<PAGE>
MARCH 31, 1996
SunAmerica
Income Funds
[ART WORK APPEARS HERE]
Annual Report
U. S. GOVERNMENT SECURITIES - FEDERAL SECURITIES
DIVERSIFIED INCOME - HIGH INCOME - TAX EXEMPT INSURED
[LOGO OF SUN AMERICA ASSET MANAGEMENT APPEARS HERE]
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER LETTER
Dear Shareholder:
FIXED INCOME OVERVIEW
Over the past several months, wide ranging economic data and market reaction
to these statistics led to volatility in the fixed income markets. An example
of this was employment data released for January and February, which varied
widely from economists' estimates. Further, events such as the January
blizzards and the closure of the federal government contributed significantly
to these statistical surprises.
The failure of Washington to reach an agreement on legislation to balance
the Federal budget also forced fixed income market investors to revise
economic growth forecasts and address the issue of continuing fiscal deficits.
Although both political parties agree on the need for action, neither party is
willing to accept final compromises over the timing or nature of spending
reductions. The resulting slight upturn in interest rates forced bond prices
lower in the first part of 1996.
Generally, we expect a favorable environment for fixed income investments,
due to an inflation rate expected to remain in the 2.5-3% range through the
balance of the year. Although commodity prices such as oil have been trending
upward, other factors have offset this movement. Corporations are using
aggressive pricing strategies to win market share and keep prices attractive.
Wage inflation also remains low, as concerns for job security overshadow calls
for increased compensation. Legislative events, lack of consensus on potential
stumbling blocks to the continued slow growth, and a controlled inflation
environment may lead to further market adjustments in coming months.
U.S. GOVERNMENT SECURITIES FUND
The U.S. Government Securities Fund is managed to be less sensitive to
changes in interest rates than many other government bond funds. This is a
defensive positioning, which means that the U.S. Government Securities Fund's
NAV should not fluctuate as widely to drops in interest rates as some other
funds. A bond portfolio's sensitivity to changes in interest rates is measured
by a mathematical formula called duration. Duration measures the amount a
portfolio will rise or fall given a one percent change in prevailing interest
rates. Over the first quarter of 1996, we reduced the duration of the U.S.
Government Securities Fund from approximately 5.0 to 4.5. This proved to be a
good tactic, as interest rates rose during the quarter, approaching 7% for the
30-year benchmark Treasury bond. In addition, our emphasis on "seasoned"
mortgage-backed securities helped stabilize the Fund's distribution rate and
principal primarily because these securities do not suffer high prepayment
rates during a period of rising interest rates.
FEDERAL SECURITIES FUND
The Federal Securities Fund has a longer duration than our U.S. Government
Securities Fund. This positioning allowed the Fund to capture strong gains
during 1995 as the bond market rose, but impeded the Fund's performance in the
first part of 1996. We responded by shortening the Fund's duration during the
1
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER LETTER
first quarter, though we believe the recent rise in interest rates was
somewhat of an overreaction to unclear market signals; we will maintain this
defensive posture in the near future. The portfolio's composition has remained
divided approximately equally between: long maturity treasury bonds which can
easily be bought or sold to adjust the Fund's duration; current coupon
mortgages; and premium mortgages with more stable cash flows. We intend to
maintain this allocation, but plan to increase the duration once the market
consensus has accepted a slow growth and controlled inflation economic
scenario.
DIVERSIFIED INCOME FUND
The Diversified Income Fund allocates assets between high yield securities,
foreign debt securities and U.S. investment grade securities. At March 31,
1996, the portfolio held 46.7% high yield securities, 28.8% foreign debt
securities and the balance in domestic investment grade bonds, primarily U.S.
Treasury securities. This mix resulted in better performance for the Fund's
fiscal year than in the past. Uncertainty in the U.S. bond market affected
high yield bond prices less than Treasury bonds. Fear of economic or political
change in Latin American markets was unfounded as those countries proceed
ahead to better fiscal responsibility.
HIGH INCOME FUND
An expanding economy with low inflation provided a favorable backdrop for
the high yield bond market during the past 12 months. This sector of the U.S.
bond market was more resistant to price fluctuations caused by the rise in
long-term benchmark rates, which approached 7% in the period. A positive
economic climate helped companies issuing high yield debt to service their
debt and improve underlying business fundamentals. We have focused the
portfolio on several industries, including gaming, retail, health care, and
communications firms in the broadcasting, cable, cellular and paging areas.
TAX EXEMPT INSURED FUND
The municipal bond market ended the first quarter slightly weaker as rising
interest rates caused bond prices to retreat from the recent highs achieved
earlier in 1996. However, the overall performance for the tax-exempt market
has been strong in comparison to other fixed income asset classes as concerns
over potential changes in the tax code have begun to dissipate. The debate
surrounding tax reform attracted a great deal of attention over the past two
years and resulted in the municipal market cheapening relative to other fixed
income investments. Now, with the demise of the Forbes candidacy which had
been the most vocal proponent of a change to a flat tax, the voting populace
appears to have rejected the concept. More importantly, neither President
Clinton nor Senator Dole are expected to support the flat tax issue in the
upcoming Presidential Election. As a result, the municipal market has been
able to outperform the taxable market in the first quarter of 1996 and should
continue to do so throughout the rest of this year.
OUTLOOK
We believe the economy will continue to exhibit moderate growth throughout
1996, and that inflation will remain subdued, in the 2.5%-3% range. Federal
Reserve policy on interest rates will remain constant in
2
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER LETTER
the short-term, but near year-end there may be some loosening of monetary
policy to a more neutral stance if there is economic consensus that slow
growth can be maintained without triggering a rise in the inflation rate.
/s/ John C. Mooney
/s/ P. Christopher Leary
John C. Mooney
P. Christopher Leary Portfolio Manager
Portfolio Manager
/s/ Howard B. Udis
Howard B. Udis
Portfolio Manager
3
<PAGE>
SUNAMERICA INCOME FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 1996
<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
$505,857,350;
$58,883,174;
$120,943,172;
$121,290,514 and
$140,630,966,
respectively)........... $505,472,082 $58,969,751 $122,816,785 $124,664,854 $149,454,718
Short-term securities
(cost equals market).... -- 198,814 -- -- --
Joint repurchase
agreements (cost equals
market)................. 109,319,000 16,631,000 3,328,000 1,051,000 --
Cash..................... 29,470 6,933 6,483 889 --
Interest receivable...... 5,042,643 406,756 2,508,277 2,777,526 2,242,339
Receivable for
investments sold........ 1,244,003 145 -- -- 20,108
Receivable for shares of
beneficial interest
sold.................... 32,676 56,315 8,744 72,879 276,316
Prepaid expenses......... 25,038 27,444 2,269 8,941 18,889
Receivable for variation
margin on futures
contracts............... 6,806 1,361 -- -- --
Receivable from
distributor............. 4,276 -- -- 6,873 --
------------ ----------- ------------ ------------ ------------
Total assets............ 621,175,994 76,298,519 128,670,558 128,582,962 152,012,370
------------ ----------- ------------ ------------ ------------
LIABILITIES:
Payable for securities
loaned.................. 63,493,750 9,500,000 -- -- --
Dividends payable........ 1,371,199 174,321 515,198 479,173 308,829
Payable for shares of
beneficial interest
redeemed................ 838,118 43,243 170,623 46,573 148,169
Accrued expenses......... 422,683 68,411 93,977 107,802 93,113
Distribution and service
maintenance fees
payable................. 405,625 34,374 100,987 97,388 61,569
Investment advisory and
management fees payable. 323,986 28,647 72,590 89,023 64,830
Payable for variation
margin on futures
contracts............... 44,948 7,175 5,972 -- --
Payable to custodian..... -- -- -- -- 63,710
------------ ----------- ------------ ------------ ------------
Total liabilities....... 66,900,309 9,856,171 959,347 819,959 740,220
------------ ----------- ------------ ------------ ------------
Net assets........... $554,275,685 $66,442,348 $127,711,211 $127,763,003 $151,272,150
============ =========== ============ ============ ============
NET ASSETS WERE COMPOSED
OF:
Shares of beneficial
interest, $.01 par
value................... $ 651,464 $ 63,670 $ 297,033 $ 183,667 $ 121,778
Paid-in capital.......... 585,381,836 67,613,871 159,376,243 170,695,156 151,543,027
------------ ----------- ------------ ------------ ------------
586,033,300 67,677,541 159,673,276 170,878,823 151,664,805
Accumulated distributions
in excess of net
investment income....... (1,255,322) (174,321) (522,977) (228,649) (308,829)
Accumulated net realized
loss on investments,
futures contracts and
foreign currency........ (30,117,025) (1,147,449) (33,312,686) (46,261,511) (8,907,578)
Net unrealized
appreciation
(depreciation) on
investments............. (385,268) 86,577 1,873,613 3,374,340 8,823,752
Net unrealized
depreciation on foreign
currency, other assets
and liabilities......... -- -- (15) -- --
------------ ----------- ------------ ------------ ------------
Net assets........... $554,275,685 $66,442,348 $127,711,211 $127,763,003 $151,272,150
============ =========== ============ ============ ============
CLASS A (UNLIMITED SHARES
AUTHORIZED):
Net asset value and
redemption price per
share
($125,503,637/14,756,884;
$40,277,524/3,862,927;
$16,761,844/3,905,764;
$35,962,610/5,176,395
and
$121,957,311/9,818,201
net assets and shares of
beneficial interest
issued and outstanding,
respectively)........... $ 8.50 $ 10.43 $ 4.29 $ 6.95 $ 12.42
Maximum sales charge
(4.75% of offering
price).................. 0.42 0.52 0.21 0.35 0.62
------------ ----------- ------------ ------------ ------------
Maximum offering price to
public.................. $ 8.92 $ 10.95 $ 4.50 $ 7.30 $ 13.04
============ =========== ============ ============ ============
CLASS B (UNLIMITED SHARES
AUTHORIZED):
Net asset value, offering
price and redemption
price (less any
applicable contingent
deferred sales charge)
per share
($428,772,048/50,389,486;
$26,164,824/2,504,077;
$110,949,367/25,797,521;
$91,800,393/13,190,350
and
$29,314,839/2,359,606
net assets and shares of
beneficial interest
issued and outstanding,
respectively)........... $ 8.51 $ 10.45 $ 4.30 $ 6.96 $ 12.42
============ =========== ============ ============ ============
</TABLE>
See Notes to Financial Statements
4
<PAGE>
SUNAMERICA INCOME FUNDS
STATEMENT OF OPERATIONS -- For the year ended March 31, 1996
<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............... $54,240,281 $5,439,937 $14,755,985 $18,337,792 $ 9,527,826
Dividends.............. -- -- -- 189,688 --
----------- ---------- ----------- ----------- -----------
Total investment
income................ 54,240,281 5,439,937 14,755,985 18,527,480 9,527,826
----------- ---------- ----------- ----------- -----------
Expenses:
Investment advisory and
management fees....... 4,212,162 360,738 915,671 1,273,169 802,564
Distribution and
service maintenance
fees--Class A......... 388,894 116,954 56,515 144,739 462,514
Distribution and
service maintenance
fees--Class B......... 5,201,895 384,150 1,247,253 1,284,954 283,659
Transfer agent fees and
expenses--Class A..... 288,579 93,492 44,348 116,344 322,325
Transfer agent fees and
expenses--Class B..... 1,329,862 105,331 325,486 329,464 68,813
Custodian fees and
expenses.............. 936,775 115,545 90,515 99,210 100,440
Interest expense....... 153,337 585 49,501 44,123 --
Trustees' fees and
expenses.............. 73,383 8,115 16,165 18,884 18,163
Audit and tax
consulting fees....... 55,490 15,985 21,960 27,200 22,535
Registration fees--
Class A............... 8,869 8,160 7,570 8,739 14,745
Registration fees--
Class B............... 22,688 7,435 11,849 13,945 10,916
Printing expense....... 21,410 2,705 5,350 7,830 3,925
Legal fees and
expenses.............. 17,210 5,395 7,035 7,455 5,795
Insurance expense...... 16,652 1,706 3,956 3,728 30,886
Miscellaneous expenses. 26,737 3,402 5,288 7,096 6,910
----------- ---------- ----------- ----------- -----------
Total expenses......... 12,753,943 1,229,698 2,808,462 3,386,880 2,154,190
Less: expenses waived
by distributor........ (44,445) -- -- (102,796) --
----------- ---------- ----------- ----------- -----------
Net expenses........... 12,709,498 1,229,698 2,808,462 3,284,084 2,154,190
