<PAGE>
September 30, 1995
SUNAMERICA
INCOME FUNDS
Semiannual
Report
U.S. Government Securities
Federal Securities
Diversified Income
High Income
Tax Exempt Insured
[LOGO] SunAmerica
Asset Management
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER LETTER
DEAR SHAREHOLDER:
FIXED INCOME OVERVIEW
Over the past few months, interest rates experienced considerable volatility
as investors were subjected to a mixture of conflicting economic data
concerning the direction of the economy. As a result, interest rates remain
relatively unchanged. The primary reason for the inconsistent economic data is
that the economy is still adjusting to the excessive inventory accumulation
which occurred in the beginning of 1995. Production-based statistics, such as
the National Association Purchasing Managers Index, portrayed the economy as
having very little forward momentum due to the continuing imbalance between
total supply and total demand. To the contrary, there have been some signs of
growth as interest rate sensitive sectors, such as the housing sector,
responded to the drop in interest rates which occurred this year. Given this
backdrop, we anticipate Gross Domestic Product (GDP) growth of 2.5% to 3.0%
for the remainder of the year.
FEDERAL SECURITIES FUND
The fixed income market was unusually volatile over the last three months as
investors had difficulty in accessing the strength of the economy. The 30-year
Treasury bond began the quarter at 6.5%, rose to 7.0% and ended back at 6.5%.
Future economic growth should be moderate and inflation under control. The
Fund's 53% weighting in seasoned GNMAs, which are subject to less prepayment
risk than newer mortgage securities, augmented the performance as rates
declined. In addition, our strategy of focusing one third of the assets in
longer-term Treasuries has been advantageous. This exposure to Treasuries
offers the flexibility, in terms of liquidity, necessary to adjust the
portfolio quickly during volatile periods.
U.S. GOVERNMENT SECURITIES FUND
The U.S. Government Securities Fund performed well in the third quarter. Fixed
income instruments with maturities greater than ten years, generally
representative of premium and super-premium mortgage issues, were very
volatile but performed well. The different prepayment experience between new
issue mortgages and more seasoned issues was important in this rally. When
interest rates decline, mortgage prepayments tend to rise. This year the
prepayments were very heavy on new mortgages because homeowners have the
option of "no-fee" or at least low-cost refinancing. The Fund's strategy of
security allocation continues to help performance and the weightings provide
effective diversification. The treasury component captured the interest
rallies, both early in the quarter and then again in September. Discount bonds
and Adjustable Rate Mortgages appreciated as rates declined, yet not as much
as Treasuries due to prepayment fears. The premium and super-premium bonds
performed above average as the prepayment experience was much less than new
issue bonds as referenced earlier. These holdings still provide relatively
stable price performance with high levels of current income. The Fund is
structured to weather the volatility we believe will occur over the next
several months.
HIGH INCOME FUND
A growing economy with low inflation provided a backdrop for the high yield
bond market to begin a sustained rally in early 1995. This rally has
principally benefited the higher credit quality sectors of the high
1
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER LETTER
yield market. These sectors reacted to improving credit fundamentals and a
favorable interest rate outlook. We believe this economic environment will
continue into 1996. Although economic conditions are somewhat mixed, a
recession is unlikely until after the 1996 Presidential election. Therefore,
we have begun to upgrade the overall credit quality of the portfolio,
positioning it for an uneven economy. Exposure to more cyclical industries
have been reduced, and we are focusing on such sectors as telecommunications,
broadcasting, and health services.
DIVERSIFIED INCOME FUND
The allocation of the Diversified Income Fund as of September 30, 1995 was 52%
in corporate bonds, 24% in foreign bonds, 22% in U.S. Government securities
and 2% in cash. The Fund improved its relative performance over the last six
months after a disappointing start to the year. The improvement was attributed
to better performance in both the high yield and foreign securities
components. We positioned the high yield component in stable and predictable
industries in response to the current direction of the economy. The foreign
sector poses the most questions at this time. Bank defaults in Japan,
political instability in Quebec and the ongoing problems in the emerging
markets are prompting us to reduce foreign exposure. For example, we reduced
our holding in Mexico this past quarter and will look to reduce exposure in
other Latin countries. Overall we are still positive on the bond market and
especially on corporate and government bonds.
TAX EXEMPT INSURED FUND
The municipal bond market ended the third quarter on a strong note as yields
continued to fall in response to moderate GDP growth and the July interest
rate reduction by the Federal Reserve. The Fund performed well under these
conditions. One of the concerns that faced the municipal market in this
quarter was the ongoing debate with regard to changes in the current tax
structure. While there have been no new developments recently, the use of tax
reform as a "sound bite" by certain legislators seeking to differentiate
themselves from mainstream politics remains problematic for the retail
investor. As a result, municipal securities remain under-valued on an after-
tax basis versus almost all comparable taxable fixed income products. While
investors should continue to be vigilant in regards to changes in tax policy,
the municipal market has already priced these concerns into the current
interest rate structure and offers a tremendous benefit for those willing to
look beyond the political rhetoric involved. As additional issues on tax
reform in the municipal market are removed from the table, the Fund remains
very attractively positioned on a total return basis in the months ahead.
OUTLOOK
One ongoing trend over the last two years has been the absence of any
meaningful inflationary pressure. While there has been occasional uptick due
to commodity prices or seasonal pressures, the labor markets continue to
minimize inflation by offering productivity driven growth with negligible cost
pressures. Recent statistics confirm this trend with second quarter
productivity growing at almost 5.0%. This overall lack of inflationary
pressure indicates that the Federal Reserve has been successful in its efforts
to limit inflation while allowing the U.S. economy to grow at a moderate pace.
Due to the conflicting nature of this economic data, it did not surprise us
that the Federal Reserve did not alter monetary policy at September's Federal
Open Market Committee meeting. While the economy appears much stronger now in
comparison to July,
2
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER LETTER
when interest rates were reduced by .25%, the spread between Fed Funds and the
rate of inflation remains large on a historical basis. As a result, the
Federal Reserve will most likely lower rates in December by .25% in a
continuing effort to shift the current monetary policy to a more neutral
position.
/s/ P. Christopher Leary /s/ John C. Mooney
P. Christopher Leary John C. Mooney
Portfolio Manager Portfolio Manager
/s/ Howard B. Udis
Howard B. Udis
Portfolio Manager
3
<PAGE>
SUNAMERICA INCOME FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT FEDERAL DIVERSIFIED HIGH TAX EXEMPT
SECURITIES FUND SECURITIES FUND INCOME FUND INCOME FUND INSURED FUND
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment securities, at
value (identified cost
$628,615,491;
$72,162,586;
$138,445,575;
$162,270,603 and
$144,202,901,
respectively)............ $632,115,500 $72,634,691 $136,817,931 $160,193,536 $153,120,786
Short-term securities
(identified cost
$494,993; $199,871;
$196,520; $0 and
$600,000, respectively).. 494,930 199,871 196,578 -- 600,000
Joint repurchase
agreements............... 124,092,000 27,888,000 374,000 5,064,000 --
Cash...................... -- 638 907 943 --
Interest and dividends
receivable............... 6,596,414 468,542 3,128,801 3,876,982 2,647,676
Receivable for investments
sold..................... 6,546,493 -- 3,693,167 2,256,635 2,845,494
Receivable for shares of
beneficial interest sold. 431,675 8,841 203,554 15,413 725,337
Prepaid expenses.......... 36,756 28,700 4,939 11,816 21,717
Receivable from
distributor.............. 4,024 -- -- 8,150 --
Receivable for variation
margin on futures
contracts................ -- 41,250 20,625 -- --
------------ ----------- ------------ ------------ ------------
Total assets............. 770,317,792 101,270,533 144,440,502 171,427,475 159,961,010
------------ ----------- ------------ ------------ ------------
LIABILITIES:
Payable for securities
loaned................... 107,387,500 15,637,500 -- -- --
Payable for investments
purchased................ 17,495,756 7,640,275 3,477,008 6,449,645 426,657
Dividends payable......... 1,535,247 217,451 575,776 630,265 343,695
Payable for shares of
beneficial interest
redeemed................. 916,553 223,267 194,897 340,174 130,572
Distribution and service
maintenance fees payable. 459,569 38,547 107,320 113,336 60,798
Accrued expenses.......... 376,223 76,241 111,106 94,664 95,569
Investment advisory and
management fees payable.. 349,381 31,186 75,239 100,962 65,596
Payable to custodian bank. 74,648 -- -- -- 107,702
------------ ----------- ------------ ------------ ------------
Total liabilities........ 128,594,877 23,864,467 4,541,346 7,729,046 1,230,589
------------ ----------- ------------ ------------ ------------
Net assets............ $641,722,915 $77,406,066 $139,899,156 $163,698,429 $158,730,421
============ =========== ============ ============ ============
NET ASSETS WERE COMPOSED
OF:
Shares of beneficial
interest, $.01 par value. $ 754,052 $ 74,030 $ 326,533 $ 238,860 $ 128,353
Paid-in capital........... 674,343,363 78,556,017 172,016,459 208,985,591 161,849,254
------------ ----------- ------------ ------------ ------------
675,097,415 78,630,047 172,342,992 209,224,451 161,977,607
Accumulated undistributed
(distribution in excess
of) net investment
income................... 2,571,789 (111,431) 277,133 (199,674) (331,121)
Accumulated net realized
loss on investments,
futures contracts and
foreign currency......... (39,446,235) (1,581,519) (31,082,455) (43,249,281) (11,833,950)
Net unrealized
appreciation/depreciation
on investments........... 3,499,946 472,105 (1,627,586) (2,077,067) 8,917,885
Net unrealized
depreciation on foreign
currency, other assets
and liabilities.......... -- -- (4,194) -- --
Net unrealized
depreciation on futures
contracts................ -- (3,136) (6,734) -- --
------------ ----------- ------------ ------------ ------------
Net assets............ $641,722,915 $77,406,066 $139,899,156 $163,698,429 $158,730,421
============ =========== ============ ============ ============
CLASS A (UNLIMITED SHARES
AUTHORIZED):
Net asset value and
redemption price per
share
($124,735,002/14,662,736;
$45,537,778/4,358,985;
$15,792,482/3,693,708;
$40,475,701/5,912,639 and
$130,418,260/10,546,287
net assets and shares of
beneficial interest
issued and outstanding,
respectively). $ 8.51 $ 10.45 $ 4.28 $ 6.85 $ 12.37
Maximum sales charge
(4.75% of offering
price)................... 0.42 0.52 0.21 0.34 0.62
------------ ----------- ------------ ------------ ------------
Maximum offering price to
public................... $ 8.93 $ 10.97 $ 4.49 $ 7.19 $ 12.99
============ =========== ============ ============ ============
CLASS B (UNLIMITED SHARES
AUTHORIZED):
Net asset value, offering
and redemption price per
share
($516,987,913/60,742,444;
$31,868,288/3,044,048;
$124,106,674/28,959,590;
$123,222,728/17,973,386
and $28,312,161/2,289,028
net assets and shares of
beneficial interest
issued and outstanding,
respectively)............ $ 8.51 $ 10.47 $ 4.29 $ 6.86 $ 12.37
============ =========== ============ ============ ============
</TABLE>
See Notes to Financial Statements
4
<PAGE>
SUNAMERICA INCOME FUNDS
STATEMENT OF OPERATIONS -- For the six months ended September 30, 1995
(unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT FEDERAL DIVERSIFIED HIGH TAX EXEMPT
SECURITIES FUND SECURITIES FUND INCOME FUND INCOME FUND INSURED FUND
--------------- --------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest (net of
withholding taxes of
$1,145 on High Income
Fund)................... $28,527,788 $2,786,520 $ 7,758,455 $9,969,922 $5,028,545
Dividends................ -- -- -- 123,438 --
----------- ---------- ----------- ---------- ----------
Total investment income.. 28,527,788 2,786,520 7,758,455 10,093,360 5,028,545
----------- ---------- ----------- ---------- ----------
Expenses:
Investment advisory and
management fees......... 2,162,962 182,541 476,215 678,116 405,254
Distribution and service
maintenance fees--Class
A....................... 166,663 42,462 26,545 73,660 236,083
Distribution and service
maintenance fees--Class
B....................... 2,783,751 242,659 656,797 694,633 135,986
Transfer agent fees and
expenses--Class A....... 114,707 32,546 21,809 55,500 166,701
Transfer agent fees and
expenses--Class B....... 677,173 65,850 174,973 178,304 33,456
Custodian fees and
expenses................ 476,860 59,125 51,145 52,355 52,475
Interest expense......... 153,337 539 47,461 30,172 --
Trustees' fees and
expenses................ 35,159 4,058 8,020 9,381 8,451
Audit and tax consulting
fees.................... 26,165 8,710 10,890 12,985 11,395
Registration fees--Class
A....................... 7,426 5,911 3,468 5,559 11,066
Registration fees--Class
B....................... 23,106 4,745 10,806 12,623 4,645
Printing expense......... 19,335 2,685 5,165 6,165 3,300
Insurance expense........ 9,047 844 2,217 1,763 20,771
Legal fees and expenses.. 4,480 2,700 3,320 3,290 2,530
