales charge of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2007, the SunAmerica U.S. Government Securities Fund Class A returned 0.22%, compared to 5.93% for the Lehman Brothers U.S. Government Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. ** The Lehman Brothers U.S. Government Bond Index is a broad index composed solely of U.S. Treasury Securities maturing from 1-30 years. Indicies are not managed and an investor cannot invest directly into an index. 85 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) GNMA Fund For the one-year period ended March 31, 2007, the SunAmerica GNMA Fund Class A shares returned 5.23% at net asset value (NAV) (before maximum sales charge). The Fund's benchmark, the Citigroup Mortgage GNMA Index*, returned 6.24% over the same period. The fiscal year began on a challenging note as both mortgage-backed bonds and Treasury yields rose sharply in tandem ahead of the Federal Reserve's tightening cycle. In the spring, Federal Reserve Chairman Ben Bernanke said that inflationary pressures were present and that further rate increases might be necessary, after initially indicating that future Federal Funds rate increases would be data-dependent. After implementing its 17/th/ consecutive 25-basis point increase in June, taking the Fed Funds Rate to 5.25%, the central bank left monetary rates unchanged at its August meeting. The Federal Open Market Committee maintained its monetary target at its regularly scheduled meetings in September, October, December, and January, but its assessment continued to focus on inflation risk. The threat of potential downgrades of a number of corporate debt issuers provided additional selling pressure in the fixed income market. In March, the Federal Reserve kept rates steady. However, it adopted language interpreted by certain investors as placing inflation risk and the risk of an economic slowdown on equal footing. While the Fund was not impacted by sector selection it did benefit from its strategy of holding minimal exposure to Freddie Mac and Fannie Mae securities. This helped the Fund as the spread continued to move in favor of GNMA securities. -------- Past performance is no guarantee of future results. U.S. Government guarantee applies only to the underlying securities of the Fund's portfolio and not to the Fund shares. * The Citigroup Mortgage GNMA Index is comprised of 15- and 30-year fixed-rate pass-through mortgage-backed securities. 86 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] GNMA Fund Class A/#/ Citigroup Mortgage GNMA Index** -------------------- ------------------------------- 3/31/1997 $ 9,523.00 $10,000.00 4/30/1997 9,676.00 10,150.91 5/31/1997 9,764.00 10,250.36 6/30/1997 9,884.00 10,370.50 7/31/1997 10,163.00 10,553.18 8/31/1997 10,097.00 10,536.47 9/30/1997 10,229.00 10,673.98 10/31/1997 10,369.00 10,781.54 11/30/1997 10,415.00 10,811.49 12/31/1997 10,548.00 10,912.26 1/31/1998 10,649.00 11,004.60 2/28/1998 10,649.00 11,041.00 3/31/1998 10,684.00 11,086.68 4/30/1998 10,728.00 11,151.05 5/31/1998 10,841.00 11,228.98 6/30/1998 10,924.00 11,274.49 7/31/1998 10,948.00 11,331.25 8/31/1998 11,140.00 11,423.25 9/30/1998 11,351.00 11,556.46 10/31/1998 11,333.00 11,548.35 11/30/1998 11,407.00 11,605.28 12/31/1998 11,455.00 11,656.90 1/31/1999 11,490.00 11,738.32 2/28/1999 11,315.00 11,713.99 3/31/1999 11,358.00 11,783.33 4/30/1999 11,392.00 11,841.74 5/31/1999 11,298.00 11,784.82 6/30/1999 11,224.00 11,741.46 7/31/1999 11,213.00 11,662.20 8/31/1999 11,225.00 11,654.09 9/30/1999 11,356.00 11,854.15 10/31/1999 11,412.00 11,917.03 11/30/1999 11,440.00 11,923.98 12/31/1999 11,447.00 11,891.05 1/31/2000 11,337.00 11,796.90 2/29/2000 11,451.00 11,945.82 3/31/2000 11,630.00 12,131.49 4/30/2000 11,624.00 12,118.74 5/31/2000 11,686.00 12,173.02 6/30/2000 11,873.00 12,397.24 7/31/2000 11,928.00 12,458.47 8/31/2000 12,097.00 12,643.30 9/30/2000 12,210.00 12,770.39 10/31/2000 12,296.00 12,863.22 11/30/2000 12,478.00 13,041.60 12/31/2000 12,734.00 13,223.46 1/31/2001 12,925.00 13,438.74 2/28/2001 13,060.00 13,502.12 3/31/2001 13,155.00 13,579.23 4/30/2001 13,099.00 13,608.02 5/31/2001 13,139.00 13,717.73 6/30/2001 13,180.00 13,745.86 7/31/2001 13,558.00 13,994.08 8/31/2001 13,671.00 14,097.50 9/30/2001 13,926.00 14,288.13 10/31/2001 14,199.00 14,473.95 11/30/2001 13,837.00 14,352.66 12/31/2001 13,687.00 14,313.94 1/31/2002 13,835.00 14,469.32 2/28/2002 14,056.00 14,607.16 3/31/2002 13,766.00 14,471.64 4/30/2002 14,114.00 14,720.02 5/31/2002 14,209.00 14,822.11 6/30/2002 14,377.00 14,934.64 7/31/2002 14,600.00 15,101.93 8/31/2002 14,794.00 15,225.05 9/30/2002 15,024.00 15,353.12 10/31/2002 15,071.00 15,401.28 11/30/2002 15,047.00 15,408.06 12/31/2002 15,264.00 15,562.78 1/31/2003 15,300.00 15,610.60 2/28/2003 15,452.00 15,695.16 3/31/2003 15,456.00 15,690.69 4/30/2003 15,539.00 15,727.76 5/31/2003 15,757.00 15,736.86 6/30/2003 15,722.00 15,780.88 7/31/2003 14,882.00 15,531.34 8/31/2003 15,066.00 15,623.84 9/30/2003 15,573.00 15,864.28 10/31/2003 15,419.00 15,828.68 11/30/2003 15,403.00 15,891.53 12/31/2003 