----------- ---------- ----------- ----------- -----------
Net investment income... 41,530,783 4,210,239 11,947,523 15,243,396 7,373,636
----------- ---------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments......... 9,603,179 2,758,114 (8,084,041) (7,236,768) 1,630,756
Net realized gain (loss)
on futures contracts... 45,590 (23,056) (292,616) -- (199,383)
Net change in unrealized
appreciation
(depreciation) on
investments............ 5,738,709 423,129 13,961,546 7,416,828 2,644,616
Net change in unrealized
appreciation
(depreciation) on
foreign currency, other
assets and liabilities. -- -- (102) -- --
----------- ---------- ----------- ----------- -----------
Net realized and
unrealized gain on
investments and foreign
currency............... 15,387,478 3,158,187 5,584,787 180,060 4,075,989
----------- ---------- ----------- ----------- -----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $56,918,261 $7,368,426 $17,532,310 $15,423,456 $11,449,625
=========== ========== =========== =========== ===========
</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 YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
--------------- --------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
DECREASE IN NET ASSETS:
OPERATIONS:
Net investment income.. $ 41,530,783 $ 53,583,054 $ 4,210,239 $ 4,623,379 $ 11,947,523 $ 16,024,304
Net realized gain
(loss) on
investments .......... 9,603,179 (45,098,323) 2,758,114 (3,546,056) (8,084,041) (23,976,569)
Net realized gain
(loss) on futures
contracts............. 45,590 -- (23,056) -- (292,616) --
Net realized loss on
foreign currency,
other assets and
liabilities........... -- -- -- -- -- (335,830)
Net change in
unrealized
appreciation
(depreciation) on
investments........... 5,738,709 12,685,155 423,129 1,261,503 13,961,546 (1,943,292)
Net change in
unrealized
appreciation
(depreciation) on
foreign currency,
other assets and
liabilities........... -- -- -- -- (102) 4,974
--------------- --------------- ----------- ----------- ------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ 56,918,261 21,169,886 7,368,426 2,338,826 17,532,310 (10,226,413)
--------------- --------------- ----------- ----------- ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... (6,676,176) (4,146,499) (1,985,432) (106,644) (1,513,903) (1,404,506)
From net investment
income (Class B)...... (27,782,092) (35,858,561) (2,098,335) (4,158,525) (11,028,301) (14,176,998)
--------------- --------------- ----------- ----------- ------------ ------------
Total dividends and
distributions to
shareholders........... (34,458,268) (40,005,060) (4,083,767) (4,265,169) (12,542,204) (15,581,504)
--------------- --------------- ----------- ----------- ------------ ------------
NET DECREASE IN NET
ASSETS RESULTING FROM
CAPITAL SHARE
TRANSACTIONS (NOTE 7).. (136,362,670) (275,662,086) (8,732,579) (7,785,923) (23,870,313) (14,272,578)
--------------- --------------- ----------- ----------- ------------ ------------
TOTAL DECREASE IN NET
ASSETS................. (113,902,677) (294,497,260) (5,447,920) (9,712,266) (18,880,207) (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
March 31, 1996 and
March 31, 1995 of
$(1,255,322),
$(1,295,646),
$(174,321), $(99,141),
$(522,977) and
$311,631,
respectively].......... $ 554,275,685 $ 668,178,362 $66,442,348 $71,890,268 $127,711,211 $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 YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income.. $ 15,243,396 $ 16,493,914 $ 7,373,636 $ 9,127,948
Net realized gain
(loss) on investments
...................... (7,236,768) (22,330,854) 1,630,756 (9,524,226)
Net realized loss on
futures contracts..... -- -- (199,383) --
Net realized loss on
foreign currency,
other assets and
liabilities........... -- (105,175) -- --
Net change in
unrealized
appreciation
(depreciation) on
investments........... 7,416,828 1,183,178 2,644,616 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........ 15,423,456 (4,756,011) 11,449,625 11,020,807
------------ ------------ ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... (4,100,978) (3,535,939) (6,307,717) (7,962,945)
From net investment
income (Class B)...... (12,111,523) (13,736,255) (1,156,665) (1,089,883)
------------ ------------ ------------ ------------
Total dividends and
distributions to
shareholders........... (16,212,501) (17,272,194) (7,464,382) (9,052,828)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7).. (65,066,720) 50,209,365 (16,652,927) (24,008,980)
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. (65,855,765) 28,181,160 (12,667,684) (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
March 31, 1996 and
March 31, 1995 of
$(228,649), $146,988,
$(308,829) and
$(216,286),
respectively].......... $127,763,003 $193,618,768 $151,272,150 $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)
- ---------------- --------- ---------- ----------- ---------- --------- ------- ------- --------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
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
3/31/96......... 8.23 0.62 0.16 0.78 (0.51) -- -- -- (0.51) 8.50 9.62
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)(6) 6.83%(4)(6) 35%
3/31/95......... 73,399 1.46(6) 7.50(6) 105
3/31/96......... 125,504 1.44(6) 7.11(6) 142
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)
- ---------------- --------- ---------- ----------- ---------- --------- ------- ------- --------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B
6/30/92(5)...... $8.90 $0.73 $(0.02) $0.71 $(0.57) $(0.16) $ -- $ -- $(0.73) $8.88 8.33%
6/30/93(5)...... 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
3/31/96......... 8.24 0.55 0.17 0.72 (0.45) -- -- -- (0.45) 8.51 8.87
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(5)...... $1,075,668 1.92% 8.21% 54%
6/30/93(5)...... 1,259,845 1.82(6) 7.27(6) 73
7/01/93-
3/31/94........ 886,089 1.95(4)(6) 6.61(4)(6) 35
3/31/95......... 594,779 2.15(6) 6.80(6) 105
3/31/96......... 428,772 2.13 6.46 142
</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)
- ---------------- --------- ------- ----------- ---------- --------- ------- --------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
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
3/31/96......... 9.98 0.68(1) 0.40 1.08 (0.63) -- -- (0.63) 10.43 10.94 40,278
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)(6) 4.68%(4)(6) 68%
3/31/95......... 1.40(6) 6.90(6) 267
3/31/96......... 1.37 6.12 311
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)
- ---------------- --------- ------- ----------- ---------- --------- ------- --------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
3/31/96......... 10.01 0.56(1) 0.44 1.00 (0.56) -- -- (0.56) 10.45 10.13 26,165
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
3/31/96......... 2.01 5.64 311
</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) Pursuant to a reorganization of the SunAmerica Mutual Funds, the Fund
changed its fiscal year end to March 31
(6) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
6/30/93 3/31/94 3/31/95 3/31/96
------- ------- ------- -------
<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
INVESTMENTS NET NET EXPENSES RATIO OF 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 NET
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/05/93 -
10/31/93(2)(5). $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)(8) 8.25 (4)(8)
3/31/95......... 4.79 0.43(3) (0.66) (0.23) (0.42) 4.14 (5.10) 14,213 1.59 9.58
3/31/96......... 4.14 0.39(3) 0.16 0.55 (0.40) 4.29 13.78 16,762 1.46 8.96
PORTFOLIO
PERIOD ENDED TURNOVER
- ----------------- ---------
<S> <C>
10/05/93 -
10/31/93(2)(5). 249%
11/01/93 -
3/31/94........ 48
3/31/95......... 160
3/31/96......... 166
NET GAIN
(LOSS) ON RATIO OF
INVESTMENTS NET NET EXPENSES RATIO OF 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 NET
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B
10/31/92(5)(6).. $5.21 $0.42 $(0.41) $0.01 $(0.40) $4.82 0.16 % $ 35,409 0.74%(8) 7.81%(8)
10/31/93(5)(6).. 4.82 0.38(3) 0.24 0.62 (0.37) 5.07 13.35 102,519 1.78 (8) 7.53 (8)
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
3/31/96......... 4.15 0.36(3) 0.17 0.53 (0.38) 4.30 13.09 110,949 2.06 8.42
PORTFOLIO
PERIOD ENDED TURNOVER
- ----------------- ---------
<S> <C>
10/31/92(5)(6).. 191%
10/31/93(5)(6).. 249
11/01/93 -
3/31/94........ 48
3/31/95......... 160
3/31/96......... 166
- --------------------------------------------------------------------------------
HIGH INCOME FUND
<CAPTION>
NET GAIN
(LOSS) ON RATIO OF
INVESTMENTS NET NET EXPENSES RATIO OF 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 NET
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
3/31/92(7)...... $6.84 $0.95 $1.28 $2.23 $(1.00) $8.07 35.27% $ 22,607 1.57% 13.19%
3/31/93(7)...... 8.07 0.95 0.18 1.13 (1.08) 8.12 15.05 30,715 1.77 11.08
3/31/94(7)...... 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
3/31/96......... 6.95 0.67(3) 0.02 0.69 (0.69) 6.95 10.43 35,963 1.53 9.36
PORTFOLIO
PERIOD ENDED TURNOVER
- ----------------- ---------
<S> <C>
3/31/92(7)...... 208%
3/31/93(7)...... 232
3/31/94(7)...... 290
3/31/95......... 196
3/31/96......... 183
CLASS B
NET GAIN
(LOSS) ON RATIO OF
INVESTMENTS NET NET EXPENSES RATIO OF 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 NET
PERIOD ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS ASSETS
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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)(8) 9.07%(4)(8)
3/31/95......... 8.04 0.73(3) (1.02) (0.29) (0.79) 6.96 (3.42) 153,034 2.16 (8) 10.26 (8)
3/31/96......... 6.96 0.62(3) 0.03 0.65 (0.65) 6.96 9.83 91,800 2.06 (8) 8.85 (8)
10/01/93 -
3/31/94(2)..... 290%
3/31/95......... 196
3/31/96......... 183
</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)Pursuant to a reorganization of the SunAmerica Mutual Funds, the Fund
changed its fiscal year end to March 31
(6)Restated to reflect 1.889180183-for-1 stock split effective December 16,
1992
(7)Restated to reflect 1.174107276-for-1 stock split effective October 1, 1993
(8)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 3/31/96
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Diversified Income Fund Class A -- -- .62% -- --
Diversified Income Fund Class B 1.25% .38% -- -- --
High Income Fund Class B -- -- .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
- ---------------- --------- ---------- ----------- ---------- ---------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
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 (7)
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)(7)
3/31/95......... 11.95 0.63(4) 0.17 0.80 (0.62) 12.13 6.97 137,955 1.20 (7)
3/31/96......... 12.13 0.59(4) 0.29 0.88 (0.59) 12.42 7.37 121,957 1.22
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 (7) 26
11/01/93-
3/31/94........ 4.99 (5)(7) 52
3/31/95......... 5.32 (7) 162
3/31/96......... 4.72 46
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)(6). $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
3/31/96......... 12.14 0.50(4) 0.29 0.79 (0.51) 12.42 6.58 29,315 1.90
RATIO OF
NET
INVESTMENT
INCOME TO
AVERAGE PORTFOLIO
PERIOD ENDED NET ASSETS TURNOVER
- ----------------- --------------- ---------
<S> <C> <C>
10/04/93-
10/31/93(2)(6). 4.09%(5) 26%
11/01/93-
3/31/94........ 4.17 (5) 52
3/31/95......... 4.60 162
3/31/96......... 4.03 46
</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)Commencement of sale of respective class of shares
(7)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 -- March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--28.8%
6.50% due 3/15/24................................. $ 9,624 $ 8,715,864
7.50% due 2/01/22 - 6/01/25....................... 24,289 24,242,475
8.50% due 6/01/01................................. 5 5,679
9.00% due 1/01/02 - 10/01/16...................... 609 636,928
9.25% due 9/01/08 - 3/01/17....................... 526 551,591
9.50% due 9/01/16 - 9/01/21....................... 7,195 7,640,917
9.63% due 5/15/06(2).............................. 5,000 4,687,501
10.00% due 10/01/02 - 8/01/21..................... 24,683 27,138,010
10.00% due 5/01/05(1)............................. 170 173,516
10.50% due 6/01/00 - 1/01/21...................... 969 1,057,083
10.75% due 9/01/00 - 1/01/15...................... 274 300,945
11.00% due 9/01/00 - 6/01/17...................... 2,555 2,838,134
11.25% due 11/01/13............................... 88 97,852
11.50% due 11/01/01 - 7/01/19..................... 1,256 1,407,217
11.75% due 8/01/11 - 10/01/14..................... 188 211,148
12.00% due 7/01/99 - 7/01/20...................... 15,671 17,587,195
12.13% due 9/01/11................................ 877 997,245
12.25% due 10/01/99 - 7/01/15..................... 1,092 1,239,226
12.50% due 8/01/99 - 4/01/19...................... 26,291 30,272,662
12.75% due 2/01/00 - 6/01/15...................... 1,316 1,508,303
13.00% due 5/01/00 - 10/01/15..................... 13,804 16,087,500
13.25% due 11/01/10 - 5/01/15..................... 1,374 1,598,796
13.50% due 2/01/10 - 2/01/19...................... 7,916 9,346,950
13.75% due 7/01/11 - 8/01/14...................... 96 112,997
14.00% due 10/01/09 - 4/01/16..................... 780 921,196
14.50% due 12/01/10 - 5/01/13..................... 140 164,848
14.72% due 2/15/21(1)(2).......................... 221 201,045
------------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORP.
