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 811-21805
---------------------------------------------
SunAmerica Focused Alpha Large-Cap 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
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Date of fiscal year end: December 31
--------------------------
Date of reporting period: December 31, 2006
-------------------------
Item 1. Reports to Stockholders
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND (FGI)
ROBERT C. DOLL THOMAS F. MARSICO
[BLACKROCK LOGO] [MARSICO CAPITAL MANAGEMENT, LLC LOGO]
2006 ANNUAL REPORT
[AIG SUNAMERICA MUTUAL FUNDS LOGO]
DECEMBER 31, 2006 ANNUAL REPORT
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND (FGI)
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
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM............ 15
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN................ 16
ANNUAL SHAREHOLDER MEETING.................................. 18
DIRECTORS AND OFFICERS INFORMATION.......................... 19
SHAREHOLDER TAX INFORMATION................................. 21
</Table>
December 31, 2006 ANNUAL REPORT
SHAREHOLDERS' LETTER
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Dear Shareholders:
We are pleased to present the annual report for the SunAmerica Focused
Alpha Large-Cap Fund for the year ended December 31, 2006 and thank you
for including this strategic investment solution in your investment plan.
In the year ended December 31, 2006, the SunAmerica Focused Alpha
Large-Cap Fund's Net Asset Value (NAV) returned 12.8%, underperforming its
benchmark, the Russell 1000 Index1, which returned 15.5% for the same
period. The Fund's market price returned -1.5% during the same period. As
of December 31, 2006, the Fund's NAV was $20.21 and its market share price
was $18.40.
The past 12 months have been a volatile period for the equity markets. The
first half brought sluggish returns due to sharply-rising oil prices,
higher interest rates, and a significant slowdown in the U.S. housing
markets. Over the summer, in the face of weaker growth, the Federal Open
Market Committee (FOMC) paused in its two-year campaign of money
tightening. The Federal Reserve decided not to raise interest rates, and
left its bell-wether federal funds target rate at 5.25% through year-end.
The equity markets began to stage recoveries, and, as the remainder of the
year unfolded, interest rates declined, oil prices fell substantially,
inflation expectations waned and corporate profits remained at attractive
levels.
Around mid-year, the equity markets experienced a change in leadership
from small-cap, lower-quality, more cyclical stocks to larger-cap,
higher-quality, more predictable securities. Robust gains in the third and
fourth quarters propelled large capitalization indexes to strong returns
for the 12-month period as a whole. Large-cap value stocks, as measured by
the Russell 1000 Value Index2, outperformed large-cap growth stocks for
2006, as measured by the Russell 1000 Growth Index3, by more than 13%.
From a broad sector standpoint, performance leaders included Utilities,
Telecommunications Services, Consumer Staples and Consumer Discretionary.
Lagging sectors were Health Care, Software & Services and Technology
Hardware & Equipment industry groups.
The SunAmerica Focused Alpha Large-Cap Fund is distinctive from its
closed-end competitors in that it employs a multi-managed, concentrated
investment approach. Two of Wall Street's best known equity managers,
Marsico Capital Management LLC and BlackRock Investment Management LLC and
their respective teams each contribute their favorite stock picks. 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,
/s/ Peter A. Harbeck
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 United States ("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 1,000 securities in the Russell 3000.
(2) The Russell 1000 Value Index measures the performance of those Russell
1000 companies with lower price-to-book ratios and lower forecasted
growth values. The Russell 1000 Index is a comprehensive large-cap
index measuring the performance of the largest 1,000 U.S. incorporated
companies.
(3) The Russell 1000 Growth Index measures the performance of those
Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values. The Russell 1000 Index is a comprehensive
large-cap index measuring the performance of the largest 1,000 U.S.
incorporated companies.
Indices are not managed and an investor cannot invest directly into an
index.
1
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
FUND REVIEW (UNAUDITED)
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BELOW, TOM MARSICO AND TEAM PORTFOLIO MANAGERS AT MARSICO CAPITAL MANAGEMENT,
LLC ("MARSICO") DISCUSS THE FUND'S PERFORMANCE OVER THE REPORTING PERIOD.
MARSICO MANAGES THE LARGE-CAP GROWTH PORTION OF THE FUND'S PORTFOLIO.
Over the past year, uncertainty surrounding the Federal Reserve's actions
appeared to create both a worry that inflation was on the rise and a conflicting
worry that the economy was heading into a recession. This uncertainty dampened
the stock prices in a few different areas of investment, and was the primary
market condition affecting the Fund's performance.
Overall, stock selection had the largest impact on the Fund's performance. This
is in keeping with our focused investing strategy. Positions in Las Vegas Sands
and Wynn Resorts Ltd, were the largest contributors in the period. Other strong
performers included Comcast, Goldman Sachs Group, and America Movil SA, which
provides wireless communications services primarily in Latin America. We also
locked in gains from positions in Broadcom and the Chicago Mercantile Exchange,
both of which were sold during the reporting period. On the flip side, holdings
in Genentech and UnitedHealth Group created a drag on performance, as did Apple
Computer, Halliburton and Home Depot, all three prior to being sold.
Although industry and sector allocations are a minor consideration compared to
our belief in the stories behind the companies that we invested in, the Fund did
benefit by a significant overweight in the Consumer Discretionary and
Telecommunications Services sectors, and an underweight in the Software &
Services and Technology Hardware & Equipment industry groups, both of which were
relatively weak-performing areas of investment.
BELOW, BOB DOLL AND TEAM PORTFOLIO MANAGERS AT BLACKROCK INVESTMENT MANAGEMENT
DISCUSS THE FUND'S PERFORMANCE OVER THE REPORTING PERIOD. BLACKROCK MANAGES THE
LARGE-CAP VALUE PORTION OF THE FUND'S PORTFOLIO.
