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: December 31, 2005
Item 1. Reports to Stockholders
SunAmerica Senior Floating Rate Fund, Inc. Annual report at December 31, 2005.
+
2005
Annual
SunAmerica Report
- -------------------------
[PHOTO]
[GRAPHIC]
Senior Floating Rate Fund
Table of Contents
PRESIDENT'S LETTER..................................... 1
SENIOR FLOATING RATE FUND REVIEW....................... 2
STATEMENT OF ASSETS AND LIABILITIES.................... 3
STATEMENT OF OPERATIONS................................ 4
STATEMENT OF CHANGES IN NET ASSETS..................... 5
STATEMENT OF CASH FLOWS................................ 6
FINANCIAL HIGHLIGHTS................................... 7
PORTFOLIO OF INVESTMENTS............................... 11
NOTES TO FINANCIAL STATEMENTS.......................... 18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 25
APPROVAL OF ADVISORY AGREEMENTS........................ 26
DIRECTORS AND OFFICERS INFORMATION..................... 30
December 31, 2005 ANNUAL REPORT
President's Letter
Dear Shareholder:
We are pleased to present you with the annual report for the SunAmerica
Senior Floating Rate Fund.
During 2005, the Fund benefited from strong economic and credit fundamentals
and continued strong demand for bank loans. In addition, the Fund benefited
from the continuation of the Federal Reserve's interest rate tightening policy.
During the year, London Interbank Offered Rate (LIBOR), the reference rate used
for most loans, increased from a low of 2.57% to 4.54% by the end of the year.
The Fund continues to emphasize strong credit analysis in its pursuit of
total return. This fundamental analysis plays an important role in identifying
credits which offer solid return/risk characteristics.
On the following page, you will find the detailed commentary written by the
Fund's portfolio management team. It offers specific insight on the challenges
and opportunities that the Fund faced in 2005.
We thank you for your continued interest in the SunAmerica Senior Floating
Rate Fund. We value your ongoing confidence in us and look forward to serving
your investment needs in the future.
Sincerely,
/s/ Peter A. Harbeck
Peter A. Harbeck
President and CEO
AIG SunAmerica Asset Management Corp.
- --------
Past performance is no guarantee of future results.
1
SunAmerica Senior Floating Rate Fund, Inc.
FUND REVIEW -- (unaudited)
John G. Lapham and Steven S. Oh, Portfolio Managers
AIG Global Investment Group
In the year ended December 31, 2005, the bank loan market benefited from a
strong economy, relatively benign default rates, several interest rate
increases and continued strong demand for bank loans. In general, issuers of
bank debt posted strong earnings enabling them to easily service their debt
obligations. London Interbank Offered Rate (LIBOR), the reference rate used for
most loans, increased from a low of 2.57% to over 4.54% by the end of the year.
Anticipating increases in interest rates, the Fund made opportunistic purchases
of certain loan holdings to take advantage of this trend. While we witnessed
some compression in loan spreads during the course of the year, this was
generally off-set by the increases in LIBOR.
The year 2005 was a record year for new loan issuance. Strong merger and
acquisition activity, dividend recaps and leveraged buy-outs all drove the
supply, as did a weak high yield bond market. Investor demand for bank loans
remained high during the course of the year.
In the first half of the year, the Telecommunications and Gaming/Leisure
industries were the top performing sectors. In the second half of the year, the
Chemical and Service sectors were the top performing industries. The Fund saw
strong returns from these sectors, especially the Telecommunications and
Gaming/Leisure sectors. The Fund benefited from holdings of specific issuers
such as cable companies Adelphia Communications and Charter Communications.
Credit news in 2005 was dominated by the automotive sector. Lower production
volumes from such companies as General Motors and Ford resulted in bankruptcy
filings by such large auto suppliers as Delphi Corporation, Tower Automotive
and Collins & Aikman. The Fund had a position in Collins & Aikman, which we
believed would have a par recovery even upon a bankruptcy filing. However, in
the wake of management's departure and eroding financial results, we chose to
sell our position during the course of the year. Calpine, the West Coast based
energy producer, also had performance issues during 2005. The company filed for
bankruptcy in December.
- --------
Past performance is no guarantee of future results.
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; nondiversification 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.
2
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES -- December 31, 2005
ASSETS:
Long-term investment securities, at value (unaffiliated)*......... $203,013,011
Short-term investment securities, at value*....................... 9,814,805
------------
Total investments............................................... 212,827,816
Receivable for:
Fund shares sold................................................ 149,077
Dividends and interest.......................................... 1,897,604
Investments sold................................................ 758,298
Prepaid expenses and other assets................................. 25,316
Due from investment adviser for expense reimbursements/fee waivers 84,517
Due from distributor for fee waivers.............................. 38,686
------------
Total assets.................................................... 215,781,314
------------
LIABILITIES:
Payable for:
Fund shares repurchased......................................... 4,943,849
Investments purchased........................................... 6,717,639
Investment advisory and management fees......................... 149,157
Distribution and service maintenance fees....................... 116,166
Administration fees............................................. 70,191
Directors' fees and expenses.................................... 13,855
Other accrued expenses.......................................... 120,732
Dividends payable................................................. 325,668
Due to custodian.................................................. 10,181
Commitments (Note 11)............................................. --
------------
Total liabilities............................................... 12,467,438
------------
Net assets..................................................... $203,313,876
============
NET ASSETS REPRESENTED BY:
Capital shares at par value of $.01............................... $ 216,583
Additional paid-in capital........................................ 231,514,219
------------
231,730,802
Accumulated undistributed net investment income (loss)............ (39,701)
Accumulated undistributed net realized gain (loss) on investments. (27,697,512)
Unrealized appreciation (depreciation) on investments............. (679,713)
------------
Net assets..................................................... $203,313,876
============
Class A Class B Class C Class D
NET ASSET VALUES: -------- ----------- ------------ ------------
Net assets................................................... $401,378 $25,180,574 $154,584,056 $ 23,147,868
Shares outstanding........................................... 42,748 2,682,336 16,467,440 2,465,758
Net asset value, offering and repurchase price per share
(excluding any applicable contingent deferred sales charges) $ 9.39 $ 9.39 $ 9.39 $ 9.39
======== =========== ============ ============
*COST
Long-term investment securities (unaffiliated)............................................. $203,692,724
============
Short-term investment securities........................................................... $ 9,814,805
============
See Notes to Financial Statements
3
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF OPERATIONS -- For the year ended December 31, 2005
INVESTMENT INCOME:
Interest (unaffiliated)........................................................... $12,743,364
Dividends (unaffiliated).......................................................... 292,398
Facility and other fee income (Note 2)............................................ 459,005
-----------
Total investment income........................................................ 13,494,767
-----------
EXPENSES:
Investment advisory and management fees........................................... 1,878,221
Administration fees............................................................... 883,869
Distribution and service maintenance fees:
Class A......................................................................... 878
Class B......................................................................... 200,277
Class C......................................................................... 1,267,042
Transfer agent fees and expenses:
Class A......................................................................... 2,899
Class B......................................................................... 21,529
Class C......................................................................... 78,357
Class D......................................................................... 10,674
Registration fees:
Class A......................................................................... 6,088
Class B......................................................................... 12,654
Class C......................................................................... 28,680
Class D......................................................................... 14,361
Accounting service fees........................................................... 69,034
Custodian fees.................................................................... 87,769
Reports to shareholders........................................................... 142,761
Audit and tax fees................................................................ 82,910
Legal fees........................................................................ 46,841
Directors' fees and expenses...................................................... 49,266
Interest expense.................................................................. 100
Other expenses.................................................................... 78,945
-----------
Total expenses before fee waivers, expense reimbursements and custody credits.. 4,963,155
Fees waived and expenses reimbursed by investment adviser and distributor...... (1,208,141)
Custody credits earned on cash balances........................................ (14,009)
-----------
Net expenses................................................................... 3,741,005
-----------
Net investment income (loss)...................................................... 9,753,762
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (unaffiliated)............................ 14,295
Change in unrealized appreciation (depreciation) on investments................... (618,514)
-----------
Net realized and unrealized gain (loss) on investments............................ (604,219)
-----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 9,149,543
===========
See Notes to Financial Statements
4
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
For the year For the year
ended ended
December 31, December 31,
2005 2004
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss).......................................................... $ 9,753,762 $ 6,093,097
Net realized gain (loss) on investments (unaffiliated)................................ 14,295 (1,564,659)
Net unrealized gain (loss) on investments (unaffiliated).............................. (618,514) 2,996,261
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 9,149,543 7,524,699
------------ ------------
Distributions To Shareholders From:
Net investment income (Class A)....................................................... (16,613) (4,667)
Net investment income (Class B)....................................................... (1,163,563) (837,534)
Net investment income (Class C)....................................................... (7,353,487) (4,536,155)
Net investment income (Class D)....................................................... (1,212,647) (729,045)
------------ ------------
Total distributions to shareholders..................................................... (9,746,310) (6,107,401)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 3) $(26,056,887) $ 84,890,736
------------ ------------
Total increase (decrease) in net assets................................................. (26,653,654) 86,308,034
NET ASSETS:
Beginning of period..................................................................... 229,967,530 143,659,496
------------ ------------
End of period+.......................................................................... $203,313,876 $229,967,530
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ (39,701) $ (47,153)
============ ============
See Notes to Financial Statements
5
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF CASH FLOWS -- For the year ended December 31, 2005
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net increase in net assets from operations...................................................................... $ 9,149,543
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities
Purchase of loans............................................................................................. (208,085,718)
Proceed from loans sold....................................................................................... 122,164,302
Loan principal paydowns....................................................................................... 93,692,487
Purchases -- funding fees..................................................................................... 5,288
Proceeds from short-term securities sold...................................................................... 12,701,862
Accretion of facility fee income.............................................................................. (98,243)
Increase in dividends and interest receivable................................................................. (604,072)
Decrease in receivables for investments sold.................................................................. 771,431
Decrease in amount due from investment adviser................................................................ 3,002
Decrease in amount due from distributor....................................................................... 4,157
Increase in other assets...................................................................................... (3,145)
Increase in payable for investments purchased................................................................. 5,132,962
Decrease in payable to the adviser............................................................................ (17,258)
Decrease in other liabilities................................................................................. (16,709)
Unrealized depreciation on investments........................................................................ 618,514
Net realized gain from investments............................................................................ (14,295)
-------------
Net cash provided by operating activities....................................................................... $ 35,404,108
-------------
Cash flows from financing activities:
Proceeds from shares sold....................................................................................... 47,180,455
Payment on shares repurchased................................................................................... (81,170,813)
Cash dividends paid (not including reinvested dividends of $6,264,825).......................................... (3,413,142)
-------------
Net cash used by financing activities........................................................................... $ (37,403,500)
-------------
Net decrease in cash............................................................................................ (1,999,392)
Cash balance at beginning of period............................................................................. 1,989,211
-------------
Cash balance at end of period................................................................................... $ (10,181)
=============
See Notes to Financial Statements
6
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS
Class A
-----------------
For the
period from
Year 4/28/04*
ended through
12/31/05 12/31/04
-------- -----------
Net Asset Value, Beginning of Period........................................... $ 9.41 $ 9.42
Investment Operations:
Net investment income (loss)@.................................................. 0.43 0.22
Net realized and unrealized gain (loss) on investments......................... (0.01) (0.01)
------ ------
Total from investment operations............................................. 0.42 0.21
------ ------
Distributions:
Dividends from net investment income........................................... (0.44) (0.22)
------ ------
Net Asset Value, End of Period................................................. $ 9.39 $ 9.41
------ ------
Total Return(1)................................................................ 4.55% 2.22%
Ratios/Supplemental Data
Net assets, end of period ($000's)............................................. $ 401 $ 224
Ratio of net expenses to average net assets.................................... 1.45% 1.45%#
Ratio of net investment income to average net assets........................... 4.74% 3.44%#
Portfolio turnover rate........................................................ 57% 24%
Expense ratio before waiver of fees and reimbursement of expenses.............. 4.32% 9.31%#
Net investment income ratio before waiver of fees and reimbursement of expenses 1.87% (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
7
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class B
-------------------------------------------
Year Year Year Year Year
ended ended ended ended ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period........................ $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.64
Investment Operations:
Net investment income (loss)@............................... 0.41 0.29 0.40 0.40 0.58
Net realized and unrealized gain (loss) on investments...... (0.02) 0.08 0.54 (0.26) (0.60)
------- ------- ------- ------- -------
Total from investment operations........................... 0.39 0.37 0.94 0.14 (0.02)
------- ------- ------- ------- -------
Distributions:
Dividends from net investment income........................ (0.41) (0.29) (0.39) (0.39) (0.59)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 9.39 $ 9.41 $ 9.33 $ 8.78 $ 9.03
------- ------- ------- ------- -------
Total Return(1)............................................. 4.24% 3.97% 10.95% 1.54% (0.41)%
Ratios/Supplemental Data
Net assets, end of period ($000's).......................... $25,181 $27,530 $26,565 $31,906 $42,335
Ratio of net expenses to average net assets................. 1.75% 1.75% 1.54% 1.45% 1.45%
Ratio of net investment income to average net assets........ 4.36% 3.04% 4.35% 4.42% 6.23%
Portfolio turnover rate..................................... 57% 24% 75% 112% 69%
Expense ratio before waiver of fees and reimbursement of
expenses................................................... 2.38% 2.38% 2.57% 2.51% 2.47%
Net investment income ratio before waiver of fees and
reimbursement of expenses.................................. 3.73% 2.41% 3.33% 3.36% 5.21%
- --------
@ Calculated based upon average shares outstanding.
