SECURITIES AND EXCHANGE COMMISSION
MANAGEMENT INVESTMENT COMPANIES
Senior Vice President
AIG SunAmerica Asset Management Corp.
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
Item 1.
|
Reports to Stockholders |
December 31, 2007
ANNUAL REPORT
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
SunAmerica Focused Alpha Large-Cap Fund
(FGI)
|
SHAREHOLDERS’
LETTER
|
1 | |
|
STATEMENT OF ASSETS AND
LIABILITIES
|
3 | |
|
STATEMENT OF
OPERATIONS
|
4 | |
|
STATEMENT OF CHANGES IN NET
ASSETS
|
5 | |
|
FINANCIAL HIGHLIGHTS
|
6 | |
|
PORTFOLIO OF
INVESTMENTS
|
7 | |
|
NOTES TO FINANCIAL
STATEMENTS
|
9 | |
|
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
|
14 | |
|
BOARD OF DIRECTORS APPROVAL OF
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY
AGREEMENTS
|
15 | |
|
DIVIDEND REINVESTMENT AND CASH
PURCHASE PLAN
|
20 | |
|
RESULTS OF SPECIAL SHAREHOLDER
MEETING
|
21 | |
|
DIRECTORS AND OFFICERS
INFORMATION
|
22 | |
|
SHAREHOLDER TAX
INFORMATION
|
24 |
December 31, 2007
ANNUAL REPORT
Shareholders’
Letter
Dear Shareholders:
We are pleased to present the annual report for the SunAmerica
Focused Alpha Large-Cap Fund (the “Fund”) and thank
you for including this strategic investment solution in your
investment plan.
In the year ended December 31, 2007, the Fund’s Net
Asset Value (NAV) returned 17.4% outperforming its
benchmark, the Russell 1000
Index1,
which returned 5.8% for the same period. The Fund’s market
price returned 16.2% during the same period. As of
December 31, 2007, the Fund’s NAV was $21.16 and its
market price was $18.84.
The past twelve months have been a volatile period for equities
as markets reacted to a variety of rapidly-unfolding news
developments. In the first half of 2007, U.S. stocks
recorded strong overall results despite a variety of challenges
that included: a slowdown in U.S. growth following
tightening by the Federal Reserve Board (“Fed”);
rising oil prices; and the beginning of concerns around credit
and a slowdown in U.S. consumer spending. The scenario
changed considerably in the second half, however, as equities
were beset by a growing malaise fueled by mortgage finance
problems, credit market pressures and further downdrafts in the
U.S. housing market. Market woes were further exacerbated
by sharply higher oil prices and nascent signs of decelerating
global economic growth. The combination of these factors led to
questions about the sustainability of the business cycle.
Market prices moved considerably in response. Government bond
yields declined, the value of the dollar plummeted and equities
turned trendless and volatile. A broad-based market sell-off in
November hurt value stocks more than growth stocks, as both
large- and small-cap issues underperformed their respective
growth counterparts.
What sets the Fund apart from its competitors in the marketplace
is its multi-managed, focused approach in a closed-end fund
structure. Two of Wall Street’s best known value equity
managers, Marsico Capital Management LLC (“Marsico”)
and BlackRock Investment Management (“BlackRock”) and
their respective teams each contribute their favorites stock
picks to the portfolio. Marsico emphasizes large-cap growth
investing while BlackRock’s Bob Doll and his team favor a
large-cap value investment style. Together, their stock picks,
blending large growth and large value, are designed to generate
strong, consistent results over the long-term.
We value your ongoing confidence in us and look forward to
serving your investment needs in the future.
Sincerely,
Peter A. Harbeck
President and CEO
AIG SunAmerica Asset Management Corp.
1
The Russell 1000 Index offers investors access to the
extensive large-cap segment of the U.S. equity universe
representing approximately 92% of the U.S. market. The
Russell 1000 is constructed to provide a comprehensive and
unbiased barometer for the large-cap segment and is completely
reconstituted annually to ensure new and growing equities are
reflected. The Russell 1000 includes the largest
1000 securities in the Russell 3000.
Indices are not managed and an investor cannot invest directly
into an index.
1
FUND
REVIEW — (unaudited)
Overall, stock selection had the largest impact on the
performance of the portion of the Fund run by Marsico. Positions
in Wynn Resorts, Ltd., Las Vegas Sands and McDonald’s Corp.
posted strong results. Information Technology positions
MasterCard, Inc. and Apple Inc. rose sharply. Railroad operator
Burlington Northern Santa Fe Corp., aerospace/defense companies
General Dynamics Corp. and Lockheed Martin Corp. also posted
strong results. Energy company Petroleo Brasileiro S/ A
benefited from a recent discovery of fields off the coast of
Brazil and Latin American wireless telecommunications company
America Movil S.A.B. lent strength to the Fund’s
performance.
On the flip side, Biotechnology company Genentech Inc. fell 17%,
creating a drag on performance. Toyota Motor Corp. and Coach
Inc. also fell prior to being sold from the portfolio during the
period, as did Cisco Systems.
Although industry and sector allocations are a minor
consideration compared to our belief in the stories behind the
companies that are owned in the portfolio, the portion of the
Fund run by Marsico did benefit by a significant underweight in
the weak-performing Financials sector during the year. On the
flip side, performance was tempered by an overweight in the
Consumer Discretionary sector, and little or no exposure to the
Energy sector. Consumer Discretionary was among the
weakest-performing sectors of the benchmark index, while the
Energy sector was the strongest-performing sector.
The portion of the Fund run by BlackRock benefited from our deep
underweight to Financials and overweight to Energy, particularly
to big, integrated energy companies such as Marathon Oil and
Chevron that benefited from rising oil prices. Within
financials, underweights and outright avoidance of thrifts and
mortgage companies and the big diversified financial services
companies were the most significant contributions.
Security selection was the main driver of performance. Medco
Health Solutions, Marathon Oil Corp. and McKesson Corp. were the
top three contributors for the year. Managed care company Medco
Health’s mail order business benefited as many drugs went
off patent and generics became marketable. Pharmaceutical
distributor McKesson was also boosted by the growth in the
markets for generic drugs and Medicare Part D. The largest
detractor was Quest Communications International, which has so
far failed to adequately strengthen its balance sheet.
Investors should carefully consider the SunAmerica Focused Alpha
Large-Cap Fund’s investment objective, strategies, risks,
charges, expenses and the Fund’s dividend distribution
policy before investing. The SunAmerica Focused Alpha Large-Cap
Fund should be considered as only one element of a complete
investment program. The Fund’s equity exposure and
derivative investments involve special risks. An investment in
the Fund should be considered speculative. There is no assurance
that the SunAmerica Focused Alpha Large-Cap Fund will achieve
its investment objective. The Fund is actively managed and its
portfolio composition will vary. Investing in the Fund is
subject to several risks, including: Non-Diversified Status
Risk, Growth and Value Stock Risk, Key Adviser Personnel Risk,
Investment and Market Risk, Issuer Risk, Foreign Securities
Risk, Emerging Markets Risk, Income Risk, Hedging Strategy Risk,
Derivatives Risk, Preferred Securities Risk, Debt Securities
Risk, Small and Medium Capitalization Company Risk, Leverage
Risk, Liquidity Risk, Market Price of Shares Risk, Management
Risk, Anti-Takeover Provisions Risk, Portfolio Turnover Risk and
Non-Investment Grade Securities Risk. The price of shares of the
Fund traded on the New York Stock Exchange will fluctuate with
market conditions and may be worth more or less than their
original offering price. Shares of closed-end funds often trade
at a discount to their net asset value, but may also trade at a
premium.
Securities listed may or may not be a part of the current
portfolio construction.