It was a good 12 months overall for equities, despite a mid-year change in
leadership from cyclical stocks to more predictable securities. Our strategy
lost ground due to its pro-cyclical positioning, with positions in Sunoco,
Aetna, Caremark and McKesson Corp. all creating a drag on performance. On the
flip side, the Fund benefited from holdings in J.C. Penny and Quest
Communication. Portfolio additions included Xerox, which is currently trading at
an attractive valuation. While there is market consensus that Xerox's revenues
have leveled off, the company continues to generate tremendous amount of free
cash flow and margins continue to improve due to operating expense controls. The
Fund also acquired Nucor, in our view, one of the best run steel companies in
the U.S. Demand for steel products continues to be strong, fueled by continued
infrastructure development in developing countries. At the same time, supply is
somewhat challenged due to Global consolidation. Within the U.S., demand for
steel continues to be strong in the non-residential construction area where
Nucor maintains a large presence.
- ---------------------
Investors should carefully consider the SunAmerica Focused Alpha Large-Cap
Fund's investment objective, strategies, risks, charges and expenses 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 this Fund
should be considered speculative. There is no assurance that the SunAmerica
Focused Alpha Large-Cap 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 LARGE-CAP FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- DECEMBER 31, 2006
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<Table>
ASSETS:
Long-term investment securities, at value (unaffiliated)*... $194,588,971
Short-term investment securities, at value
(unaffiliated)*........................................... --
------------
Total investments......................................... 194,588,971
------------
Receivable for:
Dividends and interest.................................... 219,152
Investments sold.......................................... 2,095,913
Prepaid expenses and other assets........................... 3,078
------------
Total assets.............................................. 196,907,114
------------
LIABILITIES:
Payable for:
Investment advisory and management fees................... 169,508
Administration fees....................................... 6,781
Directors' fees and expenses.............................. 251
Other accrued expenses.................................... 102,354
Due to custodian............................................ 1,451,325
------------
Total liabilities......................................... 1,730,219
------------
Net Assets.............................................. $195,176,895
============
NET ASSETS REPRESENTED BY:
Common stock, $0.001 par value (200,000,000 shares
authorized)............................................... $ 9,655
Additional paid-in capital.................................. 173,844,453
------------
173,854,108
Accumulated undistributed net investment income (loss)
(unaffiliated)............................................ --
Accumulated undistributed net realized gain (loss) on
investments (unaffiliated)................................ (445,011)
Unrealized appreciation (depreciation) on investments
(unaffiliated)............................................ 21,767,798
------------
Net Assets.............................................. $195,176,895
============
NET ASSET VALUES:
Net assets.................................................. $195,176,895
Shares outstanding.......................................... 9,655,236
Net Asset value per share................................... $ 20.21
============
*COST
Long-term investment securities (unaffiliated)............ $172,821,173
============
Short-term investment securities (unaffiliated)........... $ --
============
</Table>
See Notes to Financial Statements
3
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED DECEMBER 31, 2006
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<Table>
INVESTMENT INCOME:
Dividends (unaffiliated).................................... $ 1,923,700
Interest (unaffiliated)..................................... 384,582
-----------
Total investment income*.................................. 2,308,282
-----------
EXPENSES:
Investment advisory and management fees..................... 1,905,130
Administration fees......................................... 76,205
Transfer agent fees and expenses............................ 21,170
Custodian and accounting fees............................... 46,398
Reports to shareholders..................................... 77,973
Audit and tax fees.......................................... 27,740
Legal fees.................................................. 74,825
Directors' fees and expenses................................ 34,685
Other expenses.............................................. 49,054
-----------
Total expenses before custody credits..................... 2,313,180
Custody credits earned on cash balances................... (408)
Fees paid indirectly (Note 4)............................. (5,560)
-----------
Net expenses.............................................. 2,307,212
-----------
Net investment income (loss)................................ 1,070
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)...... 740,084
Net realized gain (loss) on disposal of investments in
violation of investment restrictions (Note 3)............. 217,534
-----------
Net realized gain (loss) on investments and foreign
currencies................................................ 957,618
-----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)................................ 21,767,798
-----------
Net realized and unrealized gain (loss) on investments and
foreign currencies........................................ 22,725,416
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $22,726,486
===========
</Table>
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<Table>
* Net of foreign withholding taxes on interest and dividends
of........................................................ $ 24,342
===========
</Table>
See Notes to Financial Statements
4
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
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<Table>
<Caption>
FOR THE PERIOD
FOR THE DECEMBER 28, 2005@
YEAR ENDED THROUGH
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------- --------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss).............................. $ 1,070 $ 7,692
Net realized gain (loss) on investments and foreign
currencies.............................................. 957,618 --
Net unrealized gain (loss) on investments and foreign
currencies.............................................. 21,767,798 --
------------ ------------
Net increase (decrease) in net assets resulting from
operations................................................ 22,726,486 7,692
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (9,064) --
Net realized gain on securities........................... (1,402,629) --
Return of capital......................................... (10,174,590) --
------------ ------------
Total distributions to shareholders......................... (11,586,283) --
------------ ------------
SHARE TRANSACTIONS (NOTE 8):
Proceeds from sales of shares issued in initial public
offering................................................ -- 184,315,000
Offering costs for common shares charged to additional
paid-in capital......................................... -- (386,000)
------------ ------------