(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 C
-----------------------------------------------
Year Year Year Year Year
ended ended ended ended ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period.... $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.64
Investment Operations:
Net investment income (loss)@........... 0.42 0.28 0.38 0.40 0.57
Net realized and unrealized gain (loss)
on investments......................... (0.03) 0.09 0.56 (0.27) (0.60)
-------- -------- -------- ------- --------
Total from investment operations....... 0.39 0.37 0.94 0.13 (0.03)
-------- -------- -------- ------- --------
Distributions:
Dividends from net investment income.... (0.41) (0.29) (0.39) (0.38) (0.58)
-------- -------- -------- ------- --------
Net Asset Value, End of Period.......... $ 9.39 $ 9.41 $ 9.33 $ 8.78 $ 9.03
-------- -------- -------- ------- --------
Total Return(1)......................... 4.24% 3.97% 10.92% 1.47% (0.45)%
Ratios/Supplemental Data
Net assets, end of period ($000's)...... 154,584 174,583 103,726 86,101 140,664
Ratio of net expenses to average net
assets................................. 1.75% 1.75% 1.59% 1.50% 1.50%
Ratio of net investment income to
average net assets..................... 4.36% 3.06% 4.22% 4.33% 6.28%
Portfolio turnover rate................. 57% 24% 75% 112% 69%
Expense ratio before waiver of fees and
reimbursement of expenses.............. 2.32% 2.35% 2.51% 2.48% 2.52%
Net investment income ratio before
waiver of fees and reimbursement of
expenses............................... 3.79% 2.46% 3.31% 3.36% 5.26%
- --------
@ Calculated based upon average shares outstanding.
(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.
FINANCIAL HIGHLIGHTS -- (continued)
Class D
---------------------------------------------
For the
period from
Year Year Year Year 5/02/01*
ended ended ended ended through
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
-------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period.... $ 9.41 $ 9.33 $ 8.78 $ 9.03 $ 9.46
Investment Operations:
Net investment income (loss)@........... 0.47 0.33 0.43 0.43 0.35
Net realized and unrealized gain (loss)
on investments......................... (0.03) 0.08 0.54 (0.27) (0.42)
------- ------- ------- ------- -------
Total from investment operations....... 0.44 0.41 0.97 0.16 (0.07)
------- ------- ------- ------- -------
Distributions:
Dividends from net investment income.... (0.46) (0.33) (0.42) (0.41) (0.36)
------- ------- ------- ------- -------
Net Asset Value, End of Period.......... $ 9.39 $ 9.41 $ 9.33 $ 8.78 $ 9.03
------- ------- ------- ------- -------
Total Return(1)......................... 4.76% 4.49% 11.28% 1.72% (0.79)%
Ratios/Supplemental Data
Net assets, end of period ($000's)...... $23,148 $27,630 $13,369 $15,037 $26,372
Ratio of net expenses to average net
assets................................. 1.25% 1.25% 1.25% 1.25% 1.25%#
Ratio of net investment income to
average net assets..................... 4.86% 3.60% 4.63% 4.58% 5.66%#
Portfolio turnover rate................. 57% 24% 75% 112% 69%
Expense ratio before waiver of fees and
reimbursement of expenses.............. 1.60% 1.62% 1.86% 1.77% 2.27%#
Net investment income ratio before
waiver of fees and reimbursement of
expenses............................... 4.51% 3.23% 4.02% 4.06% 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
10
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO PROFILE -- December 31, 2005 (unaudited)
Industry Allocation*
Broadcasting & Entertainment........................ 16.17%
Chemicals, Plastics and Rubber...................... 8.35%
Healthcare, Education and Childcare................. 7.54%
Leisure, Amusement, Entertainment................... 6.37%
Buildings & Real Estate............................. 5.16%
Electronics......................................... 5.10%
Telecommunications.................................. 4.96%
Registered Investment Companies..................... 4.83%
Hotels, Motels, Inns and Gaming..................... 4.24%
Printing and Publishing............................. 3.95%
Automobile.......................................... 3.85%
Containers, Packaging and Glass..................... 3.75%
Oil and Gas......................................... 3.55%
Diversified/Conglomerate Manufacturing.............. 3.38%
Utilities........................................... 3.26%
Home and Office Furnishings, Housewares and Durables 2.60%
Diversified/Conglomerate Service.................... 2.58%
Retail Stores....................................... 2.48%
Beverage, Food & Tobacco............................ 2.35%
Personal and Nondurable Consumer Products........... 1.79%
Ecological.......................................... 1.67%
Personal Transportation............................. 1.51%
Cargo Transport..................................... 1.39%
Personal, Goods and Misc. Services.................. 1.38%
Aerospace/Defense................................... 1.33%
Mining, Steel, Iron and Nonprecious Metals.......... 0.48%
Farming and Agriculture............................. 0.45%
Textiles and Leather................................ 0.21%
------
104.68%
======
Credit Quality +#
BB+.............. 3.45%
BB............... 8.33%
BB-.............. 18.57%
B+............... 28.59%
B................ 17.51%
B-............... 7.88%
CCC+............. 1.91%
CCC.............. 0.49%
D................ 1.61%
Not Rated@....... 11.66%
------
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.
11
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2005
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ------------------------------------------------------------------------------------------------------------------
LOANS(3)(4) -- 99.24%
Aerospace/Defense -- 1.33%
Axle Tech International.............. 1st Lien B2 B+ 6.57-8.50% 10/20/12 $ 239,286 $ 242,353
Hexcel Corp.......................... BTL-B B2 B+ 5.81-6.13 03/01/12 822,222 830,444
Midwestern Aircraft.................. BTL-B B1 BB- 6.41 07/01/13 597,000 605,893
SI International, Inc................ BTL B1 B+ 5.78 02/01/11 992,500 1,006,147
-----------
2,684,837
-----------
Automobile -- 3.85%
Dura Operating Corp.................. 2nd Lien B3 B+ 7.87 04/13/11 1,000,000 1,001,250
Goodyear Tire & Rubber Co............ 2nd Lien B2 B+ 7.06 04/30/10 2,000,000 2,016,250
HLI Operating Co., Inc............... BTL-C Caa1 B- 9.83-10.03 06/03/10 500,000 487,125
Key Plastics LLC..................... BTL-B B1 BB- 7.29-9.25 06/25/10 1,214,926 1,210,370
Ozburn-Hessey Holding Co. LLC........ BTL B2 B+ 6.74 08/01/12 546,696 554,897
Plastech, Inc.@...................... 2nd Lien B1 B 11.65 02/15/10 1,000,000 922,500
Tenneco Automotive, Inc.............. BTL-B B1 B+ 6.63 12/12/10 608,359 618,929
Tenneco Automotive, Inc.............. BTL-B1 B1 B+ 6.54 12/12/10 267,241 271,885
United Components, Inc............... BTL-C B1 BB- 6.81 06/30/10 723,333 733,279
-----------
7,816,485
-----------
Beverage, Food & Tobacco -- 2.35%
Alliance One International, Inc...... BTL-B B1 BB- 8.03 05/13/10 493,756 494,065
Dole Holding Co...................... BTL B3 B 9.44 07/21/10 1,500,000 1,531,875
Keystone Foods Holdings LLC.......... BTL Ba3 B+ 6.19-6.31 06/16/11 1,188,088 1,204,424
Leiner Health Products Group, Inc.... BTL-B B2 B 7.70 05/27/11 498,734 505,124
Meow Mix Co.......................... BTL B2 B+ 7.09 07/01/13 233,516 237,263
Pierre Foods, Inc.................... BTL-B B1 B+ 5.56 06/30/10 796,157 806,772
-----------
4,779,523
-----------
Broadcasting & Entertainment -- 15.69%
Adelphia Communications Corp.(5)..... BTL-B B1 NR 6.31 03/31/06 2,000,000 2,010,000
Cebridge Connections, Inc............ 1st Lien B3 NR 7.25-9.25 02/23/09 689,500 693,809
Cebridge Connections, Inc............ 2nd Lien Caa1 NR 9.77-12.25 02/04/09 1,280,500 1,325,318
Century -- TCI California LP(5)...... Revolver NR NR 7.25 06/30/09 1,000,000 994,750
Century Cable Holdings LLC(5)........ Discretionary BTL Ca NR 9.25 12/31/09 2,500,000 2,443,360
Charter Communications Operating LLC. BTL-B B2 B 7.50 04/27/11 3,942,523 3,957,461
Haights Cross Operating Co........... BTL B3 B- 8.84 08/20/08 1,463,800 1,485,757
Hilton Head Communications LP(5)(10). BTL NR NR 8.50 03/31/08 1,000,000 970,375
HIT Entertainment, Ltd............... 2nd Lien B2 CCC+ 9.71 02/05/13 1,000,000 1,005,125
HIT Entertainment, Ltd............... BTL B1 B 6.46 08/05/15 500,000 502,250
Insight Midwest Holdings LLC......... BTL-C Ba3 BB- 6.56 12/31/09 980,000 993,782
Intelstat Zeus, Ltd.................. BTL B1 B 5.81 07/28/11 992,500 1,003,045
Mediacom Illinois LLC................ BTL-A Ba3 BB- 5.68-5.89 09/30/12 2,000,000 1,999,464
Mission Broadcasting, Inc............ BTL-B Ba3 B+ 6.28 10/01/12 1,213,157 1,221,749
Nexstar Broadcasting, Inc............ BTL-B Ba3 B+ 6.28 10/01/12 1,234,933 1,243,680
NextMedia Operating.................. 2nd Lien Caa1 D 8.87 11/18/12 500,000 506,667
PANAMSAT Corp........................ BTL-B1 Ba3 BB+ 6.44-6.49 08/20/11 4,455,000 4,512,915
Spanish Broadcasting Systems, Inc.... 1st Lien B1 B+ 6.53 06/01/12 992,500 1,007,388
UPC Financing Partnership............ BTL-H B1 B 6.81 09/03/12 2,000,000 2,020,536
WideOpenWest Finance LLC............. BTL-B B2 NR 7.25-7.53 06/22/11 992,443 997,819
