<PAGE>
[LOGO] SUNAMERICA
THE RETIREMENT SPECIALIST
T A X M A N A G E D E Q U I T Y F U N D
---------------------------------------------
2000 SEMIANNUAL REPORT
[LOGO] SunAmerica
Mutual Funds
<PAGE>
--------------------------------------------------------------------------------
SUNAMERICA TAX MANAGED EQUITY FUND SEMIANNUAL REPORT
JUNE 15, 2000
Dear Shareholders:
We are pleased to present you with this semiannual report for the SunAmerica
Tax Managed Equity Fund. SunAmerica Tax Managed Equity Fund seeks high total
return while minimizing the effect of taxes on investors' returns. With
strategic buy and sell decisions and other cutting-edge tax-management policies,
adviser J.P. Morgan successfully kept its tax liability to a minimum. To date,
the Fund has not made a capital gains distribution.
J.P. Morgan employed many techniques to meet its tax-efficiency goals. For
example, the six months ended April 30, 2000 in the equity markets were
dominated by tremendous volatility, especially within the technology sector.
While such market volatility is nerve-wracking for many investors, from a
tax-aware perspective it provided opportunities to offset any losses against
gains. Indeed, the hallmark of J.P. Morgan's tax-aware approach is to
aggressively offset these losses against gains and buy what it believes are
attractive stocks. For the six month period ending April 30, 2000, Class A
shares of your Fund returned 6.30%*.
PORTFOLIO ACTIVITY
J.P. Morgan's primary strategy over the semiannual period was to overweight
the portfolio in high quality technology names and to invest on a more limited
basis in a few interesting newcomers believed to have sustainable competitive
advantage. Key technology holdings included Sun Microsystems, Cisco Systems and
EMC Corporation, each of which posted stunning six-month returns. Each of these
three companies is a leader in its respective niche. Sun Microsystems is a
leader in the server business, Cisco Systems in connectivity with routers, and
EMC in data storage. Thus, each was a beneficiary of the exploding Internet, a
medium that is clearly here to stay and dramatically altering the way business
is conducted. Virtually all companies, not just technology companies, are being
forced to spend capital on technology to implement new web-based applications.
Exodus Communications, a leading provider of Internet system network
management solutions and technology professional services for enterprises with
mission-critical Internet operations, and the well-known Texas Instruments also
positively contributed to portfolio performance.
The technology sector also buoyed several telecommunications and service
stocks. With increased amounts of data moving from place to place, the big news
has been the build-out of bandwidth, which allows more data to be transmitted at
faster speeds. Portfolio holdings Global Crossing and Level 3 Communications,
both of which are successfully building out their broadband networks, boosted
Fund returns. In addition, the announcement of the merger between Time Warner
and America OnLine (AOL) led other stocks in the sector higher, including News
Corp. and Seagram Co. While AOL's stock has languished since the announcement,
we continue to hold it. AOL has the largest share of on-line subscribers, which
the Adviser believes meshes well with Time Warner's ability to deliver extensive
content to subscribers with high speed access.
A few stocks did not fare as well, particularly in the financial services
sector, where businesses were impacted by rising U.S. interest rates. These
holdings included U.S. Bancorp, Washington Mutual, and First Union. In the
pharmaceuticals sector, Fund holding Bristol-Myers Squibb suffered two
individual setbacks during the period. The stock initially declined on negative
news about the patents on their highly successful cancer drug Taxol. The stock
* 1 Year Average Annual Return with Maximum Sales Charge: 5.99%; Average Annual
Return Since Inception with Maximum Sales Charge: 13.63%.
1
<PAGE>
subsequently rebounded only to fall back again when the company announced that a
highly anticipated drug known as Vanlev would be delayed. The Fund will continue
to hold these stocks as long as its fundamentals are attractive. The Adviser
seeks to turn over stocks when the return benefits outweigh the tax implications
in order to control capital gains realization.
MANAGER OUTLOOK
We expect the market to broaden a bit as the year 2000 continues. Most of
the positive performance over the past few years has come from what are known as
the Nifty 50 and the "megacap" growth stocks. This trend continued through much
of March 2000, as a number of stocks in the technology, telecommunications and
biotechnology sectors posted stunning gains. However, the valuations on these
stocks are much higher than that of the rest of the market, and in April 2000,
investors decided that valuations do matter. Many of the high-flying stocks
retraced their advances. We believe that in the coming months the return of
global economic growth may continue to lead investors to look beyond these
overpriced stocks to smaller or international companies that trade at much lower
multiples. This environment should be a positive one for the Fund.