15,588.00 16,030.99 1/31/2004 15,711.00 16,110.72 2/29/2004 15,837.00 16,217.26 3/31/2004 15,930.00 16,284.87 4/30/2004 15,513.00 16,029.22 5/31/2004 15,455.00 15,984.81 6/30/2004 15,588.00 16,131.19 7/31/2004 15,756.00 16,269.33 8/31/2004 16,002.00 16,516.21 9/30/2004 16,019.00 16,549.20 10/31/2004 16,149.00 16,687.58 11/30/2004 16,095.00 16,642.62 12/31/2004 16,202.00 16,764.25 1/31/2005 16,298.00 16,866.48 2/28/2005 16,206.00 16,810.89 3/31/2005 16,154.00 16,767.04 4/30/2005 16,332.00 16,942.48 5/31/2005 16,435.00 17,068.47 6/30/2005 16,479.00 17,124.07 7/31/2005 16,406.00 17,068.11 8/31/2005 16,554.00 17,210.35 9/30/2005 16,442.00 17,135.42 10/31/2005 16,344.00 17,054.46 11/30/2005 16,380.00 17,095.93 12/31/2005 16,571.00 17,324.17 1/31/2006 16,610.00 17,372.70 2/28/2006 16,630.00 17,409.50 3/31/2006 16,506.00 17,288.31 4/30/2006 16,426.00 17,225.51 5/31/2006 16,364.00 17,182.87 6/30/2006 16,376.00 17,189.85 7/31/2006 16,604.00 17,435.32 8/31/2006 16,834.00 17,722.30 9/30/2006 16,957.00 17,827.34 10/31/2006 17,067.00 17,956.08 11/30/2006 17,206.00 18,132.07 12/31/2006 17,163.00 18,107.33 1/31/2007 17,134.00 18,106.91 2/28/2007 17,381.00 18,333.83 3/31/2007 17,369.00 18,367.52 GNMA Fund
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average GNMA Annual Cumulative Annual Cumulative Annual Cumulative Fund Return Return+ Return Return+ Return Return+ ---------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 0.22% 5.23% 0.64% 4.64% 3.64% 4.64% ------------------------------------------------------------------------- 5 Year Return 3.74% 26.18% 3.74% 22.14% 4.10% 22.24% ------------------------------------------------------------------------- 10 Year Return 5.68% 82.38% 5.50% 70.82% N/A N/A ------------------------------------------------------------------------- Since Inception* 5.63% 119.63% 7.34% 445.41% 5.01% 46.63% -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 10/11/93; Class B: 04/25/83; Class C: 06/1/99. # For the purpose of the graph, it has been assumed that the maximum sales charge of 4.75% of offering, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2007, the SunAmerica GNMA Fund Class A returned 0.22%, compared to 6.24% for the Citigroup Mortgage GNMA Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. **The Citigroup Mortgage GNMA Index is comprised of 15 and 30-year fixed-rate pass-through mortgage-backed securities. Indicies are not managed and an investor cannot invest directly into an index. 87 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) SunAmerica Strategic Bond Fund For the one-year period ended March 31, 2007, the SunAmerica Strategic Bond Fund Class A shares returned 8.07% at net asset value (NAV) (before maximum sales charge), outperforming its benchmark, the Lehman Brothers U.S. Aggregate Bond Index*, which returned 6.59%. During the fiscal year ended March 31, 2007, the credit market posted strong performance sustained by a solid macroeconomic backdrop and strong technical dynamics. New issuance volume was supportive in the fixed-income market as a whole. Demand from both domestic and foreign investors supported primary and secondary market activity. Volatility in financial markets around the world continued to affect investor sentiment. Leveraged buyout and shareholder-friendly activities remained bondholders' main concern. The portfolio engaged in trades in both primary and secondary markets, as they were both sustained by strong technical factors. When volatility in financial markets around the world increased unexpectedly, we traded with cautious aggression, looking to take advantage of what we saw as undue weakness in certain sectors, while still respecting the risks involved and what potential problems could develop. We continued to focus on individual credits from a bottom-up perspective, taking into consideration liquidity, diversification and curve positioning. Emerging market and high-yield bonds were the top-performing asset classes. Fundamentals for emerging market countries improved during the course of the year. The U.S. economic backdrop remained positive for high-yield bonds, as default rates remained at multi-year lows. Emerging market bonds were among the top contributors to the Fund's performance during the year. Top-performing emerging market credits included bonds from the governments of Brazil (12.50%, due 1/05/2016), Argentina (8.28%, due 12/31/2033), and Uruguay (8.00%, due 11/18/2022). Bonds offered by the Republics of South Africa (13.00%, due 8/31/2010) and Colombia (12.00%, due 10/22/2015) were among the main emerging market detractors. Other top contributing credits included two high yield credits, Calpine Corporation (8.75%, due 7/15/2013) and Charter Communications Inc. (11.25%, due 1/15/2011) and a bond offered by Commonwealth of Australia (7.50%, due 9/15/2009). Bonds offered by HCA International (6.375%, due 1/15/2015), Kingdom of Norway (5.00%, due 5/15/2015), and the Government of Japan (0.70%, due 5/15/2008) were among the main detractors to the Fund's performance during the period. -------- Past performance is no guarantee of future results. Interest rates and bond prices typically move inversely to each other; therefore, as with any bond fund, the value of an investment in this Fund may go up or down in response to changes in interest rates. * The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. 