================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08727
SunAmerica Senior Floating Rate Fund, Inc.
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(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311
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(Address of principal executive offices) (Zip code)
John T. Genoy
Senior Vice President
AIG SunAmerica Asset Management Corp.
Harborside Financial Center 3200 Plaza 5
Jersey City, NJ 07311
----------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6414
Date of fiscal year end: December 31
Date of reporting period: December 31, 2008
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Item 1. Reports to Stockholders
[GRAPHIC]
ANNUAL REPORT 2008
SUNAMERICA
Senior Floating Rate Fund
[LOGO]
Table of Contents
SHAREHOLDERS' LETTER.................................... 1
EXPENSE EXAMPLE......................................... 2
STATEMENT OF ASSETS AND LIABILITIES..................... 4
STATEMENT OF OPERATIONS................................. 6
STATEMENT OF CHANGES IN NET ASSETS...................... 7
STATEMENT OF CASH FLOWS................................. 8
FINANCIAL HIGHLIGHTS.................................... 9
PORTFOLIO OF INVESTMENTS................................ 14
NOTES TO FINANCIAL STATEMENTS........................... 22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. 30
APPROVAL OF ADVISORY AGREEMENTS......................... 31
DIRECTORS AND OFFICERS INFORMATION...................... 35
SHAREHOLDER AND TAX INFORMATION......................... 38
COMPARISON: FUND vs. INDEX.............................. 39
December 31, 2008 ANNUAL REPORT
Shareholders' Letter
Dear Shareholder:
As you know, 2008 was a year for the history books; one that may mark a
watershed in our economic and financial history. We ended the year with the
economy contracting rapidly, consumer confidence eroding, increasing
joblessness, a threat of deflation, housing prices collapsing, and many major
financial institutions obtaining governmental support. Moreover, the economic
picture was not restricted to U.S. shores, as developed economies in Europe and
Asia and emerging economies, such as Brazil and China, also experienced a
serious contraction in economic growth.
The fixed income markets offered little relief for investors. Credit spreads
widened significantly in both investment-grade and below-investment-grade
credits. Even the leveraged loan market was not immune from the tidal wave that
hit. We urge you to read the detailed discussion provided in this annual report
to gain additional insight regarding the Fund and the leveraged loan market in
2008.
We strongly recommend that you consult with your financial adviser regularly to
assure that you maintain a diversified portfolio that is appropriate for both
your goals and risk tolerance. In these challenging times, we remain focused on
the management of your assets and thank you for your continued investment.
Sincerely,
THE SUNAMERICA SENIOR FLOATING RATE FUND PORTFOLIO MANAGERS
AIG Investments
Thomas G. Brandt
John G. Lapham
Steven S. Oh
- --------
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; non-diversification and borrower industry
concentration; and lack of an active trading market, in certain cases, 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.
1
SunAmerica Senior Floating Rate Fund, Inc.
EXPENSE EXAMPLE -- December 31, 2008 -- (unaudited)
Disclosure of Portfolio Expenses in Shareholder Reports
As a shareholder of the SunAmerica Senior Floating Rate Fund, Inc. (the
"Fund"), you may incur two types of costs: (1) transaction costs, including
sales charges on purchase payments and contingent deferred sales charges and
(2) ongoing costs, including management fees, distribution and service fees,
and other Fund expenses. The example set forth below is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at July 1, 2008 and
held until December 31, 2008.
Actual Expenses
The "Actual" section of the table provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the column under the heading entitled "Expenses Paid During the Six
Months Ended December 31, 2008" to estimate the expenses you paid on your
account during this period. In addition, the "Expenses Paid During the Six
Months Ended December 31, 2008" column does not include administrative fees
that may apply to qualified retirement plan accounts. See the Fund's prospectus
and/or your retirement plan documents for a full description of these fees. Had
these fees been included, the "Expenses Paid During the Six Months Ended
December 31, 2008" column would have been higher and the "Ending Account Value"
would have been lower.
Hypothetical Example for Comparison Purposes
The "Hypothetical" section of the table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Funds of other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds. In addition, the "Expenses Paid During the Six Months
Ended December 31, 2008" column does not include administrative fees that may
apply to qualified retirement plan accounts. See the Fund's prospectus and/or
your retirement plan document for full description of these fees. Had these
fees been included, the "Expenses Paid During the Six Months Ended December 31,
2008" column would have been higher and the "Ending Account Value" would have
been lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, including sales
charges on purchase payments, contingent deferred sales charges and
administrative fees, if applicable to your account. Please refer to the Fund's
prospectus and/or qualified retirement plan document for more information.
Therefore, the "Hypothetical" example is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs and other fees were
included, your costs would have been higher.
2
SunAmerica Senior Floating Rate Fund, Inc.
EXPENSE EXAMPLE -- December 31, 2008 -- (unaudited) (continued)
Actual Hypothetical
---------------------------------------------------- ---------------------------------
Ending Ending Account
Account Value Expenses Paid Value using
Beginning Using Actual During the Beginning a Hypothetical 5%
Account Value Returns at Six Months Ended Account Value Assumed Return at
at July 1, 2008 December 31, 2008 December 31, 2008* at July 1, 2008 December 31, 2008
--------------- ----------------- ------------------ --------------- -----------------
Senior Floating Rate Fund
Class A#............... $1,000.00 $629.55 $5.94 $1,000.00 $1,017.85
Class B#............... $1,000.00 $628.20 $7.16 $1,000.00 $1,016.34
Class C#............... $1,000.00 $629.38 $7.17 $1,000.00 $1,016.34
Class D#............... $1,000.00 $631.14 $5.13 $1,000.00 $1,018.85
Class Q#............... $1,000.00 $629.16 $5.94 $1,000.00 $1,017.85
-------------------
Expense
Expenses Paid Ratio
During the as of
Six Months Ended December 31,
December 31, 2008* 2008*
------------------ ------------
Senior Floating Rate Fund
Class A#............... $7.35 1.45%
Class B#............... $8.87 1.75%
Class C#............... $8.87 1.75%
Class D#............... $6.34 1.25%
Class Q#............... $7.35 1.45%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 184 days divided by 366
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges and administrative
fees, if applicable to your account. Please refer to your Prospectus and/or
your qualified retirement plan document for more information.
# During the stated period, the investment adviser and distributor either
waived a portion of or all of the fees and assumed a portion of or all
expenses for the Funds. As a result, if these fees and expenses had not been
waived, the "Actual/Hypothetical Ending Account Value" would have been lower
and the "Actual/Hypothetical Expenses Paid During the Six Months Ended
December 31, 2008" and the "Expense Ratios" would have been higher.
3
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES -- December 31, 2008
ASSETS:
Long-term investment securities, at value (unaffiliated)*............................ $ 127,832,438
Receivable for:
Fund shares sold.................................................................... 990,845
Dividends and interest.............................................................. 2,371,175
Investments sold.................................................................... 2,925,363
Prepaid expenses and other assets.................................................... 15,375
Due from investment adviser for expense reimbursements/fee waivers................... 41,560
Due from distributor for fee waivers................................................. 24,405
-------------
Total assets........................................................................ 134,201,161
-------------
LIABILITIES:
Payable for:
Fund shares redeemed................................................................ 1,678,534
Investments purchased............................................................... 255,393
Investment advisory and management fees............................................. 96,515
Distribution and service maintenance fees........................................... 71,284
Administration fees................................................................. 45,419
Transfer agent fees and expenses.................................................... 39,021
Directors' fees and expenses........................................................ 72,681
Other accrued expenses.............................................................. 180,695
Line of credit...................................................................... 4,043,397
Dividends payable.................................................................... 299,473
Commitments (Note 11)................................................................ --
-------------
Total liabilities................................................................... 6,782,412
-------------
Net assets........................................................................ $ 127,418,749
=============
NET ASSETS REPRESENTED BY:
Common stock, $.01 par value......................................................... $ 247,987
Additional paid-in capital........................................................... 291,105,616
-------------
291,353,603
Accumulated undistributed net investment income (loss)............................... (35,961)
Accumulated undistributed net realized gain (loss) on investments.................... (48,676,318)
Unrealized appreciation (depreciation) on investments................................ (115,222,575)
-------------
Net assets.......................................................................... $ 127,418,749
=============
*COST
Long-term investment securities (unaffiliated)...................................... $ 243,055,013
=============
See Notes to Financial Statements
4
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES -- December 31, 2008 -- (continued)
Class A:
Net assets................................................................. $25,545,511
Shares outstanding......................................................... 4,965,780
Net asset value and redemption price per share............................. $ 5.14
Maximum sales charge (3.75% of offering price)............................. 0.20
-----------
Maximum offering price to public........................................... $ 5.34
===========
Class B:
Net assets................................................................. $ 6,812,319
Shares outstanding......................................................... 1,326,952
Net asset value, offering and redemption price per share (excluding any
applicable contingent deferred sales charges)............................. $ 5.13
===========
Class C:
Net assets................................................................. $86,125,755
Shares outstanding......................................................... 16,766,107
Net asset value, offering and redemption price per share (excluding any
applicable contingent deferred sales charges)............................. $ 5.14
===========
Class D:
Net assets................................................................. $ 4,321,103
Shares outstanding......................................................... 841,202
Net asset value, offering and redemption price per share................... $ 5.14
===========
Class Q:
Net assets................................................................. $ 4,614,061
Shares outstanding......................................................... 898,628
Net asset value, offering and redemption price per share................... $ 5.13
===========
See Notes to Financial Statements
5
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF OPERATIONS -- For the year ended December 31, 2008
INVESTMENT INCOME:
Interest (unaffiliated)........................................................... $ 19,065,855
Dividends (unaffiliated).......................................................... 91,333
Facility and other fee income (Note 2)............................................ 1,180,835
-------------
Total investment income........................................................ 20,338,023
-------------
EXPENSES:
Investment advisory and management fees........................................... 2,270,511
Administration fees............................................................... 1,068,476
Distribution and service maintenance fees:
Class A......................................................................... 229,065
Class B......................................................................... 105,317
Class C......................................................................... 1,311,125
Class Q......................................................................... 12,482
Transfer agent fees and expenses:
Class A......................................................................... 143,984
Class B......................................................................... 36,536
Class C......................................................................... 407,750
Class D......................................................................... 18,293
Class Q......................................................................... 13,338
Registration fees:
Class A......................................................................... 41,521
Class B......................................................................... 10,962
Class C......................................................................... 35,656
Class D......................................................................... --
Class Q......................................................................... --
Accounting service fees........................................................... 65,454
Custodian and accounting fees..................................................... 120,101
Reports to shareholders........................................................... 77,583
Audit and tax fees................................................................ 81,361
Legal fees........................................................................ 25,755
Directors' fees and expenses...................................................... 83,059
Interest expense.................................................................. 54,931
Other expenses.................................................................... 88,699
-------------
Total expenses before fee waivers, expense reimbursements and custody credits.. 6,301,959
Fees waived and expenses reimbursed by investment adviser and distributor...... (1,876,397)
Custody credits earned on cash balances........................................ (1,402)
-------------
Net expenses................................................................... 4,424,160
-------------
Net investment income (loss)...................................................... 15,913,863
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (unaffiliated)............................ (22,486,848)
Change in unrealized appreciation (depreciation) on investments (unaffiliated).... (91,985,010)
-------------
Net realized and unrealized gain (loss) on investments............................ (114,471,858)
-------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....................... $ (98,557,995)
=============
See Notes to Financial Statements
6
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
For the year For the year
ended ended
December 31, December 31,
2008 2007
------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)......................................... $ 15,913,863 $ 20,860,330
Net realized gain (loss) on investments (unaffiliated)............... (22,486,848) 193,887
Net unrealized gain (loss) on investments (unaffiliated)............. (91,985,010) (22,534,602)
------------- ------------
Increase (decrease) in net assets resulting from operations........... (98,557,995) (1,480,385)
------------- ------------
Distributions to Shareholders from:
Net investment income (Class A)...................................... (3,963,017) (4,228,420)
Net investment income (Class B)...................................... (828,020) (1,423,645)
Net investment income (Class C)...................................... (10,303,857) (14,137,627)
Net investment income (Class D)...................................... (503,781) (883,440)
Net investment income (Class Q)...................................... (317,866) (180,690)
------------- ------------
Total distributions to shareholders................................... (15,916,541) (20,853,822)
------------- ------------
Net increase (decrease) in net assets resulting from capital share
transactions (Note 3)................................................ (117,400,217) 148,026,767
------------- ------------
Total increase (decrease) in net assets............................... (231,874,753) 125,692,560
============= ============
NET ASSETS:
Beginning of period................................................... 359,293,502 233,600,942
------------- ------------
End of period+........................................................ $ 127,418,749 $359,293,502
============= ============
- --------
+Includes accumulated undistributed net investment income (loss)...... $ (35,961) $ (33,283)
============= ============
See Notes to Financial Statements
7
SunAmerica Senior Floating Rate Fund, Inc.
STATEMENT OF CASH FLOWS -- For the year ended December 31, 2008
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net decrease in net assets from operations...................... $ (98,557,995)
Adjustments to reconcile net increase in net assets from
operations to net cash used in operating activities:
Purchase of loans.............................................. (84,876,002)
Proceeds from loans sold....................................... 171,655,882
Loan principal paydowns........................................ 25,936,188
Accretion of facility fee income............................... (412,723)
Decrease in receivable for dividends and interest.............. 1,987,962
Decrease in receivable for investments sold.................... 1,503,905
Decrease in amount due from investment adviser for expense
reimbursements/fee waivers................................... 71,085
Decrease in amount due from distributor for fee waivers........ 42,769
Decrease in prepaid expenses and other assets.................. (15,375)
Increase in payable for investments purchased.................. 242,915
Decrease in payable for investment advisory and management fees (169,016)
Decrease in payable for distribution and service maintenance
fees......................................................... (122,741)
Decrease in payable for administration fees.................... (79,537)
Increase in other accrued expenses............................. 1,109,300
Unrealized depreciation on investments......................... 91,985,010
Net realized loss from investments............................. 22,486,848
-------------
Net cash provided by operating activities....................... $ 132,788,475
-------------
Cash flows from financing activities:
Proceeds from shares sold....................................... 88,244,485
Payment on shares redeemed...................................... (214,092,517)
Cash dividends paid............................................. (6,921,973)
Decrease in due to custodian.................................... (18,470)
-------------
Net cash used by financing activities........................... $(132,788,475)
-------------
Net increase in cash............................................ --
Cash balance at beginning of period............................. --
-------------
Cash balance at end of period................................... $ --
=============
Supplemental disclosure of cash flow information:
Noncash financing activities not included herein consist of reinvestment of
dividends and distributions of $9,410,038.
