UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08727
SunAmerica Senior Floating Rate Fund, Inc.
(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311
(Address of principal executive offices) (Zip code)
Vincent M. Marra
Senior Vice President & Chief Operating Officer
AIG SunAmerica Asset Management Corp.
Harborside Financial Center 3200 Plaza 5
Jersey City, NJ 07311
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6464
Date of fiscal year end: December 31
Date of reporting period: June 30, 2005
Item 1. Reports to Stockholders
SunAmerica Senior Floating Rate Fund, Inc. Semiannual report at June 30, 2005.
[GRAPHIC]
SunAmerica
Senior Floating Rate Fund
2005 SEMIANNUAL REPORT
[LOGO] AIG Sun America
Mutual Funds
Table of Contents
SHAREHOLDER LETTER................. 1
STATEMENT OF ASSETS AND LIABILITIES 2
STATEMENT OF OPERATIONS............ 3
STATEMENT OF CHANGES IN NET ASSETS. 4
STATEMENT OF CASH FLOWS............ 5
FINANCIAL HIGHLIGHTS............... 6
PORTFOLIO OF INVESTMENTS........... 10
NOTES TO FINANCIAL STATEMENTS...... 16
APPROVAL OF ADVISORY AGREEMENTS.... 22
DIRECTORS AND OFFICERS INFORMATION. 25
June 30, 2005 SEMIANNUAL REPORT
Shareholder Letter
Dear Shareholders,
On June 30, 2005, the semiannual period for the SunAmerica Senior Floating
Rate Fund came to a close. Effective January 1, 2005, we assumed portfolio
management responsibilities for this Fund. We believe that our 10 plus years
experience as portfolio managers within this asset class and our strong team of
research analysts will benefit the Fund.
During the first three months of the semiannual period, the Senior Bank
Loan market benefited from strong investor demand for the asset class. This
demand, coupled with a relative lack of supply, led to record average prices
for senior loans in late March. A minor sell-off in our asset class occurred in
early Spring and was attributable to hedge funds selling in anticipation of
pending redemptions, the downgrades of GM and Ford credit, and an increase in
loan supply from several large primary issuances. This negative backdrop
provided a brief window of buying opportunity, as the downturn in loan prices
proved to be short-lived, and the market quickly rebounded.
We thank you for your continued investment in the Fund.
Sincerely,
/s/ John G. Lapham
John G. Lapham
/s/ Steven S. Oh
Steven S. Oh
AIG GLOBAL INVESTMENT GROUP
- --------
The Fund is not a money market fund and its net asset value may fluctuate.
Investments in Loans involve certain risks including nonpayment of principal
and interest; collateral impairment; non-diversification and borrower industry
concentration; and lack of full liquidity, which may impair the Fund's ability
to obtain full value for Loans sold. The Fund may invest all or substantially
all of its assets in Loans or other securities that are rated below investment
grade, or in comparable unrated securities. Credit risks include the
possibility of a default on the Loan or bankruptcy of the borrower. The value
of these Loans is subject to a greater degree of volatility in response to
interest rate fluctuations.
Past performance is no guarantee of future results.
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES -- June 30, 2005 -- (unaudited)
ASSETS:
Long-term investment securities, at value (unaffiliated)*......... $213,174,450
Short-term investment securities, at value*....................... 22,733,997
------------
Total investments............................................... 235,908,447
Cash.............................................................. 474,217
Receivable for:
Dividends and interest.......................................... 1,608,085
Investments sold................................................ 3,276,573
Prepaid expenses and other assets................................. 7,057
Due from investment adviser for expense reimbursements/fee waivers 57,585
Due from distributor for fee waivers.............................. 40,935
------------
Total assets.................................................... 241,372,899
------------
LIABILITIES:
Payable for:
Fund shares repurchased......................................... 7,504,848
Investments purchased........................................... 11,953,195
Investment advisory and management fees......................... 157,900
Distribution and service maintenance fees....................... 122,831
Administration fees............................................. 74,306
Directors' fees and expenses.................................... 10,509
Other accrued expenses.......................................... 166,161
Dividends payable................................................. 287,962
Commitments (Note 10)............................................. --
------------
Total liabilities............................................... 20,277,712
------------
Net assets..................................................... $221,095,187
============
NET ASSETS REPRESENTED BY:
Capital shares at par value of $.01............................... $ 236,075
Additional paid-in capital........................................ 249,817,406
------------
250,053,481
Accumulated undistributed net investment income (loss)............ (69,188)
Accumulated undistributed net realized gain (loss) on investments. (27,901,226)
Unrealized appreciation (depreciation) on investments............. (987,880)
------------
Net assets..................................................... $221,095,187
============
Class A Class B Class C Class D
NET ASSET VALUES: -------- ----------- ------------ ------------
Net assets................................................... $367,862 $26,714,236 $168,503,203 $ 25,509,886
Shares outstanding........................................... 39,277 2,852,417 17,992,067 2,723,740
Net asset value, offering and repurchase price per share
(excluding any applicable contingent deferred sales charges) $ 9.37 $ 9.37 $ 9.37 $ 9.37
======== =========== ============ ============
*COST
Long-term investment securities (unaffiliated)............................................. $214,162,330
============
Short-term investment securities........................................................... $ 22,733,997
============
See Notes to Financial Statements
2
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF OPERATIONS -- For the six months ended June 30, 2005 --
(unaudited)
INVESTMENT INCOME:
Interest (unaffiliated)........................................................... $ 5,950,731
Dividends (unaffiliated).......................................................... 192,681
Facility and other fee income (Note 2)............................................ 267,642
-----------
Total investment income........................................................ 6,411,054
-----------
EXPENSES:
Investment advisory and management fees........................................... 960,529
Administration fees............................................................... 452,013
Distribution and service maintenance fees:
Class A......................................................................... 392
Class B......................................................................... 101,717
Class C......................................................................... 649,971
Transfer agent fees and expenses:
Class A......................................................................... 1,407
Class B......................................................................... 10,737
Class C......................................................................... 39,208
Class D......................................................................... 5,083
Registration fees:
Class A......................................................................... 2,225
Class B......................................................................... 6,272
Class C......................................................................... 15,023
Class D......................................................................... 5,607
Accounting service fees........................................................... 33,227
Custodian fees.................................................................... 47,131
Reports to shareholders........................................................... 67,158
Audit and tax fees................................................................ 44,924
Legal fees........................................................................ 20,605
Directors' fees and expenses...................................................... 24,367
Other expenses.................................................................... 35,926
-----------
Total expenses before fee waivers, expense reimbursements and custody credits.. 2,523,522
Fees waived and expenses reimbursed by investment adviser and distributor...... (598,350)
Custody credits earned on cash balances........................................ (11,192)
-----------
Net expenses................................................................... 1,913,980
-----------
Net investment income (loss)...................................................... 4,497,074
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (unaffiliated)............................ (189,419)
Change in unrealized appreciation (depreciation) on investments................... (926,681)
-----------
Net realized and unrealized gain (loss) on investments............................ (1,116,100)
-----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 3,380,974
===========
See Notes to Financial Statements
3
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
For the
six months
ended For the year
June 30, ended
2005 December 31,
(unaudited) 2004
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss).......................................................... $ 4,497,074 $ 6,093,097
Net realized gain (loss) on investments (unaffiliated)................................ (189,419) (1,564,659)
Net unrealized gain (loss) on investments (unaffiliated).............................. (926,681) 2,996,261
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 3,380,974 7,524,699
Distributions to shareholders from:
Net investment income (Class A)....................................................... (6,685) (4,667)
Net investment income (Class B)....................................................... (534,835) (837,534)
Net investment income (Class C)....................................................... (3,417,650) (4,536,155)
Net investment income (Class D)....................................................... (559,939) (729,045)
------------ ------------
Total distributions to shareholders..................................................... (4,519,109) (6,107,401)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 3) $ (7,734,208) $ 84,890,736
------------ ------------
Total increase (decrease) in net assets................................................. (8,872,343) 86,308,034
Net Assets:
Beginning of period..................................................................... 229,967,530 143,659,496
------------ ------------
End of period+.......................................................................... $221,095,187 $229,967,530
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ (69,188) $ (47,153)
============ ============
See Notes to Financial Statements
4
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF CASH FLOWS -- For the six months ended June 30, 2005 --
(unaudited)
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net increase in net assets from operations...................................................................... $ 3,380,974
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities
Purchase of loans............................................................................................. (149,003,976)
Proceed from loans sold....................................................................................... 82,594,669
Loan principal paydowns....................................................................................... 63,465,127
Purchases -- funding fees..................................................................................... 5,288
Purchase of short-term securities, net........................................................................ (217,330)
Accretion of facility fee income.............................................................................. (56,312)
Increase in dividends and interest receivable................................................................. (314,553)
Increase in receivables for investments sold.................................................................. (1,746,844)
Decrease in amount due from investment adviser................................................................ 29,934
Decrease in amount due from distributor....................................................................... 1,908
Decrease in other assets...................................................................................... 15,114
Increase in payable for investments purchased................................................................. 10,368,518
Decrease in payable to the adviser............................................................................ (8,515)
Increase in other liabilities................................................................................. 36,154
Unrealized depreciation on investments........................................................................ 926,681
Net realized loss from investments............................................................................ 189,419
-------------
Net cash provided by operating activities....................................................................... $ 9,666,256
-------------
Cash flows from financing activities:
Proceeds from shares sold....................................................................................... 34,661,521
Payment on shares repurchased................................................................................... (44,257,086)
Cash dividends paid (not including reinvested dividends of $2,902,787).......................................... (1,585,685)
-------------
Net cash used by financing activities........................................................................... $ (11,181,250)
-------------
Net decrease in cash............................................................................................ (1,514,994)
Cash balance at beginning of period............................................................................. 1,989,211
-------------
Cash balance at end of period................................................................................... $ 474,217
=============
See Notes to Financial Statements
5
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS
Class A
--------------------
Period For the
Six Months period from
ended 4/28/04*
6/30/05 through
(unaudited) 12/31/04
----------- -----------
Net Asset Value, Beginning of Period........................................... $ 9.41 $ 9.42
Investment Operations:
Net investment income (loss)@.................................................. 0.19 0.22
Net realized and unrealized gain (loss) on investments......................... (0.03) (0.01)
------ ------
Total from investment operations............................................. 0.16 0.21
------ ------
Distributions:
Dividends from net investment income........................................... (0.20) (0.22)
------ ------
Net Asset Value, End of Period................................................. $ 9.37 $ 9.41
------ ------
Total Return(1)................................................................ 1.69% 2.22%
Ratios/Supplemental Data
Net assets, end of period ($000's)............................................. $ 368 $ 224
Ratio of net expenses to average net assets.................................... 1.45%# 1.45%#
Ratio of net investment income to average net assets........................... 4.26%# 3.44%#
Portfolio turnover rate........................................................ 38% 24%
Expense ratio before waiver of fees and reimbursement of expenses.............. 4.07%# 9.31%#
Net investment income ratio before waiver of fees and reimbursement of expenses 1.64%# (4.42)%#
- --------
* Inception date of class
@ Calculated based upon average shares outstanding.