2
|
ASSETS:
|
|||||
|
Long-term investment securities, at
market value (unaffiliated)*
|
$ | 210,727,751 | |||
|
Short-term investment securities,
at market value (unaffiliated)*
|
1,755,000 | ||||
|
Total investments
|
212,482,751 | ||||
|
Receivable for:
|
|||||
|
Dividends and interest
|
161,799 | ||||
|
Prepaid expenses and other assets
|
2,832 | ||||
|
Total assets
|
212,647,382 | ||||
|
LIABILITIES:
|
|||||
|
Payable for:
|
|||||
|
Investment advisory and management
fees
|
186,929 | ||||
|
Administration fees
|
7,478 | ||||
|
Directors’ fees and expenses
|
464 | ||||
|
Other accrued expenses
|
113,689 | ||||
|
Due to custodian
|
5,653,411 | ||||
|
Dividends payable
|
2,384,732 | ||||
|
Total liabilities
|
8,346,703 | ||||
|
Net Assets
|
$ | 204,300,679 | |||
|
NET ASSETS REPRESENTED
BY:
|
|||||
|
Common stock, $0.001 par value
(200,000,000 shares authorized)
|
$ | 9,655 | |||
|
Additional paid-in capital
|
163,634,677 | ||||
| 163,644,332 | |||||
|
Accumulated undistributed net
investment income (loss) (unaffiliated)
|
— | ||||
|
Accumulated undistributed net
realized gain (loss) on investments (unaffiliated)
|
(60,744 | ) | |||
|
Unrealized appreciation
(depreciation) on investments (unaffiliated)
|
40,717,091 | ||||
|
Net Assets
|
$ | 204,300,679 | |||
|
NET ASSET VALUES:
|
|||||
|
Net assets
|
$ | 204,300,679 | |||
|
Shares outstanding
|
9,655,236 | ||||
|
Net asset value per share
|
$ | 21.16 | |||
|
*Cost
|
|||||
|
Long-term investment securities
(unaffiliated)
|
$ | 170,010,660 | |||
|
Short-term investment securities
(unaffiliated)
|
$ | 1,755,000 | |||
| 3 |
|
INVESTMENT INCOME:
|
|||||
|
Dividends (unaffiliated)
|
$ | 2,602,049 | |||
|
Interest (unaffiliated)
|
112,236 | ||||
|
Total investment income*
|
2,714,285 | ||||
|
EXPENSES:
|
|||||
|
Investment advisory and management
fees
|
2,084,702 | ||||
|
Administration fees
|
83,388 | ||||
|
Transfer agent fees and expenses
|
22,014 | ||||
|
Custodian and accounting fees
|
59,042 | ||||
|
Reports to shareholders
|
72,265 | ||||
|
Audit and tax fees
|
43,840 | ||||
|
Legal fees
|
49,925 | ||||
|
Directors’ fees and expenses
|
45,885 | ||||
|
Other expenses
|
31,732 | ||||
|
Total expenses before custody
credits
|
2,492,793 | ||||
|
Custody credits earned on cash
balances
|
(52 | ) | |||
|
Fees paid indirectly (Note 4)
|
(2,546 | ) | |||
|
Net expenses
|
2,490,195 | ||||
|
Net investment income (loss)
|
224,090 | ||||
|
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
|
|||||
|
Net realized gain (loss) on
investments (unaffiliated)
|
13,702,281 | ||||
|
Change in unrealized appreciation
(depreciation) on investments (unaffiliated)
|
18,949,293 | ||||
|
Net realized and unrealized gain
(loss) on investments and foreign currencies
|
32,651,574 | ||||
|
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM OPERATIONS
|
$ | 32,875,664 | |||
|
* Net of foreign withholding
taxes on interest and dividends of
|
$ | 3,794 | ||
| 4 |
| For the | For the | ||||||||
| year ended | year ended | ||||||||
| December 31, 2007 | December 31, 2006 | ||||||||
|
INCREASE (DECREASE) IN NET
ASSETS
|
|||||||||
|
Operations:
|
|||||||||
|
Net investment income (loss)
|
$ | 224,090 | $ | 1,070 | |||||
|
Net realized gain (loss) on
investments and foreign currencies
|
13,702,281 | 957,618 | |||||||
|
Net unrealized gain (loss) on
investments and foreign currencies
|
18,949,293 | 21,767,798 | |||||||
|
Net increase (decrease) in net
assets resulting from operations
|
32,875,664 | 22,726,486 | |||||||
|
Distributions to shareholders
from:
|
|||||||||
|
Net investment income
|
(225,994 | ) | (9,064 | ) | |||||
|
Net realized gain on investments
|
(13,318,014 | ) | (1,402,629 | ) | |||||
|
Return of capital
|
(10,207,872 | ) | (10,174,590 | ) | |||||
|
Total distributions to shareholders
|
(23,751,880 | ) | (11,586,283 | ) | |||||
|
Total increase
(decrease) in net assets
|
9,123,784 | 11,140,203 | |||||||
|
NET ASSETS:
|
|||||||||
|
Beginning of period
|
$ | 195,176,895 | $ | 184,036,692 | |||||
|
End of period†
|
$ | 204,300,679 | $ | 195,176,895 | |||||
|
† Includes
accumulated undistributed net investment income (loss)
|
$ | — | $ | — | ||||
| 5 |
| For the Year | For the Year | For the Period | |||||||||||
| Ended | Ended | December 28, 2005‡ | |||||||||||
| December 31, 2007 | December 31, 2006 | to December 31, 2005 | |||||||||||
|
Net Asset Value, Beginning of
period
|
$ | 20.21 | $ | 19.06 | $ | 19.10 | (1) | ||||||
|
Investment Operations:
|
|||||||||||||
|
Net investment income (loss) @
|
0.02 | (0.00 | ) | 0.00 | |||||||||
|
Net realized and unrealized gain
(loss) on investments
|
3.39 | 2.35 | — | ||||||||||
|
Total from investment operations
|
3.41 | 2.35 | — | ||||||||||
|
Distributions From:
|
|||||||||||||
|
Net investment income
|
(0.02 | ) | (0.00 | ) | — | ||||||||
|
Net realized gains on investments
|
(1.38 | ) | (0.15 | ) | — | ||||||||
|
Return of capital
|
(1.06 | ) | (1.05 | ) | — | ||||||||
|
Total distributions
|
(2.46 | ) | (1.20 | ) | — | ||||||||
|
Capital Share
Transactions:
|
|||||||||||||
|
Offering costs for common shares
charged to additional paid-in capital
|
— | — | (0.04 | ) | |||||||||
|
Net Asset Value, End of
period
|
$ | 21.16 | $ | 20.21 | $ | 19.06 | |||||||
|
Net Asset Value Total Return
#(2)
|
17.40 | % | 12.77 | %(4) | (0.21 | )% | |||||||
|
Market Value, End of
Period
|
$ | 18.84 | $ | 18.40 | $ | 20.00 | |||||||
|
Market Value Total Return
#(3)
|
16.15 | % | (1.53 | )% | 0.00 | % | |||||||
|
Ratios/ Supplemental
Data
|
|||||||||||||
|
Net Assets, end of period
($000’s)
|
$ | 204,301 | $ | 195,177 | $ | 184,037 | |||||||
|
Ratio of expenses to average net
assets(5)
|
1.21 | % | 1.23 | % | 0.03 | %† | |||||||
|
Ratio of net investment income
(loss) to average net assets(5)
|
0.11 | % | 0.00 | % | 0.00 | %† | |||||||
|
Portfolio turnover rate
|
57 | % | 91 | % | 0 | % | |||||||
| ‡ | Commencement of operations | |
| @ | Calculated based upon average shares outstanding | |
| # | Total return is not annualized. | |
| † | Due to commencing operations on December 28, 2005, the ratio of expenses and ratio of net investment income are not annualized. If the ratios were annualized, the ratio of expenses and the ratio of net investment income would have been 3.07% and 0.38%, respectively. The ratios are not representative of a full year of operations. | |
| (1) | Net asset value, beginning of the period, reflects a deduction of $0.90 per share sales change from the initial offering price if $20.00. | |
| (2) | Based on the net asset value per share, dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. NAV performance reflects performance without imposition of initial sales charge in connection with the initial public offering of the Fund and would be lower if included. | |
| (3) | Based on market value per share, dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. | |
| (4) | The Fund’s performance figure was increased by 0.11% from gains on the disposal of investments in violation of investment restrictions. | |
| (5) | Excludes expense reductions. If expense reductions had been applied, the ratio of expenses and net investment income to average net assets would have remained the same. |
| 6 |
|
Industry Allocation*
|
||||
|
Computers
|
19.2 | % | ||
|
Oil Companies-Integrated
|
13.9 | |||
|
Aerospace/ Defense
|
8.6 | |||
|
Finance-Investment Banker/ Broker
|
6.0 | |||
|
Retail-Restaurants
|
5.7 | |||
|
Casino Hotels
|
5.7 | |||
|
Insurance-Property/ Casualty
|
5.5 | |||
|
Telephone-Integrated
|
5.2 | |||
|
Medical-HMO
|
5.2 | |||
|
Health Care Cost Containment
|
5.1 | |||
|
Pharmacy Services
|
5.0 | |||
|
Office Automation &
Equipment
|
4.1 | |||
|
Data Processing/ Management
|
3.7 | |||
|
Cellular Telecom
|
3.4 | |||
|
Oil & Gas Drilling
|
2.7 | |||
|
Medical-Biomedical/ Gene
|
2.6 | |||
|
Real Estate Investment Trusts
|
1.5 | |||
|
Time Deposit
|
0.9 | |||
| 104.0 | % | |||
| * | Calculated as a percentage of net assets |
| 7 |
| Value | |||||||||
| Security Description | Shares | (Note 2) | |||||||
| COMMON STOCK — 103.1% | |||||||||
|
Aerospace/ Defense —
8.6%
|
|||||||||
|
Lockheed Martin Corp.