88 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Strategic Bond Lehman Brothers Fund Class A/#/ U.S. Aggregate Bond Index/+/ --------------- ---------------------------- 3/31/1997 $ 9,528.00 $10,000.00 4/30/1997 9,635.00 10,150.00 5/31/1997 9,845.00 10,246.42 6/30/1997 9,964.00 10,368.36 7/31/1997 10,236.00 10,648.30 8/31/1997 10,198.00 10,557.79 9/30/1997 10,402.00 10,714.05 10/31/1997 10,253.00 10,869.40 11/30/1997 10,386.00 10,919.40 12/31/1997 10,485.00 11,029.69 1/31/1998 10,601.00 11,170.87 2/28/1998 10,686.00 11,161.93 3/31/1998 10,737.00 11,199.88 4/30/1998 10,763.00 11,258.12 5/31/1998 10,757.00 11,365.07 6/30/1998 10,732.00 11,461.68 7/31/1998 10,772.00 11,485.74 8/31/1998 10,036.00 11,672.96 9/30/1998 10,337.00 11,946.11 10/31/1998 10,275.00 11,882.80 11/30/1998 10,543.00 11,950.53 12/31/1998 10,561.00 11,986.38 1/31/1999 10,521.00 12,071.48 2/28/1999 10,457.00 11,860.23 3/31/1999 10,617.00 11,925.46 4/30/1999 10,818.00 11,963.62 5/31/1999 10,581.00 11,858.34 6/30/1999 10,547.00 11,820.40 7/31/1999 10,490.00 11,770.75 8/31/1999 10,371.00 11,764.87 9/30/1999 10,474.00 11,901.34 10/31/1999 10,491.00 11,945.37 11/30/1999 10,620.00 11,944.18 12/31/1999 10,705.00 11,886.85 1/31/2000 10,697.00 11,847.62 2/29/2000 10,778.00 11,990.98 3/31/2000 10,847.00 12,149.26 4/30/2000 10,693.00 12,114.02 5/31/2000 10,617.00 12,107.97 6/30/2000 10,870.00 12,359.81 7/31/2000 11,024.00 12,472.29 8/31/2000 11,220.00 12,653.14 9/30/2000 11,166.00 12,732.85 10/31/2000 10,920.00 12,816.89 11/30/2000 10,754.00 13,027.08 12/31/2000 11,047.00 13,269.39 1/31/2001 11,486.00 13,485.68 2/28/2001 11,560.00 13,603.00 3/31/2001 11,408.00 13,671.02 4/30/2001 11,265.00 13,613.60 5/31/2001 11,381.00 13,695.28 6/30/2001 11,369.00 13,747.33 7/31/2001 11,444.00 14,055.27 8/31/2001 11,640.00 14,216.90 9/30/2001 11,358.00 14,381.82 10/31/2001 11,628.00 14,682.40 11/30/2001 11,805.00 14,479.78 12/31/2001 11,760.00 14,387.73 1/31/2002 11,848.00 14,504.21 2/28/2002 11,918.00 14,644.76 3/31/2002 11,913.00 14,401.19 4/30/2002 12,139.00 14,680.47 5/31/2002 12,086.00 14,805.18 6/30/2002 11,789.00 14,933.26 7/31/2002 11,564.00 15,113.39 8/31/2002 11,865.00 15,368.53 9/30/2002 11,837.00 15,617.49 10/31/2002 11,933.00 15,546.29 11/30/2002 12,194.00 15,542.18 12/31/2002 12,469.00 15,863.19 1/31/2003 12,664.00 15,876.75 2/28/2003 12,884.00 16,096.53 3/31/2003 12,994.00 16,084.09 4/30/2003 13,489.00 16,216.85 5/31/2003 13,907.00 16,519.21 6/30/2003 14,024.00 16,486.41 7/31/2003 13,671.00 15,932.13 8/31/2003 13,876.00 16,037.87 9/30/2003 14,342.00 16,462.38 10/31/2003 14,421.00 16,308.95 11/30/2003 14,630.00 16,347.95 12/31/2003 15,014.00 16,514.30 1/31/2004 15,270.00 16,647.19 2/29/2004 15,254.00 16,827.32 3/31/2004 15,338.00 16,953.45 4/30/2004 15,010.00 16,512.29 5/31/2004 14,814.00 16,446.19 6/30/2004 15,078.00 16,539.13 7/31/2004 15,255.00 16,703.08 8/31/2004 15,573.00 17,021.73 9/30/2004 15,806.00 17,067.87 10/31/2004 16,087.00 17,210.99 11/30/2004 16,414.00 17,073.71 12/31/2004 16,868.00 17,230.84 1/31/2005 16,905.00 17,338.96 2/28/2005 17,047.00 17,236.70 3/31/2005 16,726.00 17,148.09 4/30/2005 16,801.00 17,380.15 5/31/2005 16,973.00 17,568.19 6/30/2005 17,190.00 17,663.99 7/31/2005 17,262.00 17,503.31 8/31/2005 17,528.00 17,727.69 9/30/2005 17,504.00 17,544.93 10/31/2005 17,281.00 17,406.14 11/30/2005 17,405.00 17,483.16 12/31/2005 17,638.00 17,649.28 1/31/2006 17,878.00 17,650.36 2/28/2006 17,996.00 17,708.89 3/31/2006 17,871.00 17,535.15 4/30/2006 17,998.00 17,503.41 5/31/2006 17,771.00 17,484.66 6/30/2006 17,743.00 17,521.77 7/31/2006 18,130.00 17,758.64 8/31/2006 18,417.00 18,030.55 9/30/2006 18,494.00 18,188.93 10/31/2006 18,724.00 18,309.26 11/30/2006 19,007.00 18,521.71 12/31/2006 19,036.00 18,414.17 1/31/2007 19,007.00 18,406.57 2/28/2007 19,235.00 18,690.42 3/31/2007 19,313.00 18,691.02
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average Strategic Annual Cumulative Annual Cumulative Annual Cumulative Bond Fund Return Return+ Return Return+ Return Return+ ------------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 2.83% 8.07% 3.36% 7.36% 6.36% 7.36% ---------------------------------------------------------------------------------------- 5 Year Return 9.08% 62.11% 9.15% 56.90% 9.48% 57.26% ---------------------------------------------------------------------------------------- 10 Year Return 6.80% 102.69% 6.74% 92.02% 6.64% 90.27% ---------------------------------------------------------------------------------------- Since Inception* 7.06% 162.00% 7.63% 160.03% 7.40% 152.79% ----------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 11/1/93; Class B: 04/1/94; Class C: 04/1/94. