STYLE SELECT SERIES INC
485APOS, 1998-12-30
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<PAGE>

   
   As filed with the Securities and Exchange Commission on December 30, 1998
    
                       Securities Act File No. 33-11283

                 Investment Company Act File Act No. 811-07797

 ============================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM N-1A
   
         REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933            |X|
                  PRE-EFFECTIVE AMENDMENT NO.                               | |
                  POST-EFFECTIVE AMENDMENT NO. 12                           |X|
    
                                    and/or
   
         REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940    |X|
                  AMENDMENT NO. 13
    
                       (Check appropriate box or boxes)

                           STYLE SELECT SERIES, INC.
              (Exact Name of Registrant as Specified in Charter)

                             The SunAmerica Center
                               733 Third Avenue
                              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
                       SunAmerica Asset Management Corp.
                             The SunAmerica Center
                         733 Third Avenue - 3rd Floor
                            New York, NY 10017-3204
                   (Name and Address for Agent for Service)
    
   
                                   Copy to:
                            Margery K. Neale, Esq.
                     Swidler Berlin Shereff Friedman, LLP
                               919 Third Avenue
                              New York, NY 10022
    
   
      Approximate Date of Proposed Public Offering:  As soon as practicable 
      after this Registration Statement becomes effective.
    
             It is proposed that this filing will become effective
             (check appropriate box) 
                    |_| immediately upon filing pursuant to paragraph (b) 
                    |_| on (date) pursuant to paragraph (b) 
   
                    |X| 60 days after filing pursuant to paragraph (a)(1) 
    
                    |_| on (date) pursuant to paragraph (a)(1) 
   
                    |_| 75 days after filing pursuant to paragraph (a)(2) 

    
   
                    |_| on (date) pursuant to paragraph (a)(2) of Rule 485.
    
   
                  If appropriate, check the following box:
                    |_| This post-effective amendment designates a new
                        effective date for a previously filed
                        post-effective amendment.
    

<PAGE>

================================================================================
                                           PROSPECTUS

               ___________________, 1999

================================================================================




style select series(R)

Large-Cap Growth Portfolio
Mid-Cap Growth Portfolio
Aggressive Growth Portfolio
Large-Cap Blend Portfolio
Large-Cap Value Portfolio
Value Portfolio
Small-Cap Value Portfolio
International Equity Portfolio




The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.

                                                               [Logo] SunAmerica
                                                                    Mutual Funds

<PAGE>

                                TABLE OF CONTENTS

FUND HIGHLIGHTS ..................................................... 3

FINANCIAL HIGHLIGHTS ................................................14

SHAREHOLDER ACCOUNT INFORMATION .....................................15

MORE INFORMATION ABOUT THE PORTFOLIOS ...............................28
     Investment Strategies ..........................................28
     Glossary .......................................................32
          Investment Technology .....................................32
          Risk Terminology ..........................................34

FUND MANAGEMENT .....................................................36



                                       2
<PAGE>

FUND HIGHLIGHTS

The following questions and answers are designed to give you an overview of the
Fund, and to provide you with information about eight of the Fund's separate
Portfolios and their investment goals and principal strategies. Each goal may be
changed without shareholder approval, although you will receive notice of any
change. More complete investment information is provided in chart form, under
"More Information About the Portfolios," which is on page 28, and the glossary
that follows on page 32.

Q:   What are the Portfolios' investment goals?

A:   Each Portfolio seeks long-term growth of capital. The Large-Cap Blend
     Portfolio also seeks a reasonable level of current income. There can be no
     assurance that any Portfolio's investment goal will be met or that the net
     return on an investment in a Portfolio will exceed what could have been 
     obtained through other investment or savings vehicles.

Q:   How do the Portfolios pursue their goals?

A:   Each Portfolio provides investors with access to at least three different
     professional Advisers, each with its own distinct investment methodology
     within a particular investment style. Each Adviser manages a separate
     portion of a Portfolio.

          The Large-Cap Growth, Mid-Cap Growth and Aggressive Growth Portfolios
          invest primarily in equity securities selected on the basis of growth
          criteria.

          [Margin note: "growth" companies are considered to have a historical
          record of above-average growth rate; to have significant growth
          potential; to have above-average earnings growth or value or the 
          ability to sustain earnings growth; to offer proven or unusual 
          products or services; or to operate in industries experiencing 
          increasing demand.]

          The Large-Cap Blend Portfolio invests primarily in equity securities
          selected to achieve a blend of growth companies, value companies and
          companies that the Advisers believe have elements of growth and value.
          Each Adviser may emphasize either a growth orientation or a value
          orientation at any particular time.

          The Large-Cap Value, Value and Small-Cap Value Portfolios invest 
          primarily in equity securities selected on the basis of value 
          criteria.

          [Margin note: A "value" oriented philosophy - that of investing
          principally in securities believed to be undervalued in the market -
          reflects a contrarian approach, in that the potential for superior
          relative performance is believed to be highest when stocks of
          fundamentally solid companies are out of favor. The selection criteria

                                       3

<PAGE>

          is calculated to identify stocks of large, well-known companies with
          solid financial strength and generous dividend yields that have low
          price-earnings ratios and have been generally overlooked by the
          market.]

          The International Equity Portfolio invests primarily in equity 
          securities and other securities with equity characteristics of 
          non-U.S. issuers located in at least three countries other than the 
          U.S. 

     In addition to the difference in the investment style of the Portfolios,
     the Portfolios may purchase securities issued by companies of different
     sizes as measured by their market capitalizations.

     [Margin note: Market capitalization represents the total market value of
     the outstanding securities of a corporation.]

          For the Large-Cap Growth, Large-Cap Blend and Large-Cap Value
          Portfolios, the companies will generally have market capitalizations
          of over $5 billion.

          For the Mid-Cap Growth Portfolio, the companies will generally have
          market capitalizations between $1 billion and $5 billion.

          For the Value Portfolio, the Advisers may select companies without
          regard to market capitalizations. However, the Value Portfolio as a
          whole generally expects to have a significant portion of its total
          assets invested in securities of companies with market capitalizations
          between $1 billion and $5 billion.

          For the Aggressive Growth Portfolio, the Advisers may select companies
          without regard to market capitalizations. However, the companies will
          generally have market capitalizations of less than $1 billion or
          between $1 billion and $5 billion.

          For the Small-Cap Value Portfolio, the companies will generally have
          market capitalizations of less than $1 billion.

          For the International Equity Portfolio, the Advisers may select
          companies without regard to their market capitalizations.

     SunAmerica will initially allocate the assets of each Portfolio equally
     among the Advisers. SunAmerica will also allocate new cash from share
     purchases and redemption requests equally among the Advisers, unless
     SunAmerica determines,



                                       4
<PAGE>

     subject to the review of the Board, that a different allocation of assets
     would be in the best interests of the Portfolio and its shareholders.

     SunAmerica intends, on a quarterly basis, to review the asset allocation in
     each Portfolio to ensure that no portion of assets managed by an Adviser
     exceeds that portion managed by any other Adviser to the Portfolio by more
     than 5%. If such a condition exists, SunAmerica will then re-allocate cash
     flows among the three Advisers, differently from the manner described
     above, in an effort to effect a re-balancing of the Portfolio's asset
     allocation. SunAmerica does not intend, but reserves the right, subject to
     the review of the Board, to reallocate assets from one Adviser to another
     when it would be in the best interests of the Portfolio and its
     shareholders to do so. In some instances, the effect of the reallocation
     will be to shift assets from a better performing Adviser to a portion of
     the Portfolio with a relatively lower total return.

Q:   What are the principal risks of investing in the Portfolios?

A:   As with any equity fund, the value of your investment in each of the
     Portfolios may fluctuate in response to stock market movements, and you
     could lose money. Other principal risks include:

          -    individual stocks selected for a Portfolio may underperform the
               market generally

          -    stocks of smaller companies may be more volatile than, and not as
               liquid as, those of larger companies. This will particularly
               affect the Aggressive Growth Portfolio and Small-Cap Value
               Portfolio.

          -    while investing internationally may reduce your risk by
               increasing the diversification of your overall portfolio, the
               value of your investment may be affected by fluctuating currency
               values, changing local and regional economic, political and
               social conditions, and greater market volatility, and, in
               addition, foreign securities may not be as liquid as domestic
               securities. This will particularly affect the International
               Equity Portfolio.

          -    each Portfolio is non-diversified, which means that it can invest
               a larger portion of its assets in the stock of a single company
               than can some other mutual funds; by concentrating in a smaller
               number of stocks, the Portfolio's risk is increased because the
               effect of each stock on the Portfolio's performance is greater.

     In addition, shares of the Portfolios are not bank deposits and are not
     guaranteed or insured by any bank, government entity or the Federal Deposit
     Insurance Corporation.


                                       5
<PAGE>

Q:   How have the Portfolios performed historically?

A:   The following Risk/Return Bar Charts and Tables illustrate the risks of
     investing in the Portfolios by showing changes in the Portfolios'
     performance from year to year, and compare the Portfolios' average annual
     returns to those of an appropriate market index. Sales charges are not
     reflected in the bar chart. If these amounts were reflected, returns would 
     be less than those shown. Of course, past performance is not necessarily 
     an indication of how a Portfolio will perform in the future.


Mid-Cap Growth Portfolio

1997
13.29%

(Class B)

During the period shown in the bar chart, the highest return for a quarter was
15.74% (quarter ended 06/30/97) and the lowest return for a quarter was -11.43%
(quarter ended 03/31/97). The Portfolio's year-to-date return as of September 
30, 1998 was -5.51%.

<TABLE>
<CAPTION>
Average Annual Total Returns        Past One         Return Since
(as of the calendar year            Year             Inception***
ended December 31, 1997)
- ----------------------------        --------         ------------
<S>                                 <C>              <C>
Mid-Cap Growth            A           7.29%              5.46% 
                          B           9.29%              7.00%
                          II          N/A                N/A
Russell Mid-Cap Growth*              22.54%             22.51% 
Morningstar Mid-Cap Growth**         16.80%             17.12%
</TABLE>

  * [To be filed by amendment]
 ** [To be filed by amendment]
*** Class A and B shares commenced offering on November 19, 1996. Class C 
    shares, which were redesignated Class II shares on December 1, 1998, 
    commenced offering on March 6, 1997.