Miscellaneous expenses... 10,644 1,942 3,158 3,106 3,012
----------- ---------- ----------- ---------- ----------
Total expenses........... 6,670,815 657,317 1,501,989 1,817,612 1,095,125
Less: expenses waived by
distributor............. (19,047) -- -- (55,571) --
----------- ---------- ----------- ---------- ----------
Net expenses............. 6,651,768 657,317 1,501,989 1,762,041 1,095,125
----------- ---------- ----------- ---------- ----------
Net investment income..... 21,876,020 2,129,203 6,256,466 8,331,319 3,933,420
----------- ---------- ----------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments and
futures contracts........ 7,351,750 2,502,883 (5,800,541) (4,818,006) 473,589
Net change in unrealized
appreciation/depreciation
on investments........... 9,623,923 808,657 10,460,347 1,965,421 2,738,749
Net change in unrealized
appreciation/depreciation
on foreign currency,
other assets and
liabilities.............. -- -- (4,281) -- --
Net change in unrealized
appreciation/depreciation
on
futures contracts........ -- (3,136) (6,734) -- --
----------- ---------- ----------- ---------- ----------
Net realized and
unrealized gain (loss) on
investments and foreign
currency................. 16,975,673 3,308,404 4,648,791 (2,852,585) 3,212,338
----------- ---------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $38,851,693 $5,437,607 $10,905,257 $5,478,734 $7,145,758
=========== ========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
SUNAMERICA INCOME FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND FEDERAL SECURITIES FUND DIVERSIFIED INCOME FUND
------------------------------- ------------------------------- -------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, 1995 MARCH 31, SEPTEMBER 30, 1995 MARCH 31, SEPTEMBER 30, 1995 MARCH 31,
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995
------------------ ------------ ------------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income... $ 21,876,020 $ 53,583,054 $ 2,129,203 $ 4,623,379 $ 6,256,466 $ 16,024,304
Net realized gain (loss)
on investments and
futures contracts...... 7,351,750 (45,098,323) 2,502,883 (3,546,056) (5,800,541) (23,976,569)
Net realized loss on
foreign currency, other
assets and liabilities. -- -- -- -- -- (335,830)
Net change in unrealized
appreciation/depreciation
on investments......... 9,623,923 12,685,155 808,657 1,261,503 10,460,347 (1,943,292)
Net change in unrealized
appreciation/depreciation
on foreign currency,
other assets and
liabilities............ -- -- -- -- (4,281) 4,974
Net change in unrealized
appreciation/depreciation
on futures contracts... -- -- (3,136) -- (6,734) --
------------ ------------ ----------- ----------- ------------ ------------
Net increase (decrease)
in net assets resulting
from operations......... 38,851,693 21,169,886 5,437,607 2,338,826 10,905,257 (10,226,413)
------------ ------------ ----------- ----------- ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)....... (2,912,222) (4,146,499) (764,264) (106,644) (692,166) (1,404,506)
From net investment
income (Class B)....... (15,096,363) (35,858,561) (1,377,229) (4,158,525) (5,598,798) (14,176,998)
------------ ------------ ----------- ----------- ------------ ------------
Total dividends and
distributions to
shareholders............ (18,008,585) (40,005,060) (2,141,493) (4,265,169) (6,290,964) (15,581,504)
------------ ------------ ----------- ----------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7)... (47,298,555) (275,662,086) 2,219,684 (7,785,923) (11,306,555) (14,272,578)
------------ ------------ ----------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS........... (26,455,447) (294,497,260) 5,515,798 (9,712,266) (6,692,262) (40,080,495)
NET ASSETS:
Beginning of period...... 668,178,362 962,675,622 71,890,268 81,602,534 146,591,418 186,671,913
------------ ------------ ----------- ----------- ------------ ------------
End of period [including
undistributed
(distributions in excess
of) net investment
income for September 30,
1995 and March 31, 1995
of $2,571,789,
$(1,295,646),
$(111,431), $(99,141),
$277,133 and $311,631,
respectively]........... $641,722,915 $668,178,362 $77,406,066 $71,890,268 $139,899,156 $146,591,418
============ ============ =========== =========== ============ ============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
SUNAMERICA INCOME FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
HIGH INCOME FUND TAX EXEMPT INSURED FUND
------------------------------- -------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 1995 MARCH 31, SEPTEMBER 30, 1995 MARCH 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income.... $ 8,331,319 $ 16,493,914 $ 3,933,420 $ 9,127,948
Net realized gain (loss)
on investments and
futures contracts....... (4,818,006) (22,330,854) 473,589 (9,524,226)
Net realized loss on
foreign currency, other
assets and liabilities.. -- (105,175) -- --
Net change in unrealized
appreciation/depreciation
on investments.......... 1,965,421 1,183,178 2,738,749 11,417,085
Net change in unrealized
appreciation/depreciation
on foreign currency,
other assets and
liabilities............. -- 2,926 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
operations............... 5,478,734 (4,756,011) 7,145,758 11,020,807
------------ ------------ ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)........ (2,103,310) (3,535,939) (3,445,039) (7,962,945)
From net investment
income (Class B)........ (6,574,671) (13,736,255) (603,216) (1,089,883)
------------ ------------ ------------ ------------
Total dividends and
distributions to
shareholders............. (8,677,981) (17,272,194) (4,048,255) (9,052,828)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE
TRANSACTIONS (NOTE 7).... (26,721,092) 50,209,365 (8,306,916) (24,008,980)
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............ (29,920,339) 28,181,160 (5,209,413) (22,041,001)
NET ASSETS:
Beginning of period....... 193,618,768 165,437,608 163,939,834 185,980,835
------------ ------------ ------------ ------------
End of period [including
undistributed
(distributions in excess
of) net investment income
for September 30, 1995
and March 31, 1995 of
$(199,674), $146,988,
$(331,121) and
$(216,286),
respectively]............ $163,698,429 $193,618,768 $158,730,421 $163,939,834
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
7
<PAGE>
SUNAMERICA INCOME FUNDS
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
NET
GAIN
(LOSS)
ON DISTRI-
INVEST- BUTIONS
MENTS TOTAL DIVIDENDS DISTRI- IN EXCESS NET
NET ASSET (BOTH FROM FROM NET BUTIONS OF NET ASSET
VALUE, NET REALIZED INVEST- INVEST- FROM RETURN INVEST- TOTAL VALUE,
PERIOD BEGINNING INVESTMENT AND MENT MENT OTHER OF MENT DISTRI- END OF TOTAL
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME SOURCES CAPITAL INCOME BUTIONS PERIOD RETURN(2)
- ---------------- --------- ---------- ----------- ---------- --------- ------- ------- --------- ------- ------ ---------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/01/93-
3/31/94(3)..... $8.68 $0.28 $(0.34) $(0.06) $(0.14) $ -- $(0.01) $(0.08) $(0.23) $8.39 (0.68)%
3/31/95......... 8.39 0.61 (0.30) 0.31 (0.47) -- -- -- (0.47) 8.23 3.89
9/30/95(5)...... 8.23 0.32 0.21 0.53 (0.25) -- -- -- (0.25) 8.51 6.56
RATIO OF RATIO OF
NET EXPENSES NET
ASSETS TO INVESTMENT
END OF AVERAGE INCOME TO
PERIOD PERIOD NET AVERAGE PORTFOLIO
ENDED (000'S) ASSETS NET ASSETS TURNOVER
- ---------------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
10/01/93-
3/31/94(3)..... $ 76,586 1.35%(4)(7) 6.83%(4)(7) 35%
3/31/95......... 73,399 1.46(7) 7.50(7) 105
9/30/95(5)...... 124,735 1.44(4)(7) 7.29(4)(7) 88
NET
GAIN
(LOSS)
ON DISTRI-
INVEST- BUTIONS
MENTS TOTAL DIVIDENDS DISTRI- IN EXCESS NET
NET ASSET (BOTH FROM FROM NET BUTIONS OF NET ASSET
VALUE, NET REALIZED INVEST- INVEST- FROM RETURN INVEST- TOTAL VALUE,
PERIOD BEGINNING INVESTMENT AND MENT MENT OTHER OF MENT DISTRI- END OF TOTAL
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME SOURCES CAPITAL INCOME BUTIONS PERIOD RETURN(2)
- ---------------- --------- ---------- ----------- ---------- --------- ------- ------- --------- ------- ------ ---------
CLASS B
6/30/92(6)...... $8.90 $0.73 $(0.02) $0.71 $(0.57) $(0.16) $ -- $ -- $(0.73) $8.88 8.33%
6/30/93(6)...... 8.88 0.64 (0.17) 0.47 (0.44) (0.17) -- -- (0.61) 8.74 5.49
7/01/93-
3/31/94........ 8.74 0.43 (0.40) 0.03 (0.24) -- (0.01) (0.13) (0.38) 8.39 0.25
3/31/95......... 8.39 0.56 (0.30) 0.26 (0.41) -- -- -- (0.41) 8.24 3.25
9/30/95(5)...... 8.24 0.28 0.22 0.50 (0.23) -- -- -- (0.23) 8.51 6.07
RATIO OF RATIO OF
NET EXPENSES NET
ASSETS TO INVESTMENT
END OF AVERAGE INCOME TO
PERIOD PERIOD NET AVERAGE PORTFOLIO
ENDED (000'S) ASSETS NET ASSETS TURNOVER
- ---------------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
6/30/92(6)...... $1,075,668 1.92% 8.21% 54%
6/30/93(6)...... 1,259,845 1.82(7) 7.27(7) 73
7/01/93-
3/31/94........ 886,089 1.95(4)(7) 6.61(4)(7) 35
3/31/95......... 594,779 2.15(7) 6.80(7) 105
9/30/95(5)...... 516,988 2.14(4) 6.61(4) 88
</TABLE>
- --------------------------------------------------------------------------------
FEDERAL SECURITIES FUND
<TABLE>
<CAPTION>
NET
GAIN
(LOSS)
ON DISTRI-
INVEST- BUTIONS
MENTS TOTAL DIVIDENDS DISTRI- IN EXCESS NET NET
NET ASSET NET (BOTH FROM FROM NET BUTIONS OF NET ASSET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM INVEST- TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL MENT DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS INCOME BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- ------- ----------- ---------- --------- ------- --------- ------- ------ --------- --------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/11/93-
3/31/94(3) $10.58 $0.22(1) $(0.34) $(0.12) $(0.23) $(0.01) $ -- $(0.24) $10.22 (1.14)% $ 592
3/31/95......... 10.22 0.60(1) (0.20) 0.40 (0.64) -- -- (0.64) 9.98 4.18 6,259
9/30/95(5)...... 9.98 0.34(1) 0.45 0.79 (0.32) -- -- (0.32) 10.45 8.00 45,538
RATIO OF RATIO OF
EXPENSES NET
TO INVESTMENT
AVERAGE INCOME TO
PERIOD NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- ---------------- ------------- -------------- ---------
<S> <C> <C> <C>
10/11/93-
3/31/94(3) 1.39%(4)(7) 4.68%(4)(7) 68%
3/31/95......... 1.40(7) 6.90(7) 267
9/30/95(5)...... 1.40(4) 6.10(4) 203
NET
GAIN
(LOSS)
ON DISTRI-
INVEST- BUTIONS
MENTS TOTAL DIVIDENDS DISTRI- IN EXCESS NET NET
NET ASSET NET (BOTH FROM FROM NET BUTIONS OF NET ASSET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM INVEST- TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL MENT DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS INCOME BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- ------- ----------- ---------- --------- ------- --------- ------- ------ --------- --------
CLASS B
3/31/92......... $10.35 $0.77 $ 0.29 $ 1.06 $(0.77) $ -- $ -- $(0.77) $10.64 10.57% $120,454
3/31/93......... 10.64 0.70 0.14 0.84 (0.64) -- -- (0.64) 10.84 8.06 121,267
3/31/94......... 10.84 0.62(1) (0.71) (0.09) (0.49) (0.03) (0.01) (0.53) 10.22 (0.89) 81,011
3/31/95......... 10.22 0.63(1) (0.26) 0.37 (0.58) -- -- (0.58) 10.01 3.81 65,631
9/30/95(5)...... 10.01 0.28(1) 0.47 0.75 (0.29) -- -- (0.29) 10.47 7.56 31,868
RATIO OF RATIO OF
EXPENSES NET
TO INVESTMENT
AVERAGE INCOME TO
PERIOD NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- ---------------- ------------- -------------- ---------
<S> <C> <C> <C>
3/31/92......... 1.90% 7.32% 57%
3/31/93......... 1.85 6.36 97
3/31/94......... 1.98 5.79 68
3/31/95......... 2.03 6.33 267
9/30/95(5)...... 2.01(4) 5.72(4) 203
</TABLE>
- ------------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Unaudited
(6) Pursuant to a reorganization of the SunAmerica Mutual Funds, the Fund
changed its fiscal year end to March 31
(7) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
6/30/93 3/31/94 3/31/95 9/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government
Securities Fund
Class A -- .10% .07% .04%
U.S. Government
Securities Fund
Class B .02% .06% .03% --
Federal Securities
Fund Class A -- 6.74% 1.26% --
</TABLE>
See Notes to Financial Statements
8
<PAGE>
SUNAMERICA INCOME FUNDS
FINANCIAL HIGHLIGHTS
DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
NET GAIN
(LOSS) ON RATIO OF RATIO OF
INVESTMENTS NET NET EXPENSES NET
NET ASSET (BOTH DIVIDENDS ASSET ASSETS TO INVESTMENT
VALUE, NET REALIZED TOTAL FROM FROM NET VALUE, END OF AVERAGE INCOME TO
BEGINNING INVESTMENT AND INVESTMENT INVESTMENT END OF TOTAL PERIOD NET AVERAGE
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS NET ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ----------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/05/93 -
10/31/93(2)(6). $5.05 $0.02(3) $0.01 $0.03 $(0.01) $5.07 0.65 % $ 762 1.40%(4) 8.92%(4)
11/01/93 -
3/31/94........ 5.07 0.13(3) (0.23) (0.10) (0.18) 4.79 (2.10) 12,600 1.42 (4)(9) 8.25 (4)(9)
3/31/95......... 4.79 0.43(3) (0.66) (0.23) (0.42) 4.14 (5.10) 14,213 1.59 9.58
9/30/95(5)...... 4.14 0.20(3) 0.13 0.33 (0.19) 4.28 8.09 15,792 1.52 (4) 9.07 (4)
PORTFOLIO
PERIOD ENDED TURNOVER
- ----------------- ---------
<S> <C>
10/05/93 -
10/31/93(2)(6). 249%
11/01/93 -
3/31/94........ 48
3/31/95......... 160
9/30/95(5)...... 70
NET GAIN
(LOSS) ON RATIO OF RATIO OF
INVESTMENTS NET NET EXPENSES NET
NET ASSET (BOTH DIVIDENDS ASSET ASSETS TO INVESTMENT
VALUE, NET REALIZED TOTAL FROM FROM NET VALUE, END OF AVERAGE INCOME TO
BEGINNING INVESTMENT AND INVESTMENT INVESTMENT END OF TOTAL PERIOD NET AVERAGE
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS NET ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ----------
CLASS B
10/31/92(6)(7).. $5.21 $0.42 $(0.41) $0.01 $(0.40) $4.82 0.16 % $ 35,409 0.74%(9) 7.81%(9)
10/31/93(6)(7).. 4.82 0.38(3) 0.24 0.62 (0.37) 5.07 13.35 102,519 1.78 (9) 7.53 (9)
11/01/93 -
3/31/94........ 5.07 0.15(3) (0.27) (0.12) (0.16) 4.79 (2.52) 174,072 2.11 (4) 7.48 (4)
3/31/95......... 4.79 0.40(3) (0.65) (0.25) (0.39) 4.15 (5.46) 132,378 2.12 8.98
9/30/95(5)...... 4.15 0.18(3) 0.14 0.32 (0.18) 4.29 7.76 124,107 2.11 (4) 8.48 (4)
PORTFOLIO
PERIOD ENDED TURNOVER
- ----------------- ---------
<S> <C>
10/31/92(6)(7).. 191%
10/31/93(6)(7).. 249
11/01/93 -
3/31/94........ 48
3/31/95......... 160
9/30/95(5)...... 70
</TABLE>