Net increase in net assets from share transactions.......... -- 183,929,000
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 11,140,203 183,936,692
NET ASSETS:
Beginning of period......................................... 184,036,692 100,000
------------ ------------
End of period+.............................................. $195,176,895 $184,036,692
============ ============
</Table>
- ------------
<Table>
+ Includes accumulated undistributed net investment income
(loss).................................................... $ -- $ 7,692
============ =============
</Table>
@ Commencement of operations
See Notes to Financial Statements
5
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
FOR THE FOR THE PERIOD
YEAR ENDED DECEMBER 28, 2005++
DECEMBER 31, 2006 TO DECEMBER 31, 2005
----------------- --------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 19.06 $ 19.10(1)
INVESTMENT OPERATIONS:
Net investment income (loss)@............................... 0.00 0.00
Net realized and unrealized gain (loss) on investments...... 2.35 --
-------- --------
Total from investment operations.......................... 2.35 --
-------- --------
DISTRIBUTIONS FROM:
Net investment income....................................... (0.00) --
Net realized gains.......................................... (0.15) --
Return of capital........................................... (1.05) --
-------- --------
Total distributions....................................... (1.20) --
CAPITAL SHARE TRANSACTIONS:
Offering costs for common shares charged to additional
paid-in capital........................................... -- (0.04)
-------- --------
NET ASSET VALUE, END OF PERIOD.............................. $ 20.21 $ 19.06
======== ========
NET ASSET VALUE TOTAL RETURN#(2)(4)......................... 12.77% (0.21)%
MARKET VALUE, END OF PERIOD................................. $ 18.40 $ 20.00
MARKET VALUE TOTAL RETURN#(3)............................... (1.53)% 0.00%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000's).......................... $195,177 $184,037
Ratio of expenses to average net assets..................... 1.23% 0.03%+
Ratio of net investment income (loss) to average net
assets.................................................... 0.00% 0.00%+
Portfolio turnover rate..................................... 91% 0%
</Table>
- ------------
++ 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 charge from the initial offering price of $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. (Note 3)
See Notes to Financial Statements
6
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
PORTFOLIO PROFILE -- DECEMBER 31, 2006 -- (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
INDUSTRY ALLOCATION
Aerospace/Defense....................... 11.4%
Oil Companies-Integrated................ 10.5
Casino Hotels........................... 8.9
Medical-HMO............................. 5.7
Cable TV................................ 5.4
Telephone-Integrated.................... 5.4
Computers............................... 5.3
Office Automation & Equipment........... 5.1
Retail-Major Department Stores.......... 4.8
Health Care Cost Containment............ 4.7
Auto-Cars/Light Trucks.................. 4.2
Steel-Producers......................... 4.2
Wireless Equipment...................... 4.2
Medical-Biomedical/Gene................. 3.6
Transport-Rail.......................... 3.6
Cellular Telecom........................ 3.4
Finance-Investment Banker/Broker........ 3.0
Real Estate Operations & Development.... 2.4
Real Estate Investment Trusts........... 2.1
Retail-Regional Department Stores....... 1.8
---
99.7%
===
</Table>
- ------------
* Calculated as a percentage of Net Assets
7
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2006
- --------------------------------------------------------------------------------
<Table>
<Caption>
VALUE
SECURITY DESCRIPTION SHARES NOTE (2)
- --------------------------------------------------------------------
COMMON STOCK -- 99.7%
AEROSPACE/DEFENSE -- 11.4%
General Dynamics Corp. .................. 89,157 $ 6,628,823
Lockheed Martin Corp. ................... 66,286 6,102,952
Raytheon Co. ............................ 180,000 9,504,000
------------
22,235,775
------------
AUTO-CARS/LIGHT TRUCKS -- 4.2%
Toyota Motor Co. ADR..................... 60,304 8,099,430
------------
CABLE TV -- 5.4%
Comcast Corp., Class A+.................. 250,057 10,584,913
------------
CASINO HOTELS -- 8.9%
Las Vegas Sands Corp.+................... 70,723 6,328,294
Station Casinos, Inc. ................... 42,772 3,493,189
Wynn Resorts, Ltd.+...................... 81,413 7,640,610
------------
17,462,093
------------
CELLULAR TELECOM -- 3.4%
America Movil SA de CV, Series L ADR..... 148,721 6,725,164
------------
COMPUTERS -- 5.3%
Hewlett-Packard Co. ..................... 250,000 10,297,500
------------
FINANCE-INVESTMENT BANKER/BROKER -- 3.0%
Goldman Sachs Group, Inc. ............... 28,981 5,777,363
------------
HEALTH CARE COST CONTAINMENT -- 4.7%
McKesson Corp. .......................... 180,000 9,126,000
------------
MEDICAL-BIOMEDICAL/GENE -- 3.6%
Genentech, Inc.+......................... 86,354 7,005,900
------------
MEDICAL-HMO -- 5.7%
UnitedHealth Group, Inc. ................ 208,633 11,209,851
------------
OFFICE AUTOMATION & EQUIPMENT -- 5.1%
Xerox Corp.+............................. 590,000 10,000,500
------------
OIL COMPANIES-INTEGRATED -- 10.5%
Chevron Corp. ........................... 140,000 10,294,200
Marathon Oil Corp. ...................... 110,000 10,175,000
------------
20,469,200
------------
</Table>
<Table>
- --------------------------------------------------------------------
<Caption>
VALUE
SECURITY DESCRIPTION SHARES NOTE (2)
REAL ESTATE INVESTMENT TRUSTS -- 2.1%
ProLogis................................. 67,903 $ 4,126,465
------------
REAL ESTATE OPERATIONS &
DEVELOPMENT -- 2.4%
The St. Joe Co. ......................... 86,167 4,615,966
------------
RETAIL-MAJOR DEPARTMENT STORES -- 4.8%
J.C. Penney Co., Inc. ................... 120,000 9,283,200
------------
RETAIL-REGIONAL DEPARTMENT STORES -- 1.8%
Federated Department Stores, Inc. ....... 92,614 3,531,372
------------
STEEL-PRODUCER -- 4.2%
Nucor Corp. ............................. 150,000 8,199,000
------------
TELEPHONE-INTEGRATED -- 5.4%
Qwest Communications International,
Inc.+.................................. 1,260,000 10,546,200
------------
TRANSPORT-RAIL -- 3.6%
Burlington Northern Santa Fe Corp. ...... 95,774 7,069,079
------------
WIRELESS EQUIPMENT -- 4.2%
Motorola, Inc. .......................... 400,000 8,224,000
------------
TOTAL LONG-TERM INVESTMENT SECURITIES
(cost $172,821,173).................... 194,588,971
------------
TOTAL INVESTMENTS
(cost $172,821,173)(1)................. 99.7% $194,588,971
Other assets less liabilities............ 0.3 587,924
---------- ------------
NET ASSETS............................... 100.0% $195,176,895
========== ============
</Table>
- ------------
+ Non-income producing security
ADR-American Depository Receipt
(1) See Note 7 for cost of investment on a tax basis
See Notes to Financial Statements
8
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006
- --------------------------------------------------------------------------------
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 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) 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
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 -- (CONTINUED)
- --------------------------------------------------------------------------------
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 of Directors.