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2007, the SunAmerica Strategic Bond Fund Class A returned 2.83%, compared to 6.59% for the Lehman Brothers U.S. Aggregate Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. Indices are not managed and an investor cannot invest directly into an index. 89 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) The SunAmerica High Yield Bond Fund For the one-year period ended March 31, 2007, the SunAmerica High Yield Bond Fund Class A shares returned 11.01% at net asset value (NAV) (before maximum sales charge), lagging its benchmark, the Citigroup High Yield Market Index*, which returned 11.50% The one-year period was marked by low default rates, tightening spreads and strong fundamental conditions all of which contributed to strong high-yield returns. Additionally, as the Federal Reserve decided to leave rates unchanged in the second half of the year, the interest-rate backdrop provided a boost to the market. There was a strong demand for leveraged credit assets in general, including high-yield. Lower-rated securities again outperformed higher-rated tiers. The Fund continued to benefit from this trend as it maintained a relatively larger exposure to these securities. In regards to industry selection, the most notable sectors were airlines and automotive. Our large overweight position within the airlines sector contributed significantly to the Fund's performance. In addition, an underweight position within the automotive sector detracted from the Fund's performance, as this sector performed well during the period. For the fiscal year, security selection was the primary contributor to the Fund's performance. Notable contributors were securities in the cable, utilities and aerospace sectors. Within the cable sector, Charter Communications Inc. was the primary driver of the Fund's strong performance. To a lesser extent, Calpine Corp. and Decrane Aircraft, within the utility and aerospace sectors, respectively, contributed to the Fund's performance for the period. The Fund's cash allocation, given the strong market return for the period, was the primary detractor. To a lesser extent, our beverage sector holding in Le-Nature's Inc. and our wireless sector position in iPCS, Inc. detracted from the Fund's performance -------- Past performance is no guarantee of future results. High-yield bonds tend to have lower interest-rate risk than higher-quality bonds of similar maturity but carry greater credit and default risk. Interest rates and bond prices typically move inversely to each other; therefore, as with any bond fund, the value of an investment in this Fund may go up or down in response to changes in interest rates. * The Citigroup High Yield Market Index is a broad-based unmanaged index composed of high yield securities. 90 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] High Yield Bond Citigroup High Yield Fund Class A/#/ Market Index/+/ --------------- -------------------- 11/2/1998 $ 9,524.00 $10,000.00 11/30/1998 9,666.00 10,501.84 12/31/1998 9,625.00 10,494.11 1/31/1999 9,774.00 10,651.58 2/28/1999 9,814.00 10,561.81 3/31/1999 9,999.00 10,651.21 4/30/1999 10,279.00 10,874.17 5/31/1999 10,043.00 10,703.46 6/30/1999 10,018.00 10,679.54 7/31/1999 10,063.00 10,702.72 8/31/1999 9,928.00 10,575.42 9/30/1999 9,866.00 10,495.22 10/31/1999 9,741.00 10,423.84 11/30/1999 9,909.00 10,587.20 12/31/1999 10,015.00 10,676.23 1/31/2000 9,923.00 10,587.93 2/29/2000 9,925.00 10,612.95 3/31/2000 9,710.00 10,396.98 4/30/2000 9,785.00 10,438.56 5/31/2000 9,725.00 10,293.23 6/30/2000 9,900.00 10,524.28 7/31/2000 9,945.00 10,638.71 8/31/2000 10,139.00 10,717.81 9/30/2000 10,044.00 10,603.02 10/31/2000 9,745.00 10,289.18 11/30/2000 9,224.00 9,868.29 12/31/2000 9,356.00 10,069.90 1/31/2001 10,021.00 10,748.34 2/28/2001 10,155.00 10,876.75 3/31/2001 9,877.00 10,679.18 4/30/2001 9,679.00 10,522.08 5/31/2001 9,817.00 10,690.95 6/30/2001 9,591.00 10,396.98 7/31/2001 9,631.00 10,592.72 8/31/2001 9,756.00 10,737.31 9/30/2001 9,345.00 9,964.31 10/31/2001 9,533.00 10,295.25 11/30/2001 9,752.00 10,686.53 12/31/2001 9,689.00 10,618.10 1/31/2002 9,678.00 10,663.36 2/28/2002 9,497.00 10,547.46 3/31/2002 9,692.00 10,828.18 4/30/2002 9,784.00 11,005.52 5/31/2002 9,620.00 10,869.02 6/30/2002 8,904.00 9,911.70 7/31/2002 8,521.00 9,463.58 8/31/2002 8,568.00 9,823.77 9/30/2002 8,464.00 9,630.61 10/31/2002 8,384.00 9,597.50 11/30/2002 8,849.00 10,330.02 12/31/2002 8,953.00 10,455.85 1/31/2003 9,207.00 10,845.11 2/28/2003 9,274.00 10,990.43 3/31/2003 9,454.00 11,360.56 4/30/2003 10,016.00 12,066.23 5/31/2003 10,195.00 12,146.43 6/30/2003 10,533.00 12,523.91 7/31/2003 10,479.00 12,338.85 8/31/2003 10,610.00 12,465.42 9/30/2003 10,983.00 12,834.81 10/31/2003 11,174.00 13,133.19 11/30/2003 11,364.00 13,315.67 12/31/2003 11,743.00 13,657.47 1/31/2004 12,142.00 13,893.67 2/29/2004 11,988.00 13,817.51 3/31/2004 11,917.00 13,904.34 4/30/2004 11,939.00 13,856.88 5/31/2004 11,737.00 13,617.00 6/30/2004 12,058.00 13,819.85 7/31/2004 12,145.00 13,997.42 8/31/2004 12,286.00 14,253.34 9/30/2004 12,456.00 14,447.02 10/31/2004 12,747.00 14,746.50 11/30/2004 13,201.00 14,916.30 12/31/2004 