- --------------------------------------------------------------------------------
HIGH INCOME FUND
<TABLE>
<CAPTION>
NET GAIN
(LOSS) ON RATIO OF RATIO OF
INVESTMENTS NET NET EXPENSES NET
NET ASSET (BOTH DIVIDENDS ASSET ASSETS TO INVESTMENT
VALUE, NET REALIZED TOTAL FROM FROM NET VALUE, END OF AVERAGE INCOME TO
BEGINNING INVESTMENT AND INVESTMENT INVESTMENT END OF TOTAL PERIOD NET AVERAGE
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS NET ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ----------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/92(8)...... $6.84 $0.95 $1.28 $2.23 $(1.00) $8.07 35.27% $ 22,607 1.57% 13.19%
3/31/93(8)...... 8.07 0.95 0.18 1.13 (1.08) 8.12 15.05 30,715 1.77 11.08
3/31/94(8)...... 8.12 0.87(3) (0.14) 0.73 (0.82) 8.03 9.14 33,724 1.72 10.34
3/31/95......... 8.03 0.78(3) (1.03) (0.25) (0.83) 6.95 (2.91) 40,585 1.61 10.82
9/30/95(5)...... 6.95 0.34(3) (0.09) 0.25 (0.35) 6.85 3.60 40,476 1.52 (4) 9.62 (4)
PORTFOLIO
PERIOD ENDED TURNOVER
- ---------------- ---------
<S> <C>
3/31/92(8)...... 208%
3/31/93(8)...... 232
3/31/94(8)...... 290
3/31/95......... 196
9/30/95(5)...... 114
NET GAIN
(LOSS) ON RATIO OF RATIO OF
INVESTMENTS NET NET EXPENSES NET
NET ASSET (BOTH DIVIDENDS ASSET ASSETS TO INVESTMENT
VALUE, NET REALIZED TOTAL FROM FROM NET VALUE, END OF AVERAGE INCOME TO
BEGINNING INVESTMENT AND INVESTMENT INVESTMENT END OF TOTAL PERIOD NET AVERAGE
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS NET ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ----------
CLASS B
10/01/93 -
3/31/94(2)..... $8.18 $0.38(3) $(0.17) $ 0.21 $(0.35) $8.04 2.46% $131,713 2.15%(4)(9) 9.07%(4)(9)
3/31/95......... 8.04 0.73(3) (1.02) (0.29) (0.79) 6.96 (3.42) 153,034 2.16 (9) 10.26 (9)
9/30/95(5)...... 6.96 0.32(3) (0.09) 0.23 (0.33) 6.86 3.32 123,223 2.08 (4)(9) 9.08 (4)(9)
PORTFOLIO
PERIOD ENDED TURNOVER
- ---------------- ---------
<S> <C>
10/01/93 -
3/31/94(2)..... 290%
3/31/95......... 196
9/30/95(5)...... 114
</TABLE>
- ------------
(1)Total return is not annualized and does not reflect sales load
(2)Commencement of sale of respective class of shares
(3)Calculated based upon average shares outstanding
(4)Annualized
(5)Unaudited
(6)Pursuant to a reorganization of the SunAmerica Mutual Funds, the Fund
changed its fiscal year end to March 31
(7)Restated to reflect 1.889180183-for-1 stock split effective December 16,
1992
(8)Restated to reflect 1.174107276-for-1 stock split effective October 1, 1993
(9)Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
10/31/92 10/31/93 3/31/94 3/31/95 9/30/95
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Diversified Income Fund Class A -- -- .62% -- --
Diversified Income Fund Class B 1.25% .38% -- -- --
High Income Fund Class A -- -- .08% .08% .08%
</TABLE>
See Notes to Financial Statements
9
<PAGE>
SUNAMERICA INCOME FUNDS
FINANCIAL HIGHLIGHTS
TAX EXEMPT INSURED FUND
<TABLE>
<CAPTION>
NET GAIN
(LOSS) ON RATIO OF
INVESTMENTS NET NET EXPENSES
NET ASSET (BOTH DIVIDENDS ASSET ASSETS TO
VALUE, NET REALIZED TOTAL FROM FROM NET VALUE, END OF AVERAGE
BEGINNING INVESTMENT AND INVESTMENT INVESTMENT END OF TOTAL PERIOD NET
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- --------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/92(2)..... $12.41 $0.79 $(0.07) $ 0.72 $(0.80)(3) $12.33 5.93% $110,364 1.25%
10/31/93(2)..... 12.33 0.70(4) 0.50 1.20 (0.74) 12.79 9.95 191,350 1.10 (8)
11/01/93-
3/31/94........ 12.79 0.26(4) (0.84) (0.58) (0.26) 11.95 (4.61) 165,216 1.28 (5)(8)
3/31/95......... 11.95 0.63(4) 0.17 0.80 (0.62) 12.13 6.97 137,955 1.20 (8)
9/30/95(6)...... 12.13 0.30(4) 0.25 0.55 (0.31) 12.37 4.59 130,418 1.24 (5)
RATIO OF
NET
INVESTMENT
INCOME TO
AVERAGE PORTFOLIO
PERIOD ENDED NET ASSETS TURNOVER
- ----------------- --------------- ---------
<S> <C> <C>
10/31/92(2)..... 6.26% 21%
10/31/93(2)..... 5.56 (8) 26
11/01/93-
3/31/94........ 4.99 (5)(8) 52
3/31/95......... 5.32 (8) 162
9/30/95(6)...... 4.97 (5) 21
NET GAIN
(LOSS) ON RATIO OF
INVESTMENTS NET NET EXPENSES
NET ASSET (BOTH DIVIDENDS ASSET ASSETS TO
VALUE, NET REALIZED TOTAL FROM FROM NET VALUE, END OF AVERAGE
BEGINNING INVESTMENT AND INVESTMENT INVESTMENT END OF TOTAL PERIOD NET
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- --------
CLASS B
10/04/93-
10/31/93(2)(7). $12.84 $0.02(4) $(0.05) $(0.03) $(0.02) $12.79 (0.24)% $ 4,922 1.96%(5)
11/01/93-
3/31/94........ 12.79 0.22(4) (0.83) (0.61) (0.23) 11.95 (4.84) 20,765 2.12 (5)
3/31/95......... 11.95 0.54(4) 0.19 0.73 (0.54) 12.14 6.29 25,985 1.92
9/30/95(6)...... 12.14 0.26(4) 0.24 0.50 (0.27) 12.37 4.17 28,312 1.91 (5)
RATIO OF
NET
INVESTMENT
INCOME TO
AVERAGE PORTFOLIO
PERIOD ENDED NET ASSETS TURNOVER
- ----------------- --------------- ---------
<S> <C> <C>
10/04/93-
10/31/93(2)(7). 4.09%(5) 26%
11/01/93-
3/31/94........ 4.17 (5) 52
3/31/95......... 4.60 162
9/30/95(6)...... 4.30 (5) 21
</TABLE>
- ------------
(1)Total return is not annualized and does not reflect sales load
(2)Pursuant to a reorganization of the SunAmerica Mutual Funds, the Fund
changed its fiscal year end to March 31
(3)Prior year amounts reclassified to net investment income
(4)Calculated based upon average shares outstanding
(5)Annualized
(6)Unaudited
(7)Commencement of sale of respective class of shares
(8)Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
10/31/93 3/31/94 3/31/95
-------- ------- -------
<S> <C> <C> <C>
Tax Exempt
Insured Fund
Class A .10% .11% .04%
</TABLE>
See Notes to Financial Statements
10
<PAGE>
SUNAMERICA U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- ---------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP.--27.0%
6.50% due 3/15/24.................................. $ 9,624 $ 8,989,576
7.50% due 2/01/22 - 6/01/25........................ 24,909 25,464,948
7.81% due 5/15/06(2)............................... 5,000 4,550,063
8.50% due 6/01/01 - 1/01/02........................ 63 65,234
9.00% due 1/01/02 - 10/01/16....................... 681 707,671
9.25% due 9/01/08 - 3/01/17........................ 653 679,670
9.50% due 9/01/16 - 9/01/21........................ 8,431 8,886,658
10.00% due 10/01/02 - 1/01/17...................... 27,812 30,186,763
10.00% due 5/01/05(1).............................. 202 204,947
10.50% due 6/01/00 - 1/01/21....................... 1,112 1,209,058
10.75% due 9/01/00 - 1/01/15....................... 287 311,240
11.00% due 9/01/00 - 6/01/17....................... 2,889 3,169,003
11.25% due 11/01/13................................ 89 97,365
11.50% due 11/01/01 - 7/01/19...................... 1,387 1,530,157
11.75% due 8/01/11 - 10/01/14...................... 195 214,737
12.00% due 7/01/99 - 7/01/20....................... 17,805 19,741,658
12.13% due 9/01/11................................. 962 1,068,048
12.25% due 10/01/99 - 7/01/15...................... 1,319 1,460,006
12.50% due 8/01/99 - 7/01/19....................... 29,271 32,630,141
12.72% due 2/15/21(1)(2)........................... 221 200,413
12.75% due 2/01/00 - 6/01/15....................... 1,438 1,600,265
13.00% due 5/01/00 - 12/01/15...................... 15,434 17,230,899
13.25% due 11/01/10 - 5/01/15...................... 1,563 1,741,716
13.50% due 11/01/01 - 2/15/19...................... 8,709 9,770,125
13.75% due 7/01/11 - 8/01/14....................... 99 110,648
14.00% due 10/01/09 - 4/01/16...................... 857 961,123
14.50% due 1/01/10 - 5/01/13....................... 157 175,633
------------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORP.
(cost $170,130,557)................................ 172,957,765
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--15.8%
6.00% due 9/01/00(1)............................... 9,759 9,588,795
6.00% due 11/01/03 - 12/01/99...................... 7,193 7,045,453
6.50% due 8/01/99 - 1/01/01........................ 8,018 7,975,789
8.00% due 12/01/22 - 1/01/23....................... 17,907 18,315,579
8.50% due 9/25/20(1)............................... 600 600,563
9.00% due 12/01/97 - 5/01/07....................... 3,649 3,811,386
9.25% due 12/01/10 - 1/01/17....................... 478 501,004
10.25% due 6/01/14 - 7/01/16....................... 120 130,716
10.50% due 3/01/15................................. 404 444,208
11.00% due 3/01/09 - 8/01/20....................... 1,931 2,146,033
11.50% due 5/01/00 - 3/01/14....................... 892 949,584
11.75% due 3/01/15 - 11/01/15...................... 61 68,539
12.00% due 9/01/07 - 4/01/19....................... 15,897 17,774,956
12.25% due 9/01/99 - 10/01/15...................... 2,282 2,545,965
12.50% due 12/01/97 - 9/01/15...................... 9,414 10,490,333
12.75% due 9/01/12 - 9/01/15....................... 861 960,699
13.00% due 10/01/09 - 9/01/16...................... 12,029 13,463,356
13.25% due 10/01/12 - 2/01/15...................... 327 365,358
13.50% due 10/01/10 - 2/01/17...................... 2,227 2,500,308
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION--(CONTINUED)
13.75% due 11/01/11 - 10/01/14.................... $ 196 $ 220,443
14.00% due 10/01/14............................... 523 592,419
14.50% due 7/01/11................................ 295 333,567
14.75% due 7/01/12................................ 137 161,865
15.00% due 10/01/12 - 2/01/13..................... 170 193,075
15.50% due 10/01/12............................... 93 106,315
------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
(cost $101,085,329)............................... 101,286,308
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION--27.3%
6.00% due TBA(1)(3)............................... 12,500 12,523,438
6.50% due 12/15/98 - 10/15/04..................... 6,816 6,685,897
7.00% due 11/15/22 - 10/15/23..................... 22,361 22,109,933
7.50% due 1/15/17 - 10/15/23...................... 29,279 29,576,195
8.50% due 6/15/01 - 11/15/20...................... 16,880 17,607,096
9.00% due 5/15/01 - 12/15/20...................... 11,820 12,435,819
9.50% due 2/15/98 - 7/15/20....................... 4,181 4,413,686
10.00% due 3/15/98 - 5/15/19...................... 2,995 3,171,737
10.25% due 7/15/15................................ 51 56,520
10.50% due 11/15/97 - 6/15/21..................... 11,607 12,677,275
11.00% due 2/15/98 - 4/15/21...................... 8,085 8,951,493
11.50% due 3/15/98 - 1/15/21...................... 10,453 11,804,073
11.75% due 7/15/13 - 11/15/15..................... 1,270 1,408,525
12.00% due 9/15/98 - 10/15/19..................... 4,922 5,517,398
12.25% due 8/15/13 - 7/15/15...................... 1,325 1,479,334
12.50% due 4/15/10 - 3/15/16...................... 9,984 11,327,496
12.75% due 10/15/13............................... 6 6,271
13.00% due 11/15/10 - 6/15/15..................... 5,228 5,881,612
13.25% due 7/15/14 - 11/15/14..................... 133 146,578
13.50% due 5/15/10 - 5/15/15...................... 3,632 4,094,099
14.00% due 5/15/11 - 12/15/14..................... 1,872 2,107,839
15.00% due 6/15/11 - 2/15/13...................... 1,025 1,169,390
16.00% due 12/15/11 - 7/15/12..................... 323 370,131
------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(cost $178,499,855)............................... 175,521,835
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION II--1.9%
10.00% due 9/20/16 - 4/20/19...................... 28 30,427
11.00% due 7/20/00................................ 42 43,533
11.50% due 8/20/13 - 7/20/20...................... 1,660 1,840,554
11.75% due 11/20/14 - 2/20/16..................... 711 781,973
12.00% due 10/20/13 - 5/20/15..................... 919 1,011,627
12.25% due 2/20/14 - 10/20/15..................... 141 156,381
12.50% due 9/20/13 - 1/20/15...................... 4,913 5,459,786
</TABLE>
11
<PAGE>
SUNAMERICA U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION II--(CONTINUED)
12.75% due 11/20/13--7/20/15...................... $ 215 $ 237,073
13.00% due 9/20/13--10/20/14...................... 2,248 2,485,345
13.25% due 8/20/14--5/20/15....................... 89 97,826
13.50% due 10/20/14............................... 79 86,721
------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(cost $12,375,823)................................ 12,231,246
------------
U.S. FEDERAL AGENCY--4.4%
United States Department Veteran Affairs
6.00% due 5/15/07................................. 16,504 16,167,649
6.50% due 10/15/05................................ 11,724 11,705,929
7.75% due 9/15/04................................. 142 141,840
------------
TOTAL U.S. FEDERAL AGENCY
(COST $28,946,971)................................ 28,015,418
------------
U.S. TREASURY NOTES--10.7%
5.75% due 9/30/97................................. 5,000 4,992,950
6.50% due 5/15/05................................. 30,000 30,689,100
7.25% due 8/15/04................................. 10,000 10,692,200
7.88% due 11/15/04................................ 20,000 22,240,600
------------
TOTAL U.S. TREASURY NOTES
(COST $64,756,175)................................ 68,614,850
------------
U.S. TREASURY BONDS--11.4%
6.88% due 8/15/25................................. 25,000 26,269,500
7.63% due 2/15/25................................. 41,700 47,218,578
------------
TOTAL U.S. TREASURY BONDS
(cost $72,820,781)................................ 73,488,078
------------
TOTAL INVESTMENT SECURITIES--98.5%
(cost $628,615,491)............................... 632,115,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SHORT-TERM SECURITIES--0.1%
United States Treasury Bills 5.38% due 12/07/95
(cost $494,993)................................ $ 494 $ 494,930
-------------
REPURCHASE AGREEMENTS--19.3%
Joint Repurchase Agreement Account (Note 3)..... 35,000 35,000,000
Joint Repurchase Agreement Account (Note 3)..... 89,092 89,092,000
-------------
TOTAL REPURCHASE AGREEMENTS
(cost $124,092,000)............................. 124,092,000
-------------
TOTAL INVESTMENTS--
(cost $753,202,484*)............................ 117.9% 756,702,430
Liabilities in excess of other assets............ (17.9) (114,979,515)
------ -------------
NET ASSETS-- 100.0% $ 641,722,915
====== =============
</TABLE>
- -------
* See Note 6
TBA--Securities purchased on a forward commitment basis with an approximate
principal amount and no definitive maturity date. The actual principal
amount and maturity date will be determined upon settlement.
