<PAGE>
[LOGO] SUNAMERICA
THE RETIREMENT SPECIALIST
[GRAPHIC]
TAX MANAGED EQUITY FUND
1999 SEMIANNUAL REPORT
[LOGO] SUNAMERICA
MUTUAL FUNDS
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA TAX MANAGED EQUITY FUND SEMIANNUAL REPORT
JUNE 15, 1999
Dear Shareholders:
We are pleased to present you with this first semiannual report for the
SunAmerica Tax Managed Equity Fund. We proudly report that the SunAmerica Tax
Managed Equity Funds outperformed its benchmarks for this period. (Since the
Fund has not been in operation for a full six months, performance is being
reported for the life of the Fund from its commencement of operations on March
1, 1999 through April 30, 1999.)
SunAmerica Tax Managed Equity Fund Class A returned 9.5% on a cumulative
basis compared to 8.0% for the S&P 500 Index, 7.5% for the Morningstar Large-Cap
Blend Index and 9.4% for the Lipper Growth & Income Average, for the two months
ended April 30, 1999. (Returns do not reflect the impact of sales charges).
SunAmerica Tax Managed Equity Fund seeks high total return, with a view toward
minimizing the impact of taxes on investors' returns.
PERFORMANCE REVIEW
The Fund's notable outperformance was primarily due to adviser J.P. Morgan
Investment Management's strong stock selection. J.P. Morgan's proprietary
tax-sensitive valuation model, along with its extensive fundamental research,
helped the portfolio managers add value through an emphasis on identifying the
most attractive stocks within each sector rather than on making large sector
bets. The model also provided input for portfolio buy/sell decisions to reduce
the impact of capital gains taxes on after-tax returns. The Fund favored:
- - companies with sustainable competitive advantage and long-term return
potential
- - returns from capital gains versus dividends
- - controlled capital gains realization
- - tax-lot accounting, to determine those tax lots with the lowest tax
consequences.
PORTFOLIO ACTIVITY
In the two months since the Fund's inception, the spotlight on global
economic recovery expectations grew. Japan's economy showed signs of reaching
the bottom of its long decline, and as a result, the rest of Asia began to
improve. In Latin America, problems in Brazil were not as severe or as
widespread as earlier expected. These stunning headlines, including the outbreak
of war in the Balkans, kept large-cap U.S. stocks on their upward trajectory.
The Dow Jones Industrial Average reached a major milestone, closing above the
10,000 mark for the first time on March 29th. Both the NASDAQ Composite and S&P
500 Index also closed in record territory. Yet, the market remained incredibly
narrow. For example, only two stocks--Microsoft Corp. and America Online
Inc.--accounted for one-third of the S&P's advance in the month of March. Growth
stocks continued to trounce value stocks.
However, "megacap" growth stocks began to underperform in mid-April in
dramatic fashion. In fact, by the end of the month, value stocks were ahead of
growth stocks by a wide margin, sharply reversing a well-established trend.
Cyclical industries with a heavy reliance on the global economy were the best
performing sectors in April; former leaders like the technology and
pharmaceutical sectors were the worst performers.
The tax-efficient investment strategy used by J.P. Morgan was particularly
attractive in this rising market environment, positioning the portfolio to
generate savings, as greater realized capital appreciation results in increased
capital
1
<PAGE>
gains taxes. Of course, as of April 30, 1999, the portfolio was quite new, and
J.P. Morgan looked to buy stocks that they believe will be long-term holdings.
Thus there was minimal turnover to date. As time passes, there will be many
opportunities to offset gains and losses and increase the overall expected
portfolio return.
One stock that J.P. Morgan did buy and sell within the semi-annual period
was Compaq. In that transaction, a decline in the stock came after the company
announced disappointing earnings results. Upon further analysis of the company's
fundamentals, the stock became a sell candidate, as there were other more
attractive technology stocks. The Fund's realized loss will be used to offset a
gain in the future. It is important to remember that tax-aware investing is
important in all market conditions and can help increase the after-tax returns
you actually receive in both rising and declining equity markets.
Stock selection will also continue to be key to Fund performance. As of
April 30, 1999, the Fund was fully invested in common stocks of 70 large
capitalization U.S. companies. Top holdings included Cisco Systems, MCI
Worldcom, BankAmerica, IBM, Microsoft, Sun Microsystems, Bristol Myers Squibb,
Tyco International, Royal Dutch Petroleum, and Wal-Mart Stores.
