SUNAMERICA MONEY MARKET FUNDS INC, 485BPOS, 1997-09-19

SUNAMERICA MONEY MARKET FUNDS INC
485BPOS, 1997-09-19

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<PAGE>

As filed with the Securities and Exchange Commission on September 19, 1997

File Nos. 2-85370; 811-3807
________________________________________________________________________________
________________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [_]

PRE-EFFECTIVE AMENDMENT NO. [_]

POST-EFFECTIVE AMENDMENT NO. 20 X

AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [_]

AMENDMENT NO. 19 X
(Check appropriate box or boxes)

SUNAMERICA MONEY MARKET FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)(ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 858-8850

Robert M. Zakem, Esq.
Senior Vice President and General Counsel
The SunAmerica Center
SunAmerica Asset Management Corp.
733 Third Avenue - 3rd Floor
New York, NY 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:

Margery K. Neale, Esq.
Shereff, Friedman, Hoffman, & Goodman, LLP
919 Third Avenue
New York, NY 10022

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

[_] immediately upon filing pursuant [X] on September 19, 1997 pursuant to
to paragraph (b) of Rule 485 paragraph (b) of Rule 485

[_] 60 days after filing pursuant to [_] on (date) pursuant to
paragraph (a) of Rule 485 paragraph (a) of Rule 485
____________________

Registrant has elected to register an indefinite number of shares of
common stock, par value $.001 per share, under the Securities Act of 1933
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The Rule 24f-2
Notice for Registrant's fiscal year ended December 31, 1996 was filed on March
7, 1997.

________________________________________________________________________________
________________________________________________________________________________

<PAGE>

SUNAMERICA MONEY MARKET FUNDS, INC.

CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Under the Securities Act of 1933
--------------------------------

<TABLE>
<CAPTION>
PART A
Item No. Registration Statement Caption Caption in Prospectus
- -------- ------------------------------ ---------------------
<S> <C> <C>
1 Cover Page Cover Page

2 Synopsis Summary of Fund Expenses

3 Condensed Financial Information Financial Highlights;
Performance Data

4 General Description of Registrant Investment Objective and Policies;
Investment Restrictions; General
Information; Appendix

5 Management of the Fund Management of the Corporation; Portfolio
Transactions and Brokerage

5A Management's Discussion of Fund *
Performance

6 Capital Stock and Other Dividends, Distributions and Taxes;
Securities General Information

7 Purchase of Securities Being Purchase of Shares; Determination
Offered of Net Asset Value

8 Redemption or Repurchase Redemption of Shares; Exchange Privilege

9 Pending Legal Proceedings Inapplicable

<CAPTION>
PART B Caption in Statement
Item No. Registration Statement Caption of Additional Information
- -------- ------------------------------ -------------------------
<S> <C> <C>
10 Cover Page Cover Page

11 Table of Contents Table of Contents

12 General Information and History History of the Fund

13 Investment Objectives and Investment Objective and Policies;
Policies Investment Restrictions; Appendix

14 Management of the Fund Directors and Officers

15 Contact Persons and Principal Holders Directors and Officers
of Securities

16 Investment Advisory and Other Adviser, Personal Trading, Distributor and
Services Administrator; Additional Information

17 Brokerage Allocation Portfolio Transactions and Brokerage

18 Capital Stock and Other Securities Dividends, Distributions and Taxes;
Description of Shares; Additional Information

19 Purchase, Redemption and Pricing Additional Information Regarding
of Securities Being Offered Purchase of Shares; Additional
Information Regarding Redemption of
Shares; Determination of Net Asset Value;
Retirement Plans; Additional Information

20 Tax Status Dividends, Distributions and Taxes

21 Underwriters Adviser, Personal Trading, Distributor and Administrator

22 Calculation of Performance Data Performance Data

23 Financial Statements Financial Statements
</TABLE>

PART C
The information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C of this Registration Statement

* Included in the Annual Report to Shareholders for fiscal year ended
December 31, 1996.
<PAGE>

SUNAMERICA MONEY MARKET FUND

THE SUNAMERICA CENTER, 733 THIRD AVENUE, NEW YORK, NY 10017-3204

GENERAL MARKETING AND SHAREHOLDER INFORMATION

(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., an open-end diver-
sified management investment company organized as a Maryland corporation (the
"Corporation"). The Fund is advised by SunAmerica Asset Management Corp. (the
"Adviser").

The Fund seeks to maintain a stable net asset value of $1.00 per share, al-
though no assurance can be given that the Fund will be able to do so. An in-
vestment in the Fund is neither insured nor guaranteed by the U.S. Government
or any other entity.

The Fund currently offers Class A, Class B and Class C shares. The offering
price is the next-determined net asset value per share, plus for Class B and
Class C shares only, a contingent deferred sales charge ("CDSC"). For Class B
shares, a declining CDSC is imposed on certain redemptions made within six years
of purchase; for Class C shares, the CDSC may be imposed on redemptions made
within one year of purchase. Class B shares of the Fund automatically convert to
Class A shares on the first business day of the month following the seventh
anniversary of the issuance of such Class B shares. At such time, the converted
shares will no longer be subject to a distribution fee. Each class makes account
maintenance and service fee payments, and Class B and C shares also make
distribution fee payments under a plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Investors wishing
to purchase shares of the Fund are generally required to purchase Class A
shares. Class B and Class C shares will be typically issued upon an exchange of
Class B and Class C shares, respectively, from another mutual fund in the
SunAmerica Family of Mutual Funds. (See "Purchase of Shares.")

Shares of the Fund are not deposits or obligations of, or guaranteed or en-
dorsed by, any bank through which such shares may be sold, and are not feder-
ally insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other agency.

This Prospectus explains concisely what you should know before investing in
the Fund. Please read it carefully and retain it for future reference. You can
find more detailed information about the Fund in the Statement of Additional
Information dated September 19, 1997, which is incorporated by reference into
this Prospectus and further information about the performance of the Fund in
the Corporation's Annual Report to Shareholders. The Statement of Additional
Information and Annual Report to Shareholders may be obtained without charge
by contacting the Corporation at the address or telephone number listed above.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------

PROSPECTUS DATED SEPTEMBER 19, 1997
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus........................ Cover
Summary of Fund Expenses.......... 2
Financial Highlights.............. 4
Investment Objective and Policies. 5
Investment Restrictions........... 5
Management of the Corporation..... 5
Purchase of Shares................ 7
Redemption of Shares.............. 9
Exchange Privilege................ 10
</TABLE>
<TABLE>
<CAPTION>

PAGE
----
<S> <C>
Portfolio Transactions and
Brokerage........................ 11
Determination of Net Asset Value.. 11
Performance Data.................. 12
Dividends, Distributions and
Taxes............................ 12
General Information............... 12
Appendix.......................... 13
</TABLE>

SUMMARY OF FUND EXPENSES

A general comparison of the sales arrangements and other non-recurring
expenses applicable to Class A, Class B and Class C shares follows:

<TABLE>
<CAPTION>
CLASS A CLASS B(/1/) CLASS C(/1/)(/6/)
------- ------------ -----------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load................ None None None
Maximum Sales Load on Reinvested Divi-
dends.................................... None None None
Deferred Sales Load(/2/).................. None 4.00% 1.00%
Redemption Fees(/3/)...................... None None None
Exchange Fees............................. $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................... 0.50% 0.50% 0.50%
12b-1 Fees(/4/)........................... 0.15% 0.90% 0.90%
Other Expenses............................ 0.35% 0.37% 0.37%
----- ----- -----
Total Operating Expenses(/5/)............. 1.00% 1.77% 1.77%
===== ===== =====
</TABLE>

--------
(1) Investors wishing to purchase shares of the Fund are generally
required to purchase Class A shares. Class B and Class C shares of the
Fund will typically be issued in exchange for Class B shares or Class C
shares, respectively, of other mutual funds in the SunAmerica Family of
Mutual Funds.

(2) The CDSC on Class B shares applies only if a redemption occurs within
six years from their purchase date. The CDSC on Class C shares applies
only to redemptions made within one year of purchase.

(3) A $15.00 fee may be imposed for wire redemptions.

(4) 0.15% of the 12b-1 fee comprises an Account Maintenance and Service
Fee. A portion of the Account Maintenance and Service Fee is allocated
to member firms of the National Association of Securities Dealers, Inc.
for continuous personal service by such members to investors in the
Fund, such as responding to shareholder inquiries, providing current
marketing material and attending to other shareholder matters. Class B
and Class C shareholders who own shares for an extended period of time
may pay more in Rule 12b-1 distribution fees than the economic
equivalent of the maximum front-end sales charge permitted under the
Conduct Rules of the National Association of Securities Dealers, Inc.

(5) For the fiscal year ended December 31, 1996, the total operating
expenses reflect the effect of a gross up of transfer agent expense
credits of .03% and .04% for Class A and Class B shares, respectively.

(6) Effective as of the initial offering of Class C shares, SunAmerica has
voluntarily agreed to waive fees or reimburse expenses, if necessary, to keep
annual operating expenses of such shares at or below an annual rate of 1.77%
of average daily net assets. The information provided in the table represents
estimated amounts for the current fiscal year net of current fee
waivers/expense reimbursements. Absent such fee waiver/expense
reimbursements, estimated annual operating expenses for Class C would be
3.42%.

2
<PAGE>

EXAMPLE:

You would pay the following expenses on a $1,000 investment over various time
periods assuming (1) a 5% annual return and (2) redemption at the end of each
time period. The 5% return and the expenses used in this Example should not be
considered indicative of actual or expected performance or expenses, both of
which will vary:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares.................................. $10 $32 $ 55 $122
Class B shares*................................. $58 $86 $116 $178
Class C shares.................................. $28 $56 $ 96 $208
</TABLE>

You would pay the following expenses on the same investment, assuming no
redemption:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares.................................. $10 $32 $55 $122
Class B shares*................................. $18 $56 $96 $178
Class C shares.................................. $18 $56 $96 $208
</TABLE>

The foregoing examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.

- --------
* Class B shares convert to Class A shares on the first business day of the
month following the seventh anniversary of the purchase of such Class B
shares. Therefore, with respect to the 10-year expense information, years 8,
9 and 10 reflect the lower expenses attributable to ownership of Class A
shares.

3
<PAGE>

FINANCIAL HIGHLIGHTS

The following Financial Highlights for each of the periods through December
31, 1996 have been audited by Price Waterhouse LLP, the Fund's independent
accountants, whose report on the financial statements containing such
information for the five years ended December 31, 1996 is included in the
Fund's Annual Report to Shareholders. The Financial Highlights for the six-
month period ended June 30, 1997 have not been audited. These Financial
Highlights should be read in conjunction with the Fund's financial statements
and notes thereto, which are included in the Statement of Additional
Information and are incorporated by reference herein.

<TABLE>
<CAPTION>
RATIO OF
DIVIDENDS NET NET NET
NET ASSET FROM ASSET ASSETS RATIO OF INVESTMENT
VALUE NET TOTAL FROM NET VALUE END OF EXPENSES INCOME TO
PERIOD BEGINNING INVESTMENT INVESTMENT INVESTMENT END OF TOTAL PERIOD TO AVERAGE AVERAGE
ENDED OF PERIOD INCOME OPERATIONS INCOME PERIOD RETURN(/1/) (000'S) NET ASSETS NET ASSETS
- ------ --------- ---------- ---------- ---------- ------ ----------- -------- ---------- ----------
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/87 $1.000 $0.059 $0.059 $(0.059) $1.000 5.90% $381,405 1.00% 5.87%
12/31/88 1.000 0.067 0.067 (0.067) 1.000 6.70 522,163 1.09 6.71
12/31/89 1.000 0.082 0.082 (0.082) 1.000 8.52 402,720 1.19 8.22
12/31/90 1.000 0.072 0.072 (0.072) 1.000 7.44 302,440 1.10 7.23
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
12/31/96 1.000 0.045 0.045 (0.045) 1.000 4.61 398,698 1.00(/3/) 4.52
06/30/97(/6/) 1.000 0.021 0.021 (0.021) 1.000 2.12 452,008 0.99(/3/)(/5/) 4.66(/5/)
<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%(/4/) $ 41,915 1.69%(/5/) 1.69%(/5/)
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
12/31/96 1.000 0.038 0.038 (0.038) 1.000 3.83 29,114 1.77(/3/) 3.76
06/30/97(/6/) 1.000 0.017 0.017 (0.017) 1.000 1.76 28,090 1.75(/3/)(/5/) 3.88(/5/)
</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 for the year ended December 31, 1995 of 0.05% and 0.13%
for Class A and Class B, respectively.