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 portfolio may be delayed or limited. At December 31, 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 (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 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 may be deemed a tax 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.
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.
10
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 -- (CONTINUED)
- --------------------------------------------------------------------------------
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. 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.
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, 2006, the
Funds do 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.
AIG SunAmerica has engaged Marsico Capital Management, LLC ("Marsico"), a
wholly-owned subsidiary of Bank of America, and Blackrock Investment
Management, LLC ('Blackrock"), a wholly-owned subsidiary of Blackrock Inc.,
as the Subadvisers to the Fund 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 will manage the large-cap growth portion of the Fund and Blackrock
will manage 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 of Directors. 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.
11
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 -- (CONTINUED)
- --------------------------------------------------------------------------------
On December 11, 2006, Blackrock purchased a security that resulted in the
Fund exceeding 25% of the Fund's total assets being invested in securities
of issuers in the same industry. On December 18, 2006 the security was sold
to bring the industry investment below 25%, resulting in a gain to the Fund
of $217,534.
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, 2006, the amount of expense reductions received to
offset the Fund's non-affiliated expenses were $5,560.
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, 2006 were as follows:
<Table>
Purchases (excluding U.S. government securities)............ $324,910,779
Sales and maturities (excluding U.S. government
securities)............................................... 153,041,440
Purchases of U.S. government securities..................... --
Sales and maturities of U.S. government securities.......... --
</Table>
Note 6. Transactions with Affiliates
For the year ended December 31, 2006 the Fund incurred brokerage commissions
with Banc of America Securities LLC, an affiliated broker, of $9,622, and
with Merrill Lynch, Pierce, Fenner, & Smith, Inc., an affiliated broker, of
$10,857.
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.
<Table>
<Caption>
FOR THE YEAR ENDED DECEMBER 31, 2006
------------------------------------------------------------------------------------------
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
-------- ---------------- -------------- ---------- ------------- --------------
$1,411,693
$-- $ -- $21,601,671 $ -- $10,174,590
</Table>
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)............................................ $172,987,300
============
Appreciation................................................ $ 24,694,172
Depreciation................................................ (3,092,501)
------------
Net unrealized appreciation (depreciation).............. $ 21,601,671
============
</Table>
12
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 -- (CONTINUED)
- --------------------------------------------------------------------------------
For the year ended December 31, 2006, permanent reclassifications were made
to increase accumulated net investment income by $10,175,194 with an
offsetting adjustment to additional paid-in capital and accumulated realized
gain in the amount of $(10,174,892) and $(302), respectively. The
reclassifications arising from book/tax differences were primarily due to
return of capital and distribution reclasses, and excise taxes.
Under the current law, capital losses related to securities and foreign
currency realized after October 31 and prior to the Fund's fiscal year end
may be deferred as occurring the first day of the following year. For the
fiscal year ended December 31, 2006, the Fund elected to defer post October
capital losses in the amount of $278,884.
Note 8. Capital Share Transactions
Transactions in capital shares of the Fund were as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE PERIOD
ENDED DECEMBER 28, 2005* THROUGH
DECEMBER 31, 2006 DECEMBER 31, 2005
---------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- ---------- -------------
Initial seed capital, November 14, 2005............... -- $ -- 5,236 $ 100,000
Common shares issued in connection with initial public
offering............................................ -- -- 9,650,000 183,929,000
--------- ---------- --------- ------------
Net increase...................................... -- $ -- 9,655,236 $184,029,000
========= ========== ========= ============
</Table>
- ---------------
<Table>
* Commencement of operations
</Table>
Note 9. Other Information
On February 9, 2006, AIG, the parent company and an affiliated person of AIG
SunAmerica, 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 1940 Act. Certain affiliated persons of AIG, including
the Adviser, received a temporary order from the SEC pursuant to Section
9(c) of the 1940 Act with respect to the entry of the injunction, granting
exemptive relief from the provisions of Section 9(a) of the 1940 Act. The
temporary order permits AIG and its affiliated persons, including AIG's
investment management subsidiaries, to serve as investment adviser,
sub-adviser, principal underwriter or sponsor of the Fund. The Adviser
expects that a permanent exemptive order will be granted, although there is
no assurance the SEC will issue the order.
Additionally, AIG and its subsidiaries reached a resolution of claims and
matters under investigation with the United States Department of Justice
("DOJ"), the Attorney General of the State of New York ("NYAG") and the New
York State Department of Insurance ("DOI"), regarding accounting, financial
reporting and insurance brokerage practices of AIG
13
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2006 -- (CONTINUED)
- --------------------------------------------------------------------------------
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 advisory services relating to the Fund.
14
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of SunAmerica Focused Alpha Large-Cap
Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SunAmerica Focused Alpha Large-Cap
Fund, Inc. (the "Fund") at December 31, 2006, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period December 28, 2005
(commencement of operations) through December 31, 2005, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Houston, Texas
February 16, 2007
15
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN -- DECEMBER 31, 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 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 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.
