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 811-21770
---------------------------------------------
SunAmerica Focused Alpha Growth Fund, Inc.
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(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
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(Address of principal executive offices) (Zip code)
Vincent M. Marra
Senior Vice President
AIG SunAmerica Asset Management Corp.
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
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(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, 2006
-------------------------
Item 1. Reports to Stockholders
SunAmerica Focused Alpha Growth Fund, Inc. Semiannual Report at
June 30, 2006.
SUNAMERICA FOCUSED ALPHA GROWTH FUND
THOMAS F. MARSICO PHOTO RONALD BARON PHOTO
[MARSICO CAPITAL MANAGEMENT, LLC LOGO] [BARON LOGO]
2006 SEMI-ANNUAL REPORT
[AIG SUNAMERICA MUTUAL FUNDS LOGO]
JUNE 30, 2006 SEMI-ANNUAL REPORT
SUNAMERICA FOCUSED ALPHA GROWTH FUND
SUNAMERICA FOCUSED ALPHA GROWTH FUND (FGF)
TABLE OF CONTENTS
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<Table>
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
DIVIDEND REINVEST AND CASH PURCHASE PLAN.................... 14
ANNUAL SHAREHOLDER MEETING.................................. 16
DIRECTORS AND OFFICERS INFORMATION.......................... 17
</Table>
June 30, 2006 SEMI-ANNUAL REPORT
SHAREHOLDERS' LETTER
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Dear Shareholders:
We are pleased to present this semi-annual report for the SunAmerica
Focused Alpha Growth Fund and thank you for including this strategic
investment solution in your investment plan. In the period commencing
January 1, 2006 through June 30, 2006, the SunAmerica Focused Alpha Growth
Fund's Net Asset Value (NAV) returned 4.8%, outperforming its benchmark,
the Russell 3000 Growth Index,(1) which returned -0.3% for the same
period. The Fund's market price returned 5.2% during the same period. As
of June 30, 2006, the Fund's NAV was $19.92 and its market share price was
$17.33.
The past six months have been a volatile period for the equity markets. At
the start of the calendar year, equity markets were helped to some extent
by good economic news -- including generally stronger-than-expected Gross
Domestic Product (GDP) growth and corporate profits that were better than
the consensus forecast. However, challenges arose for investors as the
period progressed. The consumer price index rose more than expected in
May, fueled by evidence of slowing in the economy and unease about the
intentions of the new Chairman of the Federal Reserve Bank, Ben Bernanke.
For the first six months of 2006, small- and mid-cap growth stocks
outperformed their large-cap counterparts. Small- and mid-cap stocks, as
measured by the Russell 2500 Growth Index(2) advanced 4.7%, while
large-cap growth stocks, as measured by the Russell 1000 Growth Index(3)
fell -0.9%. From a broad sector standpoint, telecommunications and related
services; materials, including energy and commodities; and industrials
were performance leaders, while information technology and healthcare
lagged.
Focused Alpha Growth Fund invests in what its managers believe are
well-managed companies with strong fundamentals, established business
models and growth potential.
What makes your Fund unique is that it brings together two renowned growth
managers blending large- and small/mid-cap growth investing.
Marsico Capital Management LLC selects their 10 favorite large-cap growth
stocks while Ron Baron and his team at BAMCO, Inc. contribute 20
small/mid-cap growth stocks. The Fund is designed to capitalize on the
underperformance of large-cap growth stocks in recent years and the
anticipated asset class rotation. Our multi-managed, focused approach to
investing in a closed-end fund sets SunAmerica Focused Alpha Growth Fund
apart from its competitors.
We value your ongoing confidence in us and look forward to serving your
investment needs in the future.
Sincerely,
/s/ Peter A. Harbeck
Peter A. Harbeck
President and CEO
AIG SunAmerica Asset Management Corp.
------------------
Past performance is no guarantee of future results.
(1) The Russell 3000 Growth Index offers investors access to the broad
growth segment of the U.S. equity universe. The Russell 3000 Growth
Index is constructed to provide a comprehensive and unbiased barometer
of the broad growth market. Based on ongoing empirical research of
investment manager behavior, the methodology used to determine growth
probability approximates the aggregate broad market growth manager's
opportunity set.
(2) The Russell 2500 Index offers investors access to the small to mid-cap
segment of the U.S. equity universe, commonly referred to as "smid"
cap. The Russell 2500 is constructed to provide a comprehensive and
unbiased barometer for the small to mid-cap segment and is completely
reconstituted annually to ensure larger stocks do not distort the
performance and characteristics of the true small to mid-cap
opportunity set. The Russell 2500 includes the smallest 2500
securities in the Russell 3000.