Aggressive Growth Portfolio

1997
23.87%

(Class B)

During the period shown in the bar chart, the highest return for a quarter was
17.89% (quarter ended 09/30/97) and the lowest return for a quarter was -4.55%
(quarter ended 12/31/97). The Fund's year-to-date return as of September 30,
1998 was -1.58%.

<TABLE>
<CAPTION>
Average Annual Total Returns        Past One         Return Since
(as of the calendar year            Year             Inception***
ended December 31, 1997)
- ----------------------------        --------         ------------
<S>                                 <C>              <C>
Aggressive Growth         A          17.55%              18.92% 
                          B          19.87%              21.13%
                          II         N/A                 N/A
Russell 2500 Growth*                 14.77%              17.44%
Morningstar Aggressive Growth**      15.63%              16.04%
</TABLE>

  * [To be filed by amendment]
 ** [To be filed by amendment]
*** Class A and B shares commenced offering on November 19, 1996. Class C 
    shares, which were redesignated Class II shares on December 1, 1998, 
    commenced offering on March 6, 1997.

<PAGE>

Value Portfolio

1997
28.67%

(Class B)

During the period shown in the bar chart, the highest return for a quarter was
14.76% (quarter ended 06/30/97) and the lowest return for a quarter was -1.61%
(quarter ended 12/31/97). The Fund's year-to-date return as of September 30,
1998 was -14.66%.

<TABLE>
<CAPTION>
Average Annual Total Returns        Past One         Return Since
(as of the calendar year            Year             Inception***
ended December 31, 1997)
- ----------------------------        --------         ------------
<S>                                 <C>              <C>
Value Growth              A          21.99%              21.91% 
                          B          24.67%              24.30%
                          II         N/A                 N/A
Russell Mid-Cap Value*               29.18%              30.53%
Morningstar Mid-Cap Value**          25.91%              30.60%
</TABLE>

  * [To be filed by amendment]
 ** [To be filed by amendment]
*** Class A and B shares commenced offering on November 19, 1996. Class C 
    shares, which were redesignated Class II shares on December 1, 1998, 
    commenced offering on March 6, 1997.

International Equity Portfolio

1997
- -3.47%

(Class B)

During the period shown in the bar chart, the highest return for a quarter was
9.76% (quarter ended 06/30/97) and the lowest return for a quarter was -10.20 
(quarter ended 12/31/97). The Fund's year-to-date return as of September 30,
1998 was -4.88%.

<TABLE>
<CAPTION>
Average Annual Total Returns        Past One         Return Since
(as of the calendar year            Year             Inception***
ended December 31, 1997)
- -------------------------------     --------         ------------
<S>                                 <C>              <C>
International Equity Growth  A       -8.34%              -7.12% 
                             B       -7.47%              -6.38%
                             II      N/A                 N/A
MSCI Eafe USD*                        2.05%               2.38%
Morningstar Foreign Stock**           4.68%               7.19%
</TABLE>

  * [To be filed by amendment]
 ** [To be filed by amendment]
*** Class A and B shares commenced offering on November 19, 1996. Class C 
    shares, which were redesignated Class II shares on December 1, 1998, 
    commenced offering on March 6, 1997.

Q:   What are the Portfolios' expenses?

A:   The following table describes the fees and expenses that you may pay if you
     buy and hold shares of the Portfolios.

                                       6

<PAGE>

<TABLE>
<CAPTION>
                                        Large-Cap Growth         Mid-Cap Growth        Aggressive Growth        Large-Cap Blend
                                            Portfolio              Portfolio               Portfolio               Portfolio
                                      ---------------------   ---------------------   ---------------------   ---------------------
                                      Class   Class   Class   Class   Class   Class   Class   Class   Class   Class   Class   Class
                                        A       B       II      A       B       II      A       B       II      A       B       II
                                       ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
<S>                                    <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>  
Shareholder Fees (fees
paid directly from
your investment)

  Maximum Sales Charge
  (Load) Imposed on
  Purchases (as a
  percentage of offering
  price)(1) ........................   5.75%   None    1.00%   5.75%   None    1.00%   5.75%   None    1.00%   5.75%   None    1.00%

  Maximum Deferred Sales
  Charge (Load) (as a
  percentage of amount
  redeemed)(2) .....................   None    4.00%   1.00%   None    4.00%   1.00%   None    4.00%   1.00%   None    4.00%   1.00%

  Maximum Sales Charge
  (Load) Imposed on
  Reinvested Dividends .............   None    None    None    None    None    None    None    None    None    None    None    None

  Redemption Fee(3) ................   None    None    None    None    None    None    None    None    None    None    None    None

  Exchange Fee .....................   None    None    None    None    None    None    None    None    None    None    None    None

Gross Annual Fund
Operating Expenses
(expenses that are
deducted from Fund
assets)

  Management Fees ..................   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%

  Distribution (12b-1)
    Fees ...........................   0.35%   1.00%   1.00%   0.35%   1.00%   1.00%   0.35%   1.00%   1.00%   0.35%   1.00%   1.00%

  Other Expenses ...................   1.15%   1.23%   1.85%    .73%    .76%    .82%    .70%    .71%    .87%   1.05%   1.10%   2.54%
                                       ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----

Total Gross
  Annual Fund
  Operating
  Expenses .........................   2.50%   3.23%   3.85%   2.08%   2.76%   2.82%   2.05%   2.71%   2.87%   2.40%   3.10%   4.54%
                                       ====    ====    ====    ====    ====    ====    ====    ====    ====    ====    ====    ====
Expense
Reimbursement(4)....................    .72%    .80%   1.42%   0.30%    .33%    .39%    .27%    .28%    .44%    .62%    .67%   2.11%

Net Expenses .......................   1.78%   2.43%   2.43%   1.78%   2.43%   2.43%   1.78%   2.43%   2.43%   1.78%   2.43%   2.43%
</TABLE>

(1)  The front-end sales charge on Class A shares decreases with the size of the
     purchase to 0% for purchases of $1 million or more.

(2)  Purchases of Class A shares over $1 million will be subject to a contingent
     deferred sales charge (CDSC) on redemptions made within one year of
     purchase. The CDSC on Class B shares applies only if shares are redeemed
     within six years of their purchase. The CDSC on Class II shares applies
     only if shares are redeemed within eighteen months of their purchase.

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



                                       7

<PAGE>


(4)  The Board of Directors, including a majority of the Independent Directors,
     approved the Investment Advisory and Management Agreement subject to the
     net expense ratio set forth above. SunAmerica may not increase such ratios
     without Board approval, including a majority of the Independent Directors.



                                       8

<PAGE>

<TABLE>
<CAPTION>
                                        Large-Cap Value                                  Small-Cap Value       International Equity
                                            Portfolio            Value Portfolio            Portfolio               Portfolio
                                      ---------------------   ---------------------   ---------------------   ---------------------
                                      Class   Class   Class   Class   Class   Class   Class   Class   Class   Class  Class    Class
                                        A       B       II      A       B       II      A       B       II      A      B        II
                                       ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----    ----
<S>                                    <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>    <C>  
Shareholder Fees
(fees paid
directly from
your investment)

  Maximum Sales
  Charge (Load)
  Imposed on
  Purchases (as a
  percentage of
  offering
  price)(1) ........................   5.75%   None    1.00%   5.75%   None    1.00%   5.75%   None    1.00%   5.75%   None   1.00%

  Maximum Deferred
  Sales Charge
  (Load) (as a
  percentage of
  amount
  redeemed)(2) .....................   None    4.00%   1.00%   None    4.00%   1.00%   None    4.00%   1.00%   None    4.00%  1.00%

  Maximum Sales
  Charge (Load)
  Imposed on
  Reinvested
  Dividends ........................   None    None    None    None    None    None    None    None    None    None    None   None

  Redemption Fee(3) ................   None    None    None    None    None    None    None    None    None    None    None   None

  Exchange Fee .....................   None    None    None    None    None    None    None    None    None    None    None   None

Gross Annual
Fund Operating
Expenses
(expenses that
are deducted
from Fund assets)

  Management Fees ..................   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.00%   1.10%   1.10%  1.10%

  Distribution
  (12b-1) Fees .....................   0.35%   1.00%   1.00%   0.35%   1.00%   1.00%   0.35%   1.00%   1.00%   0.35%   1.00%  1.00%

  Other Expenses ...................   1.10%   1.04%   1.57%    .60%    .62%    .64%   1.09%   1.05%   1.48%   1.03%   1.06%  1.13%

Total Gross  Annual
  Fund Operating
  Expenses .........................   2.45%   3.04%   3.57%   1.95%   2.62%   2.64%   2.44%   3.05%   3.48%   2.48%   3.16%  3.23% 

Expense Reimbursement(4)............    .67%    .61%   1.14%    .17%    .19%    .21%    .66%    .62%   1.05%    .45%    .48%   .55% 

Net Expenses .......................   1.78%   2.43%   2.43%   1.78%   2.43%   2.43%   1.78%   2.43%   2.43%   2.03%   2.68%  2.68%
</TABLE>

(1)  The front-end sales charge on Class A shares decreases with the size of the
     purchase to 0% for purchases of $1 million or more.

(2)  Purchases of Class A shares over $1 million will be subject to a contingent
     deferred sales charge (CDSC) on redemptions made within one year of
     purchase. The CDSC on Class B shares applies only if shares are redeemed
     within six years of their purchase. The CDSC on Class II shares applies
     only if shares are redeemed within eighteen months of their purchase.

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

                                       9

<PAGE>

(4)  The Board of Directors, including a majority of the Independent Directors,
     approved the Investment Advisory and Management Agreement subject to the
     net expense ratio set forth above. SunAmerica may not increase such ratios
     without Board approval, including a majority of the Independent Directors.