16
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN -- DECEMBER 31,
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 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.
17
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
ANNUAL SHAREHOLDER MEETING -- DECEMBER 31, 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................................................ 9,141,619 259,626 9,401,245
</Table>
ELECTION OF WILLIAM F. DEVIN TO THE BOARD OF DIRECTORS
<Table>
<Caption>
FOR WITHHELD TOTAL
--------- -------- ---------
Shares Voted................................................ 9,140,869 260,376 9,401,245
</Table>
A Special Meeting of the Shareholders of the Fund was held on August 15, 2006
and September 15, 2006. At the August 15, 2006 meeting the meeting was adjourned
to allow for the continued solicitation of votes with respect to the proposal to
approve a new Subadvisory Agreement among AIG SunAmerica, the Fund and
BlackRock. At the September 15, 2006 meeting the Subadvisory Agreement among AIG
SunAmerica, the Fund and BlackRock was approved.
The voting results of the shareholder meeting is as follows:
<Table>
<Caption>
FOR WITHHELD TOTAL
--------- -------- ---------
Shares Voted................................................ 5,016,625 319,423 5,336,049
</Table>
18
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
DIRECTORS AND OFFICERS INFORMATION -- DECEMBER 31, 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(1).
<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)
-------------- ---------- ----------- --------------------- ----------- ------------------------
DISINTERESTED DIRECTORS
Jeffrey S. Burum Director 2005-present Founder, Chairman and 42 None
DOB: February 27, 1963 CEO of Southern
California
Development
Corporation/National
Housing Development
Corp. (1992 to
present); Founder,
Owner and Partner of
Colonies Crossroads,
Inc. (1999 to
present); Owner and
Managing Member of
Diversified Pacific
Development Group,
LLC (1998 to
present).
Dr. Judith L. Craven Director 2005-present Retired. 90 Director, Belo
DOB: October 6, 1945 Corporation (1992 to
present); Director,
Sysco Corporation (1996
to present); Director,
Luby's Inc. (1998 to
present); Director,
University of Texas
Board of Regents (2001
to present).
William F. Devin Director 2005-present Retired. 90 Director, Boston Options
DOB: December 30, 1938 Exchange (1985 to
present).
Samuel M. Eisenstat Chairman of 2005-present Attorney, solo 52 Director, North European
DOB: March 7, 1940 the Board practitioner. Oil Royalty Trust.
Stephen J. Gutman Director 2005-present Senior Associate, 52 None
DOB: May 10, 1943 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) (June
1988 to present).
William J. Shea Director 2005-present President and CEO, 52 Director, Boston Private
DOB: February 9, 1948 Conseco, Inc. Holdings (October 2004
(Financial Services) to present).
(2001 to 2004);
Chairman of the Board
of Centennial
Technologies, Inc.
(1998 to 2001).
INTERESTED DIRECTOR
Peter A. Harbeck(3) Director 2005-present President, CEO and 99 None
DOB: January 23, 1954 Director, AIG
SunAmerica (August
1995 to present);
Director, AIG
SunAmerica Capital
Services, Inc. ("AIG
SACS") (August 1993
to present) President
and CEO, AIG Advisor
Group, Inc. (June
2004 to present).
OFFICERS
Vincent M. Marra President 2005-present Senior Vice N/A N/A
DOB: May 28, 1950 President, AIG
SunAmerica (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 2005-present Senior Vice N/A N/A
DOB: June 25, 1966 President, AIG
SunAmerica (December
2004 to present);
Vice President, AIG
SunAmerica (1997 to
December 2004).
</Table>
19
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
DIRECTORS AND OFFICERS INFORMATION -- DECEMBER 31,
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)
-------------- ---------- ----------- --------------------- ----------- ------------------------
Gregory N. Bressler Secretary 2005-present Senior Vice President N/A N/A
DOB: November 17, 1966 and Chief and General Counsel,
Legal AIG SunAmerica (June
Officer 2005 to present);
Vice President and
Director of U.S.
Asset Management
Compliance, Goldman
Sachs Asset
Management, L.P.
(June 2004 to June
2005); Deputy General
Counsel, Credit
Suisse Asset
Management, LLC (June
2002 to June 2004);
Counsel, Credit
Suisse Asset
Management, LLC
(January 2000 to June
2002).
James Nichols Vice 2006-present Director, President N/A N/A
DOB: April 7, 1966 President and CEO, AIG SACS
(July 2006 to
present); Senior Vice
President, AIG SACS
(March 2002 to July
2006); Vice
President, AIG
SunAmerica (1995 to
March 2002).
Cynthia Gibbons Chief 2005-present Vice President, AIG N/A N/A
DOB: December 6, 1967 Compliance SunAmerica (August
Officer 2002 to present);
Securities Compliance
Manager, American
General Investment
Management, (June
2000 to August 2002).
Nori L. Gabert Vice 2005-present Vice President and N/A N/A
DOB: August 15, 1953 President Deputy General
and Counsel, AIG
Assistant SunAmerica (2001 to
Secretary present); Vice
President and
Secretary, VALIC
Company I and VALIC
Company II (2000 to
present); Formerly,
Associate General
Counsel, American
General Corporation,
(1997 to 2001).
</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 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 (10 funds), SunAmerica
Income Funds (5 funds), SunAmerica Focused Series, Inc. (17
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) 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 1940 Act.
(3) Mr. Harbeck is considered to be an Interested Director
because he serves as President, CEO and Director of the
Adviser.
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.
</Table>
20
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
SHAREHOLDER TAX INFORMATION -- (UNAUDITED)
- --------------------------------------------------------------------------------
Certain tax information regarding the SunAmerica Focused Alpha Large-Cap Fund is
required to be provided to shareholders based upon the Fund's income and
distributions for the taxable year ended December 31, 2006. The information
necessary to complete your income tax returns is included with your Form
1099-DIV mailed to you in January 2007.