MANAGER OUTLOOK
Looking ahead to the remainder of 1999, we believe the move away from
"megacap" growth stocks will continue. Historically, there is a high correlation
between a strong global economy and the outperformance of value stocks over
growth stocks. A recovery in the global economy, likely the catalyst needed to
broaden the market, may also improve the prospects of more
economically-sensitive cyclical stocks, such as energy, chemicals, paper,
capital goods, transportation, and basic industry. Given this outlook, the Fund
has been positioned to benefit from the change in leadership to value stocks and
cyclical industries that began in April.
Paying attention to the different tax treatments of price appreciation,
dividends and short- and long-term capital gains continues to set SunAmerica Tax
Managed Equity Fund and its cutting-edge approach apart from most other
traditionally-managed mutual funds that focus on pre-tax performance.
We value your confidence in us and look forward to continuing to serve your
investment needs in the future.
Sincerely,
/s/ Peter A. Harbeck
Peter A. Harbeck
President
2
<PAGE>
[This page intentionally left blank]
3
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY
FUND
<S> <C>
-----------
ASSETS:
Investments securities, at value*................. $27,690,494
Short-term securites*............................. 234,000
Cash.............................................. 611
Receivable for shares of beneficial interest
sold........................................... 2,252,624
Prepaid expenses.................................. 61,826
Receivable from investment adviser................ 49,641
Interest and dividends receivable................. 16,955
-----------
Total assets.................................. 30,306,151
-----------
LIABILITIES:
Payable for shares of beneficial interest
redeemed....................................... 801,840
Accrued expenses.................................. 40,058
Investment advisory and management fees payable... 20,282
Distribution and service maintenance fees
payable........................................ 13,559
-----------
Total liabilities............................. 875,739
-----------
Net assets................................ $29,430,412
-----------
-----------
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.0001 par value... $ 215
Paid-in capital................................... 26,890,546
-----------
26,890,761
Accumulated undistributed net investment loss..... (20,750)
Accumulated undistributed net realized loss on
investments.................................... (49,131)
Net unrealized appreciation of investments........ 2,609,532
-----------
Net assets.................................... $29,430,412
-----------
-----------
*Identified cost
Investment securities............................. $25,080,962
-----------
-----------
Short-term securities............................. $ 234,000
-----------
-----------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY
FUND
<S> <C>
-----------
CLASS A (UNLIMITED SHARES AUTHORIZED):
Net assets........................................ $15,524,169
Shares of beneficial interest issued and
outstanding..................................... 1,134,161
Net asset value and redemption price per share.... $ 13.69
Maximum sales charge (5.75% of offering price).... 0.84
-----------
Maximum offering price to public.................. $ 14.53
-----------
-----------
CLASS B (UNLIMITED SHARES AUTHORIZED):
Net assets........................................ $ 7,317,792
Shares of beneficial interest issued and
outstanding..................................... 535,084
Net asset value, offering and redemption price per
share
(excluding any applicable contingent deferred
sales charge)................................... $ 13.68
-----------
-----------
CLASS II (UNLIMITED SHARES AUTHORIZED):
Net assets........................................ $ 6,588,451
Shares of beneficial interest issued and
outstanding..................................... 481,814
Net asset value and redemption price per share
(excluding any applicable contigent deferred
sales charge)................................... $ 13.67
Maximum sales charge (1.00% of offering price).... 0.14
-----------
Maximum offering price to public.................. $ 13.81
-----------
-----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF OPERATIONS -- FOR THE PERIOD MARCH 1, 1999* THROUGH APRIL 30,
1999 (UNAUDITED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY
FUND
<S> <C>
------------
INVESTMENT INCOME:
Income:
Interest........................................ $ 10,446
Dividends (net of withholding taxes of $48)..... 44,261
------------
Total investment income....................... 54,707
------------
Expenses:
Investment advisory and management fees......... 40,120
Distribution and service maintenance fees--Class
A............................................ 12,742
Distribution and service maintenance fees--Class
B............................................ 5,902
Distribution and service maintenance fees--Class
II........................................... 4,893
Transfer agent fees and expenses--Class A....... 6,101