See Notes to Financial Statements
8
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS
Class A+
----------------------------
For the
period from
Year Year 10/04/06*
ended ended through
12/31/08 12/31/07 12/31/06
-------- -------- -----------
Net Asset Value, Beginning of Period.................................. $ 8.88 $ 9.40 $ 9.39
Investment Operations:
Net investment income (loss)@......................................... 0.49 0.56 0.38
Net realized and unrealized gain (loss) on investments................ (3.74) (0.48) (0.22)
------- ------- -------
Total from investment operations..................................... (3.25) 0.08 0.16
------- ------- -------
Distributions:
Dividends from net investment income.................................. (0.49) (0.60) (0.15)
------- ------- -------
Net Asset Value, End of Period........................................ $ 5.14 $ 8.88 $ 9.40
------- ------- -------
Total Return(1)....................................................... (38.20)% 0.84% 1.75%
Ratios/Supplemental Data
Net assets, end of period ($000's).................................... $25,546 $89,077 $14,165
Ratio of net expenses to average net assets........................... 1.45% 1.45% 1.45%#
Ratio of net investment income to average net assets.................. 6.05% 6.58% 6.78%#
Portfolio turnover rate............................................... 32% 91% 61%
Expense ratio before waiver of fees and reimbursement of expenses..... 2.10% 2.04% 3.26%#
Net investment income ratio before waiver of fees and reimbursement
of expenses.......................................................... 5.41% 5.99% 4.97%#
- --------
+ Effective October 4, 2006, Class A shares were redesignated to Class Q
shares and a new class of shares designated as Class A commenced offering.
* Inception date of class
@ Calculated based upon average shares outstanding.
# Annualized
(1)Total return is not annualized and does not reflect sales load but does
include expense reimbursements.
See Notes to Financial Statements
9
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class B
--------------------------------------------
Year Year Year Year Year
ended ended ended ended ended
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period.................................. $ 8.87 $ 9.40 $ 9.39 $ 9.41 $ 9.33
Investment Operations:
Net investment income (loss)@......................................... 0.48 0.58 0.59 0.41 0.29
Net realized and unrealized gain (loss) on investments................ (3.76) (0.53) 0.01 (0.02) 0.08
------- ------- ------- ------- -------
Total from investment operations..................................... (3.28) 0.05 0.60 0.39 0.37
------- ------- ------- ------- -------
Distributions:
Dividends from net investment income.................................. (0.46) (0.58) (0.59) (0.41) (0.29)
------- ------- ------- ------- -------
Net Asset Value, End of Period........................................ $ 5.13 $ 8.87 $ 9.40 $ 9.39 $ 9.41
------- ------- ------- ------- -------
Total Return(1)....................................................... (38.42)% 0.43% 6.55% 4.24% 3.97%
Ratios/Supplemental Data
Net assets, end of period ($000's).................................... $ 6,812 $19,203 $25,885 $25,181 $27,530
Ratio of net expenses to average net assets........................... 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment income to average net assets.................. 5.90% 6.22% 6.25% 4.36% 3.04%
Portfolio turnover rate............................................... 32% 91% 61% 57% 24%
Expense ratio before waiver of fees and reimbursement of expenses..... 2.56% 2.46% 2.45% 2.38% 2.38%
Net investment income ratio before waiver of fees and reimbursement
of expenses.......................................................... 5.08% 5.51% 5.55% 3.73% 2.41%
- --------
@ 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
10
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class C
------------------------------------------------
Year Year Year Year Year
ended ended ended ended ended
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period.................................. $ 8.87 $ 9.40 $ 9.39 $ 9.41 $ 9.33
Investment Operations:
Net investment income (loss)@......................................... 0.47 0.57 0.59 0.42 0.28
Net realized and unrealized gain (loss) on investments................ (3.74) (0.52) 0.01 (0.03) 0.09
------- -------- -------- -------- --------
Total from investment operations..................................... (3.27) 0.05 0.60 0.39 0.37
------- -------- -------- -------- --------
Distributions:
Dividends from net investment income.................................. (0.46) (0.58) (0.59) (0.41) (0.29)
------- -------- -------- -------- --------
Net Asset Value, End of Period........................................ $ 5.14 $ 8.87 $ 9.40 $ 9.39 $ 9.41
------- -------- -------- -------- --------
Total Return(1)....................................................... (38.31)% 0.43% 6.54% 4.24% 3.97%
Ratios/Supplemental Data
Net assets, end of period ($000's).................................... $86,126 $235,957 $176,743 $154,584 $174,583
Ratio of net expenses to average net assets........................... 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment income to average net assets.................. 5.89% 6.24% 6.26% 4.36% 3.06%
Portfolio turnover rate............................................... 32% 91% 61% 57% 24%
Expense ratio before waiver of fees and reimbursement of expenses..... 2.48% 2.40% 2.39% 2.32% 2.35%
Net investment income ratio before waiver of fees and reimbursement
of expenses.......................................................... 5.16% 5.59% 5.62% 3.79% 2.46%
- --------
@ 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
11
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class D
--------------------------------------------
Year Year Year Year Year
ended ended ended ended ended
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period........................ $ 8.87 $ 9.40 $ 9.39 $ 9.41 $ 9.33
Investment Operations:
Net investment income (loss)@............................... 0.51 0.63 0.66 0.47 0.33
Net realized and unrealized gain (loss) on investments...... (3.74) (0.54) (0.01) (0.03) 0.08
------- ------- ------- ------- -------
Total from investment operations........................... (3.23) 0.09 0.65 0.44 0.41
------- ------- ------- ------- -------
Distributions:
Dividends from net investment income........................ (0.50) (0.62) (0.64) (0.46) (0.33)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 5.14 $ 8.87 $ 9.40 $ 9.39 $ 9.41
------- ------- ------- ------- -------
Total Return(1)............................................. (37.98)% 0.93% 7.08% 4.76% 4.49%
Ratios/Supplemental Data
Net assets, end of period ($000's).......................... $ 4,321 $10,428 $16,034 $23,148 $27,630
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........ 6.44% 6.71% 6.71% 4.86% 3.60%
Portfolio turnover rate..................................... 32% 91% 61% 57% 24%
Expense ratio before waiver of fees and reimbursement of
expenses................................................... 1.71% 1.65% 1.72% 1.60% 1.62%
Net investment income ratio before waiver of fees and
reimbursement of expenses.................................. 5.98% 6.31% 6.24% 4.51% 3.23%
- --------
@ 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
12
SunAmerica Senior Floating Rate Fund, Inc.
FINANCIAL HIGHLIGHTS -- (continued)
Class Q(2)
---------------------------------------------
For the
period from
Year Year Year Year 4/28/04*
ended ended ended ended through
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
-------- -------- -------- -------- -----------
Net Asset Value, Beginning of Period........................ $ 8.88 $ 9.40 $ 9.39 $ 9.41 $ 9.42
Investment Operations:
Net investment income (loss)@............................... 0.46 0.55 0.59 0.43 0.22
Net realized and unrealized gain (loss) on investments...... (3.72) (0.47) 0.04 (0.01) (0.01)
------- ------ ------ ------ ------
Total from investment operations........................... (3.26) 0.08 0.63 0.42 0.21
------- ------ ------ ------ ------
Distributions:
Dividends from net investment income........................ (0.49) (0.60) (0.62) (0.44) (0.22)
------- ------ ------ ------ ------
Net Asset Value, End of Period.............................. $ 5.13 $ 8.88 9.40 $ 9.39 $ 9.41
------- ------ ------ ------ ------
Total Return(1)............................................. (38.31)% 0.85% 6.86% 4.55% 2.22%
Ratios/Supplemental Data
Net assets, end of period ($000's).......................... $ 4,614 $4,628 $ 773 $ 401 $ 224
Ratio of net expenses to average net assets................. 1.45% 1.45% 1.45% 1.45% 1.45%#
Ratio of net investment income to average net assets........ 6.37% 6.58% 6.57% 4.74% 3.44%#
Portfolio turnover rate..................................... 32% 91% 61% 57% 24%
Expense ratio before waiver of fees and reimbursement of
expenses................................................... 2.02% 2.13% 4.06% 4.32% 9.31%#
Net investment income ratio before waiver of fees and
reimbursement of expenses.................................. 5.80% 5.90% 3.97% 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.
(2)Effective October 4, 2006, Class A shares were redesignated to Class Q
shares and a new class of shares designated as Class A commenced offering.
See Notes to Financial Statements
13
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO PROFILE -- December 31, 2008 -- (unaudited)
Industry Allocation*
Finance..................................................... 9.8%
Retail Stores............................................... 8.4
Broadcasting & Entertainment................................ 8.3
Leisure, Amusement, Entertainment........................... 7.6
Chemicals, Plastics and Rubber.............................. 6.6
Printing and Publishing..................................... 6.6
Buildings & Real Estate..................................... 5.4
Oil and Gas................................................. 5.3
Healthcare, Education and Childcare......................... 4.7
Hotels, Motels, Inns and Gaming............................. 4.3
Beverage, Food & Tobacco.................................... 4.3
Diversified/Conglomerate Manufacturing...................... 3.7
Cargo Transport............................................. 3.3
Electronics................................................. 2.6
Personal, Goods and Misc. Services.......................... 2.4
Personal and Nondurable Consumer Products................... 2.3
Utilities................................................... 2.3
Telecommunications.......................................... 2.1
Automobile.................................................. 2.0
Personal Transportation..................................... 1.9
Machinery................................................... 1.4
Home and Office Furnishings, Housewares and Durables........ 1.4
Mining, Steel, Iron and Nonprecious Metals.................. 1.2
Diversified/Conglomerate Service............................ 0.9
Aerospace/Defense........................................... 0.7
Containers, Packaging and Glass............................. 0.6
Textiles and Leather........................................ 0.2
-----
100.3%
=====
Credit Quality+#
BBB......................................................... 0.8%
BBB-........................................................ 0.2
BB+......................................................... 2.8
BB.......................................................... 7.6
BB-......................................................... 14.2
B+.......................................................... 25.9
B........................................................... 21.8
B-.......................................................... 11.5
CCC+........................................................ 5.3
CCC......................................................... 2.4
CCC-........................................................ 2.1
CC.......................................................... 0.6
D........................................................... 1.9
Not Rated@.................................................. 2.9
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
14
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ---------------------------------------------------------------------------------------------------------------------------
LOANS(3)(4) -- 99.8%
Aerospace/Defense -- 0.7%
McKechnie Aerospace De, Inc.@.................. 2nd Lien Ba3 CCC+ 5.47% 05/11/15 $1,500,000 $ 622,500
Wesco International, Inc....................... 2nd Lien Caa1 B- 6.22 03/28/14 500,000 347,500
-----------
970,000
-----------
Automobile -- 2.0%
Allison Transmission, Inc...................... BTL-B B1 BB- 4.19-5.00 08/07/14 1,957,530 1,103,206
FleetPride Corp................................ BTL-B Ba3 BB- 3.96 06/06/13 226,563 124,608
Key Safety Systems, Inc........................ 1st Lien B1 B+ 2.72-6.75 03/08/14 1,473,750 770,033
United Components, Inc......................... Tranche D Ba3 BB- 4.39 06/30/12 416,465 289,442
Visteon Corp................................... BTL-B B3 B+ 6.10 12/13/13 1,000,000 255,832
-----------
2,543,121
-----------
Beverage, Food & Tobacco -- 4.3%
B&G Foods, Inc................................. BTL-B Ba2 BB- 4.20 02/26/13 565,217 466,303
Best Brands Corp............................... BTL-C Ca CC 12.00-18.00 06/30/13 1,574,286 708,428
Birds Eye Foods, Inc........................... BTL B2 B 3.21 03/22/13 849,167 692,071
Dean Foods Co.................................. BTL-B B1 BB 1.97-2.96 04/02/14 982,500 830,563
Fresh Start Bakeries, Inc.@.................... 2nd Lien B2 B- 7.25 03/29/14 250,000 81,250
NPC International, Inc......................... BTL Ba3 B+ 2.22-6.09 05/03/13 1,572,024 1,068,977
Pinnacle Foods Group, Inc...................... BTL-B B2 B 4.66-6.80 04/02/14 985,000 678,665
Wrigley Jr. Co................................. BTL-B Baa3 BBB 7.75 09/30/14 1,000,000 959,167
-----------
5,485,424
-----------
Broadcasting & Entertainment -- 8.3%
Century -- TCI California LP+#@(5)............. Revolver NR NR 3.25 12/31/07 10,000 9,900
Charter Communications Operating LLC........... BTL B1 B+ 4.16-5.47 03/06/14 1,965,038 1,454,128
Citadel Broadcasting Co........................ BTL-B B3 B+ 2.22-3.65 06/12/14 6,000,000 2,460,000
Cumulus Media, Inc............................. BTL B3 B 3.58 06/07/14 1,856,000 603,200
Gray Television, Inc........................... BTL-B B3 B 3.37-5.65 12/31/14 865,275 346,111
HIT Entertainment, Ltd.@....................... 2nd Lien Caa1 B- 8.21 02/26/13 1,000,000 350,000
Intelsat Zeus, Ltd............................. BTL B1 BB- 6.65 07/03/13 965,300 784,789
Local TV LLC................................... BTL-B B2 B+ 2.47 05/07/13 847,372 283,869
Mission Broadcasting, Inc...................... BTL-B Ba2 B+ 3.21 10/01/12 1,176,671 647,169