(3) The Russell 1000 Growth Index offers investors access to the large-cap
growth segment of the U.S. equity universe. The Russell 1000 Growth is
constructed to provide a comprehensive and unbiased barometer of the
large-cap growth market. Based on ongoing empirical research of
investment manager behavior, the methodology used to determine growth
probability approximates the aggregate large-cap growth manager's
opportunity set.
1
June 30, 2006 SEMI-ANNUAL REPORT
SHAREHOLDERS' LETTER -- (continued)
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Investors should carefully consider the SunAmerica Focused Alpha Growth
Fund's investment objective, strategies, risks, charges and expenses
before investing. The SunAmerica Focused Alpha Growth 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 this Fund should be considered speculative. There is no
assurance that the SunAmerica Focused Alpha Growth Fund will achieve its
investment objectives. 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.
2
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- JUNE 30, 2006 -- (UNAUDITED)
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<Table>
ASSETS:
Long-term investment securities, at value (unaffiliated)*... $369,835,621
Short-term investment securities, at value
(unaffiliated)*........................................... 72,334,000
------------
Total investments......................................... 442,169,621
------------
Cash........................................................ 1,260
Receivable for:
Dividends and interest.................................... 155,688
Investments sold.......................................... 6,190,258
Prepaid expenses and other assets........................... 3,587
------------
Total assets.............................................. 448,520,414
------------
LIABILITIES:
Payable for:
Investments purchased..................................... 40,915,830
Investment advisory and management fees................... 332,462
Directors' fees and expenses.............................. 1,934
Administration fees....................................... 13,299
Other accrued expenses.................................... 110,227
Dividends payable........................................... 1,707,550
------------
Total liabilities......................................... 43,081,302
------------
Net Assets.............................................. $405,439,112
============
NET ASSETS REPRESENTED BY:
Common stock, $.001 par value (200,000,000 shares
authorized)............................................... $ 20,355
Additional paid-in capital.................................. 377,320,721
------------
377,341,076
Accumulated undistributed net investment income (loss)...... (12,907,362)
Accumulated undistributed net realized gain (loss) on
investments............................................... 2,178,326
Unrealized appreciation (depreciation) on investments....... 38,827,018
Unrealized foreign exchange gain (loss) on other assets and
liabilities............................................... 54
------------
Net Assets.............................................. $405,439,112
============
NET ASSET VALUES
Net assets.................................................. $405,439,112
Shares outstanding.......................................... 20,355,236
Net asset value per share................................... $ 19.92
============
*Cost
Long-term investment securities (unaffiliated)............ $331,008,603
============
Short-term investment securities (unaffiliated)........... $ 72,334,000
============
</Table>
See Notes to Financial Statements
3
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED JUNE 30, 2006 -- (UNAUDITED)
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<Table>
INVESTMENT INCOME:
Dividends (unaffiliated).................................... $ 1,018,599
Interest (unaffiliated)..................................... 679,506
-----------
Total investment income*................................ 1,698,105
-----------
EXPENSES:
Investment advisory and management fees..................... 2,052,686
Administration fees......................................... 82,108
Transfer agent fees and expenses............................ 11,150
Custodian and accounting fees............................... 46,172
Reports to shareholders..................................... 90,863
Audit and tax fees.......................................... 14,368
Legal fees.................................................. 56,763
Directors' fees and expenses................................ 18,437
Other expenses.............................................. 21,102
-----------
Total expenses before custody credits................... 2,393,649
Custody credits earned on cash balances................. (1,324)
-----------
Net expenses............................................ 2,392,325
-----------
Net investment income (loss)................................ (694,220)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)...... 2,427,367
Net realized foreign exchange gain (loss) on other assets
and liabilities........................................... (4)
-----------
Net realized gain (loss) on investments and foreign
currencies................................................ 2,427,363