(1) Fair valued security, see Note 2
(2) Inverse floater
(3) Adjustable rate mortgage security, rate as of September 30, 1995
See Notes to Financial Statements
12
<PAGE>
SUNAMERICA FEDERAL SECURITIES FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP.--11.1%
7.50% due 2/01/23 - 6/01/25........................ $ 4,690 $ 4,721,878
10.00% due 1/01/17................................. 3,517 3,809,565
12.50% due 9/30/13................................. 28 29,585
13.50% due 2/01/14................................. 8 8,489
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORP.
(cost $8,579,971).................................. 8,569,517
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.5%
6.00% due 9/01/00(1) .............................. 1,952 1,917,759
15.50% due 10/01/12................................ 12 13,517
-----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
(cost $1,920,956).................................. 1,931,276
-----------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION--50.9%
6.00% due TBA(1)(2) ............................... 2,500 2,504,688
7.00% due 3/15/23 - 12/15/99....................... 13,734 13,579,771
8.50% due 3/15/17 - 9/15/24........................ 14,288 14,894,481
9.00% due 6/15/16 - 5/15/17........................ 5,257 5,585,427
11.00% due 11/15/15................................ 591 662,008
11.25% due 7/15/15 - 8/15/15....................... 125 137,157
12.00% due 5/15/15................................. 117 132,058
12.25% due 9/15/13 - 7/15/15....................... 942 1,051,594
12.50% due 11/15/10 - 6/15/15...................... 219 248,280
13.00% due 12/15/10 - 4/15/15...................... 410 462,898
13.25% due 10/15/13................................ 21 22,766
13.50% due 5/15/11 - 10/15/14...................... 99 111,451
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(cost $39,242,204)................................. 39,392,579
-----------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION II--2.4%
10.00% due 10/20/13 - 3/20/17...................... 645 692,934
11.00% due 12/20/13................................ 96 105,352
12.00% due 3/20/15 - 1/20/16....................... 437 481,277
12.25% due 12/20/14 - 10/20/15..................... 470 520,776
13.00% due 6/20/14................................. 18 20,011
13.75% due 9/20/14................................. 15 16,531
-----------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION II
(cost $1,759,649).................................. 1,836,881
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
U.S. TREASURY BONDS--20.3%
6.88% due 8/15/25
(cost $15,520,312)............................... $ 15,000 $15,761,700
-----------
U.S. TREASURY NOTES--6.6%
5.75% due 9/30/97
(cost $5,139,494)................................ 5,150 5,142,738
-----------
TOTAL INVESTMENT SECURITIES--93.8%
(cost $72,162,586)................................ 72,634,691
-----------
SHORT-TERM SECURITIES--0.3%
United States Treasury Bills
5.81% due 10/05/95
(cost $199,871)................................... 200 199,871
-----------
REPURCHASE AGREEMENTS--36.0%
Joint Repurchase Agreement Account (Note 3)(3) ... 12,200 12,200,000
Joint Repurchase Agreement Account (Note 3)....... 15,688 15,688,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $27,888,000)................................ 27,888,000
-----------
TOTAL INVESTMENTS--
(cost $100,250,457*).............................. 130.1% 100,722,562
Liabilities in excess of other assets.............. (30.1) (23,316,496)
----------- -----------
NET ASSETS-- 100.0% $77,406,066
=========== ===========
</TABLE>
- -------
* See Note 6
TBA--Securities purchased on a forward commitment basis with an approximate
principal amount and no definitive maturity date. The actual principal and
maturity date will be determined upon settlement.
(1) Fair valued security, see Note 2
(2) Adjustable rate mortgage security, rate as of September 30, 1995
(3) The security or a portion thereof represents collateral for the following
open futures contracts:
<TABLE>
<CAPTION>
VALUE AS OF
NUMBER OF DESCRIPTION AND SEPTEMBER 30, UNREALIZED
CONTRACTS EXPIRATION DATE 1995 LOSS
--------- ------------------------- ------------- ----------
<C> <S> <C> <C> <C>
U.S. Treasury Long Bond-
30 Dec. 95 $3,430,313 $(3,136)
</TABLE>
See Notes to Financial Statements
13
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS & NOTES--51.7%
AIRLINE--0.6%
USAir, Inc.
Sr. Notes
10.00% due 7/01/03................................ $ 1,000 $ 825,000
------------
BROADCASTING--3.1%
NWCG Holding Corp.
Sr. Disc. Notes, Series B
zero coupon due 6/15/99........................... 5,000 3,325,000
Sinclair Broadcast Group, Inc.
Sr. Subordinated Notes
10.00% due 9/30/05................................ 1,000 1,021,875
------------
4,346,875
------------
BUSINESS SERVICES--2.4%
Katz Corp.
Sr. Subordinated Notes
12.75% due 11/15/02............................... 3,000 3,277,500
------------
CABLE--1.8%
International CableTel, Inc.
Sr. Deferred Coupon
zero coupon due 4/15/05(3)........................ 1,000 595,000
United International Holdings, Inc.
Sr. Disc. Notes
zero coupon due 11/15/99(6)....................... 3,000 1,845,000
------------
2,440,000
------------
CHEMICALS--3.4%
Arcadian Partners L.P.
Sr. Notes, Series B
10.75% due 5/01/05................................ 1,000 1,050,000
LaRoche Industries, Inc.
Sr. Subordinated Notes
13.00% due 8/15/04................................ 2,000 2,095,000
OSI Specialties Holdings Co.
Sr. Secured Disc. Debentures, Series B
zero coupon due 4/15/04(3)........................ 2,000 1,640,000
------------
4,785,000
------------
COMPUTERS--1.6%
Unisys Corp.
Credit Sensitive Notes
13.50% due 7/01/97................................ 2,000 2,165,000
------------
CONTAINERS--0.7%
Portola Packaging, Inc.
Sr. Notes
10.75% due 10/01/05............................... 1,000 1,007,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
FINANCE--2.8%
CSFB Ltd.
Sr. Secured Notes, Series A
7.00% due 11/15/05(2)(8).......................... $ 4,000 $ 3,950,000
------------
FINANCIAL GOODS & SERVICES--1.5%
Olympic Financial Ltd.
Sr. Notes
13.00% due 5/01/00................................ 2,000 2,135,000
------------
FOOD & BEVERAGES--0.7%
Specialty Foods Corp.
Sr. Notes, Series A
11.13% due 10/01/02(2)............................ 1,000 980,000
------------
FOREST PRODUCTS--2.2%
Crown Paper Co.
Sr. Subordinated Notes
11.00% due 9/01/05................................ 1,000 985,000
Stone Container Corp.
Sr. Notes
11.50% due 10/01/04............................... 2,000 2,100,000
------------
3,085,000
------------
GAMING--1.3%
Harrah's Jazz Co.
First Mortgage Notes
14.25% due 11/15/01............................... 2,000 1,870,000
------------
GROCERY--7.1%
Bruno's, Inc.
Sr. Subordinated Notes
10.50% due 8/01/05................................ 1,500 1,455,000
Farm Fresh, Inc.
Sr. Notes
12.25% due 10/01/00............................... 2,750 2,378,750
Kash 'N Karry Food Stores, Inc.
Sr. Notes/PIK
11.50% due 2/01/03(1)............................. 4,271 4,206,867
Ralph's Supermarkets, Inc.
Sr. Subordinated Notes
11.00% due 6/15/05................................ 2,000 1,870,000
------------
9,910,617
------------
HEALTH SERVICES--5.4%
Amerisource Distribution Corp.
Sr. Debentures/PIK
11.25% due 7/15/05(1)............................. 1,028 1,105,234
Dade International, Inc.
Sr. Subordinated Notes, Series B
13.00% due 2/01/05................................ 1,500 1,597,500
</TABLE>
14
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS & NOTES (CONTINUED)
HEALTH SERVICES (CONTINUED)
Multicare, Inc.
Sr. Subordinated Notes
12.50% due 7/01/02................................ $ 1,381 $ 1,572,614
OrNda HealthCorp
Sr. Subordinated Notes
12.25% due 5/15/02................................ 1,000 1,105,000
Tenet Healthcare Corp.
Sr. Subordinated Notes
10.13% due 3/01/05................................ 2,000 2,115,000
------------
7,495,348
------------
INDUSTRIAL--0.9%
Georgia Marble Co.
Subordinated Notes
17.00% due 1/01/96(5)............................. 2,000 1,270,000
------------
METALS--1.9%
Renco Metals, Inc.
Sr. Notes
12.00% due 7/15/00................................ 2,500 2,700,000
------------
OIL & GAS--0.3%
DeepTech International, Inc.
Sr. Secured Notes
12.00% due 12/15/00............................... 500 428,750
------------
RETAIL--6.5%
County Seat Stores, Inc.
Sr. Subordinated Notes
12.00% due 10/01/02............................... 2,000 1,960,000
Hills Stores Co.
Sr. Notes
10.25% due 9/30/03................................ 2,000 1,860,000
Rickel Home Centers, Inc.
Sr. Notes
13.50% due 12/15/01(6)............................ 2,000 1,025,000
Thrifty PayLess Holdings, Inc
Sr. Subordinated Notes
12.25% due 4/15/04(6)............................. 2,000 2,225,000
Thrifty PayLess Holdings, Inc.
Sr. Subordinated Notes
12.25% due 4/15/04................................ 2,000 2,080,000
------------
9,150,000
------------
TELECOMMUNICATIONS--7.5%
Cellular Communications International, Inc.
Sr. Disc. Notes
zero coupon due 8/15/00(3)(6)..................... 2,000 1,095,000
Comcast Cellular Corp.
Notes
zero coupon due 3/05/00........................... 3,000 2,295,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
Echostar Communications Corp.
Sr. Disc. Notes
zero coupon due 6/01/04(3)(6)..................... $ 2,000 $ 1,050,000
In-Flight Phone Corp.
Sr. Disc. Notes
zero coupon due 5/15/02(2)(3)(6).................. 2,000 770,000
Mobile Telecommunication Technologies Corp.
Sr. Subordinated Disc. Notes
13.50% due 2/15/02(6)............................. 1,000 1,120,000
Paging Network, Inc.
Sr. Subordinated Notes
10.13% due 8/01/07................................ 1,000 1,042,500
PanAmSat, L.P.
Sr. Subordinated Notes
zero coupon due 8/01/03(3)........................ 4,000 3,120,000
------------
10,492,500
------------
TOTAL CORPORATE BONDS & NOTES
(cost $72,219,895)................................ 72,314,090
------------
FOREIGN BONDS & NOTES--23.7%
BANKS--0.7%
Unibanco--Uniao de Bancos Brasileiros SA
Notes
11.13% due 11/28/97(2)............................ 1,000 1,002,500
------------
CABLE--3.0%
Bell Cablemedia PLC
Sr. Disc. Notes
zero coupon due 9/15/05(2)(3)..................... 2,000 1,165,000
Telewest PLC
Sr. Disc. Debentures
zero coupon due 10/01/07(3)....................... 3,375 1,993,359
Videotron Holdings PLC
Sr. Disc. Notes
zero coupon due 8/15/05(3)........................ 1,700 973,250
------------
4,131,609
------------
CEMENT--0.7%
Cemex SA and Tolmex
Debentures
10.00% due 11/05/99............................... 1,000 958,600
------------
FINANCE--0.9%
European Investment Bank
Debentures
6.63% due 3/15/00(4).............................. JPY 100,000 1,211,448
------------
FOOD & BEVERAGES--0.7%
Grupo Embatellador de Mexico
Bearer Notes
10.75% due 11/19/97............................... 1,000 999,240
------------
</TABLE>
15
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN BONDS & NOTES (CONTINUED)
FOREST PRODUCTS--0.7%
APP International Finance Co. BV
Guaranteed Secured Notes
11.75% due 10/01/05............................... $ 1,000 $ 1,011,250
------------
GOVERNMENT AGENCY--9.7%
Federative Republic of Brazil
Capitalization Bonds
4.00% due 4/15/14................................. 3,121 1,658,138
Federative Republic of Brazil
Variable Rate Disc. Notes
4.00% due 4/15/24(7).............................. 4,000 1,935,000
Republic of Argentina
Variable Rate Disc. Notes
5.00% due 3/31/23(7).............................. 3,500 1,697,500
Republic of Argentina
Floating Rate Bonds
6.81% due 3/31/05(7).............................. 2,000 1,237,500
Republic of Argentina
Variable Rate Disc. Notes
6.88% due 3/31/23(7).............................. 2,000 1,160,000
Republic of Argentina
Sr. Unsubordinated Bonds
8.38% due 12/20/03................................ 4,000 2,975,000
Republic of Argentina
Sr. Unsubordinated Bonds
10.95% due 11/01/99............................... 2,000 1,985,000
Republic of Ecuador
Variable Rate Disc. Notes
3.00% due 2/27/15(7).............................. 3,000 975,000
------------
13,623,138
------------
INDUSTRIAL--1.5%
International Semi-Tech
Microelectronic, Inc.