(3) The expense ratio reflects the effect of a gross up of transfer agent
expense credits as follows:

<TABLE>
<CAPTION>
12/31/96 6/30/97
-------- -------
<S> <C> <C>
Class A......................... 0.03% 0.03%
Class B......................... 0.04% 0.01%
</TABLE>

(4) Total return is not annualized.

(5) Annualized.

(6) Unaudited.

4
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to seek as high a level of current
income as is consistent with liquidity and stability of capital through
investment primarily in high quality money market instruments. There can be no
assurance that the investment objective of the Fund will be achieved.

Except as specifically indicated, the investment policies and strategies
described herein are not fundamental policies of the Fund and may be changed
by the Board of Directors ("Directors") without the approval of shareholders.
The Fund's investment objective and fundamental investment restrictions,
however, may not be changed without the approval of shareholders of the Fund.
See "Investment Restrictions."

The Fund will seek to achieve its investment objective by investing in a
diversified portfolio of money market instruments, including: (i) securities
issued or guaranteed as to principal and interest by the U.S. government, its
agencies or instrumentalities; (ii) certificates of deposit, bankers'
acceptances and time deposits; (iii) commercial paper and other short-term
obligations of U.S. and foreign corporations; (iv) repurchase agreements; (v)
reverse repurchase agreements; and (vi) asset-backed securities. The Fund
seeks to maintain a constant net asset value of $1.00 per share. To do so, the
Fund pursuant to Rule 2a-7 uses the amortized cost method of valuation in
computing its current share price under the 1940 Act. See "Determination of
Net Asset Value." In addition, the Fund complies with the quality,
diversification and maturity requirements set forth in such rule. See the
Statement of Additional Information for a discussion regarding these
requirements.

See the Appendix and the Statement of Additional Information for further
information regarding the types of securities in which the Fund may invest.

INVESTMENT RESTRICTIONS

The Fund has adopted certain fundamental policies designed to maintain the
diversity of its portfolio and reduce investment risk. With respect to 75% of
the Fund's total assets, the Fund may not invest more than 5% of its assets in
the securities of any one issuer (other than obligations of the U.S.
government, its agencies and instrumentalities) or purchase more than 10% of
an issuer's voting securities or more than 10% of any class of an issuer's
outstanding securities. The Fund may not purchase securities if as a result of
such purchase more than 25% of the Fund's total assets would be invested in
any one industry, except that the Fund may invest without limit in obligations
issued or guaranteed by the U.S. government, its agencies and
instrumentalities. In addition, the Fund reserves freedom of action to invest
in obligations issued by domestic branches of U.S. banks. As a fundamental
policy, the Fund may borrow up to 10% of its total assets for temporary or
emergency purposes. The Fund may also pledge its assets to secure such
borrowings. See the Statement of Additional Information for information
concerning other fundamental policies.

MANAGEMENT OF THE CORPORATION

DIRECTORS. The Directors of the Corporation are responsible for the overall
supervision of the operation of the Corporation and the Fund and perform
various duties imposed on directors of investment companies by the 1940 Act
and by the State of Maryland.

THE ADVISER. 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. The Adviser is
an indirect wholly owned subsidiary of SunAmerica Inc. ("SunAmerica"), an
investment-grade financial services company which, as of June 30, 1997 held
approximately $48 billion in assets. SunAmerica's principal executive offices
are located at 1 SunAmerica Center, Los Angeles, CA 90067-6022. In addition to
serving as adviser to the Fund, the Adviser serves as adviser, manager and/or
administrator for Anchor Pathway Fund, Anchor Series Trust, Seasons Series
Trust, Style Select Series, Inc., SunAmerica Equity Funds, SunAmerica Income
Funds and SunAmerica Series Trust. The Adviser managed, advised and/or
administered assets of approximately $10.0 billion as of June 30, 1997 for
investment companies, individuals, pension accounts, and corporate and trust
accounts.

5
<PAGE>

Pursuant to the Investment Advisory and Management Agreement entered into
between the Adviser and the Corporation, on behalf of the Fund, the Fund pays
the Adviser a fee, 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 for
the services performed on behalf of the Fund and the facilities furnished by
the Adviser. For the fiscal year ended December 31, 1996, the Fund paid the
Adviser a fee equal to .50% of the average daily net assets of the Fund.

PORTFOLIO MANAGEMENT. The following individuals are primarily responsible
for the day-to-day management of the Fund.

P. Christopher Leary and John J. DiVito serve as co-portfolio managers of
the Fund. Mr. Leary has served as portfolio manager since August 1995 and Mr.
DiVito has served as co-portfolio manager since July 1997. Mr. Leary is a
Senior Vice President of the Adviser and has been a portfolio manager with the
Adviser since 1990. Mr. DiVito, an Assistant Vice President of the Adviser,
has been with the Adviser since November 1994. Prior to joining the Adviser,
Mr. DiVito was an assistant trader with Stoever, Glass & Co.

THE DISTRIBUTOR. SunAmerica Capital Services, Inc. (the "Distributor"), an
indirect wholly owned subsidiary of SunAmerica, acts as distributor of the
shares of the Fund pursuant to the Distribution Agreement between the
Distributor and the Corporation on behalf of the Fund. The Distributor and
other broker-dealers pay commissions to salespersons, as well as the cost of
printing and mailing prospectuses to potential investors and of any
advertising expenses incurred by them in connection with their distribution of
Fund shares.

Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion
of the Adviser based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to
investment companies of the type contemplated by the Distribution Plans (as
described below). The Directors will consider appropriate modifications to the
operations of the Fund, including discontinuance of payments under the
Distribution Plans to banks and other depository institutions, in the event
such institutions can no longer provide the services called for under their
agreements. Banks and other financial services firms may be subject to various
state laws regarding the services described, and may be required to register
as dealers pursuant to state law.

DISTRIBUTION PLANS. Rule 12b-1 under the 1940 Act permits an investment
company directly or indirectly to pay expenses associated with the
distribution of its shares ("distribution expenses") in accordance with a plan
adopted by the investment company's board of directors and approved by its
shareholders. Pursuant to such rule, the Directors and the shareholders of
each class of shares of the Fund have adopted distribution plans hereinafter
referred to as the "Class A Plan," "Class B Plan," and the "Class C Plan," and
collectively as the "Distribution Plans." In adopting each Distribution 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
respective sales charges and distribution fees of the Class B shares and Class
C shares will not be used to subsidize the sale of shares of any other class.

Under the Class B and Class C Plans, 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 and Class C shares, respectively, to compensate
the Distributor and certain securities firms for providing sales and
promotional activities for distributing each such class of shares. The
distribution costs for which the Distributor may be reimbursed out of such
distribution fees include fees paid to broker-dealers that have sold Fund
shares, commissions, and other expenses such as those incurred for sales
literature, prospectus printing and distribution and compensation to
wholesalers. It is possible that in any given year the amount paid to the
Distributor under the Class B or Class C 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 respective class of
shares of the Fund may also 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 net assets maintained in the Fund by their customers.

6
<PAGE>

For the fiscal year ended December 31, 1996, under the Class A Plan, the
Fund paid the Distributor a fee equal to .15% of Class A's average daily net
assets. For the same period, under the Class B Plan, the Fund paid the
Distributor a fee equal to .90% of Class B's average daily net assets.

ADMINISTRATOR. The Corporation has entered into a Service Agreement under
the terms of which SunAmerica Fund Services, Inc. ("SAFS"), an indirect wholly
owned subsidiary of SunAmerica, assists the transfer agent in providing
shareholder services. Pursuant to the Service Agreement, SAFS receives a fee
from the Fund, calculated and payable monthly, at an annual rate of 0.22% of
average daily net assets. See the Statement of Additional Information for
further information.

PURCHASE OF SHARES

GENERAL. Shares of the Fund are sold at net asset value per share, plus for
Class B and Class C shares only, a deferred sales charge. The Fund seeks to
maintain a stable net asset value per share of $1.00, although no assurance
can be given that the Fund will be able to do so.

The minimum initial investment in the Fund is $1,000 and the minimum
subsequent investment is $100. However, for Individual Retirement Accounts
(IRAs), Keogh Plan accounts and accounts for other qualified plans, the
minimum initial investment is $250 and minimum subsequent investment is $25.

Investors purchasing shares of the Fund are generally required to purchase
Class A shares, since there is no sales charge or distribution fee. Class B
and Class C shares are typically intended to be purchased in connection with
exchanges of Class B or Class C shares, respectively, from other funds in the
SunAmerica Family of Mutual Funds. Dealers may receive different levels of
compensation depending on which class of shares they sell.

Upon making an investment in shares of the Fund, an open account will be
established under which shares of the Fund and additional shares acquired
through reinvestment of dividends and distributions will be held for each
shareholder's account by State Street Bank and Trust Company ("State Street")
and its affiliate, National Financial Data Services ("NFDS") (collectively,
the "Transfer Agent"). Shareholders will not be issued certificates for their
shares. Shareholders receive regular statements from the Transfer Agent that
report each transaction affecting their accounts. Further information may be
obtained by calling Shareholder/Dealer Services at (800) 858-8850.

CLASS A SHARES. Class A shares are offered at net asset value. No sales
charge is imposed on purchases or redemptions of Class A shares; provided,
however, that shareholders who purchased their Class A shares of the Fund
through an exchange from another fund in the SunAmerica Family of Mutual Funds
without an initial sales charge on the original purchase because such purchase
was in excess of $1 million, will remain subject to the 1% CDSC applicable to
such redemptions. See "Exchange Privilege."

CLASS B SHARES. Class B shares are offered at net asset value. Certain
redemptions of Class B shares within the first six years of the date of
purchase are subject to a CDSC. The charge is assessed on an amount equal to
the lesser of the then-current market value or the purchase price of the
shares being redeemed. No charge is assessed on shares derived from
reinvestment of dividends or capital gains distributions. In determining
whether the CDSC is applicable to a redemption, the calculation is determined
in the manner that results in the lowest possible rate being charged.
Therefore, it is assumed that the redemption is first of any Class A shares in
the shareholder's Fund account, second of any shares in such account that are
not subject to a CDSC (i.e., shares representing reinvested dividends and
distributions), third of shares held for more than six years and fourth of
such shares held the longest during the six-year period. The amount of the
CDSC, if any, will vary depending on the number of years from the time of
payment for the purchase of Fund shares until the time of redemption of such
shares. Solely for purposes of determining the number of years from the time
of any payment for the purchase of shares, all payments during a month are
aggregated and deemed to have been made on the first day of the month. The
following table sets forth the rates of the CDSC.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLARS INVESTED OR
YEAR SINCE PURCHASE PAYMENT WAS MADE REDEMPTION PROCEEDS
- ------------------------------------ -------------------------
<S> <C>
First................................................. 4%
Second................................................ 4%
Third................................................. 3%
Fourth................................................ 3%
Fifth................................................. 2%
Sixth................................................. 1%
Seventh and thereafter................................ 0%
</TABLE>

7
<PAGE>

Shareholders of the Fund that acquired their Class B shares pursuant to a
reorganization effected with another SunAmerica mutual fund will remain
subject to the terms of the CDSC in effect for the previous fund at the time
of such reorganization. For additional information, see "Additional
Information Regarding Purchase of Shares" in the Statement of Additional
Information.

Conversion Feature--Class B Shares. Class B shares (including a pro rata
portion of the Class B shares purchased through the 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 the issuance of
such Class B shares. Class B shares of the Fund issued upon an exchange of
Class B shares of another SunAmerica Mutual Fund will convert into Class A
shares of the Fund on the first business day of the month following the
seventh anniversary of the issuance of the original Class B shares. Subsequent
to the conversion of a Class B share to a Class A share, such share will no
longer be subject to the higher distribution fee of Class B shares. Such
conversion 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.

CLASS C SHARES. Class C shares are offered at net asset value. Certain
redemptions of Class C shares within the first year of the date of purchase
are subject to a CDSC of 1%. The method for calculating any such CDSC will be
the same method used for calculating the CDSC for Class B shares. See "Class B
Shares" above.