# Annualized
(1)Total return is not annualized and does not reflect sales load but does
include expense reimbursements.
See Notes to Financial Statements
6
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class B
---------------------------------------------------------
Period
Six Months
ended Year Year Year Year Year
6/30/05 ended ended ended ended ended
(unaudited) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00*
----------- -------- -------- -------- -------- ---------
Net Asset Value, Beginning of Period......... $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.64 $ 9.98
Investment Operations:
Net investment income (loss)................. 0.18@ 0.29@ 0.40@ 0.40@ 0.58@ 0.75
Net realized and unrealized gain (loss) on
investments................................. (0.04) 0.08 0.54 (0.26) (0.60) (0.33)
------- ------- ------- ------- ------- -------
Total from investment operations............ 0.14 0.37 0.94 0.14 (0.02) 0.42
------- ------- ------- ------- ------- -------
Distributions:
Dividends from net investment income......... (0.18) (0.29) (0.39) (0.39) (0.59) (0.76)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period............... $ 9.37 $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.64
------- ------- ------- ------- ------- -------
Total Return(1).............................. 1.54% 3.97% 10.95% 1.54% (0.41)% 4.61%
Ratios/Supplemental Data
Net assets, end of period ($000's)........... $26,714 $27,530 $26,565 $31,906 $42,335 $50,966
Ratio of net expenses to average net assets.. 1.75%# 1.75% 1.54% 1.45% 1.45% 1.42%
Ratio of net investment income to average
net assets.................................. 3.92%# 3.04% 4.35% 4.42% 6.23% 7.85%
Portfolio turnover rate...................... 38% 24% 75% 112% 69% 41%
Expense ratio before waiver of fees and
reimbursement of expenses................... 2.37%# 2.38% 2.57% 2.51% 2.47% 2.31%
Net investment income ratio before waiver of
fees and reimbursement of expenses.......... 3.31%# 2.41% 3.33% 3.36% 5.21% 6.96%
- --------
@ Calculated based upon average shares outstanding.
* The financial statements of the Fund for the period ended 12/31/00 were
audited by other independent auditors whose report dated February 23, 2001
expressed an unqualified opinion on the statements.
# Annualized
(1)Total return is not annualized and does not reflect sales load but does
include expense reimbursements.
See Notes to Financial Statements
7
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class C
------------------------------------------------------------
Period
Six Months
ended Year Year Year Year Year
6/30/05 ended ended ended ended ended
(unaudited) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00*
----------- -------- -------- -------- -------- ---------
Net Asset Value, Beginning of Period................... $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.64 $ 9.98
Investment Operations:
Net investment income (loss)........................... 0.19@ 0.28@ 0.38@ 0.40@ 0.57@ 0.76
Net realized and unrealized gain (loss) on investments. (0.05) 0.09 0.56 (0.27) (0.60) (0.33)
-------- -------- -------- ------- -------- --------
Total from investment operations...................... 0.14 0.37 0.94 0.13 (0.03) 0.43
-------- -------- -------- ------- -------- --------
Distributions:
Dividends from net investment income................... (0.18) (0.29) (0.39) (0.38) (0.58) (0.77)
-------- -------- -------- ------- -------- --------
Net Asset Value, End of Period......................... $ 9.37 $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.64
-------- -------- -------- ------- -------- --------
Total Return(1)........................................ 1.54% 3.97% 10.92% 1.47% (0.45)% 4.60%
Ratios/Supplemental Data
Net assets, end of period ($000's)..................... $168,503 $174,583 $103,726 $86,101 $140,664 $227,662
Ratio of net expenses to average net assets............ 1.75%# 1.75% 1.59% 1.50% 1.50% 1.43%
Ratio of net investment income to average net assets... 3.92%# 3.06% 4.22% 4.33% 6.28% 7.85%
Portfolio turnover rate................................ 38% 24% 75% 112% 69% 41%
Expense ratio before waiver of fees and reimbursement
of expenses........................................... 2.30%# 2.35% 2.51% 2.48% 2.52% 2.32%
Net investment income ratio before waiver of fees and
reimbursement of expenses............................. 3.37%# 2.46% 3.31% 3.36% 5.26% 6.96%
- --------
@ Calculated based upon average shares outstanding.
* The financial statements of the Fund for the period ended 12/31/00 were
audited by other independent auditors whose report dated February 23, 2001
expressed an unqualified opinion on the statements.
# Annualized
(1)Total return is not annualized and does not reflect sales load but does
include expense reimbursements.
See Notes to Financial Statements
8
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class D
--------------------------------------
Period
Six Months
ended Year Year Year
6/30/05 ended ended ended
(unaudited) 12/31/04 12/31/03 12/31/02
----------- -------- -------- --------
Net Asset Value, Beginning of Period................................................. $ 9.41 $ 9.33 $ 8.78 $ 9.03
Investment Operations:
Net investment income (loss)@........................................................ 0.21 0.33 0.43 0.43
Net realized and unrealized gain (loss) on investments............................... (0.04) 0.08 0.54 (0.27)
------- ------- ------- -------
Total from investment operations.................................................... 0.17 0.41 0.97 0.16
------- ------- ------- -------
Distributions:
Dividends from net investment income................................................. (0.21) (0.33) (0.42) (0.41)
------- ------- ------- -------
Net Asset Value, End of Period....................................................... $ 9.37 $ 9.41 $ 9.33 $ 8.78
------- ------- ------- -------
Total Return(1)...................................................................... 1.79% 4.49% 11.28% 1.72%
Ratios/Supplemental Data
Net assets, end of period ($000's)................................................... $25,510 $27,630 $13,369 $15,037
Ratio of net expenses to average net assets.......................................... 1.25%# 1.25% 1.25% 1.25%
Ratio of net investment income to average net assets................................. 4.42%# 3.60% 4.63% 4.58%
Portfolio turnover rate.............................................................. 38% 24% 75% 112%
Expense ratio before waiver of fees and reimbursement of expenses.................... 1.58%# 1.62% 1.86% 1.77%
Net investment income ratio before waiver of fees and reimbursement of expenses...... 4.09%# 3.23% 4.02% 4.06%
Class D
-------------
For the period
05/02/01*
through
12/31/01
--------------
Net Asset Value, Beginning of Period................................................. $ 9.46
Investment Operations:
Net investment income (loss)@........................................................ 0.35
Net realized and unrealized gain (loss) on investments............................... (0.42)
-------
Total from investment operations.................................................... (0.07)
-------
Distributions:
Dividends from net investment income................................................. (0.36)
-------
Net Asset Value, End of Period....................................................... $ 9.03
-------
Total Return(1)...................................................................... (0.79)%
Ratios/Supplemental Data
Net assets, end of period ($000's)................................................... $26,372
Ratio of net expenses to average net assets.......................................... 1.25%#
Ratio of net investment income to average net assets................................. 5.66%#
Portfolio turnover rate.............................................................. 69%
Expense ratio before waiver of fees and reimbursement of expenses.................... 2.27%#
Net investment income ratio before waiver of fees and reimbursement of expenses...... 4.64%#
- --------
* Inception date of class
@ Calculated based upon average shares outstanding.
# Annualized
(1)Total return is not annualized and does not reflect sales load but does
include expense reimbursements.
See Notes to Financial Statements
9
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO PROFILE -- June 30, 2005 -- (unaudited)
Industry Allocation*
Broadcasting & Entertainment........................ 13.26%
Registered Investment Companies..................... 10.28
Healthcare, Education and Childcare................. 9.52
Chemicals, Plastics and Rubber...................... 6.95
Beverage, Food & Tobacco............................ 5.89
Automobile.......................................... 5.28
Leisure, Amusement, Entertainment................... 5.20
Telecommunications.................................. 5.03
Containers, Packaging and Glass..................... 4.67
Printing and Publishing............................. 4.49
Buildings & Real Estate............................. 4.29
Hotels, Motels, Inns and Gaming..................... 3.86
Home and Office Furnishings, Housewares and Durables 3.71
Utilities........................................... 3.33
Diversified/Conglomerate Manufacturing.............. 3.17
Diversified/Conglomerate Service.................... 2.94
Retail Stores....................................... 2.75
Electronics......................................... 2.58
Personal and Nondurable Consumer Products........... 1.86
Oil and Gas......................................... 1.65
Personal, Goods and Misc. Services.................. 1.49
Ecological.......................................... 1.33
Cargo Transport..................................... 0.97
Aerospace/Defense................................... 0.83
Farming and Agriculture............................. 0.42
Mining, Steel, Iron and Nonprecious Metals.......... 0.40
Personal Transportation............................. 0.32
Textiles and Leather................................ 0.23
------
106.70%
======
Credit Quality+#
AA-............. 0.74%
BBB............. 0.47
BB+............. 6.74
BB.............. 12.75
BB-............. 16.61
B+.............. 25.12
B............... 18.33
B-.............. 7.05
Not Rated@...... 12.19
------
100.00%
======
- --------
* Calculated as a percentage of Net Assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
10
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- June 30, 2005 -- (unaudited)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