Nexstar Broadcasting, Inc...................... BTL-B B1 B+ 3.21 10/01/12 1,113,285 612,307
NextMedia Operating, Inc....................... 2nd Lien Caa2 CCC 7.46 11/15/13 502,545 232,427
Spanish Broadcasting Systems, Inc.............. 1st Lien Caa1 CCC+ 3.21 06/10/12 962,500 282,333
Univision Communications, Inc.................. BTL-B B2 B- 2.71 09/15/14 4,000,000 1,644,444
WideOpenWest Finance LLC....................... BTL B2 B- 3.97-5.97 06/22/14 1,000,000 562,500
Young Broadcasting, Inc........................ BTL B2 B- 4.00-5.25 11/03/12 965,000 358,256
-----------
10,631,433
-----------
Buildings & Real Estate -- 5.4%
Brand Services, Inc............................ BTL B1 B 3.75-4.19 02/07/14 1,965,000 1,192,101
Brand Services, Inc............................ BTL-B2 B1 B 4.75-5.19 02/07/14 987,500 518,438
Building Materials Holding Corp................ Junior 2nd Lien Caa2 B+ 6.31 09/15/14 1,000,000 447,000
Building Materials Holding Corp................ BTL B3 B+ 5.00-6.63 02/22/14 980,174 598,519
LandSource Communities Development LLC+(5)(7).. 1st Lien NR NR 8.25 05/31/09 924,624 212,664
LandSource Communities Development LLC+@(5)(7). 2nd Lien NR NR 10.55 02/27/14 500,000 17,292
North Las Vegas@............................... 1st Lien Caa3 CCC+ 4.46 05/01/11 222,667 133,600
North Las Vegas@............................... 2nd Lien C CC 9.69 05/09/12 250,194 37,529
PGT Industries, Inc............................ BTL-A2 Caa1 B- 6.25 02/14/12 329,268 230,488
Realogy Corp................................... CLTL Caa1 CCC- 6.78 10/10/13 731,288 461,322
Realogy Corp................................... BTL Caa1 CCC- 5.71 10/10/13 2,716,212 1,713,476
Tensar Earth Technologies...................... BTL-B B1 B 6.92 10/31/12 878,116 526,869
ValleyCrest Cos................................ 1st Lien B2 B+ 4.20 10/08/13 980,534 666,763
Yellowstone Club+@(5)(7)....................... BTL Ca D 5.55 09/30/10 204,667 92,100
-----------
6,848,161
-----------
15
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008 -- (continued)
Ratings/(1)/
-----------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- -------------------------------------------------------------------------------------------------------------------
Cargo Transport -- 3.3%
Cardinal Logistics Management, Inc.#@........ 2nd Lien B2 B- 7.89% 03/23/14 $1,000,000 $ 150,000
Dockwise Transport BV@....................... BTL-B B1 B 3.46 04/01/15 244,379 142,962
Dockwise Transport BV@....................... BTL-B2 B1 B 5.96 04/01/15 500,000 292,500
Dockwise Transport BV@....................... BTL-C B1 B 4.33 04/01/16 244,379 142,962
Dockwise Transport BV@....................... BTL-C2 B1 B 4.33 04/01/16 500,000 292,500
Dockwise Transport BV@....................... BTL-D B1 B 5.96 07/12/16 500,000 237,500
Dockwise Transport BV@....................... BTL-D2 B1 B 5.96 07/12/16 1,000,000 475,000
Greatwide Logistics Services, Inc.+@(5)(7)... 2nd Lien C NR 9.31 06/19/14 1,000,000 300,000
Hertz Corp................................... Tranche B Ba1 BB+ 2.72-3.77 12/21/12 342,845 204,565
Ozburn-Hessey Holding Co. LLC@............... BTL B1 B 3.71-6.67 08/10/12 504,644 391,098
Swift Transportation Co., Inc................ BTL-B B3 B+ 4.69-6.50 05/10/14 4,418,605 1,615,946
----------
4,245,033
----------
Chemicals, Plastics & Rubber -- 6.6%
AZ Chemicals, Inc............................ 1st Lien B1 BB- 2.46 02/28/13 933,902 594,584
Brenntag AG.................................. BTL B1 B+ 5.07 01/20/14 49,091 35,959
Brenntag AG.................................. BTL-B2 B1 B+ 5.07 01/20/14 200,909 147,166
Cognis GmbH.................................. STFA B1 B 4.00 09/15/13 1,000,000 604,000
Cristal Inorganic Chemicals US, Inc.......... 1st Lien Ba3 B 3.71 05/15/14 899,320 620,531
Georgia Gulf Corp............................ BTL-B Ba3 B 7.25-8.00 10/03/13 497,302 331,949
Hexion Specialty Chemicals, Inc.............. BTL-C1 Ba3 B 6.19 05/05/13 803,054 338,086
Hexion Specialty Chemicals, Inc.............. BTL-C2 Ba3 B 3.75 05/05/13 174,000 73,254
Huntsman International LLC................... BTL-B Ba1 BB+ 2.22 04/19/14 2,878,049 1,791,585
Ineos US Finance LLC......................... BTL-B B2 B 8.20 12/16/13 678,677 301,163
Ineos US Finance LLC......................... BTL-C B2 B 8.70 12/16/14 678,491 300,798
ISP Chemco, Inc.............................. BTL-B Ba3 BB- 2.50-3.69 06/04/14 1,477,500 1,007,163
Kraton Polymers LLC.......................... BTL-B B1 B 5.31 05/12/13 372,332 201,059
Lyondell Chemical Co.(11).................... BTL-B2 B3 CCC 7.00 12/20/14 1,091,743 418,501
Lyondell Chemical Co.(11).................... BTL-B3 B3 CCC 7.00 12/20/14 992,494 434,216
Momentive Performance........................ BTL Ba3 B+ 2.75 12/04/13 976,959 637,466
Wellman, Inc.+@(5)(7)........................ 2nd Lien NR NR 9.99 02/01/10 1,000,000 73,333
Yankee Candle Co............................. BTL-B Ba3 BB- 2.48-3.47 02/06/14 923,269 474,560
----------
8,385,373
----------
Containers, Packaging & Glass -- 0.6%
Graham Packaging Co. LP...................... BTL-B B1 B+ 2.75-6.31 10/07/11 952,576 693,793
MMGS Packaging Acquisition@.................. 2nd Lien Caa3 CC 6.96 03/08/15 500,000 40,000
----------
733,793
----------
Diversified/Conglomerate Manufacturing -- 3.7%
Accuride Corp................................ BTL-B Ba3 B- 5.56 01/31/12 1,071,364 741,250
Cinram International, Inc.................... BTL-B B1 B+ 4.71 05/05/11 963,521 638,333
Manitowoc Co., Inc........................... BTL-B Ba2 BB+ 6.50 11/09/14 1,000,000 709,000
RGIS LLC..................................... Delayed Draw B1 B- 3.96 05/01/14 46,905 24,097
RGIS LLC..................................... BTL-B B1 B- 2.96-4.55 04/27/14 938,095 481,946
Veyance Technologies, Inc.................... 1st Lien B1 B+ 4.38 07/31/14 2,592,188 1,419,223
Veyance Technologies, Inc.................... Delayed Draw B1 B+ 4.38 07/31/14 371,250 203,259
X-Rite, Inc.................................. 1st Lien B2 B+ 7.75 10/29/12 635,152 503,358
----------
4,720,466
----------
Diversified/Conglomerate Service -- 0.9%
Bridge Information Systems, Inc.+#@(5)(6).... BTL-B Caa1 D 6.25 05/29/05 397,353 0
NES Rentals Holdings......................... 2nd Lien Caa1 B- 9.13 07/20/13 2,157,140 873,642
Protection One, Inc.@........................ BTL Ba2 BB- 2.71-2.72 03/31/12 453,638 303,938
----------
1,177,580
----------
16
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- ------------------------------------------------------------------------------------------------------------------------------
Electronics -- 2.1%
Aspect Software, Inc................................... Tranche A-1 B2 B- 4.56% 07/11/11 $ 390,000 $ 206,700
Infor Global Solutions................................. Delayed Draw B1 B+ 5.21 07/28/12 335,143 172,599
Infor Global Solutions................................. BTL B1 B+ 5.21 07/28/12 642,357 330,814
Radio Systems, Inc.@................................... BTL-B B2 B+ 2.75 10/05/13 469,005 411,552
Reynolds & Reynolds Co................................. 1st Lien Ba2 BB 2.46 10/26/12 839,695 405,153
Reynolds & Reynolds Co................................. 2nd Lien B3 B 5.96 10/26/13 250,000 90,625
Sensata Technologies BV................................ BTL-B B1 BB- 5.26 04/30/13 1,959,799 1,009,296
-----------
2,626,739
-----------
Finance -- 9.8%
Alliant Holdings....................................... BTL-B B2 B 4.46 11/01/14 987,500 592,500
Amwins Group, Inc...................................... 1st Lien B2 B- 3.47-4.70 06/08/13 1,970,000 1,162,300
Bankruptcy Management Solutions........................ 2nd Lien Caa1 CCC 8.13 07/31/13 244,375 84,309
Chrysler Financial Services LLC........................ BTL-B Caa2 CCC- 6.00 08/03/12 987,500 519,143
First Data Corp........................................ BTL-B1 Ba3 BB- 3.21 09/24/14 977,525 632,948
First Data Corp........................................ BTL-B3 Ba3 BB- 3.21 09/24/14 987,500 639,406
Hub International Holdings, Inc.@...................... BTL B2 B+ 3.96 06/13/14 2,414,216 1,400,245
Hub International Holdings, Inc.@...................... Delayed Draw B2 B+ 3.96 06/13/14 542,637 314,730
iPayment, Inc.......................................... BTL-B B1 B 2.96-4.25 05/08/13 1,928,180 1,272,599
LPL Holdings, Inc...................................... Tranche D Ba3 B+ 2.21-3.21 06/28/13 1,974,874 1,421,910
National Processing Co. LLC............................ 1st Lien B2 B+ 7.21 09/29/13 1,341,944 821,941
National Processing Co. LLC............................ 2nd Lien Caa2 CCC+ 10.71 09/29/14 500,000 212,500
Neff Corp.............................................. 2nd Lien Caa2 CCC 5.40 05/31/13 500,000 116,250
NES Tanks.............................................. 2nd Lien Caa2 B 6.26 04/04/14 500,000 216,250
Rental Service Corp.................................... 2nd Lien B3 B- 3.97-7.71 11/30/13 2,295,841 1,234,014
TransFirst Holdings, Inc.@............................. BTL-B B2 B 4.21 06/15/14 2,959,937 1,405,970
USI Holdings Corp...................................... BTL-B B2 B 4.21 05/04/14 987,469 424,612
-----------
12,471,627
-----------
Healthcare, Education & Childcare -- 4.7%
AMR/EmCare Holdings.................................... BTL Ba1 BB 2.47-4.19 02/10/12 576,749 498,888
CHG Cos., Inc.@........................................ 2nd Lien B1 B 3.25 12/08/13 1,000,000 645,000
Gambro AB.............................................. BTL-B B2 B- 5.62 06/05/14 430,973 251,042
Gambro AB.............................................. BTL-C B2 B- 6.12 06/05/15 430,973 240,267
Health Management Associates........................... BTL-B B1 BB- 3.21 02/28/14 1,817,067 1,127,879
Hologic, Inc........................................... BTL-B Baa3 BB+ 4.75 03/31/13 572,639 515,375
PTS Pharmaceuticals.................................... BTL-B Ba3 BB- 3.71 04/10/14 1,970,000 1,196,775
Spectrum Labs.......................................... BTL-B NR NR 4.78 12/23/11 824,222 618,166
Team Health, Inc....................................... BTL-B B1 BB- 3.47-4.15 11/23/12 242,500 167,325
Vanguard Health Systems, Inc........................... Tranche 1 Ba3 B+ 2.72-3.71 09/25/11 960,723 790,195
-----------
6,050,912
-----------
Home & Office Furnishings, Housewares & Durables -- 1.4%
National Bedding Co.................................... 1st Lien B1 BB- 3.64-4.25 08/31/11 1,421,450 827,994
National Bedding Co.@.................................. 2nd Lien Caa1 B- 6.64 02/28/14 1,000,000 478,333
Simmons Co............................................. BTL-C B2 B- 9.16-9.22 12/19/11 816,772 443,099
-----------
1,749,426
-----------
17
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- -------------------------------------------------------------------------------------------------------------------------
Hotels, Motels, Inns, & Gaming -- 4.3%
CCM Merger, Inc................................ BTL-B B2 BB- 3.46-4.19% 07/13/12 $ 464,707 $ 220,736
Fairmont Hotels and Resorts@................... BTL-B NR NR 3.72 05/12/11 362,353 349,671
Golden Nugget, Inc............................. 1st Lien B2 BB- 2.48 06/30/14 1,272,727 369,091
Golden Nugget, Inc.(8)......................... Delayed Draw B2 BB- 2.47-3.83 06/30/14 242,424 70,303
Green Valley Ranch Gaming LLC@................. 2nd Lien Caa3 B 5.08 08/16/14 1,000,000 135,000
Isle of Capri Casinos, Inc..................... BTL B1 B+ 3.21 07/26/14 1,158,824 699,929
Isle of Capri Casinos, Inc..................... Delayed Draw A B1 B+ 3.21 07/26/14 349,412 211,045
Isle of Capri Casinos, Inc..................... Delayed Draw B B1 B+ 3.21 07/26/14 463,529 279,972
Las Vegas Sands, Inc........................... BTL B2 B+ 2.22 05/23/14 2,955,000 1,365,866
New World Gaming Partners, Ltd................. Delayed Draw B1 B+ 6.55 09/30/14 500,000 222,500
New World Gaming Partners, Ltd................. 1st Lien B1 B+ 6.55 09/30/14 2,475,000 1,101,375
Venetian Macau, Ltd............................ BTL B2 B 2.72 05/23/13 500,000 242,813
Venetian Macau, Ltd............................ BTL-B B2 B 2.72 05/26/13 166,667 80,938
Wembley, Inc.(10).............................. 1st Lien Caa2 CCC 4.25-7.47 07/18/12 244,154 124,111
Wembley, Inc.(10).............................. 2nd Lien Ca D 5.69 07/18/12 250,000 27,083
----------
5,500,433
----------
Leisure, Amusement, Entertainment -- 7.6%
24 Hour Fitness Worldwide, Inc................. BTL-B Ba3 B+ 2.97-6.71 06/08/12 1,945,000 1,147,550
Audio Visual Services Group, Inc.@............. 2nd Lien B3 CCC+ 6.96 08/28/14 1,000,000 75,000
Deluxe Entertainment Service Group, Inc........ CND TL-C Ba3 B- 3.71 05/14/13 69,516 31,282
Deluxe Entertainment Service Group, Inc........ Tranche A Ba3 B- 3.71 05/11/13 39,370 17,717
Deluxe Entertainment Service Group, Inc........ BTL-B Ba3 B- 3.25-5.67 05/11/13 710,012 319,505
Fender Musical Instruments Corp................ Delayed Draw B2 B+ 2.72 06/06/14 331,667 190,708
Fender Musical Instruments Corp................ BTL-B B2 B+ 3.71 06/06/14 656,667 377,583
Formula One Holdings@.......................... BTL-B1 NR NR 2.71 12/31/13 1,142,857 604,898
Formula One Holdings@.......................... BTL-B2 NR NR 2.71 12/31/13 785,714 415,868
Formula One Holdings@.......................... BTL-D2 NR NR 5.31 06/30/14 1,500,000 553,125
Hicks Sports Group@............................ BTL-B B2 CCC+ 4.00 12/22/10 3,000,000 2,325,000
Metro-Goldwyn-Mayer Studios, Inc............... BTL-B Ba3 B- 3.71-4.71 04/08/12 2,917,500 1,247,231
Panavision, Inc................................ 2nd Lien Caa3 CCC 10.92-11.03 03/30/12 500,000 200,000
Six Flags Theme Parks, Inc..................... BTL B2 B 2.73-6.14 04/30/15 1,945,063 1,157,313
WMG Acquisition Corp........................... BTL-B Ba3 BB 2.47-5.83 02/28/11 1,318,586 1,015,311
----------
9,678,091
----------
Machinery -- 1.4%
Generac Power Systems, Inc..................... 1st Lien B2 B+ 6.65 11/06/13 479,538 273,816
Generac Power Systems, Inc..................... 2nd Lien B2 B+ 10.15 05/07/14 1,000,000 316,250
Gleason Corp................................... BTL-B Ba3 B 3.88-6.25 06/30/13 974,912 658,066
NACCO Materials Handling Group, Inc............ BTL B1 BB- 2.46-4.60 03/21/13 979,899 534,045
----------
1,782,177
----------
Mining, Steel, Iron & Nonprecious Metals -- 1.2%
Aleris International, Inc...................... BTL Caa1 B 4.25 12/19/13 980,000 403,760
Algoma Steel, Inc.............................. BTL-B B3 BB- 4.42 06/20/13 705,032 437,121
Novelis, Inc................................... CND TL Ba2 BB 3.46 07/06/14 307,813 198,539
Novelis, Inc................................... BTL Ba2 BB 3.46 07/06/14 677,188 436,786
Walter Industries, Inc......................... BTL B2 BB+ 2.71-4.16 10/03/12 77,186 56,153
----------
1,532,359
----------
18
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- --------------------------------------------------------------------------------------------------------------------
Oil & Gas -- 5.3%
Alon USA, Inc. (Edgington Facility)@.......... BTL B1 BB 4.45% 06/22/13 $ 27,025 $ 17,566