(cost $154,776,200)............................... 159,742,823
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--16.7%
6.00% due 9/01/00(1).............................. 9,200 9,044,783
6.00% due 11/01/03................................ 6,429 6,314,466
6.50% due 8/01/99 - 1/01/01....................... 7,355 7,295,546
8.00% due 12/01/22 - 1/01/23...................... 16,712 17,004,784
8.50% due 9/25/20(1).............................. 600 606,750
9.00% due 12/01/97 - 4/01/07...................... 3,146 3,308,747
9.25% due 12/01/10 - 1/01/17...................... 473 498,255
10.25% due 6/01/14 - 7/01/16...................... 114 124,965
10.50% due 3/01/15................................ 360 392,410
11.00% due 3/01/09 - 8/01/20...................... 1,647 1,833,586
11.50% due 5/01/00 - 3/01/14...................... 797 844,708
11.75% due 3/01/15 - 11/01/15..................... 61 68,789
12.00% due 9/01/07 - 5/01/16...................... 14,009 15,947,455
12.25% due 9/01/99 - 10/01/15..................... 1,930 2,191,959
12.50% due 12/01/97 - 9/01/15..................... 8,241 9,444,558
12.75% due 9/01/12 - 9/01/15...................... 845 972,798
13.00% due 10/01/09 - 9/01/16..................... 10,947 12,773,140
13.25% due 10/01/13 - 2/01/15..................... 239 278,211
13.50% due 10/01/10 - 2/01/17..................... 1,900 2,245,639
13.75% due 11/01/11 - 10/01/14.................... 190 224,583
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
14.00% due 10/01/14.............................. $ 515 $ 613,962
14.50% due 7/01/11............................... 273 325,892
14.75% due 7/01/12............................... 127 157,382
15.00% due 10/01/12 - 2/01/13.................... 165 196,515
15.50% due 10/01/12.............................. 85 102,712
------------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION
(cost $91,364,378)............................... 92,812,595
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--27.0%
6.50% due 12/15/98 - 10/15/04.................... 6,044 5,882,411
7.00% due 11/15/22 - 10/15/23.................... 21,558 21,002,408
7.50% due 1/15/17 - 10/15/23..................... 27,794 27,737,641
8.50% due 6/15/01 - 11/15/20..................... 15,230 15,951,135
9.00% due 5/15/01 - 12/15/20..................... 10,652 11,260,200
9.50% due 2/15/98 - 7/15/20...................... 3,667 3,946,056
10.00% due 3/15/98 - 5/15/19..................... 2,576 2,771,585
10.25% due 7/15/15............................... 50 55,778
10.50% due 11/15/97 - 6/15/21.................... 10,292 11,218,191
11.00% due 2/15/98 - 4/15/21..................... 7,253 8,028,757
11.50% due 3/15/98 - 1/15/21..................... 9,425 10,645,070
11.75% due 7/15/13 - 11/15/15.................... 1,071 1,190,134
12.00% due 9/15/98 - 10/15/19.................... 4,286 4,904,405
12.25% due 8/15/13 - 7/15/15..................... 1,233 1,429,063
12.50% due 4/15/10 - 3/15/16..................... 9,009 10,483,519
12.75% due 10/15/13.............................. 6 6,571
13.00% due 11/15/10 - 6/15/15.................... 4,799 5,635,165
13.25% due 7/15/14 - 11/15/14.................... 119 139,688
13.50% due 5/15/10 - 1/15/15..................... 3,223 3,834,176
14.00% due 5/15/11 - 12/15/14.................... 1,651 1,996,924
15.00% due 6/15/11 - 2/15/13..................... 957 1,159,746
16.00% due 12/15/11 - 7/15/12.................... 295 348,126
------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(cost $151,845,292).............................. 149,626,749
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II--2.0%
10.00% due 9/20/16 - 4/20/19..................... 25 27,355
11.00% due 7/20/00............................... 38 39,728
11.50% due 8/20/13 - 7/20/20..................... 1,308 1,481,043
11.75% due 11/20/14 - 2/20/16.................... 569 652,550
12.00% due 10/20/13 - 5/20/15.................... 870 994,801
12.25% due 5/20/14 - 10/20/15.................... 84 96,026
12.50% due 9/20/13 - 1/20/15..................... 4,351 5,049,054
12.75% due 11/20/13 - 7/20/15.................... 195 226,804
13.00% due 9/20/13 - 10/20/14.................... 1,993 2,340,956
13.25% due 8/20/14 - 5/20/15..................... 89 103,432
13.50% due 10/20/14.............................. 78 92,771
------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(cost $10,757,426)............................... 11,104,520
------------
</TABLE>
11
<PAGE>
SUNAMERICA U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
U.S. FEDERAL AGENCY--0.2%
United States Department of Veteran Affairs
6.50% due 10/15/05
(cost $986,926).................................. $ 961 $ 959,145
------------
U.S. TREASURY NOTES--8.7%
5.63% due 2/15/06 (3)............................. 30,000 28,453,200
5.88% due 11/15/05 (3)............................ 20,400 19,660,500
------------
TOTAL U.S. TREASURY NOTES
(cost $50,586,524)................................ 48,113,700
------------
U.S. TREASURY BONDS--7.8%
6.00% due 2/15/26................................. 8,000 7,308,720
6.88% due 8/15/25 (3)............................. 19,000 19,296,780
7.63% due 2/15/25................................. 15,000 16,507,050
------------
TOTAL U.S. TREASURY BONDS
(cost $45,540,604)................................ 43,112,550
------------
TOTAL INVESTMENT SECURITIES--91.2%
(cost $505,857,350)............................... 505,472,082
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
REPURCHASE AGREEMENTS--19.7%
Joint Repurchase Agreement Account (Note 3)...... $65,000 $ 65,000,000
Joint Repurchase Agreement Account (Note 3)...... 44,319 44,319,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost $109,319,000).............................. 109,319,000
------------
TOTAL INVESTMENTS--
(cost $615,176,350*)............................. 110.9% 614,791,082
Liabilities in excess of other assets (4)......... (10.9) (60,515,397)
------- ------------
NET ASSETS-- 100.0% $554,275,685
======= ============
</TABLE>
- -------
* See Note 6
(1) Fair valued security; see Note 2
(2) Inverse floater
(3) The security or a portion thereof is out on loan; see Note 2
(4) Reflects a liability for fully collateralized securities on loan; see
Note 2
See Notes to Financial Statements
12
<PAGE>
SUNAMERICA FEDERAL SECURITIES FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--11.4%
7.50% due 2/01/23 - 6/01/25....................... $ 4,183 $ 4,176,572
10.00% due 1/01/17................................ 3,056 3,362,044
12.50% due 9/30/13................................ 26 27,386
13.50% due 2/01/14................................ 7 8,598
-----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORP.
(cost $7,566,708)................................. 7,574,600
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.7%
6.00% due 9/01/00(1).............................. 1,840 1,808,957
15.50% due 10/01/12............................... 11 12,683
-----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION
(cost $1,810,303)................................. 1,821,640
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--51.9%
7.00% due 3/15/23 - 9/15/23....................... 13,332 12,994,764
8.50% due 3/15/17 - 9/15/24....................... 12,945 13,539,160
9.00% due 6/15/16 - 5/15/17....................... 4,859 5,210,409
11.00% due 11/15/15............................... 559 625,108
11.25% due 8/15/15................................ 82 92,243
12.00% due 5/15/15................................ 93 107,322
12.25% due 9/15/13 - 7/15/15...................... 927 1,073,791
12.50% due 11/15/10 - 6/15/15..................... 212 246,040
13.00% due 1/15/11 - 4/15/15...................... 370 434,863
13.25% due 10/15/13............................... 20 24,018
13.50% due 5/15/11 - 10/15/14..................... 98 116,219
-----------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
(cost $34,352,991)................................ 34,463,937
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II--2.5%
10.00% due 10/20/13 - 3/20/17..................... 581 634,862
11.00% due 12/20/13............................... 95 106,594
12.00% due 3/20/15 - 1/20/16...................... 332 379,360
12.25% due 12/20/14 - 10/20/15.................... 404 464,995
13.00% due 6/20/14................................ 18 21,126
13.75% due 9/20/14................................ 15 17,497
-----------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION II
(cost $1,511,074)................................. 1,624,434
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
U.S. TREASURY NOTES--13.4%
5.63% due 2/28/01 (2)............................. $ 5,000 $ 4,901,550
6.50% due 8/15/05................................. 4,000 4,015,640
-----------
TOTAL U.S. TREASURY NOTES
(cost $9,043,346)................................. 8,917,190
-----------
U.S. TREASURY BONDS--6.9%
6.00% due 2/15/26 (2)
(cost $4,598,752) ............................... 5,000 4,567,950
-----------
TOTAL INVESTMENT SECURITIES--88.8%
(cost $58,883,174)................................ 58,969,751
-----------
SHORT-TERM SECURITIES--0.3%
United States Treasury Bills
4.74% due 5/16/96
(cost $198,814).................................. 200 198,814
-----------
REPURCHASE AGREEMENTS--25.0%
Joint Repurchase Agreement Account (Note 3)....... 5,000 5,000,000
Joint Repurchase Agreement Account (Note 3)....... 11,631 11,631,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $16,631,000)................................ 16,631,000
-----------
TOTAL INVESTMENTS--
(cost $75,712,988*)............................... 114.1% 75,799,565
Liabilities in excess of other assets (3).......... (14.1) (9,357,217)
------- -----------
NET ASSETS-- 100.0% $66,442,348
======= ===========
</TABLE>
- -------
* See Note 6
(1) Fair valued security; see Note 2
(2) The security or a portion thereof is out on loan; see Note 2
(3) Reflects a liability for fully collateralized securities on loan; see Note
2
See Notes to Financial Statements
13
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES--46.7%
BROADCASTING--4.4%
Argyle Television, Inc.
Sr. Subordinated Notes
9.75% due 11/01/05................................ $ 1,000 $ 960,000
NWCG Holding Corp.
Sr. Disc. Notes, Series B
zero coupon due 6/15/99........................... 5,000 3,612,500
Sinclair Broadcast Group, Inc.
Sr. Subordinated Notes
10.00% due 9/30/05................................ 1,000 982,500
------------
5,555,000
------------
BUSINESS SERVICES--2.2%
Katz Corp.
Sr. Subordinated Notes
12.75% due 11/15/02............................... 2,500 2,803,125
------------
CABLE--4.2%
Echostar Communications Corp.
Sr. Secured Disc. Notes
zero coupon due 6/01/04(4)........................ 2,000 1,457,500
Echostar Satellite Broadcasting Corp.
Sr. Disc. Notes
zero coupon due 3/15/04(1)(4)..................... 1,250 753,906
International CableTel, Inc.
Sr. Deferred Coupon
zero coupon due 4/15/05(4)........................ 1,000 645,000
International CableTel, Inc.
Sr. Deferred Coupon
zero coupon due 2/01/06(1)(4)..................... 1,000 565,000
United International Holdings, Inc.
Sr. Disc. Notes, Series B
zero coupon due 11/15/99.......................... 1,500 967,500
United International Holdings, Inc.
Sr. Disc. Notes
zero coupon due 11/15/99.......................... 1,500 967,500
------------
5,356,406
------------
CELLULAR--2.6%
Cellular Communications International, Inc.
Sr. Disc. Notes
zero coupon due 8/15/00........................... 2,000 1,220,000
Comcast Cellular Corp.
Notes
zero coupon due 3/05/00........................... 3,000 2,160,000
------------
3,380,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
CHEMICALS--2.6%
Arcadian Partners L.P.