LOANS/(3)(4)/ -- 95.86%
Aerospace/Defense -- 0.82%
Hexcel Corp.............................. BTL-B B2 B+ 4.88-5.06% 3/01/12 $ 822,222 $ 829,803
SI International, Inc.................... BTL B1 B+ 5.78-5.99 2/01/11 997,500 1,013,710
-----------
1,843,513
-----------
Automobile -- 5.28%
Collins & Aikman Products Co.(5)......... BTL-B1 Caa2 B 7.81-9.75 8/31/11 272,806 202,705
Collins & Aikman Products Co.(5)......... Revolver Caa2 B 9.75 8/31/09 107,758 79,808
Dura Operating Corp...................... 2nd Lien B2 B 6.78 4/13/11 1,000,000 996,250
Goodyear Tire & Rubber Co................ 2nd Lien B2 B+ 5.89 4/30/10 2,000,000 2,000,536
Grand Vehicle Works Holding Corp......... 2nd Lien B3 B- 11.10 7/23/11 2,000,000 1,700,000
Grand Vehicle Works Holding Corp......... BTL-B B2 B+ 8.33 7/23/10 990,000 900,900
HLI Operating Co., Inc................... BTL-C B1 BB- 8.88-8.99 6/03/10 500,000 501,563
Key Automotive Group..................... BTL-B B1 BB- 6.14-8.25 6/25/10 1,257,034 1,252,320
Plastech, Inc.@.......................... 2nd Lien B1 B 10.64 2/25/10 1,000,000 937,500
Tenneco Automotive, Inc.................. BTL-B B1 B+ 5.54 12/12/10 608,359 616,724
Tenneco Automotive, Inc.................. BTL-B1 B1 B+ 5.36 12/12/10 267,241 270,916
TRW Automotive Acquisitions Corp......... BTL-E Ba2 NR 4.94 10/31/10 1,492,500 1,497,724
United Components, Inc................... BTL-C B1 BB- 5.75 6/30/10 723,333 734,410
-----------
11,691,356
-----------
Beverage, Food and Tobacco -- 5.89%
Alliance One International, Inc.......... BTL-B B1 BB- 6.73 5/13/10 997,500 1,014,956
Chiquita Brands International, Inc....... BTL-C B1 B+ 5.84 6/30/12 500,000 506,563
Commonwealth Brands, Inc................. BTL Ba3 B+ 6.63 8/28/07 512,040 518,440
Constellation Brands, Inc................ BTL-B Ba2 BB 4.75-5.19 11/30/11 3,323,333 3,359,797
Dole Food Co., Inc....................... BTL-B Ba3 BB 4.69-6.75 7/22/12 985,031 993,343
Dole Holding Co.......................... BTL B3 B 8.00 7/21/10 1,500,000 1,545,000
Keystone Foods Holdings, LLC............. BTL Ba3 B+ 5.13 6/16/11 1,193,191 1,208,851
National Distributing@................... 2nd Lien NR NR 9.96 6/16/10 1,000,000 1,000,000
Pierre Foods, Inc........................ BTL-B B1 B+ 5.69 6/30/10 862,991 875,396
Southern Wine & Spirits of America, Inc.. BTL-B Ba3 BB+ 4.99 5/31/12 1,995,000 2,008,716
-----------
13,031,062
-----------
Broadcasting and Entertainment -- 13.26%
Adelphia Communications Corp............. BTL-B B1 NR 5.38 3/31/06 2,000,000 2,007,812
Adelphia -- Hilton Head Co............... BTL NR NR 5.76 9/30/08 1,000,000 1,000,000
Cebridge Connections, Inc................ 1st Lien B3 NR 6.37-8.50 2/23/09 691,250 693,410
Cebridge Connections, Inc................ 2nd Lien Caa1 NR 9.13-9.52 2/04/09 1,283,750 1,280,541
Century Cable Holdings, LLC(5)........... Discretionary BTL Ca NR 8.25 12/31/09 2,500,000 2,476,563
Century -- TCI California, LP(5)......... Revolver NR NR 6.25 6/30/09 1,000,000 994,688
Charter Communications Operating, LLC.... BTL-B B2 B 6.44 4/27/11 3,967,462 3,947,804
DIRECTV Holdings, LLC.................... BTL-B Ba1 BB 4.74 4/07/13 1,333,333 1,339,584
Haights Cross Operating Co............... BTL B3 B- 7.77 8/20/08 1,471,288 1,495,196
Insight Midwest Holdings, LLC............ BTL-B Ba3 BB+ 6.13 12/31/09 985,000 996,390
Intelstat Zeus, Ltd...................... BTL-B B1 B 5.25 7/28/11 995,000 1,004,453
Mission Broadcasting, Inc................ BTL-B Ba3 B+ 5.24 10/01/12 1,216,197 1,224,051
Nexstar Broadcasting, Inc................ BTL-B Ba3 B+ 5.24 10/01/12 1,283,803 1,293,698
PANAMSAT Corp............................ BTL-B1 Ba3 BB+ 5.65 8/20/11 4,466,114 4,541,368
Spanish Broadcasting Systems, Inc........ 1st Lien B1 NR 5.49 6/01/12 997,500 1,008,098
UPC Financing Partnership................ BTL-H B1 B 5.75 9/03/12 2,000,000 2,001,806
WideOpenWest Finance, LLC................ BTL-B B2 NR 6.19-6.49 6/22/11 997,481 1,004,962
Young Broadcasting, Inc.................. BTL B1 B 5.50-5.75 11/02/12 1,000,000 1,010,208
-----------
29,320,632
-----------
Buildings & Real Estate -- 4.29%
Atrium Cos., Inc......................... BTL B3 B 5.90-8.00 12/28/11 2,439,456 2,351,025
CNL Hospitality Partners, LP............. BTL Ba3 NR 5.68 10/13/06 291,111 291,838
Crescent Real Estate Equities, LP........ BTL Ba3 BB+ 5.36 5/30/08 426,117 430,245
General Growth Properties, Inc........... BTL-A Ba2 BB+ 5.37 11/12/07 473,712 476,800
Masonite International Corp.............. BTL B2 BB- 5.21-5.49 4/16/13 1,498,774 1,498,358
Masonite International Corp.............. CND TL B2 BB- 5.21-5.49 4/16/13 1,496,226 1,495,809
Palmdale Hills Property, LLC............. 1st Lien B1 B+ 6.26 5/01/12 1,000,000 1,000,000
Palmdale Hills Property, LLC............. 2nd Lien B2 B- 10.76 5/01/12 1,000,000 1,000,000
PGT Industries, Inc...................... BTL-A B1 B 5.93 1/29/10 923,000 934,537
-----------
9,478,612
-----------
11
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- June 30, 2005 -- (unaudited) (continued)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ---------------------------------------------------------------------------------------------------------------------
Cargo Transport -- 0.97%
Pacer International, Inc...................... BTL B1 NR 5.19-5.38% 6/10/10 $ 972,549 $ 982,275
United States Shipping, LLC................... BTL Ba3 NR 5.49 4/30/10 1,140,865 1,152,631
-----------
2,134,906
-----------
Chemicals, Plastics and Rubber -- 6.95%
Celanese AG................................... BTL-B B1 B+ 5.74 4/06/11 2,610,033 2,649,591
Hercules, Inc................................. BTL-B Ba1 BB 4.87-5.24 10/08/10 888,750 898,526
Hexion Specialty Chemicals, Inc............... Tranche B1 B1 BB- 5.88 5/30/12 840,000 850,500
Hexion Specialty Chemicals, Inc............... Tranche B2 B1 BB- 5.88 5/31/12 1,160,000 1,174,500
Huntsman International, LLC................... BTL-B1 Ba3 BB- 5.56 12/31/10 2,347,062 2,359,164
Invista B.V................................... BTL-B1 Ba3 BB 5.75 4/29/11 1,345,765 1,367,353
Invista B.V................................... BTL-B2 Ba3 BB 5.75 4/29/11 583,882 593,249
Mosaic Co..................................... BTL-B Ba2 BB+ 4.69-5.19 2/21/12 997,500 1,006,696
PQ Corp....................................... BTL B1 B+ 5.50 2/15/13 748,125 755,139
Rockwood Specialties Group, Inc............... BTL-D B1 B+ 5.43 7/30/12 2,000,000 2,030,626
Wellman, Inc.................................. 2nd Lien B2 B- 9.96 2/04/10 1,500,000 1,556,250
Westlake Chemical Corp........................ BTL-B Ba2 NR 5.58-7.50 7/23/10 120,000 121,200
-----------
15,362,794
-----------
Containers, Packaging and Glass -- 4.67%
Appleton Papers, Inc.......................... BTL Ba3 BB 5.55-5.73 6/11/10 1,113,750 1,125,236
Berry Plastics Corp........................... BTL-C B1 B+ 5.39-5.60 12/02/11 196,377 199,593
Berry Plastics Corp........................... BTL B2 B+ 5.39-5.60 12/02/11 1,303,623 1,324,969
Boise Cascade Corp............................ BTL-D Ba3 BB 5.09-5.25 10/28/11 1,106,713 1,122,392
Graham Packaging Co., LP...................... Tranche B B2 B 5.69-6.00 4/07/12 2,487,500 2,526,108
Owens-Illinois Group, Inc..................... BTL-A1 B1 BB- 4.92 4/01/07 486,733 489,978
Owens-Illinois Group, Inc..................... BTL-B1 B1 BB- 5.02 4/01/08 657,024 662,773
Precise Technology, Inc....................... 1st Lien B1 B+ 6.50 3/25/11 675,788 681,490
Precise Technology, Inc....................... 2nd Lien B2 B- 9.50 3/22/11 500,000 504,375
Ranpak Corp................................... BTL-B B3 B 6.66 5/26/10 680,428 687,232
Silgan Holdings, Inc.......................... BTL-B Ba3 BBB 4.74 6/30/13 1,000,000 1,004,844
-----------
10,328,990
-----------
Diversified/Conglomerate Manufacturing -- 3.18%
Accuride Corp................................. BTL-B B2 B+ 5.50-5.69 1/31/12 1,616,818 1,622,477
Enersys, Inc.................................. BTL Ba3 BB 5.22-5.66 3/17/11 594,000 602,353
Invensys International Holdings, Ltd.......... 2nd Lien B1 B- 7.87 12/05/09 1,012,329 1,032,575
Maxim Crane Works, LP......................... 2nd Lien B3 B+ 8.94 1/31/12 250,000 260,625
Maxim Crane Works, LP......................... BTL B2 BB- 6.00-6.19 1/31/10 416,667 424,479
Penn Engineering & Manufacturing Corp......... BTL B2 B 5.97 5/01/12 500,000 502,500
Ply Gem Industries, Inc....................... BTL B1 B+ 5.99-6.16 2/24/11 1,257,496 1,260,640
Ply Gem Industries, Inc....................... CND TL B1 B+ 5.99-6.16 2/24/11 184,782 185,244
Polypore, Inc................................. BTL B1 B 5.58 11/12/11 1,122,000 1,129,013
-----------
7,019,906
-----------
Diversified/Conglomerate Service -- 2.94%
Billing Concepts, Inc......................... BTL-A B2 B+ 6.49 4/22/10 975,000 975,000
Bridge Information Systems, Inc.+@(5)(6)...... BTL-B Caa1 NR 9.25 5/29/05 421,180 12,635
Coinstar, Inc................................. BTL Ba3 BB- 5.13 7/07/11 878,935 892,119
Fidelity National Information Solutions, Inc.. BTL-B Ba3 BB 4.96 3/04/13 1,845,000 1,839,714
InfoUSA, Inc.................................. BTL-A Ba3 BB 5.99 3/25/09 781,250 783,203
NES Rentals Holdings, Inc..................... 2nd Lien B3 B+ 8.97-11.25 7/20/10 1,488,750 1,517,595
Protection One, Inc........................... BTL B2 B+ 6.29-6.30 4/11/11 470,000 475,875
-----------
6,496,141
-----------
Ecological -- 1.33%
Allied Waste North America, Inc............... LOC B1 BB 5.15 1/15/12 810,811 813,739
Allied Waste North America, Inc............... BTL B1 BB 5.17-5.52 1/15/12 2,124,273 2,131,514
-----------
2,945,253
-----------
12
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- June 30, 2005 -- (unaudited) (continued)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
Electronics -- 2.13%
Amkor Technology, Inc............................ 2nd Lien B1 NR 7.79% 10/27/10 $1,000,000 $ 1,012,500
Fairchild Semiconductor Corp..................... BTL-B3 Ba3 BB- 5.25-5.44 6/19/08 1,470,112 1,486,651
UGS Corp......................................... BTL B1 B+ 5.33 3/31/12 2,177,240 2,201,734
-----------
4,700,885
-----------
Farming and Agriculture -- 0.42%
AGCO Corp........................................ BTL Ba1 BB+ 4.82-5.17 7/03/09 913,167 918,303
-----------
Healthcare, Education and Childcare -- 9.52%
Accredo Health, Inc.............................. BTL-B Ba2 NR 5.08 6/30/11 1,385,000 1,390,194
Alpharma Operating Corp.......................... BTL-A B1 B+ 5.05 10/05/08 484,948 484,797
AMR/EmCare Holdings.............................. BTL B2 B+ 5.48-5.91 2/15/12 997,500 999,994
