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