Young Broadcasting, Inc.............. BTL B1 B 6.56-6.81 11/02/12 995,000 1,000,442
-----------
31,895,692
-----------
12
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2005 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ----------------------------------------------------------------------------------------------------------
Buildings & Real Estate -- 5.16%
Atrium Cos., Inc.................... BTL B2 CCC+ 7.91-8.28% 12/28/11 $2,414,956 $ 2,394,327
Kyle Acquisition Group LLC.......... BTL Ba3 BB 6.50 07/15/10 500,000 502,813
Masonite International Corp......... BTL B2 BB- 6.21-6.53 04/16/13 1,491,262 1,478,136
Masonite International Corp......... CND TL B2 BB- 6.21-6.53 04/16/13 1,488,726 1,475,622
Palmdale Hills Property LLC......... 1st Lien B1 B+ 7.24 05/01/12 995,000 995,000
Palmdale Hills Property LLC......... 2nd Lien B2 B- 11.74 05/01/12 1,000,000 1,000,000
PGT Industries, Inc................. BTL-A1 B1 B 7.23-7.38 01/29/10 876,090 887,589
Rhodes Homes........................ 1st Lien Ba3 BB- 7.75 11/10/10 243,750 243,750
Spanish Peaks LLC................... Tranche A B1 B+ 4.43 07/29/13 75,000 75,750
Spanish Peaks LLC................... Tranche B B1 B+ 6.72-7.23 07/29/13 170,247 171,949
TCO Funding Corp.................... BTL B2 B- 7.00 10/25/12 1,000,000 1,010,000
Yellowstone Mountain Club........... BTL B1 B+ 6.76 09/30/10 248,933 250,074
-----------
10,485,010
-----------
Cargo Transport -- 1.39%
Hertz Corp.......................... BTL Ba2 BB 6.83-6.96 12/21/12 500,000 506,836
Pacer International, Inc............ BTL B1 NR 5.81-6.25 06/10/10 705,765 711,058
Transport Industries LP............. BTL-B B2 NR 6.56 09/30/12 209,297 210,474
United States Shipping LLC.......... BTL Ba3 NR 6.20 04/30/10 1,381,826 1,399,963
-----------
2,828,331
-----------
Chemicals, Plastics & Rubber -- 8.35%
Basell Finance Co................... BTL-B2 Ba3 B+ 6.91 08/01/13 104,167 105,973
Basell Finance Co................... BTL-B4 Ba3 B+ 6.91 08/01/13 20,833 21,125
Basell Finance Co................... BTL-C2 Ba3 B+ 7.24 08/01/13 104,167 105,973
Basell Finance Co................... BTL-C4 Ba3 B+ 7.24 08/01/13 20,833 21,155
Brenntag Holdings................... BTL B2 B 6.89 12/22/13 250,000 253,386
Celanese AG......................... BTL B1 B+ 6.53 04/06/11 2,596,999 2,626,540
Hercules, Inc....................... BTL-B Ba1 BB 5.86-6.28 10/08/10 884,250 895,524
Hexion Specialty Chemicals, Inc..... Tranche B1 B1 BB- 6.88 05/30/12 835,800 848,337
Hexion Specialty Chemicals, Inc..... Tranche B2 B1 BB- 7.06 05/31/12 1,154,200 1,171,513
Huntsman International LLC.......... BTL-B Ba3 BB- 6.12 08/31/12 3,564,862 3,587,420
Invista B.V......................... BTL-B1 Ba3 BB 6.69 04/29/11 1,322,235 1,336,284
Invista B.V......................... BTL-B2 Ba3 BB 6.69 04/29/11 568,196 574,233
PQ Corp............................. BTL B1 B+ 6.56 02/15/13 744,375 753,369
Rockwood Specialties Group, Inc..... BTL-E B1 B+ 6.22 07/30/12 1,990,000 2,013,786
Wellman, Inc........................ 2nd Lien B2 B- 11.00 02/10/10 2,500,000 2,556,250
Westlake Chemical Corp.............. BTL-B Ba2 NR 6.64 07/23/10 112,500 112,500
-----------
16,983,368
-----------
Containers, Packaging & Glass -- 3.75%
Appleton Papers, Inc................ BTL Ba3 BB 6.33-6.83 06/11/10 1,040,892 1,051,952
Berry Plastics Corp................. BTL B1 B+ 6.45 12/02/11 1,195,326 1,210,891
Boise Cascade Corp.................. BTL-D Ba3 BB 6.16-6.28 10/28/11 839,776 851,848
Captive Plastics, Inc............... BTL B2 B- 7.50 08/10/11 498,750 504,984
Captive Plastics, Inc............... 2nd Lien B3 CCC 11.86 12/15/12 1,000,000 1,000,000
Graham Packaging Co. LP............. Tranche B B2 B 6.38-6.81 04/07/12 2,475,000 2,506,905
Owens-Illinois Group, Inc........... BTL-A1 B1 BB- 6.10 04/01/07 486,733 489,369
-----------
7,615,949
-----------
13
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2005 -- (continued)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- -------------------------------------------------------------------------------------------------------------------------
Diversified/Conglomerate Manufacturing -- 3.38%
Accuride Corp................................. BTL-B B1 B+ 6.25-6.75% 01/31/12 $1,507,727 $ 1,522,019
Enersys, Inc.................................. BTL Ba3 BB 6.07-6.68 03/17/11 591,000 598,018
Flowserve Corp................................ BTL Ba3 BB- 6.19-6.50 08/10/12 482,083 488,486
Maxim Crane Works LP.......................... 2nd Lien B3 B+ 9.63 01/31/12 250,000 256,771
Maxim Crane Works LP.......................... BTL B2 BB- 6.88-9.00 01/31/10 374,306 379,608
National Distributing@........................ 2nd Lien B2 B- 10.88 06/16/10 1,000,000 1,002,500
Penn Engineering & Manufacturing Corp......... BTL B2 B 6.89-7.03 05/01/12 416,936 422,147
Ply Gem Industries, Inc....................... BTL B1 B+ 6.16 02/24/11 1,063,629 1,070,277
Ply Gem Industries, Inc....................... CND TL B1 B+ 6.16 03/15/10 183,847 184,996
Polypore, Inc................................. BTL B2 B 7.53 11/12/11 948,547 944,200
-----------
6,869,022
-----------
Diversified/Conglomerate Service -- 2.58%
Billing Concepts, Inc......................... BTL-A B2 B+ 7.38 04/22/10 925,000 938,875
Bridge Information Systems, Inc.+#@(5)(6)..... BTL-B Caa1 NR 10.25 06/30/05 421,180 --
Coinstar, Inc................................. BTL Ba3 BB- 6.10 07/07/11 874,496 883,788
Fidelity National Information Solutions, Inc.. BTL-B Ba3 BB 6.11 03/04/13 762,833 766,774
InfoUSA, Inc.................................. BTL-A Ba3 BB 6.89 03/25/09 677,083 678,776
NES Rentals Holdings, Inc..................... 2nd Lien B3 B 10.21-12.25 07/20/10 1,481,250 1,512,727
Protection One, Inc........................... BTL B2 B+ 7.38-7.39 04/11/11 467,644 472,613
-----------
5,253,553
-----------
Ecological -- 1.67%
Allied Waste North America, Inc............... Tranche A B1 BB 6.03 01/15/12 802,703 807,943
Allied Waste North America, Inc............... BTL B1 BB 6.09-6.39 01/15/12 2,067,516 2,081,143
Wastequip, Inc................................ 2nd Lien B3 B- 10.53 07/15/11 500,000 506,875
-----------
3,395,961
-----------
Electronics -- 5.10%
Amkor Technology, Inc......................... 2nd Lien B2 NR 8.88 10/27/10 1,000,000 1,026,875
Aspect Software............................... 1st Lien B2 B 6.56 09/22/10 250,000 253,125
Eastman Kodak Co.............................. BTL-B1 Ba2 B+ 6.42-6.75 10/15/12 1,000,000 1,002,569
Fairchild Semiconductor Corp.................. BTL-B3 Ba3 BB- 6.31 06/19/08 1,462,725 1,473,695
SSA Global Technologies, Inc.................. BTL-B B2 BB- 6.52 08/02/12 249,375 251,245
Sungard Data Systems, Inc..................... BTL-B B1 B+ 6.81 08/01/13 3,980,000 4,010,885
Targus Group International, Inc............... 2nd Lien B3 NR 12.07 11/22/12 250,000 252,188
UGS Corp...................................... BTL B1 B+ 6.39 03/31/12 2,067,588 2,096,017
-----------
10,366,599
-----------
Farming & Agriculture -- 0.45%
AGCO Corp..................................... BTL Ba1 BB+ 6.28 07/03/09 908,167 918,384
-----------
Healthcare, Education & Childcare -- 7.54%
Accellent Corp................................ BTL B2 B+ 6.39 11/18/12 500,000 505,625
AMR/EmCare Holdings........................... BTL B2 B+ 6.56-6.78 02/15/12 709,286 716,379
Community Health Systems, Inc................. BTL Ba3 BB- 6.16 08/19/11 1,312,141 1,330,319
Conmed Corp................................... BTL-C Ba3 NR 6.62 12/15/09 756,431 765,886
DaVita, Inc................................... BTL-B B1 BB- 6.40-6.94 07/30/12 2,875,147 2,917,277
Hanger Orthopedic Group, Inc.................. BTL-B B1 B+ 8.27 09/30/09 977,500 990,941
HealthSouth Corp.............................. LOC Caa2 NR 3.86 03/17/10 925,000 929,915
HealthSouth Corp.............................. BTL Caa2 NR 6.89 03/17/10 1,567,125 1,575,451
Magellan Health Services, Inc................. BTL B1 B+ 6.74 08/15/08 347,222 351,128
Magellan Health Services, Inc................. BTL B1 B+ 4.19 08/15/08 277,778 280,903
Multiplan, Inc................................ BTL Ba3 B+ 7.03 03/04/09 958,333 970,312
Spectrum Labs................................. BTL-B NR NR 7.78 12/20/12 1,000,000 1,007,500
Team Health, Inc.............................. BTL-B B2 B+ 6.88 11/18/12 250,000 252,344
Vanguard Health Holding Co. II................ BTL B2 B 6.77-6.95 09/23/11 990,019 1,003,632
Warner Chilcott Holdings Co................... BTL-B B2 B 7.01-7.28 01/18/12 1,083,632 1,084,115
Warner Chilcott Holdings Co................... BTL-C B2 B 7.28 01/18/12 436,651 436,846
Warner Chilcott Holdings Co................... BTL-D B2 B 7.28 01/18/12 201,720 201,810
-----------
15,320,383
-----------
14
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2005 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- -----------------------------------------------------------------------------------------------------------------
Home & Office Furnishings, Housewares & Durables -- 2.60%
Jarden Corp.............................. BTL B1 B+ 6.53% 04/11/12 $1,341,855 $ 1,349,522
Jarden Corp.............................. BTL-B2 B1 B+ 6.28 01/24/12 714,668 717,348