Waiver of CDSC. The CDSC will be waived in connection with redemptions which
are (a) requested within one year of the death of the shareholder of an
individual account or of a joint tenant where the surviving joint tenant is
the deceased's spouse; (b) requested within one year after the shareholder of
an individual account or a joint tenant on a spousal joint tenant account
becomes disabled; (c) taxable distributions or loans to participants made by
qualified retirement plans or retirement accounts (not including rollovers)
for which the Adviser serves as a fiduciary (e.g., prepares all necessary tax
reporting documents); provided that, in the case of a taxable distribution,
the plan participant or accountholder has attained the age of 59 1/2 at the
time the redemption is made; (d) made pursuant to a Systematic Withdrawal
Plan, up to a maximum amount of 12% per year from a shareholder account based
on the value of the account at the time the Plan is established, provided,
however, that all dividends and capital gains distributions are reinvested in
Fund shares; and (e) made of shares in accounts consisting of assets which
were originally individually managed by the Adviser and had paid an investment
advisory fee to the Adviser. See the Statement of Additional Information for
further information concerning conditions with respect to (a) and (b) above.

Other CDSC Information. For Federal income tax purposes, the amount of the
CDSC will reduce the amount realized on the redemption of shares,
concomitantly reducing gain or increasing loss. For information on the
imposition and waiver of the CDSC contact Shareholder/Dealer Services at (800)
858-8850.

ADDITIONAL PURCHASE INFORMATION. All purchases are confirmed to each
shareholder. The Corporation and the Distributor reserve the right to reject
any purchase order and may at any time discontinue the sale of any class of
shares of the Fund.

Shares of the Fund may be purchased through SAFS, by check or federal funds
wire and through a pre-authorized check investment program.

Checks should be made payable to the Fund or to "SunAmerica Funds." If the
payment is for a retirement plan account for which the Adviser serves as
fiduciary, please indicate on the check that payment is for such an account.
Payments to open new accounts should be mailed to SunAmerica Fund Services,
Inc., Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue, New
York, New York 10017-3204, together with a completed New Account Application.
Payment for subsequent purchases should be mailed to SunAmerica Fund Services,
Inc., c/o NFDS, P.O. Box 419373, Kansas City, Missouri 64141-6373 and the
shareholder's Fund account number should appear on the check. For fiduciary
retirement plan accounts, both initial and subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., Mutual Fund Operations, The
SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204. SAFS
reserves the right to reject any check made payable other than in the manner
indicated above. Under certain circumstances, the Fund will accept a multi-
party check (e.g., a check made payable to the shareholder by another party
and then endorsed by the shareholder to the Fund in payment for the purchase
of shares); however, the processing of such

8
<PAGE>

a check may be subject to a delay. The Fund does not verify the authenticity
of the endorsement of such multi-party check, and acceptance of the check by
the Fund should not be considered verification thereof. Neither the Fund nor
its affiliates will be held liable for any losses incurred as a result of a
fraudulent endorsement.

Since the Fund will be investing in instruments that normally require
immediate payment in Federal Funds (monies credited to a bank's account with
its regional Federal Reserve Bank), the Fund has adopted procedures for the
convenience of its shareholders and to ensure that it receives funds that can
be invested. Orders for purchases of shares received by wire transfer in the
form of Federal Funds will be effected at the next-determined net asset value
if received at or prior to the Fund's close of business. Orders for purchases
accompanied by check or other negotiable bank draft will be accepted and
effected as of the Fund's close of business on the next business day following
receipt of such order. Shares will be entitled to receive a dividend, if any,
commencing on the next business day after the day the purchase is effected.

See "Additional Information Regarding Purchase of Shares" in the Statement
of Additional Information for more information regarding these services, the
procedures involved and when orders are deemed to be received.

REDEMPTION OF SHARES

Shares of the Fund may be redeemed at any time at their net asset value
next-determined, less any applicable CDSC (Class B and Class C shares only),
after receipt by the Fund of a redemption request in proper form. See
"Dividends, Distributions and Taxes."

REGULAR REDEMPTION. Shareholders may redeem their shares by sending a
written request to SAFS, Mutual Fund Operations, The SunAmerica Center, 733
Third Avenue, New York, NY 10017-3204. All written requests for redemption
must be endorsed by the shareholder(s) with signature(s) guaranteed by an
"eligible guarantor institution" which includes: banks, brokers, dealers,
credit unions, securities and exchange associations, clearing agencies and
savings associations. Guarantees must be signed by an authorized signatory of
the eligible guarantor and the words "Signature Guaranteed" must appear with
the signature. Signature guarantees by notaries will not be accepted. SAFS may
request further documentation from corporations, executors, administrators,
trustees or guardians.

REPURCHASE THROUGH THE DISTRIBUTOR. The Distributor is authorized, as agent
for the Fund, to offer to repurchase shares which are presented by telephone
to the Distributor by investment dealers. Orders received by dealers must be
at least $500. The repurchase price is the net asset value per share of the
applicable class of shares of the Fund next-determined after the repurchase
order is received, less any applicable CDSC (Class B and Class C shares only).
Repurchase orders received by the Distributor after the Fund's close of
business, will be priced based on the next business day's close. Dealers may
charge for their services in connection with the repurchase, but neither the
Fund nor the Distributor imposes any such service charge. The offer to
repurchase may be suspended at any time, as described below.

TELEPHONE REDEMPTION. The Corporation accepts telephone requests for
redemption of shares with a value of less than $100,000. The proceeds of a
telephone redemption may be sent by wire to the shareholder's bank account as
set forth in the New Account Application or in a subsequent written
authorization. Shareholders utilizing the redemption through the electronic
funds transfer method will incur a $15.00 transaction fee. The Corporation
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Failure to do so may result in liability to the
Corporation for losses incurred due to unauthorized or fraudulent telephone
instructions. Such procedures include, but are not limited to, requiring some
form of personal identification prior to acting upon instructions received by
telephone and/or tape recording of telephone instructions.

A shareholder making a telephone redemption should call Shareholder/Dealer
Services at (800) 858-8850, and state (i) the name of the shareholder(s)
appearing on the Fund's records, (ii) his or her account number with the Fund,
(iii) the amount to be redeemed, and (iv) the name of the person(s) requesting
the redemption. The Corporation reserves the right to terminate or modify the
telephone redemption service at any time.

SYSTEMATIC WITHDRAWAL PLAN. Shareholders who have invested at least $5,000
in the Fund may

9
<PAGE>

provide for the periodic payment from the account pursuant to the Systematic
Withdrawal Plan. At the shareholder's election, such payment may be made
directly to the shareholder or to a third party on a monthly, quarterly, semi-
annual or annual basis. The minimum periodic payment is $50. Maintenance of a
withdrawal plan concurrently with purchases of additional shares may be
disadvantageous to a shareholder because of the sales charge applicable to
such purchases. Further information may be obtained by calling
Shareholder/Dealer Services at (800) 858-8850.

CHECKS. An individual shareholder may request from SAFS a supply of checks
which may be used to effect the redemption of shares having a value of at
least $100. Such checks may not be used to purchase shares of the Fund, or for
redemption of Class C shares. When a check is presented for payment, the
Transfer Agent redeems a sufficient number of full and fractional shares in
the shareholder's account to cover the amount of the check. The use of a check
to make a withdrawal enables a shareholder of the Fund to receive dividends on
the shares to be redeemed up to the time the check clears the Fund. Checks
provided by the Fund may not be certified. There is no charge to shareholders
for checks provided by the Fund.

GENERAL. Normally payment is made on the next business day for shares
redeemed, but in any event, payment is made by check within seven days after
receipt by the Transfer Agent of a redemption request in proper form. Under
unusual circumstances, the Fund may suspend repurchases or postpone payment
for up to seven days or longer, as permitted by the federal securities laws.

At various times, the Fund may be requested to redeem shares for which it
has not yet received good payment. The Fund may delay or cause to be delayed
the mailing of a redemption check until such time as good payment (e.g., cash
or certified check drawn on a United States bank) has been collected for the
purchase of such shares, which will not exceed 15 days.

Because of the high cost of maintaining smaller shareholder accounts, the
Fund may redeem on at least 60 days' written notice and without shareholder
consent, any account that, due to a shareholder redemption and not to market
fluctuation of the account's value, has a net asset value of less than $500
($250 for retirement plan accounts), as of the close of business on the day
preceding such notice, unless such shareholder increases the account balance
to at least $500 during such 60-day period. In the alternative, the Fund may
impose a $2.00 monthly charge on accounts below the minimum account size.

If a shareholder redeems shares of any class of the Fund and then within one
year from the date of redemption decides the shares should not have been
redeemed, the shareholder may use all or any part of the redemption proceeds
to reinstate, with the crediting of any CDSC paid with respect to such
reinstated shares at the time of redemption (Class B and Class C shares only),
all or any part of the redemption proceeds in shares of the Fund at the then-
current net asset value. Reinstatement may affect the tax status of the prior
redemption.

EXCHANGE PRIVILEGE

GENERAL. Shareholders in the Fund may exchange their shares for the same
class of shares of other funds in the SunAmerica Family of Mutual Funds that
offer such class at the respective net asset value per share; however,
exchanges of Class A shares may be subject to the applicable sales load
imposed by the acquired fund. Shareholders who wish to use the exchange
privilege to exchange their shares will incur a $5.00 exchange fee. Before
making an exchange, a shareholder should obtain and review the prospectus of
the fund whose shares are being acquired. All exchanges are subject to
applicable minimum initial investment requirements and can only be effected if
the shares to be acquired are qualified for sale in the state in which the
shareholder resides. Exchanges of shares generally will constitute a taxable
transaction except for IRAs, Keogh Plans and other qualified or tax-exempt
accounts. The exchange privilege may be terminated or modified upon 60 days'
written notice. Further information about the exchange privilege may be
obtained by calling Shareholder/Dealer Services at (800) 858-8850.

If a shareholder acquires Class A shares through an exchange from another
fund in the SunAmerica Family of Mutual Funds and the original purchase of
such fund's Class A shares was not subject to an initial sales charge because
the purchase was in excess of $1 million, such shareholder will remain subject
to

10
<PAGE>

the 1% CDSC, if any, applicable to such redemptions. In such event, the period
for which the original shares were held prior to the exchange will be "tacked"
with the holding period of the shares acquired in the exchange for purposes of
determining whether the 1% CDSC is applicable upon a redemption of any of such
shares.

A shareholder who acquires Class B or Class C shares through an exchange
from another fund in the SunAmerica Family of Mutual Funds will retain
liability for any CDSC which is outstanding on the date of the exchange. In
such event, the period for which the original shares were held prior to the
exchange will be "tacked" or combined with the holding period of the shares
acquired in the exchange for purposes of determining what, if any, CDSC is
applicable upon a redemption of any of such shares.

For federal income tax purposes, an exchange is treated as a redemption and
a purchase of shares.

RESTRICTIONS ON EXCHANGES. Because excessive trading (including short-term
"market timing" trading) can hurt the Fund's performance, the Fund may refuse
any exchange sell order (i) if it appears to be a market timing transaction
involving a significant portion of the Fund's assets or (ii) from any
shareholder account if previous use of the exchange privilege is considered
excessive. Accounts under common ownership or control, including, but not
limited to, those with the same taxpayer identification number and those
administered so as to redeem or purchase shares based upon certain
predetermined market indicators, will be considered one account for this
purpose.

In addition, the Fund reserves the right to refuse any exchange purchase
order if, in the judgment of the Adviser, the Fund would be unable to invest
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. A shareholder's purchase exchange
may be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincide with a "market timing" strategy may be
disruptive to the Fund and may therefore be refused.

Finally, as indicated under "Purchase of Shares", the Fund and Distributor
reserve the right to refuse any order for the purchase of shares.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of broker-dealers and negotiation of commission rates.
Since purchases and sales of portfolio securities by the Fund are usually
principal transactions, the Fund incurs little or no brokerage commissions.
Portfolio securities are normally purchased directly from the issuer or from a
market maker for the securities. The purchase price paid to dealers serving as
market makers may include a spread between the bid and asked price. The Fund
may also purchase securities from underwriters at prices which include a
concession paid by the issuer to the underwriter.

As a general matter, the Adviser selects broker-dealers which, in its best
judgment, provide prompt and reliable execution at favorable security prices
and reasonable commission rates. The Adviser may select broker-dealers which
provide it with research services and may cause the Fund to pay such broker-
dealers commissions which exceed those which other broker-dealers may have
charged, if in the Adviser's view the commissions are reasonable in relation
to the value of the brokerage and/or research services provided by the broker-
dealer. Brokerage arrangements may take into account the distribution of Fund
shares by broker-dealers, subject to best price and execution. The Adviser may
effect portfolio transactions through an affiliated broker-dealer, acting as
agent and not as principal, in accordance with the requirements of the 1940
Act and other applicable securities laws.