Sr. Notes, Series B
10.75% due 5/01/05................................ $ 1,000 $ 1,087,500
LaRoche Industries, Inc.
Sr. Subordinated Notes
13.00% due 8/15/04................................ 2,000 2,175,000
------------
3,262,500
------------
FINANCE--4.7%
CSFB Ltd.
Sr. Secured Notes, Series A
7.00% due 11/15/05(1)(2).......................... 4,000 3,812,500
Olympic Financial Ltd.
Sr. Notes
13.00% due 5/01/00................................ 2,000 2,170,000
------------
5,982,500
------------
FOOD & BEVERAGES--0.7%
Specialty Foods Corp.
Sr. Notes
11.13% due 10/01/02............................... 1,000 935,000
------------
GAMING--2.3%
Station Casinos, Inc.
Sr. Subordinated Notes
10.13% due 3/15/06................................ 1,000 990,625
Trump Castle Funding, Inc.
First Mortgage Notes
11.75% due 11/15/03............................... 2,000 1,950,000
------------
2,940,625
------------
GROCERY--3.5%
Kash 'N Karry Food Stores, Inc.
Sr. Notes
11.50% due 2/01/03................................ 4,517 4,527,822
------------
HEALTH SERVICES-- 4.7%
Amerisource Distribution Corp.
Sr. Debentures
11.25% due 7/15/05................................ 1,028 1,118,086
Dade International, Inc.
Sr. Subordinated Notes, Series B
13.00% due 2/01/05................................ 1,500 1,680,000
OrNda Healthcorp.
Sr. Subordinated Notes
12.25% due 5/15/02................................ 1,000 1,085,000
Tenet Healthcare Corp.
Sr. Subordinated Notes
10.13% due 3/01/05................................ 2,000 2,140,000
------------
6,023,086
------------
</TABLE>
14
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
LEISURE--0.8%
AMF Group, Inc.
Sr. Subordinated Notes
10.88% due 3/15/06 (1)............................ $ 1,000 $ 998,125
------------
MEDIA--0.8%
Hollinger International
Publishing, Inc.
Sr. Subordinated Notes
9.25% due 2/01/06................................. 1,000 970,000
------------
METALS--2.1%
Renco Metals, Inc.
Sr. Notes
12.00% due 7/15/00................................ 2,500 2,678,125
------------
OIL & GAS--0.4%
DeepTech International, Inc.
Sr. Secured Notes
12.00% due 12/15/00............................... 500 471,250
------------
PACKAGING--1.0%
Riverwood International Corp.
Sr. Subordinated Notes
10.88% due 4/01/08................................ 1,250 1,250,000
------------
PAGING--1.2%
Arch Communications Group, Inc.
Sr. Disc. Notes
zero coupon due 3/15/08(4)........................ 875 500,938
Paging Network, Inc.
Sr. Subordinated Notes
10.13% due 8/01/07................................ 1,000 1,050,000
------------
1,550,938
------------
RETAIL--5.9%
County Seat Stores, Inc.
Sr. Subordinated Notes
12.00% due 10/01/02............................... 2,000 1,480,000
Hills Stores Co.
Sr. Notes
10.25% due 9/30/03................................ 2,000 1,985,000
Thrifty PayLess Holdings, Inc.
Sr. Subordinated Notes
12.25% due 4/15/04(6)............................. 2,000 2,420,000
Thrifty PayLess Holdings, Inc.
Sr. Subordinated Notes
12.25% due 4/15/04................................ 1,500 1,665,000
------------
7,550,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
TELECOMMUNICATIONS--2.6%
PanAmSat, L.P.
Sr. Subordinated Notes
zero coupon due 8/01/03(4)........................ $ 4,000 $ 3,360,000
------------
TOTAL CORPORATE BONDS & NOTES
(cost $57,173,575)................................ 59,594,502
------------
FOREIGN BONDS & NOTES--28.8%
BANKS--0.8%
Unibanco--Uniao de Bancos Brasileiros SA
Notes
11.13% due 11/28/97(1)............................ 1,000 1,016,250
------------
CABLE--4.1%
Bell Cablemedia PLC
Sr. Disc. Notes
zero coupon due 9/15/05(4)........................ 1,750 1,106,875
Comcast UK Cable Partners Ltd.
Sr. Disc. Notes
zero coupon due 11/15/07(4)....................... 2,000 1,155,000
Diamond Cable Communications PLC
Sr. Disc. Notes
zero coupon due 12/15/05(4)....................... 2,000 1,170,000
Telewest PLC
Sr. Disc. Notes
zero coupon due 10/01/07(4)....................... 1,875 1,115,625
Videotron Holdings PLC
Sr. Disc. Notes
zero coupon due 8/15/05(4)........................ 1,000 635,000
------------
5,182,500
------------
CEMENT--0.8%
Cemex SA and Tolmex
Debentures
10.00% due 11/05/99............................... 1,000 997,500
------------
FINANCE--0.8%
European Investment Bank
Debentures
6.63% due 3/15/00(3).............................. JPY 100,000 1,095,116
------------
FOOD & BEVERAGES-- 0.8%
Fomento Economico Mexicano
SA de CV
Unsubordinated Notes
9.50% due 7/22/97................................. 1,000 1,005,625
------------
</TABLE>
15
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
FOREIGN BONDS & NOTES (CONTINUED)
GOVERNMENT AGENCY--12.0%
Federative Republic of Brazil
Variable Rate Disc. Notes
4.25% due 4/15/24(5).............................. $ 4,000 $ 2,025,000
Federative Republic of Brazil
Capitalization Bonds
4.00% due 4/15/14................................. 3,184 1,874,358
Republic of Argentina
Sr. Unsubordinated Bonds
8.38% due 12/20/03................................ 4,000 3,370,000
Republic of Argentina
Bonds
9.25% due 2/23/01................................. 3,000 2,776,875
Republic of Argentina
Sr. Unsubordinated Bonds
10.95% due 11/01/99............................... 2,000 2,065,000
United Mexican States
Par Bonds
6.25% due 12/31/19................................ 2,000 1,265,000
United Mexican States
Global Bonds
9.75% due 2/06/01................................. 2,000 1,961,250
------------
15,337,483
------------
INDUSTRIAL--1.9%
International Semi-Tech Microelectronic, Inc.
Sr. Secured Disc. Notes
zero coupon due 8/15/03(4)........................ 4,000 2,420,000
------------
INSURANCE--0.9%
Terra Nova Insurance United Kingdom Holdings PLC
Sr. Notes
10.75% due 7/01/05................................ 1,000 1,121,250
------------
OIL & GAS--1.6%
Bridas Corp.
Sr. Notes
12.50% due 11/15/99............................... 2,000 2,082,500
------------
TELECOMMUNICATIONS--4.3%
Comunicacion Celular SA
Sr. Deferred Coupon Bond
zero coupon due 11/15/03(1)(4)(6)................. 2,750 1,595,000
Fonorola, Inc.
Sr. Secured Notes
12.50% due 8/15/02................................ 1,000 1,090,000
Telecom Argentina
Debentures
8.38% due 10/18/00................................ 3,000 2,850,000
------------
5,535,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN THOUSANDS)/ VALUE
SECURITY DESCRIPTION SHARES/WARRANTS (NOTE 2)
<S> <C> <C>
TOBACCO--0.8%
Empresas La Moderna
Bearer Notes
10.25% due 11/12/97.............................. $ 1,000 $ 995,000
------------
TOTAL FOREIGN BONDS & NOTES
(cost $36,664,639)............................... 36,788,224
------------
U.S. GOVERNMENT AND AGENCIES--19.6%
FEDERAL HOME LOAN BANK--3.7%
4.35% due 12/02/97............................... 4,850 4,719,656
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.6%
6.00% due 9/01/00(2)............................. 3,385 3,327,443
------------
U.S. TREASURY BONDS--6.9%
6.00% due 2/15/26................................ 1,000 913,590
6.88% due 8/15/25................................ 4,000 4,062,480
11.13% due 8/15/03............................... 3,000 3,832,020
------------
8,808,090
------------
U.S. TREASURY NOTES--6.4%
5.13% due 11/30/98............................... 5,000 4,903,900
7.75% due 2/15/01................................ 3,000 3,205,770
------------
8,109,670
------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(cost $26,012,162)............................... 24,964,859
------------
PREFERRED STOCK--0.9%
FOREST PRODUCTS--0.9%
SDW Holdings Corp.(2)
(cost $950,530)................................. 37,000 1,110,000
------------
COMMON STOCK--0.2%
CABLE--0.2%
Echostar Communications
Corp.+
(cost $83,740)................................... 9,000 303,750
------------
WARRANTS--0.0%+
CABLE--0.0%
United International Holdings, Inc............... 3,000 7,350
------------
FOREST PRODUCTS--0.0%
SDW Holdings Corp.(2)............................ 3,700 48,100
------------
TOTAL WARRANTS
(cost $58,526)................................... 55,450
------------
TOTAL INVESTMENT SECURITIES--96.2%
(cost $120,943,172).............................. 122,816,785
------------
</TABLE>
16
<PAGE>
SUNAMERICA DIVERSIFIED INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT--2.6%
Joint Repurchase Agreement Account (Note 3)
(cost $3,328,000)................................. $ 3,328 $ 3,328,000
------------
TOTAL INVESTMENTS--
(cost $124,271,172*).............................. 98.8% 126,144,785
Other assets less liabilities...................... 1.2 1,566,426
-------- ------------
NET ASSETS-- 100.0% $127,711,211
======== ============
</TABLE>
- --------
* See Note 6
+ Non-income producing security
(1) Resale restricted to qualified institutional buyers
(2) Fair valued security; see Note 2
(3) JPY--Security denominated in Japanese Yen
(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 March 31, 1996
(6) Bond issued as part of a unit which includes an equity component
(7) Allocation of net assets by country as of March 31, 1996:
<TABLE>
<S> <C>
United States 67.6%
Argentina 10.3%
Mexico 4.9%
Britain 4.0%
Brazil 3.8%
Canada 2.7%
Colombia 1.2%
Bermuda 0.9%
Japan 0.8%
</TABLE>
See Notes to Financial Statements
17
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES--82.7%
AUTOMOTIVE--1.0%
APS, Inc.
Sr. Subordinated Notes
11.88% due 1/15/06(1)............................. $ 1,250 $ 1,275,000
------------
BROADCASTING--4.3%
NWCG Holding Corp.
Sr. Disc. Notes, Series B
zero coupon due 6/15/99........................... 6,250 4,515,625
Sinclair Broadcast Group, Inc.
Sr. Subordinated Notes
10.00% due 9/30/05................................ 1,000 982,500
------------
5,498,125
------------
BUSINESS SERVICES--4.6%
Katz Corp.
Sr. Subordinated Notes
12.75% due 11/15/02............................... 3,500 3,924,375
Sullivan Graphics, Inc.
Sr. Subordinated Notes
12.75% due 8/01/05................................ 2,000 1,967,500
------------
5,891,875
------------
CABLE--7.9%
Echostar Communications Corp.
Sr. Secured Disc. Notes
zero coupon due 6/01/04(3)........................ 3,000 2,186,250
Echostar Satellite Broadcasting Corp.
Sr. Disc. Notes
zero coupon due 3/15/04(1)(3)..................... 3,000 1,809,375
International CableTel, Inc.
Sr. Deferred Coupon
zero coupon due 4/15/05(3)........................ 2,000 1,290,000
Simmons Cable Co.
Sr. Subordinated Notes(2)(6)...................... 3,000 1,800,000
United International Holdings, Inc.
Sr. Disc. Notes, Series B
zero coupon due 11/15/99.......................... 1,500 967,500
United International Holdings, Inc.
Sr. Disc. Notes
zero coupon due 11/15/99.......................... 1,500 967,500
Wireless One, Inc.
Sr. Notes
13.00% due 10/15/03............................... 1,000 1,062,500
------------
10,083,125
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
CELLULAR--5.4%
Cellular Communications International, Inc.
Sr. Disc. Notes
zero coupon due 8/15/00........................... $ 4,000 $ 2,440,000
Comcast Cellular Corp.
Notes
zero coupon due 3/05/00........................... 4,000 2,880,000
Pricecellular Wireless Corp.
Sr. Disc. Notes
zero coupon due 10/01/03(3)....................... 2,000 1,570,000
------------
6,890,000
------------
CHEMICALS--5.5%
Agriculture Minerals & Chemicals
Sr. Notes
10.75% due 9/30/03................................ 2,500 2,712,500
Arcadian Partners L.P.