Alon USA, Inc. (Paramount Facility)@.......... BTL B1 BB 2.71-4.45 06/22/13 216,202 140,532
Alon Krotz Springs@........................... BTL-B B1 B+ 10.75 06/30/14 500,000 395,000
ATP Oil & Gas Corp............................ BTL-B1 B3 B+ 8.50 07/15/14 1,266,364 737,657
ATP Oil & Gas Corp............................ BTL-B2 B3 B+ 8.50 01/15/11 396,017 230,680
Big West Oil LLC.............................. Delayed Draw Caa3 D 4.50 05/15/14 1,100,000 495,000
Big West Oil LLC.............................. BTL-B Caa3 D 4.50 05/31/14 875,000 393,750
CDX Funding LLC+(5)(7)........................ 2nd Lien NR NR 7.50 03/31/13 1,000,000 526,667
Coffeyville Resources LLC..................... LOC B2 BB- 6.63 12/27/10 162,162 115,135
Coffeyville Resources LLC..................... BTL-B B2 BB- 8.50-9.13 12/27/13 523,598 371,755
Dresser, Inc.................................. 2nd Lien B3 B- 7.99 05/04/15 1,000,000 577,500
Helix Energy Solutions Group, Inc............. BTL-B Ba2 BB+ 2.96-6.75 07/01/13 501,907 350,080
Quicksilver Resources, Inc.................... 2nd Lien B1 B 7.75 08/08/13 935,150 617,199
Targa Resources, Inc.......................... LOC Ba3 B+ 3.46 10/31/12 96,774 61,590
Targa Resources, Inc.......................... BTL-B Ba3 B+ 5.76-5.98 10/31/12 168,444 107,202
Venoco, Inc................................... 2nd Lien Caa1 B 6.25 09/20/11 1,000,000 656,250
Western Refining Co. LP....................... BTL B3 BB- 9.25 05/30/14 1,829,286 912,814
----------
6,706,377
----------
Personal & Nondurable Consumer Products -- 2.3%
American Achievement Corp.@................... BTL-B B1 BB- 3.45 03/25/11 383,871 276,387
Hillman Group, Inc............................ BTL-B Ba3 BB- 3.46-5.25 03/31/11 703,139 620,081
Huish Detergents, Inc......................... 1st Lien Ba3 BB 2.23 04/25/14 1,970,000 1,411,834
Huish Detergents, Inc......................... 2nd Lien B3 BB 4.73 10/26/14 1,000,000 583,333
----------
2,891,635
----------
Personal, Goods & Misc. Services -- 2.4%
Central Parking Corp.@........................ LOC Ba2 B- 6.06 05/22/13 379,310 257,931
Central Parking Corp.@........................ 1st Lien Ba2 B- 2.81 05/22/14 1,054,520 717,073
NEP, Inc.@.................................... BTL-B B1 B 2.71 02/16/14 982,489 687,742
Sabre Holdings Corp........................... BTL-B B1 B+ 3.89-5.42 09/30/14 2,943,615 1,292,247
Travelport, Inc............................... BTL-B Ba2 BB- 3.71 08/23/13 264,260 118,917
----------
3,073,910
----------
Personal Transportation -- 1.9%
Continental Airlines, Inc.@................... BTL-A1 Ba3 B 5.56 06/01/11 285,714 185,714
Continental Airlines, Inc.@................... BTL-A2 Ba3 B 5.56 06/01/11 714,286 464,286
Delta Air Lines, Inc.......................... 2nd Lien B2 B 5.15 04/30/14 985,000 501,365
United Airlines, Inc.......................... Tranche B B3 B+ 2.50-3.00 02/02/14 1,414,444 688,834
US Airways Group, Inc......................... BTL B3 B+ 2.97 03/21/14 1,480,000 643,800
----------
2,483,999
----------
Printing & Publishing -- 6.6%
Advanstar Communications, Inc................. 1st Lien B1 B- 3.71 05/31/14 1,972,469 936,923
Advanstar Communications, Inc.@............... 2nd Lien Caa2 CCC 6.46 11/30/14 1,000,000 325,000
Affinity Group, Inc........................... BTL B1 B 4.50-5.92 06/24/09 1,103,663 855,339
Affinity Group, Inc........................... BTL-A B1 B 3.25-5.92 03/20/14 239,460 169,808
Caribe Information Investment, Inc............ BTL-B B1 B+ 3.14-3.69 03/31/13 1,693,962 1,058,726
GateHouse Media Operating, Inc................ Delayed Draw Caa1 CCC+ 4.20-4.25 08/28/14 815,217 127,174
GateHouse Media Operating, Inc................ BTL-B Caa1 CCC+ 4.20 08/28/14 3,184,783 496,826
GateHouse Media Operating, Inc................ BTL-C Caa1 CCC+ 4.12 08/28/14 1,000,000 156,000
Idearc, Inc................................... BTL-B B2 B- 2.47-3.46 11/17/14 1,960,000 618,799
Local Insight Regatta Holdings, Inc........... BTL Ba3 BB- 7.75 04/23/15 746,250 350,738
National CineMedia, Inc....................... BTL B1 B+ 3.75 02/13/15 1,000,000 598,333
Penton Media, Inc............................. BTL-B B2 B- 2.71-5.67 02/01/13 982,500 391,362
Reader's Digest Associations, Inc............. BTL-B B2 B- 3.83-4.21 03/02/14 982,500 338,963
Thomas Nelson Publishers...................... BTL-B B3 B 8.75 06/12/12 397,524 198,762
Tribune Co.+(5)(7)............................ BTL-B Caa3 D 6.50 05/19/14 5,925,075 1,150,454
Yell Group, Ltd............................... BTL-B Ba3 BB- 3.46 10/27/12 1,000,000 585,000
----------
8,358,207
----------
19
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008 -- (continued)
Ratings/(1)/
------------
Interest Maturity Principal Value
Industry Description Type Moody's S&P Rate Date/(2)/ Amount (Note 2)
- -------------------------------------------------------------------------------------------------------------------------
Retail Stores -- 8.4%
Claire's Stores, Inc............................ BTL-B Caa2 B 3.22-4.21% 05/29/14 $2,955,000 $ 1,173,791
David's Bridal, Inc............................. BTL B2 B 2.46-3.46 01/31/14 1,965,000 1,149,525
JRD Holdings, Inc............................... BTL Ba3 BB- 4.08 05/15/17 968,750 697,500
KIK Custom Products............................. CND TL B3 CCC+ 5.80 05/23/14 578,049 257,232
KIK Custom Products............................. BTL B3 CCC+ 5.80 05/23/14 3,371,951 1,500,518
Michaels Stores, Inc............................ BTL B2 B 2.75-4.50 10/31/13 2,954,774 1,551,995
Neiman-Marcus Group, Inc........................ BTL Ba3 BB 4.19 04/06/13 822,785 528,078
Petco Animal Supplies, Inc...................... BTL-B B1 BB- 2.71-5.67 10/25/13 490,000 308,700
Quality Stores, Inc. (Central Tractor)+#@(5)(6). BTL-B Caa2 NR 5.75 04/30/07 833,705 0
Quizno's LLC.................................... 1st Lien B2 B+ 3.75 05/05/13 2,185,142 1,171,236
Smart & Final, Inc.............................. Delayed Draw B2 B 3.46-6.83 05/21/13 402,010 281,407
Smart & Final, Inc.............................. 1st Lien B2 B 3.46-5.20 05/31/14 582,915 408,040
Smart & Final, Inc.@............................ 2nd Lien Caa1 CCC 7.21 11/30/14 1,000,000 450,000
The Pantry, Inc................................. BTL B1 BB 2.22 05/15/14 1,453,578 904,852
The Pantry, Inc................................. Delayed Draw B1 BB 2.22 05/04/14 418,470 260,498
------------
10,643,372
------------
Telecommunications -- 2.1%
Hargray Communications Group, Inc............... BTL B1 B 3.38 06/29/14 1,785,166 1,437,059
Hawaiian Telecom+(5)............................ BTL-B B3 D 4.50 06/01/14 558,595 217,453
IPC Systems, Inc................................ 1st Lien B1 B+ 3.71 05/31/14 926,639 494,594
IPC Systems, Inc................................ 2nd Lien Caa1 CCC+ 6.75 05/31/15 1,000,000 200,000
Sorenson Communications, Inc.................... Tranche B Ba2 B+ 2.97 08/16/13 425,658 327,757
------------
2,676,863
------------
Textiles & Leather -- 0.2%
William Carter Co............................... BTL-B Ba3 BBB- 1.96-4.92 07/14/12 338,026 278,872
------------
Utilities -- 2.3%
Entegra Power Group LLC......................... 2nd Lien B3 B+ 3.96 03/30/14 466,361 299,404
KGen Power Corp................................. LOC B1 BB 3.41 01/31/14 375,000 240,000
KGen Power Corp................................. BTL B1 BB 3.25 01/31/14 612,500 392,000
La Paloma Generating Co......................... Delayed Draw B2 B+ 3.21 08/16/12 14,625 10,054
La Paloma Generating Co......................... LOC B2 B+ 2.11 08/16/12 32,787 22,541
La Paloma Generating Co......................... 1st Lien B2 B+ 3.21 08/16/12 183,627 126,244
La Paloma Generating Co......................... 2nd Lien B3 CCC+ 4.96 08/16/13 250,000 143,750
Mach Gen LLC.................................... LOC B2 B+ 3.22 02/22/13 88,760 79,174
NE Energy, Inc.................................. 2nd Lien B3 CCC+ 5.97 05/01/14 250,000 137,500
NSG Holdings II LLC............................. LOC Ba2 BB 3.50 06/15/14 102,041 83,291
NSG Holdings II LLC............................. BTL Ba2 BB 3.50 06/15/14 644,056 525,711
TPF Generation Holdings LLC..................... 2nd Lien B3 B- 5.71 12/15/14 1,500,000 817,500
------------
2,877,169
------------
Total Loans (cost $240,929,032).................................................... 127,122,552
------------
20
SunAmerica Senior Floating Rate Fund, Inc.
PORTFOLIO OF INVESTMENTS -- December 31, 2008 -- (continued)
Principal Value
Industry Description Amount/Shares (Note 2)
- ----------------------------------------------------------------------------------------
CORPORATE BONDS -- 0.5%
Electronics -- 0.5%
NXP BV
Note
7.50% due 10/15/13(9) (cost $2,000,000).................. $2,000,000 $ 665,000
------------
COMMON STOCK -- 0.0%
Telecommunications -- 0.0%
Global Crossing, Ltd.+.................................... 175 1,389
SAVVIS Communications Corp.+.............................. 6,313 43,497
------------
Total Common Stock (cost $125,981)........................ 44,886
------------
Total Long-Term Investment Securities (cost $243,055,013). 127,832,438
------------
TOTAL INVESTMENTS -- 100.3%
(cost $243,055,013)(12)................................... 127,832,438
Liabilities in excess of other assets -- (0.3)%............. (413,689)
------------
NET ASSETS -- 100.0%........................................ $127,418,749
============
- --------
BTL Bank Term Loan
CND TLCanadian Term Loan
LOC Letter of Credit
FSRI First Securities Repurchase Increase
CLD Credit Linked Deposit
CLC Credit Linked Commitment
CLTL Credit Linked Term Loan
STFA Senior Term Facilities Agreement
NR Security is not rated.
+ Non-income producing security
@ Illiquid security. At December 31, 2008, the aggregate value of these
securities was $17,217,587, representing 13.5% of net assets.
# Fair valued security; see Note 2
(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, 2008.
(2) Based on the stated maturity, the weighted average to maturity of the
Loans held in the portfolio will be approximately 59 months. 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.
(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 Chapter 11 bankruptcy protection.
(6) Loan is in default and did not pay principal at maturity. Final outcome of
Chapter 11 bankruptcy is still to be determined.
(7) Loan is in default.
(8) Loan is subject to an unfunded loan commitment. See Note 11 for details.
(9) 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, 2008.
(10) PIK ("Payment-in-Kind") security. Loan that pays interest/dividends in the
form of additional loans.
(11) Subsequent to December 31, 2008, the Company has filed for Chapter 11
bankruptcy protection and is in default.
(12) See Note 6 for cost of investments on a tax basis.
See Notes to Financial Statements
21
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008
Note 1. Organization of the Fund
SunAmerica Senior Floating Rate Fund, Inc. (the "Fund"), is an open-end,
non-diversified management investment company. The Fund was organized as a
Maryland corporation in 1998, and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Fund is managed by AIG
SunAmerica Asset Management Corp. (the "Adviser" or "SunAmerica"), an
indirect wholly-owned subsidiary of American International Group, Inc.
("AIG"). The Fund's investment goal and principal investment strategy is to
provide a high level of current income as is consistent with the
preservation of capital by investing, under normal market conditions, at
least 80% of its net assets, plus any borrowings for investment purposes, in
senior secured floating rate loans and other institutionally traded secured
floating rate debt obligations. The Fund may also purchase investment grade
fixed income debt securities and money market instruments.
Prior to October 4, 2006, the Fund operated as a closed-end investment
management company. On October 4, 2006, the Fund converted from a closed-end
investment management company into an open-end investment management
company. Concurrently with the conversion, the Class A shares were
redesignated as Class Q shares and a new class of shares designated as Class
A commenced offering.
The Fund offers four classes of shares. Class A shares are offered at net
asset value per share plus an initial sales charge. Additionally, purchases
of Class A shares in excess of $1,000,000 will be purchased at net asset
value but will be subject to a contingent deferred sales charge ("CDSC") on
redemptions made within two years of purchase. Class B shares are offered
for sale at net asset value without a front-end sales charge, although a
declining CDSC charge may be imposed on redemptions made within four years
of purchase. Class C shares are offered for sale at net asset value without
a front-end sales charge, although a CDSC may be imposed on redemptions made
within 12 months of purchase. Class D shares are offered for sale to
existing Class D shareholders at net asset value without a front-end sales
charge and no CDSC. Class Q shares are not currently offered for sale and
are available only through a conversion of Class B shares eight years after
purchase and Class C shares purchased before August 18, 1999, after ten
years from purchase. The share classes differ in their respective
distribution and service fees. All classes have equal rights to assets and
voting privileges except as may otherwise be provided in the Fund's
registration statement.
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 investments by the Fund in loan interests ("Loans")
are valued in accordance with guidelines established by the Board of
Directors (the "Board"). 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 the 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
22
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
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. 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 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 fair valued, as
determined pursuant to procedures adopted in good faith by the Board. There
is no single standard for making fair value determinations, which may result
in prices that vary from those of other funds.
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 more actively traded securities.
Thus, the value upon disposition on any given Loan may differ from its
current valuation.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" (FAS 157). This standard
clarifies the definition of fair value for financial reporting, establishes
a framework for measuring fair value and requires additional disclosures
about the use of fair value measurements. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. Various inputs are used in
determining the value of the Funds' investments. These inputs are summarized
in the three broad levels listed below:
Level 1 -- Unadjusted quoted prices in active markets for identical
securities
Level 2 -- Other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, quoted
prices in inactive markets, etc.)