Community Health Systems, Inc.................... BTL Ba3 BB- 5.07 8/19/11 1,318,784 1,334,719
Conmed Corp...................................... BTL-C Ba3 BB- 5.71 12/15/09 766,408 774,910
Cooper Cos....................................... BTL-B Ba3 BB 5.00 11/15/11 1,000,000 1,009,167
DaVita, Inc...................................... BTL-B B1 BB- 5.76 7/30/12 3,000,000 3,041,484
Hanger Orthopedic Group, Inc..................... BTL-B B1 B+ 6.99 9/30/09 982,500 992,325
HealthSouth Corp................................. LOC Caa2 NR 3.06 3/17/10 925,000 937,141
HealthSouth Corp................................. BTL Caa2 NR 5.82 3/17/10 1,575,000 1,595,672
LifePoint Hospitals.............................. BTL-B Ba3 BB 4.85 4/15/12 990,000 992,104
Magellan Health Services, Inc.................... BTL B1 B+ 5.66-5.87 8/15/08 409,722 415,356
Magellan Health Services, Inc.................... LOC B1 B+ 3.03 8/15/08 277,778 281,597
Medco Health Solutions, Inc...................... BTL-A Aa3 AA- 3.72-4.57 6/30/10 1,560,714 1,568,031
Multiplan, Inc................................... BTL Ba3 B+ 6.24 3/04/09 1,041,667 1,048,828
Quintiles Transnational Corp..................... BTL-B B1 BB- 5.24 9/25/09 498,629 501,434
Vanguard Health Systems, Inc..................... Tranche 1 B2 B 6.74 9/23/11 992,500 1,009,248
Warner Chilcott Holdings Co...................... BTL-B B2 B 5.96-6.01 1/18/12 1,089,091 1,093,078
Warner Chilcott Holdings Co...................... BTL-C B2 B 6.01 1/18/12 438,851 440,457
Warner Chilcott Holdings Co...................... BTL-D B2 B 6.01 1/18/12 202,737 203,479
Youth and Family Centered Services, Inc.......... BTL-B NR NR 7.10-7.65 5/28/11 927,040 924,722
-----------
21,038,737
-----------
Home and Office Furnishings, Housewares and Durables -- 3.71%
Jarden Corp...................................... BTL B1 B+ 5.30-5.49 4/11/12 1,408,227 1,424,950
Juno Lighting, Inc............................... 1st Lien B1 B+ 5.71-7.75 11/21/10 2,095,691 2,106,170
Juno Lighting, Inc............................... 2nd Lien B2 B- 8.79 5/20/11 1,000,000 1,010,000
Maax Corp........................................ BTL-B B1 B 5.87-6.10 6/04/11 1,188,000 1,193,940
Sealy Mattress Co................................ BTL-D B1 B+ 4.91-5.08 8/06/12 1,474,251 1,484,387
Simmons Co....................................... Tranche C B2 B+ 5.44-7.75 12/19/11 967,735 973,379
-----------
8,192,826
-----------
Hotels, Motels, Inns, and Gaming -- 3.86%
Boyd Gaming Corp................................. BTL Ba2 BB 4.88-4.99 6/30/11 660,000 664,125
Isle of Capri Casinos, Inc....................... BTL Ba2 BB- 4.90-5.24 2/04/11 298,500 301,858
Penn National Gaming, Inc........................ BTL-B Ba3 BB- 5.51 6/01/12 2,000,000 2,030,178
Trump Entertainment Resorts Holdings, Inc........ BTL-B1 B2 BB- 5.93-6.14 5/04/12 500,000 506,250
Venetian Casino Resorts, LLC..................... BTL-B B1 BB- 5.24 6/15/11 4,974,359 5,029,878
-----------
8,532,289
-----------
Leisure, Amusement, Entertainment -- 5.20%
24 Hour Fitness Worldwide, Inc................... BTL-B B2 B 6.19 6/30/12 2,000,000 2,032,500
Fender Musical Instruments Corp.................. 1st Lien B1 B+ 5.46 3/31/12 500,000 508,750
Metro-Goldwyn-Mayer Studios, Inc................. BTL-B Ba3 B+ 5.74 4/08/12 3,000,000 3,014,064
Regal Cinemas, Inc............................... BTL Ba3 BB- 5.24 11/10/10 1,436,251 1,450,912
Six Flags Theme Parks, Inc....................... BTL-B B1 B- 5.72-5.90 6/30/09 997,481 1,010,262
WMG Acquisition Corp............................. BTL B1 B+ 5.15-5.52 2/28/11 3,454,831 3,480,742
-----------
11,497,230
-----------
Mining, Steel, Iron and Nonprecious Metals -- 0.40%
Novelis, Inc..................................... BTL-B Ba2 BB- 4.96 1/07/12 549,186 555,923
Novelis, Inc..................................... CND TL Ba2 BB- 4.96 1/07/12 316,198 320,077
-----------
876,000
-----------
13
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- June 30, 2005 -- (unaudited) (continued)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ---------------------------------------------------------------------------------------------------------------------
Oil and Gas -- 1.59%
Kerr-McGee Corp................................. BTL-B Ba3 BB+ 5.79% 5/24/11 $2,000,000 $ 2,033,194
Williams Production RMT Co...................... BTL-C B1 BB 5.49 5/30/07 1,470,113 1,486,651
-----------
3,519,845
-----------
Personal and Nondurable Consumer Products -- 1.86%
American Achievement Corp....................... BTL-B B1 B+ 5.85-7.75 3/22/11 897,551 904,283
American Safety Razor Co........................ BTL-B B2 B 5.88-6.07 2/28/12 997,500 1,004,981
Church & Dwight Co., Inc........................ Tranche B Ba2 BB 5.08 5/30/11 845,306 854,463
Hillman Group, Inc.............................. BTL-B B2 B 6.69-6.75 3/31/11 822,917 832,946
Spectrum Brands, Inc............................ BTL-B B1 B+ 5.13-5.49 2/07/12 498,750 505,088
-----------
4,101,761
-----------
Personal, Goods and Misc. Services -- 1.49%
Burt's Bees, Inc................................ BTL B2 B 6.13-6.41 3/29/11 498,750 504,984
Maidenform, Inc................................. BTL Ba3 B+ 5.52 5/11/10 500,000 500,000
Stewart Enterprises, Inc........................ BTL-B Ba3 BB 4.75-5.39 11/19/11 487,373 491,029
Worldspan, LP................................... BTL B2 B 5.88-6.19 2/14/10 1,844,444 1,807,556
-----------
3,303,569
-----------
Personal Transportation -- 0.32%
Northwest Airlines, Inc......................... BTL-A B3 B- 8.33 11/17/09 750,000 708,594
-----------
Printing and Publishing -- 4.49%
Affinity Group, Inc............................. BTL-B1 Ba3 NR 6.21-6.42 6/30/06 342,398 345,679
Affinity Group, Inc............................. BTL-B2 Ba3 NR 6.42 6/30/06 855,995 864,198
American Lawyers Media, Inc..................... 1st Lien B3 B- 5.99 3/14/10 498,750 499,997
Dex Media West, LLC............................. BTL-B Ba2 BB- 4.66-5.08 3/09/10 1,146,167 1,157,628
Journal Register Co............................. BTL-B Ba2 BB+ 4.57-4.69 8/12/12 1,000,000 1,005,313
Liberty Group Publishing, Inc................... BTL-B B1 B+ 5.44-7.50 2/28/12 492,516 495,799
Primedia, Inc................................... BTL B2 B 7.69 12/31/09 1,584,000 1,601,159
R.H. Donnelly, Inc.............................. BTL-D Ba3 BB 4.87-5.24 6/30/11 1,521,838 1,538,800
Transwestern Publishing Co...................... BTL-B B1 B+ 5.44-7.25 2/25/11 913,298 918,007
Transwestern Publishing Co...................... BTL B1 B+ 4.56 2/25/11 1,500,000 1,507,734
-----------
9,934,314
-----------
Retail Stores -- 2.75%
Alimentation Couche-Tard, Inc................... BTL Ba2 BB 5.06 12/17/10 604,592 610,827
Eddie Bauer, Inc................................ BTL-B Ba3 B+ 6.05 6/21/11 1,000,000 1,017,188
Eye Care Centers of America, Inc................ BTL B2 B 6.12-6.40 1/24/12 1,000,000 1,007,500
Jean Coutu Group, Inc........................... BTL-B B1 BB 5.50 7/30/11 1,488,750 1,511,779
Quality Stores, Inc. (Central Tractor)+@#(5)(6). BTL-B Caa2 NR 8.75 4/30/06 846,495 --
Ruth's Chris Steak House, Inc................... BTL NR NR 6.25 3/08/11 1,923,810 1,928,619
-----------
6,075,913
-----------
Telecommunications -- 4.98%
Centennial Cellular Operating Co................ BTL B2 B- 5.57-5.77 2/09/11 1,481,250 1,503,469
Cricket Communications, Inc..................... BTL-B B1 B- 5.99 12/20/10 1,990,000 1,999,701
FairPoint Communications, Inc................... BTL-B B1 BB- 5.44-5.56 2/07/12 1,000,000 1,012,500
Hawaiian Telecom Communications, Inc............ BTL-B B1 B+ 5.73 10/31/12 1,000,000 1,011,563
Ntelos, Inc..................................... 1st Lien B2 B 5.83 8/31/11 1,492,500 1,491,102
Ntelos, Inc..................................... 2nd Lien B3 B 8.33 2/28/12 500,000 493,750
Qwest Corp...................................... BTL-A Ba3 BB- 7.93 6/30/07 400,000 412,562
Syniverse Holding, LLC.......................... BTL-B Ba3 BB- 5.04-5.33 2/01/12 2,086,794 2,094,619
Western Wireless Corp........................... BTL-B B2 B- 6.12-6.33 5/28/11 992,500 996,222
-----------
11,015,488
-----------
Textiles and Leather -- 0.23%
Globe Manufacturing Corp.+@#(5)(6).............. BTL-B Caa2 NR 9.00 8/15/06 837,014 --
William Carter Co............................... BTL B1 B 5.08 6/30/12 500,000 507,188
-----------
507,188
-----------
14
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- June 30, 2005 -- (unaudited) (continued)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount/Shares (Note 2)
- -----------------------------------------------------------------------------------------------------------------
Utilities -- 3.33%
AES Corp................................ BTL Ba3 NR 4.75-5.07% 4/30/08 $ 1,423,571 $ 1,438,341
Calpine Corp............................ 2nd Lien B3 B 8.89 7/16/07 3,451,187 2,973,774
Cogentrix Deleware Holdings, Inc........ BTL Ba2 BB+ 5.24 4/13/12 933,249 940,054
Reliant Energy Resources, Inc........... BTL B1 B+ 5.68-6.09 3/15/07 997,500 1,007,654
Universal Compression, Inc.............. BTL Ba2 BB 5.24 6/20/11 997,500 1,011,371
------------
7,371,194
------------
Total Loans (Cost $212,938,314)........................................ 211,947,301
------------
CORPORATE BONDS -- 0.45%
Electronics -- 0.45%
SMART Modular Technologies, Inc.*(8)
8.59% due 4/01/12 (Cost $1,000,000)................................... 1,000,000 985,000
------------
COMMON STOCK -- 0.11%
Oil and Gas -- 0.06%
Shaw Group, Inc.+...................................................... 6,276 134,997
------------
Telecommunications -- 0.05%
Global Crossing, Ltd.+................................................. 175 2,987
SAVVIS Communications Corp.+........................................... 94,695 104,165
------------
107,152
------------
Total Common Stock (Cost $224,016)..................................... 242,149
------------
Total Long-Term Investment Securities (Cost $214,162,330).............. 213,174,450
------------
SHORT-TERM INVESTMENT SECURITIES -- 10.28%
Registered Investment Companies -- 10.28%
SSgA Money Market Fund (Cost $22,733,997).............................. 22,733,997 22,733,997
------------
TOTAL INVESTMENTS -- 106.70%
(Cost $236,896,327)(7)................................................. 235,908,447
Liabilities in Excess of Other Assets -- (6.70)%........................... (14,813,260)
------------
NET ASSETS -- 100.00%...................................................... $221,095,187
============
- --------
BTL Bank Term Loan
CND TLCanadian Term Loan
FATL Fixed Asset Term Loan
LOC Line of Credit
NR Security is not rated.