Sr. Notes, Series B
10.75% due 5/01/05................................ 1,500 1,631,250
LaRoche Industries, Inc.
Sr. Subordinated Notes
13.00% due 8/15/04................................ 2,500 2,718,750
------------
7,062,500
------------
FINANCE--1.7%
Olympic Financial Ltd.
Sr. Notes
13.00% due 5/01/00................................ 2,000 2,170,000
------------
FOOD & BEVERAGES--1.5%
Specialty Foods Corp.
Sr. Notes
11.13% due 10/01/02............................... 2,000 1,870,000
------------
GAMING--5.6%
Capital Gaming International, Inc.
Promissory Notes
zero coupon due 8/01/95(2)(5)+.................... 20 2,000
Showboat Marina Finance Corp.
First Mortgage Notes
13.50% due 3/15/03(1)............................. 1,250 1,279,687
Showboat, Inc.
Sr. Subordinated Notes
13.00% due 8/01/09................................ 3,000 3,435,000
</TABLE>
18
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
GAMING (CONTINUED)
Station Casinos, Inc.
Sr. Subordinated Notes
10.13% due 3/15/06................................ $ 500 $ 495,313
Trump Castle Funding, Inc.
First Mortgage Notes
11.75% due 11/15/03............................... 2,000 1,950,000
------------
7,162,000
------------
GROCERY--5.9%
Kash 'N Karry Food Stores, Inc.
Sr. Notes
11.50% due 2/01/03................................ 7,473 7,492,015
------------
HEALTH SERVICES--6.1%
Amerisource Distribution Corp.
Sr. Debentures
11.25% due 7/15/05................................ 2,089 2,272,025
Dade International, Inc.
Sr. Subordinated Notes, Series B
13.00% due 2/01/05................................ 2,000 2,240,000
OrNda Healthcorp.
Sr. Subordinated Notes
12.25% due 5/15/02................................ 3,000 3,255,000
------------
7,767,025
------------
INDUSTRIAL--2.7%
Alvey Systems, Inc.
Sr. Subordinated Notes
11.38% due 1/31/03(1)............................. 1,000 1,040,000
J.B. Poindexter & Co.
Sr. Notes
12.50% due 5/15/04(2)............................. 3,000 2,460,000
------------
3,500,000
------------
METALS--2.9%
Renco Metals, Inc.
Sr. Notes
12.00% due 7/15/00................................ 3,500 3,749,375
------------
OFFICE PRODUCTS--1.7%
Williamhouse Regency Delaware, Inc.
Sr. Subordinated Notes
13.00% due 11/15/05(1)............................ 2,000 2,210,000
------------
OIL & GAS--0.7%
DeepTech International, Inc.
Sr. Secured Notes
12.00% due 12/15/00............................... 1,000 942,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
PACKAGING--2.0%
Riverwood International Corp.
Sr. Subordinated Notes
10.88% due 4/01/08................................ $ 2,500 $ 2,500,000
------------
PAGING--6.6%
A+ Network, Inc.
Sr. Subordinated Notes
11.88% due 11/01/05............................... 2,000 2,040,000
Arch Communications Group, Inc.
Sr. Disc. Notes
zero coupon due 3/15/08(3)........................ 1,750 1,001,875
Paging Network, Inc.
Sr. Subordinated Notes
10.13% due 8/01/07................................ 3,000 3,150,000
Paging Network, Inc.
Sr. Subordinated Notes
11.75% due 5/15/02................................ 2,000 2,180,000
------------
8,371,875
------------
RETAIL--11.6%
County Seat Stores, Inc.
Sr. Subordinated Notes
12.00% due 10/01/02............................... 3,000 2,220,000
Finlay Fine Jewelry Corp.
Sr. Notes
10.63% due 5/01/03................................ 2,000 1,945,000
Hills Stores Co.
Sr. Notes
10.25% due 9/30/03................................ 3,000 2,977,500
Thrifty PayLess Holdings, Inc
Sr. Subordinated Notes
12.25% due 4/15/04(4)............................. 4,000 4,840,000
Thrifty PayLess Holdings, Inc.
Sr. Subordinated Notes
12.25% due 4/15/04................................ 2,500 2,775,000
------------
14,757,500
------------
TELECOMMUNICATIONS--5.0%
Brooks Fiber Properties
Sr. Disc. Notes
zero coupon due 3/01/06(1)(3)..................... 3,500 2,030,000
Intercel, Inc.
Sr. Disc. Notes
zero coupon due 2/01/06(3)(4)..................... 1,750 1,041,250
PanAmSat, L.P.
Sr. Subordinated Notes
zero coupon due 8/01/03(3)........................ 4,000 3,360,000
------------
6,431,250
------------
TOTAL CORPORATE BONDS & NOTES
(cost $102,506,515)............................... 105,624,165
------------
</TABLE>
19
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN THOUSANDS)/ VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
FOREIGN BONDS & NOTES--10.7%
CABLE--7.0%
Bell Cablemedia PLC
Sr. Disc. Notes
zero coupon due 9/15/05(3)....................... $ 3,000 $ 1,897,500
Comcast UK Cable Partners Ltd.
Sr. Disc. Notes
zero coupon due 11/15/07(3)...................... 2,000 1,155,000
Diamond Cable Communications PLC
Sr. Disc. Notes
zero coupon due 12/15/05(3)...................... 2,000 1,170,000
Telewest PLC
Sr. Disc. Notes
zero coupon due 10/01/07(3)...................... 3,750 2,231,250
Videotron Holdings PLC
Sr. Disc. Notes
zero coupon due 8/15/05(3)....................... 4,000 2,540,000
------------
8,993,750
------------
INDUSTRIAL--2.8%
International Semi-Tech Microelectronic, Inc.
Sr. Secured Disc. Notes
zero coupon due 8/15/03(3)....................... 6,000 3,630,000
------------
TELECOMMUNICATIONS--0.9%
Fonorola, Inc.
Sr. Secured Notes
12.50% due 8/15/02............................... 1,000 1,090,000
------------
TOTAL FOREIGN BONDS & NOTES
(cost $13,339,672)............................... 13,713,750
------------
PREFERRED STOCK--1.9%
BANKING--1.0%
Chevy Chase Savings Bank, F.S.B. ................ 40,000 1,250,000
------------
CABLE--0.0%
Maryland Cable Partners L.P.+(2)................. 16,009 16,009
------------
FOREST PRODUCTS--0.9%
SDW Holdings Corp. (2)........................... 37,000 1,110,000
------------
TOTAL PREFERRED STOCK
(cost $2,196,539)................................ 2,376,009
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN THOUSANDS)/ VALUE
SECURITY DESCRIPTION SHARES/WARRANTS (NOTE 2)
<S> <C> <C>
COMMON STOCK--2.2%
CABLE--0.4%
Echostar Communications Corp.+................... 13,500 $ 455,625
M.L. Opportunity L.P.+(2)........................ 70,106 70,106
MGCP Holdings, Inc.+(2).......................... 1 0
------------
525,731
------------
COMPUTERS--0.6%
Open Text Corp.+(1)(2)(7)........................ 70,754 749,550
------------
GAMING--0.0%
Capital Gaming
International, Inc.+............................ 30,000 6,563
------------
GROCERY--0.0%
Smittys Supermarkets, Inc........................ 500 4,125
------------
MEDIA--0.0%
TMM, Inc.+(2)(7)................................. 2,000,000 20,000
------------
TELECOMMUNICATIONS--1.2%
PanAmSat Corp. .................................. 50,000 1,525,000
------------
TOTAL COMMON STOCK
(cost $3,105,787)................................ 2,830,969
------------
WARRANTS--0.1%+
CABLE--0.0%
United International
Holdings, Inc................................... 3,000 7,350
Wireless One, Inc................................ 3,000 25,500
------------
32,850
------------
FOREST PRODUCTS--0.1%
SDW Holdings Corp.(2)............................ 3,700 48,100
------------
GAMING--0.0%
Capital Gaming
International, Inc.............................. 45,500 4,266
Casino Magic Finance Corp........................ 24,000 10,620
Fitzgerald Gaming Corp.(1)(2).................... 2,000 20,000
------------
34,886
------------
HOUSEHOLD PRODUCTS--0.0%
Chattem, Inc. ................................... 1,500 4,125
------------
TOTAL WARRANTS
(cost $142,001).................................. 119,961
------------
TOTAL INVESTMENT SECURITIES--97.6%
(cost $121,290,514).............................. 124,664,854
------------
</TABLE>
20
<PAGE>
SUNAMERICA HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT--0.8%
Joint Repurchase Agreement Account (Note 3)
(cost $1,051,000)................................. $ 1,051 $ 1,051,000
------------
TOTAL INVESTMENTS--
(cost $122,341,514*)............................... 98.4% 125,715,854
Other assets less liabilities...................... 1.6 2,047,149
---------- ------------
NET ASSETS-- 100.0% $127,763,003
========== ============
</TABLE>
- --------
* See Note 6
+ Non-income producing security
(1) Resale restricted to qualified institutional buyers
(2) Fair valued security; see Note 2
(3) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(4) Bond issued as part of a unit which includes an equity component
(5) Bond in default
(6) Principal and interest payments for this security are governed by terms set
forth in an override agreement dated December 31, 1995.