Transfer agent fees and expenses--Class B....... 1,427
Transfer agent fees and expenses--Class II...... 1,178
Custodian fees and expenses..................... 11,470
Registration fees--Class A...................... 8,107
Registration fees--Class B...................... 6,221
Registration fees--Class II..................... 6,306
Audit and tax consulting fees................... 6,100
Directors' fees and expenses.................... 1,139
Printing expense................................ 12,190
Legal fees and expenses......................... 1,850
Organizational expenses......................... 51,910
Miscellaneous expenses.......................... 610
------------
Total expenses................................ 178,266
Less: expenses waived/reimbursed by investment
adviser..................................... (102,319)
Less: custody credits earned on cash
balances.................................... (490)
Net expenses.................................. 75,457
------------
Net investment loss............................... (20,750)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments.................. (49,131)
Net change in unrealized appreciation/depreciation
on investments................................. 2,609,532
------------
Net realized and unrealized gain on investments... 2,560,401
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:.................................... $2,539,651
------------
------------
</TABLE>
* Commencement of Operations
See Notes to Financial Statements
6
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY FUND
---------------
FOR THE PERIOD
MARCH 1, 1999*
THROUGH
APRIL 30, 1999
(UNAUDITED)
<S> <C>
---------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment loss............................. $ (20,750)
Net realized loss on investments................ (49,131)
Net change in unrealized
appreciation/depreciation of investments..... 2,609,532
---------------
Net increase in net assets resulting from
operations..................................... 2,539,651
---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (Class A)............ --
From net investment income (Class B)............ --
From net investment income (Class II)........... --
From net realized gains on investments (Class
A)........................................... --
From net realized gains on investments (Class
B)........................................... --
From net realized gains on investments (Class
II).......................................... --
---------------
Total dividends and distributions to
shareholders................................... --
---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 6).................... 26,790,761
---------------
TOTAL INCREASE IN NET ASSETS...................... 29,330,412
NET ASSETS:
Beginning of period............................... 100,000
---------------
End of period [including undistributed net
investment loss for April 30, 1999 of
($20,750)]..................................... $29,430,412
---------------
---------------
</TABLE>
* Commencement of Operations
See Notes to Financial Statements
7
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
FINANCIAL HIGHLIGHTS
TAX MANAGED EQUITY FUND
<TABLE>
<CAPTION>
NET GAIN
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET
VALUE, NET INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE,
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD
- ------------------------- ---------- ------------ ------------ ----------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
3/01/99-
4/30/99(3)(6).......... $12.50 $(0.04) $1.23 $1.19 $ -- $ -- $ -- $13.69
CLASS B
3/01/99-
4/30/99(3)(6).......... $12.50 $(0.05) $1.23 $1.18 $ -- $ -- $ -- $13.68
CLASS II
3/01/99-
4/30/99(3)(6).......... $12.50 $(0.05) $1.22 $1.17 $ -- $ -- $ -- $13.67
<CAPTION>
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME
PERIOD TOTAL PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED RETURN(2) (000'S) NET ASSETS NET ASSETS TURNOVER
- ------------------------- --------- ----------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
3/01/99-
4/30/99(3)(6).......... 9.52% $15,524 1.45%(4)(5) (0.18)%(4)(5) 0%
3/01/99-
4/30/99(3)(6).......... 9.44% $ 7,318 2.10%(4)(5) (1.32)%(4)(5) 0%
3/01/99-
4/30/99(3)(6).......... 9.36% $ 6,588 2.10%(4)(5) (1.28)%(4)(5) 0%
</TABLE>
- -------------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of operations
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
4/30/99
-----------
<S> <C>
Tax Managed Equity Class A.................................. 1.95%
Tax Managed Equity Class B.................................. 2.79
Tax Managed Equity Class II................................. 3.06
</TABLE>
(6) Unaudited
See Notes to Financial Statements
8
<PAGE>
TAX MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS -- APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK -- 94.1%
AEROSPACE & MILITARY TECHNOLOGY -- 2.1%
Allied Signal, Inc.................... 10,600 $ 622,750
-----------
AUTOMOTIVE -- 1.0%
Johnson Controls, Inc................. 4,200 306,338
-----------
BANKS -- 3.7%
BankAmerica Corp...................... 12,800 920,000
Dime Bancorp, Inc..................... 7,500 172,969