What is perhaps most crucial to remember as we look ahead is that tax-aware
investing is important in all market conditions and may help increase the
after-tax returns you actually receive in both rising and declining equity
markets. 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 focus on after-tax wealth apart from most other
traditionally managed mutual funds that focus solely 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
SunAmerica Mutual Funds
2
<PAGE>
SunAmerica Strategic Investment Series, Inc.
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY
FUND
<S> <C>
-------------
ASSETS:
Investments securities, at value*........................... $119,400,886
Short-term securites*....................................... 4,213,000
Cash........................................................ 32,712
Receivable for shares of beneficial interest sold........... 1,068,749
Interest and dividends receivable........................... 84,556
Receivable from investment adviser.......................... 47,987
Prepaid expenses............................................ 248
------------
Total assets............................................ 124,848,138
------------
LIABILITIES:
Payable for investments purchased........................... 1,035,767
Accrued expenses............................................ 90,441
Investment advisory and management fees payable............. 86,190
Distribution and service maintenance fees payable........... 81,468
Payable for shares of beneficial interest redeemed.......... 28,400
------------
Total liabilities....................................... 1,322,266
------------
Net assets............................................ $123,525,872
============
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.0001 par value............. $ 856
Paid-in capital............................................. 115,030,930
------------
115,031,786
Accumulated undistributed net investment loss............... (349,179)
Accumulated undistributed net realized loss on
investments.............................................. (2,783,995)
Net unrealized appreciation of investments.................. 11,627,260
------------
Net assets............................................ $123,525,872
============
*Identified cost
Investment securities....................................... $107,773,626
============
Short-term securities....................................... $ 4,213,000
============
</TABLE>
See Notes to Financial Statements
3
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY
FUND
<S> <C>
------------
CLASS A (UNLIMITED SHARES AUTHORIZED):
Net assets.................................................. $37,092,727
Shares of beneficial interest issued and outstanding........ 2,557,170
Net asset value and redemption price per share.............. $ 14.51
Maximum sales charge (5.75% of offering price).............. 0.88
-----------
Maximum offering price to public............................ $ 15.39
===========
CLASS B (UNLIMITED SHARES AUTHORIZED):
Net assets.................................................. $42,005,170
Shares of beneficial interest issued and outstanding........ 2,918,571
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales
charge)................................................... $ 14.39
===========
CLASS II (UNLIMITED SHARES AUTHORIZED):
Net assets.................................................. $44,427,975
Shares of beneficial interest issued and outstanding........ 3,082,790
Net asset value and redemption price per share
(excluding any applicable contigent deferred sales
charge)................................................... $ 14.41
Maximum sales charge (1.00% of offering price).............. 0.15
-----------
Maximum offering price to public............................ $ 14.56
===========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY
FUND
<S> <C>
-----------
INVESTMENT INCOME:
Income:
Interest.................................................. $ 605,162
Dividends (net of withholding taxes of $2,307)............ 77,752
----------
Total investment income................................. 682,914
----------
Expenses:
Investment advisory and management fees................... 462,173
Distribution and service maintenance fees--Class A........ 59,952
Distribution and service maintenance fees--Class B........ 183,182
Distribution and service maintenance fees--Class II....... 189,259
Transfer agent fees and expenses--Class A................. 47,142
Transfer agent fees and expenses--Class B................. 50,325
Transfer agent fees and expenses--Class II................ 51,934
Registration fees--Class A................................ 14,057
Registration fees--Class B................................ 14,718
Registration fees--Class II............................... 15,458
Custodian fees and expenses............................... 49,375
Printing expense.......................................... 26,425
Audit and tax consulting fees............................. 12,495
Legal fees and expenses................................... 8,890
Trustees' fees and expenses............................... 2,251
