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SUNAMERICA MONEY MARKET FUND
Statement of Additional Information
DATED APRIL 30, 1996
The SunAmerica Center General Marketing and
733 Third Avenue Shareholder Information
New York, NY 10017-3204 (800) 858-8850
SunAmerica Money Market Fund (the "Fund") seeks as high a level of current
income as is consistent with liquidity and stability of capital by investing in
a portfolio of high quality, short-term money market instruments. The Fund is
the only series of SunAmerica Money Market Funds, Inc., which is registered as
an open-end diversified management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act") and organized as a Maryland
corporation (the "Corporation").
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Fund's Prospectus dated April 30, 1996. To obtain
a Prospectus, please call the Fund at (800) 858-8850. Capitalized terms used
herein but not defined have the meanings assigned to them in the Prospectus.
TABLE OF CONTENTS
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PAGE
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HISTORY OF THE FUND B-2
INVESTMENT OBJECTIVE AND POLICIES B-2
INVESTMENT RESTRICTIONS B-9
DIRECTORS AND OFFICERS B-13
ADVISER, PERSONAL TRADING, DISTRIBUTOR AND ADMINISTRATOR B-17
PORTFOLIO TRANSACTIONS AND BROKERAGE B-22
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES B-23
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES B-27
DETERMINATION OF NET ASSET VALUE B-28
PERFORMANCE DATA B-29
DIVIDENDS, DISTRIBUTIONS AND TAXES B-31
RETIREMENT PLANS B-34
DESCRIPTION OF SHARES B-35
ADDITIONAL INFORMATION B-37
FINANCIAL STATEMENTS B-37
APPENDIX B-38
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No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Statement of Additional Information or in the Prospectus, and, if given or made,
such other information or representations must not be relied upon as having been
authorized by the Fund, the Adviser or the Distributor. This Statement of
Additional Information and the Prospectus do not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction in which such an
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offer to sell or solicitation of an offer to buy may not lawfully be made.
HISTORY OF THE FUND
The Corporation was organized under the name Integrated Money Market
Securities, Inc. on July 20, 1983 and was subsequently renamed SunAmerica Money
Market Securities, Inc. in 1990. On September 23, 1993, the Articles of
Incorporation of the Corporation were amended to permit the creation of multiple
series and classes of shares, and on September 24, 1993, the Corporation
reorganized with the SunAmerica Cash Fund ("Cash Fund") and was renamed
SunAmerica Money Market Funds, Inc. (the "Reorganization"). All of the
outstanding shares of the Corporation were redesignated Class A shares of the
Fund in the Reorganization. In addition, in the Reorganization, the
shareholders of Cash Fund received Class B shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus. Certain types of securities in which the Fund may invest and
certain investment practices which the Fund may employ, which are described in
the Prospectus and in the Appendix thereto, are discussed more fully below.
U.S. GOVERNMENT OBLIGATIONS. As discussed in the Prospectus, the Fund may
invest in a variety of short-term debt securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. These securities include a
variety of Treasury securities which differ in their rates of interest,
maturities and dates of issuance. Treasury bills are obligations issued with
maturities of one year or less. Treasury notes are generally issued with
maturities of from one to ten years. Treasury bonds are generally issued with
maturities of more than ten years. Obligations issued by agencies and
instrumentalities, which may be purchased by the Fund, also vary in terms of
their maturities at the time of issuance. However, the Fund invests only in
obligations that, at their time of purchase by the Fund, have remaining
maturities of 397 calendar days or less.
BANK OBLIGATIONS. Certificates of deposit ("CD's") and bankers' acceptances may
be purchased by the Fund. CD's are securities which represent deposits in a
depository institution (e.g., a commercial bank or savings and loan association)
for a specified period at a specified rate of interest and normally are
negotiable. CD's issued by a foreign branch (usually London) of a U.S. domestic
bank, are known as Eurodollar CD's. Although certain risks may be associated
with Eurodollar CD's which are not associated with CD's issued in the U.S. by
domestic banks, the credit risks of these obligations are similar because U.S.
banks generally are liable for
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the obligations of their branches. CD's issued through U.S. branches of foreign
banks are known as Yankee CD's. These branches are subject to Federal or state
banking regulations. The secondary markets for Eurodollar and Yankee CD's may
be less liquid than the market for CD's issued by domestic branches of U.S.
banks.
Bankers' acceptances are short-term credit instruments that represent
the promise of a bank to pay a draft which has been drawn by one of its
customers at its maturity. These obligations are used to finance the import,
export, transfer or storage of goods and represent the obligation of both the
accepting bank and its customer.
COMMERCIAL PAPER. As discussed in the Prospectus, the commercial paper in which
the Fund may invest may be unsecured or may be backed by letters of credit.
Commercial paper that is backed by a letter of credit is, in effect, "two party"
paper with the issuer of the paper initially responsible for repayment and a
bank guaranteeing the repayment if not made by the issuer at maturity. The Fund
may also invest in variable amount master demand notes which represent a direct
lending arrangement between the Fund and a corporate borrower. These notes
permit daily changes in the amount borrowed. The Fund has the right to increase
the amount loaned under the note at any time up to the full amount provided in
the loan agreement or to decrease the amount loaned. The borrower generally has
the right to prepay up to the full amount of the loan without penalty. These
notes are generally not traded in a secondary market; however, the Fund will
only enter into such arrangements where it has the right to redeem the note on
not more than seven days notice.
CORPORATE OBLIGATIONS. These obligations include bonds, debentures and notes
issued by corporations to finance long-term credit needs. Although issued with
maturities in excess of one year, the Fund's investments in corporate
obligations are limited to obligations having remaining maturities of 397
calendar days or less at the time of purchase by the Fund.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets,
determined as of the date of purchase, in illiquid securities including
repurchase agreements which have a maturity of longer than seven days or in
other securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having a maturity of
longer than seven days. Repurchase agreements subject to demand are deemed to
have a maturity equal to the notice period. Securities which have not been
registered under the Securities Act are referred to as private
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placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. There generally will be a lapse of time between a
mutual fund's decision to sell an unregistered security and the registration of
such security promoting sale. Adverse market conditions could impede a public
offering of such securities. When purchasing unregistered securities, the Fund
will seek to obtain the right of registration at the expense of the issuer.
In recent years, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act for which there is a readily available market will not be
deemed to be illiquid. The Fund's investment adviser, SunAmerica Asset
Management Corp. (the "Adviser"), will monitor the liquidity of such restricted
securities subject to the supervision of the Board of Directors of the
Corporation (the "Directors"). In reaching liquidity decisions the Adviser will
consider, inter alia, pursuant to guidelines and procedures established by the
Directors, the following factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).
Commercial paper issues in which the Fund may invest include
securities issued by major corporations without registration under the
Securities Act in reliance on the exemption from such registration afforded by
Section 3(a)(3) thereof, and commercial paper issued in reliance on the so-
called private placement exemption from registration which is afforded by
Section 4(2) of
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the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as
to disposition under the Federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described above. The Fund's 10%
limitation on investments in illiquid securities includes Section 4(2) paper
other than Section 4(2) paper that the Adviser has determined to be liquid
pursuant to guidelines established by the Directors. The Directors delegated to
the Adviser the function of making day-to-day determinations of liquidity with
respect to Section 4(2) paper, pursuant to guidelines approved by the Directors
that require the Adviser to take into account the same factors described above
for other restricted securities and require the Adviser to perform the same
monitoring and reporting functions.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
banks, brokers or securities dealers. In such agreements, the seller agrees to
repurchase a security from the Fund at a mutually agreed-upon time and price.
The period of maturity is usually quite short, either overnight or a few days
although it may extend over a number of months. The resale price is in excess
of the purchase price, reflecting an agreed-upon rate of return effective for
the period of time the Fund's money is invested in the security. Whenever the
Fund enters into a repurchase agreement, it obtains collateral having a value at
least equal to the amount of the purchase price. The instruments held as
collateral are valued daily and if the value of the instruments declines, the
Fund will require additional collateral. If the seller defaults and the value
of the collateral securing the repurchase agreements declines, the Fund may
incur a loss. In addition, 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. The Directors have established guidelines to be used by the
Adviser in connection with transactions in repurchase agreements and will
regularly monitor the Fund's use of repurchase agreements. The Fund will not
invest in repurchase agreements maturing in more than seven days if the
aggregate of such investments along with other illiquid securities exceeds 10%
of the value of its net assets. However, there is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements having a maturity
of seven days or less for temporary defensive purposes.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements, which is considered by the Fund to be a borrowing practice subject
to the Fund's borrowing limitations, with banks and broker-dealers. A reverse
repurchase agreement
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involves the sale of a security held by the Fund, subject to an agreement by the
Fund to repurchase that security at an agreed upon price, date and interest
payment. The Fund uses the proceeds of the reverse repurchase agreement to make
additional investments which mature on or prior to the repurchase date, and will
enter into a reverse repurchase agreement when it anticipates that the interest
income to be earned from investing the proceeds of the reverse repurchase
agreement will exceed the interest expense of the transaction. During the time
a reverse repurchase agreement is outstanding, the Fund will maintain a
segregated custodial account containing cash, U.S. Government or other liquid
high quality debt securities having a value at least equal to the repurchase
price under the agreement. In the event that the other party to the reverse
repurchase agreement defaults on its obligation to resell to the Fund the
underlying securities because of insolvency or otherwise, the Fund could
experience delays and costs in gaining access to the securities and could suffer
a loss to the extent that the value of the proceeds of the agreement fell below
the value of the underlying securities. Reverse repurchase agreements are
considered to be borrowings and are subject to the percentage limitations on
borrowings. See "Investment Restrictions."
ASSET-BACKED SECURITIES. The Fund may invest up to 15% of its net assets in
asset-backed securities rated in conformance with the Fund's credit quality
restrictions. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and automobile
loan receivables, representing the obligations of a number of different parties.
The Fund may also invest in privately issued asset-backed securities.
Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To
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lessen the effect of failures by obligors to make payments on underlying assets,
the securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. The
Fund will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in such
a security.
LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend portfolio securities in amounts up to 20% of
total assets to brokers, dealers and other financial institutions, provided,
that such loans are callable at any time by the Fund and are at all times
secured by cash or equivalent collateral that is equal to at least 100% of the
market value, determined daily, of the loaned securities. In lending its
portfolio securities, a Fund receives income while retaining the securities'
potential for capital appreciation. The advantage of such loans is that a Fund
continues to receive the interest and dividends on the loaned securities while
at the same time earning interest on the collateral, which will be invested in
short-term obligations. Where securities instead of cash are delivered to the
Fund as collateral, the Fund earns its return in the form of a loan premium paid
by the borrower. A loan may be terminated by the borrower on one business day's
notice or by the Fund at any time. If the borrower fails to maintain the
requisite amount of collateral, the loan automatically terminates, and the Fund
can use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Adviser to be creditworthy. On termination of the loan, the
borrower is required to return the securities to the Fund; and any gain or loss
in the market price of the loaned security during the loan would inure to the
Fund. The Fund will pay reasonable finders', administrative and custodial fees
in connection with a loan of its securities or may share the interest earned on
collateral with the borrower.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Fund will follow the policy of
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calling the loan, in whole or in part as may be appropriate, to permit the
exercise of such rights if the matters involved would have a material effect on
the Fund's investment in the securities which are the subject of the loan.