-----------
1,092,969
-----------
BROADCASTING & MEDIA -- 2.6%
Comcast Corp., Class A+............... 3,900 256,181
News Corp. Ltd. ADR................... 8,600 280,575
Time Warner, Inc...................... 3,200 224,000
-----------
760,756
-----------
BUSINESS SERVICES -- 2.7%
Service Corp. International........... 10,000 207,500
Waste Management, Inc................. 10,400 587,600
-----------
795,100
-----------
CHEMICALS -- 1.6%
Rohm & Haas Co........................ 10,300 461,569
-----------
COMPUTERS & BUSINESS EQUIPMENT -- 10.4%
Cisco Systems, Inc.+.................. 8,400 958,125
EMC Corp.+............................ 5,500 599,156
International Business Machines
Corp................................ 4,000 836,750
Sun Microsystems, Inc.+............... 11,200 669,900
-----------
3,063,931
-----------
CONGLOMERATE -- 5.4%
Allegheny Teldyne, Inc................ 9,500 212,562
General Electric Co................... 3,400 358,700
Seagram Co., Ltd...................... 6,200 355,725
Tyco International Ltd................ 8,200 666,250
-----------
1,593,237
-----------
DEPARTMENT STORES -- 3.1%
Federated Department Stores, Inc.+.... 6,000 280,125
Wal-Mart Stores, Inc.................. 13,800 634,800
-----------
914,925
-----------
ELECTRONICS -- 3.7%
Emerson Electric Co................... 2,900 187,050
Intel Corp............................ 8,800 538,450
Texas Instruments, Inc................ 3,400 347,225
-----------
1,072,725
-----------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
ENERGY SOURCES -- 7.0%
Exxon Corp............................ 6,300 $ 523,294
Mobil Corp............................ 6,000 628,500
Royal Dutch Petroleum Co.............. 11,000 645,562
Tosco Corp............................ 9,200 246,100
-----------
2,043,456
-----------
ENTERTAINMENT PRODUCTS -- 0.8%
Mattel, Inc........................... 9,200 238,050
-----------
FINANCIAL SERVICES -- 8.8%
Ambac Financial Group, Inc............ 6,900 416,587
Citigroup, Inc........................ 8,200 617,050
Federal National Mortgage
Association Corp.................... 2,900 205,719
First Union Corp...................... 5,300 293,488
KeyCorp............................... 7,600 235,125
Washington Mutual, Inc................ 9,000 370,125
Wells Fargo Co........................ 10,400 449,150
-----------
2,587,244
-----------
FOOD, BEVERAGE & TOBACCO -- 3.8%
Coca-Cola Co.......................... 3,500 238,000
PepsiCo, Inc.......................... 9,500 350,906
Philip Morris Cos, Inc................ 10,800 378,675
Ralston-Ralston Purina Group.......... 4,800 146,400
-----------
1,113,981
-----------
FOREST PRODUCTS -- 1.3%
Temple-Inland, Inc.................... 5,300 365,700
-----------
HEALTH SERVICES -- 0.6%
HEALTHSOUTH Corp.+.................... 13,200 177,375
-----------
HOTELS & CASINO -- 0.8%
Starwood Hotels & Resorts Worldwide,
Inc................................. 6,700 245,806
-----------
HOUSEHOLD PRODUCTS -- 4.8%
Kimberly-Clark Corp................... 4,800 294,300
Procter & Gamble Co................... 5,600 525,350
Unilever NV........................... 4,500 292,219
Warner-Lambert Co..................... 4,500 305,719
-----------
1,417,588
-----------
INSURANCE -- 1.7%
Marsh & McLennan Cos., Inc............ 6,600 505,313
-----------
</TABLE>
9
<PAGE>
TAX MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK (CONTINUED)
MEDICAL PRODUCTS -- 0.4%
Genzyme Corp.+........................ 3,100 $ 117,025
-----------
PHARMACEUTICALS -- 7.5%
American Home Products Corp........... 8,400 512,400
Bristol-Myers Squibb Co............... 10,500 667,406
Forest Laboratories, Inc.+............ 5,000 222,500
Merck & Co., Inc...................... 5,000 351,250
Monsanto Co........................... 10,100 457,025
-----------
2,210,581
-----------
SOFTWARE -- 3.6%
America Online, Inc.+................. 2,200 314,050
Microsoft Corp.+...................... 9,000 731,813
-----------
1,045,863
-----------
SPECIALTY RETAIL -- 2.5%
American Stores Co.................... 6,400 202,000
Dayton Hudson Corp.................... 5,600 376,950
Home Depot, Inc....................... 2,800 167,825
-----------
746,775
-----------
TELECOMMUNICATIONS -- 10.3%
AT&T Corp............................. 6,150 310,575
Bell Atlantic Corp.................... 4,200 242,025
GTE Corp.............................. 6,900 461,869
Level 3 Communications, Inc.+......... 2,500 225,156
Lucent Technologies, Inc.............. 7,200 432,900
MCI WorldCom, Inc.+................... 11,400 936,937
SBC Communications, Inc............... 7,600 425,600
-----------
3,035,062
-----------
TRANSPORTATION -- 1.5%
Union Pacific Corp.................... 7,300 438,000
-----------
UTILITIES -- 2.4%
Columbia Gas Systems, Inc............. 3,000 144,188
Northern States Power Co.............. 7,700 185,762
PP&L Resources, Inc................... 6,400 178,800
Wisconsin Energy Corp................. 7,800 209,625
-----------
718,375
-----------
TOTAL INVESTMENT SECURITIES -- 94.1%
(cost $25,080,962)............................ 27,690,494
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SHORT-TERM SECURITIES -- 0.8%
Cayman Island Time Deposit with State
Street Bank & Trust Co.