Miscellaneous expenses.................................... 2,027
----------
Total expenses.......................................... 1,189,663
Less: expenses reimbursed by investment adviser......... (158,997)
Less: custody credits earned on cash balances........... (165)
Net expenses............................................ 1,030,501
----------
Net investment loss......................................... (347,587)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments............................ (1,873,556)
Net change in unrealized appreciation/depreciation on
investments.............................................. 7,592,728
----------
Net realized and unrealized gain on investments............. 5,719,172
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $5,371,585
==========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
----------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED MARCH 1, 1999*
APRIL 30, 2000 THROUGH
(UNAUDITED) OCTOBER 31, 1999
<S> <C> <C>
----------------------------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment loss....................................... $ (347,587) $ (136,397)
Net realized loss on investments.......................... (1,873,556) (910,439)
Net change in unrealized appreciation/depreciation on
investments............................................ 7,592,728 4,034,532
------------ -----------
Net increase in net assets resulting from operations........ 5,371,585 2,987,696
------------ -----------
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).................................... 37,678,811 77,487,780
------------ -----------
TOTAL INCREASE IN NET ASSETS................................ 43,050,396 80,475,476
NET ASSETS:
Beginning of period......................................... 80,475,476 --
------------ -----------
End of period [including undistributed net investment loss
for April 30, 2000 and October 31, 1999 of ($349,179) and
($1,592), respectively].................................. $123,525,872 $80,475,476
============ ===========
</TABLE>
* Commencement of Operations
See Notes to Financial Statements
6
<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 LOSS(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD
---------------------- --------- ----------- ----------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
3/01/99-
10/31/99(3)......... $12.50 $ -- $1.15 $1.15 $ -- $ -- $ -- $13.65
4/30/00(6)............ 13.65 (0.01) 0.87 0.86 -- -- -- 14.51
CLASS B
3/01/99-
10/31/99(3)......... $12.50 $(0.06) $1.14 $1.08 $ -- $ -- $ -- $13.58
4/30/00(6)............ 13.58 (0.06) 0.87 0.81 -- -- -- 14.39
CLASS II
3/01/99-
10/31/99(3)......... $12.50 $(0.06) $1.16 $1.10 $ -- $ -- $ -- $13.60
4/30/00(6)............ 13.60 (0.06) 0.87 0.81 -- -- -- 14.41
<CAPTION>
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
END OF EXPENSES LOSS
PERIOD TOTAL PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED RETURN(2) (000'S) NET ASSETS NET ASSETS TURNOVER
---------------------- --------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CLASS A
3/01/99-
10/31/99(3)......... 9.20% $25,067 1.45%(4)(5) (0.02)%(4)(5) 9%
4/30/00(6)............ 6.30 37,093 1.45 (4)(5) (0.19 ) (4)(5) 3
CLASS B
3/01/99-
10/31/99(3)......... 8.64% $27,524 2.10%(4)(5) (0.74)%(4)(5) 9%
4/30/00(6)............ 5.96 42,005 2.10 (4)(5) (0.84 ) (4)(5) 3
CLASS II
3/01/99-
10/31/99(3)......... 8.80% $27,884 2.10%(4)(5) (0.75)%(4)(5) 9%
4/30/00(6)............ 5.96 44,428 2.10 (4)(5) (0.85 ) (4)(5) 3
</TABLE>
-------------
<TABLE>
<C> <S>
(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>
<TABLE>
<CAPTION>
10/31/99 4/30/00
-------- --------
<S> <C> <C>
Tax Managed Equity Class A................................. 1.07% 0.29%
Tax Managed Equity Class B................................. 0.84 0.29
Tax Managed Equity Class II................................ 0.83 0.29
</TABLE>
(6) Unaudited
See Notes to Financial Statements
7
<PAGE>
TAX MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK -- 96.7%
AUTOMOTIVE -- 0.9%
Johnson Controls, Inc............ 17,600 $ 1,114,300
------------------------
BANKS -- 3.6%
BankAmerica Corp................. 37,200 1,822,800
First Union Corp................. 42,400 1,351,500
U.S. Bancorp..................... 62,600 1,271,562
------------------------
4,445,862
------------------------
BROADCASTING & MEDIA -- 5.4%
AT&T Corp.-Liberty Media Group,
Inc.+.......................... 28,100 1,403,244
Comcast Corp., Class A+.......... 19,700 789,231
News Corp. Ltd. ADR.............. 41,600 2,139,800
Seagram Co., Ltd................. 29,900 1,614,600
Time Warner, Inc................. 7,900 710,506
------------------------
6,657,381
------------------------
BUSINESS SERVICES -- 0.5%
United Parcel Service , Inc.,
Class B........................ 9,715 646,048
------------------------
CHEMICALS -- 1.2%
Rohm & Haas Co................... 41,700 1,485,563
------------------------
COMMUNICATION EQUIPMENT -- 2.4%
Lucent Technologies, Inc......... 28,000 1,741,250
Motorola, Inc.................... 6,000 714,375
Palm, Inc.+...................... 350 9,538
QUALCOMM, Inc.+.................. 5,000 542,187
------------------------
3,007,350