Maax Corp................................ BTL-B B1 B 7.23-7.53 06/04/11 1,044,130 1,038,910
Sealy Mattress Co........................ BTL-D B1 B+ 6.12-6.16 08/06/12 1,240,025 1,254,943
Simmons Co............................... Tranche C B2 B+ 5.75-8.75 12/19/11 913,414 923,832
-----------
5,284,555
-----------
Hotels, Motels, Inns, & Gaming -- 4.24%
CCM Merger, Inc.......................... BTL-B B1 B+ 6.39-6.52 07/13/12 497,500 501,605
Isle of Capri Black Hawk LLC............. BTL B1 B+ 6.11-6.53 10/24/11 498,750 502,802
Isle of Capri Casinos, Inc............... BTL Ba2 BB- 5.89-6.27 02/04/11 297,000 300,341
Kulima Resort Co......................... 2nd Lien B2 CCC+ 10.89 09/30/11 250,000 252,500
Penn National Gaming, Inc................ BTL-B Ba3 BB- 5.97-6.28 06/01/12 1,995,000 2,021,340
Trump Entertainment Resorts Holdings LP.. BTL-B1 B2 BB- 7.17 05/04/12 497,500 504,548
Venetian Casino Resorts LLC.............. Delayed Draw Ba3 BB- 6.28 06/15/11 683,761 688,996
Venetian Casino Resorts LLC.............. BTL-B Ba3 BB- 6.28 06/15/11 3,316,239 3,341,628
Wembley, Inc............................. 1st Lien B1 B+ 6.08 07/18/12 248,750 253,103
Wembley, Inc............................. 2nd Lien B1 B- 7.83 07/18/12 250,000 255,156
-----------
8,622,019
-----------
Leisure, Amusement, Entertainment -- 6.37%
24 Hour Fitness Worldwide, Inc........... BTL-B B2 B 6.78 06/30/12 2,000,000 2,028,334
Fender Musical Instruments Corp.......... 1st Lien B1 B+ 6.31-6.47 03/31/12 471,890 477,789
Metro-Goldwyn-Mayer Studios, Inc......... BTL-B Ba3 B+ 6.78 04/08/12 3,000,000 3,023,523
Regal Cinemas, Inc....................... BTL Ba2 BB- 6.53 11/10/10 1,428,979 1,446,643
Six Flags Theme Parks, Inc............... BTL-B B1 B- 6.59-6.80 06/30/09 992,443 1,005,557
Southwest Sports Group LLC............... BTL NR NR 7.06 12/22/12 1,000,000 1,012,500
True Temper Sports, Inc.................. BTL B2 B 7.45-9.25 03/15/11 475,180 479,932
WMG Acquisition Corp..................... BTL B2 B+ 6.19-6.59 02/28/11 3,434,493 3,474,972
-----------
12,949,250
-----------
Mining, Steel, Iron & Nonprecious Metals -- 0.48%
Novelis, Inc............................. BTL-B Ba2 BB- 6.01 01/07/12 456,435 461,855
Novelis, Inc............................. CND TL Ba2 BB- 6.01 01/07/12 262,796 265,917
Walter Industries, Inc................... BTL-B Ba3 B+ 6.05-6.53 10/03/12 249,375 252,882
-----------
980,654
-----------
Oil & Gas -- 3.46%
Calumet Lubricants Co. LP................ BTL B2 B 7.84 11/30/12 388,889 391,806
Calumet Lubricants Co. LP................ BTL B2 B 4.33 11/30/12 111,111 111,944
Epco Holdings, Inc....................... BTL-B Ba3 B+ 6.42-6.64 08/18/10 495,000 502,541
Key Energy Services, Inc................. Delayed Draw B1 B- 7.02-7.52 06/30/12 1,000,000 1,014,375
Petrohawk Energy Corp.................... 2nd Lien NR NR 8.88-8.94 02/24/09 1,000,000 1,010,000
Primary Energy Finance LLC............... BTL Ba2 BB- 6.53 08/24/12 498,750 505,296
Targa Resources, Inc..................... LOC Ba3 B+ 4.40 10/31/12 96,774 97,651
Targa Resources, Inc..................... BTL-B Ba3 B+ 6.59-6.78 10/31/12 402,218 405,863
TXOK Acquisition, Inc.................... 2nd Lien B2 NR 8.88 09/21/10 1,000,000 1,012,500
Williams Production RMT Co............... BTL-C Ba3 BB 6.62 05/30/07 1,462,650 1,479,105
Wolf Hollow I LP......................... 2nd Lien B2 B 9.00 12/22/12 500,000 507,500
-----------
7,038,581
-----------
Personal & Nondurable Consumer Products -- 1.79%
American Achievement Corp................ BTL-B B1 B+ 6.92-8.75 03/22/11 852,233 866,081
American Safety Razor Co................. BTL-B B2 B 7.15 02/28/12 928,056 941,976
Bushnell Performance Optics.............. BTL B1 B+ 7.53-9.00 08/19/11 500,000 507,188
Hillman Group, Inc....................... BTL-B B2 B 7.69-9.50 03/31/11 820,833 831,864
Spectrum Brands, Inc..................... BTL-B B2 B 6.17-6.78 02/07/12 496,250 499,869
-----------
3,646,978
-----------
15
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2005 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- --------------------------------------------------------------------------------------------------
Personal, Goods & Misc. Services --
1.38%
Burt's Bees, Inc............. BTL B2 B 7.04-7.44% 03/29/11 $ 496,250 $ 500,282
Maidenform, Inc.............. BTL Ba3 B+ 5.76-6.12 05/11/10 458,333 462,344
Stewart Enterprises, Inc..... BTL-B Ba3 BB 5.77-6.25 11/19/11 473,497 479,712
Worldspan LP................. BTL B2 B 6.81-7.31 02/14/10 1,406,088 1,372,693
------------
2,815,031
------------
Personal Transportation -- 1.51%
Delta Air Lines, Inc.(5)..... BTL-C Caa1 B 13.51 10/01/08 1,500,000 1,549,220
Northwest Airlines, Inc.(5).. BTL-A B3 B- 9.56 11/17/09 750,000 756,428
United Airlines, Inc......... Tranche B Ba3 BB- 8.62 07/15/09 747,783 756,351
------------
3,061,999
------------
Printing & Publishing -- 3.95%
Affinity Group, Inc.......... BTL Ba3 NR 6.95-6.97 06/30/06 1,190,893 1,202,802
American Lawyers Media, Inc.. 1st Lien B3 B- 7.03 03/14/10 993,744 994,572
Dex Media West LLC........... BTL-B Ba2 BB 5.87-6.28 03/09/10 1,054,103 1,061,110
FSC Acquisition LLC.......... BTL B2 B 6.33-6.69 08/01/12 443,667 445,516
Journal Register Co.......... Tranche B Ba2 BB+ 5.55-5.74 08/12/12 1,000,000 1,006,094
Liberty Group Publishing, 6.63
Inc........................ BTL-B B1 B+ 02/28/12 490,047 494,794
New Publications, Inc........ 2nd Lien B3 CCC+ 10.90 02/05/13 250,000 229,583
Primedia, Inc................ BTL-B B2 B 6.56 12/31/09 1,098,095 1,081,486
R.H. Donnelly, Inc........... BTL-D Ba3 BB 5.81-6.28 06/30/11 1,514,171 1,523,271
------------
8,039,228
------------
Retail Stores -- 2.48%
Alimentation Couche-Tard, 6.19
Inc........................ BTL Ba2 BB 12/17/10 601,531 609,050
Eddie Bauer, Inc............. BTL-B Ba3 B+ 7.12-9.00 06/21/11 995,000 968,881
Jean Coutu Group, Inc........ BTL-B B2 BB- 6.50 07/30/11 1,452,662 1,468,298
Linens'n Things, Inc......... BTL NR NR 1.50 11/30/06 1,000,000 990,000
Neiman-Marcus Group, Inc..... BTL B1 B+ 6.95 04/15/13 1,000,000 1,009,183
Quality Stores, Inc. 9.75
(Central Tractor)+#@(5)(7). BTL-B Caa2 NR 04/30/06 846,495 --
------------
5,045,412
------------
Telecommunications -- 4.92%
Centennial Cellular 6.45-6.83
Operating Co............... BTL B2 B- 02/09/11 1,375,000 1,393,369
Cricket Communications, Inc.. BTL-B B1 B- 7.03 12/20/10 1,980,000 2,004,502
FairPoint Communications, 6.31
Inc........................ BTL B1 BB- 02/07/12 1,000,000 1,004,125
Hawaiian Telecom 6.78
Communications, Inc........ BTL-B B1 B+ 10/31/12 1,000,000 1,006,875
Madison River Capital LLC.... BTL-B B1 B+ 6.59 08/01/12 750,000 761,485
Ntelos, Inc.................. 1st Lien B1 B 6.89 08/31/11 1,485,000 1,497,623
Ntelos, Inc.................. 2nd Lien B2 B 9.39 02/28/12 500,000 504,375
Syniverse Holding LLC........ BTL-B Ba3 BB- 6.28 02/01/12 1,558,323 1,579,750
Time Warner Telecom 6.92-7.11
Holdings, Inc.............. BTL-B B1 B 11/30/10 250,000 254,479
------------
10,006,583
------------
Textiles & Leather -- 0.21%
Globe Manufacturing 10.00
Corp.+#@(5)(7)............. BTL-B Caa2 NR 08/15/06 837,014 --
William Carter Co............ BTL-B B1 BB 5.65-5.81 07/14/12 430,032 435,049
------------
435,049
------------
Utilities -- 3.26%
Allegheny Energy Supply Co... BTL-C Ba2 BB 5.76-6.41 03/08/11 387,717 392,644
Calpine Corp.(5)............. 2nd Lien NR D 9.90 07/16/07 3,433,623 2,760,633
Cheniere LNG Holdings LLC.... BTL Ba2 BB 6.95 08/30/12 249,375 251,869
Cogentrix Deleware Holdings, 6.28
Inc........................ BTL Ba2 BB+ 04/13/12 561,698 567,725
Complete Production 7.28
Services, Inc.............. BTL-B NR B 08/01/12 249,375 252,375
La Paloma Generating Co...... BTL Ba3 BB- 6.28 08/16/12 15,482 15,652
La Paloma Generating Co...... LOC Ba3 BB- 6.11 08/16/12 32,787 33,148
La Paloma Generating Co...... 2nd lien B2 B 8.03 08/16/13 250,000 253,985
La Paloma Generating Co...... BTL-B Ba3 BB- 6.28 08/16/12 194,394 196,532
Reliant Energy, Inc.......... BTL B1 B+ 6.64-6.92 10/01/10 1,000,000 998,750
Reliant Energy Resources, 6.09-6.57
Inc........................ BTL B1 B+ 03/15/07 916,012 914,867
------------
6,638,180
------------
Total Loans (Cost $202,488,708)............................... 201,776,616
------------
16
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2005 -- (continued)
Principal Value
Industry Description Amount/Shares (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS -- 0.48%
Broadcasting & Entertainment -- 0.48%
Paxson Communications Corp.*(8) 10.78%
due 01/15/13 (Cost $980,000)......... $1,000,000 $ 980,000
------------
COMMON STOCK -- 0.13%
Oil & Gas -- 0.09%
Shaw Group, Inc.+...................... 6,276 182,569
------------
Telecommunications -- 0.04%
Global Crossing, Ltd.+................. 175 2,805
SAVVIS Communications Corp.+........... 94,695 71,021
------------
73,826
------------
Total Common Stock (Cost $224,016)..... 256,395
------------
Total Long-Term Investment Securities
(Cost $203,692,724).................. 203,013,011
------------
SHORT-TERM INVESTMENT SECURITIES --
4.83%
Registered Investment Companies -- 4.83%
SSgA Money Market Fund (Cost
$9,814,805).......................... 9,814,805 9,814,805
------------
TOTAL INVESTMENTS -- 104.68%............
