<PAGE>
--------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 15, 2000
Dear Shareholders:
We are pleased to report on a very favorable annual period for Tax Managed
Equity Fund and SunAmerica BioTech/ Health 30 Fund, which is an exciting
investment opportunity launched by SunAmerica this past June.
In keeping with their investment mandates, the Tax Managed Equity Fund
minimized its tax liabilities while turning in strong performance and the
BioTech/Health 30 Fund successfully offered shareholders aggressive
participation in the high growth potential of the biotech/health sector.
In the pages that follow, you will find a discussion of the Funds'
investment performance over the past fiscal year. The analyses highlight key
factors influencing recent performance of the Funds and are followed by detailed
financial statements for the period ended October 31, 2000.
Our continuing goal is to provide you with high-quality investment
management services across a range of broad-based and specialized mutual funds.
As always, we thank you for investing in our family of funds. 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
1
<PAGE>
TAX MANAGED EQUITY FUND
Tax Managed Equity Fund seeks high total return, with a view toward
minimizing the impact 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, for most of the fiscal year, the equity markets were dominated by
tremendous volatility. There was significant rotation from growth stocks to
value stocks as the year progressed. The technology sector experienced a
dramatic sell-off from March through May. The healthcare sector was particularly
sensitive to presidential campaign rhetoric. From a tax-aware perspective, such
volatility provided opportunities to recognize losses and to use those losses to
offset gains.
The primary strategy of J.P. Morgan's tax-aware approach is to earn excess
returns through security selection rather than to take major sector bets. The
key is to make sure either that gains are offset against losses or that there is
what we call controlled capital gains realization. This means that turnover of
stocks occurs only when sufficient return is expected from the stock to be
purchased to outweigh the taxes on the security to be sold. For the twelve month
period ended October 31, 2000, Class A shares of your Fund returned 6.52%, as
compared to 6.09% for the S&P 500 Index.*
PORTFOLIO ACTIVITY
Over the annual period, the Fund's outperformance was primarily due to
effective stock selection within the technology and pharmaceuticals sectors.
Concerns about valuations, particularly in the red-hot Internet stocks,
contributed to great volatility in the technology sector. However, certain
technology infrastructure stocks boosted the Fund's annual returns. Contributing
most were Sun Microsystems, Inc., EMC Corp. and Cisco Systems, Inc. Sun
Microsystems, Inc., a leader in the server business, experienced strong earnings
growth in all segments of the company. EMC Corp. posted outstanding earnings and
growth, benefiting from ongoing healthy demand for its core business of data
storage. Cisco Systems, Inc., a leader in connectivity with routers, has
suffered in calendar 2000. Investors became cautious about the company's ability
to grow the business off of an enormous base as competition bubbles up within
this niche. Still, Cisco Systems, Inc. was a strong performer in the fourth
calendar quarter, producing one-year gains of over 45%.
Another winner for the Fund over the fiscal year was Forest Laboratories,
Inc. This pharmaceutical company's new anti-depressant drug, known as Celexa,
continued to gain market share. It has also had good results so far in clinical
trials for ML3000, a new anti-inflammatory for the treatment of osteoarthritis.
Pharmaceutical company, PE Corp.-PE Biosystems, Corp., was a particularly strong
performer during the fourth fiscal quarter.
A few stocks did not fare as well, particularly in the financial services
sector. Regional banks, such as U.S. Bancorp and First Union Corp., were
especially impacted by rising U.S. interest rates. Once the Federal Reserve
Board appeared to be on hold after its May rate hike, the financial stocks
rebounded.
The Fund's biggest detractors from performance were in the computer software
and telecommunications-related sectors. Citrix Systems suffered as a result of a
slower than anticipated upgrade cycle in Windows 2000, to which the company was
leveraged. After a change in senior management that did not resolve some of our
uncertainty about the company's future prospects, we completely eliminated the
Fund's position in Citrix Systems. WorldCom, Inc. was another disappointment.
The proposed and eventual dissolution of its deal with Sprint kept its
management pre-occupied. A steeper than expected decline in long distance
pricing early in the year and poor earnings reports later in the year
2
<PAGE>
pushed the stock even lower. Nortel Networks Corp. declined since we purchased
it during this fiscal period. The company met investors' expectation for
earnings, but a slowdown in spending by the telecommunications industry overall
cast a wide shadow over fiber optics companies. The Fund will continue to hold
WorldCom, Inc. and Nortel Networks Corp. as long as its fundamentals remain
attractive.
MANAGER OUTLOOK**
The Federal Reserve Board's interest rate increases over the past fiscal
year seem to have had the desired impact of slowing U.S. economic growth.
Economic growth worldwide also appears to be moderating off its rapid pace. This
could, in turn, lead to disappointments in corporate earnings. Several other
factors lead us to a cautious outlook. Reduced capital spending, especially in
the telecommunications industry, could have a negative impact on the technology
sector. Healthcare/Social Security reform issues could have an impact both on
the equity market in general and on the healthcare sector in particular. Higher
oil prices are also a concern, as a drag on consumer purchasing power could
accelerate an economic slowdown. We expect volatility and sector rotation in the
U.S. equity markets to continue.
Given this outlook, we believe that effective stock selection is the key to
success. J.P. Morgan's decision process favors holdings in companies believed to
have sustainable competitive advantage and the potential for long-term returns.
What is perhaps most important to remember is that our approach to tax-managed
investing is designed to outperform in either a growth or value market.
Furthermore, tax-aware investing may help increase the after-tax returns you
actually receive in both rising and declining equity markets. J.P. Morgan pays
attention to the different tax treatments of price appreciation, dividends, and
short- and long-term capital gains. This emphasis on after-tax wealth continues
to differentiate Tax Managed Equity Fund from most other traditionally managed
mutual funds that focus solely on pre-tax performance.
*Average Annual Return Since Inception with Maximum Sales Charge for
Class A: 5.67%. The S&P 500 Index is the Standard & Poor's 500 Composite Stock
Price Index, a widely-recognized, unmanaged index of common stock prices.