------------------------
COMPUTERS & BUSINESS EQUIPMENT -- 14.3%
Cisco Systems, Inc.+............. 93,400 6,475,247
Compaq Computer Corp............. 16,200 473,850
EMC Corp.+....................... 24,000 3,334,500
International Business Machines
Corp........................... 19,800 2,210,175
Sun Microsystems, Inc.+.......... 56,200 5,166,887
------------------------
17,660,659
------------------------
CONGLOMERATE -- 8.0%
General Electric Co.............. 31,100 4,890,475
Honeywell International, Inc..... 31,500 1,764,000
Tyco International Ltd........... 69,500 3,192,656
------------------------
9,847,131
------------------------
COMPUTER SOFTWARE -- 5.0%
Citrix Systems, Inc.+............ 18,000 1,099,125
Computer Associates
International, Inc............. 8,700 485,569
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMPUTER SOFTWARE -- (CONTINUED)
Microsoft Corp.+................. 57,100 $ 3,982,725
Siebel Systems, Inc.+............ 5,000 614,375
------------------------
6,181,794
------------------------
ELECTRONICS -- 5.5%
Intel Corp....................... 30,100 3,817,056
Texas Instruments, Inc........... 17,900 2,915,463
------------------------
6,732,519
------------------------
ENERGY SOURCES -- 6.1%
Exxon Mobil Corp................. 60,310 4,685,333
Royal Dutch Petroleum Co......... 29,700 1,704,037
Tosco Corp....................... 35,900 1,151,044
------------------------
7,540,414
------------------------
FINANCIAL SERVICES -- 6.4%
Ambac Financial Group, Inc....... 18,700 897,600
CIT Group, Inc., Class A......... 24,200 409,888
Citigroup, Inc................... 26,900 1,598,869
Federal National Mortgage
Association.................... 7,500 452,344
Goldman Sachs Group, Inc......... 17,502 1,632,061
KeyCorp.......................... 32,500 601,250
Washington Mutual, Inc........... 38,900 994,381
Wells Fargo & Co................. 31,000 1,272,937
------------------------
7,859,330
------------------------
FOOD, BEVERAGE & TOBACCO -- 2.7%
Coca-Cola Co..................... 21,400 1,007,138
PepsiCo, Inc..................... 32,300 1,185,006
Philip Morris Cos., Inc.......... 49,700 1,087,187
------------------------
3,279,331
------------------------
FOREST PRODUCTS -- 0.7%
Temple-Inland, Inc............... 16,900 847,113
------------------------
HOUSEHOLD PRODUCTS -- 3.4%
Clorox Co........................ 10,900 400,575
Gillette Co...................... 27,200 1,006,400
Procter & Gamble Co.............. 19,700 1,174,612
Warner-Lambert Co................ 14,300 1,627,519
------------------------
4,209,106
------------------------
INSURANCE -- 2.1%
Marsh & McLennan Cos., Inc....... 16,400 1,616,425
XL Capital Ltd., Class A......... 20,100 957,262
------------------------
2,573,687
------------------------
</TABLE>
8
<PAGE>
TAX MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK -- (CONTINUED)
INTERNET SOFTWARE -- 2.2%
America Online, Inc.+............ 24,300 $ 1,453,444
Exodus Communications, Inc.+..... 14,800 1,308,875
------------------------
2,762,319
------------------------
MACHINERY -- 1.0%
Deere & Co....................... 19,400 783,275
Eaton Corp....................... 5,700 478,800
------------------------
1,262,075
------------------------
METALS & MINING -- 0.5%
Reynolds Metals Co............... 9,400 625,100
------------------------
PHARMACEUTICALS -- 9.0%
Abbott Laboratories, Inc......... 7,500 288,281
ALZA Corp.+...................... 12,400 546,375
American Home Products Corp...... 31,300 1,758,669
Bristol-Myers Squibb Co.......... 37,200 1,950,675
Forest Laboratories, Inc.+....... 15,800 1,328,187
Lilly Eli & Co................... 20,400 1,577,175
PE Corp.-Celera Genomics Group... 12,000 720,000
Pharmacia Corp................... 53,200 2,656,675
Schering-Plough Corp............. 8,700 350,719
------------------------
11,176,756
------------------------
RETAIL STORES -- 5.4%
Gap, Inc......................... 29,400 1,080,450
Home Depot, Inc.................. 18,550 1,039,959
Target Corp...................... 24,100 1,604,156
Wal-Mart Stores, Inc............. 53,300 2,951,488
------------------------
6,676,053
------------------------
TELECOMMUNICATIONS -- 7.5%
Allegiance Telecom, Inc.+........ 4,650 328,988
AT&T Corp........................ 28,550 1,332,928
Bell Atlantic Corp............... 11,500 681,375
Global Crossing Ltd.+............ 15,000 472,500
GTE Corp......................... 21,500 1,456,625
Level 3 Communications, Inc.+.... 8,100 720,900
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
MCI WorldCom, Inc.+............. 50,850 $ 2,310,497
SBC Communications, Inc......... 38,900 1,704,306
Sprint Corp. (PCS Group)+....... 5,400 297,000
------------------------
9,305,119
------------------------
TRANSPORTATION -- 0.9%
Union Pacific Corp.............. 25,500 1,074,188
------------------------
UTILITIES -- 2.0%
Columbia Energy Group, Inc...... 6,600 414,150
Dominion Resources, Inc......... 15,400 693,000
Entergy Corp.................... 5,000 127,188
PG&E Corp....................... 33,000 855,937
PPL Corp........................ 14,300 341,413
------------------------
2,431,688
------------------------
TOTAL INVESTMENT SECURITIES -- 96.7%