Example

This Example is intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in a Portfolio for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Portfolio's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
                                                                         1 Year    3 Years    5 Years    10 Years
                                                                         ------    -------    -------    --------
<S>                                                                      <C>       <C>        <C>        <C>

Large-Cap Growth Portfolio
  (Class A shares) ..................................................    $81       $131       $183       $325
  (Class B shares)* .................................................    $73       $130       $189       $329
  (Class II shares) .................................................    $58       $126       $206       $414

Mid-Cap Growth Portfolio
  (Class A shares) ..................................................    $77       $119       $163       $285
  (Class B shares)* .................................................    $68       $116       $166       $285
  (Class II shares) .................................................    $48       $ 97       $157       $322

Aggressive Growth Portfolio
  (Class A shares) ..................................................    $77       $118       $161       $282
  (Class B shares)* .................................................    $67       $114       $163       $281
  (Class II shares) .................................................    $49       $ 98       $160       $326

Large-Cap Blend Portfolio
  (Class A shares) ..................................................    $80       $128       $178       $315
  (Class B shares)* .................................................    $71       $126       $183       $317
  (Class II shares) .................................................    $65       $146       $237       $470

Large Cap Value Portfolio
  (Class A shares) ..................................................    $81       $129       $181       $320
  (Class B shares)* .................................................    $71       $124       $180       $315
  (Class II shares) .................................................    $56       $118       $193       $390

Value Portfolio
  (Class A shares) ..................................................    $76       $115       $157       $272
  (Class B shares)* .................................................    $67       $111       $159       $272
  (Class II shares) .................................................    $46       $ 91       $149       $304

Small-Cap Value Portfolio
  (Class A shares) ..................................................    $81       $129       $180       $319
</TABLE>
                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                         1 Year    3 Years    5 Years    10 Years
                                                                         ------    -------    -------    --------
<S>                                                                      <C>       <C>        <C>        <C>
  (Class B shares)* .................................................    $71       $124       $180       $316 
  (Class II shares) .................................................    $55       $116       $189       $382 

International Equity Portfolio
  (Class A shares) ..................................................    $81       $130       $182       $323 
  (Class B shares)* .................................................    $72       $127       $185       $324 
  (Class II shares) .................................................    $52       $109       $177       $360 
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
                                                                         1 Year    3 Years    5 Years    10 Years
                                                                         ------    -------    -------    --------
<S>                                                                      <C>       <C>        <C>        <C>
Large-Cap Growth Portfolio
  (Class A shares) ..................................................    $81       $131       $183       $325 
  (Class B shares)* .................................................    $33       $100       $169       $329 
  (Class II shares) .................................................    $48       $126       $206       $414 

Mid-Cap Growth Portfolio
  (Class A shares) ..................................................    $77       $119       $163       $285 
  (Class B shares)* .................................................    $28       $ 86       $146       $285 
  (Class II shares) .................................................    $38       $ 97       $157       $322 

Aggressive Growth Portfolio
  (Class A shares) ..................................................    $77       $118       $161       $282 
  (Class B shares)* .................................................    $27       $ 84       $143       $281 
  (Class II shares) .................................................    $39       $ 98       $160       $326 

Large-Cap Blend Portfolio
  (Class A shares) ..................................................    $80       $128       $178       $315 
  (Class B shares)* .................................................    $31       $ 96       $163       $317 
  (Class II shares) .................................................    $55       $146       $237       $470  

Large Cap Value Portfolio
  (Class A shares) ..................................................    $81       $129       $181       $320 
  (Class B shares)* .................................................    $31       $ 94       $160       $315 
  (Class II shares) .................................................    $46       $118       $193       $390 

Value Portfolio
  (Class A shares) ..................................................    $76       $115       $157       $272 
  (Class B shares)* .................................................    $27       $ 81       $139       $272 
  (Class II shares) .................................................    $36       $ 91       $149       $304 

Small-Cap Value Portfolio
  (Class A shares) ..................................................    $81       $129       $180       $319 
  (Class B shares)* .................................................    $31       $ 94       $160       $316 
  (Class II shares) .................................................    $45       $116       $189       $382 

International Equity Portfolio
  (Class A shares) ..................................................    $81       $130       $182       $323 
</TABLE>
                                       11

<PAGE>

<TABLE>
<CAPTION>
                                                                         1 Year    3 Years    5 Years    10 Years
                                                                         ------    -------    -------    --------
<S>                                                                      <C>       <C>        <C>        <C>
  (Class B shares)* .................................................    $32        $ 97       $165       $324      
  (Class II shares) .................................................    $42        $109       $177       $360
</TABLE>

- ----------

*    Class B shares convert to Class A shares approximately seven years after
     purchase. Therefore, expense information for years 8, 9 and 10 is the same
     for both Class A and B shares.

     The expenses shown in the example are based on gross expense data for the
     fiscal year ended October 31, 1998. In the case of each Portfolio, actual
     expenses were less than gross expenses for fiscal year 1998 because of
     expense waivers and reimbursements. If the actual expenses were used in the
     example rather than gross expenses, your costs would be as follows:

     If you redeem your investment at the end of each of the periods indicated:

<TABLE>
<CAPTION>
                                                            1 Year          3 Years        5 Years       10 Years
                                                            ------          -------        -------       --------
     <S>                                                    <C>             <C>            <C>           <C>
     Large-Cap Growth Portfolio
     (Class A shares) ................................       $75            $110            $148          $255
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284

     Mid-Cap Growth Portfolio 
     (Class A shares) ................................       $75            $110            $148          $255
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284

     Aggressive Growth Portfolio 
     (Class A shares) ................................       $75            $110            $148          $255 
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284

     Large-Cap Blend Portfolio 
     (Class A shares) ................................       $75            $110            $148          $255
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284

     Large-Cap Value Portfolio 
     (Class A shares) ................................       $75            $110            $148          $255
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284 

     Value Portfolio 
     (Class A shares) ................................       $75            $110            $148          $255
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284

     Small-Cap Value Portfolio
     (Class A shares) ................................       $75            $110            $148          $255
     (Class B shares) ................................       $65            $106            $150          $253
     (Class II shares) ...............................       $44            $ 85            $138          $284
</TABLE>
                                                                12

<PAGE>

<TABLE>
<CAPTION>
                                                            1 Year          3 Years        5 Years       10 Years
                                                            ------          -------        -------       --------
     <S>                                                    <C>             <C>            <C>           <C>
     International Equity Portfolio 
     (Class A shares) ................................       $77             $118            $161          $280 
     (Class B shares) ................................       $67             $113            $162          $278 
     (Class II shares) ...............................       $47             $ 92            $151          $308

     If you did not redeem your shares:

<CAPTION>
                                                            1 Year          3 Years        5 Years       10 Years
                                                            ------          -------        -------       --------
     <S>                                                    <C>             <C>            <C>           <C>
     Large-Cap Growth Portfolio
     (Class A shares) ................................       $75             $110            $148          $255
     (Class B shares) ................................       $25             $ 76            $130          $253 
     (Class II shares) ...............................       $34             $ 85            $138          $284  
                                                                                                           
     Mid-Cap Growth Portfolio                                                                              
     (Class A shares) ................................       $75             $110            $148          $255
     (Class B shares) ................................       $25             $ 76            $130          $253
     (Class II shares) ...............................       $34             $ 85            $138          $284 
                                                                                                           
     Aggressive Growth Portfolio                                                                           
     (Class A shares) ................................       $75             $110            $148          $255 
     (Class B shares) ................................       $25             $ 76            $130          $253 
     (Class II shares) ...............................       $34             $ 85            $138          $284  
                                                                                                           
     Large-Cap Blend Portfolio                                                                             
     (Class A shares) ................................       $75             $110            $148          $255 
     (Class B shares) ................................       $25             $ 76            $130          $253  
     (Class II shares) ...............................       $34             $ 85            $138          $284
                                                                                                            
     Large-Cap Value Portfolio                                                                             
     (Class A shares) ................................       $75             $110            $148          $255
     (Class B shares) ................................       $25             $ 76            $130          $253   
     (Class II shares) ...............................       $34             $ 85            $138          $284  
                                                                                                           
     Value Portfolio                                                                                       
     (Class A shares) ................................       $75             $110            $148          $255 
     (Class B shares) ................................       $25             $ 76            $130          $253
     (Class II shares) ...............................       $34             $ 85            $138          $284  
                                                                                                           
     Small-Cap Value Portfolio                                                                             
     (Class A shares) ................................       $75             $110            $148          $255 
     (Class B shares) ................................       $25             $ 76            $130          $253 
     (Class II shares) ...............................       $34             $ 85            $138          $284  
                                                                                                           
     International Equity Portfolio                                                                        
     (Class A shares) ................................       $77             $118            $161          $280
     (Class B shares) ................................       $27             $ 83            $142          $278 
     (Class II shares) ...............................       $37             $ 92            $151          $308   
</TABLE>
                                       13

<PAGE>

FINANCIAL HIGHLIGHTS

The Financial Highlights table for each Portfolio is intended to help you
understand the Portfolio's financial performance since inception. Certain
information reflects financial results for a single Fund share. The total
returns in each table represent the rate that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with each Portfolio's financial statements, are included in
the Statement of Additional Information (SAI), which is available upon request.

                           [to be filed by amendment]





                                       14

<PAGE>

SHAREHOLDER ACCOUNT INFORMATION

Selecting a Share Class

Each Portfolio offers three classes of shares through this Prospectus: Class A,
Class B and Class II shares.

Each class of shares has its own cost structure, so you can choose the one best
suited to your investment needs. Your broker or financial advisor can help you
determine which class is right for you.

<TABLE>
<CAPTION>
===========================================================================================================================
Class A                                        Class B                              Class II
===========================================================================================================================
<S>                                            <C>                                   <C>
o  Front-end sales charges, as described       o  No front-end sales charge; all     o  Front-end sales charge, as
   below. There are several ways to reduce        your money goes to work               described below.
   these charges, also described below.           for you right away.

o  Lower annual expenses than Class B or       o  Higher annual expenses than        o  Higher annual expenses than 
   Class II shares.                               Class A shares.                       Class A shares.                            