During the year ended December 31, 2006 the Fund paid the following dividends
per share:
<Table>
<Caption>
ORDINARY
TOTAL AMOUNT INVESTMENT SHORT-TERM LONG-TERM RETURN OF
PAYABLE DATE RECORD DATE PAID PER SHARE INCOME CAPITAL GAINS* CAPITAL GAINS CAPITAL(1)
------------ ----------- -------------- ---------- -------------- ------------- ----------
Common Shares:
3/31/2006 3/21/2006 $0.3000 $0.0004 $0.0363 $ -- $0.2633
6/30/2006 6/19/2006 0.3000 0.0004 0.0363 -- 0.2633
9/29/2006 9/19/2006 0.3000 0.0004 0.0363 -- 0.2633
12/28/2006 12/18/2006 0.3000 0.0004 0.0363 -- 0.2633
------- ------- ------- ----- -------
Total Common Stock: $1.2000 $0.0016 $0.1452 $ -- $1.0532
<Caption>
QUALIFYING % FOR
THE 70% DIVIDENDS
RECEIVED DEDUCTION
------------------
Common Shares:
99.46%
99.46%
99.46%
99.46%
Total Common S
</Table>
For the year ended December 31, 2006, certain dividends paid by the Fund may be
subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax
Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal
year, the maximum amount that may be considered qualified dividend income is
$1,409,489.
- ------------
* Short-term capital gains are treated as ordinary income for tax purposes.
(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 $1.0532 per share
return of capital in 2006 on common shares.
21
SUNAMERICA FOCUSED ALPHA LARGE-CAP FUND, INC.
ADDITIONAL INFORMATION -- (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund has filed with the NYSE its chief executive officer certification as
required by sec.303A.12 of the NYSE's Listed Company Manual. The Fund has also
filed with the SEC 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 principal 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 assets.
22
- --------------------------------------------------------------------------------
(AIG LOGO)
DIRECTORS
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 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, Assistant Treasurer
Nori L. Gabert, Vice President and Assistant Secretary
Corey A. Issing, Assistant Secretary
Kathleen Fuentes, 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 5607
Boston, MA 02110
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 http://www.sec.gov.
You can also 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).
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 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 Fund.
23
[AIG SUNAMERICA MUTUAL FUNDS LOGO]
SunAmerica open-end funds distributed by:
AIG SunAmerica Capital Services, Inc., Harborside Financial Center,
3200 Plaza 5, Jersey City, NJ 07311
800-858-8850 x6003 www.sunamericafunds.com
FIANN-12/06
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:
<Table>
<Caption>
2005 2006
(a) Audit Fees $ 29,550 $ 23,819
(b) Audit-Related Fees $ 0 $ 0
(c) Tax Fees $ 6,025 $ 12,495
(d) All Other Fees $ 0 $ 0
</Table>
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 including the fund's initial registration statement. 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:
2005 2006
(b) Audit-Related Fees $ 0 $ 0
(c) Tax Fees $ 0 $ 0
(d) All Other Fees $ 0 $ 0
(e)
(1) The Registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the Registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliate") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the operations and
financial reporting of the registrant. 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 Affiliate that provides ongoing services to the registrant
for 2006 and 2005 were $12,495 and $6,025, respectively.
(h) Non-audit services rendered to the registrant's investment adviser and
any Adviser Affiliate that were not pre-approved pursuant to Paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were considered by the
registrant's audit committee as to whether they were compatible with
maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
The registrant has a separately designated audit committee consisting
of the following members:
Samuel Eisenstat
Judith Craven
William Devin
Jeffrey Burum
William Shea
Stephen Gutman
Item 6. Schedule of Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
PROXY VOTING POLICIES AND PROCEDURES
Proxy Voting Responsibility. The Fund and the Underlying Funds have
adopted policies and procedures for the voting of proxies relating to portfolio
securities. The policies and procedures were drafted according to
recommendations by a proxy voting committee composed of senior management of the
Fund and the Fund's investment adviser. (i.e., representatives from the
investment, legal and compliance departments). The policies and procedures
enable the Fund to vote proxies in a manner consistent with the best interests
of the Fund's shareholders.
The Fund has retained a proxy voting service, Institutional Shareholder
Services ("ISS"), to effect votes on behalf of the Fund according to the Fund's
policies and procedures, and to assist the Fund with certain responsibilities
including record keeping of proxy votes.
Company Management Recommendations. When determining whether to invest in
the securities of a particular company, one of the key factors a portfolio
manager considers is the quality and depth of the company's management. In
holding portfolio securities, the Fund and/or Underlying Funds are seeking to
maximize the investment value for shareholders, but not necessarily exercise
control over the issuers of portfolio securities or otherwise advance a
particular social agenda. The Fund's policies and procedures therefore provide
that the Fund will generally vote in support of management recommendations on
most corporate matters. When a Corporation's portfolio manager is dissatisfied
with a company's management, the Fund typically will sell the holding.
Case-By-Case Voting Matters. The policies and procedures identify certain
voting matters that will be decided on a case-by-case basis. In these
circumstances, the proxy voting committee generally will rely on the guidance or
a recommendation from ISS, but may also rely on other appropriate personnel of
the investment adviser (or "AIG SunAmerica" or the "Adviser") and/or the
subadviser of a Portfolio and/or Underlying Fund, or other sources. In these
instances, such person(s) will recommend the vote that will maximize value for,
and is in the best interests of, the Fund's shareholders.
Examples of the Fund's Positions on Voting Matters. Consistent with the
approaches described above, the following are examples of the Fund's voting
positions on specific matters:
- Vote with management recommendations on most corporate matters;
- Vote on a case-by-case basis on proposals to increase authorized
common stock;
- Vote on a case-by-case basis on most mutual fund matters;
- 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;(1)
- Not vote proxies for index funds/portfolios and passively managed
funds/portfolios;(2)
- Not vote proxies for securities that are out on loan(3)
- Vote on a case-by-case basis on equity compensation plans.