Level 3 -- Significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund's net assets
as of December 31, 2008:
Valuation Inputs Investments in Securities Other Financial Instruments*
- ---------------- ------------------------- ----------------------------
Level 1 -- Unadjusted Quoted
Prices...................... $ 44,886 $ --
Level 2 -- Other Significant
Observable Inputs........... 60,752,989 --
Level 3 -- Significant
Unobservable Inputs......... 67,034,563 --
------------ ----
Total......................... $127,832,438 $ --
============ ====
The following is a reconciliation of Level 3 assets for which significant
unobservable inputs were used to determine fair value:
Investments in Securities Other Financial Instruments*
------------------------- ----------------------------
Balance as of 12/31/2007...... $120,463,686 $ --
Accrued discounts/premiums.... 112,657 --
Realized gain (loss).......... (3,261,792) --
Change in unrealized
appreciation (depreciation). (50,610,583) --
Net purchases (sales)......... (18,433,814) --
Transfers in and/or out of
Level 3..................... 18,764,409 --
------------ ----
Balance as of 12/31/2008...... $ 67,034,563 $ --
============ ====
-----
* Other financial instruments are derivative instruments not reflected in
the Portfolio of investments such as future, written option, swap and
forward contracts, which are valued at the unrealized
appreciation/depreciation on the instrument.
23
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
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, 2008, 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 $412,723 for the
period ended December 31, 2008, are accreted to income over the life of the
Loans. Other income, including amendment fees, commitment fees, letter of
credit fees, etc., which were $768,112 for the period ended December 31,
2008, 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. The Fund
files U.S. Federal and certain state income tax returns. With few
exceptions, the Fund is no longer subject to U.S. federal and state tax
examinations by tax authorities for tax years ending before 2005.
New Accounting Pronouncements: In March 2008, the Financial Accounting
Standards (FASB) issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand
their effects on an entity's financial position and financial performance.
It is effective for financial statements issued for fiscal years beginning
after November 15, 2008. Management is currently in the process of
determining the impact of the standard on the Fund's disclosures in the
financial statements.
24
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
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, 2008.
Note 3. Capital Share Transactions
The Fund has 1,000,000,000 of $.01 par value shares authorized that may be
issued in five different classes. Transactions in shares of each class were
as follows:
For the For the
year ended year ended
December 31, 2008 December 31, 2007
------------------------------- -----------------------------
Shares Amount Shares Amount
Class A ----------- ------------- ---------- ------------
Shares sold................. 6,245,181 $ 51,114,036 16,345,482 $151,739,920
Reinvested distributions.... 273,292 2,092,988 261,188 2,384,009
Shares redeemed............. (11,589,177) (91,945,003) (8,076,898) (73,605,625)
----------- ------------- ---------- ------------
Net increase (decrease).. (5,070,704) $ (38,737,979) 8,529,772 $ 80,518,304
=========== ============= ========== ============
For the For the
year ended year ended
December 31, 2008 December 31, 2007
------------------------------- -----------------------------
Shares Amount Shares Amount
Class B ----------- ------------- ---------- ------------
Shares sold................. 103,608 $ 828,739 319,757 $ 2,962,829
Reinvested distributions.... 77,570 586,529 107,332 990,697
Shares redeemed............. (1,018,041)(1) (7,804,218)(1) (1,016,781)(3) (9,403,485)(3)
----------- ------------- ---------- ------------
Net increase (decrease).. (836,863) $ (6,388,950) (589,692) $ (5,449,959)
=========== ============= ========== ============
For the For the
year ended year ended
December 31, 2008 December 31, 2007
------------------------------- -----------------------------
Shares Amount Shares Amount
Class C ----------- ------------- ---------- ------------
Shares sold................. 3,712,260 $ 30,768,232 14,008,359 $130,699,614
Reinvested distributions.... 812,486 6,128,175 940,512 8,648,660
Shares redeemed............. (14,346,426)(2) (109,402,031)(2) (7,162,128)(4) (65,556,497)(4)
----------- ------------- ---------- ------------
Net increase (decrease).. (9,821,680) $ (72,505,624) 7,786,743 $ 73,791,777
=========== ============= ========== ============
For the For the
year ended year ended
December 31, 2008 December 31, 2007
------------------------------- -----------------------------
Shares Amount Shares Amount
Class D ----------- ------------- ---------- ------------
Shares sold................. 4,615 $ 38,808 41,222 $ 381,302
Reinvested distributions.... 52,090 391,164 73,932 683,176
Shares redeemed............. (390,769) (2,984,986) (645,739) (5,976,532)
----------- ------------- ---------- ------------
Net increase (decrease).. (334,064) $ (2,555,014) (530,585) $ (4,912,054)
=========== ============= ========== ============
For the For the
year ended year ended
December 31, 2008 December 31, 2007
------------------------------- -----------------------------
Shares Amount Shares Amount
Class Q ----------- ------------- ---------- ------------
Shares sold................. 562,812(1)(2) $ 4,143,860(1)(2) 526,688(3)(4) $ 4,876,693(3)(4)
Reinvested distributions.... 29,709 211,182 11,501 105,134
Shares redeemed............. (215,377) (1,567,692) (98,969) (903,128)
----------- ------------- ---------- ------------
Net increase (decrease).. 377,144 $ 2,787,350 439,220 $ 4,078,699
=========== ============= ========== ============
-----
(1)Includes automatic conversion of 419,528 shares of Class B shares in the
amount of $3,261,102 to 419,281 shares of Class Q shares in the amount of
$3,261,102.
(2)Includes automatic conversion of 138,651 shares of Class C shares in the
amount of $866,418 to 138,651 shares of Class Q shares in the amount of
$866,418.
(3)Includes automatic conversion of 523,771 shares of Class B shares in the
amount of $4,850,526 to 523,771 shares of Class Q shares in the amount of
$4,850,526.
(4)Includes automatic conversion of 1,596 shares of Class C shares in the
amount of $14,348 to 1,596 shares of Class Q shares in the amount of
$14,348.
25
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
Note 4. Purchases and Sales of Securities
During the period ended December 31, 2008, the Fund's cost of purchases of
Loans and proceeds from Loan sales were $84,876,002 and $197,592,070,
respectively.
Note 5. Investment Advisory Agreement and Other Transactions with Affiliates
The Fund has entered into an Investment Advisory and Management Agreement
(the "Advisory Agreement") with SunAmerica. Pursuant to the Advisory
Agreement, SunAmerica provides continuous supervision of the Fund and
administers its corporate affairs, subject to the general review and
oversight of the Board. In connection therewith, SunAmerica furnishes the
Fund with office facilities, maintains certain of the Fund's books and
records and pays the salaries and expenses of all personnel, including
officers of the Fund who are employees of SunAmerica and its affiliates.
SunAmerica also selects, contracts with and compensates the subadviser to
manage the Fund's assets. The Fund will pay SunAmerica 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.
AIG Global Investment Corp. ("AIGGIC") acts as subadviser to the Fund
pursuant to a Subadvisory Agreement with SunAmerica. AIGGIC is an indirect
wholly-owned subsidiary of AIG and is an affiliate of SunAmerica. 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 SunAmerica a monthly fee payable at the following
annual rates: 0.25% for the first $1 billion of average daily net assets;
and 0.20% for average daily net assets of more than $1 billion. The fee paid
to the subadviser is paid by SunAmerica and not the Fund.
Pursuant to the Administrative Services Agreement (the "Administrative
Agreement") SunAmerica acts as the Fund's administrator and is responsible
for providing and supervising the performance by others, of administrative
services in connection with the operations of the Fund, subject to
supervision by the Fund's Board. For its services, SunAmerica receives an
annual fee equal to 0.40% of average daily net assets of the Fund. For the
year ended December 31, 2008, SunAmerica accrued administration fees in the
amount of $1,068,476.
The Fund has entered into a Distribution Agreement with SunAmerica Capital
Services, Inc. ("SACS" or the "Distributor")+, an affiliate of the Adviser.
The Fund has adopted a Distribution Plan on behalf of each class of shares
(other than Class D shares) (each a "Plan" and collectively, the "Plans") in
accordance with the provisions of Rule 12b-1 under the 1940 Act, hereinafter
referred to as the "Class A Plan," "Class B Plan," "Class C Plan," and
"Class Q Plan." In adopting the Plans, the Board determined that there was a
reasonable likelihood that each such Plan would benefit the Fund and the
shareholders of the respective class. The sales charge and distribution fees
of a particular class will not be used to subsidize the sale of shares of
any other class.
Under the Class A Plan, Class B Plan and Class C Plan, the Distributor
receives payments from the Fund at an annual rate of 0.10%, 0.50% and 0.50%,
respectively, of the average daily net assets of the Fund's Class A, Class B
and Class C shares to compensate the Distributor and certain securities
firms for providing sales and promotional activities for distributing that
class of shares. The distribution costs for which the Distributor may be
compensated include fees paid to broker-dealers that have sold Fund shares,
commissions and other expenses such as those incurred for sales literature,
prospectus printing and distribution and compensation to wholesalers. It is
possible that in any given year the amount paid to the Distributor under
each Class' Plan may exceed the Distributor's distribution costs as
described above. The Plans provide that the Class A, Class B, Class C and
Class Q shares of each Fund will pay the Distributor an account maintenance
fee up to an annual rate of 0.25% of the aggregate average daily net assets
of such class of shares for payments to compensate the Distributor and
certain securities firms for account maintenance activities. Accordingly,
for the year ended December 31, 2008, SACS received fees (see Statement of
Operations) based upon the aforementioned rates. For the period ended
December 31, 2008 SACS received sales charges on Class A shares of $105,013,
of which $21,153 was reallowed to affiliated broker-dealers and $64,950 to
- --------
+ Effective November 15, 2008, AIG SunAmerica Capital Services, Inc. changed
its name to SunAmerica Capital Services, Inc.
26
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
non-affiliated broker-dealers. In addition, SACS receives the proceeds of
early withdrawal charges paid by investors in connection with certain
redemptions of Class A, Class B and Class C shares. For the period ended
December 31, 2008, SACS received early withdrawal charges of $277,852. For
the period ended December 31, 2008 SACS voluntarily waived fees for the
following classes: Class A $97,463, Class B $35,105, Class C $436,889, and
Class Q $2,517. The fee waiver and expense reimbursement will continue
indefinitely but may be terminated at any time.
The Fund has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an indirect wholly-owned subsidiary of SunAmerica.
Under the Service Agreement, SAFS performs certain shareholder account
functions by assisting the Fund's transfer agent in connection with the
services that it offers to the shareholders of the Fund. The Service
Agreement, which permits the Fund to compensate SAFS for services rendered
based upon an annual rate of 0.22% of average daily net assets, is approved
annually by the Board of Directors. For the period ended December 31, 2008,
the Fund incurred the following expenses, which are included in the transfer
agent fees and expenses payable on the Statement of Assets and Liabilities
and in transfer agent fees and expenses in the Statement of Operations to
compensate SAFS pursuant to the terms of the Service Agreement.
Payable at
Expense December 31, 2008
-------- -----------------
Class A....................... $143,984 $ 4,959
Class B....................... 30,893 1,324
Class C....................... 384,597 17,016
Class D....................... 17,204 850
Class Q....................... 10,985 693
SunAmerica has contractually agreed to waive fees and/or reimburse expenses
to the extent necessary to cap the Fund's annual operating expenses at 1.45%
for Class A, and 1.75% for Class B and Class C, of average daily net assets.
Annual Fund operating expenses shall not include extraordinary expenses, as
determined under generally accepted accounting principles or acquired fees
and expenses. The expense reimbursements and fee waivers will continue
indefinitely, subject to termination by the Board, including a majority of
the directors that are not deemed to be "interested persons" of the Fund, as
defined by Section 2(a)(19) of the 1940 Act ("Disinterested Directors").
SunAmerica is voluntarily waiving fees and/or reimbursing expenses, so that
the total net expense ratios do not exceed 1.45% for Class Q and 1.25% for
Class D of average daily net assets. The voluntary fee waivers and/or
expense reimbursements may be terminated at any time at the option of
SunAmerica. For the period ended December 31, 2008, SunAmerica waived fees
and reimbursed expenses as follows: Class A $326,237, Class B $78,866, Class
C $837,267, Class D $36,195, and Class Q $25,858.
On September 22, 2008, AIG, the ultimate parent of SunAmerica, SACS and
SAFS, entered into a revolving credit facility (the "Credit Facility") and a
Guarantee and Pledge Agreement with the Federal Reserve Bank of New York
under the terms of which AIG will issue a new series of perpetual,
non-redeemable Convertible Participating Serial Preferred Stock (the
"Preferred Stock") to a trust that will hold the Preferred Stock for the
benefit of the United States Treasury. On October 3, 2008, AIG announced
that it plans to retain its U.S. property and casualty and foreign general
insurance businesses, and to retain a continuing ownership interest in its
foreign life insurance operations, and that it is exploring divestiture
opportunities for its remaining high-quality businesses and assets.
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, and treatment of defaulted securities.
Distributable Earnings Tax Distributions
- ------------------------------------------ ---------------------------------------------------------------------------
For the year ended December 31, 2008 For the year ended December 31, 2008 For the year ended December 31, 2007
- ------------------------------------------ ------------------------------------- -------------------------------------
Long-term Unrealized
Ordinary Gains/Capital and Appreciation/ Ordinary Long-term Ordinary Long-term
Income Other Losses (Depreciation) Income Capital Gains Income Capital Gains
- -------- ----------------- --------------- ------------ ------------- ------------ -------------
$38,417 $(41,919,687) $(115,222,932) $15,916,541 $ -- $20,853,822 $ --
27
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
Capital Loss Carryforwards. At December 31, 2008 capital loss carryforward
available to offset future recognized gains were $41,919,687 with $9,997,029
expiring in 2009, $7,736,363 expiring in 2010, $4,956,144 expiring in 2011,
$3,498,813 expiring in 2012, and $15,731,338 expiring in 2016.
During the year ending December 31, 2008, the Senior Floating Rate Fund had
$1,009,013 of capital loss carry forward expire.
Under the current tax law, capital losses related to securities and foreign
currency realized after October 31 and prior to the Fund's fiscal year end
may be deferred as occurring on the first day of the following year. For the
fiscal year ended December 31, 2008, the Fund elected to defer $6,756,274 of
Post-October Capital Losses.
For the period ended December 31, 2008, reclassifications were made to
increase accumulated net realized gain/(loss) by $1,009,013 with an
offsetting adjustment to additional paid-in capital of $(1,009,013). The
reclassifications arising from book/tax differences were due to the
expiration of capital loss carryforward.
Unrealized appreciation and depreciation in the value of investments at
December 31, 2008 for federal income tax purposes were as follows:
Cost (tax basis)............................................ $ 243,055,370
=============
Gross unrealized appreciation............................... $ --
Gross unrealized depreciation............................... (115,222,932)
-------------
Net unrealized depreciation................................. $(115,222,932)
=============
Note 7. Director Retirement Plan
The Directors of the Corporation have adopted the SunAmerica Disinterested
Trustees' and Directors' Retirement Plan (the "Retirement Plan") effective
January 1, 1993, as amended for the Disinterested Directors. The Retirement
Plan provides generally that a Disinterested Director may become a
participant ("Participant") in the Retirement Plan if he or she has at least
10 years of consecutive service as a Disinterested Director of any of the
adopting SunAmerica mutual funds (the "Adopting Funds") or has attained the
age of 60 while a Director and completed five (5) consecutive years of
service as a Director of any Adopting Fund (an "Eligible Director").