Investors cannot actually make investments in this index. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
**This discussion was prepared by J.P. Morgan, the subadviser of Tax Managed
Equity Fund.
3
<PAGE>
SUNAMERICA BIOTECH/HEALTH 30 FUND
The SunAmerica Biotech/Health 30 Fund's inception date was June 14, 2000.
While this is an annual report, the discussion will focus on the period from
inception through October 31, 2000. Given that this is the Fund's first
shareholder report, it is well worth reviewing this mutual fund's objective and
our investment strategies.
For the period from inception through October 31, 2000, the Fund's Class A
shares returned 27.68%. (Return does not include sales charge.) The Fund
outperformed both the S&P 500 Index, which returned -2.80% for the same period,
and the AMEX Biotech Index, which returned 25.63% for the period.* Effective
individual stock selection was the primary driver of Fund performance.
SunAmerica Biotech/Health 30 Fund seeks capital appreciation by investing
primarily in 30-50 biotechnology companies and healthcare companies of any size
that we believe to be the leading producers, providers and/or beneficiaries of
new and emerging biotechnology and healthcare trends. The Fund generally will
invest in companies that we believe exhibit characteristics that include:
- high growth potential
- large accessible market
- highly proprietary products
- history of operating success
- effective management teams
- leading edge technology
- high degree of intellectual property
- protected patent portfolio
- viable business model
PORTFOLIO ACTIVITY
While the overall U.S. equity market was fraught with volatility throughout
the fiscal period, the biotechnology sector remained in a solid up-trend.
Investors generally focused on product-based companies with explosive earnings
growth. Several key milestones recently achieved within the sector also kept
enthusiasm strong. These included significant clinical advances and ongoing
progress towards next-generation therapeutics.
We use a focused, fundamental, bottom-up approach to individual stock
selection. Since inception, we have built a well-diversified basket of
securities amongst the various biotechnology/healthcare sub-sectors, including
genomics, devices, therapeutics, cardiovascular, generic drugs and specialty
pharmaceuticals.
Top holdings and strong performers for the Fund to date included IDEC
Pharmaceuticals Corp., Genentech, Inc., Millennium Pharmaceuticals, Inc., Serono
SA and CuraGen Corp.
- Anti-cancer drug Rituxan has made IDEC Pharmaceuticals Corp. an industry
leader. Herceptin, a breast cancer therapy, has done the same for Genentech,
Inc.
- Millennium Pharmaceuticals, Inc., a U.S. biopharmaceutical company, has
collaborative research pacts with Bayer AG, Schering AG and other drug makers
to find drug targets and genetic causes for diseases such as Alzheimer's,
cancer and asthma.
- Serono SA is Europe's biggest biotechnology company. It is currently focusing
on treatments for infertility and multiple sclerosis.
4
<PAGE>
- CuraGen Corp. develops the application of genomics to accelerate the discovery
and development of therapeutics and has a proprietary portfolio of products
being put into clinical development.
MANAGER OUTLOOK
Going forward, we expect volatility in the U.S. equity markets in general to
continue. We maintain, however, that the backdrop for the
biotechnology/healthcare sector remains intact. The biotechnology/healthcare
sector is a direct beneficiary of positive secular trends, including an aging
population and an increase in drug utilization. Fundamentals for the sector
continue to improve as well. A more favorable regulatory environment has
resulted in an increasing number of drug approvals in an improved timeframe.
There is a maturing and deep pipeline of new drugs among these companies and an
increasing number of biotech companies are profitable.
We believe the greatest growth opportunities in the biotechnology/healthcare
sector will lie with those companies that demonstrate the ability to bring new,
novel and effective therapeutics to the market. New technologies are
accelerating the pace at which new products are being brought to market.
Companies that demonstrate the ability to retain the bulk of the economic value
created through the development of new therapeutics as well as those that have
sustainable business models will be attractive investment candidates. We believe
that the dynamic biotechnology/healthcare sector can be a key growth component
to a diversified portfolio.
IF YOU WOULD LIKE ADDITIONAL INFORMATION:
/ / Call FastFacts--Call our 24 hour automated account and fund information
hotline at 800-654-4760.
/ / Visit www.sunamericafunds.com for more up-to-date information.
SunAmerica Mutual Funds
thanks you for your continued support.
*The AMEX Biotech Index is an equal-dollar weighted index designed to
measure the performance of a cross section of companies in the biotechnology
industry that are primarily involved in the use of biological processes to
develop products or provide services. The index was developed with a base level
of 200 as of October 18, 1991. The S&P 500 Index is the Standard & Poor's 500
Composite Stock Price Index, a widely-recognized, unmanaged index of common
stock prices. Investors cannot actually make investments in this index. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Both biotechnology and healthcare
companies may be significantly affected by government regulations and government
approvals of products and services, legislative or regulatory changes, patent
considerations, intense competition and rapid obsolescence due to advancing
technology. As a result, the Fund's returns may be considerably more volatile
than a fund that does not invest in biotechnology and/or healthcare.
Because the Fund is non-diversified, the Portfolio's risk is increased
because the effect of each stock on the Fund's performance is greater.
5
<PAGE>
SunAmerica Strategic Investment Series, Inc.
STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 2000
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY BIOTECH/HEALTH 30
FUND FUND
<S> <C> <C>
---------------------------------
ASSETS:
Investments securities, at value*........................... $133,520,714 $66,226,770
Short-term securites*....................................... 4,626,000 --
Repurchase agreements (cost equals market).................. -- 8,065,000
Cash........................................................ 676 218
Receivable for shares of beneficial interest sold........... 798,934 2,068,896
Interest and dividends receivable........................... 109,393 3,511
Prepaid expenses............................................ 1,139 --
Receivable from investment adviser.......................... -- 73,036
------------ -----------
Total assets............................................ 139,056,856 76,437,431
------------ -----------
LIABILITIES:
Payable for shares of beneficial interest redeemed.......... 594,418 448,270
Accrued expenses............................................ 147,688 160,399
Investment advisory and management fees payable............. 95,530 43,202
Distribution and service maintenance fees payable........... 91,683 40,902
Payable to investment adviser............................... 5,784 --
Payable for investments purchased........................... -- 1,413,130
------------ -----------
Total liabilities..................................... 935,103 2,105,903
------------ -----------
Net assets.......................................... $138,121,753 $74,331,528
============ ===========
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.0001 par value............. $ 957 $ 466
Paid-in capital............................................. 128,766,444 64,133,059
------------ -----------
128,767,401 64,133,525
Accumulated net investment loss............................. (2,648) --
Accumulated undistributed net realized gain (loss) on
investments.............................................. (4,798,139) 2,641,430
Net unrealized appreciation of investments.................. 14,155,139 7,556,573
------------ -----------
Net assets............................................ $138,121,753 $74,331,528
============ ===========
*Identified cost
Investment securities....................................... $119,365,575 $58,670,197
============ ===========
Short-term securities....................................... $ 4,626,000 $ --
============ ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 2000 -- (CONTINUED)
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY BIOTECH/HEALTH 30
FUND FUND
<S> <C> <C>
--------------------------------
CLASS A (UNLIMITED SHARES AUTHORIZED):
Net assets.................................................. $38,801,906 $30,488,524
Shares of beneficial interest issued and outstanding........ 2,668,346 1,909,996
Net asset value and redemption price per share.............. $ 14.54 $ 15.96
Maximum sales charge (5.75% of offering price).............. 0.89 0.97
----------- -----------
Maximum offering price to public............................ $ 15.43 $ 16.93
=========== ===========
CLASS B (UNLIMITED SHARES AUTHORIZED):
Net assets.................................................. $47,972,249 $23,457,022
Shares of beneficial interest issued and outstanding........ 3,335,796 1,473,604
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales
charge)................................................... $ 14.38 $ 15.92
=========== ===========
CLASS II (UNLIMITED SHARES AUTHORIZED):
Net assets.................................................. $51,347,598 $20,385,982
Shares of beneficial interest issued and outstanding........ 3,566,060 1,279,877
Net asset value and redemption price per share
(excluding any applicable contigent deferred sales
charge)................................................... $ 14.40 $ 15.93
Maximum sales charge (1.00% of offering price).............. 0.15 0.16
----------- -----------
Maximum offering price to public............................ $ 14.55 $ 16.09
=========== ===========
</TABLE>
See Notes to Financial Statements
7
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
<CAPTION>
TAX MANAGED
EQUITY BIOTECH/HEALTH 30
FUND FUND@
<S> <C> <C>
--------------------------------
INVESTMENT INCOME:
Income:
Interest.................................................. $ 183,988 $ 211,361
Dividends*................................................ 1,399,738 8,727
----------- -----------
Total investment income................................. 1,583,726 220,088
----------- -----------
Expenses:
Investment advisory and management fees................... 1,025,210 136,263
Distribution and service maintenance fees--Class A........ 127,847 38,939
Distribution and service maintenance fees--Class B........ 407,103 37,983
Distribution and service maintenance fees--Class II....... 433,750 32,446
Transfer agent fees and expenses--Class A................. 86,738 27,213
Transfer agent fees and expenses--Class B................. 95,356 9,671
Transfer agent fees and expenses--Class II................ 101,850 8,240
Custodian fees and expenses............................... 82,844 28,228
Registration fees--Class A................................ 29,324 29,977
Registration fees--Class B................................ 32,107 29,977
Registration fees--Class II............................... 34,482 29,977
Printing expense.......................................... 69,545 19,620
Audit and tax consulting fees............................. 24,270 24,105
Legal fees and expenses................................... 9,110 2,835
Directors' fees and expenses.............................. 4,073 500
Insurance expense......................................... 169 --
Miscellaneous expenses.................................... 3,693 1,615
----------- -----------
Total expenses.......................................... 2,567,471 457,589
Less: expenses waived/reimbursed by investment
adviser.............................................. (271,944) (126,569)
Less: custody credits earned on cash balances........... (99) (3,631)
----------- -----------
Net expenses............................................ 2,295,428 327,389
----------- -----------