(cost $107,773,626)............................... 119,400,886
------------------------
SHORT-TERM INVESTMENTS -- 3.4%
Cayman Island Time Deposit with
State Street Bank & Trust Co.
4.25% due 5/01/00
(cost $4,213,000)............. $ 4,213 4,213,000
------------------------
TOTAL INVESTMENTS --
(cost $111,986,626)............. 100.1% 123,613,886
Liabilities in excess of other
assets.......................... (0.1) (88,014)
-------------- ------------------------
NET ASSETS --..................... 100.0% $ 123,525,872
============== ========================
</TABLE>
------------
<TABLE>
<S> <C>
+ Non-income producing security
ADR ("American Depository Receipt")
</TABLE>
See Notes to Financial Statements
9
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (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"), an indirect wholly-owned subsidiary of American International
Group, Inc. 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 two years
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 its 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
10
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
closing bid price on the NYSE or other primary exchange for that day.
However, if the last sale price on the 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 makes 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 Board of 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, are 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, invests in securities and distributes
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 its 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.
For the period March 1, 1999 through October 31, 1999, the following
reclassification arising from book/tax differences was primarily the result
of reclassifications due to net operating losses.
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
------------- -------------- ----------
<S> <C> <C> <C>
Tax Managed Equity Fund........................... $ -- $134,805 $(134,805)
</TABLE>
11
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
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.
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 six months ended April 30, 2000, 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 six months ended April 30, 2000, SAAMCo paid fees
in the amount of $236,828 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 SAAMCo and remain in compliance with the foregoing expense
limitations.
For the six months ended April 30, 2000, SAAMCo has agreed to reimburse
expenses as follows:
<TABLE>
<CAPTION>
<S> <C>
Tax Managed Equity Fund Class A........... $50,370
Tax Managed Equity Fund Class B........... 53,401
Tax Managed Equity Fund Class II ......... 55,226
</TABLE>
12
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
The Corporation, on behalf of the Fund, has entered into a Distribution
Agreement with SunAmerica Capital Services, Inc. ("SACS" or the
"Distributor"), an affiliate of SAAMCo. 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 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 six months ended April 30, 2000,
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 six months ended April 30, 2000 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 AFFILIATED NON-AFFILIATED DEFERRED
CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES
-------- -------------- -------------- ------------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$471,400 $266,103 $127,947 $35,617 $218,666 $137,771 $ 80,895 $12,854
</TABLE>
The Corporation, on behalf of the Fund, has entered into a service agreement
with SunAmerica Fund Services, Inc. ("SAFS"), an affiliate of SAAMCo. Under
the service agreement, SAFS performs certain
13
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
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 the Directors. For the six months ended April 30, 2000
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, 2000
----------------------------- ------------------------------
CLASS A CLASS B CLASS II CLASS A CLASS B CLASS II
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$37,684 $40,300 $41,637 $6,746 $7,564 $7,998
</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 six months ended April 30, 2000 were as follows:
<TABLE>
<S> <C>
Purchases (excluding U.S. government securities)............ $40,205,089
Sales (excluding U.S. government securities)................ 3,102,023
Purchases of U.S. government securities..................... --
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.................................... $ 111,986,626
=============
Appreciation............................ $ 20,189,915
Depreciation............................ (8,562,655)
-------------
Net unrealized appreciation............. $ 11,627,260
=============
</TABLE>
At October 31, 1999 the Tax Managed Equity Fund had a capital loss
carryforward of $910,428 which were available to the extent provided in
regulations and which will expire in 2007. To the extent that these carryover
losses are used to offset future capital gains, it is probable that the gains
so offset will not be distributed.