BORROWINGS. As noted in the Prospectus, the Fund may borrow from banks for
temporary or emergency purposes or to meet redemption requests. The consequence
of such borrowings might be to reduce the Fund's yield below that which would
have been realized in the absence of such borrowings.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. From time to time, in the ordinary
course of business, the Fund may purchase securities on a when-issued or
delayed-delivery basis - i.e., delivery and payment can take place a month or
more after the date of the transactions. Such agreements might be entered into,
for example, when the Fund anticipates a decline in the yield of securities of a
given issuer and is able to obtain a more advantageous yield by committing
currently to purchase securities to be issued later. The securities so purchased
are subject to market fluctuation and no interest accrues to the purchaser
during this period. At the time of delivery of the securities, the value may be
more or less than the purchase price. The Fund will establish and maintain
until the date of delivery of such when-issued securities, a segregated account
on the books with the Fund's Agent in which it will maintain cash or cash
equivalents or other high-grade portfolio securities equal in value to
commitments for such when-issued or delayed-delivery securities. The Fund will
make payment for such when-issued securities on the delivery date utilizing
then-available cash and, if cash is not available, or if it is not
disadvantageous to the Fund, utilizing the proceeds of the liquidation of
portfolio securities held in such segregated account.
SPECIAL RISK FACTORS. In the case of bank obligations not insured by the
Federal Deposit Insurance Corporation ("FDIC") or the Federal Savings and Loan
Insurance Corporation ("FSLIC"), the Fund will be dependent solely on the
financial resources of the issuing bank for payment of principal and interest.
The Fund's investments in commercial paper issued by foreign corporations and
securities of foreign branches of domestic banks and domestic branches of
foreign banks involve certain investment risks in addition to those affecting
obligations of U.S. domestic issuers. These risks include the possibility of
adverse political and economic developments, and the risk of: imposition of
foreign withholding taxes on the interest payable on such securities; seizure,
expropriation or nationalization of foreign deposits; and adoption of foreign
governmental restrictions, such as exchange controls, which might adversely
affect the payment of principal and interest on such securities. In addition,
certain reserve requirements and other regulations to which domestic banks are
subject may not apply to foreign branches or foreign banks, which also may use
accounting
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methods different from those used by U.S. domestic banks. Non-negotiable time
deposits, unlike negotiable certificates of deposit, cannot be sold in a
secondary market and may be subject to penalties for early withdrawal.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions that are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Fund's outstanding voting securities. As defined in the
1940 Act, a "majority of the outstanding voting securities" of the Fund means
the lesser of (i) 67% of the shares of the Fund represented at a meeting at
which more than 50% of the outstanding shares are present in person or
represented by proxy or (ii) more than 50% of the outstanding shares. Unless
otherwise indicated, all percentage limitations apply only at the time the
investment is made; any subsequent change in any applicable percentage resulting
from fluctuations in value will not be deemed an investment contrary to these
restrictions. Under these restrictions, the Fund may not:
1. Purchase securities other than those described under "Investment
Objective and Policies."
2. Enter into reverse repurchase agreements exceeding in the
aggregate 1/3 of the value of the Fund's total assets, less liabilities other
than obligations under such reverse repurchase agreements.
3. Purchase the securities of issuers conducting their principal
business activity in the same industry if immediately after such purchase the
value of its investments in such industry would exceed 25% of the value of the
Fund's total assets, provided that there is no limitation with respect to
investments in securities issued by domestic branches of U.S. banks or the U.S.
Government, its agencies or instrumentalities.
4. Invest more than 5% of its assets in the securities of any one
issuer (exclusive of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities) except that up to 25% of the value of the Fund's
total assets may be invested without regard to such 5% limitation, subject to
applicable limitations imposed by Rule 2a-7 under the 1940 Act.
5. Make loans, except through the purchase or holding of debt
obligations in accordance with the Fund's investment objective and policies (see
"Investment Objective and Policies").
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6. Lend its portfolio securities in excess of 20% of its total assets
provided that such loans are made according to the guidelines of the Securities
and Exchange Commission and the Fund's Board of Directors, including maintaining
collateral from the borrower equal at all times to the current market value of
the securities loaned.
7. Borrow money except from banks for temporary or emergency purposes
to meet redemption requests which might otherwise require the untimely
disposition of securities (not for the purpose of increasing income), provided
that borrowings in the aggregate may not exceed 10% of the value of the Fund's
total assets, including the amount borrowed, at the time of such borrowing.
8. Purchase or sell puts, calls, straddles, spreads or any
combination thereof, real estate, commodities, commodity contracts or interests
in oil, gas and/or mineral exploration or development programs, provided that
the Fund may purchase bonds or commercial paper issued by companies, including
real estate investment trusts, which invest in real estate or interests therein.
9. Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which the Fund will not hold more than 3% of the
outstanding voting securities of any one investment company, will not have
invested more than 5% of its total assets in any one investment company and will
not have invested more than 10% of its total assets in such securities of one or
more investment companies (each of the above percentages to be determined at the
time of investment), or except as part of a merger, consolidation or other
acquisition.
10. Act as an underwriter of securities.
11. Make short sales of securities or maintain a short position,
provided that this restriction shall not be deemed to be applicable to the
purchase or sale of "when issued" securities or of securities for delivery at a
future date.
12. Invest in or hold securities of any issuer if those officers and
Directors of the Fund or the Adviser owning individually more than 1/2 of 1% of
the securities of such issuer together own more than 5% of the securities of
such issuer.
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In addition to the foregoing, the Fund has adopted a non-fundamental
policy (which may be changed by the Directors without shareholder approval) of
not investing more than 10% of its net assets in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days, time
deposits with a maturity of longer than seven days, securities with legal or
contractual restrictions on resale and securities that are not readily
marketable in securities markets either within or without the United States.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act that have a readily available market, and commercial paper
exempted from registration under the Securities Act pursuant to Section 4(2) of
the Securities Act that may be offered and sold to "qualified institutional
buyers" as defined in Rule 144A, which the Adviser has determined to be liquid
pursuant to guidelines established by the Directors, will not be considered
illiquid for purposes of this 10% limitation on illiquid securities.
Further, pursuant to regulations under the 1940 Act, the Fund may not
purchase any security that matures more than 397 calendar days from the date of
purchase, or which has an implied maturity of more than 397 calendar days. For
the purpose of satisfying this requirement, the maturity of a portfolio security
shall be deemed to be the period remaining until the date on which the principal
amount must be paid or, in the case of a security called for redemption, the
date on which the redemption payment must be made, except that:
1. A variable rate instrument, the principal amount of which is
scheduled on the face of the instrument to be paid in 397 calendar days or less
shall be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
2. A variable rate instrument that is subject to a demand feature
shall be deemed to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.
3. A floating rate instrument that is subject to a demand feature
shall be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
4. A repurchase agreement shall be deemed to have a maturity equal to
the period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur, or where no date is specified, but the
agreement
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is subject to demand, the notice period applicable to a demand for the
repurchase of securities.
5. A portfolio lending agreement shall be treated as having a
maturity equal to the period remaining until the date on which the loaned
securities is scheduled to be returned, or, where no date is specified, but the
agreement is subject to a demand, the notice period applicable to a demand for
the return of the loaned securities.
6. The maturity of an instrument subject to a stand-by commitment will
not be affected by the stand-by commitment.
7. An instrument that is issued or guaranteed by the U.S. Government,
or any agency thereof, which has a variable rate of interest readjusted no less
frequently than every 762 days shall be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate.
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DIRECTORS AND OFFICERS
The following table lists the Directors and executive officers of the
Corporation, their ages, business addresses, and principal occupations during
the past five years. The SunAmerica Mutual Funds consist of SunAmerica Equity
Funds, SunAmerica Income Funds and SunAmerica Money Market Funds, Inc. An
asterisk indicates those directors who are interested persons of the Fund within
the meaning of the 1940 Act.
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Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
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S. James Coppersmith, 62 Director Formerly, President and
7 Elmwood Road General Manager, WCVB-TV, a
Marblehead, MA 01945 division of the Hearst Corporation from
1982 to 1994 (retired); Trustee/Director
of the SunAmerica Mutual Funds and
Trustee of Anchor Series Trust.
Samuel M. Eisenstat, 55 Chairman of Attorney in private practice;
430 East 86 Street the Board Trustee of RPS Realty Trust
New York, NY 10028 since December 1988; Director
of Volt Information Sciences
Funding, Inc., a subsidiary of
Volt Information Sciences, Inc.
since October 1993; Chairman of
the Board of the SunAmerica
Mutual Funds and Anchor Series
Trust.
Stephen J. Gutman, 52 Director Chairman of the Board, Chief
340 East 79 Street Operating and Executive
New York, NY 10021 Officer of Beau Brummel Casuals Limited,
Inc., a menswear specialty retailer
since May 1989; Trustee/Director of the
SunAmerica Mutual Funds and
Trustee of Anchor Series Trust.
Sebastiano Sterpa, 66 Director Founder of Sterpa Realty
Suite 200 Inc., a full service real
200 West Glenoaks Blvd estate firm, since 1962;
Glendale, CA 91202 Chairman of the Sterpa Group,
real estate investments and
management company; Trustee/
Director of the SunAmerica
Mutual Funds.
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Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
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Peter A. Harbeck*, 42 Director and Director and President,
The SunAmerica Center President SunAmerica Asset Management
733 Third Avenue Corp. ("SAAMCo"); Director,
New York, NY 10017-3204 SunAmerica Capital Services,Inc.
("SACS") since February 1993;
Director of SAAMCo and President
of SunAmerica Fund Services, Inc.,
("SAFS") since May 1988; President,
SunAmerica Mutual Funds and Anchor
Series Trust; Executive Vice President
and Chief Operating Officer of
SAAMCo, from May 1988 to August
1995; Executive Vice President,
SACS, from November 1991 to
August 1995; and Director,
Resources Trust Company.
Peter McMillan III*, 38 Director Executive Vice President and
1 SunAmerica Center Chief Investment Officer of
Century City SunAmerica Investments, Inc.
Los Angeles, CA 90067 since August 1989; Director,
Resources Trust Company.
Stanton J. Feeley, 58 Executive Executive Vice President and
The SunAmerica Center Vice Chief Investment Officer, SAAMCo
733 Third Avenue President since February 1992; Formerly,
New York, NY 10017-3204 Senior Portfolio Manager,
Delaware Management Company,
Inc. from December 1987 to
February 1992.
P. Christopher Leary, 36 Vice Senior Vice President, SAAMCo,
The SunAmerica Center President since January 1994; Portfolio
733 Third Avenue Manager since 1990.
New York, NY 10017-3204
Peter C. Sutton, 31 Treasurer Vice President, SAAMCo, since
The SunAmerica Center September 1994,; Treasurer,
733 Third Avenue SunAmerica Mutual Funds since
New York, NY 10017-3204 February 1996; Vice President,
SunAmerica Series Trust and
Anchor Pathway Fund since
October 1994; Controller,
SunAmerica Mutual Funds (1993-1996);
Assistant Controller,
SunAmerica Mutual Funds (1990-1993).
</TABLE>
B-14
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- ---------------------
<S> <C> <C>
Robert M. Zakem, 38 Secretary and Senior Vice President and
The SunAmerica Center Chief Compli- General Counsel of SAAMCo,
733 Third Avenue ance Officer since April 1993; Executive
New York, NY 10017-3204 Vice President and Director,
SACS, since February 1993;
Vice President of SAFS, since
January 1994; Assistant
Secretary, SunAmerica Series
Trust and Anchor Pathway Fund
since September 1993; Formerly,
Vice President and Associate
General Counsel, SAAMCo, from
March 1992 to April 1993;
Associate, Piper & Marbury from
1989 to 1992.
</TABLE>
Directors and officers of the Corporation are also trustees and officers of
some or all of the other investment companies managed, administered or advised
by the Adviser, and distributed by SunAmerica Capital Services, Inc. ("SACS" or
the "Distributor") and other affiliates of SunAmerica Inc.