DETERMINATION OF NET ASSET VALUE

The Fund is open for business on any day the New York Stock Exchange
("NYSE") is open for regular trading. Shares are valued each day as of the
close of regular trading on the NYSE (generally, 4:00 P.M., Eastern time). 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 outstanding
of each class. It is the intention of the Fund to maintain a net asset value
per share of $1.00, although there can be no assurance that the Fund will be
able to do so. In accordance with the rules and regulations of the Securities
and Exchange Commission (the "SEC"), the Fund intends to value

11
<PAGE>

its portfolio securities based upon their amortized cost. This entails
initially valuing a security 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 value, as determined by the amortized cost method, is higher or lower
than the price the Fund would receive if it sold the instrument.

PERFORMANCE DATA

The Fund may advertise performance data that reflects its yield and
effective yield. Yield is based on historical earnings and is not intended to
indicate future performance.

The Fund's yield is calculated by determining the net change in value of a
hypothetical account which had one share at the beginning of a seven day
period. The yield is compounded in order to determine the effective yield.
Yield is determined by a standard formula prescribed by the SEC to facilitate
comparison with yields quoted by other mutual funds. A detailed discussion of
the yield computation is contained in the Statement of Additional Information.

Since expenses for Class B and Class C shares are higher than those for
Class A shares, the performance of Class B and Class C shares will be lower
than that for Class A shares.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income are
declared daily and paid monthly on or about the fifteenth day of the month.
Dividends and distributions generally are taxable in the year in which they
are paid, except any dividends paid in January which were declared in the
previous calendar quarter will be treated as paid in December of the previous
year. Dividends and distributions are paid in additional shares based on the
next-determined net asset value, unless the shareholder elects in writing, not
less than five business days prior to the payment date, to receive such
amounts in excess of $10 in cash.

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, no interest will accrue
on amounts represented by uncashed dividend distribution checks.

In addition to having the dividends and distributions of the Fund reinvested
in shares of the Fund, a shareholder may, if he or she so elects on the New
Account Application, have dividends and distributions invested in the same
class of shares of any other SunAmerica Mutual Fund at the then-current net
asset value of such Fund(s).

The excess of net realized mid-or-long-term capital gains over net capital
losses, if any, will be distributed to shareholders annually. The Fund's
policy is to offset any prior year capital loss carry-forward against any
realized capital gains, and accordingly, no distribution of capital gains will
be made until gains have been realized in excess of any such capital loss
carry-forward.

TAXES. The Fund is qualified and intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended. While so qualified, the Fund will not be subject to U.S. Federal
income tax on the portion of its investment company taxable income and net
capital gains distributed to its shareholders.

For Federal income tax purposes, dividends of net ordinary income and
distributions of any net realized short-term capital gain, whether paid in
cash or reinvested in shares of the Fund, are taxable to shareholders as
ordinary income.

Statements as to the tax status of distributions to shareholders of the Fund
will be mailed annually. Shareholders are urged to consult their own tax
advisors regarding specific questions as to Federal, state or local taxes. See
"Dividends, Distributions and Taxes" in the Statement of Additional
Information.

GENERAL INFORMATION

REPORTS TO SHAREHOLDERS. The Corporation sends to its shareholders audited
annual and unaudited semi-annual reports for the Fund. The financial
statements appearing in annual reports are audited by independent accountants.
In addition, the Transfer Agent sends to each shareholder having an

12
<PAGE>

account directly with the Fund a statement confirming transactions in the
account.

ORGANIZATION. The Corporation, organized under the laws of the State of
Maryland on July 20, 1983, is an open-end diversified management investment
company, commonly referred to as a mutual fund. The Fund is the only
investment series or fund of the Corporation. The Directors have the authority
to issue up to an aggregate of ten billion (10,000,000,000) shares of common
stock of the Corporation of separate series and classes, par value $.001 per
share. The Fund currently offers Class A, Class B and Class C shares.

The Corporation does not hold annual shareholder meetings. The Directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any Director when so requested in writing by the
shareholders of record holding at least 10% of the Corporation's outstanding
shares. Each share of the Fund has equal voting rights on each matter
pertaining to the Fund or matters to be voted upon by the Corporation, except
as noted in the Statement of Additional Information. Each share of the Fund is
entitled to participate equally with the other shares of the Fund in dividends
and other distributions and the proceeds of any liquidation, except that, due
to the differing expenses borne by the classes, such dividends and proceeds
are likely to be lower for Class B and Class C shares than for Class A shares.
See the Statement of Additional Information for more information with respect
to the distinctions among classes.

INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL. Price Waterhouse LLP, 1177 Avenue
of the Americas, New York, NY 10036, serves as the Corporation's independent
accountants. The firm of Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third
Avenue, New York, NY 10022, serves as legal counsel to the Corporation.

SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or address on the cover page of this
Prospectus. For questions concerning share ownership, dividends, transfer of
ownership or share redemption, contact SAFS, Mutual Fund Operations, The
SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204, or call
Shareholder/Dealer Services at (800) 858-8850.

APPENDIX

U.S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to principal
and interest by the U.S. government, its agencies or instrumentalities include
U.S. Treasury obligations, consisting of bills, notes and bonds, which
principally differ in their interest rates, maturities and times of issuance,
and obligations issued or guaranteed by agencies and instrumentalities which
are supported by (i) the full faith and credit of the U.S. Treasury (such as
securities of the Small Business Administration), (ii) the limited authority
of the issuer to borrow from the U.S. Treasury (such as securities of the
Student Loan Marketing Association), or (iii) the authority of the U.S.
government to purchase certain obligations of the issuer (such as securities
of the Federal National Mortgage Association). No assurance can be given that
the U.S. government will provide financial support to its agencies and
instrumentalities as described in "(ii)" or "(iii)" above other than as set
forth, since it is not obligated to do so by law.

BANK OBLIGATIONS. These obligations include certificates of deposit and
bankers' acceptances issued by domestic banks and savings and loan
associations and other savings depositories, which have total assets in excess
of $2 billion. In addition, the Fund may invest in U.S. dollar denominated
obligations issued by foreign branches of the domestic banks described above
("Eurodollar CD's"), including non-negotiable fixed time deposits maturing in
seven days or less, and in U.S. dollar denominated certificates of deposit
issued through U.S. branches of foreign banks ("Yankee CD's") having total
assets in excess of $2 billion. These investments may involve risks which
differ from investments in domestic obligations, such as future unfavorable
political and economic developments, the possible imposition of exchange
controls or other governmental restrictions, the availability of public
information about issuers, and differing accounting and financial reporting
standards.

COMMERCIAL PAPER. Commercial paper is a promissory note issued by a
corporation to finance short-term credit needs. The Fund may invest in
commercial paper of domestic corporations and in U.S. dollar denominated
commercial paper issued by foreign corporations. Commercial paper may be
either unsecured or backed by a letter of credit. Commercial paper obligations
may include variable

13
<PAGE>

amount master demand notes. These notes permit the investment of fluctuating
amounts at varying rates of interest pursuant to note arrangements between the
Fund, acting as lender, and the borrower. The Fund only invests in such notes
if they are redeemable at face value, plus accrued interest, on not more than
seven days' notice at any time.

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.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements in
order to generate income while providing liquidity. When a Fund acquires a
security from a bank or securities dealer, it may simultaneously enter into a
repurchase agreement, wherein the seller agrees to repurchase the security at
a mutually agreed-upon time (generally within seven days) and price. The
repurchase price is in excess of the purchase price by an amount which
reflects an agreed-upon market rate of return, which is not tied to the coupon
rate or maturity of the underlying security. Repurchase agreements will be
fully collateralized. The Fund will only enter into repurchase agreements
involving securities in which it could otherwise invest and with selected
banks and securities dealers whose financial condition is monitored by the
Adviser, subject to the guidance of the Directors. If the seller under the
repurchase agreement defaults on its obligation to repurchase the underlying
security, the Fund may incur a loss if the value of the collateral securing
the repurchase agreement has declined, and may incur disposition costs in
connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization of the collateral by the
Fund may be delayed or limited. 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. Repurchase agreements with a maturity of greater than
seven days will be treated as illiquid securities and subject to the 10%
limitation described below.

REVERSE REPURCHASE AGREEMENTS. Subject to the Fund's restriction with
respect to borrowing, the Fund may enter into reverse repurchase agreements.
In a reverse repurchase agreement, the Fund sells a security subject to the
rights and obligations to repurchase such security. The Fund then invests the
proceeds from the transaction in another obligation in which the Fund is
authorized to invest. In order to minimize any risk involved, the Fund
maintains with the custodian in a segregated account cash or liquid securities
at least equal in value to the repurchase price.

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,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable in securities
markets either within or outside the United States. Restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or certain private placements of commercial paper issued in reliance
on an exemption from such Act pursuant to Section 4(2) thereof, that have a
readily available market are not considered illiquid for purposes of the
Fund's 10% limitation on purchases of illiquid securities. The Adviser will
monitor the liquidity of such restricted securities under the supervision of
the Directors. See "Illiquid Securities" in the Statement of Additional
Information for a further discussion of investments in such securities.

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 or
automobile loan receivables, representing the obligations of a number of
different parties. Payments of principal and interest on the underlying loans
are passed through to the holders of asset-backed securities over the life of
the securities. Corporate 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. See the
Statement of Additional Information for further information on these
securities.

LOANS OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
brokers, dealers and other financial institutions, provided such loans are
callable at any time by the Fund and are at all times secured

14
<PAGE>

by cash or equivalent collateral. By lending its portfolio securities, the
Fund will receive income while retaining the securities' potential for capital
appreciation. 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.

FUTURE DEVELOPMENTS. The Fund may invest in securities and other instruments
which do not presently exist but may be developed in the future, provided that
each such investment is consistent with the Fund's investment objectives,
policies and restrictions and is otherwise legally permissible under federal
and state laws. The Prospectus will be amended or supplemented as appropriate
to discuss any such new investments.

15
<PAGE>

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDI-
TIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESEN-
TATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE AD-
VISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES 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 OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY MAY NOT LAWFULLY BE MADE.

[LOGO] SUNAMERICA
CAPITAL SERVICES
Distributor

MMPRO

<PAGE>

SUNAMERICA MONEY MARKET FUND

Statement of Additional Information

DATED SEPTEMBER 19, 1997

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 September 19,
1997. 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

PAGE
----
HISTORY OF THE FUND ..................................................B-2
INVESTMENT OBJECTIVE AND POLICIES.....................................B-2
INVESTMENT RESTRICTIONS...............................................B-9
DIRECTORS AND OFFICERS................................................B-12
ADVISER, PERSONAL TRADING, DISTRIBUTOR AND ADMINISTRATOR..............B-16
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................B-21
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES...................B-22
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES.................B-26
DETERMINATION OF NET ASSET VALUE......................................B-27
PERFORMANCE DATA......................................................B-28
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................B-30
RETIREMENT PLANS......................................................B-33
DESCRIPTION OF SHARES.................................................B-34
ADDITIONAL INFORMATION................................................B-35
FINANCIAL STATEMENTS..................................................B-35
APPENDIX......................................................APPENDIX - 1

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 offer to sell or solicitation of an offer to buy
may not lawfully be made.

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<PAGE>

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 primarily in their interest rates,
the length of their 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 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

B-2
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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.

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 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

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<PAGE>

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 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.
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<PAGE>

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 repurchase price is in
excess of the purchase price by an amount which reflects 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 at least 102% of the repurchase
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 with brokers, dealers and other financial institutions that have been
determined by the Adviser to be creditworthy. A reverse repurchase agreement
involves the sale of a security held by the Fund, subject to an agreement by the
Fund to repurchase that security at a mutually agreed upon price, date and
interest payment. The Fund uses the proceeds of the reverse

B-5
<PAGE>

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 with the Custodian a segregated account containing cash or
liquid 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 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 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

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<PAGE>

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 calling the loan, in whole
or in part as may be appropriate, to permit the exercise of such rights if the
matters involved would

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<PAGE>

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 with
the Fund's Custodian in which it will maintain cash or liquid securities at
least 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 methods different from those used by U.S. domestic banks.
Nonnegotiable time deposits, unlike negotiable certificates of

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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").