2.75% due 5/03/99
(cost $234,000)..................... $ 234 $ 234,000
-----------------
TOTAL INVESTMENTS --
(cost $25,314,962).................... 94.9% 27,924,494
Other assets less liabilities........... 5.1 1,505,918
------ -----------------
NET ASSETS --........................... 100.0% $ 29,430,412
------ -----------------
------ -----------------
</TABLE>
- ------------
+ Non-income producing security
ADR ("American Depository Receipt")
See Notes to Financial Statements
10
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 1999 (UNAUDITED)
NOTE 1. ORGANIZATION
SunAmerica Strategic Investment Series, Inc. (the "Corporation") is an
open-end, diversified management investment company organized as a Maryland
corporation on December 16, 1998. It currently consists of one investment
fund, the Tax Managed Equity Fund (the "Fund") which seeks high total return
with a view towards minimizing the impact of capital gains taxes on
investors' returns. The Fund is managed by SunAmerica Asset Management Corp.
("SAAMCo"). The Fund currently offers three classes of shares. The cost
structure for each class is as follows:
Class A shares-- Offered at net asset value per share plus an
initial sales charge. Any purchases of Class
A shares in excess of $1,000,000 will be
subject to a contingent deferred sales charge
on redemptions made within one year of
purchase.
Class B shares-- Offered at net asset value per share without
an initial sales charge, although a declining
contingent deferred sales charge may be
imposed on redemptions made within six years
of purchase. Class B shares will convert
automatically to Class A shares on the first
business day of the month after seven years
from the issuance of such shares and at such
time will be subject to the lower
distribution fee applicable to Class A
shares.
Class II Offered at net asset value per share plus an
shares-- initial sales charge. Certain redemptions
made within 18 months of the date of purchase
are subject to a contingent deferred sales
charge.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions and each makes distribution and account maintenance and
service fee payments under the distribution plans pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act"), except that Class
B shares and Class II shares are subject to higher distribution fee rates.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with 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 their financial statements:
SECURITY VALUATIONS: Securities that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed by the Adviser to be over-the-counter, are valued at the
quoted bid price provided by principal market makers. Securities listed on
the New York Stock Exchange ("NYSE") or other national securities exchanges,
are valued on the basis of the last sale price on the exchange on which they
are primarily traded. If there is no sale on that day, then securities are
valued at the closing bid price on the NYSE or other primary exchange for
that day. However, if the last sale price on the
11
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
NYSE is different than the last sale price on any other exchange, the NYSE
price is used. Securities that are traded on foreign exchanges are ordinarily
valued at the last quoted sales price available before the time when the
assets are valued. If a security's price is available from more than one
foreign exchange, the Fund uses the exchange that is the primary market for
the security. The Fund may make use of a pricing service in the determination
of the net asset value. Securities for which market quotations are not
readily available and other assets are valued at fair value as determined
pursuant to procedures adopted in good faith by the Directors. Short-term
investments which mature in less than 60 days are valued at amortized cost,
if their original maturity was 60 days or less, or by amortizing their value
on the 61st day prior to maturity, if their original term to maturity
exceeded 60 days.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: As customary in the mutual fund industry,
securities 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 recorded on the accrual basis; dividend income is
recorded on the ex-dividend date. Funds investing in foreign securities may
be subject to taxes imposed by countries in which they invest. Such taxes are
generally based on either income or gains earned or repatriated.
Net investment income, other than class specific expenses, and realized and
unrealized gains and losses, is allocated daily to each class of shares based
upon the relative net asset value of outstanding shares (or the value of the
dividend-eligible shares, as appropriate) of each class of shares at the
beginning of the day (after adjusting for the current capital shares activity
of the respective class).