The Corporation pays each Director who is not an interested person of the
Corporation or the Adviser (each a "disinterested" Director) annual compensation
in addition to reimbursement of out-of-pocket expenses in connection with
attendance at meetings of the Directors. Specifically, each disinterested
Director receives a pro rata portion (based upon the Corporation's net assets)
of the $40,000 in annual compensation for acting as a director or trustee to all
the retail funds in the SunAmerica Mutual Funds. In addition, Mr. Eisenstat
receives an aggregate of $2,000 in annual compensation for serving as Chairman
of the Boards of the retail funds in the SunAmerica Mutual Funds. Officers of
the Corporation receive no direct remuneration in such capacity from the
Corporation or the Fund.
In addition, each disinterested Director also serves on the Audit Committee
of the Board of Directors. Each member of the Audit Committee receives an
aggregate of $5,000 in annual compensation for serving on the Audit Committees
of all of the retail funds of the SunAmerica Mutual Funds as well as Anchor
Series Trust. With respect to the Corporation, each member of the committee
receives a pro rata portion of the $5,000 annual compensation, based on the
relative net assets of the Corporation. The Corporation also has a Nominating
Committee, composed solely of disinterested Directors, which recommends to the
Directors those persons to be nominated for election as Directors by
shareholders and selects and proposes nominees for election by Directors between
shareholders' meetings. Members of the Nominating Committee serve without
compensation.
B-15
<PAGE>
The Directors (and Trustees) of the SunAmerica Mutual Funds have adopted
the SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the
"Retirement Plan") effective January 1, 1993 for the disinterested Directors of
the SunAmerica Mutual Funds. 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, each Eligible
Director will be credited with an amount equal to (i) 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, plus
(ii) 8.5% of any amounts credited under clause (i) during prior years. 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.
The following table sets forth information summarizing the compensation of
each disinterested Director as defined herein of the Corporation for his
services as Director for the fiscal year ended December 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPEN-
RETIREMENT ESTIMATED SATION FROM
AGGREGATE BENEFITS ANNUAL REGISTRANT
COMPENSATION ACCRUED AS BENEFITS AND FUND
FROM PART OF FUND UPON COMPLEX PAID
DIRECTOR REGISTRANT EXPENSES* RETIREMENT** TO DIRECTORS*
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S. James
Coppersmith $6,546 $32,550 $29,670 $65,000
- ---------------------------------------------------------------------------
Samuel M.
Eisenstat $6,851 $12,940 $46,089 $69,000
- ---------------------------------------------------------------------------
Stephen J.
Gutman $6,546 $13,940 $60,912 $65,000
- ---------------------------------------------------------------------------
Sebastiano
Sterpa $6,654 $20,000 $ 7,900 $43,333***
- ---------------------------------------------------------------------------
</TABLE>
* Information is as of December 31, 1995 for the four investment companies in
the complex which pay fees to these directors/trustees. The complex consists
of the SunAmerica Mutual Funds and Anchor Series Trust.
** Assuming participant elects to receive benefits in 15 yearly installments.
*** Mr. Sterpa is not a trustee of Anchor Series Trust.
B-16
<PAGE>
As of April 11, 1996, the Directors and officers of the Fund owned in the
aggregate, less than 1% of the Fund's total outstanding shares.
ADVISER, PERSONAL TRADING, DISTRIBUTOR AND ADMINISTRATOR
THE ADVISER. The Adviser, organized as a Delaware corporation in 1982, is
located at The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204, and
serves as adviser to the Fund pursuant to the Investment Advisory and Management
Agreement dated September 23, 1993 (the "Advisory Agreement") with the
Corporation, on behalf of the Fund. The Adviser is an indirect wholly owned
subsidiary of SunAmerica Inc. SunAmerica Inc., is incorporated in the State of
Maryland and maintains its principal executive offices at 1 SunAmerica Center,
Century City, Los Angeles, CA 90067-6022, telephone (310) 772-6000.
Under the Advisory Agreement, the Adviser selects and manages the
investments of the Fund, provides various administrative services and supervises
the Fund's daily business affairs, subject to general review by the Directors.
Except to the extent otherwise specified in the Advisory Agreement, the
Fund pays, or causes to be paid, all other expenses of the Corporation and the
Fund, including, without limitation, charges and expenses of any registrar,
custodian, transfer and dividend disbursing agent; brokerage commissions; taxes;
engraving and printing of share certificates; registration costs of the Fund and
its shares under Federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing Prospectuses and Statements of
Additional Information respecting the Fund, and supplements thereto, to the
shareholders of the Fund; all expenses of shareholders' and Directors' meetings
and of preparing, printing and mailing proxy statements and reports to
shareholders; all expenses incident to any dividend, withdrawal or redemption
options; fees and expenses of legal counsel and independent accountants;
membership dues of industry associations; interest on borrowings of the Fund;
postage; insurance premiums on property or personnel (including Officers and
Directors) of the Corporation which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification relating thereto); and all other costs of the
Corporation's operation.
As compensation for its services to the Fund, the Adviser receives a fee
from the Fund, payable monthly, computed daily at the annual rate of .50% on the
first $600 million of the Fund's average daily net assets, .45% on the next $900
million of net assets and .40% on net assets over $1.5 billion.
B-17
<PAGE>
The following table sets forth the total advisory fees paid to the Adviser
by the Fund for the fiscal years ended December 31, 1995, 1994, and 1993,
pursuant to the Advisory Agreement.
ADVISORY FEES
<TABLE>
<CAPTION>
------------------------------------
1995 1994 1993
------------------------------------
<S> <C> <C>
$1,560,968 $1,420,692 $1,060,498
</TABLE>
Certain states in which the shares of the Fund are qualified for sale
impose limitations on the expenses of the Fund. The current annual expense
limitations require that the Adviser reimburse the Fund in any amount necessary
to prevent the Fund's aggregate ordinary operating expenses (excluding interest,
taxes, distribution and brokerage fees and commissions, and extraordinary
charges such as litigation costs) from exceeding, in any fiscal year, 2 1/2% of
the first $30 million of the average daily net assets of the Fund, 2% of the
next $70 million of such assets, plus 1 1/2% of such assets in excess of $100
million. In accordance with the terms of the Advisory Agreement, if the
expenses of the Fund exceed the amount of the fees paid by the Fund to the
Adviser, then the Adviser will reimburse the Fund the amount of such excess.
For the fiscal years ended December 31, 1995, 1994 and 1993, expense
reimbursements were not required.
The Advisory Agreement continues in effect with respect to the Fund from
year to year, if approved at least annually by vote of a majority of the
Directors or by the holders of a majority of the Fund's outstanding voting
securities. Any such continuation also requires approval by a majority of the
Directors who are not parties to the Advisory Agreement or "interested persons"
of any such party as defined in the 1940 Act by vote cast in person at a meeting
called for such purpose. The Advisory Agreement may be terminated with respect
to the Fund at any time, without penalty, on 60 days' written notice by the
Directors by the holders of a majority of the Fund's outstanding voting
securities or by the Adviser. The Advisory Agreement automatically terminates
with respect to the Fund in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
Under the terms of the Advisory Agreement, the Adviser is not liable to the
Fund, or its shareholders, for any act or omission by it or for any losses
sustained by the Fund or its shareholders, except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
B-18
<PAGE>
PERSONAL TRADING. The Fund and the Adviser have adopted a written Code of
Ethics which prescribes general rules of conduct and sets forth guidelines with
respect to personal securities trading by "Access Persons" thereof. An Access
Person as defined in the Code of Ethics is an individual who is a trustee,
director, officer, general partner or advisory person of the Fund or the
Adviser. The guidelines on personal securities trading include: (i) securities
being considered for purchase or sale, or purchased or sold, by any Investment
Company advised by the Adviser, (ii) Initial Public Offerings, (iii) private
placements, (iv) blackout periods, (v) short-term trading profits, (vi) gifts,
and (vii) services as a director. These guidelines are substantially similar to
those contained in the Report of the Advisory Group on Personal Investing issued
by the Investment Company Institute's Advisory Panel. The Adviser reports to
the Board of Directors on a quarterly basis, as to whether there were any
violations of the Code of Ethics by Access Persons of the Fund or the Adviser
during the quarter.
THE DISTRIBUTOR. The Corporation, on behalf of the Fund, has entered into a
distribution agreement (the "Distribution Agreement") with the Distributor, a
registered broker-dealer and an indirect wholly owned subsidiary of SunAmerica
Inc., to act as the principal underwriter of the shares of the Fund. The
address of the Distributor is The SunAmerica Center, 733 Third Avenue, New York,
NY 10017-3204. The Distribution Agreement provides that the Distributor has the
exclusive right to distribute shares of the Fund through its registered
representatives and authorized broker-dealers. The Distribution Agreement also
provides that the Distributor will pay the promotional expenses, including the
incremental cost of printing prospectuses, annual reports and other periodic
reports respecting the Fund, for distribution to persons who are not
shareholders of the Fund and the costs of preparing and distributing any other
supplemental sales literature. However, certain promotional expenses may be
borne by the Fund (see "Distribution Plans" below).
The Distribution Agreement continues in effect from year to year with
respect to the Fund if such continuance is approved at least annually by the
Directors, including a majority of the Directors who are not "interested
persons" of the Corporation. The Corporation or the Distributor each has the
right to terminate the Distribution Agreement with respect to the Fund on 60
days' written notice, without penalty. The Distribution Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
The Distributor may, from time to time, pay additional commissions or
promotional incentives to brokers, dealers or other financial services firms
that sell shares of the Fund. In some instances, such additional commissions,
fees or other incentives may be offered only to certain firms, including Royal
Alliance Associates, Inc., SunAmerica Securities, Inc. and Advantage Capital
B-19
<PAGE>
Corporation, affiliates of the Distributor, that sell or are expected to sell
during specified time periods certain minimum amounts of shares of the Fund, or
of other funds underwritten by the Distributor. In addition, the terms and
conditions of any given promotional incentive may differ from firm to firm.
Such differences will, nevertheless, be fair and equitable, and based on such
factors as size, geographic location, or other reasonable determinants, and will
in no way affect the amount paid to any investor.
DISTRIBUTION PLANS. As indicated in the Prospectus, the Directors of the
Corporation and the shareholders of each class of shares of the Fund have
adopted Distribution Plans (the "Class A Plan" and the "Class B Plan," and
collectively, the "Distribution Plans"). Reference is made to "Management of the
Corporation - Distribution Plans" in the Prospectus for certain information with
respect to the Distribution Plans.
Under the Class B Plan, the Distributor may receive payments from the Fund
at the annual rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares, to compensate the Distributor and certain securities firms for
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 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 the Class B Plan will
exceed the Distributor's distribution costs as described above. The Class A
Plan does not provide for a distribution fee. Both Distribution Plans, however,
provide that each class of shares of the Fund may pay the Distributor an account
maintenance and service fee of up to 0.15% of the aggregate average daily net
assets of such class of shares for payments to broker-dealers for providing
continuing account maintenance. In this regard, some payments are used to
compensate broker-dealers with account maintenance and service fees in an amount
up to 0.15% per year of the assets maintained in the Fund by their customers.
The following table sets forth the distribution fees received by the
Distributor from each class of the Fund's shares for the fiscal years ended
December 31, 1995, 1994, and 1993.