+ Non-income producing security
@ Illiquid security. At June 30, 2005, the aggregate value of these
securities was $1,950,135, representing 0.88% of net assets.
# Fair valued security (see Note 2)
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. The Fund has no
rights to demand registration of the securities. At June 30, 2005, the
aggregate value of these securities was $985,000 representing 0.45% of net
assets. Unless otherwise indicated, these securities are not considered to
be illiquid.
(1) Bank loans rated below Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered below investment grade. Ratings are
unaudited. Ratings provided are as of June 30, 2005.
(2) Loans in the Fund's portfolio are generally subject to mandatory and/or
optional prepayment. Because of these mandatory prepayment conditions and
because there may be significant economic incentives for a Borrower to
prepay, prepayments may occur. As a result, the actual remaining maturity
may be substantially less than the stated maturities shown. The Fund
estimates that the maturity of the Loans held in its portfolio will be
approximately 66 months.
(3) The Fund invests in Senior Loans which generally pay interest at rates
which are periodically re-determined by reference to a base lending rate
plus a premium. These base lending rates are generally either the lending
rate offered by one or more major European banks, such as the London
Inter- Bank Offer Rate ("LIBOR") or the prime rate offered by one or more
major United States banks, or the certificate of deposit rate. Senior
Loans are generally considered to be restrictive in that the Fund is
ordinarily contractually obligated to receive approval from the Agent Bank
and/or borrower prior to the disposition of a Senior Loan.
(4) All loans in the portfolio were purchased through assignment agreements.
(5) Company has filed Chapter 11 bankruptcy.
(6) Loan is in default of interest payment.
(7) See Note 6 for cost of investments on a tax basis.
(8) Floating rate security where the rate fluctuates. The rate steps up or
down for each rate downgrade or upgrade. The rate reflected is as of June
30, 2005.
See Notes to Financial Statements
15
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2005 -- (unaudited)
Note 1. Organization of the Fund
The SunAmerica Senior Floating Rate Fund, Inc. (the "Fund"), is a
non-diversified closed-end, investment management company. The Fund is
organized as a Maryland corporation and is registered under the Investment
Company Act of 1940, as amended. The Fund is managed by AIG SunAmerica Asset
Management Corp. (the "Adviser" or "SAAMCo"), an indirect wholly-owned
subsidiary of American International Group, Inc. ("AIG"). The Fund's
investment objective is to provide as high a level of current income as is
consistent with the preservation of capital by investing primarily in senior
secured floating rate loans.
The Fund offers three classes of shares. Class B shares are offered for sale
at net asset value without a front-end sales charge but are subject to an
Early Withdrawal Charge which declines from 3% during the first year after
purchase to zero after the fourth year. Class C shares are offered for sale
at net asset value without a front-end sales charge, but are subject to an
Early Withdrawal Charge of 1% during the first year after purchase. Class D
shares are offered for sale at net asset value without a front-end sales
charge and no Early Withdrawal Charge. Class D shares are available only to
investors participating in a fee-based investment advisory program (such as
a "wrap" program) or agency commission program or to CypressTree Investors.
Class A shares are not currently offered for sale to the public and are
available only through a conversion of Class B shares after being held by
the shareholders for approximately eight years. Class C shares do not have a
conversion feature (except that Class C shares purchased before August 18,
1999 will automatically convert to Class A shares ten years after purchase).
The share classes differ in their respective distribution and service fees.
All classes have equal rights to assets and voting privileges.
Indemnifications: Under the Fund's organizational documents, its officers
and directors are indemnified against certain liability arising out of the
performance of their duties to the Fund. In addition, in the normal course
of business the Fund enters into contracts that contain a variety of
representations and warranties which provide general indemnifications. The
Fund's maximum exposure under these arrangements are unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund expects the risk of loss to be remote.
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles (GAAP) requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates. The
following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements:
Security Valuation: The Fund's investments in loan interests ("Loans") are
valued in accordance with guidelines established by the Board of Directors.
Under the Fund's current guidelines, Loans for which an active secondary
market exists to a reliable degree will be valued at the mean of the last
available bid and asked prices in the market for such Loans, as provided by
a Board-approved loan pricing service. Loans for which an active secondary
market does not exist to a reliable degree will be valued at fair value,
which is intended to approximate market value. In valuing a Loan at fair
value, the following factors will be considered, (a) the creditworthiness of
the borrower and any intermediate participants, (b) the terms of the Loan,
(c) recent prices in the market for similar Loans, if any, and (d) recent
prices in the market for instruments of similar quality, rate, and period
until next interest rate reset and maturity. Stocks are generally valued
based upon closing sales prices reported on recognized securities exchanges.
Stocks listed on the NASDAQ are valued using the NASDAQ Official Closing
Price ("NOCP"). Generally, the NOCP will be the last sale price unless the
reported trade for the stock is outside the range of the bid/ask price. In
such cases, the NOCP will be normalized to the nearer of the bid or ask
price. For listed securities having no sales reported and for unlisted
securities, such securities will be valued based upon the last reported bid
price. Non-convertible bonds and debentures, other long-term debt
securities, and short-term debt securities with maturities in excess of 60
days, are valued at bid prices obtained for the day of valuation from a bond
pricing service, when such prices are available. If a vendor quote is
unavailable the securities may be priced at the mean of two independent
quotes obtained from brokers. Securities for which market quotations are not
readily available are valued as determined pursuant to procedures adopted in
good faith by the Board of Directors. Short-term securities with 60 days or
less to maturity are amortized to maturity based on their cost to the Fund
if acquired within 60 days of
16
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2005 -- (unaudited)
(continued)
maturity or, if already held by the Fund on the 60/th/ day, are amortized to
maturity based on the value determined on the 61/st/ day. Securities for
which market quotations are not readily available or if a
development/significant event occurs that may significantly impact the value
of the security, then these securities are valued, as determined pursuant to
procedures adopted in good faith by the Board of Directors.
The Senior Loans in which the Fund primarily invests are generally not
listed on any exchange and the secondary market for those senior Loans is
comparatively illiquid relative to markets for other fixed income
securities. Consequently, obtaining valuations for those Loans may be more
difficult than obtaining valuations for actively traded securities. Thus,
the value upon disposition on any given Loan may differ from its current
valuation.
Repurchase Agreements: The Fund may enter into repurchase agreements. When
the Fund enters into a repurchase agreement through its custodian, it
receives delivery of the underlying securities, the amount of which at the
time of purchase and each subsequent business day is required to be
maintained at such a level that the market value is equal to at least 102%
of the resale price, and the Fund will take constructive receipt of all
securities underlying the repurchase agreements until such agreements
expire. If the seller defaults, the Fund would suffer a loss to the extent
that proceeds from the sale of underlying securities were less than the
repurchase price. At June 30, 2005, the Fund did not enter into any
repurchase agreements.
Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders: Security transactions are recorded on a trade
date basis. Realized gains and losses on sales of investments are calculated
on the identified cost basis. Interest income is accrued daily except when
collection is not expected. Dividend income is recorded on the ex-dividend
date. For financial statement purposes, the Fund amortizes all premiums and
accretes all discounts. Facility fees received, which were $56,312 for the
period ended June 30, 2005, are amortized as income over the stated life of
the Loans. Other income, including amendment fees, commitment fees, letter
of credit fees, etc., which were $211,330 for the period ended June 30,
2005, are recorded as income when received or contractually due to the Fund.
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 of each class
of shares at the beginning of the day (after adjusting for the current
capital share activity of the respective class). Interest earned on cash
balances held at the custodian are shown as custody credits on the statement
of operations.
Dividends from net investment income are normally declared daily and paid
monthly. Capital gain distributions, if any, are paid annually. The Fund
records dividends and distributions to the shareholders on the ex-dividend
date. The amount of dividends and distributions from net investment income
and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from U.S. 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 at fiscal year end based on their federal tax-basis treatment;
temporary differences do not require reclassification. Net investment
income/loss, net realized gain/loss, and net assets are not affected. The
Fund intends to comply with the requirements of the Internal Revenue Code,
as amended, applicable to regulated investment companies and distribute all
of its taxable income, including any net realized gain on investments, to
its shareholders. Therefore, no federal tax provision is required.
Statement of Cash Flows: Information on financial transactions which have
been settled through the receipt or disbursement of cash is presented in the
Statement of Cash Flows. The cash amount shown in the Statement of Cash
Flows is the amount included in the Fund's Statement of Assets and
Liabilities and represents cash on hand at its custodian bank account, and
does not include any short-term investments at June 30, 2005.