(7) At March 31, 1996 the Fund held restricted securities amounting to 0.6% 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 securities:
<TABLE>
<CAPTION>
VALUATION
AS OF
DATE OF UNIT MARCH 31,
DESCRIPTION ACQUISITION COST 1996
------------------------------------------------- ----------- ----- ---------
<S> <C> <C> <C>
Open Text Corp. ................................. 7/12/95 $3.92 $10.59375
TMM, Inc. ....................................... 2/1/95 .83 .01
</TABLE>
See Notes to Financial Statements
21
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS--98.8%
ALASKA--1.4%
Alaska State Housing Finance Corp.,
7.50% due 12/01/15+............................... $1,975 $ 2,047,522
------------
ARIZONA--0.8%
Maricopa County, Arizona General Obligation,
School District Number 213,
7.00% due 7/01/08+................................ 1,000 1,162,510
------------
ARKANSAS--0.9%
Arkansas State Development Finance Authority,
Single Family Mortgage Revenue,
9.00% due 6/01/14+................................ 150 154,643
Arkansas State Development Finance Authority,
Single Family Mortgage Revenue, Series A,
9.38% due 8/01/14+................................ 295 306,045
Arkansas State, General Obligation, Capital
Appreciation College Savings, Series A
zero coupon due 6/01/15........................... 2,575 839,836
------------
1,300,524
------------
CALIFORNIA--10.2%
California Housing Finance Agency, Home Mortgage
Revenue, Series A,
8.13% due 8/01/19+................................ 840 890,291
California Housing Finance Agency, Home Mortgage
Revenue, Series A,
8.20% due 8/01/17+................................ 1,000 1,047,830
Los Angeles, California Convention And Exhibition
Center Authority, Lease Revenue,
6.00% due 8/15/10+................................ 1,155 1,228,365
San Francisco, California City & County
Redevelopment Agency, Lease Revenue,
6.75% due 7/01/15+................................ 1,000 1,087,750
San Jose, California Redevelopment Agency Tax
Allocation, Merged Area Redevelopment Project,
6.00% due 8/01/11+................................ 3,700 3,909,383
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
CALIFORNIA (CONTINUED)
San Jose, California Airport Revenue,
5.88% due 3/01/07+................................ $2,905 $ 3,070,411
San Jose, California Redevelopment Agency Tax
Allocation, Merged Area Redevelopment Project,
6.00% due 8/01/07+................................ 3,000 3,214,050
Turlock, California Irrigation District Revenue,
Series A
6.00% due 1/01/10+................................ 1,000 1,061,620
------------
15,509,700
------------
COLORADO--0.1%
Colorado Housing Finance Authority, Single Family
Revenue, Series C,
9.38% due 3/01/12+................................ 140 145,090
------------
DISTRICT OF COLUMBIA--0.8%
District of Columbia Housing Finance Agency,
Mortgage Revenue Collateral, Single Family,
Series A,
7.75% due 12/01/18+............................... 1,125 1,172,025
------------
FLORIDA--0.0%
Florida Housing Finance Agency, Single Family
Mortgage, Series A,
9.25% due 7/01/07+................................ 25 25,031
------------
GEORGIA--4.2%
Georgia State General Obligation, Series C,
6.50% due 4/01/07................................. 1,700 1,901,603
Municipal Electric Authority, Georgia Special
Obligation, Fifth Crossover Series,
6.40% due 1/01/09+................................ 1,250 1,373,738
Municipal Electric Authority, Georgia Special
Obligation, Fifth Crossover Series,
6.40% due 1/01/13+................................ 1,000 1,086,120
Paulding County, Georgia, General Obligation,
School District,
6.00% due 2/01/13+................................ 1,875 1,976,925
------------
6,338,386
------------
</TABLE>
22
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
ILLINOIS--5.4%
Cook County, Illinois Community College, District
Number 508,
7.70% due 12/01/07+............................... $4,000 $ 4,858,520
Illinois Health Facilities Authority, Lutheran
General Health System,
7.00% due 4/01/08+................................ 2,850 3,257,179
------------
8,115,699
------------
INDIANA--1.0%
Indiana State Housing Finance Authority, Multi-
Unit Mortgage Program, Series A,
9.00% due 1/01/14+................................ 1,470 1,490,521
------------
KENTUCKY--0.2%
Kentucky Housing Corp., Multi-Family Revenue
Mortgage, Series A,
8.88% due 7/01/19+................................ 250 255,955
------------
LOUISIANA--1.2%
Louisiana State, General Obligation, Series A,
5.80% due 8/01/10+................................ 1,750 1,813,788
------------
MARYLAND--2.0%
Maryland State Community Development
Administration, Multi-Family Housing Revenue,
1985 Series B,
8.75% due 5/15/12................................. 3,000 3,071,970
------------
MASSACHUSETTS--6.5%
Massachusetts State Housing Finance Agency,
Insured Rental, Series A,
6.60% due 7/01/14+................................ 5,375 5,593,655
Massachusetts State Water Resources Authority,
6.25% due 11/01/10+............................... 4,000 4,247,920
------------
9,841,575
------------
MICHIGAN--1.1%
Michigan Municipal Bond Authority, Revenue Capital
Appreciation, Local Government Loan,
zero coupon due 5/01/17+.......................... 2,875 820,324
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
MICHIGAN (CONTINUED)
Michigan Municipal Bond Authority, Revenue Capital
Appreciation, Local Government Loan,
zero coupon due 5/01/16+.......................... $2,735 $ 838,934
------------
1,659,258
------------
MISSOURI--4.4%
Missouri State Housing Development Commission,
Insured, Single Family Mortgage Revenue,
9.38% due 4/01/16+................................ 85 87,876
Sikeston, Missouri Electric, Revenue,
6.20% due 6/01/10+................................ 6,000 6,507,840
------------
6,595,716
------------
NEVADA--3.2%
Nevada Housing Division, Single Family Mortgage,
Series A,
zero coupon due 4/01/16+.......................... 5,945 4,838,338
------------
NEW HAMPSHIRE--0.2%
New Hampshire State Housing Finance Authority,
Single Family Residential Mortgage, Series A,
9.25% due 7/01/11+................................ 285 294,767
------------
NEW JERSEY--1.1%
New Jersey Economic Development Authority, Market
Transition Facility Revenue,
7.00% due 7/01/04+................................ 1,500 1,712,715
------------
NEW MEXICO--0.8%
Las Cruces, New Mexico Electric
Revenue
5.45% due 12/01/08+.............................. 1,000 986,430
New Mexico Mortgage Finance Authority, Single
Family Mortgage Revenue, Series C,
8.63% due 7/01/17+................................ 210 222,728
------------
1,209,158
------------
NEW YORK--12.3%
New York City Industrial Development Agency, Civic
Facility, Revenue,
6.25% due 11/15/06+............................... 2,000 2,184,680
New York City, New York, General Obligation,
Series H
5.75% due 3/15/10................................. 1,000 955,640
</TABLE>
23
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York City, New York, General Obligation,
Series E,
6.20% due 8/01/07+................................ $2,250 $ 2,450,812
New York City, New York, General Obligation,
Series G
6.75% due 2/01/09................................. 1,000 1,046,290
New York City, New York, General Obligation,
Series I
6.50% due 3/15/06................................. 1,000 1,043,910
New York State Dormitory Authority Revenue, State
University Educational Facilities, Series A,
5.50% due 5/15/10+................................ 1,720 1,728,273
New York State Medical Care Facilities Finance
Agency, Revenue, New York Hospital, Mortgage A,
6.75% due 8/15/14+................................ 2,850 3,075,492
Niagara Falls, New York, General Obligation,
7.50% due 3/01/14+................................ 555 679,736
Niagara Falls, New York, General Obligation,
7.50% due 3/01/13+................................ 445 542,184
Niagara Falls, New York, General Obligation,
7.50% due 3/01/18+................................ 500 621,260
Suffolk County, New York Industrial Development
Agency, Southwest Sewer Systems Revenue,
6.00% due 2/01/07+................................ 4,000 4,296,600
------------
18,624,877
------------
NORTH CAROLINA--5.0%
Harnett County, North Carolina Certificates of
Participation,
6.20% due 12/01/09+............................... 2,400 2,576,160
North Carolina Municipal Power Agency, Catawba
Electric Revenue,
6.00% due 1/01/11+................................ 2,000 2,112,420
North Carolina Municipal Power Agency, Catawba
Electric Revenue,
6.00% due 1/01/10+................................ 2,750 2,922,232
------------
7,610,812
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
NORTH DAKOTA--0.4%
North Dakota State Housing Finance Agency, Single
Family Mortgage Revenue, Series A,
7.38% due 7/01/17+................................ $ 635 $ 659,251
------------
OHIO--4.0%
Adams County, Ohio Valley Local School District,
General Obligation,
7.00% due 12/01/15+............................... 1,000 1,161,600
Lucas County, Ohio Hospital Revenue, St Vincent
Medical Center,
6.50% due 8/15/07+................................ 3,500 3,826,480
Woodridge, Ohio Local School District, General
Obligation,
6.80% due 12/01/14+............................... 1,000 1,126,540
------------
6,114,620
------------
OKLAHOMA--2.0%
Grand River Dam Authority, Oklahoma Electric
Revenue,
5.75% due 6/01/08+................................ 1,850 1,942,482
Oklahoma State Industrial Authority Revenue
Refunding Integris Baptist Health Systems,
6.00% due 8/15/10+................................ 1,000 1,052,220
------------
2,994,702
------------
OREGON--0.3%
Oregon Health Sciences University Revenue
zero coupon due 7/01/16+.......................... 1,500 459,225
------------
PENNSYLVANIA--5.9%
Northeastern Pennsylvania Hospital & Education
Authority, Health Care Revenue,
6.20% due 1/01/04+................................ 2,000 2,163,220
Pennsbury, Pennsylvania School District, General
Obligation,
6.80% due 8/15/14+................................ 3,800 4,299,320
Pennsylvania Housing Finance Agency, Multi-Family
Mortgage,
9.38% due 8/01/28+................................ 170 174,124
Pennsylvania State Industrial Development
Authority, Economic Development, Series B,
7.00% due 1/01/07+................................ 2,000 2,302,420
------------
8,939,084
------------
</TABLE>
24
<PAGE>
SUNAMERICA TAX EXEMPT INSURED FUND
PORTFOLIO OF INVESTMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO--3.8%
Puerto Rico Commonwealth, General Obligation
5.50% due 7/01/08+................................ $3,000 $ 3,080,550
Puerto Rico Electric Power Authority, Power
Revenue Refunding,
7.00% due 7/01/06................................. 1,435 1,632,040
University of Puerto Rico, University System
Revenue Refunding, Series N,
6.25% due 6/01/08+................................ 1,000 1,103,250
------------
5,815,840
------------
RHODE ISLAND--0.7%
Rhode Island Housing & Mortgage Finance Corp.,
Supplementary Insurance, Series B,
8.38% due 10/01/16+............................... 1,000 1,060,010
------------
TEXAS--12.8%
Bexar County, Texas Health Facilities Development
Corp., Hospital Revenue,
6.75% due 8/15/19+................................ 4,000 4,276,760
Grand Prairie, Texas Health Facilities Development
Corp., Hospital Revenue,
6.88% due 11/01/10+............................... 1,600 1,763,168
Harris County, Texas Hospital District Mortgage,
Revenue,
7.40% due 2/15/10+................................ 2,500 2,997,325
Houston, Texas Water And Sewer Systems, Revenue,
Series C,
zero coupon due 12/01/09+......................... 1,420 656,764
Houston, Texas Water Conveyance Systems Contract,
Certificates of Participation,
6.13% due 12/15/08+............................... 1,250 1,355,238
Houston, Texas Water Conveyance Systems Contract,
Certificates of Participation
6.13% due 12/15/09+............................... 1,000 1,082,630
Houston, Texas Water Conveyance Systems Contract,
Certificates of Participation,
6.38% due 12/15/07+............................... 3,500 3,857,000
Sherman, Texas Independent School District,
General Obligation,
6.50% due 2/15/20................................. 3,000 3,328,320
------------
19,317,205
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
UTAH--1.2%
Utah State Housing Finance Agency, Single Family
Mortgage, Series B,
7.38% due 7/01/16+................................ $ 260 $ 268,884
Utah State Housing Finance Agency, Single Family
Mortgage, Series D,
7.50% due 7/01/16+................................ 1,410 1,495,728
------------
1,764,612
------------
WASHINGTON--2.6%
Washington State Housing Finance Commission,
Multi-Family Mortgage Revenue, Series A,
9.13% due 7/01/10+................................ 380 405,802
Washington State Series B, General Obligation,
6.00% due 6/01/11................................. 3,400 3,598,288
------------
4,004,090
------------
WEST VIRGINIA--2.1%
West Virginia State Housing Development Fund,
Series A,
7.25% due 5/01/17+................................ 3,000 3,122,520
------------
WISCONSIN--0.2%
Wisconsin Housing & Economic Development
Authority, Homeownership Revenue, 1985 Issue III,
9.13% due 6/01/05+................................ 145 148,971
Wisconsin Housing & Economic Development
Authority, Homeownership Revenue, 1985 Issue I,
9.13% due 12/01/11+............................... 215 218,651
------------
367,622
------------
TOTAL INVESTMENT SECURITIES--98.8%
(COST $140,630,966)............................... 149,454,718
------------
TOTAL INVESTMENTS--
(COST $140,630,966*).............................. 98.8% 149,454,718
Other assets less liabilities...................... 1.2 1,817,432
------ ------------
NET ASSETS-- 100.0% $151,272,150
====== ============
</TABLE>
- -------
* See Note 6
+ All or part of this security is insured by Municipal Bond Insurance
Association ("MBIA"), Bond Insurance Guarantee ("BIG"), Financial Guarantee
Insurance Corp. ("FGIC"), Financial Security Assurance ("FSA") or Capital
Guarantee ("CAP") ($132,054,821 or 87.3% of total assets).
See Notes to Financial Statements
25
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996
Note 1. Organization
SunAmerica Income Funds is an open-end diversified management investment
company organized as a Massachusetts business trust (the "Trust"). It
currently consists of five different 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. The investment objectives for each of
the Funds are as follows:
U.S. Government Securities Fund seeks high current income consistent with
relative safety of capital by investing primarily in securities issued or
guaranteed by the U.S. government, or any agency or instrumentality
thereof.
Federal Securities Fund seeks current income, with capital appreciation as
a secondary objective, by investing primarily in securities issued or
guaranteed by the U.S. government or any agency or instrumentality thereof.
Diversified Income Fund seeks a high level of current income consistent
with moderate investment risk, with preservation of capital as a secondary
objective.
High Income Fund seeks maximum current income by investing primarily in
high-yield, high-risk corporate bonds.
Tax Exempt Insured Fund seeks a high level of current income exempt from
Federal income taxes as is consistent with preservation of capital.
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
26
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
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 closing 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 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 first business
day following 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
27
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
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.
The Funds account for 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, 1996, 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 accumulated undistributed 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, 1996.
<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........................ $(7,032,191) $7,032,191 $ --
Federal Securities Fund...... (201,652) 201,895 (243)
Diversified Income Fund...... (239,927) 345,885 (105,958)
High Income Fund............. 593,468 (593,468) --
Tax Exempt Insured Fund...... (1,797) 1,968,588 (1,966,791)
</TABLE>
Dividends from net investment income are paid monthly. Capital gain
distributions, if any, are paid annually.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION: The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results could differ from these estimates.
INVESTMENT SECURITIES LOANED: During the year ended March 31, 1996, 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 102% 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. Alternatively, an interest
expense allocation is recorded on the books when the cash collateral from
the securities on loan is used to
28
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
cover an overdraft. As with other extensions of credit, should the borrower
of the securities fail financially, the Funds may bear the risk of delay in
recovery or may be subject to replacing the loaned securities by purchasing
them with the cash collateral held, which may be less than 100% of the
market value of such securities at the time of replacement.