|
68,705 | $ | 7,231,888 | ||||||
|
Raytheon Co.
|
170,000 | 10,319,000 | |||||||
| 17,550,888 | |||||||||
|
Casino Hotels —
5.7%
|
|||||||||
|
Las Vegas Sands Corp.†
|
50,723 | 5,227,005 | |||||||
|
Wynn Resorts, Ltd.
|
56,413 | 6,325,590 | |||||||
| 11,552,595 | |||||||||
|
Cellular Telecom —
3.4%
|
|||||||||
|
America Movil SAB de CV,
Series L ADR
|
112,529 | 6,908,155 | |||||||
|
Computers —
19.2%
|
|||||||||
|
Apple, Inc.†
|
69,520 | 13,770,521 | |||||||
|
Hewlett-Packard Co.
|
290,243 | 14,651,467 | |||||||
|
International Business Machines
Corp.
|
100,000 | 10,810,000 | |||||||
| 39,231,988 | |||||||||
|
Data Processing/
Management — 3.7%
|
|||||||||
|
Mastercard, Inc., Class A
|
35,073 | 7,547,710 | |||||||
| Finance-Investment Banker/ Broker — 6.0% | |||||||||
|
Lehman Brothers Holdings,
Inc.
|
92,060 | 6,024,407 | |||||||
|
The Goldman Sachs Group,
Inc.
|
28,981 | 6,232,364 | |||||||
| 12,256,771 | |||||||||
| Health Care Cost Containment — 5.1% | |||||||||
|
McKesson Corp.
|
160,000 | 10,481,600 | |||||||
|
Insurance-Property/
Casualty — 5.5%
|
|||||||||
|
The Travelers Cos.,
Inc.
|
210,000 | 11,298,000 | |||||||
|
Medical-Biomedical/
Gene — 2.6%
|
|||||||||
|
Genentech, Inc.†
|
77,775 | 5,216,369 | |||||||
|
Medical-HMO —
5.2%
|
|||||||||
|
UnitedHealth Group,
Inc.
|
181,369 | 10,555,676 | |||||||
| Office Automation & Equipment — 4.1% | |||||||||
|
Xerox Corp.
|
520,000 | 8,418,800 | |||||||
|
Oil & Gas
Drilling — 2.7%
|
|||||||||
|
Transocean, Inc.†
|
39,134 | 5,602,032 | |||||||
|
Oil
Companies-Integrated — 13.9%
|
|||||||||
|
Chevron Corp.
|
120,000 | 11,199,600 | |||||||
|
Marathon Oil Corp.
|
190,000 | 11,563,400 | |||||||
|
Petroleo Brasileiro SA ADR
|
49,838 | 5,743,331 | |||||||
| 28,506,331 | |||||||||
|
Pharmacy Services —
5.0%
|
|||||||||
|
Medco Health Solutions, Inc.†
|
100,000 | 10,140,000 | |||||||
|
Real Estate Investment
Trusts — 1.5%
|
|||||||||
|
ProLogis
|
48,214 | 3,055,804 | |||||||
|
Retail-Restaurants —
5.7%
|
|||||||||
|
McDonald’s Corp.
|
198,264 | 11,679,732 | |||||||
|
Telephone-Integrated —
5.2%
|
|||||||||
|
Qwest Communications International,
Inc.†
|
1,530,000 | 10,725,300 | |||||||
| Total Long-Term Investment Securities | |||||||||
|
(cost $170,010,660)
|
210,727,751 | ||||||||
| SHORT-TERM INVESTMENT SECURITIES — 0.9% | |||||||||
|
Time Deposit —
0.9%
|
|||||||||
|
Euro Time Deposit with State Street
Bank & Trust Co.
2.10% due 01/02/08 (cost $1,755,000) |
$ | 1,755,000 | 1,755,000 | ||||||
|
TOTAL INVESTMENTS
|
|||||||||
|
(cost $171,765,660)(1)
|
104.0 | % | 212,482,751 | ||||||
|
Liabilities in excess of other
assets
|
(4.0 | ) | (8,182,072 | ) | |||||
|
NET ASSETS
|
100.0 | % | $ | 204,300,679 | |||||
| † | Non-income producing security |
| (1) | See Note 7 for cost of investments on a tax basis. |
| 8 |
Note 1.
Organization of the Fund
SunAmerica Focused Alpha Large-Cap Fund, Inc. (“the
Fund”) is a non-diversified closed-end management
investment company. The Fund is traded on the New York Stock
Exchange (“NYSE”) under the ticker symbol FGI. The
Fund was organized as a Maryland corporation on
September 7, 2005 and is registered under the Investment
Company Act of 1940, as amended, (the “1940 Act”). The
Fund sold 5,236 of its common stock shares (“Shares”)
on November 14, 2005 to AIG SunAmerica Asset Management
Corp. (the “Adviser” or “AIG SunAmerica”),
an indirect wholly-owned subsidiary of America International
Group, Inc. (“AIG”). Investment operations commenced
on December 28, 2005 upon settlement of the sale of
9,650,000 Shares in the amount of $184,315,000 (net of
underwriting fees and expenses of $8,685,000). AIG SunAmerica
paid certain organizational expenses of the Fund and the
offering costs of the Fund to the extent they exceeded $.04 per
share of the Fund’s common stock.