                                               o  Deferred sales charge on           o  Deferred sales charge on shares you
                                                  shares you sell within six            sell within eighteen months of
                                                  years of purchase, as                 purchase, as described below.
                                                  described below.

                                               o  Automatic conversion to Class      o  No conversion to Class A.
                                                  A shares after approximately
                                                  seven years, thus reducing 
                                                  future annual expenses.
</TABLE>

                                       15

<PAGE>

Calculation of Sales Charges

Class A Sales Charges are as follows:

                                                                      Concession
                                                      Sales Charge    to Dealers
                                                 ===============================
                                                   % of     % of Net     % of
                                                 Offering    Amount    Offering
            Your Investment                        Price    Invested     Price
                                                 ===============================
Less than $50,000 .............................    5.75%      6.10%      5.00%

$50,000 but less than $100,000 ................    4.75%      4.99%      4.00%

$100,000 but less than $250,000 ...............    3.75%      3.90%      3.00%

$250,000 but less than $500,000 ...............    3.00%      3.09%      2.25%

$500,000 but less than $1,000,000 .............    2.10%      2.15%      1.35%

$1,000,000 or more ............................    None       None       1.00%

Investments of $1 million or more Class A shares are available with no front-end
sales charge. However, there is a 1% CDSC on any shares you sell within one year
of purchase.

Class B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC on shares you sell within six
years of buying them. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:

Class B deferred charges:

Years after purchase                 CDSC on shares being sold

1st or 2nd year                      4.00%

3rd or 4th year                      3.00%

5th year                             2.00%

6th year                             1.00%

7th year and thereafter              None




                                       16

<PAGE>

For purposes of the CDSC, we count all purchases you make during a calendar
month as having been made on the FIRST day of that month.

Class II Sales Charges are as follows:

                  Sales Charge                             Concession to Dealers
================================================================================
    % of                          % of Net                         % of
  Offering                         Amount                        Offering
   Price                          Invested                         Price
================================================================================
   1.00%                           1.01%                           1.00%

There is also a CDSC of 1% on shares you sell within 18 months after you buy 
them.

Determination of CDSC Each CDSC is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. There is no
CDSC on shares you purchase through reinvestment of dividends. To keep your CDSC
as low as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC. If there are not
enough of these shares available, we will sell shares that have the lowest CDSC.

Sales Charge Reductions and Waivers

Waivers for Certain Investors Various individuals and institutions may purchase
Class A shares without front-end sales charges, including:

o    financial planners, institutions, broker-dealer representatives or
     registered investment advisers utilizing Fund shares in fee-based
     investment products under an agreement with the Distributor

o    participants in certain retirement plans that meet applicable conditions

o    Fund Directors and other individuals who are affiliated with the Portfolios
     or other SunAmerica Mutual Funds and their families

o    selling brokers and their employees and sales representatives

o    participants in "Net Asset Value Transfer Program"

We will generally waive the CDSC for Class B or Class II shares in the following
cases:

o    within one year of the shareholder's death or becoming disabled

o    taxable distributions or loans to participants made by qualified retirement
     plans or retirement accounts (not including rollovers) for which SunAmerica
     serves as a fiduciary

o    Fund Directors and other individuals who are affiliated with the Portfolios
     or other SunAmerica Mutual Funds and their families

o    to make taxable distributions from certain retirement plans

o    to make payments through the Systematic Withdrawal Plan (subject to certain
     conditions)



                                       17

<PAGE>

Reducing your Class A sales charges There are several special purchase plans
that allow you to combine multiple purchases of Class A shares of SunAmerica
Mutual Funds to take advantage of the breakpoints in the sales charge schedule.
For information about the "Rights of Accumulation," "Letter of Intent,"
"Combined Purchase Privilege," and "Reduced Sales Charges for Group Purchases,"
contact your broker or financial advisor, or consult the SAI.

To utilize: if you think you may be eligible for a sales charge reduction or
CDSC waiver, contact your broker or financial advisor.

Reinstatement privilege If you sell shares of a Portfolio, you may invest some
or all of the proceeds in the same share class of the same Portfolio within one
year without a sales charge. If you paid a CDSC when you sold your shares, we
will credit your account with the amount of the CDSC. All accounts involved must
be registered in the same name(s).

12b-1 Fees

Each class of shares of each Portfolio has its own 12b-1 plan that provides for
distribution and account maintenance and service fees (payable to the 
Distributor) based on a percentage of average daily net assets, as follows:

                                                        Account Maintenance
                                                                and  
       Class                     Distribution Fee           Service Fee
       -----                     ----------------           -----------

        A                              .10%                     .25%
        B                              .75%                     .25%
        II                             .75%                     .25%

Because 12b-1 fees are paid out of the Portfolio's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.

Opening an Account

1.   Read this prospectus carefully.

2.   Determine how much you want to invest. The minimum initial investments for
     the Portfolios are as follows:

     o    non-retirement account: $500
 
     o    retirement account: $250
 
     o    dollar cost averaging: $500 to open; you must invest at least $25 a
          month

     The minimum subsequent investments for the Portfolios are as follows:



                                       18

<PAGE>

         o        non-retirement account:  $100
         o        retirement account:  $25

3.   Complete the appropriate parts of the Account Application, carefully
     following the instructions. If you have questions, please contact your
     broker or financial advisor or call Shareholder/Dealer Services at
     1-800-858-8850.

4.   Complete the appropriate parts of the Supplemental Account Application. By
     applying for additional investor services now, you can avoid the delay and
     inconvenience of having to submit an additional application if you want to
     add services later.

5.   Make your initial investment using the chart on the next page. You can
     initiate any purchase, exchange or sale of shares through your broker or
     financial advisor.




                                       19

<PAGE>

================================================================================
Buying shares
================================================================================
Opening an account                              Adding to an account
================================================================================
By check
================================================================================

<TABLE>
<S>                                       <C>
o  Make out a check for the investment    o  Make out a check for the investment
   amount, payable to the specific           amount payable to the specific 
   Portfolio or SunAmerica Funds.            Portfolio or SunAmerica Funds.

o  Deliver the check and your completed   o  Include the stub from your Fund 
   Account Application (and Supplemental     statement or a note specifying the 
   Account Application, if applicable)       Portfolio name, your share class, 
   to your broker or financial advisor,      your account number and the name(s)
   or mail them to:                          in which the account is registered.

   SunAmerica Fund Services, Inc.         o  Indicate the Portfolio and account 
   Mutual Fund Operations, 3rd Floor         number in the memo section of your
   The SunAmerica Center                     check.
   733 Third Avenue                       
   New York, New York  10017-3204.        o  Deliver the check and your stub or
                                             note to your broker or financial 
                                             advisor, or mail them to

                                             Non-Retirement Accounts:
                                             ------------------------
                                             SunAmerica Fund Services, Inc.
                                             c/o NFDS
                                             P.O. Box 419373
                                             Kansas City, Missouri  64141-6373

                                             Retirement Accounts:
                                             --------------------
                                             SunAmerica Fund Services, Inc.
                                             Mutual Fund Operations, 3rd Floor
                                             The SunAmerica Center
                                             733 Third Avenue
                                             New York, New York  10017-3204
================================================================================
By wire
================================================================================

o  Deliver your completed application     o  Instruct your bank to wire the 
   to your broker or financial advisor       amount of your investment to:
   or fax it to SunAmerica Fund              
   Services, Inc. at 212-551-5585.           State Street Bank & Trust Company
                                             Boston, MA
                                             ABA #0110-00028
o  Obtain your account number by             DDA # 99029712
   referring to your statement or
   by calling your broker or financial       Specify the Portfolio name, your 
   advisor or Shareholder/Dealer             share class, your Portfolio number,
   Services at 1-800-858-8850,               account number and the name(s) in
   ext. 5125.                                in which the account is registered.
                                             Your bank may charge a fee to
                                             wire funds.
</TABLE>

                                       20

<PAGE>

o  Instruct your bank to wire the amount of
   your investment to:

   State Street Bank & Trust Company
   Boston, MA
   ABA #0110-00028
   DDA # 99029712

   Specify the Portfolio name, your choice
   of share class, your new Portfolio number
   and account number and the name(s) in 
   which the account is registered. Your 
   bank may charge a fee to wire funds.

To open or add to an account using dollar cost averaging, see "Additional
Investor Services."





                                       21

<PAGE>

================================================================================
Selling shares
================================================================================
How                                         Requirements
================================================================================
Through Your Broker or Financial Advisor
================================================================================
o   Accounts of any type.                   o   Call your broker or financial
o   Sales of any amount.                        advisor to place your order to 
                                                sell shares.
================================================================================
By mail
================================================================================
o   Accounts of any type.                   o   Write a letter of instruction 
o   Sales of any amount.                        indicating the Portfolio name,
                                                your share class, your account
                                                number, the name(s) in which the
                                                account is registered and the
                                                dollar value or number of shares
                                                you wish to sell.

o   Include all signatures and any 
    additional documents that may be 
    required
    (see next page).

o   Mail the materials to:

    SunAmerica Fund Services, Inc.
    Mutual Fund Operations, 3rd Floor
    The SunAmerica Center
    733 Third Avenue
    New York, New York  10017-3204

                                            o   A check will normally be mailed
                                                on the next business day to the
                                                name(s) and address in which the
                                                account is registered, or
                                                otherwise according to your
                                                letter of instruction.

================================================================================
By phone
================================================================================
o   Most accounts.
o   Sales of less than $100,000.

                                       22

<PAGE>

o    Call Shareholder/Dealer Services at
     1-800-858-8850 between 8:30 a.m.
     and 7:00 p.m. (Eastern time) on
     most business days. State the
     Portfolio name, the name of the
     person requesting the redemption,
     your share class, your account
     number, the name(s) in which the
     account is registered and the
     dollar value or number of shares
     you wish to sell.

o    A check will be mailed to the
     name(s) and address in which the
     account is registered, or to a
     different address indicated in a
     written authorization previously
     provided to the Portfolio by the
     shareholder(s) on the account.