Conflicts of Interest. Members of the proxy voting committee will resolve
conflicts of interest presented by a proxy vote. In practice, application of the
Fund's proxy voting policies guidelines will in most instances adequately
address any possible conflicts of interest, as votes generally are effected
according to the guidelines or recommendations of the independent proxy voting
agent. Also, the proxy committee consists of members who are not involved in
marketing or other business units that may be likely to present conflicts.
However, if a situation arises where a vote presents a conflict between
the interests of the Trust's shareholders and the interests of AIG SunAmerica,
the Trust's principal underwriter, or one of AIG SunAmerica's or the
underwriter's affiliates, and the conflict is known to the Trust, senior
management of the Trust and AIG SunAmerica, including the proxy voting
committee, and possibly one or more Trustee(s) who are not interested persons,
as the term is defined in the 1940 Act will be consulted. Any individual with a
known conflict may be required by the proxy voting committee to recuse himself
or herself from being involved in the proxy voting decision. Senior management,
including the proxy voting committee, will evaluate the situation and ensure
that the Trust selects the vote that is in the best interests of the Trust's
shareholders.
Proxy Voting Records. The independent Proxy Voting agent will be
responsible for documenting its basis for any determination to vote in a
non-uniform or contrary manner, as well as, for ensuring the maintenance of
records for each proxy vote cast on behalf of the Trust. Pursuant to SEC
requirements, beginning in August of 2004, on an annual basis the Trust makes
available on its website its proxy voting record for the one-year period ending
on June 30th. The proxy voting record will also be available on the SEC's
website at http://www.sec.gov.
- ----------
(1) In these circumstances, the Fund will consider the effect that the vote's
outcome may have on the issuing company and the value of its securities as
part of the Fund's overall investment evaluation of whether to retain or
sell the company's securities. The Fund will either retain or sell the
securities according to the best interests of the Fund's shareholders.
(2) The Board of the Trustees 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.
(3) Similarly, the Board has determined that the costs of voting proxies with
respect to securities that are out on loan generally outweigh any benefits
that may be achieved by the voting of such proxies. The costs of voting
such proxies include the opportunity cost of lost securities lending
income when securities are recalled from a loan. However, under certain
circumstances, including where the investment adviser and/or subadviser to
a Fund determines that a proxy vote is materially important to the Fund's
interest and where it is feasible to recall the security on a timely
basis, the investment adviser will use its reasonable efforts to recall
the security.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
BlackRock Investment Management, LLC (BlackRock) and Marsico Capital
Management, LLC ("Marsico") are the subadvisers to the registrant. Thomas F.
Marsico is the portfolio manager for Marsico and is primarily responsible for
the day-to-day management of the large-cap growth portion of the registrant's
assets. Robert C. Doll is the portfolio manager for BlackRock and is primarily
responsible for the large-cap value portion of the registrant's assets.
Mr. Marsico is the Chief Investment Officer of Marsico. Mr. Marsico has
over 20 years of experience as a securities analyst and a portfolio manager.
Prior to forming Marsico, Mr. Marsico served as the portfolio manager of the
Janus Twenty Fund from January 31, 1988 through August 11, 1997 and served in
the same capacity for the Janus Growth and Income Fund from May 31, 1991 (the
Fund's inception date through August 11, 1997.
Mr. Doll is the President and Chief Investment Officer of BlackRock. He is
also Senior Portfolio Manager of the Merrill Lynch Large Cap Series Funds, which
includes three large cap funds: Large-Cap Value, Large-Cap Core and Large-Cap
Growth. Mr. Doll has been with Merrill Lynch Investments since 1999 and has over
20 years of investment experience. Mr. Doll also manages the SunAmerica Focused
Large-Cap Value Portfolio and SunAmerica Focused Large-Cap Growth Portfolio.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER
The following table indicates the number of other accounts managed by
each Portfolio Manager and the total assets in the accounts in each of the
following categories as of December 31, 2006: Registered Investment Company
("RIC"), Other Pooled Investments ("OPI"), and Other Accounts ("OA"). For each
category, the table also shows the number of accounts and the total assets in
the accounts with respect to which the advisory fee is based on account
performance.
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 Capital
Management Thomas F. Marsico $ 36 $ 14 $ 189 -- -- --
$ 35,175.89 2,261.20 28,219.01 -- -- --
Black Rock Investment
Management Bob Doll $ 23 $ 4 $ 7 -- -- --
$ 18,100 $ 8,600 495 -- -- --
POTENTIAL CONFLICTS OF INTEREST
As shown in the tables above, the portfolio managers are responsible for
managing other accounts for other clients, ("Other Client Accounts") in addition
to the Fund. In certain instances, conflicts may arise in their management of
the Fund and such Other Client Accounts. The portfolio managers aim to conduct
their activities in such a manner that permits them to deal fairly with each of
their clients on an overall basis in accordance with applicable securities laws
and fiduciary obligations. Notwithstanding, transactions, holdings and
performance, among others, may vary among the Fund and such Other Client
Accounts.
- - Trade Allocations. Conflicts may arise between the Fund and Other Client
Accounts in the allocation of trades among the Fund and the Other Client
Accounts, as the case may be. For example, the Adviser and/or 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.
PORTFOLIO MANAGER COMPENSATION
MARSICO
Marsico's portfolio managers are generally subject to the compensation
structure applicable to all Marsico employees. As such, Mr. Marsico's
compensation consists of a base salary (reevaluated at least annually), and
periodic cash bonuses. Bonuses are typically based on two primary factors: (1)
Marsico's overall profitability for the period, and (2) individual achievement
and contribution.