At March 31, 1996, U.S. Government Securities Fund and Federal Securities
Fund have loaned securities having a value of $63,740,849 and $9,531,092,
respectively, and held cash collateral of $63,493,750 and $9,500,000,
respectively, 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 on the last business
day of the fiscal year, 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.
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.
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 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
29
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
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 or other appropriate allocation
methods.
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 March 31, 1996, the U.S. Government Securities Fund, Federal
Securities Fund, Diversified Income Fund and High Income Fund had a 60.4%,
4.6%, 3.1% and 1.0% undivided interest which represented $65,000,000,
$5,000,000, $3,328,000 and $1,051,000 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 38.1%
and 10.0% undivided interest which represented $44,319,000 and $11,631,000
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, 5.35% dated 3/29/96, in the
principal amount of $107,576,000 repurchase price $107,623,961 due 4/01/96
collateralized by $50,000,000 U.S. Treasury Bill 5.07% due 10/17/96,
$50,000,000 U.S. Treasury Bill 5.07% due 10/17/96 and $12,815,000 U.S.
Treasury Bill 5.00% due 6/27/96, approximate aggregate value $109,828,144.
Yamaichi International, Inc. Repurchase Agreement, 5.45% dated 3/29/96, in
the principal amount of $116,221,000 repurchase price $116,273,784 due
4/01/96 collateralized by $12,385,000 U.S. Treasury Bond 8.50% due 2/15/20,
$20,850,000 U.S. Treasury Bond 9.875% due 11/15/15, $12,500,000 U.S.
Treasury Bond 12.00% due 8/15/13, $20,000,000 U.S. Treasury Note 7.625% due
2/15/07, $19,430,000 U.S. Treasury Bill 5.33% due 4/18/96 and $15,865,000
U.S. Treasury Note 6.625% due 3/31/97, approximate aggregate value
$117,381,445.
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
30
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
"Agreement") with SAAMCo. Under the Agreement, SAAMCo provides continuous
supervision of a Fund's portfolio and administers its corporate affairs,
subject to general review by the Trustees. In connection therewith, SAAMCo
furnishes the Funds with office facilities, maintains certain of the Funds'
books and records, and pays the salaries and expenses of all personnel,
including officers of the Funds, who are employees of SAAMCo and its
affiliates.
The Funds pay SAAMCo a monthly investment advisory and management fee
calculated daily at the following annual percentages of each Fund's net
assets:
<TABLE>
<CAPTION>
MANAGEMENT
ASSETS FEES
----------------- ----------
<S> <C> <C>
U.S. Government Securities Fund and High In-
come Fund.................................... $0 - $200 million 0.75%
> $200 million 0.72%
> $400 million 0.55%
Federal Securities Fund....................... $0 - $25 million 0.55%
> $25 million 0.50%
> $50 million 0.45%
Diversified Income Fund....................... $0 - $350 million 0.65%
> $350 million 0.60%
Tax Exempt Insured Fund....................... $0 - $350 million 0.50%
> $350 million 0.45%
</TABLE>
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 year ended March 31, 1996, no such reimbursement
was required.
The Trust, on behalf of each Fund, has a Distribution Agreement with
SunAmerica Capital Services, Inc. ("SACS"), an indirect wholly owned
subsidiary of SunAmerica Inc. 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
trustees and approved by its shareholders. Pursuant to such rule, the
Trustees and the shareholders of each class of shares of each Fund have
adopted Distribution Plans, hereinafter referred to as the "Class A Plan"
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 and Class B Plan, the Distributor receives payments
from a Fund at an annual rate of up to 0.10% and .75%, respectively, of
average daily net assets of such Fund's Class
31
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
A and 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 of up to 0.25% of the aggregate average daily net assets of such class
of shares for payments to broker-dealers for providing continuing account
maintenance. Accordingly, for the year ended March 31, 1996, SACS received
fees (see Statement of Operations) based upon the aforementioned rates (of
which $44,445 and $102,796 was waived for the U.S. Government Securities
Fund Class A and High Income Fund Class B, respectively).
SACS receives sales charges on each Fund's Class A shares, portions of
which are reallowed to affiliated broker-dealers and non-affiliated broker-
dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of Class B
fund shares. SACS has advised the Funds that for the year ended March 31,
1996, the proceeds received from Class A sales (and paid out to affiliated
and non-affiliated broker-dealers) and Class B redemptions are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------- ------------
CONTINGENT
SALES AFFILIATED NON-AFFILIATED DEFERRED
CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGE
------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
U.S. Government Securi-
ties Fund.............. $34,701 $23,047 $6,065 $1,767,247
Federal Securities Fund. 51,871 26,836 17,101 92,902
Diversified Income Fund. 59,956 41,282 9,079 353,984
High Income Fund........ 110,516 75,941 17,311 379,578
Tax Exempt Insured Fund. 118,382 78,270 19,723 113,374
</TABLE>
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
year ended March 31, 1996, the Funds incurred the following expenses to
reimburse SAFS pursuant to the terms of the Service Agreement:
<TABLE>
<CAPTION>
PAYABLE AT
EXPENSES MARCH 31, 1996
------------------- ---------------
CLASS A CLASS B CLASS A CLASS B
-------- ---------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government Securities Fund.......... $244,448 $1,144,417 $23,517 $81,007
Federal Securities Fund.................. 73,514 84,513 7,523 4,929
Diversified Income Fund.................. 35,524 274,396 3,618 20,950
High Income Fund......................... 90,979 282,690 7,212 18,901
Tax Exempt Insured Fund.................. 290,723 62,405 23,046 5,479
</TABLE>
32
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
Note 5. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments (excluding U.S. Government securities in the
Diversified Income and High Income Funds, respectively) during the year
ended March 31, 1996 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..... $880,205,959 $209,939,662 $138,628,017 $274,280,092 $72,677,050
============ ============ ============ ============ ===========
Aggregate sales......... $970,794,439 $216,971,920 $155,167,680 $339,295,010 $88,075,655
============ ============ ============ ============ ===========
</TABLE>
Note 6. Portfolio Securities (Tax Basis)
The costs of securities and the aggregate appreciation and depreciation of
securities for federal income tax purposes at March 31, 1996 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 (tax basis)........ $616,853,175 $76,050,488 $124,864,491 $122,379,322 $140,674,446
============ =========== ============ ============ ============
Appreciation............ $ 9,123,730 $ 624,633 $ 5,457,011 $ 8,226,185 $ 8,971,081
Depreciation............ (11,185,823) (875,556) (4,176,717) (4,889,653) (190,809)
------------ ----------- ------------ ------------ ------------
Unrealized appreciation/
depreciation--net...... $ (2,062,093) $ (250,923) $ 1,280,294 $ 3,336,532 $ 8,780,272
============ =========== ============ ============ ============
</TABLE>
Capital losses and currency losses after October 31 within the taxable year
are deemed to arise on the first business day of the Funds' net taxable
year. Accordingly, the U.S. Government Securities Fund, Federal Securities
Fund, Diversified Income Fund and High Income Fund incurred and elected to
defer capital losses of $131,079, $13,833, $875,593 and $1,342,211,
respectively, to the taxable year ended March 31, 1997. Diversified Income
Fund incurred and elected to defer currency losses of $7,779 to the taxable
year ended March 31, 1997. To the extent these losses are permitted under
regulations to be used to offset future gains, it is probable that the
gains so offset will not be distributed.
At March 31, 1996, U.S. Government Securities Fund, Federal Securities
Fund, Diversified Income Fund, High Income Fund and Tax Exempt Insured Fund
had capital loss carryforwards of $28,309,121, $796,117, $31,843,774,
$44,735,276 and $8,864,098, respectively, which were available to the
extent provided in regulations and which will expire between 1997-2004. To
the extent that these carryover losses are used to offset future capital
gains, it is probable that the gains so offset will not be distributed.
U.S. Government Securities Fund and Federal Securities Fund utilized
capital loss carryforwards of $2,453,957 and $2,115,737, respectively, to
offset the Funds' net taxable gains realized and recognized in the year
ended March 31, 1996.
Tax Exempt Insured Fund had capital loss carryforwards expire of $1,573,186
in the year ended March 31, 1996.
33
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
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 FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 13,131,939 $112,301,977 2,544,560 $ 20,825,728 9,360,875 $ 79,755,257 10,324,909 $ 84,569,618
Reinvested
dividends...... 410,804 3,519,824 254,756 2,091,612 1,974,201 16,845,172 2,655,859 21,791,813
Shares redeemed. (7,702,779) (65,848,530) (3,015,559) (24,712,085) (33,167,131) (282,936,370) (46,389,311) (380,228,772)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 5,839,964 $ 49,973,271 (216,243) $ (1,794,745) (21,832,055) $(186,335,941) (33,408,543) $(273,867,341)
========== ============ ========== ============ =========== ============= =========== =============
<CAPTION>
FEDERAL SECURITIES FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 4,123,463 $ 43,030,581 859,631 $ 8,566,946 814,487 $ 8,530,005 895,438 $ 9,024,876
Reinvested
dividends...... 111,354 1,172,357 3,735 36,932 153,756 1,604,033 312,480 3,098,412
Shares redeemed. (998,837) (10,515,594) (294,336) (2,931,987) (5,023,383) (52,553,961) (2,574,743) (25,581,102)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 3,235,980 $ 33,687,344 569,030 $ 5,671,891 (4,055,140) $(42,419,923) (1,366,825) $ (13,457,814)
========== ============ ========== ============ =========== ============= =========== =============
<CAPTION>
DIVERSIFIED INCOME FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 2,955,037 $ 12,861,772 1,911,715 $ 8,713,009 2,801,046 $ 12,136,400 13,562,550 $ 62,234,623
Reinvested
dividends...... 195,515 841,738 179,521 791,930 1,377,852 5,943,373 1,784,570 7,929,584
Shares redeemed. (2,674,706) (11,458,461) (1,294,317) (5,722,753) (10,248,505) (44,195,135) (19,804,466) (88,218,971)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 475,846 $ 2,245,049 796,919 $ 3,782,186 (6,069,607) $ (26,115,362) (4,457,346) $ (18,054,764)
========== ============ ========== ============ =========== ============= =========== =============
<CAPTION>
HIGH INCOME FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 8,359,027 $ 57,916,776 4,517,500 $32,145,067 12,736,686 $ 88,552,474 18,144,837 $ 132,472,191
Reinvested
dividends...... 368,814 2,562,289 285,804 2,048,889 977,729 6,803,888 982,211 7,057,922
Shares redeemed. (9,390,977) (64,906,948) (3,162,108) (23,140,910) (22,505,915) (155,995,199) (13,525,747) (100,373,794)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... (663,136) $ (4,427,883) 1,641,196 $11,053,046 (8,791,500) $ (60,638,837) 5,601,301 $ 39,156,319
========== ============ ========== ============ =========== ============= =========== =============
</TABLE>
34
<PAGE>
SUNAMERICA INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS -- March 31, 1996 -- (continued)
<TABLE>
<CAPTION>
TAX EXEMPT INSURED FUND
----------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
------------------------ ------------------------ ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.......... 561,023 $ 7,051,303 1,153,762 $ 13,706,273 1,455,371 $ 18,163,807 1,052,706 $12,534,448
Reinvested dividends. 264,543 3,294,346 353,885 4,191,241 55,207 688,264 52,888 626,133
Shares redeemed...... (2,378,115) (29,684,179) (3,966,717) (46,779,234) (1,292,255) (16,166,468) (701,719) (8,287,841)
---------- ------------ ---------- ------------ ---------- ------------ --------- -----------
Net increase
(decrease).......... (1,552,549) $(19,338,530) (2,459,070) $(28,881,720) 218,323 $ 2,685,603 403,875 $ 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. During the year ended
March 31, 1996, the High Income Fund had borrowings outstanding for 46 days
under the line of credit and incurred $43,583 in interest charges related
to these borrowings. The High Income Fund's average amount of debt under
the line of credit for the days utilized during the year ended March 31,
1996 was $4,797,070 at a weighted average interest of 7.01%. The Funds did
not have any outstanding borrowings at March 31, 1996.