Net investment loss......................................... (711,702) (107,301)
----------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments..................... (3,887,700) 2,722,129
Net change in unrealized appreciation/depreciation of
investments.............................................. 10,120,607 7,556,573
----------- -----------
Net realized and unrealized gain on investments............. 6,232,907 10,278,702
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 5,521,205 $10,171,401
=========== ===========
*Net of foreign withholding taxes on dividends of........... $ 7,814 $ 138
=========== ===========
</TABLE>
@ Commenced operations June 14, 2000
See Notes to Financial Statements
8
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND BIOTECH/HEALTH 30 FUND
------------------------------------ ----------------------
FOR THE PERIOD FOR THE PERIOD
FOR THE MARCH 1, 1999* JUNE 14, 2000*
YEAR ENDED THROUGH THROUGH
OCTOBER 31, 2000 OCTOBER 31, 1999 OCTOBER 31, 2000
---------------- ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment loss..................... $ (711,702) $ (136,397) $ (107,301)
Net realized gain (loss) on
investments.......................... (3,887,700) (910,439) 2,722,129
Net change in unrealized appreciation/
depreciation on investments.......... 10,120,607 4,034,532 7,556,573
------------ ----------- -----------
Net increase in net assets resulting from
operations............................. 5,521,205 2,987,696 10,171,401
------------ ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS (NOTE 6).... 52,125,072 77,387,780 64,160,127
------------ ----------- -----------
TOTAL INCREASE IN NET ASSETS.............. 57,646,277 80,375,476 74,331,528
NET ASSETS:
Beginning of period....................... 80,475,476 100,000 --
------------ ----------- -----------
End of period............................. $138,121,753 $80,475,476 $74,331,528
============ =========== ===========
Accumulated net investment loss........... $ (2,648) $ (1,592) $ --
============ =========== ===========
</TABLE>
* Commencement of Operations
See Notes to Financial Statements
9
<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
10/31/00........... 13.65 (0.02) 0.91 0.89 -- -- -- 14.54
CLASS B
3/01/99-
10/31/99(3)......... $12.50 $(0.06) $1.14 $1.08 $ -- $ -- $ -- $13.58
10/31/00........... 13.58 (0.11) 0.91 0.80 -- -- -- 14.38
CLASS II
3/01/99-
10/31/99(3)......... $12.50 $(0.06) $1.16 $1.10 $ -- $ -- $ -- $13.60
10/31/00........... 13.60 (0.11) 0.91 0.80 -- -- -- 14.40
<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%
10/31/00........... 6.52 38,802 1.45(5) (0.14)(5) 7
CLASS B
3/01/99-
10/31/99(3)......... 8.64% $27,524 2.10%(4)(5) (0.74)%(4)(5) 9%
10/31/00........... 5.89 47,972 2.10(5) (0.79)(5) 7
CLASS II
3/01/99-
10/31/99(3)......... 8.80% $27,884 2.10%(4)(5) (0.75)%(4)(5) 9%
10/31/00........... 5.88 51,348 2.10(5) (0.79)(5) 7
</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 10/31/00
-------- --------
<S> <C> <C>
Tax Managed Equity Class A................................. 1.07% 0.23%
Tax Managed Equity Class B................................. 0.84 0.22
Tax Managed Equity Class II................................ 0.83 0.22
</TABLE>
See Notes to Financial Statements
10
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
FINANCIAL HIGHLIGHTS
BIOTECH/HEALTH 30 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
6/14/00-
10/31/00(3)......... $12.50 $(0.02) $3.48 $3.46 -- -- -- $15.96
CLASS B
6/14/00-
10/31/00(3)......... $12.50 $(0.05) $3.47 $3.42 -- -- -- $15.92
CLASS II
6/14/00-
10/31/00(3)......... $12.50 $(0.05) $3.48 $3.43 -- -- -- $15.93
<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
6/14/00-
10/31/00(3)......... 27.68% $530,489 1.55%(4)(5) (0.28)%(4)(5) 112%
CLASS B
6/14/00-
10/31/00(3)......... 27.36% $23,457 2.20%(4)(5) (1.08)%(4)(5) 112%
CLASS II
6/14/00-
10/31/00(3)......... 27.44% $20,386 2.20%(4)(5) (1.07)%(4)(5) 112%
</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>
10/31/00
--------
<S> <C>
Biotech/Health 30 Fund Class A............................. 0.49%
Biotech/Health 30 Fund Class B............................. 0.96
Biotech/Health 30 Fund Class II............................ 1.09
</TABLE>
See Notes to Financial Statements
11
<PAGE>
Tax Managed Equity Fund
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2000
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK -- 96.7%
AUTOMOTIVE -- 0.8%
Johnson Controls, Inc........... 17,600 $ 1,049,400
------------
BANKS -- 4.2%
Bank of America Corp............ 27,200 1,307,300
First Union Corp................ 42,400 1,285,250
KeyCorp......................... 32,500 802,344
U.S. Bancorp.................... 97,100 2,348,606
------------
5,743,500
------------
BROADCASTING & MEDIA -- 4.9%
AT&T Corp.-Liberty Media Corp.,
Class A+...................... 56,200 1,011,600
Comcast Corp., Class A+......... 29,700 1,210,275
News Corp. Ltd. ADR............. 41,600 1,788,800
Seagram Co., Ltd................ 29,900 1,708,037
Time Warner, Inc................ 12,900 979,239
------------
6,697,951
------------
BUSINESS SERVICES -- 0.4%
United Parcel Service, Inc.
Class B....................... 9,715 590,186
------------
CHEMICALS -- 1.0%
Rohm & Haas Co.................. 46,100 1,385,881
------------
COMMUNICATION EQUIPMENT -- 6.4%
Cisco Systems, Inc.+............ 103,400 5,570,675
Lucent Technologies, Inc........ 28,000 652,750
Motorola, Inc................... 18,000 448,875
Nortel Networks Corp............ 36,662 1,668,121
Tellabs, Inc.+.................. 10,000 499,375
------------
8,839,796
------------
COMPUTERS & BUSINESS EQUIPMENT -- 9.6%
Compaq Computer Corp............ 16,200 492,642
EMC Corp.+...................... 51,000 4,542,187
International Business Machines
Corp.......................... 19,800 1,950,300
Sun Microsystems, Inc.+......... 56,200 6,231,175
------------
13,216,304
------------
COMPUTER SOFTWARE -- 4.1%
Microsoft Corp.+................ 57,100 3,932,763
NCR Corp........................ 14,504 625,485
Siebel Systems, Inc.+........... 10,000 1,049,375
------------
5,607,623
------------
CONGLOMERATE -- 8.4%
General Electric Co............. 93,300 5,114,006
Honeywell International, Inc.... 35,500 1,910,344
Tyco International Ltd.......... 81,500 4,620,031