(Cost $213,507,529)(9)................. 212,827,816
Liabilities in Excess of Other Assets
-- (4.68)%............................. (9,513,940)
------------
NET ASSETS -- 100.00%................... $203,313,876
============
- --------
BTL Bank Term Loan
CND TLCanadian Term Loan
LOC Letter of Credit
NR Security is not rated.
+ Non-income producing security
@ Illiquid security. At December 31, 2005, the aggregate value of these
securities was $1,925,000, representing 0.95% 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 these securities. At December 31, 2005,
the aggregate value of these securities was $980,000 representing 0.48% 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 December 31, 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 63 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
unless otherwise indicated.
(5) Company has filed for Chapter 11 bankruptcy protection.
(6) Bond is in default and did not pay principal at maturity. Final outcome of
Chapter 11 bankruptcy still to be determined.
(7) Loan is in default of interest payments.
(8) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of December 31, 2005.
(9) See Note 6 for cost of investments on a tax basis.
(10) Loan was purchased through a participation agreement.
See Notes to Financial Statements
17
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005
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 and other institutionally traded senior secured
floating rate debt obligations.
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 may contain the obligation
to indemnify others. The Fund's maximum exposure under these arrangements is
unknown. Currently, 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
18
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005 -- (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. The
Fund's custodian takes possession of the collateral pledged for investments
in repurchase agreements. The underlying collateral is valued daily on a
mark to market basis to ensure that the value, including accrued interest,
is at least 102% of the repurchase price. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. If the seller
defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At
December 31, 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 $98,243 for the
period ended December 31, 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 $360,762 for the period ended
December 31, 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 December 31, 2005.
19
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005 -- (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 For the period
year ended April 28, 2004**-
December 31, 2005 December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class A ---------- ------------ ---------- ------------
Shares sold................. 20,621@ $ 194,088@ 23,650* $ 222,806*
Reinvested distributions.... 1,003 9,426 391 3,681
Shares repurchased.......... (2,715) (25,453) (202) (1,902)
---------- ------------ ---------- ------------
Net increase (decrease).. 18,909 $ 178,061 23,839 $ 224,585
========== ============ ========== ============
For the For the
year ended year ended
December 31, 2005 December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class B ---------- ------------ ---------- ------------
Shares sold................. 254,487 $ 2,391,460 649,863 $ 6,108,232
Reinvested distributions.... 84,193 791,345 60,214 566,344
Shares repurchased.......... (581,114)@ (5,462,413)@ (633,762)* (5,961,214)*
---------- ------------ ---------- ------------
Net increase (decrease).. (242,434) $ (2,279,608) 76,315 $ 713,362
========== ============ ========== ============
For the For the
year ended year ended
December 31, 2005 December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class C ---------- ------------ ---------- ------------
Shares sold................. 3,815,180 $ 35,893,397 11,042,355 $103,837,676
Reinvested distributions.... 480,086 4,512,412 300,723 2,828,393
Shares repurchased.......... (6,375,191) (59,926,283) (3,917,703) (36,835,107)
---------- ------------ ---------- ------------
Net increase (decrease).. (2,079,925) $(19,520,474) 7,425,375 $ 69,830,962
========== ============ ========== ============
For the For the
year ended year ended
December 31, 2005 December 31, 2004
------------------------- -------------------------
Shares Amount Shares Amount
Class D ---------- ------------ ---------- ------------
Shares sold................. 923,576 $ 8,679,305 1,986,376 $ 18,679,110
Reinvested distributions.... 101,255 951,642 59,527 559,853
Shares repurchased.......... (1,494,315) (14,065,813) (544,090) (5,117,136)
---------- ------------ ---------- ------------
Net increase (decrease).. (469,484) $ (4,434,866) 1,501,813 $ 14,121,827
========== ============ ========== ============
- --------
@ Includes automatic conversion of 20,621 shares of Class B shares in the
amount of $194,088 to 20,621 shares of Class A shares in the amount of
$194,088.
* 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 December 31, 2005, the Fund made twelve Repurchase Offers, and
redeemed the amounts shown in the table below. In no case was a monthly
Repurchase Offer oversubscribed.
Amount Tendered Amount Tendered
--------------------- -------------------
Shares Amount Shares Amount
--------- ----------- ------- -----------
January. 661,676 $ 6,232,968 July..... 884,668 $ 8,315,784
February 1,170,031 11,044,512 August... 526,903 4,964,450
March... 608,742 5,746,522 September 679,591 6,388,689
April... 1,011,550 9,498,612 October.. 374,146 3,513,277
May..... 553,973 5,179,654 November. 644,785 6,054,515
June.... 793,654 7,436,496 December. 543,616 5,104,483
20
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005 -- (continued)
Note 4. Purchases And Sales Of Securities
During the period ended December 31, 2005, the Fund's cost of purchases of
Loans and proceeds from Loan sales were $208,085,718 and $122,164,302,
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 December 31, 2005,
SAAMCo received advisory fees in the amount of $1,878,221.
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 $552,418 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 December 31, 2005, SAAMCo received administration
fees in the amount of $883,869.
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 December 31,
2005 SACS received distribution fees of $1,468,197. In addition, SACS
receives the proceeds of early withdrawal charges paid by investors in
connection with certain redemptions of Class B and Class C shares. For the
period ended December 31, 2005, SACS received early withdrawal charges of
$143,432. For the period ended December 31, 2005 SACS voluntarily waived
fees for the following classes: Class A $176, Class B $66,760, and Class C
$422,337.
SAAMCo contractually agreed to waive fees or reimburse expenses, if
necessary, at or below 1.75% for Class B and Class C average net assets. The
expense reimbursements and fee waivers will continue indefinitely, subject
to termination by the Directors, including a majority of the Independent
Directors. SAAMCo voluntarily agreed to waive fees or reimburse expenses, if
necessary, at or below 1.45% for Class A and 1.25% for Class D average net
assets. The expense waiver and fee reimbursement will continue indefinitely,
but may be terminated at any time. For the period ended December 31, 2005,
SAAMCo waived fees and reimbursed expenses as follows: Class A $9,859, Class
B $99,925, Class C $522,525, and Class D $86,559.
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 wash
sales, retirement pension expense, dividends payable and treatment of
defaulted securities.
Distributable Earnings Tax Distributions
- ---------------------------------------- -------------------------------------------------------------------------
For the year ended December 31, 2005 For the year ended December 31, 2005 For the year ended December 31, 2004
- ---------------------------------------- ------------------------------------ ------------------------------------
Long-term Gains/ Unrealized Long-term Long-term
Ordinary Capital Loss Appreciation Ordinary Capital Ordinary Capital
Income Carryover (Depreciation) Income Gains Income Gains
- -------- ---------------- -------------- ---------- --------- ---------- ---------
$ -- $(27,697,156) $(680,069) $9,746,310 $ -- $6,107,401 $ --
21
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005 -- (continued)
Capital Loss Carryforwards. At December 31, 2005 capital loss carryforwards
available to offset future recognized gains were $27,697,156, with $329,673
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.
During the year ending December 31, 2005, the Senior Floating Rate Fund
utilized $14,305 of capital loss carry forwards to offset current year
capital gains.
Unrealized appreciation and depreciation in the value of investments at
December 31, 2005 for federal income tax purposes were as follows:
Cost (tax basis)............................................ $213,507,885
============
Gross unrealized appreciation............................... $ 1,918,453
Gross unrealized depreciation............................... (2,598,522)
------------
Net unrealized depreciation................................. $ (680,069)
============
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 December 31, 2005, the Fund had accrued $11,744 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 December 31, 2005, expensed
$4,227 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 other expenses on the Statement of
Operations. For the period ended December 31, 2005, the Fund had borrowings
outstanding for 3 days under the line of credit and incurred $100 in
interest charges related to these borrowings. The Fund's average amount of
debt under the line of credit for the days utilized was $266,775 at a
weighted average interest rate of 4.50%. At December 31, 2005, there were no
borrowings outstanding.
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
22
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005 -- (continued)
receive a more favorable interest rate than would otherwise be available
from a typical bank for a comparable transaction. For the period ended
December 31, 2005, the Fund did not participate in this program.
Note 10. Investment Concentration
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 December 31, 2005, the Fund had the following unfunded loan commitments
which could be extended at the option of the Borrower:
Maturity
Name Type Date Amount
- ---- ---------------------- -------- ----------
FSC Acquisition LLC..................... Delayed Draw Term Loan 08/01/12 $ 52,980
NRG Energy, Inc......................... Bridge Loan 02/01/13 1,000,000
Trump Entertainment Resorts Holdings LP. Delayed Draw Term Loan 05/20/12 497,500
Warner Chilcott Corp.................... Delayed Draw Term Loan 06/30/06 44,164
Warner Chilcott Corp.................... Delayed Draw Term Loan 01/18/12 220,820
WMG Acquisition Corp.................... Revolver 02/28/10 500,000
Note 12. Other Information
On February 9, 2006, American International Group, Inc. ("AIG"), the parent
company and an affiliated person of AIG SunAmerica Asset Management Corp.