17
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2005 -- (unaudited)
(continued)
Note 3. Capital Share Transactions
The Fund has 1,000,000,000 of $.01 par value shares authorized that may be
issued in four different classes. Transactions in capital shares of each
class were as follows:
For the
period ended For the period
June 30, 2005 April 28, 2004**-
(unaudited) December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class A ---------- ------------ ---------- ------------
Shares sold................. 16,698@ $ 157,187@ 23,650* $ 222,806*
Reinvested distributions.... 443 4,164 391 3,681
Shares repurchased.......... (1,703) (15,949) (202) (1,902)
---------- ------------ ---------- ------------
Net increase (decrease).. 15,438 $ 145,402 23,839 $ 224,585
========== ============ ========== ============
For the
period ended For the
June 30, 2005 year ended
(unaudited) December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class B ---------- ------------ ---------- ------------
Shares sold................. 151,185 $ 1,420,572 649,863 $ 6,108,232
Reinvested distributions.... 38,698 363,785 60,214 566,344
Shares repurchased.......... (262,236)@ (2,464,960)@ (633,762)* (5,961,214)*
---------- ------------ ---------- ------------
Net increase (decrease).. (72,353) $ (680,603) 76,315 $ 713,362
========== ============ ========== ============
For the
period ended For the
June 30, 2005 year ended
(unaudited) December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class C ---------- ------------ ---------- ------------
Shares sold................. 2,785,115 $ 26,213,715 11,042,355 $103,837,676
Reinvested distributions.... 222,963 2,095,941 300,723 2,828,393
Shares repurchased.......... (3,563,376) (33,498,139) (3,917,703) (36,835,107)
---------- ------------ ---------- ------------
Net increase (decrease).. (555,298) $ (5,188,483) 7,425,375 $ 69,830,962
========== ============ ========== ============
For the
period ended For the
June 30, 2005 year ended
(unaudited) December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class D ---------- ------------ ---------- ------------
Shares sold................. 712,888 $ 6,698,765 1,986,376 $ 18,679,110
Reinvested distributions.... 46,696 438,897 59,527 559,853
Shares repurchased.......... (971,086) (9,148,186) (544,090) (5,117,136)
---------- ------------ ---------- ------------
Net increase (decrease).. (211,502) $ (2,010,524) 1,501,813 $ 14,121,827
========== ============ ========== ============
- --------
@ Includes automatic conversion of 16,695 shares of Class B shares in the
amount of $157,157 to 16,695 shares of Class A shares in the amount of
$157,157.
* Includes automatic conversion of 13,025 shares of Class B shares in the
amount of $122,726 to 13,025 shares of Class A shares in the amount of
$122,726.
** Inception date of class.
In order to provide shareholders with liquidity and the ability to receive
net asset value on a disposition of shares, the Fund will make monthly
offers to repurchase a percentage (usually 10%) of outstanding shares at net
asset value. Shareholders are sent a Notification of Repurchase Offer seven
to fourteen days before each monthly repurchase offer. During the period
ended June 30, 2005, the Fund made six Repurchase Offers, and redeemed the
amounts shown in the table below. In no case was a monthly Repurchase Offer
oversubscribed.
Amount Tendered
---------------------
Shares Amount
--------- -----------
January. 661,676 $ 6,232,968
February 1,170,031 11,044,512
March... 608,742 5,746,522
April... 1,011,550 9,498,612
May..... 553,973 5,179,654
June.... 793,654 7,436,496
18
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2005 -- (unaudited)
(continued)
Note 4. Purchases And Sales Of Securities
During the period ended June 30, 2005, the Fund's cost of purchases of Loans
and proceeds from Loan sales were $149,003,976 and $82,594,669, respectively.
Note 5. Investment Advisory Agreement And Other Transactions With Affiliates
The Fund currently maintains an Investment Advisory Agreement with SAAMCo,
who oversees the administration of certain aspects of the business and
affairs of the Fund, and selects, contracts with and compensates the
subadviser to manage the Fund's assets. The Fund will pay SAAMCo a monthly
advisory fee at the following annual rates, based on the average daily net
assets of the Fund: 0.85% on the first $1 billion; 0.80% on the next $1
billion; and 0.75% thereafter. For the period ended June 30, 2005, SAAMCo
received advisory fees in the amount of $960,529.
American International Group Global Investment Corp. ("AIGGIC") acts as
subadviser to the Fund pursuant to a Subadvisory Agreement with SAAMCo.
Under the Subadvisory Agreement, AIGGIC manages the investment and
reinvestment of the Fund's assets. As compensation for its services as
subadviser, AIGGIC is entitled to receive from SAAMCo an annual fee paid
monthly equal to the following percentage of average daily net assets: 0.25%
for the first $1 billion of average daily net assets; 0.20% for average
daily net assets of more than $1 billion. AIGGIC received $282,508 as
compensation for its services. The fee paid to the subadviser is paid by
SAAMCo.
SAAMCo acts as the Fund's administrator under an Administration Agreement
and is responsible for managing the Fund's business affairs, subject to
supervision by the Fund's Board of Directors. For its services, SAAMCo
receives an annual fee equal to 0.40% of average daily net assets of the
Fund. For the period ended June 30, 2005, SAAMCo received administration
fees in the amount of $452,013.
The Fund has adopted Distribution Plans ("Plans") applicable to Class A,
Class B and C shares to use the assets attributable to that class of shares
of the Fund to finance certain activities relating to the distribution of
shares to investors. The Plans are compensation plans providing for the
payment to AIG SunAmerica Capital Services, Inc. ("SACS"), of a fixed
percentage of 0.50% of average net assets to finance distribution expenses
for Class B and Class C, and 0.25% of average net assets to finance service
fees for Class A, Class B and Class C. For the period ended June 30, 2005
SACS received distribution fees and early withdrawal charges on redemptions
in the amount of $752,080 and $100,410, respectively. For the period ended
June 30, 2005 SACS voluntarily waived fees for the following classes: Class
A $78, Class B $33,911, Class C $216,676.
Pursuant to the Investment Advisory Agreement, the Adviser voluntarily
waived the advisory fee and reimbursed expenses in order to maintain an
expense ratio on the Fund that did not exceed a certain voluntary rate. The
rates are 1.45% for Class A, 1.75% for Class B and Class C, and 1.25% for
Class D. For the period ended June 30, 2005, the Adviser waived fees and
reimbursed expenses for the following classes: Class A $3,995, Class B
$48,470, Class C $255,265, and Class D $39,955.
Note 6. Federal Income Taxes
The following details the tax basis distributions as well as the components
of distributable earnings. The tax basis components of distributable
earnings differ from the amounts reflected in the Statement of Assets and
Liabilities by temporary book/tax differences primarily arising from
retirement pension expense, dividends payable and treatment of defaulted
securities.
Distributable Earnings Tax Distributions
---------------------------------------- ------------------------------------
For the year ended December 31, 2004 For the year ended December 31, 2004
---------------------------------------- ------------------------------------
Long-term Gains/ Unrealized Long-term
Ordinary Capital Loss Appreciation Ordinary Capital
Income Carryover (Depreciation) Income Gains
-------- ---------------- -------------- ---------- ---------
$ -- $(27,711,461) $(61,545) $6,107,401 $ --
19
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2005 -- (unaudited)
(continued)
Capital Loss Carryforwards. At December 31, 2004 capital loss carryforwards
available to offset future recognized gains were $27,711,461, with $9,669
expiring in 2005, $334,309 expiring in 2007, $1,179,134 expiring in 2008,
$9,997,029 expiring in 2009, $7,736,363 expiring in 2010, $4,956,144
expiring in 2011, and $3,498,813 expiring in 2012.
Unrealized appreciation and depreciation in the value of investments at June
30, 2005 for federal income tax purposes were as follows:
Gross unrealized appreciation............................... $ 1,830,057
Gross unrealized depreciation............................... (2,816,039)
-----------
Net unrealized depreciation................................. $ (985,982)
===========
Note 7. Director Retirement Plan
The Directors of the SunAmerica Senior Floating Rate Fund, Inc. have adopted
the AIG SunAmerica Disinterested Trustees' and Directors' Retirement Plan
("Retirement Plan") for the unaffiliated Directors. The Retirement Plan
provides generally that if an unaffiliated Director who has at least 10
years of consecutive service as a Disinterested Director of any of the AIG
SunAmerica mutual funds (an "Eligible Director") retires after reaching age
60 but before age 70, or who has at least 5 years of consecutive service
after reaching age 65 but before age 70, or dies while a Director, such
person will be eligible to receive a retirement or death benefit from each
AIG SunAmerica mutual fund with respect to which he or she is an Eligible
Director. As of each birthday, prior to the 70th birthday, but in no event
for a period greater than 10 years, each Eligible Director will be credited
with an amount equal to 50% of his or her regular fees (excluding committee
fees) for services as a Disinterested Director of each AIG SunAmerica mutual
fund for the calendar year in which such birthday occurs. In addition, an
amount equal to 8.50% of any amounts credited under the preceding clause
during prior years, is added to each Eligible Director's account until such
Eligible Director reaches his or her 70th birthday. An Eligible Director may
elect to receive any benefits payable under the Retirement Plan, at his or
her election either in one lump sum or in up to fifteen annual installments.
Any undistributed amounts continue to accrue interest at 8.50% per year. As
of June 30, 2005, the Fund had accrued $9,613 for the Retirement Plan, which
is included in Directors' fees and expenses line on the Statement of Assets
and Liabilities and for the period ended June 30, 2005, expensed $2,096 for
the Retirement Plan, which is included in Directors' fees and expenses line
on the Statement of Operations.
Note 8. Line of Credit
The Fund currently has an agreement with State Street Bank & Trust Company
that provides a $20,000,000 committed unsecured Line of Credit to the Fund
which will be used for cash overdraft protection. Interest is currently
payable at the Federal Funds rate plus 50 basis points. There is also a
commitment fee of 10 basis points per annum on the daily unused portion of
the line of credit which is included in interest expense on the Statement of
Operations. During the period ended June 30, 2005, the Fund did not have any
borrowings outstanding under the agreement.
Note 9. Interfund Leading Agreement
Pursuant to the exemptive relief granted by the Securities and Exchange
Commission, the Fund is permitted to participate in an interfund lending
program among investment companies advised by SAAMCo or an affiliate. The
interfund lending program allows the participating funds to borrow money
from and lend money to each other for temporary or emergency purposes. An
interfund loan will be made under this facility only if the participating
Funds receive a more favorable interest rate than would otherwise be
available from a typical bank for a comparable transaction. For the period
ended June 30, 2005, the Fund did not participate in this program.
20
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2005 -- (unaudited)
(continued)
Note 10. Senior Loan Participation Commitments
The Fund invests primarily in participations and assignments, or acts as a
party to the primary lending syndicate of a Variable Rate Senior Loan
interest to United States corporations, partnerships, and other entities. If
the lead lender in a typical lending syndicate becomes insolvent, enters
receivership or, if not FDIC insured, enters into bankruptcy, the Fund may
incur certain costs and delays in receiving payment, or may suffer a loss of
principal and/or interest. When the Fund purchases a participation of a
Senior Loan interest, the Fund typically enters into a contractual agreement
with the lender or other third party selling the participation, but not with
the borrower directly. As such, the Fund assumes the credit risk of the
Borrower, Selling Participant or other persons positioned between the Fund
and the Borrower.