-----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)................................ 17,112,266
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities.................................... 65
-----------
Net unrealized gain (loss) on investments and foreign
currencies................................................ 17,112,331
-----------
Net realized and unrealized gain (loss) on investments and
foreign currencies........................................ 19,539,694
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $18,845,474
===========
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* Net of foreign withholding taxes on interest and dividends
of........................................................ $ 1,100
===========
</Table>
See Notes to Financial Statements
4
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
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<Table>
<Caption>
FOR THE FOR THE PERIOD
SIX MONTHS ENDED JULY 29, 2005@
JUNE 30, 2006 THROUGH
(UNAUDITED) DECEMBER 31, 2005
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss).............................. $ (694,220) $ (452,306)
Net realized gain (loss) on investments and foreign
currencies.............................................. 2,427,363 (249,038)
Net unrealized gain (loss) on investments and foreign
currencies.............................................. 17,112,331 21,714,741
------------ ------------
Net increase (decrease) in net assets resulting from
operations................................................ 18,845,474 21,013,397
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income*.................................... -- --
Net realized short-term gain on investments*.............. (1,733,143) --
Return of capital*........................................ (10,479,998) (10,177,618)
------------ ------------
Total distributions to shareholders......................... (12,213,141) (10,177,618)
------------ ------------
SHARE TRANSACTIONS (NOTE 7):
Proceeds from sales of shares issued in initial public
offering................................................ -- 353,350,000
Proceeds from the underwriters' over-allotment option of
common shares exercised................................. -- 35,335,000
Offering costs for common shares charged to additional
paid-in capital......................................... -- (814,000)
------------ ------------
Net increase in net assets from share transactions.......... -- 387,871,000
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 6,632,333 398,706,779
NET ASSETS:
Beginning of period......................................... $398,806,779 $ 100,000
End of period+.............................................. $405,439,112 $398,806,779
============ ============
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+ Includes accumulated undistributed net investment income
(loss).................................................. $(12,907,362) $ --
============ ============
</Table>
@ Commencement of operations
* Amounts are estimated as of June 30, 2006, and are subject to change and
recharacterization at fiscal year end.
See Notes to Financial Statements
5
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
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<Table>
<Caption>
FOR THE FOR THE PERIOD
SIX MONTHS ENDED JULY 29, 2005++
JUNE 30, 2006 THROUGH
(UNAUDITED) DECEMBER 31, 2005
---------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 19.59 $ 19.10(1)
INVESTMENT OPERATIONS:
Net investment income (loss)@............................... (0.03) (0.02)
Net realized and unrealized gain (loss) on investments...... 0.96 1.05
-------- --------
Total from investment operations.......................... 0.93 1.03
-------- --------
DISTRIBUTIONS FROM:
Net investment income....................................... --* --
Net realized short-term gains on investments................ (0.09)* --
Return of capital........................................... (0.51)* (0.50)
-------- --------
Total distributions....................................... (0.60) (0.50)
CAPITAL SHARE TRANSACTIONS:
Offering costs for common shares charged to additional
paid-in capital........................................... -- (0.04)
-------- --------
NET ASSET VALUE, END OF PERIOD.............................. $ 19.92 $ 19.59
======== ========
NET ASSET VALUE TOTAL RETURN(2)#............................ 4.77% 5.27%
MARKET VALUE, END OF PERIOD................................. $ 17.33 $ 17.03
MARKET VALUE TOTAL RETURN(3)#............................... 5.20% (12.42)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000's).......................... $405,439 $398,807
Ratio of expenses to average net assets..................... 1.17%+ 1.17%+
Ratio of net investment income to average net assets........ (0.34)+ (0.28)+
Portfolio turnover rate..................................... 36% 28%
</Table>
- ------------
++ Commencement of operations
@ Calculated based upon average shares outstanding
# Total return is not annualized.
+ Annualized
* Amounts are estimated as of June 30, 2006, and are subject to change and
recharacterization at fiscal year end.
(1) Net asset value, beginning of period, reflects a deduction of $0.90 per
share sales charge from the initial offering price of $20.00.
(2) Based on 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.