Sr. Secured Disc. Notes
zero coupon due 8/15/03(3)....................... 4,000 2,070,000
------------
INSURANCE--0.8%
Terra Nova Insurance United
Kingdom Holdings PLC
Sr. Notes
10.75% due 7/01/07................................ 1,000 1,065,000
------------
OIL & GAS--2.4%
Bridas Corp.
Sr. Notes
12.50% due 11/18/99............................... 2,000 1,925,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN THOUSANDS)/ VALUE
SECURITY DESCRIPTION SHARES/WARRANTS (NOTE 2)
<S> <C> <C>
OIL & GAS (CONTINUED)
Petroleos Mexicanos
Debentures
8.63% due 12/01/23............................... $ 2,000 $ 1,430,000
------------
3,355,000
------------
TELECOMMUNICATIONS--1.9%
Telecom Argentina
Debentures
8.38% due 10/18/00............................... 3,000 2,692,500
------------
TOBACCO--0.7%
Empresas La Moderna
Bearer Notes
10.25% due 11/12/97(2)........................... 1,000 978,750
------------
TOTAL FOREIGN BONDS & NOTES
(cost $34,756,630)............................... 33,099,035
------------
U.S. GOVERNMENT AND AGENCIES--21.6%
FEDERAL HOME LOAN BANK--3.4%
4.35% due 12/02/97............................... 5,000 4,826,250
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.5%
6.00% due 7/01/00(8)............................. 3,590 3,527,576
------------
U.S. TREASURY BONDS--7.6%
6.25% due 8/15/23................................ 7,000 6,663,090
11.13% due 8/15/03............................... 3,000 3,907,020
------------
10,570,110
------------
U.S. TREASURY NOTES--8.1%
5.13% due 11/30/98............................... 5,000 4,882,050
7.75% due 2/15/01(9)............................. 3,000 3,229,230
8.00% due 8/15/99................................ 3,000 3,208,590
------------
11,319,870
------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $30,468,496)............................... 30,243,806
------------
PREFERRED STOCK--0.7%
FOREST PRODUCTS--0.7%
SDW Holdings Corp.(8)
(cost $1,000,554)............................... 3,700 1,036,000
------------
WARRANTS--0.1%
CHEMICALS--0.1%
OSI Specialties Holdings Co.+.................... 2,000 125,000
------------
TOTAL INVESTMENT SECURITIES--97.8%
(cost $138,445,575).............................. 136,817,931
------------
</TABLE>
16
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES--0.1%
United States Treasury Bills
5.40% due 1/25/96(9)
(cost $196,520)................................... $ 200 $ 196,578
------------
REPURCHASE AGREEMENT--0.3%
Joint Repurchase Agreement Account (Note 3)
(cost $374,000).................................. 374 374,000
------------
TOTAL INVESTMENTS--
(cost $139,016,095*).............................. 98.2% 137,388,509
Other assets less liabilities...................... 1.8 2,510,647
-------- ------------
NET ASSETS-- 100.0% $139,899,156
======== ============
</TABLE>
- --------
* See Note 6
+ Non-income producing security
(1) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash
(2) Resale restricted to qualified institutional buyers
(3) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(4) JPY--Security denominated in Japanese Yen
(5) Bond in default
(6) Bond issued as part of a unit which includes an equity component
(7) Variable rate security, rate as of September 30, 1995
(8) Fair valued security, see Note 2
(9) The security or a portion thereof represents collateral for the following
open futures contracts:
<TABLE>
<CAPTION>
DESCRIPTION
AND VALUE AS OF
NUMBER OF EXPIRATION SEPTEMBER 30, UNREALIZED
CONTRACTS DATE 1995 LOSS
--------- --------------- ------------- ----------
<C> <S> <C> <C>
U.S. Treasury
Long Bond-Dec.
15 95 $1,715,156 $(6,734)
</TABLE>
(10) Allocation of net assets by country as of September 30, 1995:
<TABLE>
<S> <C>
United States 73.6%
Argentina 10.0%
Great Britain 3.8%
Brazil 3.4%
Mexico 3.2%
Canada 1.5%
Japan 0.9%
Singapore 0.7%
Ecuador 0.7%
</TABLE>
See Notes to Financial Statements
17
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS & NOTES--84.3%
AIRLINE--1.3%
USAir, Inc.
Sr. Notes
10.00% due 7/01/03................................ $ 2,500 $ 2,062,500
------------
BROADCASTING--3.2%
NWCG Holding Corp.
Sr. Disc. Notes, Series B
zero coupon due 6/15/99........................... 6,250 4,156,250
Sinclair Broadcast Group, Inc.
Sr. Subordinated Notes
10.00% due 9/30/05................................ 1,000 1,021,875
------------
5,178,125
------------
BUSINESS SERVICES--5.1%
Dictaphone Corp.
Sr. Subordinated Notes
11.75% due 8/01/05................................ 1,500 1,494,375
Katz Corp.
Sr. Subordinated Notes
12.75% due 11/15/02............................... 4,500 4,916,250
Sullivan Graphics, Inc.
Sr. Subordinated Notes
12.75% due 8/01/05(2)............................. 2,000 1,993,750
------------
8,404,375
------------
CABLE--2.8%
International CableTel, Inc.
Sr. Deferred Coupon
zero coupon due 4/15/05(4)........................ 2,000 1,190,000
Simmons Cable Co.
Sr. Subordinated Notes
zero coupon due 4/30/96(3)(6)..................... 3,000 1,582,500
United International Holdings, Inc.
Sr. Disc. Notes
zero coupon due 11/15/99(7)....................... 3,000 1,845,000
------------
4,617,500
------------
CHEMICALS--5.2%
Agriculture Minerals & Chemicals
Sr. Notes
10.75% due 9/30/03................................ 2,500 2,618,750
Arcadian Partners L.P.
Sr. Notes, Series B
10.75% due 5/01/05................................ 1,500 1,575,000
LaRoche Industries, Inc.
Sr. Subordinated Notes
13.00% due 8/15/04................................ 2,500 2,618,750
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
CHEMICALS (CONTINUED)
OSI Specialties Holdings Co.
Sr. Secured Disc. Debentures, Series B
zero coupon due 4/15/04(4)........................ $ 2,000 $ 1,640,000
------------
8,452,500
------------
CONTAINERS--0.6%
Portola Packaging, Inc.
Sr. Notes
10.75% due 10/01/05............................... 1,000 1,007,500
------------
FINANCIAL GOODS & SERVICES--2.0%
Olympic Financial Ltd.
Sr. Notes
13.00% due 5/01/00................................ 3,000 3,202,500
------------
FOOD & BEVERAGES--1.2%
Specialty Foods Corp.
Sr. Notes, Series A
11.13% due 10/01/02(2)............................ 2,000 1,960,000
------------
FOREST PRODUCTS--4.4%
Crown Paper Co.
Sr. Subordinated Notes
11.00% due 9/01/05................................ 3,000 2,955,000
Stone Container Corp.
Sr. Notes
11.50% due 10/01/04............................... 4,000 4,200,000
------------
7,155,000
------------
GAMING--6.9%
Fitzgerald Gaming Corp.
Sr. Secured Notes
14.25% due 3/15/96(3)(5)(7)....................... 500 375,000
Harrah's Jazz Co.
First Mortgage Notes
14.25% due 11/15/01............................... 3,000 2,805,000
Players International, Inc.
First Mortgage Notes
10.88% due 4/15/05(2)............................. 3,000 2,850,000
Santa Fe Hotel, Inc.
First Mortgage Notes
11.00% due 12/15/00............................... 2,721 2,081,565
Showboat, Inc.
Sr. Subordinated Notes
13.00% due 8/01/09................................ 3,000 3,240,000
------------
11,351,565
------------
</TABLE>
18
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS & NOTES (CONTINUED)
GROCERY--11.9%
Bruno's, Inc.
Sr. Subordinated Notes
10.50% due 8/01/05................................ $ 5,000 $ 4,850,000
Farm Fresh, Inc.
Sr. Notes
12.25% due 10/01/00............................... 5,000 4,325,000
Kash 'N Karry Food Stores, Inc.
Sr. Notes/PIK
11.50% due 2/01/03(1)............................. 7,067 6,960,928
Ralph's Supermarkets, Inc.
Sr. Subordinated Notes
11.00% due 6/15/05................................ 3,500 3,272,500
------------
19,408,428
------------
HEALTH SERVICES--10.0%
Amerisource Distribution Corp.
Sr. Debentures/PIK
11.25% due 7/15/05(1)............................. 2,089 2,245,910
Dade International, Inc.
Sr. Subordinated Notes,
Series B
13.00% due 2/01/05................................ 2,000 2,130,000
Multicare, Inc.
Sr. Subordinated Notes
12.50% due 7/01/02................................ 3,000 3,416,250
OrNda HealthCorp
Sr. Subordinated Notes
12.25% due 5/15/02................................ 4,000 4,420,000
Tenet Healthcare Corp.
Sr. Subordinated Notes
10.13% due 3/01/05................................ 4,000 4,230,000
------------
16,442,160
------------
HOUSEHOLD PRODUCTS--0.9%
Samsonite Corp.
Sr. Subordinated Notes
11.13% due 7/15/05(2)............................. 1,500 1,455,000
------------
INDUSTRIAL--3.2%
Georgia Marble Co.
Subordinated Notes
17.00% due 1/01/96(6)............................. 3,750 2,381,250
J.B. Poindexter & Co.
Sr. Notes
12.50% due 5/15/04................................ 3,000 2,910,000
------------
5,291,250
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
METALS--2.3%
Renco Metals, Inc.
Sr. Notes
12.00% due 7/15/00................................ $ 3,500 $ 3,780,000
------------
OIL & GAS--0.5%
DeepTech International, Inc.
Sr. Secured Notes
12.00% due 12/15/00............................... 1,000 857,500
------------
RETAIL--8.7%
County Seat Stores, Inc.
Sr. Subordinated Notes
12.00% due 10/01/02............................... 3,000 2,940,000
Hills Stores Co.
Sr. Notes
10.25% due 9/30/03................................ 3,000 2,790,000
Rickel Home Centers, Inc.
Sr. Notes
13.50% due 12/15/01(7)............................ 2,000 1,025,000
Thrifty PayLess Holdings, Inc.
Sr. Subordinated Notes
12.25% due 4/15/04(7)............................. 4,000 4,450,000
Thrifty PayLess Holdings, Inc.
Sr. Subordinated Notes
12.25% due 4/15/04................................ 3,000 3,120,000
------------
14,325,000
------------
TELECOMMUNICATIONS--14.1%
Cellular Communications International, Inc.
Sr. Disc. Notes
zero coupon due 8/15/00(4)(7)..................... 4,000 2,190,000
Comcast Celluar Corp.
Notes
zero coupon due 3/05/00........................... 4,000 3,060,000
Echostar Communications Corp.
Sr. Disc. Notes
zero coupon due 6/01/04(4)(7)..................... 3,000 1,575,000
In-Flight Phone Corp.
Sr. Disc. Notes
zero coupon due 5/15/02(2)(4)(7).................. 1,000 385,000
IntelCom Group, Inc.
Sr. Disc. Notes
zero coupon due 9/15/05(7)........................ 1,500 832,500
Mobile Telecommunication Technologies Corp.
Sr. Subordinated Disc. Notes
13.50% due 12/15/02(7)............................ 4,000 4,480,000
</TABLE>
19
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS & NOTES (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
Paging Network, Inc.
Sr. Subordinated Notes
10.13% due 8/01/07................................ $ 3,000 $ 3,127,500
Paging Network, Inc.
Sr. Subordinated Notes
11.75% due 5/15/02................................ 2,000 2,200,000
PanAmSat, L.P.
Sr. Subordinated Notes
zero coupon due 8/01/03(4) ....................... 4,000 3,120,000
Pricecellular Wireless Corp.
Sr. Disc. Notes
zero coupon due 10/01/03.......................... 3,000 2,130,000
------------
23,100,000
------------
TOTAL CORPORATE BONDS & NOTES
(cost $139,418,445)............................... 138,050,903
------------
FOREIGN BONDS & NOTES--10.3%
CABLE--5.5%
Bell Cablemedia PLC
Sr. Disc. Notes
zero coupon due 9/15/05(2)(4)..................... 3,500 2,038,750
Telewest PLC
Sr. Disc. Debentures
zero coupon due 10/01/07(4)....................... 6,750 3,986,719
Videotron Holdings PLC
Sr. Disc. Notes
zero coupon due 8/15/05(4) ....................... 5,100 2,919,750
------------
8,945,219
------------
CHEMICALS--0.6%
Acetex Corp.
Sr. Secured Notes
9.75% due 10/01/03................................ 1,000 1,008,750
------------
FOREST PRODUCTS--0.6%
APP International Finance Co. BV
Guaranteed Secured Notes
11.75% due 10/01/05............................... 1,000 1,011,250
------------
GOVERNMENT AGENCY--1.0%
Federative Republic of Brazil
Capitalization Bonds
4.00% due 4/15/14................................. 3,121 1,658,137
------------
INDUSTRIAL--1.9%
International Semi-Tech
Microelectronic, Inc.