The Fund’s investment objective is to provide growth of
capital. The Fund seeks to pursue this objective by employing a
concentrated stock picking strategy in which the Fund, through
subadvisers selected by the Adviser, actively invests primarily
in a small number of equity securities (i.e., common stocks) of
large-capitalization companies and to a lesser extent in
equity-related securities (i.e., preferred stocks, convertible
securities, warrants and rights) of large-capitalization
companies primarily in the U.S. markets. Under normal market
conditions, the Fund will invest at least 80% of its net assets,
plus any borrowing for investment purposes, in
large-capitalization companies.
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 the obligation to
indemnify others. The Fund’s maximum exposure under these
arrangements is unknown. Currently, however, the Fund expects
the risk of loss to be remote.
Note 2.
Significant Accounting Policies
The preparation of financial statements in accordance with U.S.
generally accepted accounting principles 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: 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.
As of the close of regular trading on the NYSE, securities
traded primarily on security exchanges outside the U.S. are
valued at the last sale price on such exchanges on the day of
valuation, or if there is no sale on the day of valuation, at
the last-reported bid price. If a security’s price is
available from more than one exchange, the Fund uses the
exchange that is the primary market for the security. However,
depending on the foreign market, closing prices may be up to 15
hours old when they are used to price the Fund’s shares,
and the Fund may determine that certain closing prices are
unreliable. This determination will be based on review of a
number of factors, including developments in foreign markets,
the performance of U.S. securities markets, and the performance
of instruments trading in U.S. markets that represent foreign
securities and baskets of foreign securities. If the Fund
determines that closing prices do not reflect the fair value of
the securities, the Fund will adjust the previous closing prices
in accordance with pricing procedures approved by the Board of
Directors (the “Board” or the “Directors”)
to reflect what it believes to be the fair value of the
securities as of the close of regular trading on the NYSE. The
Fund may also fair value securities in other situations, for
example, when a particular foreign market is closed but the Fund
is open. For foreign equity securities, the Fund uses an outside
pricing service to provide it with closing market prices and
information used for adjusting those prices.
9
Short-term securities with 60 days or less to maturity are
amortized to maturity based on their cost to the Fund if
acquired within 60 days of maturity or, if already held by
the Fund on the 60th day, are amortized to maturity based on the
value determined on the 61st day.
Securities for which market quotations are not readily available
or where a development/significant event occurs that may
significantly impact the value of the security, are fair valued,
as determined pursuant to procedures adopted in good faith by
the Board.
Repurchase Agreements: The Fund may enter into repurchase
agreements. When the Fund enters into a repurchase agreement the
Fund’s custodian takes possession of the collateral pledged
for investments in repurchase agreements. The underlying
collateral is valued daily on a mark to market basis to ensure
that the value, including accrued interest, is at least 102% of
the repurchase price. In the event of default of the obligation
to repurchase, a Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if
bankruptcy proceedings are commenced with respect to the seller
of the security, realization of the collateral by the Fund may
be delayed or limited. At December 31, 2007, the Fund did
not invest in 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 except for certain dividends from foreign
securities, which are recorded as soon as the Fund is informed
after the ex-dividend date. Foreign income and capital gains may
be subject to foreign withholding taxes and capital gains taxes
at various rates. Under applicable foreign law, a withholding of
tax may be imposed on interest, dividends, and capital gains at
various rates. Interest earned on cash balances held at the
custodian are shown as custody credits on the Statement of
Operations.
The Fund has adopted a distribution policy (the
“Distribution Policy”) under which the Fund will pay
level quarterly dividend distributions, subject to an adjusting
dividend distribution in the fourth quarter as described below.
The Distribution Policy and the dividend distribution rate may
be terminated or modified at any time. The Fund intends to pay a
level quarterly amount in each of the first three quarters of
the calendar year and increase, if necessary, the amount payable
for the fourth quarter to an amount expected to satisfy the
minimum distribution requirements of the Internal Revenue Code
of 1986, as amended (the “Code”), or as necessary to
distribute long-term capital gains in a manner consistent with
the requirements of the 1940 Act, as amended, whichever is
greater. Each quarter the Board will review the amount of any
potential dividend distribution and the income, capital gains
and capital available. A portion of the dividend distribution
may be treated as ordinary income (derived from short-term
capital gains) and qualifying dividend income for individuals.
If the Fund does not generate earnings from dividends, interest
and net realized capital gains equal to or in excess of the
aggregate dividend distributions paid by the Fund for the year,
then the amount distributed in excess of the Fund’s
investment income and net realized capital gains may be deemed a
tax return of capital. A return of capital represents a return
of a shareholder’s investment in the Fund and should not be
confused with “yield,” “income” or
“profit.” As the 1940 Act limits the distribution of
long-term capital gains generally to once per year, the Fund
expects that it will distribute higher returns of capital than
if the Fund were permitted to distribute long-term capital gains
more frequently. The Fund presently intends to apply to the
Securities and Exchange Commission (the “Commission”)
for an exemption to permit it to distribute long-term capital
gains more frequently, subject to applicable representations and
conditions. There can be no assurance that any such exemption
will be granted. The final determination of the source of all
dividend distributions in 2007 will be made after year-end. The
payment of dividend distributions in accordance with the
Distribution Policy may result in a decrease in the Fund’s
net assets. A decrease in the Fund’s net assets may cause
an increase in the Fund’s annual operating expenses and a
decrease in the Fund’s market price per share to the extent
the market price correlates closely to the Fund’s net asset
value per share. The Distribution Policy may also negatively
affect the Fund’s investment activities to the extent that
the
10
Fund is required to hold larger cash positions than it typically
would hold or to the extent that the Fund must liquidate
securities that it would not have sold or hold securities that
it would liquidate, for the purpose of paying the dividend
distribution. The Distribution Policy may, under certain
circumstances, result in the amounts of taxable distributions to
exceed the levels required to be distributed under the Code
(i.e., to the extent the Fund has capital losses in any
taxable year, such losses may be carried forward to reduce the
amount of capital gains required to be distributed in future
years if distributions in a year exceed the amount minimally
required to be distributed under the tax rules, such excess will
be taxable as ordinary income to the extent loss carryforwards
reduce the required amount of capital gains in that year). The
Fund’s Board has the right to amend, suspend or terminate
the Distribution Policy at any time. The amendment, suspension
or termination of the Dividend Distribution Policy may affect
the Fund’s market price per share. Shareholders of shares
of the Fund held in taxable accounts who receive a dividend
distribution (including shareholders who reinvest in shares of
the Fund pursuant to the Fund’s dividend reinvestment
policy) must adjust the cost basis to the extent that a dividend
distribution contains a nontaxable return of capital. Investors
should consult their tax adviser regarding federal, state and
local tax considerations that may be applicable in their
particular circumstances.
The Fund intends to comply with the requirements of the Code,
applicable to regulated investment companies and distribute all
of their taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal tax
provisions are required. The Fund files U.S. federal and
certain state income tax returns. With few exceptions, the Fund
is no longer subject to U.S. federal and state examinations
by tax authorities for tax years ending before 2004.
New Accounting Pronouncements: On July 13, 2006, the
Financial Accounting Standards Board (“FASB”) released
FASB Interpretation No. 48 “Accounting for Uncertainty
in Income Taxes” (“FIN 48”). FIN 48 provides
guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements.
FIN 48 requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the Fund’s
tax returns to determine whether the tax positions are
“more-likely-than-not” of being sustained by the
applicable tax authority. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. However,
Registered Investment Companies are not required to implement
FIN 48 until their last net asset value calculation in the
first required financial statement reporting period for fiscal
years beginning after December 15, 2006. Management has
evaluated the implications of FIN 48 and determined that
there is no impact to the financial statements.
In September 2006, the FASB issued Statement on Financial
Accounting Standards No. 157, “Fair Value
Measurements” (“FAS 157”). This standard
clarifies the definition of fair value for financial reporting,
establishes a framework for measuring fair value and requires
additional disclosures about the use of fair value measurements.
FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. As of December 31, 2007,
the Fund does not believe the adoption of FAS 157 will
impact the amounts reported in the financial statements,
however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
Note 3.
Investment Advisory and Management Agreement
Pursuant to its Investment Advisory and Management Agreement
(“Advisory Agreement”) with the Fund, AIG SunAmerica
manages the affairs of the Fund, and selects, supervises and
compensates the subadvisers to manage the Fund’s assets.
AIG SunAmerica monitors the compliance of the subadvisers with
the investment objective and related policies of the Fund,
reviews the performance of the subadvisers, and reports
periodically on such performance to the Directors. Pursuant to
the Advisory Agreement, the Fund will pay AIG SunAmerica a
monthly fee at the annual rate of 1.00% of the average daily
total assets of the Fund.
11
AIG SunAmerica has engaged Marsico Capital Management, LLC
(“Marsico”), an independently owned investment
management firm as of December 14, 2007, and Blackrock
Investment Management, LLC (‘Blackrock”), a
wholly-owned subsidiary of Blackrock Inc., as the subadvisers to
the Fund (the “Subadvisers”) to manage the investment
and reinvestment of the Fund’s assets. Pursuant to the
subadvisory agreements (“Subadvisory Agreements”)
among AIG SunAmerica, the Fund and Marsico and Blackrock,
respectively, Marsico and Blackrock select the investments made
by the Fund. Marsico manages the large-cap growth portion of the
Fund and Blackrock manages the large-cap value portion of the
Fund. Pursuant to the Subadvisory Agreements, AIG SunAmerica and
not the Fund, pays each of the subadvisers a fee at the annual
rate of 0.40% of the Fund’s average daily total assets
allocated to each subadvisor.
AIG SunAmerica serves as administrator to the Fund. Under the
Administrative Services Agreement, AIG SunAmerica is responsible
for performing or supervising the performance by others of
administrative services in connection with the operations of the
Fund, subject to the supervision of the Fund’s Board. AIG
SunAmerica will provide the Fund with administrative services,
regulatory reporting, all necessary office space, equipment,
personnel and facilities for handling the affairs of the Fund.
AIG SunAmerica’s administrative services include
recordkeeping, supervising the activities of the Fund’s
custodian and transfer agent, providing assistance in connection
with the Directors’ and shareholders’ meetings and
other administrative services necessary to conduct the
Fund’s affairs. For its services as administrator, AIG
SunAmerica is paid a monthly fee at the annual rate of 0.04% of
the Fund’s average daily total assets.
Note 4.
Expense Reductions
Through expense offset arrangements resulting from broker
commission recapture, a portion of the expenses of the Fund have
been reduced. For the year ended December 31, 2007, the
amount of expense reductions received to offset the Fund’s
non-affiliated expenses were $2,546.
Note 5.
Purchase and Sales of Investment Securities
The cost of purchases and proceeds from sales and maturities of
long-term investments during the year ended December 31,
2007 were as follows:
|
Purchases (excluding
U.S. government securities)
|
$ | 115,791,036 | ||
|
Sales and maturities (excluding
U.S. government securities)
|
132,255,071 | |||
|
Purchases of U.S. government
securities
|
— | |||
|
Sales and maturities of
U.S. government securities
|
— |
| Note 6. | Transactions with Affiliates |
| For the year ended December 31, 2007 the Fund incurred brokerage commissions with Banc of America Securities LLC, an affiliated broker, of $5,608, and with Merrill Lynch, Pierce, Fenner, & Smith, Inc., an affiliated broker, of $3,361. | |
| The Fund is permitted to transfer securities by purchasing from and/or selling to other affiliated funds under certain conditions approved by the Board. The affiliated funds involved in such transaction must have a common investment adviser or investment advisers which are affiliated persons of each other, common directors, and/or common officers in compliance with Rule 17a-7 of the 1940 Act. Pursuant to the 1940 Act, such transaction must be either a purchase or a sale, for no consideration other than cash payment against prompt delivery of the security at the current market price. | |
| No brokerage commission or fee (except for customary transfer fees), or other remuneration is paid in connection with such transaction. For the year ended December 31, 2007, the Fund engaged in securities transactions with affiliated funds and had proceeds from sales of $1,601,500 and realized gains of $452,828. |
| 12 |
Note 7.
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 may differ from the amounts reflected
in the Statement of Assets and Liabilities due to temporary
book/tax differences such as wash sales and Post-October losses.
| For the year ended December 31, 2007 | ||||||||||||||||||||||
| Distributable Earnings | Tax Distributions | |||||||||||||||||||||
| Long-Term | Unrealized | |||||||||||||||||||||
| Ordinary | Gains/Capital | Appreciation | Ordinary | Long-Term | Return of | |||||||||||||||||
| Income | and Other Losses | (Depreciation) | Income | Capital Gains | Capital | |||||||||||||||||
| $ | — | $ | — | $ | 40,656,348 | $ | 973,184 | $ | 12,570,824 | $ | 10,207,872 | |||||||||||
| The amounts of aggregate unrealized gain (loss) and the cost of investment securities for federal tax purposes, including short-term securities were as follows: |
|
Cost (tax basis)
|
$ | 171,826,403 | |||
|
Appreciation
|
$ | 42,562,471 | |||
|
Depreciation
|
(1,906,123 | ) | |||
|
Net unrealized appreciation
(depreciation)
|
$ | 40,656,348 | |||
| For the year ended December 31, 2007, permanent reclassifications were made to increase accumulated net investment income by $8,948,384 with an offsetting adjustment to additional paid-in capital and accumulated realized gain in the amount of $(10,209,775) and $1,261,392, respectively. The reclassifications arising from book/tax differences were primarily due to return of capital and distribution reclasses. |
| Note 8. | Capital Share Transactions |
| The authorized capital stock of the Fund is 200,000,000 shares of common stock, $0.001 par value. |
| Note 9. | Other Information |
| The matter related to AIG’s settlement with the Commission and other governmental authorities that was reported in recent shareholder reports has been resolved. With respect to such matter, in September 2007, the Commission issued a permanent exemptive order (the “Order”) pursuant to Section 9(c) of the 1940 Act, as amended, to AIG and certain affiliated persons of AIG, including AIG SunAmerica. The Order permits AIG SunAmerica to continue to provide advisory services to the Fund. There has been no adverse impact to the Fund or the Fund’s shareholders. |
| 13 |
14
15
16
17
18
19
The Fund has adopted a Dividend Reinvestment and Cash Purchase
Plan (the “Plan”), through which all net investment
income dividends and capital gains distributions are paid to
Common Stock Shareholders in the form of additional shares of
the Fund’s Common Stock (plus cash in lieu of any
fractional shares which otherwise would have been issuable),
unless a Common Stock Shareholder elects to receive cash as
provided below. In this way, a Common Stock Shareholder can
maintain an undiluted investment in the Fund and still allow the
Fund to pay out the required distributable income.
No action is required on the part of a registered Common Stock
Shareholder to receive a distribution in shares of Common Stock
of the Fund. A registered Common Stock Shareholder may elect to
receive an entire distribution in cash by notifying
Computershare Trust Company, NA, Inc.
(“Computershare”), P.O. Box 43010, Providence, RI
02940-3010, the Plan Agent and the Fund’s transfer agent
and registrar, in writing so that such notice is received by
Computershare no later than 10 days prior to the record
date for distributions to Common Stock Shareholders.
Computershare will set up an account for shares acquired through
the Plan for each Common Stock Shareholder who has not elected
to receive distributions in cash (“Participant”) and
hold such shares in non-certificated form.
Those Common Stock Shareholders whose shares are held by a
broker or other financial intermediary may receive distributions
in cash by notifying their broker or other financial
intermediary.