See Notes to Financial Statements
6
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
PORTFOLIO PROFILE -- JUNE 30, 2006 -- (UNAUDITED)
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<Table>
INDUSTRY ALLOCATION*
Time Deposit.............................................. 17.9%
Leisure & Tourism......................................... 17.8
Financial Services........................................ 16.2
Health Services........................................... 11.4
Transportation............................................ 10.1
Pharmaceuticals........................................... 8.4
Broadcasting & Media...................................... 6.3
Aerospace & Military Technology........................... 4.6
Telecommunications........................................ 4.1
Business Services......................................... 3.0
Retail.................................................... 2.4
Education................................................. 1.9
Energy Sources............................................ 1.5
Utilities................................................. 1.4
Medical Products.......................................... 1.3
Insurance................................................. 0.8
-----
109.1%
=====
</Table>
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* Calculated as a percentage of net assets
7
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 -- (UNAUDITED)
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<Table>
<Caption>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ---------------------------------------------------------------------
COMMON STOCK -- 91.2%
AEROSPACE & MILITARY
TECHNOLOGY -- 4.6%
General Dynamics Corp. ........... 282,790 $ 18,511,433
------------
BROADCASTING & MEDIA -- 6.3%
Comcast Corp., Class A+........... 778,162 25,477,024
------------
BUSINESS SERVICES -- 3.0%
ChoicePoint, Inc.+................ 140,000 5,847,800
SEI Investments Co. .............. 130,000 6,354,400
------------
12,202,200
------------
EDUCATION -- 1.9%
DeVry, Inc.+...................... 350,000 7,689,500
------------
ENERGY SOURCES -- 1.5%
Encore Acquisition Co.+........... 220,000 5,902,600
------------
FINANCIAL SERVICES -- 16.2%
Chicago Mercantile Exchange
Holdings, Inc. ................. 40,899 20,087,544
Jefferies Group, Inc. ............ 300,000 8,889,000
Nuveen Investments, Inc., Class
A............................... 150,000 6,457,500
The First Marblehead Corp. ....... 65,000 3,701,100
The Goldman Sachs Group, Inc. .... 89,633 13,483,492
UBS AG............................ 118,000 12,944,600
------------
65,563,236
------------
HEALTH SERVICES -- 11.4%
Centene Corp.+.................... 200,000 4,706,000
Manor Care, Inc. ................. 160,000 7,507,200
UnitedHealth Group, Inc. ......... 761,268 34,089,581
------------
46,302,781
------------
INSURANCE -- 0.8%
Axis Capital Holdings, Ltd. ...... 120,000 3,433,200
------------
LEISURE & TOURISM -- 17.8%
Boyd Gaming Corp. ................ 250,000 10,090,000
Four Seasons Hotels, Inc. ........ 150,000 9,216,000
Las Vegas Sands Corp.+............ 384,330 29,923,934
Scientific Games Corp., Class
A+.............................. 180,000 6,411,600
Wynn Resorts, Ltd.+............... 225,000 16,492,500
------------
72,134,034
------------
</Table>
<Table>
- ---------------------------------------------------------------------
<Caption>
SHARES/PRINCIPAL VALUE
SECURITY DESCRIPTION AMOUNT (NOTE 2)
MEDICAL PRODUCTS -- 1.3%
Edwards Lifesciences Corp.+....... 120,000 $ 5,451,600
------------
PHARMACEUTICALS -- 8.4%
Genentech, Inc.+.................. 414,675 33,920,415
------------
RETAIL -- 2.4%
Dick's Sporting Goods, Inc.+...... 250,000 9,900,000
------------
TELECOMMUNICATIONS -- 4.1%
QUALCOMM, Inc. ................... 413,108 16,553,238
------------
TRANSPORTATION -- 10.1%
Burlington Northern Santa Fe
Corp. .......................... 405,946 32,171,220
Expeditors International of
Washington, Inc. ............... 160,000 8,961,600
------------
41,132,820
------------
UTILITIES -- 1.4%
ITC Holdings Corp. ............... 213,000 5,661,540
------------
TOTAL LONG-TERM INVESTMENT
SECURITIES
(cost $331,008,603)............. 369,835,621
------------
SHORT-TERM INVESTMENT SECURITIES -- 17.9%
TIME DEPOSITS -- 17.9%
Euro Time Deposit with State
Street Bank & Trust Co.
4.05% due 07/03/06
(cost $72,334,000).............. $72,334,000 72,334,000
------------
TOTAL INVESTMENTS
(cost $403,342,603)(1).......... 109.1% 442,169,621
LIABILITIES IN EXCESS OF OTHER
ASSETS............................ (9.1) (36,730,509)
----------- ------------
NET ASSETS.......................... 100.0% $405,439,112
=========== ============
</Table>
- ------------
+ Non-income producing securities
(1) See Note 5 for cost of investments on a tax basis
See Notes to Financial Statements
8
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 -- (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Organization of the Fund
SunAmerica Focused Alpha Growth Fund, Inc. (the "Fund") is a non-diversified
closed-end management investment company. The Fund was organized as a
Maryland corporation on May 18, 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 July 18, 2005 to AIG SunAmerica Asset
Management Corp. (the "Adviser" or "SAAMCo"), an indirect wholly-owned
subsidiary of America International Group, Inc. ("AIG"). Investment
operations commenced on July 29, 2005 upon settlement of the sale of
18,500,000 shares in the amount of $353,350,000 (net of underwriting fees
and expenses of $16,650,000). In addition, on August 25, 2005 and September
13, 2005, the Fund issued 1,200,000 and 650,000 shares in the amount of
$22,920,000 and $12,415,000 (net of underwriting fees and expenses of
$1,080,000 and $585,000) in conjunction with the exercise of the
underwriters' over-allotment option. SAAMCo paid certain organizational
expenses of the Fund and then 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) and to a lesser extent equity-related securities (i.e.,
preferred stocks, convertible securities, warrants and rights) primarily in
the U.S. markets.