The Fund issues and redeems shares, invest in securities and distribute
dividends from net investment income and net realized gains which are paid in
cash or are reinvested at the discretion of shareholders. These activities
are reported in the Statement of Changes in Net Assets. Capital gain
distributions and dividends from net investment income, if any, are paid at
least annually.
The Fund records dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined and presented
in accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Net investment income/loss, net
realized gain/loss, and net assets are not affected.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the mean of the quoted bid and
asked prices of such currencies against the U.S. dollar.
The Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at fiscal year-end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the changes
in the market prices of portfolio securities sold during the year.
12
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
NOTE 3. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, DISTRIBUTION AGREEMENT AND
SERVICE AGREEMENT
The Corporation, on behalf of the Fund, has entered into an Investment
Advisory and Management Agreement (the "Agreement") with SAAMCo. Under the
Agreement, SAAMCo provides continuous supervision of the Fund and administers
its corporate affairs, subject to general review by the Board of Directors
(the "Directors"). In connection therewith, SAAMCo furnishes the Fund with
office facilities, maintains certain of the Fund's books and records, and
pays for the salaries and expenses of all personnel, including officers of
the Fund who are employees of SAAMCo and its affiliates. The investment
advisory and management fee payable by the Fund to SAAMCo is computed daily
and payable monthly, at an annual rate of 0.85% of the average daily net
assets. For the period March 1, 1999 through April 30, 1999, SAAMCo earned
fees in the amount stated on the Statement of Operations.
J.P. Morgan Investment Management, Inc. acts as Adviser to the Fund pursuant
to a subadvisory agreement with SAAMCo. Under the subadvisory agreement, the
Adviser manages the investment and reinvestment of the assets of the Fund.
The Adviser is independent of SAAMCo and discharges its responsibilities
subject to the policies of the Directors and the oversight and supervision of
SAAMCo, which pays the Adviser's fees. The annual rate of fees payable by
SunAmerica to the Adviser will be 0.45% of the Fund's average daily net
assets up to $200 million, 0.40% on the next $200 million, and 0.35%
thereafter. The Adviser has agreed to waive fees in the amount of 0.05% of
the Fund's average daily net assets on the first $200 million through
December 31, 1999. For the period March 1, 1999 through April 30, 1999,
SAAMCo paid fees in the amount of $18,880 to the Adviser.
SAAMCo has agreed to waive fees or reimburse expenses, if necessary, to keep
annual expenses at or below 1.45% of average daily net assets on Class A
shares and 2.10% of average daily net assets on Class B and Class II shares.
SAAMCo also may waive or reimburse additional amounts to increase the
investment return to the Fund's investors. Further, any waivers or
reimbursements made by SAAMCo are subject to recoupment from the Fund within
the following two years, provided that the Fund is able to effect such
payment to SunAmerica and remain in compliance with the foregoing expense
limitations.
For the period March 1, 1999 through April 30, 1999, SAAMCo has agreed to
reimburse expenses as follows:
<TABLE>
<CAPTION>
<S> <C>
Tax Managed Equity Fund Class A........... $70,907
Tax Managed Equity Fund Class B........... 16,440
Tax Managed Equity Fund Class II ......... 14,972
</TABLE>
The Corporation, on behalf of the Fund, has entered into a Distribution
Agreement with SunAmerica Capital Services, Inc. ("SACS" or the
"Distributor"). The Fund has adopted a distribution plan in accordance with
the provisions of Rule 12b-1 under the 1940 Act. Rule 12b-1 permits an
investment company directly or indirectly to pay expenses associated with the
distribution of its shares ("distribution expenses") in accordance with a
plan adopted by the investment company's Board of Directors. Pursuant to such
rule, the Directors have adopted distribution plans hereinafter referred to
as the "Class A Plan," the "Class B Plan" and the "Class II Plan." In
adopting the Class A Plan, the Class B Plan and the Class II Plan, the
13
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
Directors determined that there was a reasonable likelihood that each such
Plan would benefit the Fund and the shareholders of the respective class. The
sales charge and distribution fees of a particular class will not be used to
subsidize the sale of shares of any other class.