Computershare will set up an account for shares acquired
pursuant to the Plan for Participants who have not so elected to
receive dividends and distributions in cash. The shares of
Common Stock will be acquired by the Plan Agent for the
Participants’ accounts, depending upon the circumstances
described below, either (i) through receipt of additional
unissued but authorized shares of Common Stock from the Fund
(“Additional Common Stock”) or (ii) by purchase
of outstanding shares of Common Stock on the open market on the
NYSE or elsewhere. If on the payment date for a dividend or
distribution, the net asset value per share of Common Stock is
equal to or less than the market price per share of Common Stock
plus estimated brokerage commissions, Computershare shall
receive Additional Common Stock, including fractions, from the
Fund for each Participant’s account. The number of shares
of Additional Common Stock to be credited shall be determined by
dividing the dollar amount of the dividend or distribution by
the greater of (i) the net asset value per share of Common
Stock on the payment date, or (ii) 95% of the market price
per share of the Common Stock on the payment date. If the net
asset value per share of Common Stock exceeds the market price
plus estimated brokerage commissions on the payment date for a
dividend or distribution, Computershare (or a broker-dealer
selected by Computershare) shall endeavor to apply the amount of
such dividend or distribution on each Participant’s shares
of Common Stock to purchase shares of Common Stock on the open
market. Such purchases will be made on or shortly after the
payment date for such dividend or distribution but in no event
will purchases be made on or after the ex-dividend date for the
next dividend or distribution. The weighted average price
(including brokerage commissions) of all shares of Common Stock
purchased by Computershare shall be the price per share of
Common Stock allocable to each Participant. If, before
Computershare has completed its purchases, the market price plus
estimated brokerage commissions exceeds the net asset value of
the shares of Common Stock as of the payment date, the purchase
price paid by Computershare may exceed the net asset value of
the Common Stock, resulting in the acquisition of fewer shares
of Common Stock than if such dividend or distribution had been
paid in shares of Common Stock issued by the Fund. Participants
should note that they will not be able to instruct Computershare
to purchase shares of Common Stock at a specific time or at a
specific price.
There is no charge to Common Stock Shareholders for receiving
their distributions in the form of additional shares of the
Fund’s Common Stock. Computershare’s fees for handling
distributions in stock are paid by the Fund. There are no
brokerage charges with respect to shares issued directly by the
Fund as a result of distributions payable in stock. If a
Participant elects by written notice to Computershare to have
Computershare sell part or all of the shares held by
Computershare in the Participant’s account and remit the
proceeds to the Participant, Computershare is authorized to
deduct a $2.50 transaction fee plus brokerage commissions from
the proceeds.
Common Stock Shareholders who receive distributions in the form
of stock are subject to the same Federal, state and local tax
consequences as are Common Stock Shareholders who elect to
receive their distributions in cash. A Common Stock
Shareholder’s basis for determining gain or loss upon the
sale of stock received in a distribution from the Fund will be
equal to the total dollar amount of the distribution paid to the
Common Stock Shareholder in the form of additional shares.
20
A special meeting of the shareholders of the Fund was held on
November 14, 2007 and adjourned to December 12, 2007.
At the December 12, 2007 meeting, shareholders approved a
new subadvisory agreement among the Fund, AIG SunAmerica
and Marsico.
The voting results of the meeting to approve the new subadvisory
agreement were as follows:
| For | Against | Abstain | Total | |||||||||||||
|
Shares Voted
|
4,552,346 | 235,639 | 177,104 | 4,965,089 | ||||||||||||
| 21 |
| Number of | ||||||||||||||||
| Funds | ||||||||||||||||
| in Fund | ||||||||||||||||
| Position | Term of | Complex | ||||||||||||||
| Name, | Held With | Office and | Overseen | |||||||||||||
| Address and | SunAmerica | Length of | Principal Occupations | by | Other Directorships Held | |||||||||||
| Date of Birth* | Complex | Time Served | During Past 5 Years | Director(1) | by Director(2) | |||||||||||
|
Disinterested
Directors
|
||||||||||||||||
|
Jeffrey S. Burum DOB: February 27, 1963 |
Director | 2005-present | Founder and CEO of Southern California Development Corporation/ National Housing Development Corp. (1992 to present); Founder, Owner and Partner of Colonies Crossroads, Inc. (2000 to present); Owner and Managing Member of Diversified Pacific Development Group, LLC (1998 to present). | 39 | None | |||||||||||
|
Dr. Judith L. Craven DOB: October 6, 1945 |
Director | 2005-present | Retired. | 87 | Director, Belo Corporation (1992 to present); Director, Sysco Corporation (1996 to present); Director, Luby’s Inc. (1998 to present). | |||||||||||
|
William F. Devin DOB: December 30, 1938 |
Director | 2005-present | Retired. | 88 | Member of the Board of Governors, Boston Stock Exchange (1985 to present). | |||||||||||
|
Samuel M. Eisenstat DOB: March 7, 1940 |
Chairman of the Board | 2005-present | Attorney, solo practitioner. | 49 | Director, North European Oil Royalty Trust. | |||||||||||
|
Stephen J. Gutman DOB: May 10, 1943 |
Director | 2005-present | Senior Associate, Corcoran Group (Real Estate) (2003 to present); President and Member of Managing Directors, Beau Brummell — Soho LLC (Licensing of menswear specialty retailing and other activities) (1988 to present). | 49 | None | |||||||||||
|
William J. Shea DOB: February 9, 1948 |
Director | 2005-present | Managing Partner, DLB Capital, LLC (Private Equity) (2006 to present); President and CEO, Conseco, Inc. (Financial Services) (2001 to 2004); Chairman of the Board of Centennial Technologies, Inc. (1998 to 2001). | 49 | Chairman of the Board, Royal and Sun Alliance U.S.A. Inc. (2005 to present); Director Boston Private Financial Holdings (2004 to present). | |||||||||||
|
Interested Director
|
||||||||||||||||
|
Peter A. Harbeck(3) DOB: January 23, 1954 |
Director | 2005-present | President, CEO and Director, AIG SunAmerica (1995 to present); Director, AIG SunAmerica Capital Services, Inc. (“SACS”) (1993 to present) President and CEO, AIG Advisor Group, Inc. (2004 to present). | 96 | None | |||||||||||
|
Officers
|
||||||||||||||||
|
John T. Genoy** DOB: November 8, 1968 |
President | December 2007-present |
Chief Financial Officer, AIG SunAmerica (2002 to present); Senior Vice President, AIG SunAmerica (2003 to present); Chief Operating Officer, AIG SunAmerica (2006 to present). | N/A | N/A | |||||||||||
|
Donna M. Handel DOB: June 25, 1966 |