INDEMNIFICATIONS: Under the Fund's organizational documents, its officers
and directors are indemnified against certain liability arising out of the
performance of their duties to the Fund. In addition, in the normal course
of business the Fund enters into contracts that may contain the obligation
to indemnify others. The Fund's maximum exposure under these arrangements is
unknown. Currently, however, the Fund expects the risk of loss to be remote.
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles 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 New York Stock Exchange,
securities traded primarily on security exchanges outside the United States
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 to reflect what it believes to be the fair value of
the securities as of the close of regular trading on the New York Stock
Exchange. 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
9
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 -- (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
equity securities, the Fund uses an outside pricing service to provide it
with closing market prices and information used for adjusting those prices.
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 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.
REPURCHASE AGREEMENTS: For repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in repurchase
agreements. The underlying collateral is valued daily on a mark to market
basis to ensure that the value, including accrued interest, is at least 102%
of the repurchase price. In the event of default of the obligation to
repurchase, 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 June 30, 2006, 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 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, or as necessary to distribute long-term capital
gains in a manner consistent with the requirements of the Investment Company
Act of 1940, as amended, whichever is greater. Each quarter the Board of
Directors 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 will be deemed a return of
capital. The final determination of the source of all dividend distributions
will be made after year-end. The Distribution Policy may, under certain
circumstances, have certain adverse consequences to the Fund and its
shareholder because it may result in a return of capital resulting in less
of a shareholder's assets being invested in the Fund and, over time,
increase the Fund's expense ratio. The Distribution Policy also may cause
the Fund to sell a security at a time it would not otherwise do so in order
to manage the distribution of income and/or gains.
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
10
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 -- (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
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. At
this time, management is evaluating the implications of FIN 48 and its
impact in the financial statements, if any, has not yet been determined.
The Fund intends to comply with the requirements of the Internal Revenue
Code, as amended, 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.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars based on the exchange rate of such currencies
against U.S. dollars on the date of the valuation. The Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rates from the changes in the market prices of
securities held at the end of the period. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the changes in
the market prices of Fund securities sold during the year.
Change in unrealized foreign exchange gains and losses on other assets and
liabilities located in the Statement of Operations include foreign exchange
gains and losses from currency gains or losses between the trade and
settlement dates of securities transactions, the difference between the
amounts of interest, dividends and foreign withholding taxes recorded on a
Fund's books and the U.S. dollar equivalent amounts actually received or
paid and changes in the unrealized foreign exchange gains and losses
relating to other assets and liabilities arising as a result of changes in
the exchange rate.
Note 3. Investment Advisory and Management Agreement
Pursuant to its investment advisory and management agreement ("Advisory
Agreement") with the Fund, SAAMCo manages the affairs of the Fund, and
selects, contracts with and compensates the Subadvisers to manage the Fund's
assets. SAAMCo 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 Board of Directors. Pursuant to the Advisory Agreement, the Fund will
pay SAAMCo a monthly fee at the annual rate of 1.00% of the average daily
total assets of the Fund.
Marsico Capital Management, LLC ("Marsico"), a wholly-owned subsidiary of
Bank of America, and BAMCO, Inc., a wholly-owned subsidiary of Baron Capital
Group, Inc. ("Baron") have been retained by SAAMCo as the Subadvisers to the
Fund to manage the investment and reinvestment of the Fund's assets.
Pursuant to the investment subadvisory agreements ("Subadvisory Agreements")
between SAAMCo and Marsico and Baron, respectively, Marsico and Baron select
the investments made by the Fund. Marsico will manage the large-cap portion
of the Fund and is entitled to receive a fee at the annual rate of 0.40% of
the Fund's average daily total assets managed in the large-cap portion of
the Fund. Baron will manage the small-and mid-cap portion of the Fund and is
entitled to receive a fee at the annual rate of 0.60% of the Fund's average
daily total assets managed in the small- and mid-cap portion of the Fund.
Each Subadviser is paid by SAAMCo.