B-20
<PAGE>
DISTRIBUTION FEES
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$373,008 $571,694 $307,701 $714,820 $303,272 $89,267*
-----------------------------------------------------------
</TABLE>
* For the fiscal period 9/24/93 through 12/31/93
Continuance of the Distribution Plans with respect to the Fund is subject
to annual approval by vote of the Directors, including a majority of the
Independent Directors. A Distribution Plan may not be amended to increase
materially the amount authorized to be spent thereunder with respect to a class
of shares of the Fund, without approval of the shareholders of the affected
class of shares of the Fund. In addition, all material amendments to the
Distribution Plans must be approved by the Directors in the manner described
above. A Distribution Plan may be terminated at any time with respect to the
Fund without payment of any penalty by vote of a majority of the Independent
Directors or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the affected class of shares of the Fund. So long
as the Distribution Plans are in effect, the election and nomination of the
Independent Directors of the Corporation shall be committed to the discretion of
the Independent Directors. In the Directors' quarterly review of the
Distribution Plans, they will consider the continued appropriateness of, and the
level of, compensation provided in the Distribution Plans. In their
consideration of the Distribution Plans with respect to the Fund, the Directors
must consider all factors they deem relevant, including information as to the
benefits of the Fund and the shareholders of the relevant class of the Fund.
THE ADMINISTRATOR. The Corporation has entered into a Service Agreement, under
the terms of which SunAmerica Fund Services, Inc., an indirect wholly owned
subsidiary of SunAmerica Inc., acts as a servicing agent assisting State Street
Bank and Trust Company ("State Street") in connection with certain services
offered to the shareholders of the Fund. Under the terms of the Service
Agreement, SAFS may receive reimbursement of its costs in providing such
shareholder services. SAFS is located at The SunAmerica Center, 733 Third
Avenue, New York, NY 10017-3204.
The Service Agreement continues in effect from year to year provided that
such continuance is approved annually by vote of the Directors including a
majority of the disinterested Directors.
Pursuant to the Service Agreement, as compensation for services rendered,
SAFS receives a fee from the Corporation subject to review and approval by the
Directors. This fee represents the full
B-21
<PAGE>
cost of providing shareholder and transfer agency services to the Corporation.
From this fee, SAFS pays a fee to State Street, and its affiliate, National
Financial Data Services ("NFDS" and with State Street, the "Transfer
Agent")(other than out-of-pocket charges of the Transfer Agent which are paid by
the Corporation). For further information regarding the Transfer Agent see the
section entitled "Additional Information" below.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As discussed in the Prospectus, the Adviser is responsible for decisions to
buy and sell securities for the Fund, selection of broker-dealers and
negotiation of commission rates. Purchases and sales of securities on a
securities exchange are effected through brokers-dealers who charge a negotiated
commission for their services. Orders may be directed to any broker-dealer
including, to the extent and in the manner permitted by applicable law, an
affiliated brokerage subsidiary of SunAmerica Inc.
In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission (although the price of the security usually includes a profit to the
dealer). In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The Adviser's primary consideration in effecting a security transaction is
to obtain the best net price and the most favorable execution of the order.
However, the Adviser may select broker-dealers which provide them with research
services and may cause the Fund to pay such broker-dealers commissions which
exceed those that other broker-dealers may have charged, if in its view the
commissions are reasonable in relation to the value of the brokerage and/or
research services provided by the broker-dealer. Certain research services
furnished by brokers may be useful to the Adviser with clients other than the
Corporation. No specific value can be determined for research services
furnished without cost to the Adviser by a broker. The Adviser is of the
opinion that because the material must be analyzed and reviewed by its staff,
its receipt does not tend to reduce expenses, but may be beneficial in
supplementing the Adviser's research and analysis. Therefore, it may tend to
benefit the Fund by improving the quality of the Adviser's investment advice.
The investment advisory fees paid by the Fund are not reduced because the
Adviser receives such services. When making purchases of underwritten issues
with fixed underwriting fees, the Adviser may designate the use of broker-
dealers who have agreed to provide the Adviser with certain statistical,
research and other information.
B-22
<PAGE>
Subject to applicable law and regulations, consideration may also be given
to the willingness of particular brokers to sell shares of the Fund as a factor
in the selection of brokers for transactions effected on behalf of the Fund,
subject to the requirement of best price and execution.
Although the objectives of other accounts or investment companies which the
Adviser manages may differ from those of the Fund, it is possible that, at
times, identical securities will be acceptable for purchase by the Fund and one
or more other accounts or investment companies which the Adviser manages.
However, the position of each account or company in the securities of the same
issue may vary with the length of the time that each account or company may
choose to hold its investment in those securities. The timing and amount of
purchase by each account and company will also be determined by its cash
position. If the purchase or sale of a security is consistent with the
investment policies of the Fund and one or more of these other accounts or
companies is considered at or about the same time, transactions in such
securities will be allocated in a manner deemed equitable by the Adviser. The
Adviser may combine such transactions, in accordance with applicable laws and
regulations, where the size of the transaction would enable it to negotiate a
better price or reduced commission. However, simultaneous transactions could
adversely affect the ability of the Fund to obtain or dispose of the full amount
of a security, which it seeks to purchase or sell, or the price at which such
security can be purchased or sold.
For the fiscal years ended December 31, 1995, 1994 and 1993, no brokerage
commissions were paid by the Fund.
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES
Shares of the Fund are sold at net asset value next-determined after
receipt of a purchase order, plus for Class B shares, a deferred sales charge.
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares.
The Distributor advised the Fund that it received the following contingent
deferred sales charges, with respect to Class B shares of the Fund, for the
fiscal years ended December 31, 1995, 1994, and 1993.
CONTINGENT DEFERRED SALES CHARGES - CLASS B
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------
<S> <C> <C>
372,779 546,660 64,877
--------------------------
</TABLE>
B-23
<PAGE>
CONTINGENT DEFERRED SALES CHARGES ("CDSCS") APPLICABLE TO CERTAIN CLASS B
SHARES. Class B shares of the Fund issued to shareholders in exchange for
shares of the Cash Fund in the Reorganization, are subject to the CDSC schedule,
if any, that applied to such shares at the time of Reorganization. In the event
that the shares were originally acquired in an exchange from another SunAmerica
Mutual Fund which imposes a CDSC (a "CDSC Fund"), the CDSC schedule that was
applicable to such shares at the time of the exchange will continue to apply;
provided, that in determining the holding period for such shares, the holding
period prior to such exchange and the holding period following the date of the
Reorganization will be "tacked" or combined. No credit toward the holding
period is given for the time during which the Cash Fund shares were held. For
example, if shares of a CDSC Fund were held by a shareholder for two years prior
to an exchange for shares of Cash Fund, Cash Fund shares were held for one year
prior to the Reorganization, and the Class B shares of the Fund were held for
one year prior to redemption, when the Class B shares are redeemed by the
shareholder, they will be subject to a contingent deferred sales charge as
though they were redeemed from the CDSC Fund three years after the initial
investment in the CDSC Fund without regard to the length of time that the Cash
Fund shares were actually held.
The following CDSC schedule applies to shares originally acquired (prior to
the date of the Reorganization) in an exchange from one of the four series of
shares of the SunAmerica Fund Group (i.e., SunAmerica U.S. Government Securities
Fund, SunAmerica High Income Fund, SunAmerica Emerging Growth Fund and
SunAmerica Balanced Assets Fund) or from the SunAmerica Federal Securities Fund:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
- ------------------- ---------------------------------
<S> <C>
First 5%
- -------------------------------------------------------------------------
Second 4%
- -------------------------------------------------------------------------
Third 3%
- -------------------------------------------------------------------------
Fourth 2%
- -------------------------------------------------------------------------
Fifth 1%
- -------------------------------------------------------------------------
Sixth and thereafter 0%
- -------------------------------------------------------------------------
</TABLE>
The following table sets forth the rates of CDSC applicable to shares
originally acquired (prior to the date of the
B-24
<PAGE>
Reorganization) in an exchange from the SunAmerica Diversified Income Fund
series of SunAmerica Multi-Asset Portfolios, Inc.:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
- ------------------- ---------------------------------
<S> <C>
First 3%
- -------------------------------------------------------------------------
Second 2%
- -------------------------------------------------------------------------
Third 1%
- -------------------------------------------------------------------------
Fourth and thereafter 0%
- -------------------------------------------------------------------------
</TABLE>
Any Class B shares purchased after the date of the Reorganization
(other than through the reinvestment of dividends and distributions, which are
not subject to the CDSC) will be subject to the CDSC schedule reflected in the
Prospectus. After the Reorganization, in calculating the contingent deferred
sales charge due upon redemption of Class B shares of the Fund acquired through
an exchange from a CDSC Fund or in the Reorganization, a shareholder will
receive credit toward the holding period for the period of time they held Class
B shares of the Fund.
CONVERSION FEATURE APPLICABLE TO CLASS B SHARES. Class B shares (including a
pro rata portion of the Class B shares purchased through reinvestment of
dividends and distributions) will convert automatically to Class A shares on the
first business day of the month following the seventh anniversary of issuance of
such Class B shares or, in the case of Class B shares acquired pursuant to the
Reorganization, seven years after the issuance of a shareholder's original CDSC
Fund shares (which were subsequently exchanged for the Cash Fund shares which
were in turn exchanged for Class B shares of the Fund in the Reorganization),
provided, that in calculating such seven-year period, any time during which the
shareholder held the Cash Fund shares will be excluded. For example, if shares
of a CDSC Fund were held by a shareholder for four years and then exchanged for
shares of Cash Fund which were then held for two years as of the date of the
Reorganization, such shareholder's Class B shares of the Fund received in the
Reorganization will convert to Class A shares of the Fund at the end of the
third year following consummation of the Reorganization. The conversion to Class
A shares will be on the basis of the relative net asset values of Class B shares
and Class A shares, without the imposition of any sales load, fee or charge.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES. As discussed under "Purchase of
Shares" in the Prospectus, CDSCs may be waived on redemptions of Class B shares
under certain circumstances. The
B-25
<PAGE>
conditions set forth below are applicable with respect to the following
situations with the proper documentation:
Death. CDSCs may be waived on redemptions within one year following
------
the death (i) of the sole shareholder on an individual account, (ii) of a joint
tenant where the surviving joint tenant is the deceased's spouse, or (iii) of
the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfers to Minors
Act or other custodial account. The CDSC waiver is also applicable in the case
where the shareholder account is registered as community property. If, upon the
occurrence of one of the foregoing, the account is transferred to an account
registered in the name of the deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B shares are not redeemed within one year of the death, they will
remain Class B shares and be subject to the applicable CDSC, when redeemed.
Disability. CDSCs may be waived on redemptions occurring within one
-----------
year after the sole shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, as amended (the "Code")). To be eligible for
such waiver, (i) the disability must arise AFTER the purchase of shares AND (ii)
the disabled shareholder must have been under age 65 at the time of the initial
determination of disability. If the account is transferred to a new
registration and then a redemption is requested, the applicable CDSC will be
charged.
PURCHASES THROUGH THE DISTRIBUTOR. An investor may purchase shares of the Fund
through dealers which have entered into selected dealer agreements with the
Distributor. An investor's dealer who has entered into a distribution
arrangement with the Distributor is expected to forward purchase orders and
payment promptly to the Fund. Orders received by the Distributor before the
close of business will be executed on that day. Orders received by the
Distributor after the close of business will be executed on the next trading
day. The Distributor reserves the right to cancel any purchase order for which
payment has not been received by the fifth business day following the
investment. The Fund will not be responsible for delays caused by dealers.
PURCHASE BY CHECK. In the case of a new account, purchase orders by check must
be submitted directly by mail to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204,
together with payment for the purchase price of such shares and a completed New
Account Application. Shares of the Fund may be purchased directly through the
Transfer Agent. Upon receipt of the completed New Account Application and
payment check, the Transfer Agent will purchase full and fractional shares of
the Fund at the net asset value next computed after the check is received.
Certified checks are not
B-26
<PAGE>
necessary, but checks are accepted subject to collection at full face value in
United States funds and must be drawn on a bank located in the United States.
Checks should be made payable to "SunAmerica Money Market Fund." There are
restrictions on the redemption of shares purchased by check for which funds are
being collected. (See "Redemption of Shares.")