Note 11. Unfunded Loan Commitments
On June 30, 2005, the Fund had the following unfunded loan commitments which
could be extended at the option of the Borrower:
Maturity
Name Type Date Amount
- ---- ---------------------- -------- ----------
Celanese AG............................. Delayed Draw Term Loan 4/06/11 $ 383,214
Trump Entertainment Resorts Holdings, LP Delayed Draw Term Loan 5/20/12 500,000
United States Shipping, LLC............. Delayed Draw Term Loan 3/30/10 346,154
Venetian Casino Resorts, LLC............ Delayed Draw Term Loan 6/15/11 1,025,641
Warner Chilcott Corp.................... Delayed Draw Term Loan 6/30/06 44,164
Warner Chilcott Corp.................... Delayed Draw Term Loan 1/31/06 220,820
WMG Acquisition Corp.................... Revolver 2/28/10 500,000
Note 12. Other Information
On May 26, 2005, the New York Attorney General and the New York
Superintendent of Insurance filed a civil complaint against American
International Group, Inc. ("AIG") as well as its former Chairman and Chief
Executive Officer and former Vice Chairman and Chief Financial Officer, in
the Supreme Court of the State of New York. The complaint asserts claims
under New York's Martin Act and Insurance Law, among others, and makes
allegations concerning certain transactions entered into by AIG and certain
of its subsidiaries, but in no case involving any subsidiary engaged in
providing management or administrative services to the Fund. The complaint
seeks disgorgement, injunctive relief, punitive damages and costs, among
other things.
AIG is the indirect parent company and an affiliated person of the AIG
SunAmerica Asset Management Corp. ("Adviser"), AIG SunAmerica Capital
Services, Inc. (the "Distributor") and AIG Global Investment Corp. (the
"Subadviser"). Neither the Adviser, the Distributor, the Subadviser or their
respective officers and directors nor the Fund have been named in the
complaint, and the complaint does not seek any penalties against them.
In the Adviser's view, the matters alleged in the lawsuit are not material
in relation to the financial position of the Adviser, the Distributor or the
Subadviser, or to their ability to provide their respective services to the
Fund. Due to a provision in the law governing the operation of mutual funds,
however, if the lawsuit results in an injunction being entered against AIG,
then the Adviser, the Distributor or the Subadviser, will need to obtain
permission from the Securities and Exchange Commission to continue to
service the Fund. While the Securities and Exchange Commission has granted
this type of relief to others in the past in similar circumstances, there is
no assurance that this permission would be granted.
21
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- June 30, 2005 -- (unaudited)
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
At a meeting held on January 12, 2005, the Board of Directors (the "Board"),
including the Directors that are not interested persons of the Fund (the
"Disinterested Directors"), approved a new Subadvisory Agreement between AIGGIC
(the "Subadviser") and SAAMCo with respect to the Fund (the "Subadvisory
Agreement"). The Board's approval of the Subadvisory Agreement was subject to
approval by a majority of the shareholders of the Fund. The Subadvisory
Agreement was subsequently approved by a majority vote of the shareholders at a
special meeting of the shareholders which took place on March 31, 2005.
At a meeting held on December 20, 2004, the Board had previously approved an
interim subadvisory agreement (the "Interim Agreement") between AIGGIC and
SAAMCo with respect to the Fund. The Interim Agreement was approved by the
Board pursuant to Rule 15a-4 of the Investment Company Act of 1940, as amended
(the "1940 Act") and as such would remain in effect until a new subadvisory
agreement could be approved by both the Board and a majority of the Fund's
shareholders, but only for a period of time not to exceed 150 days.
In accordance with Section 15(c) of the 1940 Act, the Board received materials
for its consideration of the following: (1) the nature and quality of the
services reasonably anticipated to be provided and the results reasonably
anticipated to be achieved by the Subadviser; (2) the amount and structure of
the Subadvisers' fees and comparative fee information for the Fund and
representative peer groups, (3) the terms of the Subadvisory Agreement; (4)
economies of scale; (5) the Subadviser's compliance history and program; (6)
the comparative investment performance of the Subadviser and the Fund; and (7)
the management personnel and operations of the Subadviser. Experienced counsel
that is independent of SAAMCo provided guidance to the Board. These factors, as
considered by the Board, are described in more detail below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board, including the Disinterested Directors, considered the nature,
quality and extent of services to be provided by the Subadviser. The Board
noted that the Subadviser is responsible for providing investment management
services, including investment research, advice and supervision, and
determining which securities shall be purchased or sold by the Fund. The Board
reviewed the Subadviser's history, structure, size, and investment experience.
The Board was informed that in SAAMCo's opinion, the Subadviser has the size,
visibility and resources to attract and retain highly qualified investment
professionals. With respect to administrative services, the Board considered
that the Subadviser provides general assistance in marketing and has developed
internal procedures for monitoring compliance with investment objectives,
policies and restrictions as set forth in the Fund's prospectus.
The Board noted that it was familiar with AIGGIC because it served as
subadviser to other funds overseen by the Board. The Board concluded that it
was satisfied with the nature, quality and extent of the services to be
provided by the Subadviser and that there was a reasonable basis on which to
conclude that the Subadviser would be capable of providing the high quality of
investment management services expected by the Board.
THE AMOUNT AND STRUCTURE OF THE SUBADVISER'S FEE
The Board, including the Disinterested Directors, received information
regarding the reasonableness of the subadvisory fee. The Board considered that
the subadvisory fee rate for AIGGIC was negotiated based on the consideration
of a variety of factors, including the value of the services provided; the
competitive environment in which the portfolio is marketed; the investment
characteristics of the portfolio relative to other similar funds in its
category; fees charged to comparable funds within the industry; and fees
charged by the subadviser to manage comparable portfolios. The Board also
considered that negotiations also took into account the fee levels paid to
Stanfield Capital Partners, LLC ("Stanfield") under the Previous Agreement and
the fee ceiling imposed by Rule 15a-4 on the fee to be paid under the Interim
Agreement.
In considering the reasonableness of the subadvisory fee, the Board noted that
AIGGIC's fee would be the same as the fee that had been paid to the previous
subadviser, Stanfield. The Board also considered that the Fund pays a fee to
SAAMCo pursuant to the Investment Advisory and Management Agreement, and that,
in turn, SAAMCo rather than the Fund, pays a fee to the Subadviser. Therefore,
the Board considered the amount of the fee retained by SAAMCo and the fee paid
to the Subadviser with respect to the different services provided by the
Subadviser.
22
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- June 30, 2005 -- (unaudited)
(continued)
On the basis of the information considered, the Board was satisfied with
SAAMCo's recommendation that the subadvisory fee rates were fair in light of
the usual and customary charges made for services of the same nature and
quality.
TERMS OF THE SUBADVISORY AGREEMENT
At the meeting held on January 12, 2005, the Board, including the Disinterested
Directors, received a draft of the proposed SubAdvisory Agreement. The Board
considered that the Subadvisory Agreement which they were being asked to
approve was substantially similar in all material aspects to the Interim
Agreement which the Board had approved on December 20, 2004, except for the
effective date, the termination date and certain provisions required to be
included in the Interim Subadvisory Agreement pursuant to Rule 15a-4 under the
1940 Act.
The Board considered that the Subadvisory Agreement would continue in effect
for a period of two years from the date of their execution, unless terminated
sooner. The Board further considered that the Subadvisory Agreement may be
renewed from year to year, so long as its continuance is specifically approved
at least annually in accordance with the requirements of the 1940 Act and that
the Subadvisory Agreement provides that it will terminate in the event of an
assignment (as defined in the 1940 Act) or upon termination of the Advisory
Agreement. The Board also considered, that under the terms of the Subadvisory
Agreement, the Subadviser is liable to the Fund, or its shareholders, for any
act or omission by it or for any losses sustained by the Fund or its
shareholders, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties; and that the
Subadvisory Agreement with AIGGIC may be terminated at any time by the Board,
SAAMCo or by vote of the majority of outstanding voting securities of the Fund.
The Board also considered that the Subadvisory Agreement provides that the
Subadviser will pay all of its own expenses in connection with the performance
of its duties as well as the cost of maintaining the staff and personnel as
necessary for it to perform its obligations.
ECONOMIES OF SCALE
The Board considered information about the potential of shareholders to
experience economies of scale as the Fund's assets increase. The Board
considered that because SAAMCo, and not the Fund, is responsible for paying any
fees to Subadvisers, that any breakpoints in the Subadvisory Agreement would
not directly benefit the Fund's shareholders. The Board also considered that
they had previously approved net expense ratios in the Investment Advisory and
Management Agreement between SAAMCo and the Fund. Under this agreement, SAAMCo
will waive and reimburse the Fund should the Total Annual Fund Operating
Expenses be higher than the net expense ratio. This would keep shareholders
expenses below a certain level and would provide shareholders with benefits
similar to breakpoints in realizing economies of scale.
COMPLIANCE
The Board considered AIGGIC's Code of Ethics, as well as its compliance and
regulatory history, including information concerning their involvement in any
regulatory actions or investigations. In addition, the Board considered the
Subadviser's compliance staff, which would be responsible for providing
compliance functions for the Subadviser.
INVESTMENT PERFORMANCE
The Board, including the Disinterested Directors, received information
regarding the investment performance of AIGGIC and of the Fund. The Board
specifically considered AIGGIC's historical performance in regards to similarly
managed accounts as compared to the Fund's performance. The Board also
considered performance information prepared by SAAMCo which provided: (1) a
performance comparison of the Fund to a relevant Morningstar Category and
various indexes for one, two and three-year periods; and (2) AIGGIC's risk
statistics as compared to that of other managers.
SAAMCo also provided the Board with a report detailing AIGGIC's performance
record as measured by their CLO Composite. The Board considered that AIGGIC's
performance was comparable with its peer group and with Stanfield's record. The
report prepared by SAAMCo also stated that AIGGIC's risk-adjusted performance
and portfolio risk statistics were favorable. Specifically, AIGGIC's composite
risk-adjusted performance, as measured by the portfolio's Alpha and Sharpe
Ratio, exceeded the Morningstar Bank Loan category average, CSFB Leverage Loan
Index, and Stanfield's performance numbers.
23
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- June 30, 2005 -- (unaudited)
(continued)
While aware that past performance is not necessarily indicative of future
results, the Board concluded that the historical performance of registered
investment companies and private accounts advised by AIGGIC was in line with
that of the Fund and that it was reasonable to believe that AIGGIC would
provide satisfactory performance in the future.
MANAGEMENT PERSONNEL AND OPERATIONS OF THE SUBADVISERS
The Board, including the Disinterested Directors, was provided with a list of
key management, investment and compliance personnel of the Subadviser as well
as information on the organizational structure, investment process and
discipline of the Subadviser and the proposed portfolio management team.
The Board considered that AIGGIC serves as subadviser to other Funds overseen
by the Board and that they were familiar with AIGGIC's structure, size, and
operations. The Board further considered that AIGGIC is an affiliate of SAAMCo
and is part of AIG Global Investment Group which managed approximately $421
billion, of which approximately $359 billion relates to AIG affiliates and $62
billion relates to client assets. Additionally, as detailed in a report
prepared by SAAMCo, the Board considered that AIGGIC's lead portfolio manager
and the portfolio management team's analytical support team are highly
experienced and have developed a disciplined investment approach. This approach
is consistent with the Fund's current mandate with respect to investment
philosophy and risk considerations. In response to a question from the Board,
SAAMCo's management explained that AIGGIC has studied the Fund's portfolio and
based on AIGGIC's preparation and SAAMCo's familiarity with the operations of
AIGGIC, management reasonably anticipates a smooth transition. Furthermore,
SAAMCo's management noted, that in their opinion, AIGGIC has done its due
diligence by studying the Fund's performance and risk exposure for a period of
time dating back to 2002. The Board also considered the availability of other
non-affiliated managers to serve as subadviser and how they might compare to
the philosophy and performance of Stanfield.