SAAMCo serves as administrator to the Fund. Under the Administrative
Services Agreement, SAAMCo is responsible for performing administrative
services in connection with the operations of the Fund, subject to the
supervision of the Fund's Board of Directors. SAAMCo will provide the Fund
with regulatory reporting, all necessary office space, equipment, personnel
and facilities for handling the affairs of the Fund. SAAMCo's administrative
services include recordkeeping, supervising the activities of the Fund's
custodian and transfer agent, providing assistance in connection
11
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 -- (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
with the Directors' and shareholders' meetings and other administrative
services necessary to conduct the Fund's affairs. For its services as
administrator, SAAMCo is entitled to receive a monthly fee at the annual
rate of 0.04% of the Fund's average daily total assets.
Note 4. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales and maturities of long-term
investments during the period ended June 30, 2006, were as follows:
<Table>
Purchases (excluding U.S. government securities)............ $139,046,998
Sales and maturities (excluding U.S. government
securities)............................................... 182,602,166
Purchases of U.S. government securities..................... --
Sales and maturities of U.S. government securities.......... --
</Table>
Note 5. 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 due to temporary book/tax differences primarily arising from
wash sales.
<Table>
<Caption>
DISTRIBUTABLE EARNINGS TAX DISTRIBUTIONS
- -------------------------------------------- ----------------------------------
FOR THE PERIOD ENDED DECEMBER 31, 2005
- ---------------------------------------------------------------------------------
LONG-TERM GAINS/ UNREALIZED LONG-TERM
ORDINARY CAPITAL LOSS APPRECIATION ORDINARY CAPITAL RETURN OF
INCOME CARRYOVER (DEPRECIATION) INCOME GAINS CAPITAL
- -------- ---------------- -------------- -------- --------- -----------
$ -- $(225,073) $21,690,776 $ -- $ -- $10,177,618
</Table>
At December 31, 2005, for Federal income tax purposes, the Fund had a
capital loss carryforward of $225,073, which will expire in the year 2013,
and is available to offset future capital gains, if any.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for federal tax purposes, including short-term securities were as
follows:
<Table>
Cost (tax basis)............................................ $403,366,568
============
Appreciation................................................ $ 50,249,982
Depreciation................................................ (11,446,929)
------------
Net unrealized appreciation (depreciation).................. $ 38,803,053
============
</Table>
Note 6. Transactions with Affiliates
For the period ended June 30, 2006 the Fund incurred brokerage commissions
with Banc of America Securities LLC, an affiliated broker, of $165.
12
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 -- (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
Note 7. Capital Share Transactions
Transactions in capital shares of the Fund were as follows:
<Table>
<Caption>
FOR THE
SIX MONTHS ENDED FOR THE PERIOD
JUNE 30, 2006 JULY 29, 2005* THROUGH
(UNAUDITED) DECEMBER 31, 2005
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Initial seed capital, July 18, 2005....................... -- $ -- 5,236 $ 100,000
Common shares issued in connection with initial public
offering................................................ -- -- 18,500,000 353,350,000
Common shares issued from underwriters' over-allotment
option exercised........................................ -- -- 1,850,000 35,335,000
---------- ------------ ---------- ------------
Net increase............................................ -- $ -- 20,355,236 $388,785,000
========== ============ ========== ============
</Table>
- ------------
* Commencement of operations
Note 8. Other Information
On February 9, 2006, American International Group, Inc. ("AIG"), the parent
company and an affiliated person of AIG SunAmerica Asset Management Corp.
("Adviser"), announced that it had consented to the settlement of an
injunctive action instituted by the Securities and Exchange Commission
("SEC"). In its complaint, the SEC alleged that AIG violated Section 17(a)
of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)
and 13(b)(5) of the Securities Exchange Act of 1934, as amended, and Rules
10b-5, 12b-20, 13a-1 and 13b2-1 promulgated thereunder, in connection with
AIG's accounting and public reporting practices. The conduct described in
the complaint did not involve any conduct of AIG or its subsidiaries related
to their investment advisory or distribution activities with respect to the
assets of the Fund.
AIG, without admitting or denying the allegations in the complaint (except
as to jurisdiction), consented to the entry of an injunction against further
violations of the statutes referred to above. Absent exemptive relief
granted by the SEC, the entry of such an injunction would prohibit AIG and
its affiliated persons from, among other things, serving as an investment
adviser of any registered investment management company or principal
underwriter for any registered open-end investment company pursuant to
Section 9(a) of the Investment Company Act of 1940, as amended ("1940 Act").