------------
11,644,381
------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
ELECTRONICS -- 3.9%
Intel Corp...................... 72,200 $ 3,249,000
Texas Instruments, Inc.......... 44,800 2,198,000
------------
5,447,000
------------
ENERGY SERVICES -- 1.0%
Baker Hughes, Inc............... 42,000 1,443,750
------------
ENERGY SOURCES -- 5.6%
Exxon Mobil Corp................ 65,310 5,824,836
Royal Dutch Petroleum Co. GDR... 31,700 1,882,187
------------
7,707,023
------------
FINANCIAL SERVICES -- 8.0%
Ambac Financial Group, Inc...... 20,600 1,644,138
Associates First Capital Corp.,
Class A....................... 17,000 631,125
Citigroup, Inc.................. 39,866 2,097,948
E*TRADE Group, Inc.+............ 40,000 582,500
Federal National Mortgage
Association Corp.............. 7,500 577,500
Goldman Sachs Group, Inc........ 23,502 2,345,793
Washington Mutual, Inc.......... 38,900 1,711,600
Wells Fargo & Co................ 31,000 1,435,688
------------
11,026,292
------------
FOOD, BEVERAGE & TOBACCO -- 3.6%
Coca-Cola Co.................... 21,400 1,292,025
PepsiCo, Inc.................... 32,300 1,564,531
Philip Morris Cos., Inc......... 56,300 2,061,988
------------
4,918,544
------------
FOREST PRODUCTS -- 0.5%
Temple-Inland, Inc.............. 16,900 756,275
------------
HOUSEHOLD PRODUCTS -- 2.8%
Clorox Co....................... 10,900 486,412
Estee Lauder Cos., Inc., Class
A............................. 18,000 835,875
Gillette Co..................... 27,200 948,600
Procter & Gamble Co............. 23,300 1,664,494
------------
3,935,381
------------
INSURANCE -- 2.9%
Marsh & McLennan Cos., Inc...... 18,400 2,405,800
XL Capital Ltd., Class A........ 20,100 1,545,188
------------
3,950,988
------------
INTERNET SOFTWARE -- 1.6%
America Online, Inc.+........... 24,300 1,225,449
Exodus Communications, Inc.+.... 29,600 993,450
------------
2,218,899
------------
</TABLE>
12
<PAGE>
TAX MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK -- (CONTINUED)
MACHINERY -- 0.5%
Deere & Co...................... 19,400 $ 714,163
------------
MEDICAL INSTRUMENTS -- 1.0%
PE Corp.-PE Biosystems Group.... 12,000 1,404,000
------------
MEDICAL PRODUCTS -- 1.4%
Forest Laboratories, Inc.+...... 11,800 1,563,500
Millennium Pharmaceuticals,
Inc.+......................... 5,000 362,813
------------
1,926,313
------------
METALS & MINING -- 0.7%
Alcoa, Inc...................... 32,928 944,622
------------
PHARMACEUTICALS -- 9.7%
ALZA Corp.+..................... 18,900 1,529,719
American Home Products Corp..... 31,300 1,987,550
Bristol-Myers Squibb Co......... 37,100 2,260,781
Eli Lilly and Co................ 25,400 2,270,125
Pfizer, Inc..................... 44,325 1,914,286
Pharmacia Corp.................. 53,200 2,926,000
Schering-Plough Corp............ 8,700 449,681
------------
13,338,142
------------
RETAIL STORES -- 4.0%
Gap, Inc........................ 30,300 782,119
Home Depot, Inc................. 18,550 797,650
Target Corp..................... 48,200 1,331,525
Wal-Mart Stores, Inc............ 58,300 2,645,362
------------
5,556,656
------------
TELECOMMUNICATIONS -- 6.0%
AT&T Corp....................... 28,550 662,003
Corvis Corp.+................... 2,616 171,675
Global Crossing Ltd............. 15,000 354,375
JDS Uniphase Corp.+............. 5,000 406,875
Level 3 Communications, Inc.+... 8,100 386,269
SBC Communications, Inc......... 43,900 2,532,481
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
Sprint Corp. (PCS Group)+....... 11,400 $ 434,625
Verizon Communications.......... 37,730 2,181,266
WorldCom, Inc.+................. 50,850 1,207,687
------------
8,337,256
------------
TRANSPORTATION -- 0.9%
Union Pacific Corp.............. 25,500 1,195,313
------------
UTILITIES -- 2.8%
CP&L Energy, Inc................ 25,000 1,007,812
Dominion Resources, Inc......... 15,400 917,263
Entergy Corp.................... 29,000 1,111,062
PG&E Corp....................... 33,000 888,938
------------
3,925,075
------------
TOTAL INVESTMENT SECURITIES -- 96.7%
(cost $119,365,575)............. 133,520,714
------------
SHORT-TERM SECURITIES -- 3.3%
Time Deposit with State Street
Bank & Trust Co.
4.50% due 11/01/00
(cost $4,626,000)............. $ 4,626 4,626,000
------------
TOTAL INVESTMENTS --
(cost $123,991,575)............. 100.0% 138,146,714
Liabilities in excess of other
assets.......................... 0.0 (24,961)
-------------- ------------
NET ASSETS --..................... 100.0% $138,121,753
============== ============
</TABLE>
------------
<TABLE>
<S> <C>
+ Non-income producing security
ADR ("American Depository Receipt")
GDR ("Global Depository Receipt")
</TABLE>
See Notes to Financial Statements
13
<PAGE>
SunAmerica Biotech/Health 30 Fund
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2000
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK -- 89.1%
BIOMEDICAL -- 23.2%
Arena Pharmaceuticals, Inc.+..... 10,000 $ 349,375
Ciphergen Biosystems, Inc.+...... 80,000 2,480,000
Eden Bioscience Corp.+........... 15,000 568,125
Enzon, Inc.+..................... 40,000 2,850,000
Genentech, Inc.+................. 24,000 1,980,000
Human Genome Sciences, Inc.+..... 12,400 1,096,044
IDEC Pharmaceuticals Corp.+...... 10,000 1,961,250
Illumina Corp.+.................. 60,000 1,950,000
Large Scale Biology Corp.+....... 60,000 1,113,750
Paradigm Genetics Corp.+......... 60,000 952,500
Rosetta Inpharmatics, Inc.+...... 60,500 1,342,343
Variagenics Corp.+............... 35,000 577,500
-----------
17,220,887
-----------
GENOMICS -- 12.7%
Affymetrix, Inc.+................ 25,000 1,384,375
CuraGen Corp.+................... 50,000 3,231,250
Genomic Solutions, Inc........... 30,000 420,000
Incyte Genomics, Inc.+........... 20,000 732,500
Lexicon Genetics, Inc.+.......... 20,000 405,000
Millennium Pharmaceuticals,
Inc.+.......................... 28,000 2,031,750
Myriad Genetics, Inc.+........... 10,000 1,200,000
-----------
9,404,875
-----------
HOSPITALS -- 3.4%
Province Healthcare Co.+......... 60,000 2,527,500
-----------
MEDICAL DRUGS -- 20.4%
Alliance Pharmaceutical Corp.+... 100,000 1,418,750
ALZA Corp.+...................... 20,000 1,618,750
Andrx Group+..................... 15,000 1,080,000
Celgene Corp.+................... 30,000 1,931,250