PURCHASE THROUGH SAFS. SAFS will effect a purchase order on behalf of a
customer who has an investment account upon confirmation of a verified credit
balance at least equal to the amount of the purchase order (subject to the
minimum investment requirements set forth in the Prospectus). If such order is
received at or prior to 4:00 P.M., Eastern time, on a day the New York Stock
Exchange ("NYSE") is open for business, the purchase of shares of the Fund will
be effected on that day. If the order is received after 4:00 P.M., Eastern
time, the order will be effected on the next business day.
PURCHASE BY FEDERAL FUNDS WIRE. An investor may make purchases by having his or
her bank wire Federal funds to the Corporation's Transfer Agent. Federal funds
purchase orders will be accepted only on a day on which the Corporation and the
Transfer Agent are open for business. In order to insure prompt receipt of a
Federal funds wire, it is important that these steps be followed:
1. You must have an existing SunAmerica Fund Account before wiring
funds. To establish an account, complete the New Account Application and send
it via facsimile to SunAmerica Fund Services, Inc. at: (212) 551-5343.
2. Call SunAmerica Fund Services' Shareholder/Dealer Services, toll
free at (800) 858-8850, extension 5125 to obtain your new account number.
3. Instruct the bank to wire the specified amount to the Transfer
Agent: State Street Bank and Trust Company, Boston, MA, ABA# 0110-00028; DDA#
99029712, SunAmerica [name of Fund, Class __] (include shareholder name and
account number).
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for
certain information as to the redemption of Fund shares.
If the Directors determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Corporation, having filed with the Securities and Exchange
Commission ("SEC") a notification of election pursuant to Rule 18f-1 on behalf
of the Fund, may pay the redemption price in whole, or in part, by a
distribution in
B-27
<PAGE>
kind of securities from the Fund in lieu of cash. In conformity with applicable
rules of the SEC, the Fund is committed to pay in cash all requests for
redemption of Fund shares, by any shareholder of record, limited in amount with
respect to each shareholder during any 90-day period to the lesser of (i)
$250,000, or (ii) 1% of the net asset value of the Fund at the beginning of such
period. If shares are redeemed in kind, the redeeming shareholder would incur
brokerage costs in converting the assets into cash. The method of valuing
portfolio securities is described below in the section entitled "Determination
of Net Asset Value," and such valuation will be made as of the same time the
redemption price is determined.
DETERMINATION OF NET ASSET VALUE
The Fund calculates the net asset value of each class of its shares
separately by dividing the total value of each class's net assets by the shares
of such class outstanding. Shares are valued each day the Fund is open for
business, with the exception of holidays on which the New York Stock Exchange
("NYSE") is closed, at the close of regular trading on the NYSE (currently, 4:00
P.M., Eastern time). The net asset value may not be computed on a day in which
no orders to purchase, sell or redeem Fund shares have been received.
Under applicable rules of the SEC, the valuation of the Fund's
investments is based upon their amortized cost. This entails valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any premium or discount regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during which the value
of an instrument, as determined by the amortized cost method, is higher or lower
than the price the Fund would receive if it sold the instrument. During periods
of rising interest rates, the daily yield on shares of the Fund computed on an
amortized cost basis may tend to be higher than the like computation made by a
mutual fund with identical investments utilizing a method of valuation based
upon market prices. The converse would apply in a period of declining rates.
The purpose of this method of valuation is to facilitate the maintenance of a
constant net asset value per share of $1.00. There can be no assurance,
however, that the Fund will be able to maintain a stable net asset value of
$1.00 per share.
Certain conditions must be met in connection with the application of
valuation rules to the Fund. These conditions include maintaining a dollar-
weighted average portfolio maturity of 90 days or less, purchasing instruments
having remaining maturities of 397 calendar days or less, and investing only in
securities determined by the Adviser under procedures adopted by the Directors
to present minimal credit risks and which are of high quality as determined by
the requisite number of nationally recognized
B-28
<PAGE>
statistical rating organizations or, in the case of any instrument that is not
rated, determined to be of comparable quality by the Adviser under procedures
adopted by the Directors. In accordance with the applicable regulations, the
Directors have established procedures designed to stabilize at $1.00 the Fund's
net asset value per share to the extent reasonably possible. Such procedures
include review of the Fund's portfolio holdings at such intervals as appropriate
to determine whether the Fund's net asset value, calculated by using available
market quotations, deviates from $1.00 per share based on amortized cost. If
such deviation exceeds .5% of the Fund's $1.00 per share net asset value, the
Directors will promptly consider what action, if any, will be initiated. In the
event that the Directors determine that a deviation exists which may result in
material dilution or other unfair results to investors or existing shareholders,
they will take such corrective action as they deem necessary and appropriate,
which may include selling portfolio instruments, withholding dividends or
establishing a net asset value per share based upon available market quotations.
PERFORMANCE DATA
The Fund may advertise performance data that reflects various measures
of yield. An explanation of the data presented and the methods of computation
that will be used are as follows.
The Fund's performance may be compared to the historical returns of
various investments, performance indices of those investments or economic
indicators, including, but not limited to, stocks, bonds, certificates of
deposit, money market deposit accounts, money market funds and U.S. Treasury
Bills. Certain of these alternative investments may offer fixed rates of return
and guaranteed principal and may be insured.
Yield is determined separately for Class A and Class B shares of the
Fund in accordance with a standardized formula prescribed by the SEC and is not
indicative of the amounts which were or will be paid to shareholders. The yield
quoted in the Fund's advertisements is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the 7-day period. A
hypothetical charge reflecting deductions for shareholder accounts is subtracted
from the above net change and the difference is divided by the value of the
account at the beginning of the 7-day period. The resulting figure is
multiplied by 365 divided by seven and carried to the nearest one hundredth of
one percent.
Effective yield quoted in the Fund's advertisements is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the 7-day period. A
B-29
<PAGE>
hypothetical charge reflecting deductions from shareholder accounts is
subtracted from the above net change and the difference is divided by the value
of the account at the beginning of the 7-day period. The resulting figure is
then compounded by adding one, raising the sum to a power equal to 365 divided
by seven, and subtracting one. The following formula illustrates the effective
yield computation.
[(Base period return + 1) 365/7] - 1
The following table sets forth the Fund's yield and effective yield
for the Class A and Class B shares for the 7-day periods ended December 31,
1995, 1994, and 1993.
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------
Effective Effective Effective
CLASS Yield Yield Yield Yield Yield Yield
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A 4.96% 5.08% 4.89% 5.01% 2.39% 2.42%
- ----------------------------------------------------------------------------
B 4.29% 4.38% 4.19% 4.28% 1.83% 1.85%
- ----------------------------------------------------------------------------
</TABLE>
COMPARISONS
- -----------
The Fund may compare its yield to similar measures as calculated by
various publications, services, indices, or averages. Such comparisons are made
to assist in evaluating an investment in the Fund. The following references may
be used:
a) Lipper: Mutual Fund Performance Analysis, Fixed Income Analysis,
and Mutual Fund Indices -- measures total return and average current yield for
the mutual fund industry. Ranks individual mutual fund performance over
specified time periods assuming reinvestment of all distributions, exclusive of
sales charges.
b) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc., analyzes price, current yield, risk, total return, and average rate of
return (average annual compounded growth rate) over specified time periods for
the mutual fund industry.
c) Stocks, Bonds, Bills, and Inflation, published by Ibbotson
Associates -- historical measure of yield, price, and total return for common
and small company stock, long-term government bonds, treasury bills, and
inflation.
B-30
<PAGE>
d) IBC/Donoghue's Inc. Money Fund Report -- comprehensive evaluation
of money market funds which monitors portfolio characteristics on a weekly
basis. The Report provides the information with respect to yield, average
maturity, security selection (asset allocation) and credit quality.
In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
figures. Specifically, the Fund may compare its performance to that of certain
indices which include securities with government guarantees. However, the
Fund's shares do not contain any such guarantees. In addition, there can be no
assurance that the Fund will continue its performance as compared to such other
standards.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute to the registered
holders of its shares all or substantially all of its net investment income,
which includes dividends, interest and net short-term capital gains, if any, in
excess of any net long-term capital losses. The Fund intends to distribute any
net long-term capital gains in excess of any net short-term capital losses.
Dividends from net investment income are declared daily and paid monthly.
Dividends are paid on or about the fifteenth day of the month. Net capital
gains, if any, will be paid annually. In determining amounts of capital gains
to be distributed, any capital loss carry-forwards from prior years will be
offset against capital gains.
Dividends and distributions are paid in additional Fund shares based
on the net asset value at the close of business on the record date, unless the
dividends total in excess of $10 per distribution period and the shareholder
notifies the Fund at least five business days prior to the payment date to
receive such distributions in cash.
TAXES. The Fund is qualified and intends to remain qualified and elects to be
treated as a regulated investment company under Subchapter M of the Code for
each taxable year. In order to remain qualified as a regulated investment
company, the Fund generally must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, proceeds from loans of stock or
securities and certain other related income; (b) derive less than 30% of its
gross income from the sale or other disposition of stock or securities held less
than 3 months; and (c) diversify its
B-31
<PAGE>
holdings so that, at the end of each fiscal quarter, (i) 50% of the market value
of the Fund's assets is represented by cash, government securities, securities
of other regulated investment companies and other securities limited, in respect
of any one issuer, to an amount not greater than 5% of the Fund's assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than government securities or the securities of other
regulated investment companies).
As a regulated investment company, the Fund will not be subject to
U.S. Federal income tax on its income and gains which it distributes as
dividends or capital gains distributions to shareholders provided that it
distributes to shareholders at least 90% of its investment company taxable
income for the taxable year. The Fund intends to distribute sufficient income to
meet this qualification requirement.
Under the Code, amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To avoid the tax, the Fund must distribute during
each calendar year (1) at least 98% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, (2) at least 98% of
its net capital gains, i.e., capital gains in excess of its capital losses for
the 12-month period ending on October 31 of the calendar year, and (3) all
ordinary income and net capital gains for previous years that were not
distributed during such years. To avoid application of the excise tax, the Fund
intends to make distributions in accordance with the calendar year distribution
requirement. A distribution will be treated as paid on December 31 of the
calendar year if it is paid during the calendar year or if declared by the Fund
in October, November or December of such year, payable to shareholders of record
on a date in such month and paid by the Fund during January of the following
year. Any such distributions paid during January of the following year will be
taxable to shareholders as of December 31, rather than the date on which the
distributions are received.
Distributions of net investment income and short-term capital gains
("ordinary income dividends") are taxable to a shareholder as ordinary dividend
income regardless of whether the shareholder receives such distributions in
additional shares or in cash. Distributions of net long-term capital gains, if
any, are taxable as long-term capital gains regardless of whether the
shareholder receives such distributions in additional shares or in cash or how
long the investor has held his or her shares. Dividends and distributions paid
by the Fund will not be eligible for the dividends received deduction for
corporations.
B-32
<PAGE>
Upon a sale or exchange of its shares, a shareholder may realize a
taxable gain or loss depending upon its basis in the shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term capital gain or loss if the shares
have been held for more than one year. The amount of any CDSC will reduce the
amount realized on the sale or exchange of shares for purposes of determining
gain or loss. Generally, any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced within a period of
61 days beginning 30 days before and ending 30 days after the shares are
disposed of. Any loss realized by a shareholder on the sale of shares of the
Fund held by the shareholder for six months or less will be treated for tax
purposes as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.
Under certain circumstances (such as the exercise of an exchange
privilege in certain cases), the tax effect of sales load charges imposed on the
purchase of shares in a regulated investment company is deferred if the
shareholder does not hold the shares for at least 90 days.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries is not known. It is not anticipated
that the Fund will qualify to pass through to shareholders the ability to claim
as a foreign tax credit their respective shares of foreign taxes paid by the
Fund.