Sr. Secured Disc. Notes
zero coupon due 8/15/03(4)........................ 6,000 3,105,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN THOUSANDS)/ VALUE
SECURITY DESCRIPTION SHARES/WARRANTS (NOTE 2)
<S> <C> <C>
INSURANCE--0.7%
Terra Nova Insurance United Kingdom Holdings PLC
Sr. Notes
10.75% due 7/01/07............................... $ 1,000 $ 1,065,000
------------
TOTAL FOREIGN BONDS & NOTES
(cost $16,676,543)............................... 16,793,356
------------
PREFERRED STOCK--1.4%
BANKING--0.7%
Chevy Chase Savings Bank, F.S.B.................. 40,000 1,177,500
------------
CABLE--0.0%
Maryland Cable
Partners L.P.+(3) .............................. 16,009 16,009
------------
FOREST PRODUCTS--0.7%
SDW Holdings Corp.(3) ........................... 3,700 1,036,000
------------
TOTAL PREFERRED STOCK
(cost $2,246,563)................................ 2,229,509
------------
COMMON STOCK--1.6%
CABLE--0.0%
M.L. Opportunity L.P.+(3) ....................... 70,106 70,106
MGCP Holdings, Inc.+(3) ......................... 1 0
------------
70,106
------------
GAMING--0.7%
Capital Gaming International, Inc.+.............. 30,000 7,500
Showboat, Inc.................................... 50,000 1,081,250
------------
1,088,750
------------
GROCERY--0.0%
Smittys Supermarkets, Inc........................ 500 4,250
------------
MEDIA--0.4%
TMM, Inc.+(3)(8) ................................ 2,000,000 750,000
------------
TELECOMMUNICATIONS--0.5%
PanAmSat Corp.................................... 50,000 762,500
------------
TOTAL COMMON STOCK
(cost $3,580,606)................................ 2,675,606
------------
WARRANTS--0.3%+
CHEMICALS--0.1%
OSI Specialties Holdings Co...................... 2,000 125,000
------------
COMPUTERS--0.2%
Open Text Corp.(3) .............................. 141,509 278,996
------------
</TABLE>
20
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
WARRANTS/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (CONTINUED)
GAMING--0.0%
Capital Gaming International, Inc................. 45,500 $ 4,266
Casino Magic Finance Corp......................... 24,000 11,400
Fitzgerald Gaming Corp.(2)(3) .................... 2,000 20,000
------------
35,666
------------
HOUSEHOLD PRODUCTS--0.0%
Chattem, Inc...................................... 1,500 4,500
------------
TOTAL WARRANTS
(cost $348,446)................................... 444,162
------------
TOTAL INVESTMENT SECURITIES--97.9%
(cost $162,270,603)............................... 160,193,536
------------
REPURCHASE AGREEMENT--3.1%
Joint Repurchase Agreement Account (Note 3)
(cost $5,064,000) ............................... $5,064 5,064,000
------------
TOTAL INVESTMENTS--
(cost $167,334,603*).............................. 101.0% 165,257,536
Liabilities in excess of other assets.............. (1.0) (1,559,107)
------ ------------
NET ASSETS-- 100.0% $163,698,429
====== ============
</TABLE>
- --------
* See Note 6
+ Non-income producing security
(1) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash
(2) Resale restricted to qualified institutional buyers
(3) Fair valued security, see Note 2
(4) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(5) Variable rate security, rate as of September 30, 1995
(6) Bond in default
(7) Bond issued as part of a unit which includes an equity component
(8) At September 30, 1995 the Fund held a restricted security amounting to 0.4%
of net assets. The Fund will not bear any costs, including those involved
in registration under the Securities Act of 1933, in connection with the
disposition of the following security:
<TABLE>
<CAPTION>
VALUATION
DATE OF UNIT AS OF
DESCRIPTION ACQUISITION COST SEPTEMBER 30, 1995
----------------------------------------- ----------- ---- ------------------
<S> <C> <C> <C>
TMM, Inc. ............................... 2/1/95 $.83 $.375
</TABLE>
See Notes to Financial Statements
21
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS--96.4%
ALASKA--1.3%
Alaska State Housing Finance Corp.,
7.50% due 12/01/15................................ $1,975 $ 2,084,277
------------
ARIZONA--0.7%
Maricopa County, Arizona
General Obligation, School
District Number 213,
7.00% due 7/01/08+................................ 1,000 1,161,100
------------
ARKANSAS--0.3%
Arkansas State Development
Finance Authority, Single
Family Mortgage Revenue,
Conventional Mortgage Loans,
9.00% due 6/01/14+................................ 150 156,159
Arkansas State Development
Finance Authority, Single
Family Mortgage Revenue,
Conventional & FHA Insured,
Series A,
9.38% due 8/01/14+................................ 335 346,906
------------
503,065
------------
CALIFORNIA--9.8%
California Housing Finance
Agency, Home Mortgage
Revenue, Series A,
8.13% due 8/01/19+................................ 870 938,121
California Housing Finance
Agency, Home Mortgage
Revenue, Series A,
8.20% due 8/01/17+................................ 1,000 1,065,850
Los Angeles, California
Convention And Exhibition
Center Authority, Lease Revenue,
6.00% due 8/15/10+................................ 1,155 1,214,275
San Francisco, California City
& County Redevelopment Agency, Lease Revenue,
6.75% due 7/01/15+................................ 1,000 1,077,590
San Jose, California Airport
Revenue,
5.88% due 3/01/07+................................ 2,905 3,061,899
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
CALIFORNIA (CONTINUED)
San Jose, California
Redevelopment Agency Tax
Allocation, Merged Area
Redevelopment Project,
6.00% due 8/01/06+................................ $1,000 $ 1,081,940
San Jose, California
Redevelopment Agency Tax
Allocation, Merged Area
Redevelopment Project,
6.00% due 8/01/07+................................ 3,000 3,230,580
San Jose, California
Redevelopment Agency Tax
Allocation, Merged Area
Redevelopment Project,
6.00% due 8/01/11+................................ 3,700 3,873,604
------------
15,543,859
------------
COLORADO--0.1%
Colorado Housing Finance
Authority, Single Family
Revenue, Series C,
9.38% due 3/01/12+................................ 140 146,090
------------
DISTRICT OF COLUMBIA--0.9%
District of Columbia Housing
Finance Agency, Mortgage
Revenue Collateral, Single
Family, Series A,
7.75% due 12/01/18................................ 1,280 1,356,557
------------
FLORIDA--1.7%
Florida Housing Finance Agency,
Residential Mortgage, 1985
Series 1,
8.50% due 6/15/06+................................ 2,500 2,587,575
Florida Housing Finance Agency,
Single Family Mortgage,
Series A,
9.25% due 7/01/07+................................ 80 84,264
------------
2,671,839
------------
GEORGIA--5.4%
Georgia State General
Obligation, Series C,
6.50% due 4/01/07................................. 1,700 1,917,855
Georgia State General
Obligation,
7.20% due 3/01/07................................. 1,980 2,361,170
</TABLE>
22
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
GEORGIA (CONTINUED)
Municipal Electric Authority,
Georgia Special Obligation,
Fifth Crossover Series,
Project 1,
6.40% due 1/01/13+................................ $1,000 $ 1,067,010
Municipal Electric Authority,
Georgia Special Obligation,
Fifth Crossover Series,
Project 1,
6.40% due 1/01/09+................................ 1,250 1,358,437
Paulding County, Georgia School
District,
6.00% due 2/01/13+................................ 1,875 1,940,438
------------
8,644,910
------------
ILLINOIS--4.9%
Cook County, Illinois Community College, District
Number 508,
7.70% due 12/01/07+............................... 4,000 4,876,840
Illinois Health Facilities Authority, Lutheran
General Health System,
7.00% due 4/01/08+................................ 2,500 2,845,600
------------
7,722,440
------------
INDIANA--0.9%
Indiana State Housing Finance Authority, Multi-
Unit Mortgage Program, Series A,
9.00% due 1/01/14................................. 1,470 1,506,382
------------
KENTUCKY--0.2%
Kentucky Housing Corp., Multi-Family Revenue
Mortgage, Series A,
8.88% due 1/01/19+................................ 250 258,235
------------
LOUISIANA--1.2%
Louisiana Housing Finance Agency, Single Family
Mortgage Revenue, 1985 Series A,
9.38% due 2/01/15+................................ 125 130,174
Louisiana State, General Obligation, Series A,
5.80% due 8/01/10+................................ 1,750 1,802,622
------------
1,932,796
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
MARYLAND--1.9%
Maryland State Community Development
Administration, Multi-Family Housing Revenue,
1985 Series B,
8.75% due 5/15/12................................. $3,000 $ 3,085,500
------------
MASSACHUSETTS--6.8%
Massachusetts State Housing Finance Agency,
Insured Rental, Series A,
6.60% due 7/01/14+................................ 5,375 5,515,771
Massachusetts State Housing Finance Agency, Multi-
Family Mortgage, GNMA, Series A,
9.00% due 12/01/10................................ 500 514,390
Massachusetts State Housing Finance Agency, Multi-
Family Mortgage, GNMA, Series A,
9.13% due 12/01/20................................ 485 499,070
Massachusetts State Water Resources Authority,
6.25% due 11/01/10+............................... 4,000 4,215,000
------------
10,744,231
------------
MICHIGAN--1.0%
Michigan Municipal Bond Authority, Revenue Capital
Appreciation, Local Government Loan,
zero coupon due 5/01/16+.......................... 2,735 782,675
Michigan Municipal Bond Authority, Revenue Capital
Appreciation, Local Government Loan,
zero coupon due 5/01/17+.......................... 2,875 772,599
------------
1,555,274
------------
MISSISSIPI--0.0%
Mississippi Housing Finance Corp., Single Family
Mortgage Purchase Revenue, Series A,
8.80% due 4/15/10+................................ 75 77,760
------------
MISSOURI--4.1%
Missouri State Housing Development Commission,
Insured, Single Family Mortgage Revenue,
9.38% due 4/01/16+................................ 100 106,503
</TABLE>
23
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
MISSOURI (CONTINUED)
Sikeston, Missouri Electric, Revenue,
6.20% due 6/01/10+................................ $6,000 $ 6,475,140
------------
6,581,643
------------
NEVADA--2.9%
Nevada Housing Division, Single Family Mortgage,
Series A,
zero coupon due 4/01/16+.......................... 5,945 4,653,270
------------
NEW HAMPSHIRE--0.2%
New Hampshire State Housing Finance Authority,
Single Family Residential Mortgage, Series A,
9.25% due 7/01/11+................................ 285 298,971
------------
NEW JERSEY--1.5%
New Jersey Economic Development Authority, Market
Transition Facility Revenue,
7.00% due 7/01/04+................................ 2,000 2,309,760
New Jersey State Housing & Mortgage Finance
Agency, Revenue, Series B,
9.13% due 4/01/15................................. 15 15,401
------------
2,325,161
------------
NEW MEXICO--0.3%
New Mexico Mortgage Finance Authority, Single
Family Mortgage Revenue, Series C,
8.63% due 7/01/17................................. 225 242,399
New Mexico Mortgage Finance Authority, Single
Family Mortgage Program, Series A,
9.25% due 7/01/12+................................ 190 196,508
------------
438,907
------------
NEW YORK--9.3%
New York City Industrial Development Agency, Civic
Facility, Revenue,
6.25% due 11/15/06+............................... 2,000 2,187,420
New York City, New York Series E,
6.20% due 8/01/07+................................ 2,250 2,461,433
New York State Dormitory Authority Revenue, State
University Educational Facilities, Series A,
5.50% due 5/15/10+................................ 1,000 994,960
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
NEW YORK (CONTINUED)
New York State Medical Care Facilities Finance
Agency, Revenue, New York Hospital, FHA Insured,
Mortgage A,
6.75% due 8/15/14+................................ $2,850 $ 3,104,989
Niagara Falls, New York General Obligation,
7.50% due 3/01/13+................................ 445 534,921
Niagara Falls, New York General Obligation,
7.50% due 3/01/14+................................ 555 665,850
Niagara Falls, New York General Obligation,
7.50% due 3/01/18+................................ 500 603,700
Suffolk County, New York Industrial Development
Agency, Southwest Sewer Systems Revenue,
6.00% due 2/01/07+................................ 4,000 4,274,680
------------
14,827,953
------------
NORTH CAROLINA--4.4%
Harnett County, North Carolina Certificates of
Participation,
6.20% due 12/01/09+............................... 2,400 2,557,200
North Carolina Municipal Power Agency, Catawba
Electric Revenue,
6.00% due 1/01/10+................................ 2,250 2,362,185
North Carolina Municipal Power Agency, Catawba
Electric Revenue,
6.00% due 1/01/11+................................ 2,000 2,091,600
------------
7,010,985
------------
NORTH DAKOTA--0.4%
North Dakota State Housing Finance Agency, Single
Family Mortgage Revenue, Series A,
7.38% due 7/01/17+................................ 650 678,262
------------
OHIO--3.9%
Adams County, Ohio Valley Local School District,
7.00% due 12/01/15+............................... 1,000 1,175,910
Lucas County, Ohio Hospital Revenue, St. Vincent
Medical Center,
6.50% due 8/15/07................................. 3,500 3,836,910
</TABLE>
24
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Woodridge, Ohio Local School District, General
Obligation,
6.80% due 12/01/14+............................... $1,000 $ 1,147,550
------------
6,160,370
------------
OKLAHOMA--1.9%
Grand River Dam Authority, Oklahoma Electric
Revenue,
5.75% due 6/01/08+................................ 1,850 1,952,194
Grand River Dam Authority, Oklahoma Electric
Revenue,
5.88% due 6/01/07+................................ 1,000 1,074,750
------------
3,026,944
------------
PENNSYLVANIA--5.7%
Northeastern Pennsylvania Hospital & Education
Authority, Health Care Revenue,
6.20% due 7/01/04+................................ 2,000 2,174,580
Pennsbury, Pennsylvania School District, General
Obligation,
6.80% due 8/15/14+................................ 3,800 4,343,818
Pennsylvania Housing Finance Agency, Multi-Family
Mortgage,
9.38% due 8/01/28+................................ 170 176,339
Pennsylvania State Industrial Development
Authority, Economic Development, Series B,
7.00% due 1/01/07+................................ 2,000 2,305,440
------------
9,000,177
------------
PUERTO RICO--3.7%
Puerto Rico Commonwealth,
5.50% due 7/01/08+................................ 3,000 3,088,530
Puerto Rico Electric Power Authority, Power
Revenue Refunding,
7.00% due 7/01/06+................................ 1,435 1,630,347
University of Puerto Rico, University System
Revenue Refunding, Series N,
6.25% due 6/01/08+................................ 1,000 1,101,360
------------
5,820,237
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
RHODE ISLAND--0.7%
Rhode Island Housing & Mortgage Finance Corp.,
Supplementary Insurance, Series B,
8.38% due 10/01/16+............................... $1,000 $ 1,074,750
------------
TEXAS--12.0%
Bexar County, Texas Health Facilities Development
Corp., Hospital Revenue,
6.75% due 8/15/19+................................ 4,000 4,292,960
Grand Prairie, Texas Health Facilities Development
Corp., Hospital Revenue,
6.88% due 11/01/10+............................... 1,600 1,766,656
Harris County, Texas Hospital District Mortgage,
Revenue,
7.40% due 2/15/10+................................ 2,500 2,962,025
Houston, Texas Water And Sewer Systems, Revenue,
Series C,
zero coupon due 12/01/09+......................... 1,420 633,249
Houston, Texas Water Conveyance Systems Contract,
Certificates of Participation,
6.13% due 12/15/09+............................... 1,000 1,063,000
Houston, Texas Water Conveyance Systems Contract,
Certificates of Participation,
6.13% due 12/15/08+............................... 1,250 1,339,575
Houston, Texas Water Conveyance Systems Contract,
Certificates of Participation,
6.38% due 12/15/07+............................... 3,500 3,854,620
Sherman, Texas Independent School District,
General Obligation,
6.50% due 2/15/20................................. 3,000 3,147,750
------------
19,059,835
------------
UTAH--1.2%
Utah State Housing Finance Agency, Single Family
Mortgage, Series B,
7.38% due 7/01/16+................................ 285 297,004
Utah State Housing Finance Agency, Single Family
Mortgage, Series D,
7.50% due 7/01/16+................................ 1,535 1,642,189
------------
1,939,193
------------
</TABLE>
25
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
VIRGINIA--2.3%
Metropolitan, Washington District Of Columbia
Airport Authority, General Airport Revenue,
5.50% due 10/01/24+............................... $4,000 $ 3,655,120
------------
WASHINGTON--2.5%
Washington State Housing Finance Commission,
Multi-Family Mortgage Revenue, Series A,
9.13% due 7/01/10+................................ 380 406,349
Washington State Series B, General Obligation,
6.00% due 6/01/11................................. 3,400 3,562,044
------------
3,968,393
------------
WEST VIRGINIA--2.0%
West Virginia State Housing Development Fund,
Series A,
7.25% due 5/01/17+................................ 3,000 3,149,490
------------
WISCONSIN--0.3%
Wisconsin Housing & Economic Development
Authority, Homeownership Revenue, 1985 Issue III,
9.13% due 6/01/05+................................ 155 159,854
Wisconsin Housing & Economic Development
Authority, Homeownership Revenue, 1985 Issue I,
9.13% due 12/01/11+............................... 285 296,956
------------
456,810
------------
TOTAL INVESTMENT SECURITIES--96.4%
(cost $144,202,901)............................... 153,120,786
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SHORT-TERM SECURITIES--0.4%
TEXAS--0.4%
Gulf Coast Industrial Development Authority, Texas
Solid Waste Disposal Revenue,
4.10% due 10/03/95
(Cost $600,000)................................... $ 600 $ 600,000
------------
TOTAL INVESTMENTS--
(cost $144,802,901*).............................. 96.8% 153,720,786
Other assets less liabilities...................... 3.2 5,009,635
------ ------------
NET ASSETS-- 100.0% $158,730,421
====== ============
</TABLE>
- -------
* See Note 6
+ All or part of this security position is insured by Municipal Bond Insurance
Association ("MBIA"), Bond Insurance Guarantee ("BIG") or Financial
Guarantee Insurance Corporation ("FGIC") ($128,991,081 or 81.3% of total
assets).