14
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (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
----------------------------------------------------
FOR THE FOR THE PERIOD
SIX MONTHS ENDED MARCH 1, 1999*
APRIL 30, 2000 THROUGH
(UNAUDITED) OCTOBER 31, 1999
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold............................... 1,112,143 $15,894,423 3,854,550 $ 49,922,780
Reinvested dividends...................... -- -- -- --
Shares redeemed........................... (390,947) (5,657,869) (2,026,576) (27,210,196)
--------- ----------- ---------- ------------
Net increase.............................. 721,196 $10,236,554 1,827,974 $ 22,712,584
========= =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
---------------------------------------------------
CLASS B
---------------------------------------------------
FOR THE FOR THE PERIOD
SIX MONTHS ENDED MARCH 1, 1999*
APRIL 30, 2000 THROUGH
(UNAUDITED) OCTOBER 31, 1999
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold................................ 1,136,322 $16,117,107 2,060,880 $27,669,284
Reinvested dividends....................... -- -- -- --
Shares redeemed............................ (243,854) (3,430,676) (34,777) (496,594)
--------- ----------- --------- -----------
Net increase............................... 892,468 $12,686,431 2,026,103 $27,172,690
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
---------------------------------------------------
CLASS II
---------------------------------------------------
FOR THE FOR THE PERIOD
SIX MONTHS ENDED MARCH 1, 1999*
APRIL 30, 2000 THROUGH
(UNAUDITED) OCTOBER 31, 1999
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold................................ 1,304,477 $18,632,822 2,098,012 $28,177,645
Reinvested dividends....................... -- -- -- --
Shares redeemed............................ (272,359) (3,876,996) (47,340) (675,139)
--------- ----------- --------- -----------
Net increase............................... 1,032,118 $14,755,826 2,050,672 $27,502,506
========= =========== ========= ===========
</TABLE>
* Commencement of Operations
15
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2000 (UNAUDITED) -- (CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES
The SunAmerica Family of Mutual Funds has established committed and
uncommitted lines of credit with State Street Bank and Trust Company, the
Funds' custodian. Interest is currently payable at the Federal Funds Rate
plus 50 basis points on the committed line and Federal Funds Rate plus 100
basis points on the uncommitted line of credit. There is also a commitment
fee of 8 basis points per day for the daily unused portion of the committed
line of credit. 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, 2000 the Fund had accrued $2,689 for the Retirement Plan, which is
included in accrued expenses on the Statement of Assets and Liabilities, and
for the six months ended April 30, 2000 expensed $1,097, which is included in
Directors' fees and expenses on the Statement of Operations.
16
<PAGE>
FIRST CLASS MAIL
U.S. POSTAGE
PAID
HACKENSACK, NJ
PERMIT NO. 552
[LOGO] SUNAMERICA
MUTUAL FUNDS
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Trustees
S. JAMES COPPERSMITH
SAMUEL M. EISENSTAT
STEPHEN J. GUTMAN
PETER A. HARBECK
SEBASTIANO STERPA
Officers
PETER A. HARBECK, PRESIDENT
J. STEVEN NEAMTZ, VICE PRESIDENT
ROBERT M. ZAKEM, SECRETARY
PETER C. SUTTON, TREASURER
PETER E. PISAPIA, ASSISTANT SECRETARY
ABBE P. STEIN, ASSISTANT SECRETARY
LAURIE FILIPPONE, ASSISTANT 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
SUNAMERICA 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.
[logo] Member of American International Group, Inc.
TXSAN-3/00