================================================================================
By wire
================================================================================
o   Request by mail to sell any amount      o   Proceeds will normally be wired 
    (accounts of any type).                     on the next business day. A $15 
                                                fee will be deducted from your
o   Request by phone to sell less than          account.
    $100,000.

To sell shares through a systematic withdrawal plan, see "Additional Investor
Services."

Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. Corporations, executors, administrators,
trustees or guardians may need to include additional items with a request to
sell shares. You may also need to include a signature guarantee, which protects
you against fraudulent orders. You will need a signature guarantee if:

     o    your address of record has changed within the past 30 days

     o    you are selling more than $100,000 worth of shares

     o    you are requesting payment other than by a check mailed to the address
          of record and payable to the registered owner(s)

You can generally obtain a signature guarantee from the following sources:

     o    a broker or securities dealer

     o    a federal savings, cooperative or other type of bank



                                       23

<PAGE>

     o    a savings and loan or other thrift institution

     o    a credit union

     o    a securities exchange or clearing agency

     A notary public CANNOT provide a signature guarantee.

Transaction Policies

Valuation of shares The net asset value per share (NAV) for each Portfolio and
class is determined each business day at the close of regular trading on the New
York Stock Exchange (generally 4:00 p.m., Eastern time) by dividing the net
assets of each class by the number of such class's outstanding shares. 
Investments for which market quotations are readily available are valued at 
market at their closing price. All other securities and assets are valued at 
fair value following procedures approved by the Directors.

Buy and sell prices When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable CDSCs.

Execution of requests Each Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. We execute buy and sell requests  at
the next NAV to be calculated after your request is accepted by the Fund. If the
Fund or the Distributor receives your order before the Portfolio's close of
business (generally 4:00 p.m., Eastern time), you will receive that day's
closing price. If the Fund or the Distributor receives your order after that
time, you will receive the next business day's closing price. If you place your
order through a broker or financial advisor, you should make sure the order is
transmitted to the Portfolio before its close of business. The Fund and the
Distributor reserve the right to reject any order to buy shares.

During periods of extreme volatility or market crisis, a Portfolio may
temporarily suspend the processing of sell requests, or may postpone payment of
proceeds for up to three business days or longer, as allowed by federal
securities laws.

The International Equity Portfolio may invest to a large extent in securities
that are primarily listed on foreign exchanges that trade on weekends or other
days when the Fund does not price its shares. As a result, the value of this
Portfolio's shares may change on days when you will not be able to purchase or
redeem your shares.

If the Fund determines that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of redemption proceeds wholly
or partly in cash, the Fund may pay the redemption price, by a distribution in
kind of securities from the Fund in lieu of cash. However, the Fund has made an
election that requires it to pay a certain portion of redemption proceeds in
cash. 

Telephone transactions For your protection, telephone requests are recorded in
order to verify their accuracy. In addition, Shareholder/Dealer Services will
take measures to verify the identity of the caller, such as asking for name,
account number, social security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, the Fund is responsible for
any losses that may occur to any account due to an unauthorized telephone call.
Also for your protection, telephone transactions are not permitted on accounts
whose names or addresses have changed within



                                       24

<PAGE>

the past 30 days. At times of peak activity, it may be difficult to place
requests by phone. During these times, consider sending your request in writing.

Exchanges You may exchange shares of a Portfolio for shares of the same class of
any other SunAmerica Mutual Fund. Before making an exchange, you should review a
copy of the prospectus of the fund into which you would like to exchange. All
exchanges are subject to applicable minimum investment requirements. A
Systematic Exchange Program is described under "Additional Investor Services."

If you exchange shares that were purchased subject to a CDSC, the CDSC will
continue to apply following the exchange. In determining the CDSC applicable to
shares being sold after an exchange, we will take into account the length of
time you held those shares prior to the exchange. Your CDSC schedule will not 
change if you exchange Class C or Class II shares that you purchased prior to
December 1, 1998 for another Portfolio or fund's Class II shares (which
currently have a longer CDSC schedule).

To protect the interests of other shareholders, we may cancel the exchange
privileges of any investors that, in the opinion of the Fund, are using market
timing strategies or making excessive exchanges. A Portfolio may change or
cancel its exchange privilege at any time, upon 60 days' written notice to its
shareholders. A Portfolio may also refuse any exchange order.

Certificated shares Most shares are electronically recorded. If you wish to have
certificates for your shares, please call Shareholder/Dealer Services at
1-800-858-8850 for further information. You may sell or exchange certificated
shares only by returning the certificates to the Fund, along with a letter of
instruction and a signature guarantee. The Fund does not issue certificates for
fractional shares.

Multi-party checks The Fund may agree to accept a "multi-party check" in payment
for Fund shares. This is a check made payable to the investor by another party
and then endorsed over to the Fund by the investor. If you use a multi-party
check to purchase shares, you may experience processing delays. In addition, the
Fund is not responsible for verifying the authenticity of any endorsement and
assumes no liability for any losses resulting from a fraudulent endorsement.

Additional Investor Services

To select one or more of these additional services, complete the relevant
part(s) of the Supplemental Account Application. To add a service to an existing
account, contact your broker or financial advisor, or call Shareholder/Dealer
Services at 1-800-858-8850.

Dollar Cost Averaging lets you make regular investments from your bank account
to the SunAmerica Mutual Funds of your choice. You determine the frequency and
amount of your investments, and you can terminate your participation at any
time.

Systematic Withdrawal Plan may be used for routine bill payment or periodic
withdrawals from your account. To use:



                                       25
<PAGE>

     o    Make sure you have at least $5,000 worth of shares in your account.

     o    Make sure you are not planning to invest more money in this account
          (buying shares during a period when you are also selling shares of the
          same fund is not advantageous to you, because of sales charges).

     o    Specify the payee(s) and amount(s). The payee may be yourself or any
          other party, and there is no limit to the number of payees you may
          have, as long as they are all on the same payment schedule. Each
          withdrawal must be at least $50.

     o    Determine the schedule: monthly, quarterly, semi-annually, annually or
          in certain selected months.

     o    Make sure your dividends and capital gains are being reinvested.

You cannot elect the systematic withdrawal plan if you have requested
certificates for your shares.

Systematic Exchange Program may be used to exchange shares of a Portfolio
periodically for the same class of shares of one or more other SunAmerica Mutual
Funds. To use:

     o    Specify the SunAmerica Mutual Fund(s) from which you would like money
          withdrawn and into which you would like money invested.

     o    Determine the schedule: monthly, quarterly, semi-annually, annually or
          in certain selected months.

     o    Specify the amount(s). Each exchange must be worth at least $25.

     o    Accounts must be registered identically; otherwise a signature
          guarantee will be required.

Asset Protection Plan (optional) Anchor National Life Insurance Company offers
an Asset Protection Plan to certain investors in the Fund. The benefits of this
optional coverage payable at death will be related to the amounts paid to
purchase Fund shares and to the value of the Fund shares held for the benefit of
the insured persons. However, to the extent the purchased shares are redeemed
prior to death, coverage with respect to these shares will terminate.

Purchasers of the Asset Protection Plan are required to authorize periodic
redemptions of Fund shares to pay the premiums for this coverage. These
redemptions will not be subject to CDSCs, but will have the same tax
consequences as any other Fund redemptions.

The Asset Protection Plan will be available to eligible persons who enroll for
the coverage within a limited time period after shares in any Portfolio are
initially purchased or transferred. In addition, coverage cannot be made
available unless Anchor National knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides Anchor National with information
regarding the beneficial owners of the shares. In addition, coverage is
available only to shares purchased on behalf of natural persons between 21 and
75 years of age; coverage is not available with respect to shares purchased for
a retirement account. Other restrictions on the coverage apply. This coverage
may not be available in all states and may be subject to additional restrictions
or limitations. Purchasers of



                                       26

<PAGE>

shares should also make themselves familiar with the impact on the Asset
Protection Plan coverage of purchasing additional shares, reinvestment of
dividends and capital gains distributions and redemptions.

Anchor National is a SunAmerica company.

Please call 1-800-858-8850 for more information, including the cost of the Asset
Protection Plan option.

Retirement plans SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Simple IRAs, Roth IRAs, SARSEPs, 401(k) plans, 403(b) 
plans and other pension and profit-sharing plans. Using these plans, you can 
invest in any SunAmerica Mutual Fund with a low minimum investment of $250 or, 
for some group plans, no minimum investment at all. To find out more, call 
Shareholder/Dealer Services at 1-800-858-8850.

Dividend and Account Policies

Account statements In general, you will receive account statements as follows:

     o    after every transaction that affects your account balance (except a
          dividend reinvestment or automatic purchase from your bank account)

     o    after any changes of name or address of the registered owner(s)

     o    in all other circumstances, quarterly or annually, depending upon the
          Portfolio

Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

Dividends The Portfolios generally distribute most or all of their net earnings
in the form of dividends. Income dividends, if any, are paid quarterly by the
Large-Cap Blend Portfolio and annually by the other Portfolios. Capital gains
distributions, if any, are paid annually by the Portfolios.

Dividend Reinvestments Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same Portfolio and share
class on which they were paid. Alternatively, dividends and distributions may be
reinvested in any other SunAmerica Mutual Fund or paid in cash (if more than
$10). You will need to complete the relevant part of the Account Application to
elect one of these other options. For existing accounts, contact your broker or
financial advisor or call Shareholder/Dealer Services at 1-800-858-8850 to
change dividend and distribution payment options.

Taxability of dividends As long as a Portfolio meets the requirements for being
a tax-qualified regulated investment company, which each Portfolio has in the
past and intends to in the future, it pays no federal income tax on the earnings
it distributes to shareholders.

                                       27
<PAGE>

Consequently, dividends you receive from a Portfolio, whether reinvested or
taken as cash, are generally considered taxable. Distributions of a Portfolio's
long-term capital gains are taxable as capital gains; dividends from other
sources are generally taxable as ordinary income.

Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.

The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions. If you hold Class B shares, you will not have a taxable event when
they convert into Class A shares.