Forest Laboratories, Inc.+....... 10,000 1,325,000
MedImmune, Inc.+................. 20,000 1,307,500
Pfizer, Inc...................... 22,875 987,914
Schering-Plough Corp............. 40,000 2,067,500
Serono SA ADR+................... 75,000 1,696,875
Teva Pharmaceutical
Industries Ltd. ADR............ 18,000 1,064,250
Versicor Corp.+.................. 50,000 656,250
-----------
15,154,039
-----------
MEDICAL INFORMATION SYSTEMS -- 3.4%
Cerner Corp.+.................... 40,000 2,477,500
Informax, Inc.+.................. 1,000 27,813
-----------
2,505,313
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
MEDICAL INSTRUMENTS -- 8.8%
PE Corp.-PE Biosystems Group..... 11,000 $ 1,287,000
PerkinElmer, Inc................. 15,000 1,792,500
Techne Corp.+.................... 18,000 2,029,500
Waters Corp.+.................... 20,000 1,451,250
-----------
6,560,250
-----------
MEDICAL INSURANCE -- 1.4%
Oxford Health Plans, Inc.+....... 30,000 1,012,500
-----------
MEDICAL SUPPLIES -- 2.8%
Charles River Laboratories
International, Inc.+........... 80,000 2,100,000
-----------
RESPIRATORY PRODUCTS -- 0.7%
Edwards Lifesciences Corp.+...... 40,000 537,500
-----------
TELECOMMUNICATIONS -- 0.0%
Aspect Communications Corp.+..... 2,000 32,969
-----------
THERAPEUTICS -- 12.3%
CV Therapeutics, Inc.+........... 20,000 1,575,000
Dyax Corp.+...................... 50,000 1,856,250
Gilead Sciences, Inc.+........... 15,000 1,290,000
Immunex Corp.+................... 20,000 851,250
Introgen Therapeutics, Inc.+..... 125,000 1,476,562
Medicines, Co.+.................. 50,000 1,506,250
Progenics Pharmaceuticals,
Inc.+.......................... 25,000 615,625
-----------
9,170,937
-----------
TOTAL INVESTMENT SECURITIES -- 89.1%
(cost $58,670,197)............... 66,226,770
-----------
REPURCHASE AGREEMENT -- 10.8%
Joint Repurchase Agreement with
State Street Bank & Trust Co.
(Note 2)
(cost $8,065,000).............. $ 8,065 8,065,000
-----------
TOTAL INVESTMENTS --
(cost $66,735,197)............... 99.9% 74,291,770
Other assets less liabilities...... 0.1 39,758
-------------- -----------
NET ASSETS --...................... 100.0% $74,331,528
============== ===========
</TABLE>
------------
<TABLE>
<S> <C>
+ Non-income producing security
ADR ("American Depository Receipt")
</TABLE>
See Notes to Financial Statements
14
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000
NOTE 1. ORGANIZATION
SunAmerica Strategic Investment Series, Inc. (the "Corporation") is an
open-end, diversified investment company organized as a Maryland corporation
on December 16, 1998. It currently consists of two different investment funds
(each, a "Fund" and collectively, the "Funds"). Each Fund is a separate
series with a distinct investment objective and/or strategy. Each Fund is
advised and/or managed by SunAmerica Asset Management Corp. (the "Adviser" or
"SAAMCo"), an indirect wholly-owned subsidiary of American International
Group, Inc. An investor may invest in one or more of the following
Funds: Tax Managed Equity Fund ("Tax Managed Equity Fund"), and SunAmerica
Biotech/Health 30 Fund ("Biotech/Health 30 Fund"). The investment objective
for each of the Funds is as follows:
Tax Managed Equity Fund seeks high total return with a view towards
minimizing the impact of the capital gains taxes on investors' returns.
Biotech/Health 30 Fund seeks long-term growth of capital by investing in
securities of companies principally engaged in biotechnology and healthcare,
without regard to market capitalization.
Each Fund currently offers three classes of shares. The cost structure for
each class is as follows:
<TABLE>
<S> <C>
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 shares-- Offered at net asset value per share plus an initial sales
charge. Certain redemptions made within 18 months of the
date of purchase are subject to a contingent deferred sales
charge.
</TABLE>
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.
15
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
The following is a summary of the significant accounting policies followed by
the Funds 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 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, a Fund
uses the exchange that is the primary market for the security. The Funds may
make use of a pricing service in the determination of their 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.
REPURCHASE AGREEMENTS: The Funds, along with other affiliated registered
investment companies, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. The Funds' custodian takes possession of the collateral pledged
for investments in such 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 equal to the repurchase price. In the event of
default of the obligation to repurchase, a Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Pursuant to exemptive relief granted by the Securities and Exchange
Commission, the Funds are permitted to participate in joint repurchase
agreement transactions with other affiliated mutual funds.
As of October 31, 2000, Biotech/Health 30 Fund had a 3.7% undivided interest
which represented $8,065,000 in principal amount in a joint repurchase
agreement with State Street Bank & Trust Co. As of such date, the repurchase
agreement in the joint account and the collateral therefore were as follows:
State Street Bank & Trust Co. Repurchase Agreement 6.30% dated 10/31/00, in
the principal amount of $220,932,000 repurchase price $220,970,663 due
11/01/00, collaterized by $4,970,000 U.S. Treasury Note 6.13% due 8/31/02,
$49,090,000 U.S. Treasury Note 4.88% due 3/31/01, $48,640,000 U.S. Treasury
Note 5.63% due 2/28/01, $24,330,000 U.S. Treasury Note 4.50% due 1/31/01,
$24,290,000 U.S. Treasury Note 5.75% due 8/15/03, $24,245,000 U.S. Treasury
Note 5.25% due 1/31/01 and, $37,530,000 U.S. Treasury Bond 8.50% due 2/15/20,
approximate aggregate value $225,382,714.
16
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: 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 of each class
of shares at the beginning of the day (after adjusting for the current
capital share activity of the respective class).
Expenses common to all Funds are allocated among the Funds based upon their
relative net asset values or other appropriate methods.