Pursuant to the Retirement Plan, an Eligible Director may receive benefits
upon (i) his or her death or disability while a Director or (ii) the
termination of his or her tenure as a Director, other than removal for cause
from each of the Adopting Funds with respect to which he or she is an
Eligible Director.
As of each of the first 10 birthdays after becoming a Participant and on
which he or she is both a Director and Participant, 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
Adopting Fund for the calendar year in which such birthday occurs. In
addition, an amount equal to 8.50% of any amounts credited under the
preceding clause during prior years is added to each Eligible Director's
account. The rights of any Participant to benefits under the Retirement Plan
shall be an unsecured claim against the assets of the Adopting Funds. An
Eligible Director may receive any benefits payable under the Retirement
Plan, at his or her election, either in one lump sum or in up to 15 annual
installments. Any undistributed amounts shall continue to accrue interest at
8.50%.
Effective December 3, 2008 the Retirement Plan was amended to among other
things, (1) freeze the Retirement Plan as to future accruals for active
Participants as of December 31, 2008, (2) prohibit Disinterested Directors
from first becoming participants in the Retirement Plan after December 31,
2008 and (3) permits active Participants to elect to receive a distribution
of their entire Retirement Plan account balance in 2009. The freeze on
future accruals does not apply to Participants that have commenced receiving
benefits under the Retirement Plan on or before December 31, 2008.
28
SunAmerica Senior Floating Rate Fund, Inc.
NOTES TO FINANCIAL STATEMENTS -- December 31, 2008 -- (continued)
As of December 31, 2008, the Fund had accrued $55,547 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,
2008, expensed $17,714 for the Retirement Plan, which is included in
Directors' fees and expenses line on the Statement of Operations.
Note 8. Line of Credit
The SunAmerica Family of Mutual Funds has established $75 million committed
and $50 million uncommitted lines of credit with State Street Bank & Trust
Company ("State Street"), the Fund's custodian. Interest is currently
payable at the Federal Funds rate plus 50 basis points on the committed line
and State Street's discretionary bid rate on the uncommitted line of credit.
There is also a commitment fee of 10 basis points per annum on the daily
unused portion of the $75 million committed line of credit, which is
included in other expenses on the Statement of Operations. Borrowings under
the line of credit will commence when the Fund's cash shortfall exceeds
$100,000. For the period ended December 31, 2008, the Fund had borrowings
outstanding for 153 days under the line of credit and incurred $54,931 in
interest charges related to these borrowings. The Fund's average amount of
debt under the line of credit for the days utilized was $6,037,310 at a
weighted average interest rate of 2.10%. At December 31, 2008, the line of
credit had a balance outstanding of $4,043,397.
Note 9. Interfund Lending Agreement
Pursuant to the exemptive relief granted by the Securities and Exchange
Commission (the "Commission"), the Fund is permitted to participate in an
interfund lending program among investment companies advised by SunAmerica
or an affiliate. The interfund lending program allows the participating
funds to borrow money from and lend money to each other for temporary or
emergency purposes. An interfund loan will be made under this facility only
if the participating funds receive a more favorable interest rate than would
otherwise be available from a typical bank for a comparable transaction. For
the period ended December 31, 2008, 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, 2008, the Fund had the following unfunded loan commitments
which could be extended at the option of the Borrower:
Maturity
Name Type Date Amount
---- ---------------------- -------- --------
Golden Nugget, Inc............ Delayed Draw Term Loan 06/30/14 $484,848
29
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 portfolio 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, 2008, 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 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, 2008 by correspondence with the
custodian, brokers and selling or agent banks, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Houston, Texas
February 25, 2009
30
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- December 31, 2008 -- (unaudited)
The Board, the members of which are referred to as "Directors" of the Fund,
including the Directors who are not "interested persons," as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act"), of
the Fund, SunAmerica or AIGGIC (the "Disinterested Directors"), approved the
continuation of the Advisory Agreement for a one-year period ending August 31,
2009 at an in-person meeting held on August 26-27, 2008. At this same meeting,
the Board also approved the continuation of the Subadvisory Agreement between
SunAmerica and AIGGIC (the "Subadvisory Agreement") with respect to the Fund
for a one-year period ending August 31, 2009.
In accordance with Section 15(c) of the 1940 Act, the Board requested and
SunAmerica and AIGGIC, where applicable, provided materials relating to the
Board's consideration of whether to approve the continuation of the Advisory
Agreement and Subadvisory Agreement. These materials included (a) a summary of
the services provided by SunAmerica and its affiliates to the Fund; (b)
information independently compiled and prepared by Lipper, Inc. ("Lipper") on
Fund fees and expenses, and the investment performance of the Fund as compared
with a peer group of funds; (c) information on the profitability of SunAmerica,
AIGGIC and their affiliates, a discussion of any indirect benefits; (d) a
report on economies of scale; (e) a discussion on general compliance policies
and procedures; (f) a summary of brokerage and soft dollar practices; and (g) a
discussion of the key personnel of SunAmerica, AIGGIC and their affiliates.
In determining whether to approve the continuation of the Advisory Agreement
and Subadvisory Agreement, the Board, including Disinterested Directors,
considered the following information:
Nature, Extent and Quality of Services Provided by SunAmerica and AIGGIC. The
Board, including the Disinterested Directors, considered the nature, quality
and extent of services to be provided by SunAmerica and AIGGIC. The Board noted
that the services include acting as investment manager and adviser to the Fund,
managing the daily business affairs of the Fund, and obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment the Fund's investment policies, or for providing oversight with
respect to he daily management of the Fund's portfolio by a subadviser.
Additionally, the Board observed that SunAmerica would provide office space,
bookkeeping, accounting, clerical, secretarial and certain administrative
services (excusive of, an in addition to, any such service provide by any other
party retained by the Fund) and has authorized any of its officers and
employees, if elected, to serve as officers or trustees of the Fund without
compensation. Finally, the Board noted that SunAmerica is responsible for
monitoring and reviewing the activities of affiliated and unaffiliated
third-party service providers, including AIGGIC. In addition to the quality of
the advisory services, the Board considered the quality of the administrative
and non-investment advisory services provided to the Fund pursuant to the
Advisory Agreement. Additionally, the Board observed that SunAmerica performs
or supervises the performance by others of other administrative services in
connection with the operation of the Fund pursuant to the Administrative
Services Agreement between SunAmerica and the Fund (the "Administrative
Services Agreement"). Finally, the Board noted that SunAmerica is responsible
for overseeing the activities of affiliated and unaffiliated third-party
service providers, including AIGGIC.
In connection with the services provided by SunAmerica, the Board analyzed the
structure and duties of SunAmerica's fund administration, accounting, legal and
compliance departments and concluded that they were adequate to meet the needs
of the Fund. The Board also reviewed the personnel responsible for providing
advisory services to the Fund and other key personnel of SunAmerica and
concluded, based on their experience and interaction with SunAmerica, that: (i)
SunAmerica is able to retain quality portfolio managers, analysts and other
personnel; (ii) SunAmerica exhibited a high level of diligence and attention to
detail in carrying out its advisory and other responsibilities under the
Advisory Agreement; (iii) SunAmerica had been responsive to requests of the
Board; and (iv) SunAmerica had kept the Board apprised of developments relating
to the Fund and the industry in general. The Board concluded that the nature
and extent of services provided under the Advisory Agreement were reasonable
and appropriate in relation to the management fee and that the quality of
services continues to be high. The Board also noted the high quality of
services under the Administrative Services Agreement.
31
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- December 31, 2008 -- (unaudited) (continued)
The Board also considered SunAmerica's reputation and relationship with the
Fund and considered the benefit to shareholders of investing in funds that are
part of a family of funds offering a variety of types of mutual funds and
shareholder services. The Board considered SunAmerica's experience in providing
management and investment advisory and administrative services to advisory
clients and noted that as of June 30, 2008, SunAmerica managed, advised an/or
administered approximately $49.7 billion in assets. The Board also considered
SunAmerica's code of ethics, and that it has developed internal procedures,
adopted by the Board, for monitoring compliance with the investment objectives,
policies and restrictions of the Fund as set forth in the Fund's prospectus.
Additionally, the Board considered SunAmerica's compliance and regulatory
history.
The Board also considered the nature, quality and extent of subadvisory
services provided by AIGGIC. The Board observed that AIGGIC is responsible for
providing investment management services, including investment research, advice
and supervision, and determining which securities will be purchased or sold by
the Fund, subject to the oversight and review of SunAmerica. The Board reviewed
AIGGIC's history, structure, size, visibility and resources, which are needed
to attract and retain highly qualified investment professionals. The Board
reviewed the personnel that are responsible for providing subadvisory services
to the Fund and concluded, based on their experience with AIGGIC, that: (i)
AIGGIC is able to retain high quality portfolio managers and other investment
personnel; (ii) AIGGIC exhibited a high level of diligence and attention to
detail in carrying out its responsibilities under the Subadvisory Agreement;
and (iii) AIGGIC had been responsive to requests of the Board and of
SunAmerica. The Board considered that AIGGIC has developed internal policies
and procedures for monitoring compliance with the investment objectives,
policies and restrictions of the Fund as set forth in the Prospectus. The Board
also considered AIGGIC's code of ethics, compliance and regulatory history. The
Board concluded that the nature and extent of services to be provided by AIGGIC
under the Subadvisory Agreement were reasonable and appropriate in relation to
the subadvisory fee and that the quality of services continues to be high.
Investment Performance. The Board, including the Disinterested Directors, also
considered the investment performance of SunAmerica and AIGGIC with respect to
the Fund. In connection with its review, the Board received and reviewed
information regarding the investment performance of the Fund as compared to the
Fund's peer group ("Peer Group") and peer universe ("Peer Universe") as
independently determined by Lipper and to the S&P/LSTA Leveraged Loan Index.
The Board was provided with a description of the methodology used by Lipper to
select the funds in the Peer Group and Universe. The Board also noted that it
regularly reviews the performance of the Fund throughout the year. The Board
noted that, while it monitors performance of the Fund closely, it generally
attaches more importance to performance over relatively long periods of time,
typically three to five years.
In preparation for the August 26-27, 2008 meeting, the Board was provided with
reports independently prepared by Lipper. Based on the Lipper reports, the
Board reviewed the Fund's annualized total returns for the prior one-, two-,
three-, four- and five-year periods ended May 31, 2008. The Board noted that it
was also provided with a supplemental Lipper performance report for the periods
ended June 30, 2008. In addition, the Board received a report prepared by
SunAmerica that detailed the Fund's performance for the three- and six-month
periods ended June 30, 2008.
Specifically, the Board considered that the Fund ranked in the fifth quintile
of its Peer Universe for one-, two-, three- and four-year periods ended May 31,
2008 and ranked in the third quintile for the five-year period ended May 31,
2008. The Board noted that there were only two other funds in the Fund's Peer
Group. The Board noted that the Fund's performance does not meet the Board's
expectations. SunAmerica noted that it was working with the Fund's portfolio
manager and analysts in an effort to improve performance. The Board noted that
it will continue to carefully monitor and discuss the Fund's performance with
SunAmerica.
Consideration of the Management Fee and Subadvisory Fee and the Cost of the
Services and Profits to be Realized by SunAmerica and AIGGIC and their
Affiliates from the Relationship with the Fund. The Board, including the
Disinterested Directors, received and reviewed information regarding the fees
to be paid by the Fund to SunAmerica pursuant to the Advisory Agreement and the
fees paid by SunAmerica to AIGGIC pursuant to the Subadvisory Agreement. The
Board examined this information in order to determine the reasonableness of the
fees in light of the nature and quality of services to be provided and any
potential additional benefits to be received by SunAmerica, AIGGIC or their
affiliates in connection with providing such services to the Fund.
32
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- December 31, 2008 -- (unaudited) (continued)
To assist in analyzing the reasonableness of the management fee for the Fund,
the Board received reports independently prepared by Lipper. The reports showed
comparative fee information for the Fund's Peer Group and Peer Universe. In
considering the reasonableness of the management fee to be paid by the Fund to
SunAmerica, the Board reviewed a number of expense comparisons, including: (i)
contractual and actual management fees; and (ii) actual total operating
expenses. In considering the Fund's total operating expenses, the Board
analyzed the level of fee waivers and expense reimbursements and the net
expense caps contractually agreed upon by SunAmerica. The Board compared the
Fund's net expense ratio to those of other funds within its Peer Group and Peer
Universe as a guide to help assess the reasonableness of the management fee for
the Fund. The Board acknowledged that it was difficult to make precise
comparisons with other funds in the Peer Group and Peer Universe since the
exact nature of services provided under the various fund agreements is often
not apparent. The Board also noted the relative small size of the Fund's Peer
Group. The Board noted, however, that the comparative fee information provided
by Lipper as a whole was useful in assessing whether SunAmerica was providing
services at a cost that was competitive with other, similar funds. The Board
did not consider services and fees paid under investment advisory contracts
that SunAmerica has with other registered investment companies or other types
of clients with similar investment strategies to the Fund since SunAmerica
informed the Board that there were no such Funds or accounts.
The Board also received and reviewed information regarding the fees paid by
SunAmerica to AIGGIC pursuant to the Subadvisory Agreement. To assist in
analyzing the reasonableness of the subadvisory fee, the Board received a
report independently prepared by Lipper. The report showed comparative fee
information of the Fund's Peer Group and Peer Universe that the Directors used
as a guide to help assess the reasonableness of the subadvisory fee. The
Directors noted that Peer Group and Peer Universe information as a whole was
useful in assessing whether AIGGIC was providing services at a cost that was
competitive with other similar funds. The Directors also considered that the
subadvisory fee is paid by SunAmerica out of its management fee and not by the
Fund, and that subadvisory fees may vary widely within a Peer Group and Peer
Universe for various reasons, including market pricing demands, existing
relationships, experience and success, and individual client needs. The Board
further considered the amount of the subadvisory fee paid out by SunAmerica and
the amount of the management fee which it retained. The Board noted that the
subadvisory fee paid by SunAmerica to AIGGIC was reasonable as compared to fees
AIGGIC receives for other mutual funds and accounts for which it serves as
adviser or subadviser.
The Board also considered SunAmerica's profitability and the benefits
SunAmerica and its affiliates received from its relationship with the Fund. The
Board received and reviewed financial statements relating to SunAmerica's
financial condition and profitability with respect to the services it provided
the Fund and considered how profit margins could affect SunAmerica's ability to
attract and retain high quality investment professionals and other key
personnel. The Board was also provided with a profitability analysis that
detailed the revenues earned and the expenses incurred by SunAmerica and its
affiliates that provide services to the Fund.