Small accounts If you draw down an account so that its total value is less than
$500 ($250 for retirement plan accounts), you may be asked to purchase more
shares within 60 days. If you do not take action, the Fund may close out your
account and mail you the proceeds. Alternatively, you may be charged a $2.00
monthly charge to maintain your account. Your account will not be closed if its
drop in value is due to Portfolio performance or the effects of sales charges.

MORE INFORMATION ABOUT THE PORTFOLIOS

Investment Strategies

Each Portfolio has its own investment goal and a strategy for pursuing it. The
chart summarizes information about each Portfolio's investment approach. We have
included a glossary to define the investment and risk terminology used in the
chart.


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                  Large-Cap                  Mid-Cap                  Aggressive                  Large-Cap         
                              Growth Portfolio           Growth Portfolio           Growth Portfolio           Blend Portfolio      
                             -------------------------------------------------------------------------------------------------------
<S>                          <C>                       <C>                        <C>                       <C>
What is the Portfolio's      Long-term growth          Long-term growth of        Long-term growth of       Long-term growth of     
investment goal?             of capital                capital                    capital                   capital and reasonable  
                                                                                                            level of current
                                                                                                            income

What are the                 equity securities of      equity securities of       equity securities of      equity securities of    
Portfolio's principal        large companies (at       medium-sized               companies selected        large companies (at     
investments (under           least 65% of total        companies (at least        through a growth          least 65% of total      
normal market                assets) selected          65% of total assets)       strategy; generally       assets), consisting of a
conditions)?                 through a growth          selected through a         invests in small and      blend of growth         
                             strategy                  growth strategy            medium-sized              companies, value        
                                                                                  companies                 companies, and          
                                                                                                            companies with          
                                                                                                            elements of both        
                                                                                                            growth and value

What are the                 o   stock market          o   stock market           o   stock market          o   stock market        
Portfolio's principal            volatility                volatility                 volatility                volatility          
risks?                       o   securities            o   securities             o   securities            o   securities          
                                 selection                 selection                  selection                 selection           
                             o   non-                  o   non-                   o   small market          o   non-                
                                 diversification           diversification            capitalization            diversification     
                                                                                  o   non-                                          
                                                                                      diversification                               

What other investment 
strategies can the 
Portfolio use?

o   Large Company
    stocks                       see principal                   Yes                        Yes                   see principal     
                               investments above                                                                investments above   
o   Medium-sized
    Company stocks                     Yes                   see principal              see principal                  Yes          
                                                           investments above          investments above                             

<CAPTION>
                                 Large-Cap                                             Small-Cap                International
                              Value Portfolio            Value Portfolio            Value Portfolio            Equity Portfolio
                           ---------------------------------------------------------------------------------------------------------
<S>                        <C>                         <C>                        <C>                       <C>
What is the Portfolio's    Long-term growth of         Long-term growth of        Long-term growth of       Long-term growth of
investment goal?           capital                     capital                    capital                   capital
                           
                           
What are the               equity securities of        equity securities of       equity securities of      equity and other
Portfolio's principal      large companies (at         companies selected         small companies (at       securities with equity
investments (under         least 65% of total          through a value            least 65% of total        characteristics
normal market              assets) selected through    strategy; a                assets) selected          securities of issuers in
conditions)?               a value strategy            significant portion of     through a value           at least 3 countries
                                                       Portfolio as a whole       strategy                  other than the United
                                                       will generally be                                    States
                                                       invested in medium-
                                                       sized companies

What are the               o   stock market            o   stock market           o   stock market          o   stock market
Portfolio's principal          volatility                  volatility                 volatility                volatility
risks?                     o   securities selection    o   securities             o   securities            o   securities selection
                           o   non-diversification         selection                  selection             o   foreign exposure
                                                       o   non-                   o   small market          o   emerging markets
                                                           diversification            capitalization        o   non-diversification
                                                                                  o   non-
                                                                                      diversification

What other investment 
strategies can the 
Portfolio use?

o   Large Company
    stocks                       see principal                   Yes                        Yes                        Yes
                               investments above

o   Medium-sized
    Company stocks                    Yes                   see principal                   Yes                        Yes
                                                          investments above
</TABLE>

                                       29
<PAGE>

<TABLE>
<CAPTION>
                                  Large-Cap                  Mid-Cap                  Aggressive                  Large-Cap         
                              Growth Portfolio           Growth Portfolio           Growth Portfolio           Blend Portfolio      
                             -------------------------------------------------------------------------------------------------------
<S>                          <C>                       <C>                        <C>                       <C>
o   Small Company
    stocks                             Yes                       Yes                    see principal                  Yes          
                                                                                      investments above                             

o   Active Trading                     Yes                       Yes                        Yes                        Yes          

o   Fixed income
    securities

       Investment                                                                                                                   
       grade                           Yes                       Yes                        Yes                        Yes          

       Junk bonds                      Yes                       No                         Yes                        Yes          

       Asset-backed                                                                                                                 
       Securities                      Yes                       Yes                        Yes                        Yes          

o   REITs                              No                        No                         No                         Yes          

o  Short-term
   investments                   Yes (up to 25%)            Yes (up to 25%)            Yes (up to 25%)            Yes (up to 25%)   

o  Defensive
   investments                         Yes                       Yes                        Yes                        Yes          

o  Foreign securities            Yes (up to 30%)            Yes (up to 30%)            Yes (up to 30%)            Yes (up to 30%)   

       ADRs/EDRs/                      Yes                       Yes                        Yes                        Yes          
       GDRs

       Foreign                                                                                                                      
       Investment                                                                                                                   
       Companies                 Yes (up to 10%)                 No                    Yes (up to 10%)                 No           

o   Currency                           Yes                       Yes                        Yes                        Yes          
    Transactions

o   Illiquid securities          Yes (up to 15%)            Yes (up to 15%)            Yes (up to 15%)            Yes (up to 15%)   


<CAPTION>
                                Large-Cap                                               Small-Cap                 International
                             Value Portfolio             Value Portfolio             Value Portfolio             Equity Portfolio
                          ----------------------------------------------------------------------------------------------------------
<S>                          <C>                         <C>                       <C>                           <C>
o   Small Company
    stocks                        Yes                         Yes                    see principal                    Yes
                                                                                   investments above

o   Active Trading                Yes                         Yes                         Yes                         Yes

o   Fixed income         
    securities           

       Investment            
       grade                      Yes                         Yes                         Yes                         Yes
                         
       Junk bonds                 No                          Yes                         Yes                         Yes
                         
       Asset-backed          
       Securities                 Yes                         Yes                         Yes                         Yes
                         
o   REITs                         Yes                         Yes                         Yes                         No
                         
o  Short-term            
   investments               Yes (up to 25%)             Yes (up to 25%)             Yes (up to 25%)              Yes (up to 25%)
                         
o  Defensive             
   investments                    Yes                         Yes                         Yes                         Yes
                         
o  Foreign securities        Yes (up to 30%)             Yes (up to 30%)             Yes (up to 30%)              See principal
                                                                                                                 investments above

       ADRs/EDRs/                 Yes                         Yes                         Yes                         Yes
       GDRs              
                         
       Foreign                                   
       Investment                                
       Companies                  No                          No                          No                      Yes (up to 10%)
                         
o   Currency                      Yes                         Yes                         Yes                         Yes
    Transactions         
                         
o   Illiquid securities       Yes (up to 15%)            Yes (up to 15%)             Yes (up to 15%)              Yes (up to 15%)
</TABLE>


                                       30

<PAGE>

<TABLE>
<CAPTION>
                                  Large-Cap                  Mid-Cap                  Aggressive                  Large-Cap         
                              Growth Portfolio           Growth Portfolio           Growth Portfolio           Blend Portfolio      
                             -------------------------------------------------------------------------------------------------------
<S>                          <C>                       <C>                        <C>                       <C>
o   Securities lending           Yes (up to 33 1/3%)       Yes (up to 33 1/3%)        Yes (up to 33 1/3%)       Yes (up to 33 1/3%)

o   Borrowing for                Yes (up to 33 1/3%)       Yes (up to 33 1/3%)        Yes (up to 33 1/3%)       Yes (up to 33 1/3%)
    temporary or emergency
    purposes

o   Options and                        Yes                       Yes                        Yes                        Yes          
    futures

o   Hybrid                             Yes                       Yes                        Yes                        Yes          
    Instruments

o   Short sales                  Yes (up to 25%)           Yes (up to 25%)            Yes (up to 25%)           Yes (up to 25%)     

o   Short sales
    (against-the-box)            Yes (up to 25%)           Yes (up to 25%)            Yes (up to 25%)           Yes (up to 25%)     

o   Special Situations                 Yes                       Yes                        Yes                        Yes          

What other potential
risks can affect a           o   interest rate         o   interest rate          o   interest rate         o   Interest rate       
Portfolio?                       fluctuations              fluctuations               fluctuations              fluctuations        
                             o   small market          o   small market           o   foreign exposure      o   small market        
                                 capitalization            capitalization         o   illiquidity               capitalizations     
                             o   foreign               o   foreign exposure       o   derivatives           o   foreign exposure    
                                 exposure              o   illiquidity            o   emerging              o   illiquidity         
                             o   illiquidity           o   derivatives                markets               o   derivatives         
                             o   derivatives           o   emerging               o   euro conversion       o   emerging markets    
                             o   emerging                  markets                                          o   euro conversion     
                                 markets               o   euro conversion                                                          
                             o   euro conversion


<CAPTION>
                                 Large-Cap                                             Small-Cap              International
                              Value Portfolio            Value Portfolio            Value Portfolio          Equity Portfolio
                           --------------------------------------------------------------------------------------------------------
<S>                        <C>                         <C>                        <C>                        <C>
o   Securities lending         Yes (up to 33 1/3%)         Yes (up to 33 1/3%)        Yes (up to 33 1/3%)        Yes (up to 33 1/3%)

o   Borrowing for              Yes (up to 33 1/3%)         Yes (up to 33 1/3%)        Yes (up to 33 1/3%)        Yes (up to 33 1/3%)
    temporary or
    emergency purposes

o   Options and                       Yes                        Yes                        Yes                      Yes
    futures

o   Hybrid                            Yes                        Yes                        Yes                      Yes
    Instruments

o   Short sales                Yes (up to 25%)             Yes (up to 25%)            Yes (up to 25%)            Yes (up to 25%)

o   Short sales
    (against-the-box)          Yes (up to 25%)             Yes (up to 25%)            Yes (up to 25%)            Yes (up to 25%)

o   Special Situations                Yes                        Yes                        Yes                      Yes

What other potential
risks can affect a         o   interest rate           o   interest rate          o   interest rate          o   small market
Portfolio?                     fluctuations                fluctuations               fluctuations               capitalizations
                           o   small market            o   small market           o   foreign exposure       o   interest rate
                               capitalization              capitalization         o   illiquidity                fluctuations
                           o   foreign exposure        o   foreign exposure       o   derivatives            o   illiquidity
                           o   illiquidity             o   illiquidity            o   emerging               o   derivatives
                           o   derivatives             o   derivatives                markets                o   euro conversion
                           o   emerging markets        o   emerging               o   euro conversion
                           o   euro conversion             markets
                                                       o   euro conversion
</TABLE>


                                       31


<PAGE>


Glossary

Investment Terminology

Growth of capital is growth of the value of an investment.