Certain affiliated persons of AIG, including the Adviser, received a
temporary order from the SEC pursuant to Section 9(c) of the 1940 Act with
respect to the entry of the injunction, granting exemptive relief from the
provisions of Section 9(a) of the 1940 Act. The temporary order permits AIG
and its affiliated persons, including AIG's investment management
subsidiaries, to serve as investment adviser or sponsor of the Fund. The
Adviser expects that a permanent exemptive order will be granted, although
there is no assurance the SEC will issue the order.
Additionally, AIG and its subsidiaries reached a resolution of claims and
matters under investigation with the United State Department of Justice
("DOJ"), the Attorney General of the State of New York ("NYAG") and the New
York State Department of Insurance ("DOI"), regarding accounting, financial
reporting and insurance brokerage practices of AIG and its subsidiaries, as
well as claims relating to the underpayment of certain workers compensation
premium taxes and other assessments.
As a result of the settlements with the SEC, the DOJ, the NYAG and the DOI,
AIG will make payments totaling approximately $1.64 billion. In addition, as
part of its settlements, AIG has agreed to retain for a period of three
years an Independent Consultant who will conduct a review that will include
the adequacy of AIG's internal controls over financial reporting and the
remediation plan that AIG has implemented as a result of its own internal
review.
Subject to receipt of permanent relief, the Adviser believes that the
settlements are not likely to have a material adverse effect on its ability
to perform investment advisory services relating to the Fund.
13
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN -- JUNE 30, 2006 -- (UNAUDITED)
- --------------------------------------------------------------------------------
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 Co., N.A. ("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 New York Stock Exchange 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.
14
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN -- JUNE 30,
2006 -- (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
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 Shareholder 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.
15
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
ANNUAL SHAREHOLDER MEETING -- JUNE 30, 2006 -- (UNAUDITED)
- --------------------------------------------------------------------------------
The Annual Meeting of the Shareholders of the Fund was held on April 19, 2006.
At this meeting Jeffrey S. Burum and William F. Devin were elected by
shareholders to serve as the Class I Directors of the Fund for three-year terms
and until their respective successors are duly elected and qualify.
The voting results of the shareholder meeting to elect Jeffrey S. Burum and
William F. Devin to the Board of Directors is as follows:
ELECTION OF JEFFREY S. BURUM TO THE BOARD OF DIRECTORS
<Table>
<Caption>
FOR WITHHELD TOTAL
---------- -------- ----------
Shares Voted................................................ 19,139,453 433,452 19,572,905
</Table>
ELECTION OF WILLIAM F. DEVIN TO THE BOARD OF DIRECTORS
<Table>
<Caption>
FOR WITHHELD TOTAL
---------- -------- ----------
Shares Voted................................................ 19,135,800 437,105 19,572,905
</Table>
16
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
DIRECTORS AND OFFICERS INFORMATION -- JUNE 30, 2006 -- (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.
<Table>
<Caption>
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)
-------------- ---------- ----------- --------------------- ----------- ------------------------
DIRECTORS
Jeffrey S. Burum Director June 2005 to Founder and CEO of 42 None
DOB: February 27, 1963 present National Housing
Development
Corporation (January
2000 to present);
Founder, Owner and
Partner of Colonies
Crossroads, Inc.
(January 2000 to
present); Owner and
Managing Member of
Diversified Pacific
Development Group,
LLC (June 1990 to
present)
Judith L. Craven Director June 2005 to Retired 90 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 (May
2001 to present)
William F. Devin Director June 2005 to Retired 90 Member of the Board of
DOB: December 30, 1938 present Governors, Boston Stock
Exchange (1985-
Present);
Samuel M. Eisenstat DOB: Chairman of June 2005 to Attorney, solo 52 Director of North
March 7, 1940 the Board present practitioner; European Oil Royalty
Trust.
Stephen J. Gutman Director June 2005 to Senior Associate, 52 None
DOB: May 10, 1943 present Corcoran Group (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 May 2005 to President, CEO and 99 None
DOB: January 23, 1954 present Director, SAAMCo.
(August 1995 to
present); Director,
AIG SunAmerica
Capital Services,
Inc. ("SACS") (August
1993 to present)
President and CEO,
AIG Advisor Group,
Inc. (June 2004 to
present)
William J. Shea Director June 2005 to President and CEO, 52 Chairman of the Board,
DOB: February 9, 1948 present Conseco, Inc. Royal and SunAlliance,
(Financial Services) U.S.A., Inc. (March 2005
(2001-2004); Chairman to present); Director,
of the Board of Boston Private Holdings
Centennial (October 2004 to
Technologies, Inc. present)
(1998 to 2001); Vice
Chairman, Bank Boston
Corporation
(1993-1998)
</Table>
17
SUNAMERICA FOCUSED ALPHA GROWTH FUND, INC.