The Fund may be required to backup withhold U.S. Federal income tax at
the rate of 31% of all taxable distributions payable to shareholders who fail to
provide their correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's U.S. Federal
income tax liability.
Foreign shareholders generally will be subject to a withholding tax at
the rate of 30% (or lower treaty rate) on any ordinary income dividends pay by
the Fund.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with
B-33
<PAGE>
their own tax advisers regarding the particular tax consequences, including
foreign tax consequences, to them of an investment in the Fund. Qualification
as a regulated investment company under the Code for tax purposes does not
entail government supervision of management or investment policies.
RETIREMENT PLANS
Shares of the Fund are eligible to be purchased in conjunction with
various types of qualified retirement plans. The summary below is only a brief
description of the Federal income tax laws for each plan and does not purport to
be complete. Further information or an application to invest in shares of the
Fund by establishing any of the retirement plans described below may be obtained
by calling Retirement Plans at (800) 858-8850. However, it is recommended that a
shareholder considering any retirement plan consult a tax adviser before
participating.
PENSION AND PROFIT-SHARING PLANS. Sections 401(a) and 401(k) of the Code permit
business employers and certain associations to establish pension and profit
sharing plans for employees. Shares of the Fund may be purchased by those who
would have been covered under the rules governing old H.R. 10 (Keogh) Plans, as
well as by corporate plans. Each business retirement plan provides tax
advantages for owners and participants. Contributions made by the employer are
tax-deductible, and participants do not pay taxes on contributions or earnings
until withdrawn.
TAX-SHELTERED CUSTODIAL ACCOUNTS. Section 403(b)(7) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code, to purchase
shares of the Fund and, subject to certain limitations, exclude the amount of
purchase payments from gross income for tax purposes.
INDIVIDUAL RETIREMENT ACCOUNTS (IRA). Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program, including
Simplified Employee Pension Plans, commonly referred to as SEP-IRA. These IRA's
are subject to limitations with respect to the amount that may be contributed,
the eligibility of individuals, and the time in which distributions would be
allowed to commence. In addition, certain distributions from some other types
of retirement plans may be placed on a tax-deferred basis in an IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION (SARSEP). This plan was introduced
by a provision of the Tax Reform Act of 1986 as a unique way for small employers
to provide the benefit of retirement planning for their employees.
Contributions are deducted from the employee's paycheck before tax deductions
and are deposited into an
B-34
<PAGE>
IRA by the employer. These contributions are not included in the employee's
income and therefore are not reported or deducted on his or her tax return.
DESCRIPTION OF SHARES
Ownership of the Corporation is represented by transferable shares of
common stock, having a par value of $.001 per share. The Articles of
Incorporation, as amended to date (the "Articles of Incorporation"), authorize
the Corporation to issue 10 billion shares of common stock and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate interests of shareholders of the Corporation.
Currently, one series of shares of the Corporation, the Fund, has been
authorized pursuant to the Articles of Incorporation. This series has been
divided into two classes of shares, designated as Class A and Class B shares.
The Directors may authorize the creation of additional series of shares so as to
be able to offer to investors additional investment portfolios within the
Corporation that would operate independently from the Corporation's present
portfolio, or to distinguish among shareholders, as may be necessary, to comply
with future regulations or other unforeseen circumstances. Each series of the
Corporation's shares, in the event that more than one series is authorized, will
represent the interests of the shareholders of that series in a particular
portfolio of the Corporation's assets. In addition, the Directors may authorize
the creation of additional classes of shares in the future.
Shareholders are entitled to a full vote for each full share held.
The Directors have terms of unlimited duration (subject to certain removal
procedures) and have the power to alter the number of Directors, and appoint
their own successors, provided that at all times at least a majority of the
Directors have been elected by shareholders. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Directors being elected, while the holders of the
remaining shares would be unable to elect any Directors. Although the
Corporation need not hold annual meetings of shareholders, the Directors may
call special meetings of shareholders for action by shareholder vote as may be
required by the 1940 Act, Maryland law, the Articles of Incorporation or the By-
Laws of the Corporation (the "By-Laws"). Also, a shareholders meeting must be
called, if so requested in writing by the holders of record of 10% or more of
the outstanding shares of the Corporation. In addition, the Directors may be
removed only for cause by the action of the holders of record of at least a
majority of all outstanding shares entitled to vote for election of Directors.
All series of shares will vote with respect to certain matters, such as election
of Directors. When all series of shares,
B-35
<PAGE>
to the extent that more than one series is authorized, are not affected by a
matter to be voted upon, such as approval of investment advisory agreements or
changes in a series' policies, only shareholders of the series affected by the
matter may be entitled to vote.
Both classes of shares of the Fund are identical in all respects,
except that (i) each class may bear differing amounts of certain class-specific
expenses, (ii) Class A shares are subject to an ongoing account maintenance and
service fee, (iii) Class B shares are subject to a contingent deferred sales
charge, a distribution fee and an ongoing account maintenance and service fee,
(iv) Class B shares convert automatically to Class A shares on the first
business day of the month seven years after the purchase of such Class B shares,
(v) each class has voting rights on matters that pertain to the Rule 12b-1 plan
adopted with respect to such class, except that under certain circumstances, the
holders of Class B shares may be entitled to vote on material changes to the
Class A Rule 12b-1 plan, and (vi) each class of shares will be exchangeable only
into the same class of shares of other funds in the SunAmerica Mutual Funds that
offers that class. All shares of the Corporation issued and outstanding and all
shares offered by the Prospectus when issued, are and will be fully paid and
non-assessable. Shares have no preemptive or other subscription rights and are
freely transferable on the books of the Corporation. In addition, shares have
no conversion rights, except as described above.
The By-Laws provide that the Corporation shall indemnify any person
who was or is a Director, officer or employee of the Corporation to the maximum
extent permitted by Maryland law and the 1940 Act upon a determination, made in
accordance with the terms of the By-Laws, that indemnification is proper in the
circumstances. In addition, the By-Laws provide that the Corporation may
maintain insurance on behalf of any person who is or was a director or officer,
employee or agent of the Corporation or who is or was serving at the request of
the Corporation as director, officer, agent or employee of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted or incurred in connection with serving in such capacity. However, no
Director or officer of the Corporation will be protected by indemnification,
insurance or otherwise from any liability to the Corporation or its shareholders
to which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in his
or her office.
B-36
<PAGE>
ADDITIONAL INFORMATION
REPORTS TO SHAREHOLDERS. The Fund sends audited annual and unaudited semi-
annual reports to shareholders of the Fund. In addition, the Transfer Agent
sends a statement to each shareholder having an account directly with the Fund
to confirm transactions in the account.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Fund and in those capacities maintains certain financial and accounting
books and records pursuant to agreements with the Corporation. Transfer agent
functions are performed for State Street, by National Financial Data Services,
P.O. Box 419572, Kansas City, MO 64141-6572, an affiliate of State Street.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL. Price Waterhouse LLP, 1177 Avenue of
the Americas, New York, NY 10036, has been selected to serve as the Fund's
independent accountants and in that capacity examines the annual financial
statements of the Fund. The firm of Shereff, Friedman, Hoffman & Goodman, LLP,
919 Third Avenue, New York, NY 10022, has been selected as legal counsel to the
Corporation.
FINANCIAL STATEMENTS
Set forth following this Statement of Additional Information are the
financial statements of SunAmerica Money Market Funds, Inc. with respect to its
SunAmerica Money Market Fund series for the fiscal year ended December 31, 1995.
B-37
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
SHAREHOLDER LETTER
February 1, 1996
Dear Shareholder:
As the Federal Reserve orchestrated a picture perfect soft landing for the
economy, 1995 finished as a very good year for investors. When the Department
of Commerce releases its data it will show an economy which grew 2% based on
the Gross Domestic Product, with inflation around 2.5%. This soft landing
differs from other cycles in two ways, unemployment declined and short-term
rates remained high while long-term rates declined. This phenomenon is called a
flattening of the yield curve and occurs when investors believe that inflation
is not going to rise and reduce the value of future investments. The flattening
of the yield curve benefited the shareholders of the Fund in 1995 because it
resulted in higher yields throughout the year, which is atypical in a slowing
economy.
We start 1996 with some important issues facing us: will we get a balanced
budget resolution and how resilient is the economy? It appears that the
politicians have not practiced the art of compromise thus far; however, we
believe the process will inevitably lead to a resolution that will be
beneficial to all Americans. Another issue of importance is the future
direction of the economy. Consumers are concerned about their long-term
employment prospects and generally have too much debt. Some of the reasons why
there is concern includes the continuation of consolidations (e.g., Chase and
Chemical Bank), downsizings (e.g., AT&T) and bankruptcies (e.g., retail sector)
in corporate America, all of which give consumers reasons not to spend more
than in the past. Inventories of unsold goods are high, and the harsh winter
has magnified this problem as we begin the new spring selling season. Lastly,
the export picture is not quite as optimistic as many economists thought. Many
countries in Europe are, surprisingly, economically weak, and the recent rise
in the U.S. Dollar will make our products more expensive and therefore less
desirable abroad.
The SunAmerica Money Market Fund performed well in 1995 because of the longer
average maturity maintained throughout most of the year. Currently the average
maturity stands at approximately 45 days. As always, we are focusing on credit
quality and liquidity as we continue to provide you with a very competitive
yield.