("Adviser"), AIG SunAmerica Capital Services, Inc., the distributor of the
Fund ("Distributor), and AIG Global Investment Corp., the subadviser to the
Fund ("AIGGIC"), announced that it had consented to the settlement of an
injunctive action instituted by the Securities and Exchange Commission
("SEC"). In its complaint, the SEC alleged that AIG violated Section 17(a)
of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)
and 13(b)(5) of the Securities Exchange Act of 1934, as amended, and Rules
10b-5, 12b-20, 13a-1 and 13b2-1 promulgated thereunder, in connection with
AIG's accounting and public reporting practices. The conduct described in
the complaint did not involve any conduct of AIG or its subsidiaries related
to their investment advisory or distribution activities with respect to the
assets of the Fund.
AIG, without admitting or denying the allegations in the complaint (except
as to jurisdiction), consented to the entry of an injunction against further
violations of the statutes referred to above. Absent exemptive relief
granted by the SEC, the entry of such an injunction would prohibit AIG and
its affiliated persons from, among other things, serving as an investment
adviser of any registered investment management company or principal
underwriter for any registered open-end investment company pursuant to
Section 9(a) of the Investment Company Act of 1940, as amended ("1940 Act").
Certain affiliated persons of AIG, including the Adviser, received a
temporary order from the SEC pursuant to Section 9(c) of the 1940 Act with
respect to the entry of the injunction, granting exemptive relief from the
provisions of Section 9(a) of the 1940 Act. The temporary order permits AIG
and its affiliated persons, including AIG's investment management
subsidiaries, to serve as investment adviser, sub-adviser, principal
underwriter or sponsor of the Fund. The Adviser expects that a permanent
exemptive order will be granted, although there is no assurance the SEC will
issue the order.
23
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2005 -- (continued)
Additionally, AIG and its subsidiaries reached a resolution of claims and
matters under investigation with the United States Department of Justice
("DOJ"), the Attorney General of the State of New York ("NYAG") and the New
York State Department of Insurance ("DOI"), regarding accounting, financial
reporting and insurance brokerage practices of AIG and its subsidiaries, as
well as claims relating to the underpayment of certain workers compensation
premium taxes and other assessments.
As a result of the settlements with the SEC, the DOJ, the NYAG and the DOI,
AIG will make payments totaling approximately $1.64 billion. In addition, as
part of its settlements, AIG has agreed to retain for a period of three
years an Independent Consultant who will conduct a review that will include
the adequacy of AIG's internal controls over financial reporting and the
remediation plan that AIG has implemented as a result of its own internal
review.
Subject to receipt of permanent relief, the Adviser, Distributor and AIGGIC
believe that the settlements are not likely to have a material adverse
effect on their ability to perform their respective investment advisory or
distribution services relating to the Fund.
Note 13. Subsequent Events
At a meeting held on February 21, 2006, the Board of Directors of the Fund
approved a proposal to convert the Fund from its current status as a
closed-end investment company into an open-end investment company (the
"Conversion") and certain related matters, subject to approval by
shareholders at a meeting to be held in the future.
24
SunAmerica Senior Floating Rate Fund, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of SunAmerica Senior Floating Rate
Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, of
changes in net assets and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of SunAmerica Senior
Floating Rate Fund, Inc. (the "Fund") at December 31, 2005, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 2005 by
correspondence with the custodian, brokers, and selling or agent banks, provide
a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 24, 2006
25
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- December 31, 2005 -- (unaudited)
Annual Approval of the Advisory Agreement and Subadvisory Agreements
The Board of Directors (the "Board"), including the Directors that are not
interested persons of the SunAmerica Senior Floating Rate Fund, Inc. (the
"Fund") (the "Disinterested Directors"), last approved the Investment Advisory
and Management Agreement between the Fund and AIG SunAmerica Asset Management
Corp. ("SAAMCo") (the "Advisory Agreement") for a period of one year, at a
meeting held on August 31, 2005. At this same meeting, the Board also approved
the renewal of the subadvisory agreement between SAAMCo and AIG Global
Investment Company ("AIGGIC" or the "Subadviser") with respect to the Fund (the
"Subadvisory Agreement").
The Board noted that the discussion and approval of the Advisory Agreement and
Subadvisory Agreement at the August 31, 2005 meeting was the culmination of
numerous discussions and meetings that had taken place in recent months. The
Board further noted that certain members of the Board had met with senior
management on numerous occasions and had in-depth discussions regarding the
Fund's performance, advisory expenses and other fees and negotiations with
respect to advisory expenses.
In accordance with Section 15(c) of the Investment Company Act of 1940, as
amended (the "1940 Act"), the Board was provided with materials relating to its
consideration of the Advisory Agreement. These materials assisted the Board in
analyzing: (1) the nature, extent and quality of services to be provided by
SAAMCo and the Subadviser, including administrative and shareholder services to
be provided by SAAMCo and certain other affiliated companies; (2) the costs of
services to be provided and benefits realized by SAAMCo and the Subadviser,
including a comparison of fees and expense ratios of other similar funds, as
well as SAAMCo's profitability and financial condition; (3) the terms of the
Advisory Agreement and Subadvisory Agreement; (4) economies of scale and
whether the fee levels reflect these economies of scale; (5) SAAMCo's overall
organization, compliance policies and history, as well as the Subadviser's
compliance policies and history; and (6) the investment performance of the Fund
in its peer group ("Peer Group") as determined by Lipper, Inc. ("Lipper") and
as compared to their relevant benchmarks and indices. Experienced counsel that
is independent of SAAMCo provided advice to the Disinterested Directors
("Independent Counsel"). The Disinterested Directors considered additional
information, such as expense and other comparative data from Lipper. In
considering these factors, as described in more detail below, the Board did not
identify any single factor or group of factors as being more important than the
others, but considered all factors together.
Nature, Extent and Quality of Services
The Board, including the Disinterested Directors, considered the nature,
quality and extent of services to be provided by SAAMCo. In making its
evaluation, the Board considered that SAAMCo acts as investment manager and
adviser to the Fund, manages the daily business affairs of the Fund, and
obtains and evaluates economic, statistical and financial information to
formulate and implement investment policies. Additionally, SAAMCo provides
office space, accounting, legal, compliance, clerical and administrative
services (exclusive of, and in addition to, overseeing of any such service
provided by any others retained by the Fund), and has authorized its officers
and employees, if elected, to serve as officers or directors of the Fund
without compensation. Finally, SAAMCo is responsible for monitoring and
reviewing the activities of third-party service providers.
In making their determination regarding the nature and quality of SAAMCo's
services, the Directors considered SAAMCo's responsibility to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective administration of the Fund. The Board also reviewed the
performance of the Fund, the details of which are described below.
The Board also reviewed the compliance and administrative services of SAAMCo.
The Board noted that SAAMCo provides and compensates a Chief Compliance Officer
for the Fund, and that SAAMCo maintains a compliance staff of eight people. The
Board analyzed the structure and duties of SAAMCo's accounting, legal and
compliance departments and concluded that they were adequate to meet the needs
of the Fund.
SAAMCo has delegated daily investment management responsibilities to AIGGIC.
Therefore, the Board also considered the nature, quality and extent of services
to be provided by the Subadviser. The Board considered that the Subadviser is
responsible for providing investment management services, including investment
research, advice and supervision, and
26
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- December 31, 2005 -- (unaudited)
(continued)
determining which securities will be purchased or sold by the Fund. The Board
reviewed each Subadviser's history, structure and size, visibility and
resources, which are needed to attract and retain highly qualified investment
professionals. With respect to administrative services to be provided by the
Subadviser, the Board considered that each Subadviser provides assistance in
general marketing assistance and has developed internal procedures for
monitoring compliance with investment objectives, policies and restrictions of
the Fund as set forth in the prospectus.
The Board concluded that it was satisfied with the nature, quality and extent
of the services provided by or to be provided by SAAMCo and the Subadviser and
that there was a reasonable basis on which to conclude that SAAMCo and the
Subadviser would continue to provide a high quality of investment management
services.
Fees and Expenses
The Board, including the Disinterested Directors, reviewed information
regarding the fees paid by the Fund to SAAMCo for investment advisory and
management services. The Board examined this information in order to determine
the reasonableness of the fees in light of the nature and quality of SAAMCo's
services and any additional benefits received by SAAMCo or its affiliates in
connection with providing such services to the Fund.
To assist in analyzing the reasonableness of the fees, the Board received
reports prepared independently by Lipper detailing comparative advisory fee and
other information of the Fund's Peer Group as determined objectively by Lipper,
and rankings within the relevant Lipper categories. The Board also received
reports prepared by SAAMCo (including reports on investment management fees
charged by SAAMCo to other funds it manages) and by the Board's Independent
Counsel. In considering the reasonableness of the advisory fee, the Board
reviewed a number of expense comparisons, including: (i) contractual management
fees; (ii) actual total expenses; and (iii) actual and allowable Rule 12b-1 and
non-12b-1 fees. The Board also took into account that certain fee arrangements
included breakpoints that will adjust the fee downward as the size of Fund
increases, thereby allowing the shareholders to participate in economies of
scale
Additionally, the Board reviewed the Fund's net expense ratios and analyzed the
expense reimbursements and/or fee waivers. The Board further considered net
expense ratio caps contractually agreed upon by SAAMCo for certain classes of
shares of the Fund. The Board compared the Fund's net expense ratios to those
of other funds within its Peer Group. Based upon the reports prepared by Lipper
and other information provided by SAAMCo and by counsel to the Disinterested
Trustees, the Board was satisfied that the fee and expense ratios of the Fund
were acceptable given the quality of services expected to be provided and were
comparable to the fee and expense ratios of similar funds within the Peer Group.
In considering the subadvisory fee, the Board, including the Disinterested
Directors, considered that the Fund pays a fee to SAAMCo pursuant to the
Advisory Agreement, and that, in turn, SAAMCo, rather than the Fund, pays a fee
to the Subadviser. Therefore, the Board considered the amount retained by
SAAMCo and the fee paid to the Subadviser, which is an affiliate of SAAMCo,
with respect to the different services provided by the Subadviser. The Board
also considered that the shareholders of the Fund had approved the Subadvisory
Agreement, including the fee schedule, by majority vote, at a Special Meeting
of Shareholders on March 31, 2005.
The Board also considered that the Subadvisory Agreement contained breakpoints
in the fee schedule if the Fund reached certain asset levels. The Board noted
that such breakpoints would not directly benefit the shareholders, but would
result in SAAMCo retaining a larger portion of the advisory fee. The Board,
however, was satisfied that the Advisory Agreement also contained breakpoints
in the fee schedule that would directly benefit shareholders if the Fund
reached certain asset levels. Furthermore, the Board noted that SAAMCo had
agreed to contractual expense caps for certain classes which benefited
shareholders, as described above.