6. Lend its portfolio securities in excess of 20% of its total
assets provided that such loans are made according

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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 "whenissued" 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.

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

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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.

Pursuant to Rule 2a-7 under the 1940 Act, (the "Rule") the Fund is
required to limit its portfolio investments to those U.S. dollar denominated
instruments determined in accordance with procedures established by the
Directors to present minimal credit risks and which are at the time of
acquisition "eligible securities" as defined in the Rule. Under such Rule an
eligible security is an instrument that is rated (or that has been issued by an
issuer rated with respect to other short-term debt of comparable priority and
security) by at least two nationally recognized statistical rating organizations
( or if only one such organization has issued a rating, by that organization) in
one of the two highest rating categories for short-term debt obligations, or an
unrated security which is determined to be of comparable quality under
procedures established by the Directors. The Rule prohibits the Fund from
investing more than 5% of its assets in the securities of any one issuer, except
that the Fund may invest up to 25% of its assets in the securities rated (or
deemed comparable to securities rated) in the highest rating category of a
single issuer for a period of up to three business days after purchase. In
addition, the Fund may not invest more than 5% of its assets in securities which
have not been rated (or deemed comparable to securities rated) in the highest
rating category, with investment in such second tier securities of any one
issuer being limited to the greater of 1% of the Fund's assets or $1 million.
These issuer diversifications restrictions do not apply to U.S. government
securities. The Rule also prohibits the Fund from purchasing any instrument with
a remaining maturity of greater than 397 calendar days, and requires the Fund to
maintain a dollar-weighted average portfolio maturity of 90 days or less. For
purposes of the Rule, certain variable or floating rate instruments are deemed
to have a maturity equal to the period remaining until the next readjustment of
their interest rate or, in the case of an instrument that is subject to a demand
feature, the period remaining until the principal amount can be recovered
through demand.

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<PAGE>

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, SunAmerica Money Market Funds, Inc. and Style
Select Series, Inc. An asterisk indicates those Directors who are interested
persons of the Fund within the meaning of the 1940 Act.

Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------

S. James Coppersmith,64 Director Director/Trustee of the
Emerson College Boston Stock Exchange, Uno
100 Beacon Street Restaurant Corp., Waban Corp.,
Boston, MA 02116 Kushner-Locke Co. and Chayron
Inc.; Chairman of the Board of
Emerson College; formerly,
President and General Manager,
WCVB-TV, a division of the Hearst
Corporation, from 1982 to 1994
(retired); Director/Trustee of the
SunAmerica Mutual Funds and Anchor
Series Trust.

Samuel M. Eisenstat,57 Chairman of Attorney in private practice;
430 East 86th Street the Board President and Chief Executive
New York, NY 10028 Officer, Abjac Energy
Corporation; Director/Trustee of
Atlantic Realty Trust, UMB Bank
and Trust(a subsidiary of United
Mizrachi Bank), North European
Royalty Trust, Volt Information
Sciences Funding, Inc. (a
subsidiary of Volt Information
Sciences, Inc.) and Venture
Partners International (an Israeli
venture capital fund); Chairman of
the Boards of the
Directors/Trustees of the
SunAmerica Mutual Funds and Anchor
Series Trust.

Stephen J. Gutman, 54 Director Partner and Chief Operating
515 East 79th Street Officer of B.B. Associates
New York, NY 10021 LLC (menswear specialty retailing
and other activities) since May
1989; Director/Trustee of the
SunAmerica Mutual Funds and Anchor
Series Trust.

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<PAGE>

Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------

Peter A. Harbeck*,43 Director and Director and President,
The SunAmerica Center President SunAmerica Asset Management
733 Third Avenue Corp. ("SunAmerica");
New York, NY 100173-3204 Director, SunAmerica Capital
Services, Inc. ("SACS"), since
February 1993; Director and
President, SunAmerica Fund
Services, Inc. ("SAFS"),since
May 1988; President,
SunAmerica Mutual Funds and
Anchor Series Trust; Executive
Vice President and Chief
Operating Officer, SunAmerica,
from May 1988 to August 1995;
Executive Vice President,
SACS, from November 1991 to
August 1995; Director,
Resources Trust Company.

Peter McMillan III*,39 Director Executive Vice President and
1 SunAmerica Center Chief Investment Officer,
Century City SunAmerica Investments, Inc.,
Los Angeles, CA 90067 since August 1989;
Director/Trustee of the
SunAmerica Mutual Funds;
Director, Resources Trust
Company.

Sebastiano Sterpa, 68 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;
Director/Trustee of the
SunAmerica Mutual Funds.

Stanton J. Feeley, 60 Executive Vice Executive Vice President and
The SunAmerica Center President Chief Investment Officer,
733 Third Avenue SunAmerica, since February
New York, NY 10017-3204 1992; Executive Vice
President, SunAmerica Mutual
Funds.

P. Christopher Leary, 37 Vice Director of Fixed-
The SunAmerica Center President Income, SunAmerica, since
733 Third Avenue October 1996; Senior Vice
New York, NY 10017-3204 President SunAmerica,
since January 1994.

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<PAGE>

Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------

Nancy Kelly, 47 Vice Vice President and Head
The SunAmerica Center President Trader, SunAmerica, since
733 Third Avenue April 1994; Vice President,
New York, NY 10017-3204 SunAmerica Mutual Funds and
Anchor Series Trust; formerly,
Vice President, Whitehorne &
Co. Ltd. from 1991 to 1994;
Sales Trader, Lynch, Jones and
Ryan from 1992 to 1994.

Robert M. Zakem, 39 Secretary Senior Vice President and
The SunAmerica Center General Counsel, SunAmerica
733 Third Avenue since April 1993; Executive
New York, NY 10017-3204 Vice President, General
Counsel and Director, SACS,
since February 1993; Vice
President, General Counsel and
Assistant Secretary, SAFS,
since January 1994; Vice
president, SunAmerica Series
Trust, Anchor Pathway Fund and
Seasons Series Trust; Assistant
Secretary, SunAmerica Series
Trust and Anchor Pathway Fund,
since September 1993; Assistant
Secretary, Seasons Series
Trust, since April 1997;
Secretary, SunAmerica Mutual
Funds and Anchor Series Trust;
formerly, Vice President and
Associate General Counsel,
SunAmerica, March 1992 to April
1993.

Peter C. Sutton, 33 Treasurer Senior Vice President,
The SunAmerica Center SunAmerica, since April
733 Third Avenue 1997; Treasurer, SunAmerica
New York, NY 10017-3204 Mutual Funds and Anchor Series
Trust, since February 1996;
Vice President, SunAmerica
Series Trust and Anchor Pathway
Fund, since October 1994; Vice
President, Seasons Series
Trust, since April 1997;
formerly, Vice President,
SunAmerica from 1994 to 1997;
Controller, SunAmerica Mutual
Funds and Anchor Series Trust
from March 1993 to February
1996; Assistant Controller,
SunAmerica Mutual Funds from
1990 to 1993.

B-14
<PAGE>

Directors and officers of the Corporation are also directors or 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 of the SunAmerica Mutual Funds as well as Anchor Series
Trust. With respect to the Corporation, each member of the Audit 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.

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, 1996.

B-15
<PAGE>

COMPENSATION TABLE

PENSION OR
RETIREMENT TOTAL COMPEN-
BENEFITS ESTIMATED SATION FROM
AGGREGATE ACCRUED AS ANNUAL REGISTRANT
COMPENSATION PART OF BENEFITS AND FUND
FROM FUND UPON COMPLEX PAID
DIRECTOR REGISTRANT EXPENSES* RETIREMENT** TO DIRECTORS*
- --------------------------------------------------------------------------------
S. James
Coppersmith $7,125 $35,315 $29,670 $65,000
- --------------------------------------------------------------------------------
Samuel M.
Eisenstat $7,490 $31,099 $46,089 $69,000
- --------------------------------------------------------------------------------
Stephen J.
Gutman $7,125 $32,200 $60,912 $65,000
- --------------------------------------------------------------------------------
Sebastiano
Sterpa $7,209 $21,700 $ 7,900 $43,333***
- --------------------------------------------------------------------------------
* Information is as of December 31, 1996 for the five 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.

As of June 30, 1997 the Directors and officers of the Fund owned in the
aggregate, less than 1% of the Fund's total outstanding shares.

The following shareholders owned of record or beneficially 5% or more of
the SunAmerica Money Market Fund's shares outstanding as of August 28, 1997:
Class A - SunAmerica Inc., Los Angeles, CA 90067 owned beneficially 6%; Class B
- - JBC Profit Sharing Plan & Trust, St. Louis, MO 63131 - owned beneficially 7%;
Chicago Board of Education, c/o Michael J. Gurgone Trustee - owned beneficially
22%.

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,
Los Angeles, CA 90067-6022, telephone (310) 772-6000.

B-16
<PAGE>

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.

The following table sets forth the total advisory fees paid to the
Adviser by the Fund for the fiscal years ended December 31, 1996, 1995, and
1994, pursuant to the Advisory Agreement.

ADVISORY FEES

1996 1995 1994
$1,923,536 $1,560,968 $1,420,692

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, 1996, 1995 and 1994, 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

B-17
<PAGE>

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.

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).

B-18
<PAGE>

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).

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," the "Class B Plan," and the
"Class C 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 and Class C Plans, 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 and Class C shares, to compensate the Distributor and
certain securities firms for sales and promotional activities for distributing
each such class of shares. The distribution costs for which the Distributor may
be reimbursed out of such distribution fees include fees paid to broker-dealers
that have sold Fund shares, commissions and other expenses such as 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 and Class C Plans will exceed the Distributor's
distribution costs as described above. The Class A Plan does not provide for a
distribution fee. The 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 net 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, 1996, 1995, and 1994.

DISTRIBUTION FEES

1996 1995 1994
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
$513,979 $378,491 $378,008 $571,694 $307,701 $714,820

B-19
<PAGE>

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. ("SAFS"), 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, computed and payable monthly based
upon an annual rate of 0.22% of average daily net assets subject to review and
approval by the Directors. This fee represents the full 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.

B-20
<PAGE>

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.

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

B-21
<PAGE>

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, 1996, 1995 and 1994, 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 and Class C 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, 1996, 1995, and 1994.

CONTINGENT DEFERRED SALES CHARGES - CLASS B

1996 1995 1994
339,999 372,779 546,660

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" orcombined. No credit toward the holding period
is given for the time during which the Cash Fund shares were held. For example,
if shares

B-22
<PAGE>

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:

CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
- ---------------- -------------------------------
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 1%
Sixth and thereafter 0%

The following table sets forth the rates of CDSC applicable to shares
originally acquired (prior to the date of the Reorganization) in an exchange
from the SunAmerica Diversified Income Fund series of SunAmerica Multi-Asset
Portfolios, Inc.:

B-23
<PAGE>

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 and
Class C shares under certain circumstances. The 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 or Class C shares are not redeemed within one year of the death,
they will remain subject to the applicable CDSC, when redeemed.

B-24
<PAGE>

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.

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). Orders for purchases of
shares received by the Distributor by wire transfer in the form of Federal Funds
will be effected at the next-determined net asset value if received at or prior
to the Fund's close of business. Orders for purchases accompanied by check or
other negotiable bank draft will be accepted and effected as of the Fund's close
of business on the next business day following receipt of such order. Shares
will be entitled to receive a dividend, if any, commencing on the next business
day after the day the purchase is effected.