The Board considered the profitability of SunAmerica under the Advisory
Agreement and Administrative Services Agreement, and considered the
profitability of SunAmerica's affiliates under the Service Agreement, Rule
12b-1 Plans and Distribution Agreement. Additionally, the Board considered
whether SunAmerica, AIGGIC and its affiliates received any indirect benefits
from the relationship with the Fund. Specifically, the Board observed that AIG
Federal Savings Bank, an affiliate of SunAmerica and AIGGIC, serves as
custodian with respect to certain shareholder retirement accounts that are
administered by SunAmerica and receives a fee payable by the qualifying
shareholders. The Board further considered whether there were any collateral or
"fall-out" benefits that SunAmerica and its affiliates may derive as a result
of their relationship with the Fund. The Board noted that SunAmerica believes
that any such benefits are de minimis and do not impact the reasonableness of
the management fees.
The Board also reviewed AIGGIC's financial statements and considered whether
AIGGIC had the financial resources necessary to attract and retain high quality
investment management personnel and to continue to provide the high quality of
services that it had provided to the Fund to date.
33
SunAmerica Senior Floating Rate Fund, Inc.
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- December 31, 2008 -- (unaudited) (continued)
The Board concluded that SunAmerica and AIGGIC had the financial resources
necessary to perform their obligations under the Advisory Agreement and
Subadvisory Agreement and to continue to provide the Fund with the high quality
services that they had provided in the past. The Board also concluded that the
management fee and subadvisory fee were reasonable in light of the factors
discussed above.
Economies of Scale. The Board, including the Disinterested Directors,
considered whether the shareholders would benefit from economies of scale and
whether there was potential for future realization of economies with respect to
the Fund. The Board considered that as a result of being part of the SunAmerica
fund complex, the Fund shares common resources and may share certain expenses,
and if the size of the complex increases, the Fund could incur lower expenses
than it otherwise would achieve as a stand-alone entity. The Board also
considered the anticipated efficiencies in the processes of SunAmerica as it
adds labor and capital to expand the scale of operations. The Board further
noted that SunAmerica has agreed to contractually cap the total annual
operating expenses of Class A, B and C shares of the Fund at certain levels and
is voluntarily waiving fees and/or reimbursing expenses for Class D and Class Q
shares. The Board observed that those expense caps benefited shareholders by
keeping total fees down even in the absence of breakpoints or economies of
scale. The Board concluded that the Fund's management fee structure was
reasonable and that it would continue to review fees in connection with the
renewal of the Advisory Agreement, including whether the implementation of
additional breakpoints would be appropriate in the future due to an increase in
asset size or otherwise.
The Board did not review specific information regarding whether there have been
economies of scale with respect to AIGGIC's management of the Fund because it
regards that information as less relevant at the subadviser level. Rather, the
Board considered information regarding economies of scale in the context of the
renewal of the Advisory Agreement.
Other Factors. In consideration of the Advisory Agreement and Subadvisory
Agreement, the Board also received information regarding SunAmerica's and
AIGGIC's brokerage and soft dollar practices. The Board considered that
SunAmerica and AIGGIC are responsible for decisions to buy and sell securities
for the portfolios they manage, selection of broker-dealers and negotiation of
commission rates. The Board noted that they receive reports from SunAmerica and
from an independent third party that included information on brokerage
commissions and execution throughout the year and that commissions paid had
generally been reasonable and the quality of brokerage execution had generally
been high. The Board also considered the benefits SunAmerica and AIGGIC derive
from their soft dollar arrangements, including arrangements under which brokers
provide brokerage and/or research services to SunAmerica and/or AIGGIC in
return for allocating brokerage; however the Board noted that AIGGIC generally
does not pay commissions to soft dollar brokerages for the Fund. The Board
further observed that when making purchases of new issues with fixed
underwriting fees, SunAmerica or AIGGIC may designate the use of broker-dealers
who have agreed to provide certain statistical, research and other information.
Conclusion. After a full and complete discussion, the Board approved the
Advisory Agreement and the Subadvisory Agreement for the Fund, each for a
one-year period ending August 31, 2009. Based upon their evaluation of all
these factors in their totality, the Board, including the Disinterested
Directors, was satisfied that the terms of the Advisory Agreement and
Subadvisory Agreement were fair and reasonable and in the best interests of the
Fund and the Fund's shareholders. In arriving at a decision to approve the
Advisory Agreement and Subadvisory Agreement, the Board did not identify any
single factor or group of factors as all-important or controlling, but
considered all factors together. The Disinterested Directors were also assisted
by the advice of independent counsel in making this determination.
34
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- December 31, 2008 -- (unaudited)
The following table contains basic information regarding the Directors and
Officers who oversee operations of the Fund and other investment companies
within the Fund complex.
Number of
Term of Funds in
Name, Position(s) Office and Fund Complex
Address and Held With Length of Principal Occupation(s) Overseen by Other Directorships
Date of Birth* the Fund Time Served(4) During Past 5 Years Director(1) Held by Director(2)
- ------------------------ ----------- -------------- ------------------------ ------------ ------------------------
Disinterested Directors
Dr. Judith L. Craven Director 2000 - Retired. 87 Director, Belo Corp.
DOB: October 6, 1945 present (1992 to present);
Director, Sysco Corp.
(1996 to present);
Director, Luby's Inc.
(1998 to present).
William F. Devin Director 1998 - Retired. 88 Director, Boston Options
DOB: December 30, 1938 present Exchange (2001 to
Present).
Samuel M. Eisenstat Chairman 2001 - Attorney, sole 48 Director, North European
DOB: March 7, 1940 of the present practitioner. Oil Royalty Trust.
Board
Stephen J. Gutman Director 2001 - Vice President, Corcoran 48 None
DOB: May 10, 1943 present Group (Real Estate)
(2003 to present);
President and Member of
Managing Directors, Beau
Brummell -- Soho, LLC
(Licensing of menswear
specialty retailing and
other activities) (1988
to present).
William J. Shea Director 2004 - Managing Partner, DLB 48 Chairman of the Board,
DOB: February 9, 1948 present Capital LLC Private Royal and SunAlliance
Equity (2006 to Co. U.S.A., Inc. (2005
present); President and to present); Director,
CEO, Conseco, Inc. Boston Private Financial
(Financial Services) Holdings (2004 to
(2001 to 2004); Chairman present).
of the Board of
Centennial Technologies,
Inc. (1998 to 2001).
Interested Director
Peter A. Harbeck(3) Director 2001 - President, CEO and 96 None
DOB: January 23, 1954 present Director, SunAmerica
(1995 to present);
Director, SunAmerica
Capital Services, Inc.
("SACS") (1993 to
present); Chairman, AIG
Advisor Group, Inc.
(2004 to present).
35
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- December 31, 2008 -- (unaudited)
The following table contains basic information regarding the Directors and
Officers who oversee operations of the Fund and other investment companies
within the Fund complex.
Number of
Term of Funds in
Name, Office and Fund Complex
Address and Position(s) Held Length of Principal Occupations Overseen by Other Directorships
Date of Birth* With the Fund Time Served(4) During Past 5 Years Director(1) Held by Director(2)
- ----------------------- ---------------- -------------- ----------------------------- ------------ -------------------
Officers
John T. Genoy President 2007 - Chief Financial Officer, N/A N/A
DOB: November 8, 1968 present SunAmerica (2002 to
present); Senior Vice
President, SunAmerica (2003
to present); Chief Operating
Officer, SunAmerica (2006 to
present).
Donna M. Handel Treasurer 2002 - Senior Vice President, N/A N/A
DOB: June 25, 1966 present SunAmerica (2004 to
present); Vice President,
SunAmerica (1997 to 2004).
Gregory N. Bressler Secretary and 2005 - Senior Vice President and N/A N/A
DOB: November 17, 1966 Chief Legal Present General Counsel,
Officer SunAmerica (2005 to
present); Vice President and
Director of U.S. Asset
Management Compliance,
Goldman Sachs Asset
Management, L.P. (2004 to
2005); Deputy General
Counsel, Credit Suisse Asset
Management, LLC. (2002 to
2004);
James Nichols Vice President 2006 - Director, President and CEO, N/A N/A
DOB: April 7, 1966 Present SACS (2006 to present);
Senior Vice President, SACS
(2002 to 2006);
Cynthia A. Skrehot Vice President 2002 - Vice President, SunAmerica N/A N/A
DOB: December 6, 1967 and Chief present (2002 to present); Chief
Compliance Compliance Officer,
Officer ("CCO") SunAmerica (2003-2006).
36
SunAmerica Senior Floating Rate Fund, Inc.
DIRECTORS AND OFFICERS INFORMATION -- December 31, 2008 -- (unaudited)
(continued)
Number of
Term of Funds in
Name, Position(s) Office and Fund Complex
Address and Held With Length of Principal Occupations Overseen by Other Directorships
Date of Birth* the Fund Time Served(4) During Past 5 Years Director(1) Held by Director(2)
- ----------------------- ----------- -------------- ----------------------------- ------------ -------------------
Gregory R. Kingston Vice 2002 - Vice President, SunAmerica N/A N/A
DOB: January 18, 1966 President present (2001 to present)
and
Assistant
Treasurer
Nori L. Gabert Vice 2002 - Vice President and Deputy N/A N/A
DOB: August 15, 1953 President present General Counsel,
and SunAmerica (2005 to
Assistant present); Vice President and
Secretary Senior Counsel, SunAmerica,
(2001 to 2005).
Matthew J. Hackethal Anti-Money 2006 - Chief Compliance Officer, N/A N/A
DOB: December 31, 1971 Laundering present SunAmerica (2006 to
Compliance present); Vice President,
Officer Credit Suisse Asset
Management (2001 to 2006);
Chief Compliance Officer,
Credit Suisse Alternative
Funds (2005 to 2006); CCO,
Credit Suisse Asset
Management Securities, Inc.
(2004 to 2005)
- --------
* The business address for each Director and Officer is Harborside Financial
Center, 3200 Plaza 5, Jersey City, NJ 07311-4992.
(1) The "Fund Complex" means two or more registered investment companies that
hold themselves out to investors as related companies for purposes of
investment services or have a common investment adviser or an investment
adviser that is an affiliated person of the Adviser. The "Fund Complex"
includes the SunAmerica Money Market Funds (2 funds), SunAmerica Equity
Funds (9 funds), SunAmerica Income Funds (5 funds), SunAmerica Focused
Series, Inc. (17 portfolios), SunAmerica Focused Alpha Growth Fund, Inc. (1
fund), SunAmerica Focused Alpha Large-Cap Fund, Inc. (1 fund), Anchor
Series Trust (9 portfolios), the Fund, (1 fund), SunAmerica Series Trust
(35 portfolios), AIG Series Trust (3 funds), AIG Retirement Company I (33
portfolios), AIG Retirement Company II (15 funds), Seasons Series Trust (24
portfolios), AIG Strategic Hedge Fund of Funds (1 fund) and Brazos Mutual
Funds (4 funds).
(2) Directorships of companies required to report to the Commission under the
Securities Exchange Act of 1934 (i.e. "public companies") or other
investment companies registered under the 1940 Act, other than those listed
under the preceding column.
(3) Interested Director, as defined within the Investment Company Act of 1940,
because he or she is an officer and a 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 Directors' retirement plan as discussed in Note 7 of the
financial statements. Each officer will hold office for an indefinite term
until the date he or she resigns or retires or until his/her successor is
duly elected and qualifies.
Additional information concerning the Directors is contained in the Statement
of Additional Information and is available without charge by calling (800)
858-8850.
37
SunAmerica Senior Floating Rate Fund, Inc.
SHAREHOLDER TAX INFORMATION -- (unaudited)
Certain tax information regarding the Fund is required to be provided to
shareholders based upon the Fund's income and distributions for the taxable
year ended December 31, 2008. The information necessary to complete your income
tax returns is included with your Form 1099-DIV mailed to you in January 2009.
During the year ended December 31, 2008 the Fund paid the following dividends:
Net
Ordinary Net Net Qualifying % for Qualifying
Total Investment Short-Term Long-Term the 70% Dividends Dividend
Dividends Income Capital Gains* Capital Gains Received Deduction Income %
--------- ---------- -------------- ------------- ------------------ ----------
Class A....................... $0.49 $0.49 $-- $-- --% --%
Class B....................... 0.46 0.46 -- -- -- --
Class C....................... 0.46 0.46 -- -- -- --
Class D....................... 0.50 0.50 -- -- -- --
Class Q....................... 0.49 0.49 -- -- -- --
- --------
* Short-term capital gains are treated as ordinary income for tax purposes.
38
SunAmerica Senior Floating Rate Fund, Inc.
COMPARISON: FUND vs. INDEX -- (unaudited)
The following graph shows how the value of a $10,000 investment in the Fund
would have changed over the period shown in the graph, and also shows how the
index shown performed over the same period of time. The graph and table shown
do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Please note that the term
"inception" as used herein reflects the date on which a specific class of
shares commenced operations. It is important to note that the Fund is a
professionally managed mutual fund while the index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only. The graph presents the performance of Class C shares of the Fund. The
performance of the other classes will vary based upon the difference in sales
charges and fees assessed to shareholders of that class. Past performance does
not predict future results.
39
SunAmerica Senior Floating Rate Fund, Inc.
COMPARISON: FUND vs. INDEX -- (unaudited) (continued)
The SunAmerica Senior Floating Rate Fund (Class C) returned -38.31% for the
annual period ended December 31, 2008, lagging its benchmark, the S&P/LSTA
Leveraged Loan Index*, which returned -29.10% for the same period.
The credit market dislocation had a direct and unprecedented negative impact
on leveraged loans. The massive supply-demand imbalance at the beginning of the
year combined with subsequent leverage unwind during the fourth quarter from
hedge funds and financial institutions resulted in forced selling of the asset
class into a market which was void of potential buyers. The net result was an
historical decline in the price of leveraged loans. Average loan prices, which
historically have been near par, reached the low 60s by the end of 2008.
The S&P/LSTA Leveraged Loan Index declined by an extraordinary 29.10% for
the year. To put this decline into context, the historically stable leveraged
loan asset class had not experienced an annual loss since the S&P/LSTA Index
was established in 1997. The market declined precipitously when the financial
crisis imploded in September 2008 as is highlighted by the 28.5% loss that the
loan market experienced from September 1st through December 26th.
At the close of the fiscal year, the SunAmerica Senior Floating Rate Fund
included senior loans to 185 issuers spanning 28 industries. In our efforts to
maintain a diversified portfolio, the average loan size was approximately $1.3
million and the largest industry concentration was in the Finance sector,
representing 9.8% of the Fund's assets (based on market value). The Fund's
holdings in the Finance sector do not include banks. The average credit quality
of the portfolio was approximately B2 as of 12/31/08.
Given the difficult year, there was not one industry category in the Fund or
in the S&P LSTA Leveraged Loan Index that posted a positive return for the
year. The Food Products sector was the best performing sector for the Fund this
year. We had a slightly underweight position in this sector as compared to the
index. Two of the worst performing sectors for the Fund this year were
Publishing and Broadcasting. Historically, these industry sectors have been
defensive sectors, which is why the Fund is overweight the index in both of
these categories. In 2008, however, the decline in advertising revenue was much
more precipitous than we expected. The Hotel/Casino sector also performed
poorly this year. In the past, the Gaming sector has been recession resistant,
but that was not the case this year. As of the end of the annual period, the
weightings for the Broadcasting, Publishing and Hotel/Casino sectors were 8.3%,
6.6% and 4.3%, respectively (based on market value).