Under the Class A Plan, the Distributor receives payments from the Fund at an
annual rate of 0.10% of average daily net assets of the Fund's Class A shares
to compensate the Distributor and certain securities firms for providing
sales and promotional activities for distributing that class of shares. Under
the Class B and Class II Plans, the Distributor may receive payments from the
Fund at the annual rate of 0.75% of the average daily net assets of the
Fund's Class B and Class II shares, respectively, to compensate the
Distributor and certain securities firms for providing sales and promotional
activities and for distributing each such class of shares. The distribution
costs for which the Distributor may be reimbursed out of such distribution
fees include fees paid to broker-dealers that have sold Fund shares,
commissions, and other expenses such as those incurred for sales literature,
prospectus printing and distribution and compensation to wholesalers. It is
possible that in any given year the amount paid to the Distributor under each
Class' Plan may exceed the Distributor's distribution costs as described
above. The Distribution Plans also provide that each class of shares of the
Fund may also pay the Distributor an account maintenance and service fee at
an annual rate of 0.25% of the aggregate average daily net assets of such
class of shares for payments to broker-dealers for providing continuing
account maintenance. Accordingly, for the period March 1, 1999 through April
30, 1999, SACS received fees (see Statement of Operations) based on the
aforementioned rate.
SACS receives sales charges on the Funds Class A and Class II shares,
portions of which are reallowed to affiliated broker-dealers and
non-affiliated broker-dealers. SACS also receives the proceeds of contingent
deferred sales charges paid by investors in connection with certain
redemptions of the Funds Class B and Class II shares. SACS has advised the
Fund that for the period March 1, 1999 through April 30, 1999 the proceeds
received from sales (and paid out to affiliated and non-affiliated
broker-dealers) and redemptions are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS II CLASS II
- --------------------------------------- --------------- --------------------------------------- ---------------
CONTINGENT CONTINGENT
SALES AFFILIATED NON-AFFILIATED DEFERRED SALES SALES AFFILIATED NON-AFFILIATED DEFERRED SALES
CHARGES BROKER-DEALERS BROKER-DEALERS CHARGES CHARGES BROKER-DEALERS BROKER-DEALERS CHARGES
- --------- ------------- ------------- --------------- --------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 215,671 $ 140,581 $ 51,928 $ 703 $ 53,645 $ 34,037 $ 19,608 $ --
</TABLE>
The Corporation, on behalf of the Fund, has entered into a service agreement
with SunAmerica Fund Services, Inc. ("SAFS"). Under the service agreement,
SAFS performs certain shareholder account functions by assisting the Fund's
transfer agent in connection with the services that it offers to the
shareholders of the Fund. The service agreement, which permits the Fund to
compensate SAFS for services rendered based upon an annual rate of 0.22% of
average daily net assets, is approved annually by
14
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
the Directors. For the period March 1, 1999 through April 30, 1999 the Fund
incurred the following expenses which are included in transfer agent fees in
the Statement of Operations to compensate SAFS pursuant to the terms of the
Service Agreement.
<TABLE>
<CAPTION>
PAYABLE AT
EXPENSES APRIL 30, 1999
- ------------------------------------- -------------------------------------
CLASS A CLASS B CLASS II CLASS A CLASS B CLASS II
- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 8,009 $ 1,298 $ 1,076 $ 3,487 $ 972 $ 790
</TABLE>
NOTE 4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales and maturities of long-term
investments during the period March 1, 1999 through April 30, 1999 were as
follows:
<TABLE>
<S> <C>
Purchases (excluding U.S. government securities)............ $25,029,572
Sales (excluding U.S. government securities)................ 102,552
Purchases of U.S. government securities..................... 203,073
Sales of U.S. government securities......................... --
</TABLE>
NOTE 5. PORTFOLIO SECURITIES
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and distribute all of its
taxable income, including any net realized gain on investments, to its
shareholders. Therefore, no federal tax provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for book purposes, including short-term securities, were as
follows:
<TABLE>
<S> <C>
Cost.................................... $25,314,962
-----------
-----------
Appreciation............................ $ 2,930,986
Depreciation............................ (321,454)
-----------
Net unrealized appreciation............. $ 2,609,532
-----------
-----------
</TABLE>
15
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 1999 (UNAUDITED) -- (CONTINUED)
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each class of each series were as follows:
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
----------------------------------------------------------------------------------
CLASS A CLASS B CLASS II
---------------------------- ------------------------- -------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
MARCH 1, 1999 THROUGH MARCH 1, 1999 THROUGH MARCH 1, 1999 THROUGH
APRIL 30, 1999 APRIL 30, 1999 APRIL 30, 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ -------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 2,565,728 $ 32,472,509 538,008 $ 7,116,954 492,795 $ 6,515,861
Reinvested dividends.......... -- -- -- -- -- --
Shares redeemed............... 1,439,567 19,130,761 2,924 38,446 10,981 145,356
------------ -------------- ---------- ------------- ---------- -------------
Net increase.................. 1,126,161 $ 13,341,748 535,084 $ 7,078,508 481,814 $ 6,370,505
------------ -------------- ---------- ------------- ---------- -------------
------------ -------------- ---------- ------------- ---------- -------------
</TABLE>
NOTE 7. COMMITMENTS AND CONTINGENCIES
The SunAmerica Family of mutual funds may borrow up to $100,000,000 under an
uncommitted line of credit with State Street Bank and Trust Company, the
Funds' custodian, with interest payable at the Federal Funds rate plus 100
basis points. Borrowings under the line of credit will commence when the
respective Fund's cash shortfall exceeds $100,000.