PURCHASE BY CHECK. Checks should be made payable to the Fund or to "SunAmerica
Funds." If the payment is for a retirement plan account for which the Adviser
serves as fiduciary, please indicate on the check that payment is for such an
account. 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, New York
10017-3204, together with payment for the purchase price of such shares and a
completed New Account Application. Payment for subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas
City, Missouri 64141-6373 and the shareholder's account number should appear on
the check. For fiduciary retirement plan accounts, both initial and subsequent
purchases should be mailed to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204. Certified checks are not 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. 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. Subsequent purchases of shares of the Fund may be purchased
directly through the Transfer Agent. Orders for purchases accompanied by check
or other negotiable bank draft will be accepted and effected as of the Fund's
close of business on the next business day following receipt of such order and
such shares will receive the dividend for the business day following the day the
purchase is effected. SAFS reserves the right to reject

B-25
<PAGE>

any check made payable other than in the manner indicated above. Under certain
circumstances, the Fund will accept a multi-party check (e.g., a check made
payable to the shareholder by another party and then endorsed by the shareholder
to the Fund in payment for the purchase of shares); however, the processing of
such a check may be subject to a delay. The Fund does not verify the
authenticity of the endorsement of such multi-party check, and acceptance of the
check by the Fund should not be considered verification thereof. Neither the
Fund nor its affiliates will be held liable for any losses incurred as a result
of a fraudulent endorsement. There are restrictions on the redemption of shares
purchased by check for which funds are being collected. (See "Redemption of
Shares")

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. Orders for purchase of shares received by
wire transfer in the form of Federal Funds will be effected at the
next-determined net asset value if received at or prior to the Fund's close of
business. Such shares will receive the dividend for the next business day. 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 kind of securities from the Fund in lieu of cash. In conformity
with

B-26
<PAGE>

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 is open for business on any day the New York Stock Exchange
("NYSE") is open for regular trading. Shares are valued each day as of the close
of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). 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 outstanding of
such class. 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 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

B-27
<PAGE>

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, Class B and Class C 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 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

B-28
<PAGE>

365 divided by seven, and subtracting one. The following formula illustrates the
effective yield computation.

[(Base period return + 1) to the power of 365 divided by 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, 1996,
1995, and 1994.

1996 1995 1994
CLASS
Effective Effective Effective
Yield Yield Yield Yield Yield Yield

A 4.55% 4.65% 4.96% 5.08% 4.89% 5.01%
B 3.76% 3.83% 4.29% 4.38% 4.19% 4.28%

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.

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.

B-29
<PAGE>

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 mid-term or 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.

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, no interest will accrue
on amounts represented by uncashed dividend or distribution checks.

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) solely for tax years of the
Fund beginning before August 6, 1997, 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 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

B-30
<PAGE>

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.
Generally, a distribution will be subject to tax in the year it is received.
However, distribution will be treated as paid on December 31 of the calendar
year 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 mid-term or long-term capital
gains, if any, are taxable as mid-term or 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.

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. In the case of an individual shareholder, such gain will be
taxed as mid-term gain if the shares have been held for more than one year, but
not more than

B-31
<PAGE>

18 months, and as long-term capital gain if the shares have been held for more
than 18 months. Any such capital loss 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 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

B-32
<PAGE>

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 IRAs
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 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.

SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES (SIMPLE). The SIMPLE was created to
make establishing employee retirement plans practical for small businesses.
Generally, the plan permits employers with 100 or

B-33
<PAGE>

fewer employees who do not maintain another employer-sponsored retirement plan
to establish a SIMPLE Plan. Contributions made by the employer are tax
deductible and contributions are deducted from the employee's paycheck before
tax deductions and are deposited into a SIMPLE Plan by the employer.

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 three classes of shares, designated as Class A, Class B and Class C
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 "ByLaws"). 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, 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

B-34
<PAGE>

advisory agreements or changes in a series' policies, only shareholders of the
series affected by the matter may be entitled to vote.

The three 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 and Class C 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.

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

B-35
<PAGE>

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, serves as the Corporation'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, serves 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, 1996
and for the six-month period ended June 30, 1997.

B-36
<PAGE>

- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS AT JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) RATE** MATURITY (NOTE 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES--2.3%
Americredit Automobile
Receivable Trust $ 4,327 5.52% 4/06/98 $ 4,326,568
Capital Equipment
Receivable Trust 1,889 5.60 10/15/97 1,888,667
Standard Credit Card
Master Trust 5,000 5.86 9/15/97 5,002,876
------------
TOTAL ASSET BACKED SECURITIES
(amortized cost $11,218,111) 11,218,111
------------
BANKERS ACCEPTANCE--6.0%
Dai-Itchi Kango Bank 8,000 5.70 8/06/97 7,954,400
Industrial Bank of Japan Ltd. 7,000 5.70 7/01/97 7,000,000
Sanwa Bank Ltd. 14,000 5.64-5.71 7/14/97-8/14/97 14,021,366
------------
TOTAL BANKERS ACCEPTANCE
(amortized cost $28,975,766) 28,975,766
------------
CERTIFICATES OF DEPOSIT--12.5%
Bank of Tokyo Mitsubishi Ltd. 12,000 5.76 9/19/97 12,000,526
Dai-Itchi Kango Bank 8,000 5.86 8/05/97 8,000,230
Industrial Bank of Japan Ltd. 7,000 5.85 7/18/97 7,000,065
Norinchuken Bank 10,000 5.78 7/02/97 10,000,006
Rabobank Nederland N.V. 13,000 6.07-6.20 3/26/98-4/09/98 12,999,266
Societe Generale Institutional 10,000 6.35 4/15/98 9,998,497
------------
TOTAL CERTIFICATES OF DEPOSIT
(amortized cost $59,998,590) 59,998,590
------------
COMMERCIAL PAPER--47.5%
American Home Products Corp. 6,000 5.56 7/15/97 5,987,027
Australian Wheat Board 6,000 5.63 8/07/97 5,965,282
Bil North America, Inc. 10,000 5.65 7/17/97 9,974,889
Cemex SA, Series B 10,000 5.67 8/11/97 9,935,425
Certain Funding Corp. 7,000 5.63 7/11/97 6,989,053
Cregem North America, Inc. 7,000 5.60 8/29/97 6,935,756
Demir Funding Corp. 10,000 5.59 10/14/97 9,836,958
Eksportinas ASA 6,000 5.60 8/29/97 5,944,933
First Deposit Master Trust 8,000 5.60 7/15/97 7,982,578
Garanti Funding Corp., Series A 10,000 5.65 7/11/97 9,984,305
Goldman Sachs Group L.P. 10,000 5.73 1/20/98 9,676,892
Greenwich Asset Funding, Inc. 10,000 5.58 8/13/97 9,933,350
Guinness PLC 8,000 5.62 7/21/97 7,975,022
Island Finance Puerto Rico, Inc. 8,000 5.62 7/10/97 7,988,760
Madison Funding Corp. 7,130 5.66 7/28/97 7,099,733
Merrill Lynch & Co., Inc. 18,000 5.62-5.63 7/09/97-8/20/97 17,911,815
Mitsui & Co. USA, Inc. 16,000 5.60-5.68 7/22/97-8/12/97 15,920,854
Oak Funding Corp. 8,500 5.65 8/14/97 8,441,303
Old Line Funding Corp. 11,721 5.60 9/12/97 11,587,901
Sinochem American CP, Inc. 8,000 5.61 8/08/97 7,952,627
Southwestern Bell Telephone Co. 20,000 6.15 7/01/97 20,000,000
Sumitomo Corp. of America 7,000 5.78 8/22/97 6,941,558
Sunbelt-DIX, Inc. 6,000 5.60 9/16/97 5,928,133
Transportadora de Gas Del Sur 5,000 5.65 7/24/97 4,981,951
USAA Capital Corp. 6,000 5.60 7/07/97 5,994,400
------------
TOTAL COMMERCIAL PAPER
(amortized cost $227,870,505) 227,870,505
------------
</TABLE>
<PAGE>

- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS AT JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) RATE** MATURITY (NOTE 2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT AGENCIES-- 4.7%
Agency for International Development India+ $ 3,000 5.52% 7/01/97 $ 3,005,105
Agency for International Development Israel+ 2,812 5.78 7/01/97 2,812,321
Agency for International Development Panama+ 4,952 5.89 7/01/97 4,982,444
Federal National Mortgage Association
Discount Notes 12,000 5.57 10/09/97 11,814,333
------------
TOTAL GOVERNMENT AGENCIES
(amortized cost $22,614,203) 22,614,203
------------
MEDIUM TERM NOTES--16.6%
American Express Centurion Bank 5,000 5.66 7/09/97 5,000,000
Asset Backed Securities Investments 11,000 5.48 7/16/97 11,000,000
Bear Stearns Cos., Inc.+ 20,500 5.69-5.89 7/03/97-7/17/97 20,513,036
Boatmen's National Bank of St. Louis+ 8,000 5.67 7/08/97 7,999,838
Fleet Financial Group 5,000 5,91 9/29/97 5,001,486
PNC Bank, N.A. 15,000 5.60 12/11/97 14,996,459
Sigma Finance Corp. 6,000 6.28 4/24/98 6,000,000
Sony Capital Corp.+ 9,000 5.78 8/29/97 9,000,000
------------
TOTAL MEDIUM TERM NOTES
(amortized cost $79,510,819) 79,510,819
------------
TAXABLE MUNICIPAL MEDIUM TERM NOTES--8.2%
Illinois Student Assistance Corp.+ 21,000 5.65 7/02/97 21,000,000
New Hampshire State Industrial Development
Authority 11,000 5.51 7/23/97 10,999,994
Texas G.O.+ 7,415 5.63 7/02/97 7,415,000
------------
TOTAL TAXABLE MUNICIPAL MEDIUM TERM NOTES
(amortized cost $39,414,994) 39,414,994
------------
TOTAL INVESTMENT SECURITIES
(amortized cost $469,602,988) 469,602,988
------------
REPURCHASE AGREEMENTS--1.5%
Joint Repurchase Agreement Account (Note 3)
Chase Securities, Inc. 835 5.65 7/01/97 835,000
Yamaichi International (America), Inc. 6,365 5.90 7/01/97 6,365,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost $7,200,000) 7,200,000
------------
TOTAL INVESTMENTS
(amortized cost $476,802,988*) 99.3% 476,802,988
Other assets less liabilities 0.7 3,294,519
----- ------------
NET ASSETS 100.0% $480,097,507
===== ============
</TABLE>
- --------
* At June 30, 1997 the cost of securities for Federal income tax purposes was
the same for book purposes
** Rates shown are rates in effect as of June 30, 1997
+ Variable rate security; maturity date reflects the next reset date
G.O.--General Obligation

PORTFOLIO BREAKDOWN AS A PERCENTAGE OF NET ASSETS (EXCLUDING REPURCHASE
AGREEMENT) BY INDUSTRY@
<TABLE>
<S> <C>
Banking 23.3%
Finance 18.9
Financial Services 10.6
Securities Holding Company 10.0
Municipalities 8.2
Industrial 7.7
Receivables Company 6.3
Government Agencies 4.7
Utilities 4.2
Food & Beverages 1.7
Sovereign 1.2
Consumer Credit Services 1.0
----
97.8%
====
</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 JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>

<S> <C>
ASSETS:
Investment securities, at value (amortized cost $476,802,988)....... $476,802,988
Receivable for fund shares sold..................................... 9,863,768
Interest receivable................................................. 1,544,023
Prepaid expenses.................................................... 84,692
------------
Total assets....................................................... 488,295,471
------------
LIABILITIES:
Payable for fund shares repurchased................................. 6,441,632
Dividends payable................................................... 938,142
Accrued expenses.................................................... 278,566
Due to custodian bank............................................... 265,179
Investment advisory and management fees payable..................... 197,536
Distribution and service maintenance fees payable................... 76,909
------------
Total liabilities.................................................. 8,197,964
------------
Net assets...................................................... $480,097,507
============
NET ASSETS WERE COMPOSED OF:
Common Stock, $.001 par value (10 billion shares authorized)........ $ 480,073
Additional paid-in capital.......................................... 479,487,214
------------
479,967,287
Accumulated undistributed net investment income..................... 130,220
------------
Net assets...................................................... $480,097,507
============
CLASS A:
Net asset value ($452,007,629/451,987,502 shares outstanding)...... $1.00
=====
CLASS B:
Net asset value ($28,089,878/28,085,102 shares outstanding)........ $1.00
=====
</TABLE>

- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $13,265,391
-----------
EXPENSES:
Investment advisory and management fees............... $1,179,567
Service maintenance fees--Class A..................... 326,388
Distribution and service maintenance fees--Class B.... 164,895
Transfer agent and shareholder servicing fees and ex-
penses--Class A...................................... 555,627
Transfer agent and shareholder servicing fees and ex-
penses--Class B...................................... 48,255
Directors' fees and expenses.......................... 66,559
Custodian fees and expenses........................... 53,270
Registration fees--Class A............................ 40,744
Registration fees--Class B............................ 3,664
Audit and tax consulting fees......................... 18,140
Printing expense...................................... 15,480
Insurance expense..................................... 2,547
Legal fees and expenses............................... 2,060
Miscellaneous expenses................................ 3,185
----------
2,480,381
Less: expense offset.................................. (72,902)
-----------
Net expenses.......................................... 2,407,479
-----------
Net investment income................................. 10,857,912
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $10,857,912
===========
</TABLE>
See Notes to Financial Statements
<PAGE>

- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................... $ 10,857,912 $ 17,081,743
------------ ------------
Net increase in net assets resulting
from operations........................ 10,857,912 17,081,743
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (Class A).... (10,133,467) (15,491,408)
From net investment income (Class B).... (710,098) (1,583,636)
------------ ------------
Total dividends and distributions to
shareholders........................... (10,843,565) (17,075,044)
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS (NOTE 5)................... 52,270,659 59,699,130
------------ ------------
Total increase in net assets............ 52,285,006 59,705,829
NET ASSETS:
Beginning of year....................... 427,812,501 368,106,672
------------ ------------
End of period (including undistributed
net investment income of $130,220 and
$105,317 at June 30, 1997 and December
31, 1996, respectively)................ $480,097,507 $427,812,501
============ ============
</TABLE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET NET NET RATIO OF
ASSET DIVIDENDS ASSET ASSETS RATIO OF NET INVESTMENT
VALUE NET TOTAL FROM FROM NET VALUE END OF EXPENSES INCOME TO
PERIOD BEGINNING INVESTMENT INVESTMENT INVESTMENT END OF TOTAL PERIOD TO AVERAGE AVERAGE
ENDED OF PERIOD INCOME OPERATIONS INCOME PERIOD RETURN(1) (000'S) NET ASSETS NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
12/31/96 1.000 0.045 0.045 (0.045) 1.000 4.61 398,698 1.00(3) 4.52
06/30/97(6) 1.000 0.021 0.021 (0.021) 1.000 2.12 452,008 0.99(3)(5) 4.66(5)
<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%(4) $41,915 1.69%(5) 1.69%(5)
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
12/31/96 1.000 0.038 0.038 (0.038) 1.000 3.83 29,114 1.77(3) 3.76
06/30/97(6) 1.000 0.017 0.017 (0.017) 1.000 1.76% 28,090 1.75(3)(5) 3.88(5)
</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 for the year ended December 31, 1995 of 0.05% and
0.13% for Class A and Class B, respectively.
(3) The expense ratio reflects the effect of a gross up of transfer agent
expense credits as follows:
<TABLE>
<CAPTION>
12/31/96 6/30/97
-------- -------
<S> <C> <C>
Class A......... 0.03% 0.03%
Class B......... 0.04% 0.01%
</TABLE>

(4) Total return is not annualized
(5) Annualized
(6) Unaudited

See Notes to Financial Statements
<PAGE>

- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

NOTE 1. ORGANIZATION
SunAmerica Money Market Fund (the "Fund") is an open-end diversified
management investment company organized as a Maryland Corporation.

The Fund currently offers 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--JUNE 30, 1997 (UNAUDITED)--(CONTINUED)
- --------------------------------------------------------------------------------

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.

For the year ended December 31, 1996, the Fund incurred capital loss of
$15,566 which was offset against interest income on the Statement of
Operations. At December 31, 1996, the Fund had capital loss carryforwards in
the following amounts:

<TABLE>
<CAPTION>
EXPIRATION
--------------------------------------------------------------
2002 2003 2004
------ ------- -------
<S> <C> <C>
$5,892 $11,725 $15,660
</TABLE>

To the extent that these capital loss carryforwards are utilized to offset
future net realized gains on securities transactions, the gain, so offset
will not be distributed to the shareholders, to the extent provided by the
regulations.

Capital losses incurred after October 31 within the Fund's fiscal year are
deemed to arise on the first business day of the following fiscal year for
tax purposes. The fund has incurred and will elect to defer $820 of such
capital losses.

NOTE 3. JOINT REPURCHASE AGREEMENT ACCOUNT
As of June 30, 1997, the Fund had a 1.7% undivided interest, which
represented $835,000 in principal amount, in a repurchase agreement in a
joint account with Chase Securities, Inc. and a 7.7% undivided interest,
which represented $6,365,000 in principal amount in a repurchase agreement
in a joint account with Yamaichi International (America), Inc. As of such
date, the repurchase agreements in the joint account and the collateral
therefore was as follows:

Chase Securities, Inc., Repurchase Agreement, 5.65% dated 6/30/97, in the
principal amount of $49,405,000 repurchase price $49,412,754 due 7/01/97
collateralized by $41,520,000 U.S. Treasury Bonds 8.50% due 2/15/20,
approximate aggregate value $50,394,900.

Yamaichi International (America), Inc., Repurchase Agreement, 5.90% dated
6/30/97, in the principal amount of $82,450,000 repurchase price $82,463,513
due 7/01/97 collateralized by $19,395,000 U.S. Treasury Bonds 7.625% due
11/15/22 and $45,810,000 U.S. Treasury Bonds 7.25% due 5/15/16 and
$13,875,000 U.S. Treasury Notes 8.00% due 5/15/01, approximate aggregate
value $84,105,712.

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.

<PAGE>

- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997 (UNAUDITED)--(CONTINUED)
- --------------------------------------------------------------------------------

The Fund has a Distribution Agreement with SunAmerica Capital Services, Inc.
("SACS" or the "Distributor"), 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 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 six months ended June 30, 1997, SACS
earned fees of $491,283 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 six months ended June 30, 1997, SACS informed the Fund that
it received approximately $114,756 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 six months ended June 30,
1997, the Fund (Class A and Class B) incurred expenses of $519,009 to
reimburse SAFS pursuant to the terms of the Service Agreement. Of this
amount, $86,916 was payable to SAFS at June 30, 1997.
<PAGE>

- --------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997 (UNAUDITED)--(CONTINUED)
- --------------------------------------------------------------------------------

NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of each class, all at $1.00 per share, for the six
months ended June 30, 1997 and for the prior year were as follows:

<TABLE>
<CAPTION>
MONEY MARKET FUND
--------------------------------------------------------------
CLASS A CLASS B
------------------------------- -----------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
---------------- -------------- ---------------- ------------
<S> <C> <C> <C> <C>
Shares sold............. 1,069,503,224 1,460,788,582 69,895,359 122,015,372
Reinvested dividends.... 9,116,002 15,326,870 544,475 1,346,953
Shares redeemed......... (1,025,320,294) (1,393,731,702) (71,468,107) (146,046,945)
-------------- -------------- ----------- ------------
Net increase (decrease). 53,298,932 82,383,750 (1,028,273) (22,684,620)
============== ============== =========== ============
</TABLE>

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 June
30, 1997, the Fund had accrued $39,240 for the Retirement Plan, which is
included in accrued expenses on the Statement of Assets and Liabilities and
for the six months ended June 30, 1997, expensed $8,879 for the Retirement
Plan, which is included in Directors' fees and expenses on the Statement of
Operations.
<PAGE>

- -------------------------------------------------------------------------------
SUNAMERICA MONEY MARKET FUND
- --------------------------------------------------------------------------------

Peter McMillan III DISTRIBUTOR
Sebastiano Sterpa SunAmerica Capital Services, Inc.

OFFICERS The SunAmerica Center
Peter A. Harbeck, President 733 Third Avenue
Nancy Kelly, Vice President New York, NY 10017-3204
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
Abbe P. Stein, Assistant Secretary New York, NY 10017-3204

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 8:30 a.m.-6:00
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HERE'S HOW IT WORKS
All you need is:
* A Touch-Tone Telephone
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(the last four digits of your Social Security number, a tax identification
number or a number chosen by you)
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<TABLE>
<CAPTION>
CLASS
-------
A B
EQUITY FUNDS --- ---
<S> <C> <C>
Balanced Assets 51 551
Blue Chip Growth 522 22
Mid-Cap Growth 71 571
Small Company
Growth 36 536
Growth and Income 24 524

<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>

<TABLE>
<CAPTION>
CLASS
-----------
STYLE SELECT A B C
SERIES --- --- ---
<S> <C> <C> <C>
Aggressive
Growth
Portfolio 701 711 771
Mid-Cap Growth
Portfolio 702 712 772
Value Portfolio 704 714 774
International
Equity
Portfolio 703 713 773
</TABLE>

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<PAGE>

SUNAMERICA MONEY MARKET FUND
SHAREHOLDER LETTER

February 10, 1997

Dear Shareholder:

The SunAmerica Money Market Fund's investment objective is to seek as high a
level of current income as is consistent with liquidity and stability of
capital by investing primarily in high quality, short-term money market
instruments.

For the year ended December 31, 1996, the Fund's Class A share's total
return was 4.61% and the Fund's SEC seven-day yield was 4.55%. Since the Fund
invests only in short-term obligations with a maturity of 13 months or less,
its performance generally tracks the short-term market levels.

The Federal Reserve's rates remained unchanged for most of 1996. This was
based on their belief that although the economy was expanding, enhancements in
technology and global competition would keep inflation close to their target
range of 2.5% to 3%. While economists revised their forecasts frequently due
to increases in economic activity, the increases in economic growth did not
produce the inflationary pressures that many feared. Although the average
American consumer had more disposable income, the additional income was
generally invested rather than spent. The American consumer has sent a message
to businesses everywhere; they want quality and low prices and they are
willing to wait for them.

As we enter 1997, we believe that short-term rates will remain stable
throughout the first quarter. It is our belief that the rapid rise in the
dollar will keep American companies from expanding their distribution overseas
and domestic activity will tend to be moderate. As competition continues to
grow, however, some companies may be pushed to their limits, thereby making
credit quality our primary focus.

The Fund's strategy remains conservative. We will attempt to maintain the
average maturity close to the Donoghue Average and will focus on the larger
issuers of debt which offer the greatest level of liquidity. This will enable
us to actively manage the portfolio to minimize potential future volatility.

/s/ P. Christopher Leary

P. Christopher Leary
Portfolio Manager
<PAGE>

SUNAMERICA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) RATE** MATURITY (NOTE 2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES--1.8%
AT&T Capital Equipment Leasing $ 7,723 5.60% 10/15/97 $ 7,723,064
------------
TOTAL ASSET BACKED SECURITIES
(amortized cost $7,723,064) 7,723,064
------------
CERTIFICATES OF DEPOSIT--8.6%
Commerzbank Yankee 6,000 5.40 1/08/97 6,000,048
Dai-Itchi Kango Bank 11,000 5.53 1/21/97 11,000,352
Sanwa Bank Ltd. 10,000 5.50 1/15/97 9,999,964
Sumitomo Bank 10,000 5.52 2/06/97 10,000,099
------------
TOTAL CERTIFICATES OF DEPOSIT
(amortized cost $37,000,463) 37,000,463
------------
COMMERCIAL PAPER--53.9%
Allegheny University Hospital 9,000 5.40 2/18/97 8,935,200
Avnet, Inc. 6,820 5.33 2/07/97 6,782,640
Banca CRT Financial Corp. 6,000 5.35 1/06/97 5,995,542
Bass Finance (C.I.) Ltd. 7,000 5.36 2/10/97 6,958,311
BHF Finance (DE), Inc. 7,000 5.40 2/04/97 6,964,300
Cofco Capital Corp. 6,000 5.35 2/14/97 5,960,767
Commed Fuel Co., Inc. 7,959 5.32 2/13/97 7,908,425
Cooperative Association of Tractor Dealers,
Inc. 13,700 5.32 1/13/97 13,675,705
Dean Witter, Discover & Co. 8,000 5.31 1/09/97 7,990,560
Dynamic Funding Corp. 7,000 5.57 2/05/97 6,962,093
Embarcadero Center Venture (Four) 8,000 5.62 1/15/97 7,982,516
Formosa Plastics Corp. 5,000 5.32 1/22/97 4,984,483
Goldman Sachs Group L.P. 8,000 5.30 3/05/97 7,925,800
Guinness PLC 7,000 5.30 1/21/97 6,979,389
Hitachi Credit America Corp. 10,441 5.34 1/28/97 10,399,184
Japan Leasing Finance Corp. 8,000 5.45 3/03/97 7,926,122
Madison Funding Corp. 14,000 5.34-5.36 1/13/97-1/27/97 13,960,442
Merrill Lynch & Co., Inc. 10,000 5.33 2/12/97 9,937,817
Mont Blanc Capital Corp. 7,000 5.45 1/13/97 6,987,283
Oak Funding Corp. 12,000 5.44 1/31/97 11,945,600
Orix America, Inc. 8,000 5.40 1/02/97 7,998,800
Premium Funding, Inc. 8,000 5.35 1/15/97 7,983,356
Ryobi Finance Corp. 5,000 5.68 1/21/97 4,984,222
Sheffield Receivables Corp. 10,500 6.85 1/02/97 10,498,002
SRD Finance, Inc. 10,000 5.50 1/23/97 9,966,389
Sunbelt-DIX, Inc. 7,976 5.35 2/04/97 7,935,699
USA Group Secondary Market Services, Inc. 6,000 5.32 2/10/97 5,964,533
Working Capital Management Co. L.P. 8,000 5.45 1/24/97 7,972,145
------------
TOTAL COMMERCIAL PAPER
(amortized cost $230,465,325) 230,465,325
------------
GOVERNMENT AGENCIES--2.7%
Agency for International Development India+ 3,000 5.67 1/07/97 3,006,319
Agency for International Development Isra-
el+ 3,216 5.56 1/07/97 3,216,127
Agency for International Development Pana-
ma+ 5,089 5.68 1/07/97 5,121,703
------------
TOTAL GOVERNMENT AGENCIES
(amortized cost $11,344,149) 11,344,149
------------
</TABLE>
<PAGE>