- --------
Past performance is no guarantee of future results.
* The S&P/LSTA Leveraged Loan Index (LLI) reflects the market-weighted
performance of U.S. dollar-denominated institutional leveraged loan portfolios.
The LLI is the only domestic leveraged loan index that utilizes real-time
market weightings, spreads and interest payments. Indices are not managed and
an investor cannot invest directly into an index.
Holdings and weightings are as of 12/31/08 and are subject to change after that
date. The Portfolio is actively managed and its holdings and composition will
differ over time.
The Fund is not a money market fund and its net asset value may fluctuate.
Investments in loans involve certain risks including nonpayment of principal
and interest; collateral impairment; non-diversification and borrower industry
concentration; and lack of an active trading market in certain cases, 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.
40
SunAmerica Senior Floating Rate Fund, Inc.
COMPARISON: FUND vs. INDEX -- (unaudited) (continued)
Over the past ten years, $10,000 invested in Senior Floating Rate Fund Class C
shares would have decreased to $8,963. The same amount invested in securities
mirroring the performance of the S&P/LSTA Leveraged Loan Index would be valued
at $10,843.
[CHART]
Senior Floating S&P/LSTA
Rate Class C@ Leveraged Loan Index
--------------- --------------------
12/31/1998 $10,000 $10,000
1/31/1999 10,072 10,035
2/28/1999 10,124 10,019
3/31/1999 10,191 9,954
4/30/1999 10,256 10,015
5/31/1999 10,315 10,140
6/30/1999 10,382 10,220
7/31/1999 10,432 10,283
8/31/1999 10,475 10,286
9/30/1999 10,524 10,206
10/31/1999 10,576 10,221
11/30/1999 10,647 10,286
12/31/1999 10,712 10,365
1/31/2000 10,776 10,455
2/29/2000 10,826 10,503
3/31/2000 10,784 10,447
4/30/2000 10,819 10,480
5/31/2000 10,890 10,565
6/30/2000 10,950 10,642
7/31/2000 11,003 10,728
8/31/2000 11,068 10,761
9/30/2000 11,118 10,790
10/31/2000 11,117 10,787
11/30/2000 11,148 10,827
12/31/2000 11,205 10,882
1/31/2001 11,248 11,000
2/28/2001 11,298 11,109
3/31/2001 11,285 11,112
4/30/2001 11,257 11,096
5/31/2001 11,345 11,222
6/30/2001 11,311 11,234
7/31/2001 11,317 11,320
8/31/2001 11,370 11,404
9/30/2001 11,240 11,215
10/31/2001 11,102 11,105
11/30/2001 11,124 11,241
12/31/2001 11,166 11,336
1/31/2002 11,205 11,394
2/28/2002 11,195 11,360
3/31/2002 11,274 11,496
4/30/2002 11,341 11,630
5/31/2002 11,413 11,641
6/30/2002 11,400 11,526
7/31/2002 11,289 11,423
8/31/2002 11,233 11,385
9/30/2002 11,239 11,393
10/31/2002 11,071 11,258
11/30/2002 11,194 11,417
12/31/2002 11,318 11,553
1/31/2003 11,368 11,694
2/28/2003 11,384 11,745
3/31/2003 11,539 11,791
4/30/2003 11,747 11,930
5/31/2003 11,910 12,060
6/30/2003 12,071 12,207
7/31/2003 12,146 12,288
8/31/2003 12,177 12,316
9/30/2003 12,300 12,432
10/31/2003 12,390 12,546
11/30/2003 12,466 12,627
12/31/2003 12,540 12,705
1/31/2004 12,682 12,815
2/29/2004 12,699 12,855
3/31/2004 12,726 12,901
4/30/2004 12,809 12,965
5/31/2004 12,814 12,979
6/30/2004 12,858 13,060
7/31/2004 12,888 13,103
8/31/2004 12,878 13,126
9/30/2004 12,909 13,180
10/31/2004 12,960 13,247
11/30/2004 13,011 13,306
12/31/2004 13,052 13,361
1/31/2005 13,106 13,415
2/28/2005 13,171 13,487
3/31/2005 13,215 13,543
4/30/2005 13,189 13,534
5/31/2005 13,178 13,542
6/30/2005 13,253 13,629
7/31/2005 13,343 13,733
8/31/2005 13,423 13,815
9/30/2005 13,459 13,871
10/31/2005 13,487 13,914
11/30/2005 13,544 13,966
12/31/2005 13,605 14,040
1/31/2006 13,698 14,137
2/28/2006 13,787 14,226
3/31/2006 13,885 14,312
4/30/2006 13,955 14,382
5/31/2006 13,969 14,418
6/30/2006 14,012 14,459
7/31/2006 14,077 14,541
8/31/2006 14,172 14,630
9/30/2006 14,247 14,709
10/31/2006 14,355 14,807
11/30/2006 14,401 14,885
12/31/2006 14,496 14,991
1/31/2007 14,617 15,122
2/28/2007 14,717 15,226
3/31/2007 14,762 15,286
4/30/2007 14,852 15,377
5/31/2007 14,926 15,471
6/30/2007 14,953 15,505
7/31/2007 14,473 14,986
8/31/2007 14,489 15,021
9/30/2007 14,710 15,315
10/31/2007 14,805 15,461
11/30/2007 14,558 15,246
12/31/2007 14,558 15,294
1/31/2008 14,031 14,800
2/29/2008 13,660 14,429
3/31/2008 13,586 14,416
4/30/2008 14,040 14,950
5/31/2008 14,216 15,090
6/30/2008 14,270 15,128
7/31/2008 14,056 15,012
8/31/2008 14,026 14,993
9/30/2008 13,114 14,071
10/31/2008 10,971 12,211
11/30/2008 9,689 11,172
12/31/2008 8,963 10,843
Class A++ Class B Class C Class D Class Q++
Senior ---------------------------------------------------------------------------------------------------
Floating Average Average Average Average Average
Rate Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+ Return Return+ Return Return+
- - ---------------------------------------------------------------------------------------------------
1 Year Return (40.54)% (38.20)% (40.16)% (38.42)% (38.89)% (38.31)% (37.98)% (37.98)% (38.31)% (38.31)%
- ---------------------------------------------------------------------------------------------------------------------
5 Year Return NA NA (6.49)% (28.51)% (6.49)% (28.52)% (6.06)% (26.84)% NA NA
- ---------------------------------------------------------------------------------------------------------------------
10 Year Return NA NA (1.00)% (9.59)% (1.09)% (10.37)% NA NA NA NA
- ---------------------------------------------------------------------------------------------------------------------
Since Inception* (19.79)% (36.59)% (0.78)% (7.73)% (0.88)% (8.71)% (2.54)% (17.93)% (7.01)% (28.81)%
- ---------------------------------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would have been lower.
* Inception date: Class A: 10/04/2006; Class B: 08/31/1998; Class C:
08/31/1998; Class D: 05/02/2001; Class Q: 04/28/2004.
++ Effective October 4, 2006, Class A shares were redesignated to Class Q
shares and a new class of shares designated as Class A commenced offering.
@ Returns of Class C shares have replaced the returns of Class B shares in the
Graph because Class C shares have the same inception date as the Class B
shares and Class C shares currently have the largest amount of net assets of
any Class of the Fund.
For the 12 month period ended December 31, 2008, the SunAmerica Senior Floating
Rate Class C returned (38.89)% compared to (29.10)% for the S&P/LSTA Leveraged
Loan Index. (The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 3.75%; Contingent Deferred Sales
Charge (CDSC), Class B: 3.00%, Class C 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com
41
[LOGO] AIG Sun America
Mutual Funds
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Directors Custodian DISCLOSURE OF QUARTERLY
Dr. Judith L. Craven State Street Bank and PORTFOLIO HOLDINGS
William F. Devin Trust Company The Fund is required to
Samuel M. Eisenstat P.O. Box 5607 file its com-plete
Stephen J. Gutman Boston, MA 02110 schedule of portfolio
Peter A. Harbeck holdings with the U.S.
William J. Shea VOTING PROXIES ON FUND Securities and Exchange
PORTFOLIO SECURITIES Commission for its first
Officers A description of the and third fiscal quarters
John T. Genoy, President policies and proce-dures on Form N-Q. The Fund's
and Chief Executive that the Fund uses to Forms N-Q are available
Officer determine how to vote on the U.S. Securities
Donna M. Handel, proxies related to and Exchange Commission's
Treasurer securities held in the website at
James Nichols, Vice Fund's portfolio, which http://www.sec.gov. You
President is available in the can also review and
Cynthia A. Skrehot, Vice Fund's Statement of obtain copies of the
President and Chief Additional Information, Forms N-Q at the U.S.
Compliance Officer may be ob-tained without Securities and Exchange
Gregory N. Bressler, charge upon request, by Commission's Public
Chief Legal calling (800) 858-8850. Refer-ence Room in
Officer and Secretary This in-formation is also Washington, DC
Gregory R. Kingston, available from the EDGAR (information on the
Vice President and database on the U.S. operation of the Public
Assistant Treasurer Secu-rities and Exchange Reference Room may be
Nori L. Gabert, Vice Commission's website at ob-tained by calling
President and http://www.sec.gov. 1-800-SEC-0330).
Assistant Secretary
John E. McLean, DELIVERY OF SHAREHOLDER PROXY VOTING RECORD ON
Assistant Secretary DOCUMENTS FUND PORTFOLIO SECURITIES
Kathleen Fuentes, The Fund has adopted a Information regarding how
Assistant Secretary policy that allows them the Fund voted proxies
Diedre L. Shepherd, to send only one copy of relating to securities
Assistant Treasurer a Fund's prospectus, held in the Fund's
Matthew J. Hackethal, proxy material, annual portfolio during the most
Anti-Money Laundering report and semi-annual recent twelve month
Compliance Officer report (the "shareholder period ended June 30 is
documents") to available, once filed
Investment Adviser shareholders with with the U.S. Securities
AIG SunAmerica Asset multiple accounts and Exchange Commis-sion,
Management Corp. residing at the same without charge, upon
Harborside Financial "household." This request, by calling
Center practice is called (800) 858-8850 or on the
3200 Plaza 5 householding and reduces U.S. Securities and
Jersey City, NJ Fund expenses, which Exchange Commission's
07311-4992 benefits you and other website at
shareholders. Unless the http://www.sec.gov.
Distributor Funds receive
SunAmerica Capital instructions to the This report is submitted
Services, Inc. con-trary, you will only solely for the general
Harborside Financial receive one copy of the information of
Center shareholder documents. shareholders of the Fund.
3200 Plaza 5 The Funds will continue Distribution of this
Jersey City, NJ to household the report to persons other
07311-4992 share-holder documents than shareholders of the
indefinitely, until we Fund is authorized only
Shareholder Servicing are instructed otherwise. in connection with a
Agent If you do not wish to currently effective
AIG SunAmerica Fund participate in prospectus, setting forth
Services, Inc. householding, please details of the Fund,
Harborside Financial contact Shareholder which must precede or
Center Services at (800) accompany this report.
3200 Plaza 5 858-8850 ext. 6010 or
Jersey City, NJ send a written request
07311-4992 with your name, the name
of your fund(s) and your
Transfer Agent account number(s) to
State Street Bank and SunAmerica Mutual Funds
Trust Company c/o BFDS, P.O. Box
P.O. Box 219373 219186, Kansas City MO,
Kansas City, MO 64141 64121-9186. We will
resume individual
mailings for your account
within thirty (30) days
of receipt of your
request.
42
Distributed by:
SunAmerica Capital Services, Inc.
Investors should carefully consider a Fund's investment objectives, risks,
charges and expenses before investing. The prospectus, containing this and
other important information, can be obtained from your financial adviser, the
SunAmerica Sales Desk at 800-858-8850, ext. 6003, or at
www.sunamericafunds.com. Read the prospectus carefully before investing.
www.sunamericafunds.com
SFANN - 12/08
[LOGO]
AIG
Sun America
Mutual Funds
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. During the fiscal year 2008, there were no reportable
amendments, waivers or implicit waivers to a provision of the code of
ethics that applies to the registrant's Principal Executive and Principal
Accounting Officers.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors has determined that William J. Shea,
the Chairman of the registrant's Audit Committee, qualifies as an audit
committee financial expert, as defined in the instructions to Item 3(a) of
Form N-CSR. Mr. Shea is considered to be "independent" for purposes of Item
3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)--(d) Aggregate fees billed to the registrant for the last two fiscal
years for professional services rendered by the registrant's principal
accountant were as follows:
2007 2008
------- -------
(a) Audit Fees $74,471 $80,591
(b) Audit-Related Fees $ 0 $ 0
(c) Tax Fees $11,372 $12,166
(d) All Other Fees $ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the principal
accountant in connection with statutory and regulatory filings. Tax Fees
principally include tax compliance, tax advice, tax planning and
preparation of tax returns.
Aggregate fees billed to the investment adviser and Adviser Affiliates (as
defined below in Item 4(e)) that are required to be pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X for the last two
fiscal years for services rendered by the registrant's principal accountant
were as follows:
2007 2008
---- ----
(b) Audit-Related Fees $ 0 $ 0
(c) Tax Fees $ 0 $ 0
(d) All Other Fees $ 0 $ 0
(e) (1) The registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliates") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the operations and
financial reporting of the registrant. The audit committee has not
presently established any pre-approval policies and procedures that
permit the pre-approval of the above services other than by the full
audit committee. Certain de minimis exceptions are allowed for non-
audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation
S-X as set forth in the registrant's audit committee charter.
(2) No services included in (b)-(d) above in connection with fees
billed to the registrant or the investment adviser or Adviser
Affiliates were approved pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the registrant's principal accountant for
non-audit services rendered to the registrant, its investment adviser,
and Adviser Affiliates that provides ongoing services to the
registrant for 2008 and 2007 were $626,231 and $478,375, respectively.
(h) Non-audit services rendered to the registrant's investment adviser and
any Adviser Affiliate that provides ongoing services to the registrant
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. Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Directors that were
implemented after the registrant last provided disclosure in response to
the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407)
(as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a- 101), or this
Item 10.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as defined under Rule 30a-3(c)
under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)). Based
on that evaluation, the registrant's management, including the
President and Treasurer, concluded that the registrant's disclosure
controls and procedures are effective.
(b) There was no change in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940 (17 CFR 270.30a-3(d))) that occurred during the
registrant's last fiscal quarter of the period covered by this report
that has materially affected, or is reasonably likely to materially
affect, the registrant's internal contro1 over financial reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and Principle
Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act
of 2002 attached hereto as Exhibit 99.406. Code of Ethics.
(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the Sarbanes-
Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Senior Floating Rate Fund, Inc.
By: /s/ John T. Genoy
------------------------------------
John T. Genoy
President
Date: March 6, 2009
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/ John T. Genoy
------------------------------------
John T. Genoy
President
Date: March 6, 2009
By: /s/ Donna M. Handel
------------------------------------
Donna M. Handel
Treasurer
Date: March 6, 2009