Costs of Services and Benefits Derived, as well as the Adviser's Profitability
and Financial Condition.
The Board, including the Disinterested Directors, considered the direct and
indirect costs and benefits of SAAMCo's providing services to the Fund. The
Board reviewed financial statements relating to SAAMCo's profitability and
financial condition with respect to the services it provided the Fund, and
considered how profit margins could affect SAAMCo's ability to attract and
retain qualified investment personnel. The Board concluded that SAAMCo had a
satisfactory financial condition, and that their profitability was not
excessive as compared to standards set forth in applicable Court cases and
other available industry information.
27
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- December 31, 2005 -- (unaudited)
(continued)
With respect to indirect costs and benefits, the Board was informed, based on
management's judgment, that (1) any indirect costs incurred by SAAMCo in
connection with rendering investment advisory services to the Fund are
inconsequential to the analysis of the adequacy of the advisory fees, and (2)
any collateral benefits derived as a result of providing advisory services to
the Fund are de minimis and do not impact upon the reasonableness of the
advisory fee. The Board also considered the reputational value to SAAMCo from
serving as investment adviser.
The Board also considered fees and, where applicable, profits earned by
affiliates for providing other services to the Fund, and, as described above,
research and other services SAAMCo obtained in connection with soft dollar
commissions. The Board concluded that any benefits that SAAMCo and its
affiliates could be expected to receive with regard to providing investment
advisory and other services to the Fund were not excessive.
Terms of the Advisory Agreement and Subadvisory Agreement
The Board, including the Disinterested Directors, received a draft of the
proposed Advisory Agreement and Subadvisory Agreement. The Board considered
that they may be renewed from year to year, so long as their continuance is
specifically approved at least annually in accordance with the requirements of
the 1940 Act and that the Agreements provide that they will terminate in the
event of an assignment (as defined in the 1940 Act) or upon termination of the
agreement.
In reviewing the terms of the Advisory Agreement, the Board considered that
SAAMCo pays all of its own expenses in connection with the performance of its
duties, as well as the salaries, fees and expenses of the Directors and
Officers who are employees of SAAMCo. The Board noted, however, that the Fund
bears certain proxy-related expenses. The Board also considered the termination
and liability provisions of the Advisory Agreement.
With respect to the Subadvisory Agreement, the Board further considered, that
under the terms of the Subadvisory Agreement, the Subadviser is not liable to
the Fund, or its shareholders, for any act or omission by the Subadviser or for
any losses sustained by the Fund, or its shareholders, except in the case of
willful misfeasance, bad faith, gross negligence and reckless disregard of
obligations or duties. 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, including the Disinterested Directors, considered whether the Fund
has benefited from economies of scale and whether there is potential for future
realization of economies with respect to the Fund. The Board concluded that any
potential economies of scale are being shared between shareholders and SAAMCo
in an appropriate manner. The Board considered that the Funds in the AIG
SunAmerica complex share common resources and as a result, an increase in the
overall size of the complex could permit each fund to incur lower expenses than
they otherwise would achieve as stand-alone entities. The Board also considered
the anticipated efficiencies in the processes of SAAMCo as it adds labor and
capital to expand the scale of operations.
The Board concluded that the advisory fee structure was reasonable and that no
changes were currently necessary to further reflect economies of scale. The
Board noted that it will continue to review fees, including breakpoints and
expense caps in connection with contract renewals.
The Overall Organization of SAAMCo
The Directors considered the benefit to shareholders of investing in a Fund
that is part of a family of funds offering a variety of types of mutual funds
and shareholder services. The Directors also considered SAAMCo's experience in
providing management and investment advisory services to advisory clients, and
the fact that SAAMCo currently managed, advised and/or administered
approximately $42 billion of assets. The Directors also considered SAAMCo's
record of compliance with the Fund's objectives, strategies and restrictions
and its positive regulatory and compliance history. The Directors also
considered SAAMCo's relationships with its affiliates and the resources
available to them.
28
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF ADVISORY AGREEMENTS -- December 31, 2005 -- (unaudited)
(continued)
Compliance
The Board considered SAAMCo's and AIGGIC's compliance and regulatory history,
and inquired whether SAAMCo or AIGGIC had been the target of any regulatory
actions or investigations. In addition, the Board reviewed information
concerning SAAMCo's compliance staff that would be responsible for providing
compliance functions on behalf of the Fund. Finally, the Board reviewed the
Code of Ethics of SAAMCo and AIGGIC, and determined that they contain
provisions reasonably necessary to prevent fraudulent, deceptive or
manipulative acts by personnel in connection with their personal transactions
in securities held or to be acquired by the Fund.
Investment Performance
The Board regularly reviews the performance of the Fund over various periods of
time. At the Board meeting held on August 31, 2005, in connection with the
approval of the continuation of the Advisory Agreement and the Subadvisory
Agreement, the Board reviewed the Fund's annualized total return for the one-,
two-, three-, four- and five-year periods. The Board, including the
Disinterested Directors, received and reviewed information regarding the
investment performance of the Fund as compared to its respective benchmarks,
the performance of the Fund's Peer Group, and to an appropriate index or
combination of indices. The Board also received reports detailing the Fund's
daily liquidity record, which included cash positions, and monthly repurchase
rates.
In preparation for the August 31, 2005 meeting, the Board was provided with
performance reports independently prepared by Lipper. Based on the Lipper
reports, the Board reviewed the Fund's annualized total return for the prior
one-, two-, three-, four- and five-year periods ending on June 30, 2005. The
Board also received a report prepared by SAAMCo's management which detailed the
Fund's performance with respect to 2005.
In reviewing the performance of the Fund, the Board noted that AIGGIC had
assumed portfolio management responsibilities on January 1, 2005 and that the
Fund's performance history prior to that date was the result of a different
subadviser. The Board considered AIGGIC's performance record in managing a
portfolio with similar investment objectives prior to assuming portfolio
management responsibilities of the Fund. The Board further considered that
while the Fund's performance still lagged its Peer Group and relevant Index
they remained confident that AIGGIC would provide the high level of investment
management services expected by the Board.
Conclusion
After a full and complete discussion, and following negotiations with SAAMCo's
management, the Board renewed the Advisory and Subadvisory Agreement with
respect to the Fund for a period of one year. The Board indicated that it would
carefully monitor the performance of the Fund and that the Board would take
appropriate action, as necessary, in an effort to enhance performance
Based on their evaluation of all material factors and assisted by the advice of
independent counsel, the Board, including the Disinterested Directors, were
satisfied that the terms of the Advisory Agreement and Subadvisory Agreement
were fair, and in the best interest of the Fund and its shareholders, and that
the advisory fee rates provided in the Advisory Agreement are acceptable in
light of the usual and customary charges made for services of similar nature
and quality. In arriving at a decision to approve the continuation of the
Advisory Agreement and Subadvisory Agreement, the Board did not single out any
one factor or group of factors as being more important than other factors, but
considered all factors together.
29
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- December 31, 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)
- ---------------------- ---------- -------------- ----------------------------- ------------ -------------------------------
Directors
Dr. Judith L. Craven Director 2000- Retired. 91 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. 91 Member of the Board of
DOB: December 30, 1938 present Governors, Boston Stock
Exchange (1985-Present).
Samuel M. Eisenstat Director 2001- Attorney, solo practitioner. 52 Director of North European
DOB: March 7, 1940 present Oil Royalty Trust.
Stephen J. Gutman Director 2001- Associate, Corcoran Group 52 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, 100 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 Director 2004- President and CEO, 52 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).
30
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- December 31, 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)
- ------------------- ---------- -------------- ------------------------------ ------------ -------------------
Officers
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).
Donna M. Handel Treasurer 2002- Senior Vice President, N/A N/A
DOB: June 25, 1966 present SAAMCo (December 2004-
Present); Assistant Treasurer
(2001 to 2002); Vice
President, SAAMCo (August
1997 to December 2004).
Gregory N. Bressler Secretary September Senior Vice President and N/A N/A
DOB: November 17, and Chief 2005 to General Counsel, SAAMCo
1966 Legal Present (June 2005 to Present); Vice
Officer President and Director of U.S.
Asset Management
Compliance, Goldman Sachs
Asset Management, L.P.
(June 2004 to June 2005);
Deputy General Counsel,
Credit Suisse Asset
Management, LLC. (June
2002-June 2004); Vice
President and Counsel, Credit
Suisse Asset Management,
LLC (January 2000-June
2002).
- --------
* 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), SunAmerica Focused Alpha Large-Cap Fund (1
fund), Anchor Series Trust (9 portfolios), SunAmerica Senior Floating Rate
Fund, Inc. (1 fund), SunAmerica Series Trust (32 portfolios), AIG Series
Trust (6 funds), VALIC Company I (33 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.
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.
31
[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.
J. Steven Neamtz, Vice Center Securities and Exchange
President 3200 Plaza 5 Commission's website at
Gregory R. Kingston, Jersey City, NJ www.sec.gov. You can also
Vice President and 07311-4992 obtain cop-ies of Form
Assistant Treasurer N-Q by (i) visiting the
Cynthia A. Gibbons, Vice Shareholder Servicing U.S. Securities and
President and Chief Agent Exchange Commis-sion's
Compliance Officer AIG SunAmerica Fund Public Reference Room in
Gregory N. Bressler, Services, Inc. Washington DC
Chief Legal Harborside Financial (information on the
Officer and Secretary Center operation of the Public
Nori L. Gabert, 3200 Plaza 5 Reference Room may be
Assistant Secretary Jersey City, NJ obtained by calling
Corey A. Issing, 07311-4992 1-800-SEC-0330); (ii)
Assistant Secretary sending your request and
Kathryn A. Pearce, Custodian and Transfer a duplicating fee to the
Assistant Treasurer 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.
32
[LOGO]
Distributed by:
AIG SunAmerica Capital Services, Inc.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Investors should carefully consider the investment objectives, risks, charges
and expenses of any mutual fund before investing. This and other important
information is contained in the prospectus, which can be obtained from your
financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext.
6003. Read the prospectus carefully before you invest. Funds distributed by AIG
SunAmerica Capital Services, Inc.
www.sunamericafunds.com
SFANN-12/05
Item 2. Code of Ethics.
The SunAmerica Senior Floating Rate Fund, Inc. the ("registrant") has adopted
a Code of Ethics applicable to its Principal Executive and Principal Accounting
Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors has determined that William J. Shea, the
Charirman of the registrant's Audit Committe, qualifies as an audit committee
financial expert, as defined in the instructions to Item 3(a) of Form N-CSR. Mr.
Shea is considered to be "independent" for purposes of Item 3(a)(2) of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)--(d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal
accountant were as follows:
2004 2005
---- ----
Audit Fees ................... $65,637 $67,006
Audit-Related Fees ........... $22,138 $22,334
Tax Fees ..................... $ 8,650 $ 8,871
All Other Fees ............... $ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the principal accountant
in connection with statutory and regulatory filings. Audit-Related Fees
principally include a SAS No. 100 review of the registrant's Semiannual
Shareholder Report. Tax Fees principally include tax compliance, tax advice, tax
planning and preparation of tax returns.