Portfolio manager compensation takes into account, among other factors,
the overall performance of all accounts for which the manager provides
investment advisory services. Portfolio managers do not receive special
consideration based on the performance of particular accounts. Exceptional
individual efforts are rewarded through greater participation in the bonus pool.
Portfolio manager compensation comes solely from Marsico.
Although Marsico may compare account performance with relevant benchmark
indices, portfolio manager compensation is not directly tied to achieving any
pre-determined or specified level of performance. In order to encourage a
long-term time horizon for managing portfolios, Marsico seeks to evaluate the
portfolio manager's individual performance over periods longer than the
immediate compensation period. In addition, portfolio managers are compensated
based on other criteria, including effectiveness of leadership within Marsico's
Investment Team, contributions to Marsico's overall investment performance,
discrete securities analysis, and other factors. In addition to his salary and
bonus, Mr. Marsico may participate in other Marsico benefits to the same extent
and on the same basis as other Marsico employees.
BLACKROCK
The portfolio manager compensation program of BlackRock and its affiliates
(collectively, herein "BlackRock") is critical to BlackRock's ability to attract
and retain the most talented asset management professionals. This program
ensures that compensation is aligned with maximizing investment returns and it
provides a competitive pay opportunity for competitive performance.
COMPENSATION PROGRAM The elements of total compensation for BlackRock portfolio
managers are: fixed base salary, annual performance based cash and stock
compensation (cash and stock bonus) and other benefits. BlackRock has balanced
these components of pay to provide portfolio managers with a powerful incentive
to achieve consistently superior investment performance. By design, portfolio
manager compensation levels fluctuate - both up and down - with the relative
investment performance of the portfolios that they manage.
BASE SALARY Under the BlackRock approach, like that of many asset management
firms, base salaries represent a relatively small portion of a portfolio
manager's total compensation. This approach serves to enhance the motivational
value of the performance-based (and therefore variable) compensation elements of
the compensation program.
PERFORMANCE-BASED COMPENSATION BlackRock believes that the best interests of
investors are served by recruiting and retaining exceptional asset management
talent and managing their compensation within a consistent and disciplined
framework that emphasizes pay for performance in the context of an intensely
competitive market for talent. To that end, the portfolio manager incentive
compensation is based on a formulaic compensation program.
BlackRock's formulaic portfolio manager compensation program includes: pre-tax
investment performance relative to appropriate competitors or benchmarks over
1-, 3- and 5-year performance periods and a measure of operational efficiency.
If a portfolio manager's tenure is less than 5-years, performance periods will
reflect time in position. For these purposes, investment performance is compared
to the applicable Lipper fund category. Portfolio managers are compensated based
on products they manage. Due to Mr. Doll's unique position (as Portfolio
Manager, Vice Chairman and Director of BlackRock, Inc., Global Chief Investment
Officer for Equities, Chairman of the BlackRock Private Client Operating
Committee, and member of the BlackRock Executive Committee), his compensation
does not solely reflect his role as portfolio manager of the funds managed by
him. The performance of his fund(s) is included in consideration of his
incentive compensation but, given his multiple roles and the balance of the
components of pay, the performance of his fund(s) is not the primary driver of
his compensation. In addition, a portfolio manager's compensation can be based
on BlackRock's investment performance, financial results of BlackRock, expense
control, profit margins, strategic planning and implementation, quality of
client service, market share, corporate reputation, capital allocation,
compliance and risk control, leadership, workforce diversity, technology and
innovation. All factors are considered collectively by BlackRock management.
Cash Bonus Performance-based compensation is distributed to portfolio managers
in a combination of cash and stock. Typically, the cash bonus, when combined
with base salary, represents more than 60% of total compensation for portfolio
managers.
Stock Bonus A portion of the dollar value of the total annual performance-based
bonus is paid in restricted shares of stock of the Company. Paying a portion of
annual bonuses in stock puts compensation earned by a portfolio manager for a
given year "at risk" based on the Company's ability to sustain and improve its
performance over future periods. The ultimate value of stock bonuses is
dependent on future Company stock price performance. As such, the stock bonus
aligns each portfolio manager's financial interests with those of the Company
shareholders and encourages a balance between short-term goals and long-term
strategic objectives. Management strongly believes that providing a significant
portion of competitive performance-based compensation in stock is in the best
interests of investors and shareholders. This approach ensures that portfolio
managers participate as shareholders in both the "downside
risk" and "upside opportunity" of the Company's performance. Portfolio managers
therefore have a direct incentive to protect the Company's reputation for
integrity.
Other Compensation Programs Portfolio managers who meet relative investment
performance and financial management objectives during a performance year are
eligible to participate in a deferred cash program. Awards under this program
are in the form of deferred cash that may be benchmarked to a menu of BlackRock
mutual funds (including their own fund) during a five-year vesting period. The
deferred cash program aligns the interests of participating portfolio managers
with the investment results of BlackRock products and promotes continuity of
successful portfolio management teams.
Other Benefits Portfolio Managers are also eligible to participate in
broad-based plans offered generally to BlackRock employees, including
broad-based retirement, 401(k), health, and other employee benefit plans.
PORTFOLIO MANAGER OWNERSHIP OF FUND SHARES
The following table shows the dollar range of shares beneficially owned by
each portfolio manager as of December 31, 2006.
DOLLAR RANGE OF EQUITY
NAME OF SECURITIES IN
PORTFOLIO MANAGER REGISTRANT
Thomas F. Marsico None
Robert C. Doll None
(b) Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
None.
Item 10. Submission of Matters to a Vote of Security Holders.
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
second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and Principle
Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act
of 2002 attached hereto as Exhibit 99.406. Code of Ethics.
(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Focused Alpha Large-Cap Fund, Inc.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: March 9, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Vincent M. Marra
--------------------
Vincent M. Marra
President
Date: March 9, 2007
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: March 9, 2007