13,596.00 15,130.61 1/31/2005 13,675.00 15,110.01 2/28/2005 13,914.00 15,337.01 3/31/2005 13,497.00 14,906.18 4/30/2005 13,275.00 14,700.88 5/31/2005 13,538.00 15,003.31 6/30/2005 13,871.00 15,254.60 7/31/2005 14,236.00 15,475.35 8/31/2005 14,535.00 15,539.74 9/30/2005 14,430.00 15,384.47 10/31/2005 14,241.00 15,269.68 11/30/2005 14,401.00 15,309.05 12/31/2005 14,597.00 15,444.81 1/31/2006 14,914.00 15,687.27 2/28/2006 14,952.00 15,765.64 3/31/2006 15,064.00 15,879.32 4/30/2006 15,276.00 15,966.15 5/31/2006 15,262.00 15,955.48 6/30/2006 15,212.00 15,886.31 7/31/2006 15,398.00 16,058.13 8/31/2006 15,721.00 16,326.34 9/30/2006 15,907.00 16,552.24 10/31/2006 16,132.00 16,789.55 11/30/2006 16,253.00 17,068.80 12/31/2006 16,445.00 17,274.49 1/31/2007 16,529.00 17,436.72 2/28/2007 16,709.00 17,679.32 3/31/2007 16,723.00 17,705.24
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average High Yield Annual Cumulative Annual Cumulative Annual Cumulative Bond Fund Return Return+ Return Return+ Return Return+ ---------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return 5.72% 11.01% 6.29% 10.29% 9.27% 10.27% ------------------------------------------------------------------------- 5 Year Return 10.43% 72.55% 10.61% 67.53% 10.85% 67.39% ------------------------------------------------------------------------- 10 Year Return N/A N/A N/A N/A N/A N/A ------------------------------------------------------------------------- Since Inception* 6.31% 75.59% 6.08% 64.20% 7.32% 59.54% -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, the return would be lower. * Inception Date - Class A: 11/2/98; Class B: 11/2/98; Class C: 08/21/00. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2007, the SunAmerica High Yield Bond Fund Class A returned 5.72%, compared to 11.50% for the Citigroup High Yield Market Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Citigroup High Yield Market Index is a broad-based unmanaged index composed of high yield securities. Indices are not managed and an investor cannot invest directly into an index. 91 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) The SunAmerica Tax Exempt Insured Fund For the one-year period ending March 31, 2007, the SunAmerica Tax Exempt Insured Fund Class A returned 4.63% at net asset value (NAV) before (maximum sales charge), underperforming its benchmark, the Lehman Brothers Municipal Bond Index*, which returned 5.43%. As growth slowed in the final two quarters, the U.S. Treasury yield curve ended 2006 with an inverted slope, as the Federal Reserve ended its tightening of the Federal Funds rate with a final 25-basis point increase in June to 5.25%. For the first half of the one-year period, the 10-year U.S. Treasury bond yielded between 4.42% and 5.24%, as market participants oscillated between weaker growth and higher inflation. Since January 2007, the U.S. Treasury yield curve has steepened, with short yields falling and longer yields increasing modestly. This trend was the result of market anticipation that the Federal Reserve may have to lower the Federal Funds rate before year end, as growth slowed due to the weakening housing market. Municipal Bond new issuance in 2006 declined 6% from the record pace generated in 2005. However, first quarter volume in 2007 was a record for any first quarter, with a 49% increase from the prior fiscal year. The rise in new issuance was led by refunding issuance, which increased 88%. Due to this surge in activity, municipal bonds underperformed taxable bonds during the past 12 months. However, the taxable-equivalent yield for municipal bonds still remained attractive. As of March 31, 2007, the 10-year AAA municipal bond was yielding 3.77%, with a taxable equivalent of 5.80% (based on a 35% tax bracket), as compared to a 4.64% yield for the 10-year U.S. Treasury bond. The Fund benefited from bonds with maturities of 20 years and beyond, as the municipal yield curve continued its flattening bias. In addition, the Fund was helped by executing a few relative-value transactions whereby bonds were sold and replaced with either higher-yielding bonds of like quality or better-structured bonds. The Fund's performance was also helped by several holdings being pre-refunded to a call date, which resulted in an increase in price. Three of the Fund's best performing bonds were New York Thruway General Revenue (5.25%, due 1/1/27), Sales Tax Asset Receivable Corporation (NY 5.25%, due 01/01/27), and New York Environmental Facilities Corporation (4.75%, due 6/15/31). These issuers have benefited from strong demand for New York bonds and a 16% reduction in New York supply over the last year. As a result, New York prices have risen as spreads have tightened to the municipal generic yield curve. Among the Fund's performance detractors were Chicago Metropolitan Water Reclamation District 5.25% due 12/1/33 and Dallas TX Area Rapid Transit Authority 5.00% 12/1/32, which were added in the first quarter 2007. The bonds detracted from the performance of the fund due to the steeper yield curve and spreads. -------- Past performance is no guarantee of future results. Interest rates and bond prices typically move inversely to each other; therefore, as with any bond fund, the value of an investment in this Fund may go up or down in response to changes in interest rates. * The Lehman Brothers Municipal Bond Index is a broad market performance benchmark for the tax-exempt bond market. It is currently derived from approximately 40,000 issues. 