Equity securities include common and preferred stocks, convertible securities,
warrants and rights.

Convertible securities are bonds or preferred stocks that may be exchanged for
common stock of the same or a different company.

Large companies have market capitalizations of over $5 billion.

Medium-sized companies have market capitalizations ranging from $1 billion to $5
billion.

Small companies have market capitalizations of $1 billion or less.

[Margin note: Large companies and medium-sized companies generally have a
substantial record of operations (i.e., in business for at least five years) and
are listed for trading on the New York Stock Exchange or another national or
international stock exchange or, in some cases, are traded over the counter.
Small companies generally will be companies that have been in business for a
shorter period of time.]

Active trading means that a Portfolio may engage in frequent trading of
portfolio securities to achieve its investment goal. Because a Portfolio may
sell a security without regard to how long it has held the security, active
trading may have tax consequences for certain shareholders, involving a possible
increase in short-term capital gains or losses. Active trading may result in
high portfolio turnover and correspondingly greater brokerage commissions and
other transaction costs, which will be borne directly by a Portfolio. During
periods of increased market volatility, active trading may be more pronounced.

Fixed income securities provide consistent interest or dividend payments. They
include corporate bonds, notes, debentures, preferred stocks, convertible
securities, U.S. Government securities and mortgage-backed and asset-backed
securities. The issuer of a senior fixed income security is obligated to make
payments on this security ahead of other payments to security holders. An
investment grade fixed income security is rated in one of the top four ratings
categories by a debt rating agency (or is considered of comparable quality by
SunAmerica).

[Margin note: The two best-known debt rating agencies are Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc. and Moody's
Investors Service, Inc. "Investment grade" refers to any security rated "BBB" or
above by Standard & Poor's or "Baa" or above by Moody's.]



                                       32

<PAGE>

A "junk bond" is a high yield, high risk bond that does not meet the credit
quality standards of investment grade securities.

Asset-backed securities represent an interest in a pool of consumer or other
types of loans. 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.

Real estate investment trusts ("REITs") are trusts that invest primarily in
commercial real estate or real estate related loans. The value of an interest in
a REIT may be affected by the value and the cash flows of the properties owned
or the quality of the mortgages held by the trust.

Short-term investments include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Portfolio
with sufficient liquidity to meet redemptions and cover expenses.

Defensive investments include high quality fixed income securities and money
market instruments. A Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When a
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, a Portfolio may not achieve its
investment goal.

Foreign securities are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary
Receipts (ADRs) or other similar securities that convert into foreign
securities, such as European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs).

It may be necessary under certain foreign laws, less expensive, or more
expedient to invest in foreign investment companies, which invest in certain
foreign markets, including emerging markets. Investing through such vehicles may
involve frequent or layered fees or expenses, and the Advisers will not invest
in such investment companies unless, in their judgment, the potential benefits
justify the payment of any associated fees and expenses.

Currency transactions include the purchase and sale of currencies to facilitate
securities transactions and forward currency contracts, which are used to hedge
against changes in currency exchange rates.

Illiquid securities are subject to legal or contractual restrictions that may
make them difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid. Certain restricted securities (such
as Rule 144A securities) are not generally considered illiquid because of their
established trading market.


                                       33

<PAGE>

Securities lending involves a loan of securities by a Portfolio in exchange for
cash or collateral. The Fund earns interest on the loan while retaining
ownership of the security.

The Fund may borrow for temporary or emergency purposes including to meet
redemptions. Borrowing will cost the Fund interest expense and other fees. 

Options and futures are contracts involving the right to receive or obligation
to deliver assets or money depending on the performance of one or more
underlying assets or a market or economic index.

Hybrid Instruments, including indexed or structured securities, can combine the
characteristics of securities, futures, and options. For example, the principal
amount, redemption, or conversion terms of a security could be related to the
market price of some commodity, currency, or securities index. Such securities
may bear interest or pay dividends at below market (or even relatively nominal)
rates. Under certain conditions, the redemption value of such an investment
could be zero.

A short sale is the sale of a security that you do not own, but which you intend
to borrow in order to make delivery. A short sale is "against the box" when a
Portfolio sells short a security that it owns in its portfolio to lock in
appreciation on that security.

A special situation arises when, in the opinion of the Adviser, the securities 
of a particular issuer will be recognized and appreciated in value due to a 
specific development with respect to that issuer. Developments creating a 
special situation might include, among others, a new product or process, a 
technological breakthrough, a management change or other extraordinary 
corporate event, or differences in market supply of and demand for the security.
Investments in special situations may carry an additional risk of loss in the 
event that the anticipated development does not occur or does not attract the 
expected attention.

Risk Terminology

Market volatility: The stock and/or bond markets as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Portfolio's portfolio.

Securities selection: A strategy used by a Portfolio, or securities selected by
its Adviser, may fail to produce the intended return.

Small market capitalization: Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. It may be difficult to obtain reliable
information and financial data about these companies. Consequently, the
securities of smaller companies may not be as readily marketable and may be
subject to more abrupt or erratic market movements.

Foreign exposure: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about



                                       34

<PAGE>

a foreign company and it may not be subject to the same uniform accounting,
auditing and financial reporting standards as U.S. companies. Foreign
governments may not regulate securities markets and companies to the same degree
as in the U.S. Foreign investments will also be affected by local political or
economic developments and governmental actions. Consequently, foreign securities
may be less liquid, more volatile and more difficult to price than U.S.
securities. These risks are heightened when the issuer is in an emerging market.

Emerging Market: An emerging market country is one that the World Bank, the
International Finance Corporation or the United Nations or its authorities has
determined to have a low or middle income economy. Historical experience
indicates that the markets of emerging market countries have been more volatile
than more developed markets; however, such markets can provide higher rates of
return to investors.

Interest rate fluctuations: Volatility of the bond market is due principally to
changes in interest rates. As interest rates rise, bond prices typically fall;
and as interest rates fall, bond prices typically rise. Longer-term and lower
coupon bonds tend to be more sensitive to changes in interest rates.

Illiquidity: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.

Derivatives: In addition to general risks relating to market volatility,
interest rate fluctuations, and creditworthiness of the counterparty to the
option or futures transactions, options and futures contracts are subject to
certain special risks. To the extent a contract is used to hedge another
position in the portfolio, there is a risk that changes in the value of the
contract will not match those of the hedged position. Moreover, while hedging
can reduce or eliminate losses, it can also reduce or eliminate gains. To the
extent an option or futures contract is used to enhance return, rather than as a
hedge, a Portfolio will be directly exposed to the risks of the contract. Gains
or losses from non-hedging positions may be substantially greater than the cost
of the position.

Credit quality: The creditworthiness of the issuer is always a factor in
analyzing fixed income securities. An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise become unable to
honor its financial obligations. This type of issuer will typically issue junk
bonds. In addition to the risk of default, junk bonds may be more volatile, less
liquid, more difficult to value and more susceptible to adverse economic
conditions or investor perceptions than other bonds.

Euro Conversion: Effective January 1, 1999, several European countries
irrevocably fixed their existing national currencies to a new single European
currency unit, the "euro." Certain European investments may be subject to
additional risks as a result of this conversion. These risks include adverse tax
and accounting consequences, as well as difficulty in processing transactions.
SunAmerica is aware of such potential problems and is coordinating efforts to
prevent or alleviate their adverse impact on the Portfolios. There can be no
assurance that a Portfolio will not suffer any adverse consequences as a result
of the euro conversion.



                                       35

<PAGE>

Hedging: Hedging is a strategy in which the Adviser uses a derivative to offset
the risk that other instruments held by a Fund may decrease in value. Gains on a
derivative that reacts in an opposite manner to market movements may
substantially reduce losses on the other investment. While hedging can reduce
losses, it can also reduce or eliminate gains if the market moves in a different
manner than the Adviser anticipates or if the cost of the derivative outweighs
the benefit of the hedge. Hedging also involves the risk that changes in the
value of the derivative will not match those of the instruments being hedged as
expected, in which case any losses on the instruments being hedged may not be
reduced.

FUND MANAGEMENT

Manager SunAmerica Asset Management Corp. selects the Advisers for the
Portfolios, may manage certain portions of Portfolios, provides various
administrative services, and supervises the daily business affairs of each
Portfolio. The Advisers are responsible for decisions to buy and sell securities
for the Portfolios, selection of broker-dealers and negotiation of commission
rates for their respective portion of the relevant Portfolio. SunAmerica may
terminate any agreement with another Adviser without shareholder approval.
Moreover, SunAmerica has received an exemptive order from the Securities and
Exchange Commission that permits SunAmerica, subject to certain conditions, to
enter into agreements relating to the Fund with Advisers approved by the Board
of Directors without obtaining shareholder approval. The exemptive order also
permits SunAmerica, subject to the approval of the Board but without shareholder
approval, to employ new Advisers for new or existing Portfolios, change the
terms of particular agreements with Advisers or continue the employment of
existing Advisers after events that would otherwise cause an automatic
termination of a subadvisory agreement. Shareholders of a Portfolio have the
right to terminate an agreement with an Adviser for that Portfolio at any time
by a vote of the majority of the outstanding voting securities of such
Portfolio. Shareholders will be notified of any Adviser changes. The order also
permits the Fund to disclose to shareholders the Advisers' fees only in the
aggregate for each Portfolio. For the fiscal year ended October 31, 1998, each
Portfolio paid SunAmerica a fee equal to 1.00% of average daily net assets
except the International Equity Portfolio, which paid a fee equal to 1.10% of
average daily net assets.