See Notes to Financial Statements
26
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited)
Note 1. Organization
The SunAmerica Income Funds is an open-end diversified management
investment company organized as a Massachusetts business trust (the
"Trust"). It currently consists of five different investment series (each,
a "Fund" and collectively, the "Funds"). Each Fund is a separate series of
the Trust with distinct investment objectives and/or strategies. Each Fund
is managed by SunAmerica Asset Management Corp. (the "Adviser" or
"SAAMCo"). An investor may invest in one or more of the following Funds:
SunAmerica U.S. Government Securities Fund, SunAmerica Federal Securities
Fund, SunAmerica Diversified Income Fund, SunAmerica High Income Fund and
SunAmerica Tax Exempt Insured Fund. The Funds are considered to be separate
entities for financial and tax reporting purposes.
Each Fund currently offers two classes of shares. Class A shares are
offered at net asset value per share plus an initial sales charge. Class B
shares are offered without an initial sales charge, although a declining
contingent sales charge may be imposed on redemptions made within six years
of purchase. Additionally any purchases of Class A shares in excess of
$1,000,000 will be subject to a contingent deferred sales charge on
redemptions made within one year of purchase. Class B shares of each Fund
convert automatically to Class A shares on the first business day of the
month following the seventh 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. Each class of shares bears the same voting,
dividend, liquidation and other rights and conditions and each makes
distribution and account maintenance and service fee payments under a
distribution plan pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "1940 Act") except that Class B shares are subject to higher
distribution fee rates.
Note 2. Significant Accounting Policies
The following is a summary of the significant accounting policies followed
by the Funds in the preparation of their financial statements:
SECURITY VALUATIONS: Securities that are actively traded in the over-the-
counter market, including listed securities for which the primary market is
believed by the Adviser to be over-the-counter, are valued at the quoted
bid price provided by principal market makers. Securities for which the
primary market is on an exchange are valued at the last sale price on such
exchange on the day of valuation or, if there was no sale on such day, the
last bid price quoted on such day. Securities listed on the New York Stock
Exchange ("NYSE") or other national securities exchanges, are valued on the
basis of the last sale price on the exchange on which they are primarily
traded. If there is no sale on that day, then securities are valued at the
bid price on the NYSE or other primary exchange for that day. However, if
the last sale price on the NYSE is different than the last sale price on
any other exchange, the NYSE price is used. Options traded on national
securities exchanges are valued as of the close of the exchange on which
they are traded. Futures and options traded on commodities exchanges are
valued at their last sale price as of the close of such exchange. The Funds
may make use of a pricing service in the determination of their net asset
values. The preceding procedures need not be used to determine the value of
debt securities owned by a Fund if, in the opinion of the
27
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
Trustees, some other method would more accurately reflect the fair market
value of such debt securities in quantities owned by such Fund. Securities
for which market quotations are not readily available and other assets are
valued at fair value as determined pursuant to procedures adopted in good
faith by the Trustees. Short-term investments which mature in less than 60
days are valued at amortized cost, if their original maturity was 60 days
or less, or by amortizing their value on the 61st day prior to maturity, if
their original term to maturity exceeded 60 days.
REPURCHASE AGREEMENTS: The Funds, along with other affiliated registered
investment companies, 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. The Funds' custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral
is valued daily on a mark to market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. 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.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS: Securities transactions are recorded on the trade date.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Interest income is recorded on the accrual basis;
dividend income is recorded on the ex-dividend date. The Funds do not
amortize market premiums (except for Tax Exempt Insured Fund) or accrue
market discounts (except for Diversified Income Fund) except original issue
discounts and interest only securities for which amortization is required
for federal income tax purposes.
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).
The Fund records dividends and distributions to its shareholders on the ex-
dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined in
accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. 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 based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions
which exceed net investment income and net realized capital gains for
financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent distributions exceed current and
accumulated earnings and profits for federal income tax purposes, they are
reported as distributions of paid-in-capital.
28
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
The Funds Account and report distributions to shareholders in accordance
with AICPA Statement of Position 93-2: Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies.
For the year ended March 31, 1995, the reclassification arising from
book/tax differences resulted in increases (decreases) to the components of
net assets. The following table discloses the effect of such differences
reclassified between undistributed accumulated net investment income/loss,
accumulated undistributed net realized gain/loss on investments and paid-in
capital. These reclassifications were primarily the result of market
discount, paydown loss and expiration of capital loss carryover for the
year ended March 31, 1995.
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET UNDISTRIBUTED NET
INVESTMENT REALIZED PAID-IN
INCOME/(LOSS) GAIN/(LOSS) CAPITAL
----------------- ----------------- --------
<S> <C> <C> <C>
U.S. Government Securities
Fund.......................... (12,987,212) 12,987,212 --
Federal Securities Fund........ (302,435) 302,435 --
Diversified Income Fund........ -- -- --
High Income Fund............... 263,716 (263,716) --
Tax Exempt Insured Fund........ 13,398 266,034 (279,432)
</TABLE>
Dividends from net investment income are paid monthly. Capital gain
distributions, if any, are paid annually.
INVESTMENT SECURITIES LOANED: During the six months ended September 30,
1995, U.S. Government Securities Fund, Federal Securities Fund, Diversified
Income Fund and High Income 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 100% of the market value of the loaned
securities during the period of the loan. To the extent income is earned on
the cash collateral invested, it is recorded as interest income. As with
other extensions of credit, should the borrower of the securities fail
financially, the Funds may bear the risk of delay in recovery or may be
subject to replacing the loaned securities by purchasing them with the cash
collateral held, which may be less than 100% of the market value of such
securities at the time of replacement.
At September 30, 1995, U.S. Government Securities Fund and Federal
Securities Fund have loaned securities having a value of $107,506,100 and
$15,761,700 and held cash collateral of $107,387,500 and $15,637,500 for
these loans. The value of the collateral was sufficient at the time the
loan agreements were entered into. As a result of an increase in the market
value of the loaned securities, the Funds were furnished with additional
collateral on the following business day.
FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at published rates on the following basis:
(i) market value of investment securities, other assets and
liabilities--at the prevailing rate of exchange at the valuation date.
(ii) purchases and sales of investment securities, income and expenses--
at the rate of exchange prevailing on the respective dates of such
transactions.
29
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
Assets and liabilities denominated in foreign currencies and commitments
under forward foreign currency contracts are translated into U.S. dollars
at the mean of the quoted bid and asked prices of such currencies against
the U.S. dollar at the year end date. Purchases and sales of portfolio
securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or incurred.
The Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in
the market prices of securities held at fiscal year-end. The Fund does not
isolate the effect of changes in foreign exchange rates from the changes in
the market prices of portfolio securities sold during the year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends,
discount 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 rates.
FUTURES CONTRACTS: A futures contract is an agreement between two parties
to buy and sell a security at a set price on a future date. Each Fund may
purchase and sell financial futures contracts which are traded on a
commodities exchange or board of trade for certain hedging and risk
management purposes. Upon entering into such a contract the Funds are
required to pledge to the broker an amount of cash or U.S. government
securities equal to the minimum "initial margin" requirements of the
exchange on which the futures contract is traded. The contract amount
reflects the extent of a Fund's exposure in these financial instruments. A
Fund's participation in the futures markets involves certain risks,
including imperfect correlation between movements in the price of futures
contracts and movements in the price of the securities hedged or used for
cover. The Funds activities in futures contracts are conducted through
regulated exchanges which do not result in counterparty credit risks.
Pursuant to a contract the Funds agree to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as "variation margin" and are recorded
by the Funds as unrealized appreciation or depreciation. When a contract is
closed, the Funds record a realized gain or loss 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.
FEDERAL INCOME TAXES: It is the Funds' policy to meet the requirements of
the Internal Revenue Code of 1986, 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 income tax or
excise tax provisions are required.
EXPENSES: Expenses common to all Funds are allocated among the Income Funds
based upon their relative net asset values.
30
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
Note 3. Joint Repurchase Agreement Account
Pursuant to exemptive relief granted by the Securities and Exchange
Commission, the Funds are permitted to participate in joint repurchase
agreement transactions.
As of September 30, 1995, the U.S. Government Securities Fund, Federal
Securities Fund, Diversified Income Fund and High Income Fund had a 34.0%,
11.9%, 0.4% and 4.9% undivided interest which represented $35,000,000,
$12,200,000, $374,000 and $5,064,000, respectively, in principal amount in
a joint repurchase agreement with Chemical Securities, Inc. In addition,
the U.S. Government Securities Fund and Federal Securities Fund had a 73.7%
and 13.0% undivided interest which represented $89,092,000 and $15,688,000,
respectively, in principal amount in a joint repurchase agreement with
Yamaichi International (America), Inc. As of such date, the repurchase
agreements in the joint account and the collateral therefore were as
follows:
Chemical Securities, Inc. Repurchase Agreement, 6.25% dated 9/29/95, in the
principal amount of $102,947,000 repurchase price $103,000,618 due 10/2/95
collateralized by $50,000,000 U.S. Treasury Notes 6.875% due 10/31/96 and
$51,850,000 U.S. Treasury Notes 6.125% due 3/31/97, approximate aggregate
value $105,092,351.
Yamaichi International (America), Inc. Repurchase Agreement, 6.45% dated
9/29/95, in the principal amount of $120,864,000 repurchase price
$120,928,964 due 10/2/95 collateralized by $19,375,000 U.S. Treasury Bonds
6.25% due 8/15/23, $8,500,000 U.S. Treasury Bonds 9.25% due 2/15/16,
$49,250,000 U.S. Treasury Bonds 8.75% due 11/15/16, $13,090,000 U.S.
Treasury Notes 8.75% due 8/15/00 and $22,375,000 U.S. Treasury Bills 5.365%
due 8/22/96, approximate aggregate value $128,362,436.
Note 4. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and
Management Agreement (the "Agreement") with SAAMCo. Under the Agreement,
SAAMCo provides continuous supervision of a Fund's portfolio and
administers its corporate affairs, subject to general review by the
Trustees. In connection therewith, SAAMCo furnishes the Funds with office
facilities, maintains certain of the Funds' books and records, and pays the
salaries and expenses of all personnel, including officers of the Funds who
are employees of SAAMCo and its affiliates. The investment advisory and
management fee payable to SAAMCo with respect to U.S. Government Securities
Fund and High Income Fund is computed daily and payable monthly, at an
annual rate of .75% of average daily net assets up to $200 million; .72% of
the next $200 million; and .55% of average daily net assets in excess of
$400 million. The investment advisory and management fee payable to SAAMCo
with respect to Federal Securities Fund is computed daily and payable
monthly, at an annual rate of .55% of average daily net assets up to $25
million; .50% of the next $25 million; and .45% of average daily net assets
in excess of $50 million. The investment advisory and management fee
payable to SAAMCo with respect to Diversified Income Fund is computed daily
and payable monthly, at an annual rate of .65% of average daily net assets
of up to $350 million; and .60% of average daily net assets in excess of
$350 million. The investment advisory and management fee payable to SAAMCo
31
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
with respect to Tax Exempt Insured Fund is computed daily and payable
monthly, at an annual rate of .50% of average daily net assets up to $350
million; and .45% of average daily net assets in excess of $350 million.
For the six months ended September 30, 1995, SAAMCo earned fees of
$2,162,962, $182,541, $476,215, $678,116 and $405,254 for U.S. Government
Securities Fund, Federal Securities Fund, Diversified Income Fund, High
Income Fund and Tax Exempt Insured Fund, respectively.
SAAMCo has agreed that, in any fiscal year, it will refund or rebate its
management fee to each of the Funds to the extent that the Fund's expenses
(including the fees of SAAMCo and amortization of organizational expenses,
but excluding interest, taxes, brokerage commissions, distribution fees and
other extraordinary expenses) exceed the most restrictive expense
limitation imposed by states where the Fund's shares are sold. The most
restrictive expense limitation is presently believed to be 2 1/2% of the
first $30 million of the Fund's average daily net assets, 2% of the next
$70 million of average net assets and 1 1/2% of such net assets in excess
of $100 million. For the six months ended September 30, 1995, no such
reimbursement was required.