92 SunAmerica Income Funds COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued) [CHART] Tax Exempt Insured Lehman Brothers Fund Class A/#/ Municipal Bond Index/+/ ------------------ ----------------------- 3/31/1997 $ 9,522.00 $10,000.00 4/30/1997 9,581.00 10,083.74 5/31/1997 9,725.00 10,235.38 6/30/1997 9,841.00 10,344.41 7/31/1997 10,151.00 10,630.96 8/31/1997 9,999.00 10,531.38 9/30/1997 10,124.00 10,656.36 10/31/1997 10,160.00 10,724.91 11/30/1997 10,212.00 10,787.97 12/31/1997 10,413.00 10,945.32 1/31/1998 10,505.00 11,058.29 2/28/1998 10,529.00 11,061.66 3/31/1998 10,501.00 11,071.38 4/30/1998 10,417.00 11,021.45 5/31/1998 10,618.00 11,195.92 6/30/1998 10,639.00 11,240.03 7/31/1998 10,651.00 11,268.22 8/31/1998 10,821.00 11,442.35 9/30/1998 10,973.00 11,584.94 10/31/1998 10,917.00 11,584.65 11/30/1998 10,938.00 11,625.32 12/31/1998 10,991.00 11,654.63 1/31/1999 11,119.00 11,793.17 2/28/1999 11,017.00 11,741.64 3/31/1999 10,978.00 11,757.93 4/30/1999 10,999.00 11,787.21 5/31/1999 10,895.00 11,718.97 6/30/1999 10,703.00 11,550.23 7/31/1999 10,749.00 11,592.28 8/31/1999 10,651.00 11,499.50 9/30/1999 10,637.00 11,504.24 10/31/1999 10,511.00 11,379.51 11/30/1999 10,636.00 11,500.63 12/31/1999 10,597.00 11,414.92 1/31/2000 10,494.00 11,365.29 2/29/2000 10,640.00 11,497.16 3/31/2000 10,846.00 11,748.55 4/30/2000 10,775.00 11,679.07 5/31/2000 10,683.00 11,618.36 6/30/2000 10,963.00 11,926.05 7/31/2000 11,120.00 12,092.09 8/31/2000 11,268.00 12,278.37 9/30/2000 11,201.00 12,214.62 10/31/2000 11,316.00 12,347.91 11/30/2000 11,393.00 12,441.25 12/31/2000 11,724.00 12,748.64 1/31/2001 11,815.00 12,875.03 2/28/2001 11,859.00 12,915.85 3/31/2001 11,940.00 13,031.60 4/30/2001 11,724.00 12,890.46 5/31/2001 11,868.00 13,029.16 6/30/2001 11,976.00 13,116.33 7/31/2001 12,158.00 13,310.81 8/31/2001 12,350.00 13,530.02 9/30/2001 12,298.00 13,484.65 10/31/2001 12,443.00 13,645.14 11/30/2001 12,273.00 13,530.29 12/31/2001 12,119.00 13,402.23 1/31/2002 12,295.00 13,634.65 2/28/2002 12,473.00 13,799.05 3/31/2002 12,164.00 13,528.54 4/30/2002 12,412.00 13,792.97 5/31/2002 12,483.00 13,876.82 6/30/2002 12,602.00 14,023.50 7/31/2002 12,801.00 14,203.77 8/31/2002 12,972.00 14,374.50 9/30/2002 13,308.00 14,689.47 10/31/2002 12,945.00 14,445.85 11/30/2002 12,841.00 14,385.85 12/31/2002 13,136.00 14,689.31 1/31/2003 13,054.00 14,652.16 2/28/2003 13,274.00 14,857.01 3/31/2003 13,269.00 14,865.90 4/30/2003 13,378.00 14,964.24 5/31/2003 13,678.00 15,314.62 6/30/2003 13,589.00 15,249.44 7/31/2003 13,088.00 14,715.75 8/31/2003 13,239.00 14,825.63 9/30/2003 13,622.00 15,261.36 10/31/2003 13,522.00 15,184.59 11/30/2003 13,644.00 15,342.97 12/31/2003 13,760.00 15,469.95 1/31/2004 13,813.00 15,558.52 2/29/2004 14,036.00 15,792.77 3/31/2004 13,924.00 15,737.62 4/30/2004 13,597.00 15,364.89 5/31/2004 13,525.00 15,309.33 6/30/2004 13,560.00 15,365.09 7/31/2004 13,715.00 15,567.10 8/31/2004 13,978.00 15,879.07 9/30/2004 14,036.00 15,963.48 10/31/2004 14,150.00 16,100.74 11/30/2004 14,015.00 15,968.11 12/31/2004 14,197.00 16,162.90 1/31/2005 14,347.00 16,314.11 2/28/2005 14,295.00 16,259.70 3/31/2005 14,167.00 16,157.29 4/30/2005 14,381.00 16,412.03 5/31/2005 14,496.00 16,527.97 6/30/2005 14,565.00 16,630.69 7/31/2005 14,457.00 16,555.37 8/31/2005 14,605.00 16,722.48 9/30/2005 14,483.00 16,609.83 10/31/2005 14,372.00 16,509.01 11/30/2005 14,409.00 16,588.24 12/31/2005 14,530.00 16,730.95 1/31/2006 14,538.00 16,776.11 2/28/2006 14,642.00 16,888.83 3/31/2006 14,511.00 16,772.22 4/30/2006 14,493.00 16,766.53 5/31/2006 14,535.00 16,841.30 6/30/2006 14,469.00 16,777.74 7/31/2006 14,627.00 16,977.46 8/31/2006 14,843.00 17,229.33 9/30/2006 14,941.00 17,349.11 10/31/2006 15,043.00 17,457.79 11/30/2006 15,178.00 17,603.50 12/31/2006 15,104.00 17,541.12 1/31/2007 15,052.00 17,496.32 2/28/2007 15,235.00 17,726.92 3/31/2007 15,182.00 17,683.19
Class A Class B Class C ------------------ ------------------ ------------------ Average Average Average Annual Cumulative Annual Cumulative Annual Cumulative Tax Exempt Insured Fund Return Return+ Return Return+ Return Return+ ----------------------- ------- ---------- ------- ---------- ------- ---------- 1 Year Return (0.36)% 4.63% (0.28)% 3.72% 2.98% 3.98% -------------------------------------------------------------------------------- 5 Year Return 3.53% 24.81% 3.46% 20.53% 3.84% 20.75% -------------------------------------------------------------------------------- 10 Year Return 4.26% 59.44% 4.20% 50.94% N/A N/A -------------------------------------------------------------------------------- Since Inception* 5.50% 229.33% 4.11% 72.26% 3.65% 32.46% --------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been included, return would be lower. * Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 06/1/99. # For the purposes of the graph, it has been assumed that the maximum sales charge, of 4.75% of offering price, was deducted from the initial $10,000 investment in the Fund. For the 12-month period ending March 31, 2007, SunAmerica Tax Exempt Insured Fund Class A returned (0.36)%, compared to 5.43% for the Lehman Brothers Municipal Bond Index. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) -------- Performance data quoted represents past performance and is no guarantee of future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund convert automatically to Class A shares approximately eight years after purchase. The fund's daily net asset values are not guaranteed and shares are not insured by the FDIC, the Federal Reserve Board or any other agency. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be higher or lower than the original cost. Current performance may be higher or lower than that shown. Performance as of the most recent month end is available at www.sunamericafunds.com. + The Lehman Brothers Municipal Bond Index is a broad market performance benchmark for the tax-exempt bond market. It is currently derived from approximately 40,000 issues. Indices are not managed and an investor cannot invest directly into an index. 93 [LOGO] AIG SunAmerica Mutual Funds Harborside Financial Center 3200 Plaza 5 Jersey City, NJ 07311-4992 Directors/Trustees VOTING PROXIES ON TRUST DISCLOSURE OF QUARTERLY Samuel M. Eisenstat PORTFOLIO SECURITIES PORTFOLIO HOLDINGS Peter A. Harbeck A description of the The Trust is required to Dr. Judith L. Craven policies and proce-dures file its com-plete William F. Devin that the Trust uses to schedule of portfolio Stephen J. Gutman determine how to vote holdings with the U.S. Jeffrey S. Burum proxies relating to Securities and Exchange William J. Shea secu-rities held in a Commission for its first Fund's portfolio which is and third fiscal quarters Officers available in the Trust's on Form N-Q. The Trust's Vincent M. Marra, Statement of Additional Forms N-Q are available President Information, may be on the U.S. Securities Donna M. Handel, ob-tained without charge and Exchange Commis-sion Treasurer upon request, by calling website at www.sec.gov. James Nichols, Vice (800) 858-8850. The You can also review and President in-formation is also obtain copies of the Timothy Pettee, Vice available from the EDGAR Forms N-Q at the U.S. President database on the U.S. Securities and Exchange Michael Cheah, Vice Secu-rities and Exchange Commission Public President Commission's website at Refer-ence Room in Cynthia Gibbons, Vice http://www.sec.gov. Washington DC President and Chief (information on the Compliance Officer DELIVERY OF SHAREHOLDER operation of the Public Gregory N. Bressler, DOCUMENTS Reference Room may be Chief Legal Officer The Funds have adopted a ob-tained by calling and Secretary policy that allows them 1-800-SEC-0330). Nori L. Gabert, Vice to send only one copy of President and a Fund's prospectus, PROXY VOTING RECORD ON Assistant Secretary proxy material, annual SUNAMERICA INCOME FUNDS Kathleen Fuentes, report and semi-annual Information regarding how Assistant Secretary report (the "shareholder the SunAmerica Income Corey A. Issing, documents") to Funds voted proxies Assistant Secretary shareholders with related to securities Gregory R. Kingston, multiple accounts held in the SunAmerica Vice President and residing at the same Income Funds during the Assistant Treasurer "household." This most recent twelve month Chris Okeke, Assistant practice is called period ended June 30 is Treasurer householding and reduces available, once filed Matthew J. Hackethal, Fund expenses, which with the U.S. Securities Anti-Money Laundering benefits you and other and Exchange Commission, Compliance Officer shareholders. Unless the without charge, upon Funds receive request, by calling Investment Adviser instructions to the (800) 858-8850 or on the con-trary, you will only U.S. Securities and AIG SunAmerica Asset Management Corp. receive one copy of the Exchange Commission's Harborside Financial shareholder documents. website at Center The Funds will continue http://www.sec.gov. 3200 Plaza 5 to household the Jersey City, NJ share-holder documents This report is submitted 07311-4992 indefinitely, until we solely for the general are instructed otherwise. information of Distributor If you do not wish to shareholders of the AIG SunAmerica Capital participate in Funds. Distribution of Services, Inc. householding please this report to persons Harborside Financial contact Shareholder other than shareholders Center Services at (800) of the Funds is 3200 Plaza 5 858-8850 ext. 6010 or authorized only in Jersey City, NJ send a written request con-nection with a 07311-4992 with your name, the name currently effective of your fund(s) and your pro-spectus, setting Shareholder Servicing account number(s) to AIG forth details of the Agent SunAmerica Mutual Funds Funds, which must precede AIG SunAmerica Fund c/o BFDS, P.O. Box or accom-pany this report. Services, Inc. 219186, Kansas City MO, Harborside Financial 64121-9186. We will Center resume individual 3200 Plaza 5 mailings for your account Jersey City, NJ within thirty (30) days 07311-4992 of receipt of your request. Custodian and Transfer Agent State Street Bank and Trust Company P.O. Box 419572 Kansas City, MO 64141-6572