Treasurer | 2005-present | Senior Vice President, AIG SunAmerica (2004 to present); Vice President, AIG SunAmerica (1997 to 2004). | N/A | N/A | |||||||||||
| 22 |
| Number of | ||||||||||||||||
| Funds | ||||||||||||||||
| in Fund | ||||||||||||||||
| Position | Term of | Complex | ||||||||||||||
| Name, | Held With | Office and | Overseen | |||||||||||||
| Address and | SunAmerica | Length of | Principal Occupations | by | Other Directorships Held | |||||||||||
| Date of Birth* | Complex | Time Served | During Past 5 Years | Director(1) | by Director(2) | |||||||||||
|
Gregory N. Bressler DOB: November 17, 1966 |
Secretary and Chief Legal Officer | 2005-present | Senior Vice President and General Counsel, AIG SunAmerica (2005 to present); Vice President and Director of U.S. Asset Management Compliance, Goldman Sachs Asset Management, L.P. (2004 to 2005); Deputy General Counsel, Credit Suisse Asset Management, LLC (2002 to 2004); Counsel, Credit Suisse Asset Management, LLC (2000 to 2002). | N/A | N/A | |||||||||||
|
James Nichols DOB: April 7, 1966 |
Vice President | 2006-present | Director, President and CEO, AIG SACS (2006 to present); Senior Vice President, SACS (2002 to 2006); Vice President, AIG SunAmerica (1995 to 2002). | N/A | N/A | |||||||||||
|
Cynthia Gibbons DOB: December 6, 1967 |
Chief Compliance Officer | 2005-present | Vice President, AIG SunAmerica and Variable Annuity Life Insurance Company (2002 to present); Securities Compliance Manager, American General Investment Management, (2000 to 2002). | N/A | N/A | |||||||||||
|
Nori L. Gabert DOB: August 15, 1953 |
Vice President and Assistant Secretary | 2005-present | Vice President and Deputy General Counsel, AIG SunAmerica (2001 to present); Vice President and Secretary, VALIC Company I and VALIC Company II (2000 to present); Formerly, Associate General Counsel, American General Investment Management, (1997 to 2001). | N/A | N/A | |||||||||||
|
Gregory R. Kingston DOB: January 18, 1966 |
Vice President and Assistant Treasurer | 2005-present | Vice President, AIG SunAmerica (2001 to present); Formerly, Vice President, American General Investment Management, L.P. (1999 to 2001). | N/A | N/A | |||||||||||
|
*
|
The business address for each Director and Officer is the Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311-4992. | |
|
**
|
On December 10, 2007, John T. Genoy was elected as President and chief executive officer of the Fund. | |
|
(1)
|
The term “Fund Complex” means two or more registered investment company portfolios that hold themselves out to investors as related companies for purposes of investment services or have a common investment adviser or an investment adviser that is an affiliate of the Adviser. The “Fund Complex” includes the SunAmerica Money Market Funds (2 funds), SunAmerica Equity Funds (9 funds), SunAmerica Income Funds (5 funds), SunAmerica Focused Series, Inc. (18 portfolios), SunAmerica Focused Alpha Growth Fund, Inc. (1 fund), the Fund (1 fund), Anchor Series Trust (9 portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1 fund), SunAmerica Series Trust (35 portfolios), VALIC Company I (32 portfolios), VALIC Company II (15 funds), Seasons Series Trust (24 portfolios), AIG Series Trust (3 portfolios), AIG Strategic Hedge Fund of Funds (1 fund) and Brazos Mutual Funds (4 funds). | |
|
(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 1940 Act. | |
|
(3)
|
Mr. Harbeck is an “interested person” of the Fund, 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. | |
| The Fund’s Statement of Additional Information includes additional information about the Directors and is available, without charge, upon request, by calling (800) 858-8850. | ||
| 23 |
| Ordinary | Qualifying % for | |||||||||||||||||||||||||||||||
| Total Amount | Investment | Short-Term | Long-Term | Return of | the 70% Dividends | |||||||||||||||||||||||||||
| Payable Date | Record Date | Paid Per Share | Income | Capital Gains* | Capital Gains | Capital(1) | Received Deduction | |||||||||||||||||||||||||
|
Common Shares:
|
||||||||||||||||||||||||||||||||
| 3/29/2007 | 3/19/2007 | $ | 0.30000 | $ | 0.01898 | $ | 0.07739 | $ | 0.07489 | $ | 0.12874 | 100.00 | % | |||||||||||||||||||
| 6/28/2007 | 6/18/2007 | 0.30000 | 0.00000 | 0.00000 | 0.17126 | 0.12874 | 100.00 | % | ||||||||||||||||||||||||
| 9/27/2007 | 9/17/2007 | 0.35000 | 0.00000 | 0.00000 | 0.19980 | 0.15020 | 100.00 | % | ||||||||||||||||||||||||
| 12/31/2007 | 12/24/2007 | 1.51000 | 0.00000 | 0.00000 | 0.86199 | 0.64801 | 100.00 | % | ||||||||||||||||||||||||
| Total Common Stock: | $ | 2.46000 | $ | 0.01898 | $ | 0.07739 | $ | 1.30794 | $ | 1.05569 | ||||||||||||||||||||||
| (1) | The amount received as a non-taxable (return of capital) distribution should be applied to reduce the tax cost of shares. There was a $1.05569 per share return of capital in 2007 on common shares. |
| 24 |
25
Samuel M.
Eisenstat
Peter A. Harbeck
Dr. Judith L.
Craven
William F. Devin
Stephen J.
Gutman
Jeffrey S. Burum
William J. Shea
John T. Genoy,
President and
Chief Executive Officer
Donna M. Handel,
Treasurer
James Nichols, Vice
President
Cynthia Gibbons, Chief
Compliance Officer
Gregory N. Bressler, Chief
Legal Officer and
Secretary
Gregory R. Kingston, Vice
President and Assistant Treasurer
Nori L. Gabert, Vice
President and Assistant Secretary
Kathleen Fuentes,
Assistant Secretary
Richard J. Barton,
Assistant Secretary
John E. Smith Jr.,
Assistant Treasurer
AIG SunAmerica Asset
Management Corp.
Harborside Financial
Center
3200 Plaza 5
Jersey City, NJ
07311-4992
State Street Bank and
Trust Company
P.O. Box 5607
Boston, MA 02110
Computershare Shareholder
Services, Inc.
250 Royall
Street
Canton, MA 02021
A description of the policies
and procedures that the Fund uses to determine how to vote
proxies related to securities held in the Fund’s portfolio,
which is available in the Fund’s Form N-CSR, may be
obtained without charge upon request, by calling
(800) 858-8850.
This information is also available from the EDGAR database on
the U.S. Securities and Exchange Commission’s website
at http://www.sec.gov.
The Fund is required to file
its complete schedule of portfolio holdings with the U.S.
Securities and Exchange Commission for its first and third
fiscal quarters on Form N-Q. The Fund’s
Forms N-Q are
available on the U.S. Securities and Exchange Commission’s
website at http://www.sec.gov. You can also review and obtain
copies of Form N-Q
at the U.S. Securities and Exchange Commission’s
Public Reference Room in Washington, DC (information on the
operation of the Public Reference Room may be obtained by
calling
1-800-SEC-0330).
Information regarding how the
Fund voted proxies related to securities held in the Fund’s
portfolio during the most recent twelve month period ended
June 30, is available, once filed with the U.S. Securities
and Exchange Commission without charge, upon request, by calling
(800) 858-8850 or on the U.S. Securities and Exchange
Commission’s website at http://www.sec.gov.
This report is submitted
solely for the general information of shareholders of the Funds.