The Funds issue and redeem 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 Funds record dividends and distributions to their respective 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 year ended October 31, 2000, the following reclassifications arising
from book/tax differences were 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................. $ -- $710,646 $(710,646)
Biotech/Health 30....................... (80,699) 107,301 (26,602)
</TABLE>
NOTE 3. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, DISTRIBUTION AGREEMENT AND
SERVICE AGREEMENT
The Corporation, on behalf of each Fund, has entered into an Investment
Advisory and Management Agreement (the "Agreement") with SAAMCo. Under the
Agreement, SAAMCo provides continuous supervision of each respective Fund and
administers its corporate affairs, subject to general review by the Board of
Directors (the "Directors"). In connection therewith, SAAMCo furnishes the
Funds with office facilities, maintains certain of the Fund's books and
records, and pays for the salaries and expenses of all personnel,
17
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
including officers of the Funds who are employees of SAAMCo and its
affiliates. The investment advisory and management fee payable by the Funds
to SAAMCo is computed daily and payable monthly, at an annual rate of 0.85%
of the average daily net assets for the Tax Managed Equity Fund, and 0.75% of
the average daily net assets for the Biotech/Health 30 Fund. For the year
ended October 31, 2000, SAAMCo earned fees in the amount stated on the
Statement of Operations.
SAAMCo acts as Adviser to the Biotech/Health 30 Fund, and J.P. Morgan
Investment Management, Inc. ("J.P. Morgan") acts as Adviser to the Tax
Managed Equity Fund pursuant to a subadvisory agreement with SAAMCo. Under
the subadvisory agreement, J.P. Morgan manages the investment and
reinvestment of the assets of the Tax Managed Equity Fund. J.P. Morgan 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 fees. The annual rate of fees payable by SunAmerica to J.P. Morgan
will be 0.45% of Tax Managed Equity Fund's average daily net assets up to
$200 million, 0.40% on the next $200 million, and 0.35% thereafter.
J.P. Morgan has agreed to waive fees in the amount of 0.05% of Tax Managed
Equity Fund's average daily net assets on the first $200 million through
December 31, 1999. For the year ended October 31, 2000, SAAMCo paid fees in
the amount of $534,906 to J.P. Morgan.
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
for the Tax Managed Equity Fund, and at or below 1.55% of the average daily
net assets on Class A shares, and 2.20% of average daily net assets on
Class B and Class II shares for the Biotech/Health 30 Fund. 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.
At October 31, 2000, expenses previously waived or reimbursed by SAAMCo that
are subject to recoupment are as follows:
<TABLE>
<S> <C>
Tax Managed Equity Fund Class A ............................ $215,163
Tax Managed Equity Fund Class B ............................ 166,505
Tax Managed Equity Fund Class II ........................... 172,495
Biotech/Health 30 Class A .................................. 54,804
Biotech/Health 30 Class B .................................. 36,457
Biotech/Health 30 Class II ................................. 35,308
</TABLE>
The Corporation, on behalf of each Fund, has entered into a Distribution
Agreement with SunAmerica Capital Services, Inc. ("SACS" or the
"Distributor"), an affiliate of SAAMCo. Each Fund has adopted a Distribution
Plan (the "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 and approved by its shareholders. Pursuant to such rule,
the Directors and shareholders of each Class of shares of each fund 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
18
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
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, Class B Plan and Class II Plan, the distributor
receives payments from a Fund at an annual rate of up to 0.10%, 0.75% and
0.75%, respectively, of average daily net assets of such Fund's Class to
compensate the Distributor and certain securities firms for providing sales
and promotional activities for distributing that 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 each Fund may also pay the Distributor an account maintenance
and service fee up to 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 periods ended
October 31, 2000, SACS received fees (see Statement of Operations) based upon
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
Funds that for the periods ended October 31, 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
----------------------------------------------- -------------
CONTINGENT
AFFILIATED NON-AFFILIATED DEFERRED
SALES CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Tax Managed Equity Fund...................... $668,191 $358,172 $202,104 $74,787
Biotech/Health 30 Fund....................... 933,122 170,781 645,008 4,640
</TABLE>
<TABLE>
<CAPTION>
CLASS II
---------------------------------------------------------------
CONTINGENT
AFFILIATED NON-AFFILIATED DEFERRED
SALES CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Tax Managed Equity Fund...................... $317,901 $192,508 $125,393 $34,089
Biotech/Health 30 Fund....................... 166,583 57,128 109,455 2,709
</TABLE>
The Corporation has entered into a Service Agreement with SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of SAAMCo. 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 Funds. The Service Agreement, which permits the Funds 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
19
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
the periods ended October 31, 2000 the Funds 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 OCTOBER 31, 2000
------------------------------ ------------------------------
CLASS A CLASS B CLASS II CLASS A CLASS B CLASS II
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Tax Managed Equity Fund............... $80,361 $89,563 $95,425 $7,008 $8,500 $9,218
Biotech/Health 30 Fund................ 24,476 8,356 7,138 5,652 3,702 3,318
</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 year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
TAX MANAGED BIOTECH/HEALTH 30
EQUITY FUND FUND
------------ -----------------
<S> <C> <C>
Purchases (excluding U.S. government securities)............ $59,027,388 $96,666,096
Sales (excluding U.S. government securities)................ 8,318,230 40,718,028
</TABLE>
NOTE 5. PORTFOLIO SECURITIES
The Funds intend to comply with the requirements of the Internal Revenue 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 provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for tax purposes, including short-term securities and repurchase
agreements, were as follows:
<TABLE>
<CAPTION>
TAX MANAGED BIOTECH/HEALTH 30
EQUITY FUND FUND
------------- -----------------
<S> <C> <C>
Cost (tax basis)............................................ $123,991,575 $67,197,981
============ ===========
Appreciation................................................ $ 25,362,905 $ 9,486,303
Depreciation................................................ (11,207,766) (2,392,514)
------------ -----------
Net unrealized appreciation................................. $ 14,155,139 $ 7,093,789
============ ===========
</TABLE>
At October 31, 2000 the Tax Managed Equity Fund had a capital loss
carryforward of $4,798,139 which will be available to the extent provided in
regulations and which will expire in 2007-2008. 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.