94 [LOGO] Distributed by: AIG SunAmerica Capital Services, Inc. Harborside Financial Center 3200 Plaza 5 Jersey City, NJ 07311-4992 Investors should carefully consider the investment objectives, risks, charges and expenses of any mutual fund before investing. This and other important information is contained in the prospectus, which can be obtained from your financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext. 6003. Read the prospectus carefully before you invest. Funds distributed by AIG SunAmerica Capital Services, Inc. www.sunamericafunds.com INANN-3/07 Item 2. Code of Ethics SunAmerica Income Funds (the "registrant") has adopted a Code of Ethics applicable to its Principal Executive and Principal Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. Item 3. Audit Committee Financial Expert. The registrant's Board of Trustees has determined that William J. Shea, the Chairman of the Registrant's Audit Committee, qualifies as an audit committee financial expert, as defined in the instructions to Item 3(a) of Form N-CSR. Mr. Shea is considered to be "independent" for purposes of Item 3(a)(2) of Form N-CSR. Item 4. Principal Accountant Fees and Services. (a)--(d) Aggregate fees billed to the registrant for the last two fiscal years for services rendered by the registrant's principal accountant were as follows: 2006 2007 (a) Audit Fees ....................$ 151,472 $ 135,755 (b) Audit-Related Fees ............$ 49,316 $ 0 (c) Tax Fees ......................$ 56,470 $ 54,670 (d) All Other Fees ................$ 0 $ 0 Audit Fees include amounts related to the audit of the registrant's annual financial statements and services normally provided by the principal accountant in connection with statutory and regulatory filings. Audit-Related Fees principally include a SAS No. 100 review of the registrant's Semiannual Shareholder Report. Tax Fees principally include tax compliance, tax advice, tax planning and preparation of tax returns. Aggregate fees billed to the investment adviser and Adviser Affiliates (as defined below in Item 4(e)) that are required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X for the last two fiscal years for services rendered by the Registrant's principal accountant were as follows: 2006 2007 (b) Audit-Related Fees ............$ 0 $ 0 (c) Tax Fees ......................$ 0 $ 0 (d) All Other Fees ................$ 0 $ 0 (e) (1) The registrant's audit committee pre-approves all audit services provided by the registrant's principal accountant for the Registrant and all non-audit services provided by the registrant's principal accountant for the registrant, its investment adviser and any entity controlling, controlled by, or under common control with the investment adviser ("Adviser Affiliates") that provides ongoing services to the registrant, if the engagement by the investment adviser or Adviser Affiliate relates directly to the operations and financial reporting of the registrant. The audit committee has not presently established any pre-approval policies and procedures that permit the pre-approval of the above services other than by the full audit committee. Certain de minimis exceptions are allowed for non- audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation S-X as set forth in the Registrant's audit committee charter. (2) No services included in (b)-(d) above in connection with fees billed to the registrant or the investment adviser or Adviser Affiliates were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2- 01 of Regulation S-X. (f) Not Applicable. (g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant's principal accountant for non-audit services rendered to the registrant, its investment adviser, and Adviser Affiliates that provides ongoing services to the registrant for 2007 and 2006 were $537,120 and $607,911, respectively. (h) 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 last fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal contro1 over financial reporting. Item 12. Exhibits. (a) (1) Code of Ethics applicable to its Principal Executive and Principle Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406. Code of Ethics. (2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the Sarbanes- Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SunAmerica Income Funds By: /s/ Vincent M. Marra ------------------- Vincent M. Marra President Date: June 8, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Vincent M. Marra ------------------- Vincent M. Marra President Date: June 8, 2007 By: /s/ Donna M. Handel ------------------- Donna M. Handel Treasurer Date: June 8, 2007