DIRECTORS AND OFFICERS INFORMATION -- JUNE 30,
2006 -- (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
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)
-------------- ---------- ----------- --------------------- ----------- ------------------------
OFFICERS
Vincent M. Marra President May 2005 to Senior Vice N/A N/A
DOB: May 28, 1950 present President, SAAMCo
(February 2003 to
Present); Chief
Administrative
Officer, Chief
Operating Officer and
Chief Financial
Officer, Carret &
Co., LLC (June 2002
to February 2003);
President and Chief
Operating Officer,
Bowne Digital
Solutions (1999 to
May 2002)
Donna M. Handel Treasurer May 2005 to Senior Vice N/A N/A
DOB: June 25, 1966 present President, SAAMCo
(December 2004 to
Present); Vice
President, SAAMCo
(1997 to December
2004)
Gregory N. Bressler Secretary August 2005 Senior Vice President N/A N/A
DOB: November 17, 1966 and Chief to present and General Counsel,
Legal SAAMCo (June 2005 to
Officer present); Vice
President and
Director of U.S.
Asset Management
Compliance, Goldman
Sachs Asset
Management (June 2004
to June 2005); Deputy
General Counsel,
Credit Suisse Asset
Management (June 2002
to June 2004);
Counsel, Credit
Suisse Asset
Management (January
2000 to June 2002)
</Table>
- ---------------
<Table>
* 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 administrator. The "Fund Complex" includes the
SunAmerica Money Market Funds, Inc. (2 funds), SunAmerica
Equity Funds (10 funds), SunAmerica Income Funds (5 funds),
SunAmerica Focused Series, Inc. (17 portfolios), SunAmerica
Focused Alpha Growth Fund, Inc. (1 fund), SunAmerica Focused
Alpha Large-Cap Fund, Inc. (1 fund), Anchor Series Trust (9
portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1
fund), SunAmerica Series Trust (32 portfolios), VALIC
Company I (32 portfolios), VALIC Company II (15 funds),
Seasons Series Trust (24 portfolios) and AIG Series Trust (6
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 within the Investment
Company Act of 1940, because he is an officer and a director
of the advisor of the Fund.
</Table>
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
The Fund has filed with the NYSE its chief executive officer certification with
the NYSE's listing standards. The Fund has also filed with the Securities and
Exchange Commission the certification of its principal executive officer and
principal financial officer required by Section 302 of the Sarbanes-Oxley Act
with respect to the most recently completed fiscal year end.
During the period, there were no material changes to the Fund's investment
objective or policies or to the Fund's articles of incorporation or by-laws that
were not approved by the shareholders or in the principle risk factors
associated with investment in the Fund. There have been no changes in the
persons who are primarily responsible for the day-to-day management of the
Fund's portfolio.
18
- --------------------------------------------------------------------------------
(AIG LOGO)
DIRECTORS/TRUSTEES
Samuel M. Eisenstat
Peter A. Harbeck
Dr. Judith L. Craven
William F. Devin
Stephen J. Gutman
Jeffrey S. Burum
William J. Shea
OFFICERS
Vincent M. Marra, President
Donna M. Handel, Treasurer
Cynthia Gibbons, Vice President
and 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
Corey A. Issing, Assistant Secretary
INVESTMENT ADVISER
AIG Sun America Asset Management Corp.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 419572
Kansas City, MO 64141-6572
TRANSFER AGENT
Computershare Shareholder Services, Inc.
250 Royall Street
Canton, MA 02021
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
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.
DISCLOSURE OF QUARTERLY PORTFOLIO HOLDINGS
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 www.sec.gov. You can
also review and obtain copies of the Forms 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).
PROXY VOTING RECORD ON FUND
PORTFOLIO SECURITIES
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 (i) without charge, upon request, by calling (800)
858-8850 or (ii) 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 Fund.
The accompanying report has not been audited by independent accountants
and accordingly no opinion has been expressed thereon.
19
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.
None.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the policies by which
shareholders may recommend nominees to the Board of Directors.
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
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) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Focused Alpha Growth Fund, Inc.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: September 7, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: September 7, 2006
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: September 7, 2006