20
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (CONTINUED)
NOTE 6. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of each class of each fund were as follows:
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 1, 1999* MARCH 1, 1999*
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 2000 OCTOBER 31, 1999 OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------- ------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............ 1,602,279 $ 22,950,803 3,854,550 $ 49,922,780 1,734,423 $24,698,344 2,060,880 $27,669,284
Shares redeemed........ (769,907) (11,150,489) (2,026,576) (27,210,196) (424,730) (6,031,497) (34,777) (496,594)
---------- ------------ ---------- ------------ --------- ----------- --------- -----------
Net increase........... 832,372 $ 11,800,314 1,827,974 $ 22,712,584 1,309,693 $18,666,847 2,026,103 $27,172,690
========== ============ ========== ============ ========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
-----------------------------------------------------
CLASS II
-----------------------------------------------------
FOR THE PERIOD
MARCH 1, 1999*
FOR THE YEAR ENDED THROUGH
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold............ 2,003,298 $ 28,654,618 2,098,012 $ 28,177,645
Shares redeemed........ (487,910) (6,996,707) (47,340) (675,139)
---------- ------------ ---------- ------------
Net increase........... 1,515,388 $ 21,657,911 2,050,672 $ 27,502,506
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
BIOTECH/HEALTH 30 FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS II
------------------------- ------------------------- ------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JUNE 14, 2000* JUNE 14, 2000* JUNE 14, 2000*
THROUGH THROUGH THROUGH
OCTOBER 31, 2000 OCTOBER 31, 2000 OCTOBER 31, 2000
------------------------- ------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............ 4,046,729 $ 55,420,384 1,532,598 $ 22,674,733 1,299,077 $19,237,646
Shares redeemed........ (2,136,733) (31,991,539) (58,994) (885,718) (19,200) (295,379)
---------- ------------ ---------- ------------ --------- -----------
Net increase........... 1,909,996 $ 23,428,845 1,473,604 $ 21,789,015 1,279,877 $18,942,267
========== ============ ========== ============ ========= ===========
</TABLE>
* Commencement of Operations
21
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2000 -- (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 annum on the daily unused portion of the
$25,000,000 committed line of credit which is included in miscellaneous
expenses on the Statement of Operations. Borrowings under the line of credit
will commence when the respective Fund's cash shortfall exceeds $100,000. The
Funds did not utilize the line of credit during the fiscal year October 31,
2000.
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
Director 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. Any
undistributed amounts shall continue to accrue interest at 8.5%. As of
October 31, 2000 the Tax Managed Equity Fund had accrued $2,648 for the
Retirement Plan, which is included in accrued expenses on the Statement of
Assets and Liabilities, and for the year ended October 31, 2000 the Tax
Managed Equity Fund expensed $1,978, which is included in Directors' fees and
expenses on the Statement of Operations.
NOTE 9. SUBSEQUENT EVENTS
Effective for purchases made on or after December 6, 2000, the maximum
contingent deferred sales charge on Class B shares will change from 4% to 5%.
In addition, Class B shares will convert to Class A shares eight years from
the date of purchase rather than seven years from the date of purchase.
22
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of SunAmerica Strategic Investment
Series, 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 Tax Managed Equity Fund and
SunAmerica Biotech/Health 30 Fund (constituting the SunAmerica Strategic
Investment Series, Inc., hereafter referred to as the "Fund") at October 31,
2000, and the results of each of their operations, the changes in each of their
net assets and the financial highlights for each of the periods indicated, 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 auditing standards generally accepted in the United States of
America, which 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 October 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, NY
December 15, 2000
23
<PAGE>
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
COMPARISON: PORTFOLIO VS. INDEX
As required by the Securities and Exchange Commission, the following graph
compares the performance of a $10,000 investment in the SunAmerica Strategic
Investment Series' portfolio to a similar investment in an index. Please note
that "inception" as used herein reflects the date a Fund commenced operations
without regard to when a second class of shares was introduced. It is important
to note that the SunAmerica Strategic Investment Series Funds are professionally
managed mutual funds while the indices are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
TAX MANAGED EQUITY FUND
Tax Managed Equity Fund seeks high total return, with a view toward minimizing
the impact of taxes on investors' return by utilizing strategic buy and sell
decisions and other cutting-edge tax management policies. In 2000, the Fund did
not pass on any negative tax consequences to shareholders. The Fund Class A also
outperformed the S&P 500 Index for the twelve months ended October 31, 2000,
with a return of 6.52% as compared to 6.09% for the S&P 500 Index. (Returns do
not reflect the impact of sales charges.) As you can see in the chart, all share
classes of the Fund have closely tracked the performance of the S&P 500 Index
over the longer term. Remember, the S&P 500 is an unmanaged index that does not
incur fees and expenses, unlike an actively managed mutual fund.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 INDEX (DIVIDENDS REINVESTED) CLASS A CLASS B CLASS II
<S> <C> <C> <C> <C>
3/1/99 10,000 9,425 10,000 9,900
3/31/99 10,400 9,840 10,440 10,336
4/30/99 10,802 10,322 10,944 10,827
7/31/99 10,786 10,202 10,793 10,692
10/31/99 11,098 10,293 10,664 10,771
1/31/00 11,389 10,716 11,303 11,199
4/30/00 11,897 10,942 11,511 11,412
7/31/00 11,755 10,837 11,391 11,293
10/31/00 11,776 10,966 11,103 11,404
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS II
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TAX MANAGED TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
EQUITY FUND RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
1 Year Return 6.52% 0.40% 5.89% 1.89% 5.88% 3.82%
Since Inception* 16.32% 5.67% 15.04% 6.48% 15.20% 8.76%
</TABLE>
+ Traditional returns do not include sales load.
* Commencement of Operations - Class A: 3/01/99; Class B: 3/01/99;
Class II: 3/01/99
For the 12 month period ending October 31, 2000, Tax Managed Equity Fund
Class A returned 0.40%, Class B returned 1.89% and Class II returned 3.82%,
compared to 0.09% for the S&P 500 Index. (Past performance is no guarantee of
future results.)
24