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, but in no event
for a period greater than 10 years, each Eligible Trustee will be credited
with an amount equal to 50% of his or her regular fees (excluding
committee fees) for services as a Disinterested Trustee of each SunAmerica
mutual fund for the calendar year in which such birthday occurs. In
addition, an amount equal to 8.5% of any amounts credited under the
preceding clause during prior years is added to each Eligible Trustee's
Account until such Eligible Trustee reaches his or her 70th birthday. An
Eligible Trustee may receive any benefits payable under the Retirement
Plan, at his or her election, either in one lump sum or in up to fifteen
annual installments. As of March 31, 1996, U.S. Government Securities Fund,
Federal Securities Fund, Diversified Income Fund, High Income Fund and Tax
Exempt Insured Fund had accrued $30,620, $2,882, $5,893, $5,951 and $6,696,
respectively, for the Retirement Plan, which is included in accrued
expenses on the Statement of Assets and Liabilities and for the year ended
March 31, 1996 expensed $17,403, $1,755, $3,929, $3,681 and $4,188,
respectively, for the Retirement Plan, which is included in Trustees' fees
and expenses on the Statement of Operations.
35
<PAGE>
SUNAMERICA INCOME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of SunAmerica Income Funds
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SunAmerica U.S. Government
Securities Fund, SunAmerica Federal Securities Fund, SunAmerica Diversified
Income Fund, SunAmerica High Income Fund and SunAmerica Tax Exempt Insured Fund
(constituting the SunAmerica Income Funds, hereafter referred to as the "Fund")
at March 31, 1996, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at March 31, 1996 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
May 13, 1996
36
<PAGE>
SUNAMERICA INCOME FUNDS
SHAREHOLDER TAX INFORMATION--(UNAUDITED)
Certain tax information regarding the SunAmerica Income Funds is required to be
provided to shareholders based upon each Fund's income and distributions for
the taxable periods ended March 31, 1996. The information and distributions
reported herein may differ from the information and distributions taxable to
the shareholders for the calendar year ending December 31, 1996. The
information necessary to complete your income tax returns will be included with
your Form 1099-DIV to be received under separate cover in January 1997.
During the year ended March 31, 1996 Tax Exempt Insured Fund paid tax exempt
interest dividends of $.59 per share to Class A shareholders and $.51 per share
to Class B shareholders. For the year ended March 31, 1996, 1.2% of the
dividends paid from ordinary income by High Income Fund qualified for the 70%
dividends received deductions for corporations.
37
<PAGE>
SUNAMERICA INCOME FUNDS
COMPARISONS: PORTFOLIOS VS. INDICES
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in the SunAmerica Income
Funds' portfolios to a similar investment in an index. It is important to
note that the SunAmerica Income Funds are professionally managed mutual
funds while the indices are not available for investment and are unmanaged.
The comparison is shown for illustrative purposes only. The graphs present
the performance of the class of that particular Fund which has been in
existence the longest. The performance of the other class will vary based
upon the difference in sales charges and fees assessed to shareholders of
that class. The maximum sales charge for Class A is 4.75% of the public
offering price. The maximum contingent deferred sales charge for Class B is
4.0% and is reduced to 0% after 6 years. Both Class A and Class B bear
ongoing 12b-1 distribution and service fees.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period Lehman Brothers U.S. Governmental Securities
(Fiscal year Covered) Government Index Fund Class B Index
- --------------------- ---------------- ----------------------------
<S> <C> <C>
Measurement PT - 10,000.00 10,000.00
6/86 10,132.00 9,980.00
6/87 10,549.00 10,652.00
6/88 11,305.00 11,359.00
6/89 12,668.00 12,112.00
6/90 13,547.00 13,034.00
6/91 14,922.00 14,279.00
6/92 16,976.00 15,468.00
6/93 19,165.00 16,318.00
3/94 19,126.00 16,359.00
3/95 19,952.00 16,896.00
3/96 22,131.00 18,396.00
[CHART APPEARS HERE]
<CAPTION>
U.S. Government Securities Fund Class Class
Average Annual Total Returns+ A B
<S> <C> <C>
1 Year Return 4.42% 4.52%
5 Year Return N/A 5.07%
10 Year Return N/A 6.28%
Since Inception* 3.02% 6.28%
</TABLE>
+Includes any applicable sales charges
*Inception dates for Class A and Class B are 10/01/93 and 3/03/86, respectively
The U.S. Government Securities Fund slightly underperformed its group average
(tracked by Lipper Analytical Service) for the fiscal year ended March 31, 1996.
A reduction in the portfolio duration from 5 to 4.5 helped the Fund in the first
calendar quarter as interest rates began to rise. In this quarter the Fund
ranked 25 out of 184 U.S. Government Funds. The Fund underperformed relative to
the Lehman Brothers Government Bond Index, which is an unmanaged index and not
available as an investment.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period Solomon Brothers Federal Securities
(Fiscal year Covered) Government Index Fund Class B Index
- --------------------- ---------------- ------------------
<S> <C> <C>
Measurement PT - 10,000.00 10,000.00
3/87 11,073.00 10,699.00
3/88 11,669.00 11,074.00
3/89 12,337.00 11,480.00
3/90 14,097.00 12,737.00
3/91 16,094.00 14,365.00
3/92 18,046.00 15,883.00
3/93 20,102.00 17,164.00
3/94 20,351.00 17,011.00
3/95 21,624.00 17,660.00
3/96 23,979.00 19,449.00
[CHART APPEARS HERE]
<CAPTION>
Federal Securities Fund Class Class
Average Annual Total Returns+ A B
<S> <C> <C>
1 Year Return 5.67% 5.73%
5 Year Return N/A 5.82%
10 Year Return N/A 6.88%
Since Inception* 3.44% 8.29%
</TABLE>
+Includes any applicable sales charges
*Inception dates for Class A and Class B are 10/11/93 and 4/25/83, respectively
The bond market rally in 1995 aided this Fund's performance for the first nine
months covered by this report, however, rising interest rates in early 1996
dampened the gain for the one year period. When compared to the Salomon
Brothers GNMA Index, an unmanaged index that tracks performance of the GNMA
portion of the U.S. Government bond market, the Fund's results were less
favorable. The fiscal year result for the period ended March 31, 1996 shows the
effects of the early 1996 bond market decline--the Federal Securities Fund Class
B rose 10.10% for the period while the Lipper group average was 9.63%.
38
<PAGE>
SUNAMERICA INCOME FUNDS
COMPARISONS: PORTFOLIOS VS. INDICES -- (continued)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period Lehman Brothers Salomon Brothers JP Morgan Global Diversified Income
(Fiscal year Covered) Government Index High Yield Market Index Government Bond Index Fund Class B
- --------------------- ---------------- ----------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Measurement PT - 10,000.00 10,000.00 10,000.00 10,000.00
10/91 10,691.00 11,331.00 10,774.00 10,346.00
10/92 11,795.00 13,304.00 12,128.00 10,362.00
10/93 13,344.00 15,996.00 13,462.00 11,699.00
3/94 12,850.00 15,799.00 13,415.00 11,405.00
3/95 13,404.00 16,824.00 15,035.00 10,782.00
3/96 14,868.00 19,569.00 16,023.00 11,950.00
[CHART APPEARS HERE]
<CAPTION>
Diversified Income Fund Class Class
Average Annual Total Returns+ A B
<S> <C> <C>
1 Year Return 8.38% 8.57%
5 Year Return N/A N/A
Since Inception* 0.54% 3.63%
</TABLE>
+Includes any applicable sales charges
*Inception dates for Class A and Class B are 10/05/93 and 4/06/91, respectively
Performance results in all sectors owned in the Diversified Income Fund's
portfolio performed generally well over the past fiscal year. The Fund's Class
B shares had a total return of 13.09% for the period and we generally avoided
losses due to credit quality or country risk. Because the Fund invests in three
sectors of the bond market, high yield securities, foreign debt securities and
U.S. investment grade bonds, it is difficult to compare the Fund to any single
index. In the past fiscal year the Fund fell short of the performance of the
J.P. Morgan Global Government Bond Index, the Lehman Brothers Government Bond
Index and the Salomon Brothers High Yield Market Index. The Fund's objective
has been a high level of current income consistent with moderate investment risk
since late 1992; therefore, performance comparisons since the Fund's inception
in April 1991 may not be relevant.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period Salomon Brothers High High Income
(Fiscal year Covered) Yield Market Index Fund Class A Index
- --------------------- --------------------- ------------------
<S> <C> <C>
Measurement PT - 10,000.00 9,525.00
3/87 11,047.00 10,006.00
3/88 11,594.00 10,137.00
3/89 12,762.00 11,277.00
3/90 12,233.00 10,165.00
3/91 13,946.00 11,136.00
3/92 17,954.00 15,054.00
3/93 21,035.00 17,335.00
3/94 22,773.00 18,912.00
3/95 24,251.00 18,362.00
3/96 28,207.00 20,278.00
[CHART APPEARS HERE]
<CAPTION>
High Income Fund Class Class
Average Annual Total Returns+ A B
<S> <C> <C>
1 Year Return 5.19% 5.43%
5 Year Return 11.65% N/A
Since Inception* 7.73% 2.13%
</TABLE>
+Includes any applicable sales charges
*Inception dates for Class A and Class B are 9/19/86 and 10/01/93, respectively
During the past fiscal year the High Income Fund recovered from losses incurred
due to poor credit selection in the period covered by last year's annual report.
The Fund underperformed the Salomon Brothers High Yield Market Index, an
unmanaged index of high yield bonds. Class A shares of the Fund had a total
return for the fourth quarter 1995 and the first quarter 1996 above its group
average as tracked by Lipper Analytical Services. We expect to be able to
strengthen the quality of the portfolio even further as this moderate growth
economic environment allows high yield debt issuers to improve debt coverage
ratios and expand business opportunities.
39
<PAGE>
SUNAMERICA INCOME FUNDS
COMPARISONS: PORTFOLIOS VS. INDICES -- (continued)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period Lehman Brothers Tax Exempt Insured
(Fiscal year Covered) Municipal Bond Index Fund Class A
- --------------------- --------------------- ------------------
<S> <C> <C>
Measurement PT - 10,000.00 9,525.00
10/86 10,654.00 9,850.00
10,564.00 9,575.00
10/88 12,101.00 11,038.00
13,081.00 11,869.00
10/90 14,051.00 12,615.00
15,761.00 13,702.00
10/92 17,085.00 14,516.00
19,489.00 15,960.00
10//94 18,643.00 15,225.00
20,034.00 16,286.00
3/96 21,711.00 17,486.00
[CHART APPEARS HERE]
<CAPTION>
Tax Exempt Insured Fund Class Class
Average Annual Total Returns+ A B
<S> <C> <C>
1 Year Return 2.27% 2.32%
5 Year Return 5.00% N/A
10 Year Return 5.75% N/A
Since Inception* 6.34% 1.70%
</TABLE>
+Includes any applicable sales charges
*Inception dates for Class A and Class B are 11/22/85 and 10/04/93, respectively
For the year ended March 31, 1996 the Tax Exempt Insured Fund Class A had a
total return of 7.33% outperforming the group average of 6.86% as tracked by
Lipper Analytical Services. The Fund slightly underperformed the return for the
Lehman Brother Municipal Bond Index. Please note that the index is unmanaged,
and consists of municipal bonds that may not be insured as to the timely payment
of principal and interest, as are at least 65% of the holdings of the Tax Exempt
Insured Fund, under normal conditions.
40
<PAGE>
TRUSTEES INVESTMENT ADVISER
S. James Coppersmith SunAmerica Asset Management Corp.
Samuel M. Eisenstat The SunAmerica Center
Stephen J. Gutman 733 Third Avenue
Peter A. Harbeck New York, NY 10017-3204
Peter McMillan III
Sebastiano Sterpa DISTRIBUTOR
SunAmerica Capital Services, Inc.
OFFICERS The SunAmerica Center
Peter A. Harbeck, President 733 Third Avenue
Stanton J. Feeley, Executive Vice President New York, NY 10017-3204
Nancy Kelly, Vice President
P. Christopher Leary, Vice President SHAREHOLDER SERVICING AGENT
Robert M. Zakem, Secretary SunAmerica Fund Services, Inc.
Peter C. Sutton, Treasurer The SunAmerica Center
John T. Genoy, Assistant Treasurer 733 Third Avenue
Donna M. Handel, Assistant Treasurer New York, NY 10017-3204
Hilary R. Kastleman, Assistant Secretary
Abbe P. Stein, Assistant Secretary CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company
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.
SPONSORED BY:
[LOGO OF SUN AMERICA ASSET MANAGEMENT APPEARS HERE]
IFANN