The Trust, on behalf of each Fund, has a Distribution Agreement with
SunAmerica Capital Services, Inc. ("SACS"). Each Fund, with respect to each
class of Shares, has adopted a Distribution Plan (the "Plan") in accordance
with the provisions of Rule 12b-1 under the 1940 Act. Rule 12b-1 under the
1940 Act permits an investment company directly or indirectly to pay
expenses associated with the distribution of its shares ("distribution
expenses") in accordance with a plan adopted by the investment company's
board of directors and approved by its shareholders. Pursuant to such rule,
the Trustees and the shareholders of each class of shares of each Fund have
adopted Distribution Plans, hereinafter referred to as the "Class A Plan"
and the "Class B Plan." In adopting the Class A Plan and the Class B 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.
Under the Class A Plan, the Distributor receives payments from a Fund at an
annual rate of up to 0.10% of average daily net assets of such Fund's Class
A shares to compensate the Distributor and certain securities firms for
providing sales and promotional activities for distributing that class of
shares. Under the Class B Plan, the Distributor receives payments from a
Fund at the annual rate up to 0.75% of the average daily net assets of such
Fund's Class B shares to compensate the Distributor and certain securities
firms for providing sales and promotional activities for distributing that
class of shares. The distribution costs for which the Distributor may be
reimbursed out of such distribution fees 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 or Class B Plan may
exceed the Distributor's distribution costs as described above. The
Distribution Plans provide that each class of shares of each Fund may also
pay the Distributor an account maintenance and service fee at the annual
rate up to 0.25% of the aggregate average daily net assets of such class of
shares for payments to broker-dealers for providing continuing account
maintenance. In this regard, some payments are used to compensate broker-
dealers with account
32
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
maintenance and service fees in an amount up to 0.25% per year of the
assets maintained in a Fund by their customers. For the six months ended
September 30, 1995, SACS earned fees of $2,950,414, $285,121, $683,342,
$768,293 and $372,069 for U.S. Government Securities Fund, Federal
Securities Fund, Diversified Income Fund, High Income Fund and Tax Exempt
Insured Fund, respectively, (of which $19,047 and $55,571 was waived by
U.S. Government Securities Fund Class A and High Income Fund Class B,
respectively).
For the six months ended September 30, 1995, SACS has advised the Funds
that it has received sales concessions on each Fund's Class A shares,
portions of which are reallowed to affiliated broker-dealers and non-
affiliated broker-dealers as follows:
<TABLE>
<CAPTION>
SALES AFFILIATED NON-AFFILIATED
CONCESSIONS BROKER-DEALERS BROKER-DEALERS
----------- -------------- --------------
<S> <C> <C> <C>
U.S. Government Securities Fund... $15,342 $11,868 $ 997
Federal Securities Fund........... 6,769 5,702 4
Diversified Income Fund........... 30,952 23,969 2,092
High Income Fund.................. 73,154 54,048 7,816
Tax Exempt Insured Fund........... 57,619 45,258 2,357
</TABLE>
SACS also receives the proceeds of contingent deferred sales charges paid
by investors in connection with certain redemptions of Class B fund shares.
For the six months ended September 30, 1995, SACS informed U.S. Government
Securities Fund, Federal Securities Fund, Diversified Income Fund, High
Income Fund and Tax Exempt Insured Fund that it received approximately
$890,354, $26,884, $158,981, $190,506 and $64,107, respectively, in
contingent deferred sales charges.
The Trust has entered into a Service Agreement with SunAmerica Fund
Services, Inc. ("SAFS"), an indirect wholly owned subsidiary of SunAmerica
Inc. 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 reimburse SAFS for costs incurred in
providing such services which is approved annually by the Trustees. For the
six months ended September 30, 1995, U.S. Government Securities Fund,
Federal Securities Fund, Diversified Income Fund, High Income Fund and Tax
Exempt Insured Fund incurred expenses of $717,185, $80,076, $161,181,
$199,120 and $178,312, respectively, to reimburse SAFS pursuant to the
terms of the Service Agreement. Of these amounts $115,490, $13,744,
$25,465, $29,616 and $28,862, respectively, were payable to SAFS at
September 30, 1995.
Note 5. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
investments (excluding U.S. Government securities and short-term
investments in the Diversified Income, High Income and Tax Exempt Insured
Funds, respectively) during the six months ended September 30, 1995 were as
follows:
<TABLE>
<CAPTION>
U.S.
GOVERNMENT FEDERAL DIVERSIFIED HIGH TAX EXEMPT
SECURITIES SECURITIES INCOME INCOME INSURED
FUND FUND FUND FUND FUND
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Aggregate purchases..... $576,684,744 $140,572,118 $80,144,806 $182,352,364 $34,181,233
============ ============ =========== ============ ===========
Aggregate sales......... $591,293,925 $137,758,317 $84,976,944 $199,068,780 $45,010,357
============ ============ =========== ============ ===========
</TABLE>
33
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
Note 6. Portfolio Securities
The costs of securities and the aggregate appreciation and depreciation of
securities at September 30, 1995 were as follows:
<TABLE>
<CAPTION>
U.S.
GOVERNMENT FEDERAL DIVERSIFIED HIGH TAX EXEMPT
SECURITIES SECURITIES INCOME INCOME INSURED
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cost.................... $753,202,484 $100,250,457 $139,016,095 $167,334,603 $144,802,901
============ ============ ============ ============ ============
Appreciation............ $ 9,005,258 $ 1,077,683 $ 5,251,515 $ 5,335,609 $ 8,999,640
Depreciation............ (5,505,312) (605,578) (6,879,101) (7,412,676) (81,755)
------------ ------------ ------------ ------------ ------------
Unrealized appreciation/
depreciation--net...... $ 3,499,946 $ 472,105 $ (1,627,586) $ (2,077,067) $ 8,917,885
============ ============ ============ ============ ============
</TABLE>
Note 7. Capital Share Transactions
Transactions in capital shares of each class of each series were as
follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
SEPTEMBER 30, 1995 YEAR ENDED SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995 (UNAUDITED) MARCH 31, 1995
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 9,453,719 $ 80,283,230 2,544,560 $ 20,825,728 8,332,548 $ 70,860,744 10,324,909 $ 84,569,618
Reinvested
dividends...... 161,957 1,366,639 254,756 2,091,612 1,083,923 9,138,498 2,655,859 21,791,813
Shares redeemed. (3,869,860) (32,542,352) (3,015,559) (24,712,085) (20,895,568) (176,405,314) (46,389,311) (380,228,772)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 5,745,816 $ 49,107,517 (216,243) $ (1,794,745) (11,479,097) $ (96,406,072) (33,408,543) $(273,867,341)
========== ============ ========== ============ =========== ============= =========== =============
<CAPTION>
FEDERAL SECURITIES FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
SEPTEMBER 30, 1995 YEAR ENDED SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995 (UNAUDITED) MARCH 31, 1995
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 3,895,563 $ 40,621,779 859,631 $ 8,566,946 603,996 $ 6,297,740 895,438 $ 9,024,876
Reinvested
dividends...... 34,589 358,807 3,735 36,932 100,679 1,040,357 312,480 3,098,412
Shares redeemed. (198,114) (2,050,464) (294,336) (2,931,987) (4,219,844) (44,048,535) (2,574,743) (25,581,102)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 3,732,038 $ 38,930,122 569,030 $ 5,671,891 (3,515,169) $(36,710,438) (1,366,825) $ (13,457,814)
========== ============ ========== ============ =========== ============= =========== =============
</TABLE>
34
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
<TABLE>
<CAPTION>
DIVERSIFIED INCOME FUND
---------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- -----------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
SEPTEMBER 30, 1995 YEAR ENDED SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995 (UNAUDITED) MARCH 31, 1995
------------------------ ------------------------ ------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 864,372 $ 3,701,789 1,911,715 $ 8,713,009 1,442,991 $ 6,199,523 13,562,550 $ 62,234,623
Reinvested
dividends...... 89,540 384,050 179,521 791,930 697,002 2,996,792 1,784,570 7,929,584
Shares redeemed. (690,122) (2,945,352) (1,294,317) (5,722,753) (5,047,531) (21,643,357) (19,804,466) (88,218,971)
---------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
Net increase
(decrease)..... 263,790 $ 1,140,487 796,919 $ 3,782,186 (2,907,538) $(12,447,042) (4,457,346) $ (18,054,764)
========== ============ ========== ============ =========== ============ =========== =============
<CAPTION>
HIGH INCOME FUND
---------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- -----------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
SEPTEMBER 30, 1995 YEAR ENDED SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995 (UNAUDITED) MARCH 31, 1995
------------------------ ------------------------ ------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 5,051,628 $ 35,070,982 4,517,500 $32,145,067 9,202,740 $ 64,147,250 18,144,837 $ 132,472,191
Reinvested
dividends...... 197,542 1,377,062 285,804 2,048,889 532,267 3,718,055 982,211 7,057,922
Shares redeemed. (5,176,062) (35,795,146) (3,162,108) (23,140,910) (13,743,471) (95,239,295) (13,525,747) (100,373,794)
---------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
Net increase
(decrease)..... 73,108 $ 652,898 1,641,196 $11,053,046 (4,008,464) $(27,373,990) 5,601,301 $ 39,156,319
========== ============ ========== ============ =========== ============ =========== =============
<CAPTION>
TAX EXEMPT INSURED FUND
---------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- -----------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
SEPTEMBER 30, 1995 YEAR ENDED SEPTEMBER 30, 1995 YEAR ENDED
(UNAUDITED) MARCH 31, 1995 (UNAUDITED) MARCH 31, 1995
------------------------ ------------------------ ------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 225,161 $ 2,782,116 1,153,762 $ 13,706,273 639,408 $ 7,871,589 1,052,706 $ 12,534,448
Reinvested
dividends...... 144,231 1,776,133 353,885 4,191,241 28,443 350,429 52,888 626,133
Shares redeemed. (1,193,855) (14,684,952) (3,966,717) (46,779,234) (520,106) (6,402,231) (701,719) (8,287,841)
---------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
Net increase
(decrease)..... (824,463) $(10,126,703) (2,459,070) $(28,881,720) 147,745 $ 1,819,787 403,875 $ 4,872,740
========== ============ ========== ============ =========== ============ =========== =============
</TABLE>
Note 8. Commitments and Contingencies
State Street Bank and Trust Company has established an uncommitted line of
credit with the SunAmerica Family of Mutual Funds with interest payable at
the Federal Funds rate plus 100 basis points with respect to the U.S.
Government Securities Fund, and Federal Securities Fund, and Federal Funds
rate plus 125 basis points with respect to the Diversified Income Fund and
the High Income Fund. Borrowings under the line of credit will commence
when the Fund's cash shortfall exceeds $100,000. The High Income Fund,
periodically utilized the uncommitted line of credit and incurred interest
expense of $29,632 for the six months ended September 30, 1995. The Funds
did not have any outstanding borrowings at September 30, 1995.
35
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 (unaudited) -- (continued)
Note 9. Trustees Retirement Plan
The Trustees (and Directors) of the SunAmerica Family of Mutual Funds have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement
Plan (the "Retirement Plan") effective January 1, 1993 for the unaffiliated
Trustees. The Retirement Plan provides generally that if an unaffiliated
Trustee who has at least 10 years of consecutive service as a Disinterested
Trustee of any of the SunAmerica mutual funds (an "Eligible Trustee")
retires after reaching age 60 but before age 70 or dies while a Trustee,
such person will be eligible to receive a retirement or death benefit from
each SunAmerica mutual fund with respect to which he or she is an Eligible
Trustee. As of each birthday, prior to the 70th birthday, each Eligible
Trustee will be credited with an amount equal to (i) 50% of his or her
regular fees (excluding committee fees) for services as a Disinterested
Trustee of each SunAmerica mutual fund for the calendar year in which such
birthday occurs, plus (ii) 8.5% of any amounts credited under clause (i)
during prior years. An Eligible Trustee may receive any benefits payable
under the Retirement Plan, at his or her election, either in one lump sum
or in up to fifteen annual installments. As of September 30, 1995, the
Funds had accrued $20,529, $1,823, $3,655, $3,640 and $4,196 which is
included in accrued expenses on the Statement of Assets and Liabilities,
and for the six months ended September 30, 1995 expensed $7,364, $703,
$1,720, $1,382 and $1,711 which is included in Trustees' fees and expenses
on the Statement of Operations for the U.S. Government Securities Fund,
Federal Securities Fund, Diversified Income Fund, High Income Fund and Tax
Exempt Insured Fund, respectively, for the Retirement Plan.
36
<PAGE>
TRUSTEES INVESTMENT ADVISER
Eli Broad SunAmerica Asset Management Corp.
S. James Coppersmith The SunAmerica Center
Samuel M. Eisenstat 733 Third Avenue
Stephen J. Gutman New York, NY 10017-3204
Sebastiano Sterpa
Jay S. Wintrob DISTRIBUTOR
SunAmerica Capital Services, Inc.
The SunAmerica Center
OFFICERS 733 Third Avenue
Peter A. Harbeck, President New York, NY 10017-3204
Stanton J. Feeley, Executive Vice President
Nancy Kelly, Vice President SHAREHOLDER SERVICING AGENT
P. Christopher Leary, Vice President SunAmerica Fund Services, Inc.
Robert M. Zakem, Secretary The SunAmerica Center
Peter C. Sutton, Controller 733 Third Avenue
John T. Genoy, Assistant Controller New York, NY 10017-3204
Donna M. Handel, Assistant Controller CUSTODIAN AND TRANSFER AGENT
Hilary R. Kastleman, Assistant Secretary State Street Bank & Trust Company
Abbe P. Stein, Assistant Secretary P.O. Box 419572
Kansas City, MO 64141-6572
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BULK RATE
SUNAMERICA INCOME FUNDS U.S. POSTAGE
THE SUNAMERICA CENTER PAID
733 THIRD AVENUE Kansas City,
NEW YORK, NY 10017-3204 MO
1-800-858-8850 PERMIT NO.
3657
This report is submitted solely for
the general information of
shareholders of the Fund.
Distribution of this report to
persons other than shareholders of
the Fund is authorized only in
connection with a currently effective
prospectus, setting forth details of
the Fund, which must precede or
accompany this report.
The accompanying report has not been
examined by independent accountants
and accordingly no opinion has been
expressed thereon.
SPONSORED BY:
[LOGO] SunAmerica
Asset Management
IFANN