SUNAMERICA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1996 -- (CONTINUED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) RATE** MATURITY (NOTE 2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MEDIUM TERM NOTES--23.4%
American Express Centurion+ $ 6,000 5.57% 1/13/97 $ 6,000,000
Bear Stearns Cos., Inc.+ 12,500 5.56-5.61 1/02/97-1/03/97 12,500,000
Beneficial Corp. 4,700 9.13 3/12/97 4,734,286
Boatmen's Credit Card Bank+ 8,000 5.54 1/08/97 7,999,068
Boatmen's National Bank of St. Louis+ 5,000 5.35 1/07/97 5,000,000
Campbell Soup Co. 4,567 7.75 2/24/97 4,584,089
Credit National+ 8,000 5.50 2/24/97 7,999,900
Ford Motor Credit Co. 4,000 5.20 1/01/97 4,000,000
General Motors Acceptance Corp. 7,000 5.00 1/27/97 6,996,210
Key Bank of Wyoming+ 5,000 5.55 1/14/97 4,999,587
Manufacturers Life Insurance Cos. 3,000 8.25 3/01/97 3,014,174
Nationsbank Corp. 7,300 7.50 2/15/97 7,318,990
PNC Bank, N.A.+ 11,000 5.24-5.50 1/07/97-1/13/97 10,995,666
Smith Barney Holdings, Inc. 5,000 6.00 3/15/97 5,007,167
Sony Capital Corp.+ 9,000 5.50 2/28/97 9,000,000
------------
TOTAL MEDIUM TERM NOTES
(amortized cost $100,149,137) 100,149,137
------------
TAXABLE MUNICIPAL MEDIUM TERM NOTES--8.5%
Illinois Student Assistance Corp.+ 16,000 5.85-5.91 1/01/97 16,000,000
New Hampshire State Industrial
Development Authority 13,000 5.48 1/22/97 13,000,000
Texas G.O.+ 7,415 5.88 1/01/97 7,415,000
------------
TOTAL TAXABLE MUNICIPAL MEDIUM TERM NOTES
(amortized cost $36,415,000) 36,415,000
------------
TOTAL INVESTMENT SECURITIES
(amortized cost $423,097,138) 423,097,138
------------
REPURCHASE AGREEMENT--0.7%
Joint Repurchase Agreement Account (Note 3)
(cost $3,076,000) 3,076 6.25 1/02/97 3,076,000
------------
TOTAL INVESTMENTS--
(amortized cost $426,173,138*) 99.6% 426,173,138
Other assets less liabilities 0.4 1,639,363
----- ------------
NET ASSETS 100.0% $427,812,501
===== ============
</TABLE>
- --------
* At December 31, 1996 the cost of securities for Federal income tax purposes
was the same as for book purposes
** Rates shown are rates in effect as of December 31, 1996
+ Variable rate security; maturity date reflects the next reset date
G.O. --General Obligation

PORTFOLIO BREAKDOWN AS A PERCENTAGE OF NET ASSETS (EXCLUDING REPURCHASE
AGREEMENT) BY INDUSTRY@

<TABLE>
<S> <C> <C> <C> <C> <C>
Consumer Credit Services 5.1% Financial Services 22.2% Real Estate 1.9%
Industrials 3.8 Finance 19.1 Utilities 1.9
Government Agencies 2.7 Banking 18.5 Food & Beverages 1.6
Receivables Company 2.5 Municipalities 8.5 Insurance 0.7
Pharmaceuticals 2.1 Securities Holding Company 8.3 ----
98.9%
====
</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, 1996
<TABLE>
<S> <C>
ASSETS:
Investment securities, at value (amortized cost $426,173,138)....... $426,173,138
Cash................................................................ 434,237
Interest receivable................................................. 2,043,498
Receivable for fund shares sold..................................... 921,283
Prepaid expenses.................................................... 90,425
------------
Total assets....................................................... 429,662,581
------------
LIABILITIES:
Payable for fund shares repurchased................................. 1,312,832
Accrued expenses.................................................... 281,477
Investment advisory and management fees payable..................... 181,780
Distribution and service maintenance fees payable................... 73,991
------------
Total liabilities.................................................. 1,850,080
------------
Net assets...................................................... $427,812,501
============
NET ASSETS WERE COMPOSED OF:
Common Stock, $.001 par value (10 billion shares authorized)........ $ 427,802
Additional paid-in capital.......................................... 427,279,382
------------
427,707,184
Accumulated undistributed net investment income..................... 105,317
------------
Net assets...................................................... $427,812,501
============
CLASS A:
Net asset value ($398,698,191/398,688,570 shares outstanding)...... $1.00
=====
CLASS B:
Net asset value ($29,114,310/29,113,376 shares outstanding)........ $1.00
=====
</TABLE>

STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $21,126,368
-----------
EXPENSES:
Investment advisory and management fees............... $1,923,536
Service maintenance fees--Class A..................... 513,979
Distribution and service maintenance fees--Class B.... 378,491
Transfer agent and shareholder servicing fees and ex-
penses--Class A...................................... 909,471
Transfer agent and shareholder servicing fees and ex-
penses--Class B...................................... 110,682
Custodian fees and expenses........................... 161,170
Registration fees--Class A............................ 43,403
Registration fees--Class B............................ 12,028
Directors' fees and expenses.......................... 47,820
Audit and tax consulting fees......................... 31,620
Printing expense...................................... 32,375
Insurance expense..................................... 6,763
Legal fees and expenses............................... 6,610
Miscellaneous expenses................................ 6,101
----------
4,184,049
Less: expense offset.................................. (139,424)
-----------
Net expenses.......................................... 4,044,625
-----------
Net investment income................................. 17,081,743
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $17,081,743
===========
</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, 1996 DECEMBER 31, 1995
-----------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income..................... $ 17,081,743 $ 15,308,139
------------ ------------
Net increase in net assets resulting from
operations............................... 17,081,743 15,308,139
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (Class A)...... (15,491,408) (12,540,465)
From net investment income (Class B)...... (1,583,636) (2,793,748)
------------ ------------
Total dividends and distributions to
shareholders............................. (17,075,044) (15,334,213)
INCREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS (NOTE 5)..................... 59,699,130 55,776,169
------------ ------------
Total increase in net assets.............. 59,705,829 55,750,095
NET ASSETS:
Beginning of year......................... 368,106,672 312,356,577
------------ ------------
End of period (including undistributed net
investment income of $105,317 and $98,618
at December 31, 1996 and December 31,
1995, respectively)...................... $427,812,501 $368,106,672
============ ============
</TABLE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
NET NET NET RATIO OF
ASSET DIVIDENDS ASSET ASSETS RATIO OF NET INVESTMENT
VALUE NET TOTAL FROM FROM NET VALUE END OF EXPENSES INCOME TO
PERIOD BEGINNING INVESTMENT INVESTMENT INVESTMENT END OF TOTAL PERIOD TO AVERAGE AVERAGE
ENDED OF PERIOD INCOME OPERATIONS INCOME PERIOD RETURN(1) (000'S) NET ASSETS NET ASSETS
- ------------------------------------------------------------------------------------------------------------
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
12/31/96 1.000 0.045 0.045 (0.045) 1.000 4.61 398,698 1.00(2) 4.52
<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
12/31/96 1.000 0.038 0.038 (0.038) 1.000 3.83 29,114 1.77(2) 3.76
</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 credit for the year ended December 31, 1995 and a
gross up of transfer agent expense credits for the year ended December 31,
1996 as follows:
<TABLE>
<CAPTION>
12/31/95 12/31/96
-------- --------
<S> <C> <C>
Class A......... 0.05% 0.03%
Class B......... 0.13% 0.04%
</TABLE>

(3) Total return is not annualized
(4) Annualized

See Notes to Financial Statements
<PAGE>

SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1996

NOTE 1. ORGANIZATION
SunAmerica Money Market Fund (the "Fund") is an open-end diversified
management investment company organized as a Maryland Corporation.

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:

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.

Dividends from net investment income are declared daily and paid monthly.

SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1996--(CONTINUED)

EXPIRATION
---------------------------------------------------
2002 2003 2004
------ ------- -------
$5,892 $11,725 $15,660

NOTE 3. JOINT REPURCHASE AGREEMENT ACCOUNT
As of December 31, 1996, the Fund had a 9.3% undivided interest, which
represented $3,076,000 in principal amount, in a repurchase agreement in a
joint account with other SunAmerica managed funds. As of such date, the
repurchase agreement in the joint account and the collateral therefore was
as follows:

Yamaichi International (America), Inc., Repurchase Agreement, 6.25% dated
12/31/96, in the principal amount of $33,000,000 repurchase price
$33,011,458 due 1/2/97 collateralized by $8,040,000 U.S. Treasury Notes
5.75% due 9/30/97 and $24,810,000 U.S. Treasury Notes 6.375% due 9/30/01,
approximate aggregate value $33,660,748.

SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1996--(CONTINUED)

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, 1996, SACS
earned fees of $892,470 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, 1996, SACS informed the Fund that it
received approximately $339,999 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, 1996
the Fund (Class A and Class B) incurred expenses of $846,356 to reimburse
SAFS pursuant to the terms of the Service Agreement. Of this amount, $79,983
was payable to SAFS at December 31, 1996.

NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of each class, all at $1.00 per share, for the year
ended December 31, 1996 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,
1996 1995 1996 1995
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Shares sold............. 1,460,788,582 1,100,031,147 122,015,372 445,571,488
Reinvested dividends.... 15,326,870 12,194,638 1,346,953 2,179,516
Shares redeemed......... (1,393,731,702) (1,009,865,935) (146,046,945) (494,334,685)
-------------- -------------- ------------ ------------
Net increase (decrease). 82,383,750 102,359,850 (22,684,620) (46,583,681)
============== ============== ============ ============
</TABLE>
<PAGE>

SUNAMERICA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--DECEMBER 31, 1996--(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, 1996, the Fund had accrued $30,361 for the Retirement Plan,
which is included in accrued expenses on the Statement of Assets and
Liabilities and for the year ended December 31, 1996, and expensed $14,130
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, 1996, 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, 1996 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, 1997
<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.
OFFICERS The SunAmerica Center
Peter A. Harbeck, President 733 Third Avenue
Nancy Kelly, Vice President New York, NY 10017-3204
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

CLASS CLASS
------- -------
EQUITY FUNDS A B INCOME FUNDS A B
--- --- --- ---
Balanced Assets 51 551 U.S. Government
Global Balanced 23 523 Securities 70 570
Blue Chip Growth 522 22 Federal Securities 534 34
Mid-Cap Growth 71 571 Diversified Income 580 80
Small Company Growth 36 536 High Income 28 228
Growth and Income 24 524 Tax Exempt Insured 33 533

Money Market 35 535

FUNCTIONS
1 List of Available Functions 6 Last Dividend Transaction
2 Account Balance 7 Duplicate Statement
3 Fund Price 8 Year-End Tax
4 Process an Exchange Information/Duplicate Tax
5 Lost Transaction Forms
9 Check Reorders
<PAGE>

December 31, 1996

SunAmerica
Money Market
Fund

Annual
Report

[LOGO] SunAmerica
Asset Management

800.858.8850

SunAmerica Money Market Fund
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
1-800-858-8850

This report is submitted soley 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.