26
Item 2.
|
Code of Ethics | |
| The SunAmerica Focused Alpha Large-Cap Fund, Inc. (the “registrant”) has adopted a Code of Ethics applicable to its Principal Executive and Principal Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. | ||
Item 3.
|
Audit Committee Financial Expert. | |
| The registrant’s Board of Directors has determined that William J. Shea, the Chairman of the registrant’s Audit Committee, qualifies as an audit committee financial expert, as defined in the instructions to Item 3(a) of Form N-CSR. Mr. Shea is considered to be “independent” for purposes of Item 3(a)(2) of Form N-CSR. | ||
Item 4.
|
Principal Accountant Fees and Services. | |
| (a)—(d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant’s principal accountant were as follows: |
| 2006 | 2007 | |||||||
(a) Audit Fees |
$ | 23,819 | $ | 25,221 | ||||
(b) Audit-Related Fees |
$ | 0 | $ | 0 | ||||
(c) Tax Fees |
$ | 12,495 | $ | 13,115 | ||||
(d) All Other Fees |
$ | 0 | $ | 0 | ||||
| Audit Fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the principal accountant in connection with statutory and regulatory filings. Tax Fees principally include tax compliance, tax advice, tax planning and preparation of tax returns. | |||
| Aggregate fees billed to the investment adviser and Adviser Affiliates (as defined below in Item 4(e)) that are required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X for the last two fiscal years for services rendered by the registrant’s principal accountant were as follows: |
| 2006 | 2007 | |||||||
(b) Audit-Related Fees |
$ | 0 | $ | 0 | ||||
(c) Tax Fees |
$ | 0 | $ | 0 | ||||
(d) All Other Fees |
$ | 0 | $ | 0 | ||||
| (e) | ||||
| (1) The registrant’s Audit Committee (“Committee”) pre-approves all audit services provided by the registrant’s principal accountant for the registrant and all non-audit services provided by the registrant’s principal accountant for the registrant, its investment adviser and any entity controlling, controlled by, or under common control with the investment adviser (“Adviser Affiliates”) that provide ongoing services to the registrant, if the engagement by the investment adviser or Adviser Affiliate relates directly to the operations and financial reporting of the registrant. The audit committee has not presently established any pre-approval policies and procedures that permit the pre-approval of the above services other than by the full audit committee. Certain de minimis exceptions are allowed for non-audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation S-X as set forth in the registrant’s audit committee charter. | ||||
| (2) No services included in (b)-(d) above in connection with fees billed to the registrant or the investment advisor or Adviser Affiliates were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. | ||||
| (f) | Not Applicable. | |||
| (g) | The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal accountant for non-audit services rendered to the registrant, its investment adviser, and Adviser Affiliates that provide ongoing services to the registrant for 2007 and 2006 were $13,115 and $12,495, respectively. | |||
| (h) | Not Applicable. |
Item 5.
|
Audit Committee of Listed Registrants. | |
| The registrant has a separately designated audit committee consisting of the following members: | ||
| Jeffrey Burum | ||
| Judith Craven | ||
| William Devin | ||
| Samuel Eisenstat | ||
| Stephen Gutman | ||
| William Shea | ||
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. |
| • | Vote on a case-by-case basis on proposals to increase authorized common stock; | ||
| • | Vote on a case-by-case basis on mutual fund matter shareholder proposals to terminate the investment adviser; | ||
| • | Vote against the authorization of preferred stock with unspecified voting, conversion, dividend distribution and other rights (“blank check” preferred stock); | ||
| • | Vote on a case-by-case basis regarding finance, merger and acquisition matters; | ||
| • | Abstain from voting on social responsibility or environmental matters, unless the Fund’s objective is directly related to the social or environmental matter in question; | ||
| • | Not vote proxies for index funds/portfolios and passively managed funds/portfolios;1 and | ||
| • | Vote on a case-by-case basis on equity compensation plans. |
| 1 | The Board of the Directors has determined that the costs of voting proxies for index and passively managed funds will generally outweigh any benefits that may be achieved by voting such proxies because the outcome will not directly affect whether the Fund retains a particular security. That is, the Fund will retain or sell a particular security based on objective, rather than subjective, criteria. For example, in the case of an index fund, the Fund will make a determination to retain or sell a security based on whether the index retains or deletes the security. |
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
| Number of Other Accounts Managed | Number of Accounts and Total Assets for | |||||||||||||||||||
| and Total Assets by Account | Which Advisory Fee is Performance Based | |||||||||||||||||||
| Name of Investment | Name of Portfolio | (in millions) | (in millions) | |||||||||||||||||
| Adviser | Manager | RIC | OPI | OA | RIC | OPI | OA | |||||||||||||
Marsico |
Thomas F. Marsico | $ | 31 | $ | 15 | $ | 169 | * | — | — | — | |||||||||
| $ | 41,910 | $ | 2,899 | $ | 29,183 | — | — | — | ||||||||||||
BlackRock
|
Robert C. Doll | $ | 24 | $ | 6 | $ | 19 | $ | 1 | — | — | |||||||||
| $ | 19,800 | $ | 7,700 | $ | 23,600 | $ | 160 | — | — | |||||||||||
| * | One of these accounts is a wrap fee platform which includes approximately 30,256 underlying clients for total assets of approximately $13,116,700,000. |
| • | Trade Allocations. Conflicts may arise between the Fund and Other Client Accounts in the allocation of trades among the Fund and the Other Client Accounts, as the case may be. For example, the Adviser and/or Portfolio Managers may determine that there is a security that is suitable for the Fund as well as for Other Client Accounts that have a similar investment objective. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security, or the Adviser and/or Portfolio Managers may take “short” positions in Other Client Accounts with respect to securities held “long” within the Fund, or vice-versa, which may adversely affect the value of securities held by the Fund. Such ownership or different interests may cause a conflict of interest. The Fund, the Adviser and/or subadvisers have adopted policies, procedures and/or practices regarding the allocation of trades and brokerage, which the Funds address the conflicts associated with managing multiple accounts for multiple clients (including affiliated clients). Subject to cash and security availability and lot size, among other factors, the policies, procedures and/or practices generally require that securities be allocated among the Fund and Other Client Accounts with a similar investment objective in a manner that is fair, equitable and consistent with their fiduciary obligations to each. | |
| • | Allocation of Portfolio Managers’ Time. The Portfolio Managers’ management of the Fund and Other Client Accounts may result in the Portfolio Managers devoting a disproportionate amount of time and attention to the management of the Fund and Other Client Accounts if the Fund and Other Client Accounts have different objectives, benchmarks, time horizons, and fees. Generally, such competing interests for the time and attention of the Portfolio Managers are managed. Although the Adviser does not track the time the Portfolio Managers spends on the Fund or a single Other Client Account, the Adviser and/or subadvisers do periodically assess whether the Portfolio Managers have adequate time and resources to effectively manage all of such Portfolio Managers’ accounts. In certain instances, Portfolio Managers may be employed by two or more employers. Where the Portfolio Manager receives greater |
| compensation, benefits or incentives from one employer over another, the Portfolio Managers may favor one employer over the other (or Other Client Accounts) causing a conflict of interest. | ||
| • | Personal Trading by Portfolio Managers. The management of personal accounts by a Portfolio Manager may give rise to potential conflicts of interest. While generally, each subadviser’s Code of Ethics will impose limits on the ability of a Portfolio Manager to trade for his or her personal account, especially where such trading might give rise to a potential conflict of interest, there is no assurance that the Codes of Ethics will eliminate such conflicts. |
| DOLLAR RANGE OF EQUITY | ||
| NAME OF | SECURITIES IN | |
| PORTFOLIO MANAGER | REGISTRANT | |
| Thomas F. Marsico | None | |
| Robert C. Doll | None | |
Item 9.
|
Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. | |
| None. | ||
Item 10.
|
Submission of Matters to a Vote of Security Holders. | |
| There were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Directors that were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a-101), or this Item 10. | ||
Item 11.
|
Controls and Procedures. |
| (a) | An evaluation was performed within 90 days of the filing of this report, under the supervision and with the participation of the registrant’s management, including the President and Treasurer, of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures (as defined under Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))). Based on that evaluation, the registrant’s management, including the President and Treasurer, concluded that the registrant’s disclosure controls and procedures are effective. | |||
| (b) | There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12.
|
Exhibits. |
| (a) | (1) Code of Ethics applicable to its Principal Executive and Principle Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406. Code of Ethics. | |||
| (2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. | ||||
| (3) Not Applicable. | ||||
| (b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. |
By:
|
/s/ John T. Genoy | |||
| John T. Genoy | ||||
| President |
By:
|
/s/ John T. Genoy | |||
| John T. Genoy | ||||
| President |
By:
|
/s/ Donna M. Handel | |||
| Donna M. Handel | ||||
| Treasurer |