/s/ P. Christopher Leary
P. Christopher Leary
Portfolio Manager
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) RATE* MATURITY (NOTE 2)
- --------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--62.7%
<S> <C> <C> <C> <C>
Abbey National North America $ 5,000 5.71% 1/05/96 $ 4,996,828
Accor S.A. 7,961 5.62 3/01/96 7,886,432
AT&T Capital Corp. 5,000 5.70 1/10/96 4,992,875
Banque Internationale a Luxembourg, Inc. 8,000 5.70 1/09/96 7,989,867
Cemex S.A. 5,000 5.69 2/22/96 4,958,906
Chemical Banking Corp. 5,000 5.72 1/31/96 4,976,167
Corporacion Andina de Fomento 8,000 5.74 1/31/96 7,961,733
Cosco Co. Ltd. 10,000 5.72 2/13/96 9,931,678
CPC International, Inc.# 5,000 5.71 1/12/96 4,991,276
Fayette Funding L.P. 10,000 5.73 2/14/96 9,929,967
General Electric Capital Corp. 7,000 5.58 3/08/96 6,927,305
Golden Peanut Co. 3,000 5.65 2/21/96 2,975,988
Goldman Sachs Group L.P. 10,000 5.60 4/09/96-4/17/96 9,839,778
Hanson Finance PLC 7,000 5.58 3/07/96 6,928,390
Indosuez N.A., Inc. 7,000 5.71 1/04/96 6,996,669
International Securitization Corp. 16,130 5.75-6.00 1/04/96-3/07/96 16,070,421
Island Finance Puerto Rico, Inc. 4,487 5.67 2/23/96 4,449,545
JMG Funding L.P. 9,000 5.73 1/17/96 8,977,080
Mayne Nickless Ltd. 5,000 5.75 2/07/96 4,970,451
Merrill Lynch & Co., Inc. 16,000 5.68-5.70 1/16/96-3/06/96 15,889,334
Morgan (J.P.) & Co., Inc. 7,000 5.58 1/03/96 6,997,830
Morgan Stanley Group, Inc. 8,000 5.75 1/30/96 7,962,944
Orix America, Inc.# 11,500 5.77-6.00 2/01/96-3/15/96 11,387,033
Petroleos de Venezuela S.A. 7,000 5.60 3/08/96 6,927,044
Quebec (Province of) 8,000 5.70 1/30/96 7,963,267
Southland Corp. 7,000 5.70 3/05/96 6,929,067
SRD Finance, Inc. 5,000 6.05 1/18/96 4,985,715
Telefonica N.A., Inc. 8,000 5.65 4/01/96 7,885,744
TMI-1 Fuel Corp. 10,000 5.78 1/11/96 9,983,944
Windmill Funding Corp.# 6,000 5.80 1/25/96 5,976,800
Working Capital Management Co. L.P. 1,114 6.10 2/09/96 1,106,638
------------
TOTAL COMMERCIAL PAPER 230,746,716
(amortized cost $230,746,716) ------------
GOVERNMENT AGENCIES--5.5%
Agency for International Development India+ 4,000 5.50 1/03/96 4,011,699
Agency for International Development Isra-
el+ 3,975 5.50 1/03/96 3,974,755
Agency for International Development Pana-
ma+ 5,365 6.40 1/03/96 5,400,379
Federal Farm Credit Bank+ 7,000 5.93 3/17/96 7,000,318
------------
TOTAL GOVERNMENT AGENCIES 20,387,151
(amortized cost $20,387,151) ------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) RATE* MATURITY (NOTE 2)
- -------------------------------------------------------------------------------------------------------
MEDIUM TERM NOTES--18.9%
<S> <C> <C> <C> <C> <C>
Bear Stearns & Co., Inc.+ $15,000 5.94-6.16% 1/25/96-3/18/96 $ 15,013,741
Carolina Power & Light Co. 2,500 5.13 4/01/96 2,495,150
Citicorp 1,000 9.35 6/03/96 1,012,249
Ford Motor Credit Co. 3,500 8.25 5/15/96 3,525,304
Goldman Sachs & Co.#+ 6,000 6.11 1/15/96 6,001,267
Gulf Coast Texas, I.D.A.+ 10,000 6.15 1/02/96 10,000,000
Liberty Mutual Capital Corp. 6,000 8.50 7/08/96 6,070,144
NBD Bank 8,000 6.40 4/25/96-4/29/96 7,999,812
Norwest Corp., Series D+ 2,000 5.93 1/17/96 2,000,162
PNC Bank, N.A.+ 13,000 5.58-5.87 1/03/96-1/16/96 12,993,263
World Saving and Loan Association 2,500 4.85 4/01/96 2,493,192
------------
TOTAL MEDIUM TERM NOTES 69,604,284
(amortized cost $69,604,284) ------------
TAXABLE MUNICIPAL MEDIUM TERM
NOTES--9.6%
Illinois Student Assistance Corp.+ 14,300 5.83-6.16 1/03/96 14,300,000
New Hampshire State Industrial
Development Authority 13,000 5.85 2/13/96 13,000,000
State of Texas Veteran's Housing Assis- 7,900,000
tance+ 7,900 5.86 1/03/96 ------------
TOTAL TAXABLE MUNICIPAL MEDIUM TERM
NOTES 35,200,000
(amortized cost $35,200,000) ------------
TOTAL INVESTMENT SECURITIES 355,938,151
(amortized cost $355,938,151) ------------
REPURCHASE AGREEMENT--3.1%
Joint Repurchase Agreement Account (Note
3) 11,284,000
(cost $11,284,000) 11,284 5.82 1/02/96 ------------
TOTAL INVESTMENTS--
(amortized cost $367,222,151**) 99.8% 367,222,151
Other assets less liabilities-- 0.2 884,521
----- ------------
NET ASSETS 100.0% $368,106,672
===== ============
</TABLE>
- --------
*Rates shown are rates in effect as of December 31, 1995
** At December 31, 1995 the cost of securities for Federal income tax purposes
was the same as for book purposes
# Resale restricted to qualified institutional buyers
+ Variable rate security; maturity date reflects next reset date
<TABLE>
<CAPTION>
PORTFOLIO BREAKDOWN AS A PERCENTAGE OF NET ASSETS (EXCLUDING REPURCHASE AGREEMENT) BY INDUSTRY
<S> <C> <C> <C> <C> <C>
Finance 23.0% Telecommunication 3.5% Electronics 1.9%
Securities Holding Electric 3.4 Retail 1.9
Company 14.9 Food & Beverages 2.2 Oil & Gas 1.9
Municipalities 12.3 Foreign Government 2.2 Insurance 1.7
Banking 11.9 Lodging 2.1 Materials 1.3
Government Savings & Loan 2.0 Automotive 1.0
Agencies 5.5 ----
Transportation 4.0 96.7%
====
</TABLE>
@ As grouped by Moody's Investors Service Global Short Term Market Record
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at value (amortized cost $367,222,151)....... $367,222,151
Cash................................................................ 54,972
Interest receivable................................................. 1,529,704
Receivable for fund shares sold..................................... 968,111
Prepaid expenses.................................................... 80,716
------------
Total assets....................................................... 369,855,654
------------
LIABILITIES:
Payable for fund shares repurchased................................. 1,273,748
Accrued expenses.................................................... 237,047
Investment advisory and management fees payable..................... 154,763
Distribution and service maintenance fees payable................... 78,013
Dividends payable................................................... 5,411
------------
Total liabilities.................................................. 1,748,982
------------
Net assets....................................................... $368,106,672
============
NET ASSETS WERE COMPOSED OF:
Common Stock, $.001 par value....................................... $ 368,103
Additional paid-in capital.......................................... 367,639,951
------------
368,008,054
Accumulated undistributed net investment income..................... 98,618
------------
Net assets....................................................... $368,106,672
============
CLASS A (UNLIMITED SHARES AUTHORIZED):
Net asset value ($316,307,871/316,304,820 shares outstanding)...... $1.00
=====
CLASS B (UNLIMITED SHARES AUTHORIZED):
Net asset value ($51,798,801/51,797,995 shares outstanding)........ $1.00
=====
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $18,765,665
-----------
EXPENSES:
Investment advisory and management fees............... $1,560,968
Service maintenance fees--Class A..................... 373,008
Distribution and service maintenance fees--Class B.... 571,694
Transfer agent and shareholder servicing fees and
expenses--Class A.................................... 653,088
Transfer agent and shareholder servicing fees and
expenses--Class B.................................... 176,054
Custodian fees and expenses........................... 127,419
Registration fees--Class A............................ 59,457
Registration fees--Class B............................ 14,175
Directors' fees and expenses.......................... 40,061
Audit and tax consulting fees......................... 30,715
Printing expense...................................... 11,315
Legal fees and expenses............................... 10,985
Insurance expense..................................... 7,209
Miscellaneous expenses................................ 17,005 3,653,153
----------
Less: expense offset.................................. (195,627)
-----------
Net expenses.......................................... 3,457,526
-----------
Net investment income................................. 15,308,139
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $15,308,139
===========
</TABLE>
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income..................... $ 15,308,139 $ 9,362,232
------------ ------------
Net increase in net assets resulting from
operations............................... 15,308,139 9,362,232
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (Class A)...... (12,540,465) (7,019,390)
From net investment income (Class B)...... (2,793,748) (2,312,911)
------------ ------------
Total dividends and distributions to
shareholders............................. (15,334,213) (9,332,301)
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS (NOTE 5)..................... 55,776,169 81,252,104
------------ ------------
Total increase in net assets.............. 55,750,095 81,282,035
NET ASSETS:
Beginning of year......................... 312,356,577 231,074,542
------------ ------------
End of year (including undistributed net
investment income of $98,618 and $124,692
at December 31, 1995 and December 31,
1994, respectively)...................... $368,106,672 $312,356,577
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
RATIO OF RATIO OF
NET NET NET EXPENSES NET
ASSET TOTAL DIVIDENDS ASSET ASSETS TO INVESTMENT
VALUE NET FROM FROM NET VALUE END OF AVERAGE INCOME TO
PERIOD BEGINNING INVESTMENT INVESTMENT INVESTMENT END OF TOTAL PERIOD NET AVERAGE
ENDED OF PERIOD INCOME OPERATIONS INCOME PERIOD RETURN(1) (000'S) ASSETS NET ASSETS
- ----------------------------------------------------------------------------------------------------------
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/91 $1.000 $0.052 $0.052 $(0.052) $1.000 5.32% $270,405 1.21% 5.25%
12/31/92 1.000 0.027 0.027 (0.027) 1.000 2.74 215,521 1.27 2.76
12/31/93 1.000 0.023 0.023 (0.023) 1.000 2.32 189,160 1.16 2.30
12/31/94 1.000 0.034 0.034 (0.034) 1.000 3.47 213,958 1.00 3.43
12/31/95 1.000 0.051 0.051 (0.051) 1.000 5.18 316,308 1.01(2) 5.04
<CAPTION>
CLASS B
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/24/93-
12/31/93 $1.000 $0.004 $0.004 $(0.004) $1.000 0.44%(3) $41,915 1.69%(4) 1.69%(4)
12/31/94 1.000 0.027 0.027 (0.027) 1.000 2.76 98,398 1.69 2.91
12/31/95 1.000 0.044 0.044 (0.044) 1.000 4.49 51,799 1.78(2) 4.37
</TABLE>
- --------
(1) Total return does not reflect sales load
(2) The expense ratio reflects the effect of a gross up of custody and transfer
agent expense credits of .05% and .13% for Class A and Class B,
respectively
(3) Total return is not annualized
(4) Annualized
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995
NOTE 1. ORGANIZATION
SunAmerica Money Market Fund (the "Fund") is an open-end diversified
management investment company organized as a Maryland Corporation.
Effective September 24, 1993, the Fund offered Class A shares and Class B
shares. The offering price is the next determined net asset value per share.
For Class B shares only, a declining contingent deferred sales charge
("CDSC") is imposed on certain redemptions made within six years. Class B
shares of the Fund convert automatically to Class A shares on the first
business day of the month seven years after the issuance of such Class B
shares and at such time are no longer subject to a distribution fee. Each
class of shares bears the same voting, dividend, liquidation and other
rights and conditions and each makes account maintenance and service fee
payments under a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") except that Class B shares
are subject to distribution fees.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed
by the Fund in the preparation of its financial statements:
SECURITY VALUATIONS: Portfolio securities are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing
a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of any discount or premium.
REPURCHASE AGREEMENTS: The Fund, 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 Fund's custodian takes possession of the collateral pledged
for investments in repurchase agreements. The underlying collateral is
valued daily on a mark to market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the 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.
SECURITIES TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS TO
SHAREHOLDERS: Securities transactions are recorded as of the trade date.
Interest income, including the accretion of discount and amortization of
premium, is accrued daily. Realized gains and losses on sales of investments
are calculated on the identified cost basis.
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 shares activity of the respective class).
Dividends from net investment income are declared daily and paid monthly.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION: 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.
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
STATEMENT OF POSITION 93-2: As required by Statement of Position 93-2
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies,
permanent book-tax differences relating to shareholder distributions have
been reclassified to paid in capital. Net investment income/loss, net
realized gain/loss, and net assets were not affected. For the year ended
December 31, 1995, no such reclassifications were required.
FEDERAL INCOME TAXES: It is the Fund's policy to meet the requirements of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute all of its taxable net income to its
shareholders. Therefore, no federal income or excise tax provisions are
required.
NOTE 3. JOINT REPURCHASE AGREEMENT ACCOUNT
As of December 31, 1995, the Fund had a 6.8% undivided interest, which
represented $11,284,000 in principal amount, in a repurchase agreement in
the joint account. As of such date, the repurchase agreement in the joint
account and the collateral therefore was as follows:
Yamaichi International (America), Inc., Repurchase Agreement, 5.82% dated
12/29/95, in the principal amount of $164,950,000 repurchase price
$165,056,668 due 1/2/96 collateralized by $17,455,000 U.S. Treasury Notes
5.75% due 8/15/03, $50,000,000 U.S. Treasury Notes 4.75% due 8/31/98,
$18,735,000 U.S. Treasury Notes 5.125% due 3/31/98, $5,000,000 U.S. Treasury
Notes 5.50% due 9/30/97, $50,000,000 U.S. Treasury Notes 5.50% due 9/30/97,
$18,955,000 U.S. Treasury Notes 7.50% due 12/31/96 and $4,885,000 U.S.