CONCLUSION
In reaching its decision to approve the Subadvisory Agreement, the Board did
not identify any single factor as being of principal significance, but based
its recommendation on the factors considered. Based upon the materials reviewed
and the consideration described above, the Board, including the Disinterested
Directors, concluded that the terms of the Subadvisory Agreement were
reasonable, fair and in the best interest of the Fund and its shareholders, and
that the subadvisory fee rates are fair and reasonable in light of the usual
and customary charges made for services of the same nature and quality.
24
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- June 30, 2005 -- (unaudited)
The following table contains basic information regarding the Directors and
Officers that oversee operations of the Fund and other investment companies
within the Fund complex.
Number of
Position Term of Funds in
Name, Held With Office and Fund Complex
Address and SunAmerica Length of Principal Occupations Overseen by Other Directorships
Date of Birth* Complex Time Served(4) During Past 5 Years Director(1) Held by Director(2)
- ---------------------- ---------- -------------- ------------------------------ ------------ -------------------------------
Dr. Judith L. Craven Director 2000- Retired. 79 Director, A.G. Belo
DOB: October 6, 1945 present Corporation (1992 to
present); Director, Sysco
Corporation (1996 to
present); Director, Luby's Inc.
(1998 to present); Director,
University of Texas Board of
Regents (2001-Present).
William F. Devin Director 1998- Retired. 79 Member of the Board of
DOB: December 30, 1938 present Governors, Boston Stock
Exchange (1985-Present).
Samuel M. Eisenstat Director 2001- Attorney, solo practitioner. 49 Director of North European
DOB: March 7, 1940 present Oil Royalty Trust.
Stephen J. Gutman Director 2001- Associate, Corcoran Group 49 None
DOB: May 10, 1943 present (Real Estate) (2003 to
present); Partner and
Member of Managing
Directors, Beau Brummell-
Soho, LLC (Licensing of
menswear specialty retailing
and other activities) (June
1988 to present).
Peter A. Harbeck(3) Director 2001- President, CEO and Director, 88 None
DOB: January 23, 1954 present AIG SunAmerica Asset
Management Corp.
("SAAMCo") (August 1995 to
present); Director, AIG
SunAmerica Capital Services,
Inc. ("SACS") (August 1993 to
present); President and CEO,
AIG AdvisorGroup, Inc. (June
2004 to present).
William J. Shea(5) Director 2004- President and CEO, 49 Chairman of the Board, Royal
DOB: February 9, 1948 present Conseco, Inc. (Financial and SunAlliance, U.S.A., Inc.
Services) (2001 to 2004); (March 2005 to present);
Chairman of the Board of Director, Boston Private
Centennial Technologies, Inc. Financial Holdings (October
(1998 to 2001); Vice 2004 to present).
Chairman, Bank Boston
Corporation (1993 to 1998).
Vincent M. Marra President 2004- Senior Vice President and N/A N/A
DOB: May 28, 1950 present Chief Operating Officer,
SAAMCo (February 2003 to
Present); Chief Administrative
Officer, Chief Operating
Officer and Chief Financial
Officer, Carret & Co., LLC
(June 2002 to February 2003);
President, Bowne Digital
Solutions (1999 to May 2002).
25
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- June 30, 2005 -- (unaudited)
(continued)
Number of
Position Term of Funds in
Name, Held With Office and Fund Complex
Address and SunAmerica Length of Principal Occupations Overseen by Other Directorships
Date of Birth* Complex Time Served(4) During Past 5 Years Director(1) Held by Director(2)
- ------------------ ---------- -------------- ----------------------------- ------------ -------------------
Donna M. Handel Treasurer 2002- Assistant Treasurer (2001 to N/A N/A
DOB: June 25, 1966 present 2002); Senior Vice President,
SAAMCo (December 2004-
Present); Vice President,
SAAMCo (August 1997 to
December 2004).
- --------
* The business address for each Director and Officer is the Harborside
Financial Center, 3200 Plaza 5, Jersey City, NJ 07311-4992.
(1) The "Fund Complex" consists of all registered investment company portfolios
for which SAAMCo serves as investment adviser or business manager. The
"Fund Complex" includes the SunAmerica Money Market Funds (2 funds),
SunAmerica Equity Funds (9 funds), SunAmerica Income Funds (6 funds),
SunAmerica Focused Series, Inc. (17 portfolios), SunAmerica Focused Alpha
Growth Fund, Inc. (1 fund), Anchor Series Trust (9 portfolios), SunAmerica
Senior Floating Rate Fund, Inc. (1 fund), SunAmerica Series Trust (32
portfolios), AIG Series Trust (4 funds), VALIC Company I (24 portfolios),
VALIC Company II (15 funds) and Seasons Series Trust (24 portfolios).
(2) Directorships of companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e. "public
companies") or other investment companies registered under the Investment
Company Act of 1940.
(3) Interested Director, as defined in the Investment Company Act of 1940,
because he is an officer and director of the adviser and a director of the
principal underwriter of the Fund.
(4) Directors serve until their successors are duly elected and qualified,
subject to the Board's retirement plan discussed in Note 7 of the financial
statements.
(5) Effective on November 30, 2004, William J. Shea began serving as a Director.
Additional information concerning the Directors and Officers is contained in
the Statement of Additional Information and is available without charge by
calling (800) 858-8850.
26
SunAmerica Senior Floating Rate Fund, Inc.
SPECIAL MEETING OF SHAREHOLDERS -- June 30, 2005 -- (unaudited)
Proxy Voting Results
A Special Meeting of Shareholders of SunAmerica Senior Floating Rate Fund,
Inc. was held on March 31, 2005. The Fund voted in favor of adopting the
following proposal.
1. To approve a new Sub-Advisory Agreement between AIG SunAmerica Asset
Management Corp. and AIG Global Investment Corp. which provides that AIGGIC
will serve as the sub-adviser to the SunAmerica Senior Floating Rate Fund,
Inc.
Votes in Favor of the proposal 18,157,299
Votes Against the proposal.... 150,677
Votes Abstained............... 308,959
27
SunAmerica Senior Floating Rate Fund
If you would like additional information:
[_] Call FastFacts -- our 24-hour, automated account and fund information
hotline at 800-654-4760.
[_] Visit www.sunamericafunds.com for more up-to-date information.
AIG SunAmerica Mutual Funds
thank you for your continued support.
28
[LOGO] AIG Sun America
Mutual Funds
AIG SunAmerica Asset Management Corp.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Directors Investment Adviser DISCLOSURE OF QUARTERLY
Dr. Judith L. Craven PORTFOLIO HOLDINGS
William F. Devin AIG SunAmerica Asset Management Corp. The Fund is required to
Samuel M. Eisenstat Harborside Financial file its com-plete
Stephen J. Gutman Center schedule of portfolio
Peter A. Harbeck 3200 Plaza 5 holdings with the U.S.
William J. Shea Jersey City, NJ Securities and Exchange
07311-4992 Commission for its first
Officers and third fiscal quarters
Vincent M. Marra, Distributor on Form N-Q. Once filed,
President AIG SunAmerica Capital the Fund's Form N-Q will
Donna M. Handel, Services, Inc. be available without
Treasurer Harborside Financial charge on the U.S.
Thomas Lynch, Secretary Center Securities and Exchange
Nori L. Gabert, 3200 Plaza 5 Commission's website at
Assistant Secretary Jersey City, NJ www.sec.gov. You can also
Corey A. Issing, 07311-4992 obtain cop-ies of Form
Assistant Secretary N-Q by (i) visiting the
J. Steven Neamtz, Vice Shareholder Servicing U.S. Securities and
President Agent Exchange Commis-sion's
Gregory R. Kingston, AIG SunAmerica Fund Public Reference Room in
Vice President and Services, Inc. Washington DC
Assistant Treasurer Harborside Financial (information on the
Cynthia A. Gibbons, Vice Center operation of the Public
President and Chief 3200 Plaza 5 Reference Room may be
Compliance Officer Jersey City, NJ obtained by calling
Kathryn A. Pearce, 07311-4992 1-800-SEC-0330); (ii)
Assistant Treasurer sending your request and
Custodian and Transfer a duplicating fee to the
Agent U.S. Securities and
State Street Bank and Exchange Commis-sion's
Trust Company Public Reference Room,
P.O. Box 219373 Washington, DC 20549-0102
Kansas City, MO 64141 or (iii) sending your
request electronically to
VOTING PROXIES ON FUND publicinfo@sec.gov.
PORTFOLIO SECURITIES
A description of the PROXY VOTING RECORD ON
policies and proce-dures FUND PORTFOLIO SECURITIES
that the Fund uses to Information regarding how
determine how to vote the Fund voted proxies
proxies relating to related to securities
secu-rities held in the held in the Fund's
Fund's portfolio which is portfolio during the
available in the Fund's twelve month period ended
State-ment of Additional June 30, 2005 is
Information, may be available (i) without
obtained without charge charge, upon request, by
upon re-quest, by calling calling (800) 858-8850 or
(800) 858-8850. This (ii) on the U.S.
information is also Securities and Exchange
available from the EDGAR Commission's website at
database on the U.S. http://www.sec.gov.
Secu-rities and Exchange
Commission's website at This report is submitted
http://www.sec.gov. solely for the general
information of
shareholders of the Fund.
Distribution of this
report to persons other
than shareholders of the
Fund is authorized only
in connection with a
currently effective
prospectus, setting forth
details of the Fund which
must precede or accompany
this report.
The accompanying report
has not been audited by
independent accountants
and accordingly no
opinion has been
expressed thereon.
29
[LOGO] AIG Sun America
Mutual Funds
Distributed by:
AIG SunAmerica Capital Services, Inc.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Investors should carefully consider the investment objectives, risks, charges
and expenses of any mutual fund before investing. This and other important
information is contained in the prospectus, which can be obtained from your
financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext.
6003. Read the prospectus carefully before you invest. Funds distributed by AIG
SunAmerica Capital Services, Inc.
www.sunamericafunds.com
SFSAN-6/05
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 to the form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures. Based on that evaluation, the
registrant's management, including the President and Treasurer,
concluded that the registrant's disclosure controls and procedures are
effective.
(b) There was no change in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940 (17 CFR 270.3a-3(d))) that occurred during the
second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) (1) Not applicable.
(2) Certification pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as
Exhibit 99.CERT.
(3) Not applicable.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Senior Floating Rate Fund, Inc.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: September 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: September 7, 2005
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: September 7, 2005