(e)
(1) The registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliate") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the operations and
financial reporting of the registrant.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and Adviser Affiliate
that provides ongoing services to the registrant for 2005 and 2004 were
$298,518 and $1,651,391 respectively.
(h) Non-audit services rendered to the registrant's investment adviser and any
Adviser Affiliate that were not pre-approved pursuant to Paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were considered by the
registrant's audit committee as to whether they were compatible with
maintaining the principal accountant's independence.
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.
PROXY VOTING POLICIES AND PROCEDURES
Proxy Voting Responsibility. The Fund has adopted policies and procedures
for the voting of proxies relating to portfolio securities. The policies and
procedures were drafted according to recommendations by a proxy voting committee
composed of senior management of the Fund and the Fund's investment adviser. The
policies and procedures enable the Fund to vote proxies in a manner consistent
with the best interests of the Fund's shareholders.
The Fund has retained a proxy voting service, Institutional
Shareholder Services ("ISS"), to effect votes on behalf of the Fund according to
the Fund's policies and procedures, and to assist the Fund with record keeping
of proxy votes.
Company Management Recommendations. When determining whether to invest in
the securities of a particular company, one of the key factors a portfolio
manager considers is the quality and depth of the company's management. In
holding portfolio securities, the Fund is seeking to maximize the investment
value for shareholders, but not necessarily exercise control over the issuers of
portfolio securities or otherwise advance a particular social agenda. The Fund's
policies and procedures therefore provide that the Fund will generally vote in
support of management recommendations on most corporate matters. When a
corporation's portfolio manager is dissatisfied with a company's management, the
Fund typically will sell the holding.
Case-By-Case Voting Matters. The policies and procedures identify certain
voting matters that will be decided on a case-by-case basis. In these
circumstances, the proxy voting committee generally will rely on the guidance or
a recommendation from the proxy voting service, but may also rely on other
appropriate personnel of the investment adviser (or "SunAmerica" or the
"Adviser") and/or the subadviser of the Fund, or other sources. In these
instances, suchperson(s) will recommend the vote that will maximize value for,
and is in thebest interests of, the Fund's shareholders.
Examples of the Fund's Positions on Voting Matters. Consistent with
the approaches described above, the following are examples of the Fund's voting
positions on specific matters:
. Vote with management recommendations on most corporate and mutual fund
matters;
. Vote on a case-by-case basis on proposals to increase authorized
common stock;
. Vote against the authorization of preferred stock with unspecified
voting, conversion, dividend distribution and other rights ("blank
check" preferred stock);
. Vote on a case-by-case basis regarding finance, merger and acquisition
matters;
. Vote against most shareholder proposals;
. Abstain from voting on social responsibility or environmental matters,
unless the fund's objective is directly related to the social or
environmental matter in question;
. Not vote proxies for index funds/portfolios and passively managed
funds/portfolios; and
. Vote on a case-by-case basis on equity compensation plans.
Conflicts of Interest. Members of the proxy voting committee will
resolve conflicts of interest presented by a proxy vote. In practice,
application of the Fund's proxy voting policies and procedures will in most
instances adequately address any possible conflicts of interest, as the policies
and procedures were pre-determined by the proxy voting committee, and votes are
effected according to the policies and procedures by ISS, an independent third
party.
However, if a situation arises where a vote presents a conflict between the
interests of the Fund's shareholders and the interests of SunAmerica, or one of
SunAmerica's affiliates, and the conflict is known to the proxy voting
committee, the proxy voting committee will consult with a Director who is not an
"interested" person, as that term is defined in the Investment Company Act of
1940, as amended, time permitting before casting the vote to ensure that the
Fund votes in the best interests of its shareholders. Any individual with a
known conflict may be required by the proxy voting committee to recuse himself
or herself from being involved in the proxy voting decision. Senior management,
including the proxy voting committee, will evaluate the situation and ensure
that the Fund selects the vote that is in the best interests of the Fund's
shareholders.
Proxy Voting Records. ISS will maintain records of voting decisions
for each vote cast on behalf of the Fund. Pursuant to SEC requirements,
beginning in August of 2004, on an annual basis the Fund will make available on
its website its proxy voting record for the one-year period ending on June 30th.
The proxy voting record will also be available on the SEC's website at
http://www.sec.gov.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
AIG Global Investment Company ("AIGGIC") is the Subadviser to the
SunAmerica Senior Floating Rate Fund (the "Fund"). Steven Oh, John Lapham and
Thomas Brandt are the Fund's portfolio managers and are jointly and primarily
responsible for the day-to-day management of the Fund.
Steven Oh, CFA, joined AIGGIC in 2002 and is currently Managing
Director and co-portfolio manager for the Leveraged Loan Group. Prior to
joining AIGGIC, Mr. Oh served as a portfolio manager at Citadel Investments and
Koch Capital and was a Vice President in high yield and distressed debt trading
at BancAmerica Securities.
John Lapham, CFA, joined AIGGIC with the acquisition of SunAmerica in
1999. He is a co-portfolio manager for the Leveraged Loan Group. Mr. Lapham
joined SunAmerica in 1995 as a Managing Director in the Corporate Finance Group.
Thomas Brandt joined AIGGIC in 2000 as a trader. Mr. Brandt as co-
portfolio manager of the Fund is responsible for purchases and sales of bank
debt. Prior to joining AIGGIC, Mr. Brandt was a Managing Director at BNO
Paribas' Media and Technology Finance Department, where he was responsible for a
$2.8 billion media and telecom loan portfolio.
Other Accounts Managed by the Portfolio Managers
The following table indicates the type (Registered Investment Company
("RIC"), Other Pooled Investments ("OPI"), and Other Accounts ("OA"), number of
accounts, and total assets of the accounts which each Portfolio Manager had day-
to-day responsibilities as of December 31, 2005,
Total Assets
Name of Portfolio Number of Managed in
Manager Type of Account Accounts Accounts ($millions)
- ----------------- --------------- --------- --------------------
Steven Oh RIC 0 None
OPI None N/A
OA 1 $241.47
- ----------------- --------------- --------- --------------------
John Lapham RIC 0 None
OPI 0 None
OA 10 $4,421.55
- ----------------- --------------- --------- --------------------
Thomas Brandt RIC 0 None
OPI 0 None
OA 10 $4,421.55
- ----------------- --------------- --------- --------------------
Potential Conflicts of Interest
As shown in the tables above, the Portfolio Managers are responsible
for managing other accounts for other clients, ("Other Client Accounts") in
addition to the Fund. In certain instances, conflicts may arise in their
management of the Fund and such Other Client Accounts. The Portfolio Managers
aim to conduct their activities in such a manner that permits them to deal
fairly with each of their clients on an overall basis in accordance with
applicable securities laws and fiduciary obligations. Notwithstanding,
transactions, holdings and performance, among others, may vary among the Fund
and such Other Client Accounts.
.. Trade Allocations. Conflicts may arise between the Fund and Other Client
Accounts in the allocation of trades among the Fund and the Other Client
Accounts, as the case may be. For example, the Adviser and/or the
Portfolio Manager may determine that there is a security that is suitable
for the Fund as well as for Other Client Accounts that have a similar
investment objective. Likewise, a particular security may be bought for one
or more clients when one or more other clients are selling that same
security, or the Adviser and/or the Portfolio Manager may take "short"
positions in Other Client Accounts with respect to securities held "long"
within the Fund, or vice-versa, which may adversely affect the value of
securities held by the Fund. Such ownership or different interests may
cause a conflict of interest. The Fund, Adviser and/or AIGGIC have adopted
policies, procedures and/or practices regarding the allocation of trades
and brokerage (where applicable), which address the conflicts associated
with managing multiple accounts for multiple clients (including affiliated
clients). Subject to cash and security availability and lot size, among
other factors, the policies, procedures and/or practices generally require
that securities be allocated among the Fund and Other Client Accounts with
a similar investment objective in a manner that is fair, equitable and
consistent with their fiduciary obligations to each.
.. Allocation of Portfolio Managers' Time. The Portfolio Managers' management
of the Fund and Other Client Accounts may result in the Portfolio Managers
devoting a disproportionate amount of time and attention to the management
of the Fund and Other Client Accounts if the Fund and Other Client Accounts
have different objectives, benchmarks, time horizons, and fees. Generally,
such competing interests for the time and attention of the Portfolio
Managers are managed. Although the Adviser does not track the time the
Portfolio Managers spends on the Fund or a single Other Client Account, the
Adviser and/or AIGGIC do periodically assess whether the Portfolio
Managers have adequate time and resources to effectively manage all of such
Portfolio Managers' accounts. In certain instances, Portfolio Managers may
be employed by two or more employers. Where the Portfolio Manager receives
greater compensation, benefits or incentives from one employer over
another, the Portfolio Managers may favor one employer over the other (or
Other Client Accounts) causing a conflict of interest.
.. Personal Trading by Portfolio Managers. The management of personal accounts
by a Portfolio Manager may give rise to potential conflicts of interest.
While generally, AIGGIC's Code of Ethics will impose limits on the ability
of a Portfolio Manager to trade for his or her personal account, especially
where such trading might give rise to a potential conflict of interest,
there is no assurance that AIGGIC's Code of Ethics will eliminate such
conflicts.
AIGGIC's Portfolio Manager Compensation
Compensation for AIGGIG Portfolio Managers has both a salary and a
bonus component. The salary component is a fixed base salary, which is generally
based upon several factors, including experience and market levels of salary for
such position. The bonus component is based both on a Portfolio Manager's
individual performance and the organizational performance of AIGGIC. The bonus
component is generally calculated as follows: (1) 60% is linked to the
management of a Portfolio Manager's funds; (2) 20% is based on AIGGIC's
profitability; and (3) 20% is determined on a discretionary basis (including
individual qualitative goals). For the 60% component, the measures for a
Portfolio Manager may vary according to the day-to-day responsibilities of a
particular Portfolio Manager. The measures comprise any combination of (a) total
return measures, (b) benchmark measures and (c) peer group measures. Any
long-term compensation may include stock options and restricted stock units,
both having vesting schedules.
Portfolio Manager Ownership of Fund Shares
The following table shows the dollar range of shares beneficially
owned by each Portfolio Manager as of December 31, 2005.
Aggregate Dollar Range of
Equity Securities in All
Dollar Range of Equity Registered Investment
Name of Securities in each Fund managed Companies Managed by
Portfolio Manager by the named Portfolio Manager SunAmerica
- ----------------- ------------------------------ -------------------------
Steven Oh None None
- ----------------- ------------------------------ -------------------------
John Lapham None None
- ----------------- ------------------------------ -------------------------
Thomas Brandt None None
- ----------------- ------------------------------ -------------------------
(b) Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
None.
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 270.30a-3(d))) that occurred during the
second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and
Principal Accounting Officers pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406.Code
of Ethics.
(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: March 10, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: March 10, 2006
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: March 10, 2006