Treasury Notes 5.625% due 6/30/97, approximate aggregate value $168,257,239.
NOTE 4. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, DISTRIBUTION AGREEMENT
AND SERVICE AGREEMENT
The Fund has an Investment Advisory and Management Agreement (the
"Agreement") with SunAmerica Asset Management Corp. ("SAAMCo"), an indirect
wholly owned subsidiary of SunAmerica Inc. Under the Agreement, SAAMCo
provides continuous supervision of the Fund's portfolio and administers its
corporate affairs, subject to general review by the Directors. In connection
therewith, SAAMCo furnishes the Fund with office facilities, maintains
certain of the Fund's books and records, and pays 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 to SAAMCo is
computed daily and payable monthly, at an annual rate of .50% on the first
$600 million of the Fund's daily net assets, .45% on the next $900 million
of net assets and .40% on net assets over $1.5 billion.
SAAMCo has agreed that, in any fiscal year, it will refund or rebate its
management fee to the Fund to the extent that the Fund's expenses (including
the fees of SAAMCo and amortization of organizational expenses, but
excluding interest, taxes, brokerage commissions, distribution fees and
other extraordinary expenses) exceed the most restrictive expense limitation
imposed by states where the Fund's shares are sold. The most restrictive
expense limitation is presently believed to be 2 1/2% of the first $30
million of the Fund's daily net assets, 2% of the next $70 million of net
assets and 1 1/2% of such net assets in excess of $100 million. For the year
ended December 31, 1995, no such reimbursement was required.
The Fund has a Distribution Agreement with SunAmerica Capital Services, Inc.
("SACS"), an indirect wholly owned subsidiary of SunAmerica Inc. The 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
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
by its shareholders. Pursuant to such rule, the Directors and the
shareholders of each class of shares of the Fund have adopted Distribution
Plans hereinafter referred to as the "Class A Plan" and the "Class B Plan."
In adopting the Class A Plan and the Class B 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 the Class B shares will not be used to subsidize the
sale of Class A shares.
Under the Class B Plan the Distributor receives payments from the Fund at
the annual rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares, 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 the Class B Plan may exceed the
Distributor's distribution costs as described above. The Class A Plan does
not provide for a distribution fee. The Distribution Plans provide that each
class of shares of the Fund may also pay the Distributor an account
maintenance and service fee of up to an annual rate of 0.15% of the
aggregate average daily net assets of such class of shares for payments to
broker-dealers for providing continuing account maintenance. In this regard,
some payments are used to compensate broker-dealers with account maintenance
and service fees in an amount up to 0.15% per year of the assets maintained
in the Fund by their customers. For the year ended December 31, 1995, SACS
earned fees of $944,702 from the Fund.
SACS also receives the proceeds of contingent deferred sales charges paid by
investors in connection with certain redemptions of the Fund's Class B
shares. For the year ended December 31, 1995, SACS informed the Fund that it
received approximately $372,779 in contingent deferred sales charges.
The Fund has entered into a Service Agreement with SunAmerica Fund Services,
Inc. ("SAFS"), an indirect wholly owned subsidiary of SunAmerica Inc. Under
the Service Agreement, SAFS performs certain shareholder account functions
by assisting the Fund's transfer agent in connection with the services that
it offers to the shareholders of the Fund. The Service Agreement permits the
Fund to reimburse SAFS for costs incurred in providing such services which
is approved annually by the Directors. For the year ended December 31, 1995
the Fund (Class A, Class B) incurred expenses of $686,826 to reimburse SAFS
pursuant to the terms of the Service Agreement. Of this amount, $68,096 was
payable to SAFS at December 31, 1995.
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of each class, all at $1.00 per share, for the year
ended December 31, 1995 and for the prior year were as follows:
<TABLE>
<CAPTION>
MONEY MARKET FUND
--------------------------------------------------------
CLASS A CLASS B
---------------------------- --------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold............. 1,100,031,147 904,696,309 445,571,488 504,544,389
Reinvested dividends.... 12,194,638 6,720,048 2,179,516 1,759,780
Shares redeemed......... (1,009,865,935) (886,631,162) (494,334,685) (449,837,260)
-------------- ------------ ------------ ------------
Net increase (decrease). 102,359,850 24,785,195 (46,583,681) 56,466,909
============== ============ ============ ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1995--(CONTINUED)
NOTE 6. 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 an unaffiliated
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 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
December 31, 1995, the Fund had accrued $16,064 for the Retirement Plan,
which is included in accrued expenses on the Statement of Assets and
Liabilities and for the year ended December 31, 1995, expensed $12,175 for
the Retirement Plan, which is included in Directors' fees and expenses on
the Statement of Operations.
<PAGE>
- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
SunAmerica Money Market Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SunAmerica Money Market Fund (the
"Fund") at December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
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 generally accepted auditing standards 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 December 31, 1995 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
February 13, 1996
<PAGE>
- -------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
TRUSTEES INVESTMENT MANAGER AND ADMINISTRATOR
S. James Coppersmith SunAmerica Asset Management Corp.
Samuel M. Eisenstat The SunAmerica Center
Stephen J. Gutman 733 Third Avenue
Peter A. Harbeck New York, NY 10017-3204
Peter McMillan III
Sebastiano Sterpa DISTRIBUTOR
SunAmerica Capital Services, Inc.
The SunAmerica Center
OFFICERS 733 Third Avenue
Peter A. Harbeck, President New York, NY 10017-3204
Nancy Kelly, Vice President
P. Christopher Leary, Vice President
Robert M. Zakem, Secretary SHAREHOLDER SERVICING AGENT
Peter C. Sutton, Treasurer SunAmerica Fund Services, Inc.
John T. Genoy, Assistant Treasurer The SunAmerica Center
Donna M. Handel, Assistant Treasurer 733 Third Avenue
Hilary R. Kastleman, Assistant Secretary New York, NY 10017-3204
Abbe P. Stein, Assistant Secretary
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 419572
Kansas City, MO 64141-6572
- -------------------------------------------------------------------------------
FASTFACTS . . . AVAILABLE FOR YOUR CONVENIENCE
The easy and convenient way to obtain the most current information on your
mutual funds. By calling our toll free number, 1-800-654-4760, you can receive
mutual fund information 24 hours a day. If you require any additional
information, please call us at 1-800-858-8850 Monday-Friday 9:00 a.m.-6:00
p.m. (Eastern time).
HERE'S HOW IT WORKS
All you need is:
* A Touch-Tone Telephone
* Your account number
* Your Personal Identification number "PIN"
(the last four digits of your Social Security number, a tax identification
number or a number chosen by you)
* Your Fund Code
<TABLE>
<CAPTION>
CLASS
-------
A B
EQUITY FUNDS --- ---
<S> <C> <C>
Balanced Assets 51 551
Global Balanced 23 523
Blue Chip Growth 522 22
Mid-Cap Growth 71 571
Small Company Growth 36 536
Growth and Income 24 524
</TABLE>
<TABLE>
<CAPTION>
CLASS
-------
A B
INCOME FUNDS --- ---
<S> <C> <C>
U.S. Government
Securities 70 570
Federal Securities 534 34
Diversified Income 580 80
High Income 28 228
Tax Exempt Insured 33 533
Money Market 35 535
</TABLE>
FUNCTIONS
1 Price 12 Duplicate Statement
2 Account Balance 13 Year-End Tax
4 Last Transaction Information/Duplicate Tax
5 Help Forms
10 Check Reorder (Money Market Only) 16 Change "PIN"
17 Last Dividend Transaction
<PAGE>
- -------------------------------
BULK RATE
SUNAMERICA MONEY MARKET FUND
U.S.
THE SUNAMERICA CENTER POSTAGE
733 THIRD AVENUE PAID
NEW YORK, NY 10017-3204 Kansas
City, MO
PERMIT NO.
1-800-858-8850 3657
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.
SPONSORED BY:
[LOGO] SunAmerica
Asset Management
MMANN
December 31, 1995
SunAmerica
Money Market
Fund
Annual
Report
[LOGO] SunAmerica
Asset Management
<PAGE>
APPENDIX
BOND, NOTE AND COMMERCIAL PAPER RATINGS
DESCRIPTION OF APPLICABLE MOODY'S INVESTORS SERVICE, INC.'S ("MOODY'S")
CORPORATE BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Note: Moody's may apply numerical modifiers 1, 2 and 3 to issues
rated Aa to denote relative strength within such classification. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of the Aa rating category.
DESCRIPTION OF APPLICABLE MOODY'S NOTE RATINGS
MIG 1 Notes bearing the designation MIG 1 are judged to be of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG 2 Notes bearing the designation MIG 2 are judged to be of high
quality, with margins of protection ample although not so large as in the
preceding group.
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DESCRIPTION OF APPLICABLE MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representations as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act, nor does it
represent that any specific note is a valid obligation of a rated issuer or
issued in conformity with any applicable law.
Issuers rated P-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. P-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries
-- High rates of return on funds employed
-- Conservative capitalization structures with moderate reliance on
debt and ample asset protection
-- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation
-- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated P-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
If an issuer represents to Moody's that its commercial paper
obligations are supported by the credit of another entity or entities, then the
name or names of such supporting entity or entities are listed within
parentheses beneath the name of the issuer, or there is a footnote referring the
reader to another page for the name or names of the supporting entity or
entities. In assigning ratings to such issuers, Moody's evaluates the financial
strength of the indicated affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment. Moody's makes no representation and gives no opinion
on the legal validity or enforceability of any support arrangement. You are
cautioned to
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review with your counsel any questions regarding particular support
arrangements.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
DESCRIPTION OF APPLICABLE STANDARD & POOR'S RATINGS SERVICES, A DIVISION OF THE
MCGRAW-HILL COMPANIES, INC. ("S&P") BOND RATINGS
An S&P corporate rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligers such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information, or
for other reasons.
The ratings are based, in varying degrees, on the following
considerations: (1) likelihood of default capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions of the
obligation; and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.
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Plus (+) or minus (-): The rating of "AA" may be modified by the addition
of a plus or minus sign to show relative standing within these ratings
categories.
PROVISIONAL RATINGS:
P The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project
being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of
the project, makes no comment on the likelihood or risk of default
upon failure of such completion. The investor should exercise
judgment with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is insured by the Federal Savings & Loan Insurance Corp.
or the Federal Deposit Insurance Corp. and interest is adequately
collateralized.
* Continuance of the rating is contingent upon S&P receipt of an
executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that S&P does
not rate a particular type of obligation as a matter of policy.
Debt Obligations of Issuers outside the United States and its territories
are rated on the same basis as domestic corporate issues. The ratings measure
the credit worthiness of the obligor but do not take into account currency
exchange and related uncertainties.
APPLICABLE BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated "AAA" or "AA"
(commonly known as "investment grade" ratings) are generally regarded as
eligible for bank investment. In addition, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance companies
and fiduciaries generally.
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DESCRIPTION OF APPLICABLE S&P NOTE RATINGS
SP-1 The designation "SP-1" indicates a very strong capacity to pay
principal and interest. A "+" is added for those issues
determined to possess overwhelming safety characteristics.
SP-2 An "SP-2" designation indicates a satisfactory capacity to pay
principal and interest.
DESCRIPTION OF APPLICABLE S&P COMMERCIAL PAPER RATINGS.
A S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of not more
than 365 days.
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative
degree of safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics
are denoted with a plus (+) sign designation.
The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based on current information furnished to S&P
by the issuer or obtained from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
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