NOTE 8. DIRECTORS' RETIREMENT PLAN
The Directors (and Trustees) of the SunAmerica Family of Mutual Funds have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement Plan
(the "Retirement Plan") effective January 1, 1993 for the unaffiliated
Directors. The Retirement Plan provides generally that if a disinterested
Director who has at least 10 years of consecutive service as a Disinterested
Director of any of the SunAmerica mutual funds (an "Eligible Director")
retires after reaching age 60 but before age 70 or dies while a Director,
such person will be eligible to receive a retirement or death benefit from
each SunAmerica mutual fund with respect to which he or she is an Eligible
Director. As of each birthday, prior to the 70th birthday, but in no event
for a period greater than 10 years, each Eligible Director will be credited
with an amount equal to 50% of his or her regular fees (excluding committee
fees) for services as a Disinterested Director of each SunAmerica mutual fund
for the calendar year in which such birthday occurs. In addition, an amount
equal to 8.5% of any amounts credited under the preceding clause during prior
years, is added to each Eligible Director's account until such Eligible
Trustee reaches his or her 70th birthday. An Eligible Director may receive
any benefits payable under the Retirement Plan, at his or her election,
either in one lump sum or in up to fifteen annual installments. As of April
30, 1999 the Fund had accrued $34 for the Retirement Plan, which is included
in accrued expenses on the Statement of Assets and Liabilities, and for the
period March 1, 1999 through April 30, 1999 expensed $34, which is included
in Directors' fees and expenses on the Statement of Operations.
16
<PAGE>
[LOGO] SUNAMERICA BULK RATE
MUTUAL FUNDS U.S. POSTAGE
PAID
Kansas City, MO
Permit No. 2891
THE SUNAMERICA CENTER
733 THIRD AVENUE
NEW YORK, NY 10117-3204
TRUSTEES
S. JAMES COPPERSMITH
SAMUEL M. EISENSTAT
STEPHEN J. GUTMAN
PETER A. HARBECK
SEBASTIANO STERPA
OFFICERS
PERTER A. HARBECK, PRESIDENT
J. STEVEN NEAMTZ, VICE PRESIDENT
ROBERT M. ZAKEM, SECRETARY
PETER E. PISAPIA, ASSISTANT SECRETARY
ABBE P. STEIN, ASSISTANT SECRETARY
PETER C. SUTTON, TREASURER
JOHN T. GENOY, ASSISTANT TREASURER
DONNA M. HANDEL, ASSISTANT TREASURER
CHERYL L. HAWTHORNE, ASSISTANT TREASURER
INVESTMENT ADVISER
SUNAMERICA ASSET MANAGEMENT CORP.
THE SUNAMERICA CENTER
733 THIRD AVENUE
NEW YORK, NY 10017-3204
DISTRIBUTOR
SUMAMERICA CAPITAL SERVICES, INC.
THE SUNAMERICA CENTER
733 THIRD AVENUE
NEW YORK, NY 10017-3204
SHAREHOLDER SERVICING AGENT
SUNAMERICA FUND SERVICES, INC.
THE SUNAMERICA CENTER
733 THIRD AVENUE
NEW YORK, NY 10017-3204
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
P.O. BOX 419572
KANSAS CITY, MO 64141-6572
This report is submitted solely for the
general information of shareholders of
the Fund. Distribution of this report to
persons other than shareholders of the
Fund is authorized only in connection
with a currently effective prospectus,
setting forth details of the Fund, which
must precede or accompany this report.
The accompanying report has not been
examined by independent accountants
and accordingly no opinion has been
expressed thereon.
Mutual Fund Shares offered by:
SunAmerica Capital Services, Inc.
TXANN