SunAmerica, which was organized in 1982 under the laws of Delaware, managed,
advised or administered assets in excess of $15 billion as of October 31, 1998.
In addition to managing the Portfolios, SunAmerica serves as adviser, manager
and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Seasons
Series Trust, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc., and
SunAmerica Series Trust.

The Advisers and Portfolio Managers for each Portfolio are described below:

<TABLE>
<CAPTION>
Portfolio                                   Portfolio management allocated among the following Advisers
- ---------                                   -----------------------------------------------------------
<S>                                         <C>      
Large-Cap Growth Portfolio                  Janus Capital Corporation  ("Janus")
                                            L. Roy Papp & Associates  ("Papp")
                                            Montag & Caldwell, Inc. ("Montag & Caldwell")

</TABLE>


                                       36

<PAGE>

<TABLE>
<CAPTION>
Portfolio                                   Portfolio management allocated among the following Advisers
- ---------                                   -----------------------------------------------------------
<S>                                         <C>      
Mid-Cap Growth Portfolio                    Miller Anderson & Sherrerd, LLP ("MAS")
                                            T. Rowe Price Associates, Inc. ("T. Rowe Price")
                                            Wellington Management Company, LLP
                                            ("Wellington Management")

Aggressive Growth Portfolio                 Janus
                                            SunAmerica
                                            Warburg Pincus Asset Management, Inc.
                                            ("Warburg")

Large-Cap Blend Portfolio                   Lazard Asset Management ("Lazard")
                                            Morgan Stanley Dean Witter Investment Management
                                            ("MSDW Investment Management")
                                            T. Rowe Price

Large-Cap Value Portfolio                   David J. Babson & Co., Inc. ("Babson")
                                            Davis Selected Advisers, L.P. ("Davis")
                                            Wellington Management

Value Portfolio                             Davis
                                            Neuberger Berman, LLC ("Neuberger Berman")
                                            American Century Investment Management, Inc.
                                            ("American Century")

Small-Cap Value Portfolio                   Berger Associates, Inc. ("Berger") (subcontracted to
                                            Perkins, Wolf, McDonnell & Company ("PWM")
                                            The Glenmede Trust Company ("Glenmede")
                                            Lazard

International Equity Portfolio              Bankers Trust Company ("BT")
                                            Rowe Price-Fleming International, Inc. ("Rowe-
                                            Fleming") Warburg
</TABLE>

Information about Advisers

                           Description of the Advisers


AMERICAN CENTURY INVESTMENT, INC. American Century is a Delaware corporation
with principal offices at the American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. As of October 28, 1998, American Century had approximately
$70 billion in total assets under management.



                                       37

<PAGE>

DAVID J. BABSON & CO., INC. Babson is a Massachusetts corporation, located at
One Memorial Drive, Cambridge, Massachusetts 02142. Babson provides investment
advisory services to a substantial number of institutional and other investors,
including other registered investment companies. As of [March 31], 1998, Babson
had over $[20.3] billion in assets under management.

BANKERS TRUST COMPANY. BT has principal offices at 130 Liberty Street (One
Bankers Trust Plaza), New York 10006. BT is a worldwide merchant bank that
provides investment management services for the nation's largest corporations
and institutions. As of [March 31], 1998, BT managed approximately $[330]
billion in assets globally.

BERGER ASSOCIATES, INC. Berger is a Delaware corporation, located at 210
University Boulevard, Suite 900, Denver Colorado 80206, and serves as investment
adviser, sub-adviser, administrator, or sub-administrator to mutual funds, and
institutional and private investors.

DAVIS SELECTED ADVISERS, L.P. Davis is a Colorado limited partnership, located
at 124 East Marcy Street, Santa Fe, New Mexico 87501. As of [March 31], 1998,
Davis had assets under management of approximately $[17.9] billion.

THE GLENMEDE TRUST COMPANY. Glenmede is a privately-owned, independent trust
company devoted exclusively to investment management and trust services.
Glenmede is located at One Liberty Place, 1650 Market Street, Suite 1200,
Philadelphia, Pennsylvania 19103. As of [March 31], 1998, Glenmede had
approximately $[14.0] billion in assets under management.

JANUS CAPITAL CORPORATION. Janus is a Colorado corporation located at 100
Fillmore Street, Denver, Colorado 80206-4923, and serves as investment adviser
or subadviser to mutual funds and individual, corporate, charitable and
retirement accounts. As of [March 31, 1998], Janus had under management
approximately [$80] billion.

L. ROY PAPP & ASSOCIATES. Papp is an Arizona partnership located at 4400 North
32nd Street, Suite 280, Phoenix, Arizona 85018. Papp serves as investment
adviser to individuals, trusts, retirement plans, endowments, and foundations.
As of [March 31, 1998], assets under management exceeded $[1.2] billion.

LAZARD ASSET MANAGEMENT. Lazard is a division of Lazard Freres & Co. LLC, a New
York limited liability company. Located at 30 Rockefeller Plaza, New York, New
York 10112, Lazard provides investment management services to individual and
institutional clients. As of [March 31], 1998, Lazard and its affiliated
companies managed client discretionary accounts with assets totaling
approximately $[67] billion.

MILLER ANDERSON & SHERRERD, LLP. MAS, a Pennsylvania limited liability
partnership founded in 1969, is located at One Tower Bridge, West Conshohocken,
Pennsylvania 19428. MAS provides investment services to employee benefit plans,
endowment funds, foundations and other



                                       38

<PAGE>

institutional investors. As of [March 31], 1998, MAS had in excess of $[67.1]
billion in assets under management.

MONTAG & CALDWELL, INC. Montag & Caldwell is a Georgia corporation located at
3343 Peachtree Road, Suite 1100, Atlanta, Georgia 30326-1022. Montag & Caldwell
was founded in 1945 and serves as investment adviser to employee benefit,
endowment, charitable and other institutional clients, as well as high net worth
individuals. As of [March 31], 1998, Montag & Caldwell had in excess of $[20]
billion in assets under management.

MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT MSDW Investment Management
offers investment management and fiduciary services to taxable and tax-exempt
funds and institutions, international organizations and individuals investing in
U.S. and international equity and fixed income securities. As of [March 31],
1998, MSDW Investment Management, together with its institutional investment
management affiliates, had approximately $[166.0] billion of combined assets
under management as investment managers or fiduciary advisers. MSDW Investment
Management is located at 1221 Avenue of the Americas, New York, New York, 10020.

NEUBERGER BERMAN, LLC. Neuberger Berman is a Delaware limited liability company
located at 605 Third Avenue, New York, New York 10158-0180. Neuberger Berman has
been in the investment advisory business since 1939. As of [March 31], 1998,
Neuberger Berman and its affiliates had assets under management of approximately
$[59] billion.

PERKINS, WOLF, MCDONNELL & COMPANY. PWM, located at 53 West Jackson Boulevard,
Suite 818, Chicago, Illinois 60604, was organized as a Delaware corporation in
1980. PWM is a member of the National Association of Securities Dealers, Inc.
and, in 1984, registered with the Securities and Exchange Commission as an
investment adviser. As of [March 31], 1998, PWM had assets under management of
approximately $[325] million.

ROWE PRICE-FLEMING INTERNATIONAL, INC. Rowe-Fleming is a Maryland corporation,
incorporated in 1979. It is located at 100 East Pratt Street, Baltimore,
Maryland 21202. As of [March 31], 1998, Rowe-Fleming managed over $[32] billion
of foreign assets.

T. ROWE PRICE ASSOCIATES, INC. T. Rowe Price is a Maryland corporation located
at 100 East Pratt Street, Baltimore, Maryland 21202. Founded in 1937, T. Rowe
Price and its affiliates managed over $[135] billion for over four and a half
million individual and institutional investor accounts as of [March 31], 1998.

WARBURG PINCUS ASSET MANAGEMENT, INC. Warburg is a professional investment
advisory firm which provides investment services to investment companies,
employee benefit plans, endowment funds, foundations and other institutions and
individuals. As of [April 30], 1998, Warburg managed approximately $[21.8]
billion in assets. Warburg is located at 466 Lexington Avenue, New York, NY
10017-3147.



                                       39

<PAGE>

WELLINGTON MANAGEMENT COMPANY, LLP. Wellington Management is a Massachusetts
limited liability partnership, located at 75 State Street, Boston, Massachusetts
02109. Wellington Management is a professional investment counseling firm which
provides investment services to investment companies, employee benefit plans,
endowments, foundations, and other institutions and individuals. As of [March
31, 1998], Wellington Management had investment management authority with
respect to approximately $[193.9] billion of assets.

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
Large-Cap Growth Portfolio              Marc Pinto                             Mr. Pinto has been the Vice
                                        Portfolio Manager and Vice President   President of Portfolio Management 
                                        of Portfolio Management (Janus)        of Janus since 1994.  From 1993 
                                                                               to 1994, he was Co-President of
                                                                               Creative Retail Technology, a
                                                                               producer of hardware for retail
                                                                               clients. From 1991 to 1993,
                                                                               Mr. Pinto was an equity analyst at
                                                                               Priority Investments Ltd., a family
                                                                               owned business.

                                        L. Roy Papp                            Mr. Papp has been in the money
                                        Partner, Portfolio Manager (Papp)      management field since 1955. He has 
                                                                               served as managing general partner 
                                                                               since 1989.


                                        Rosellen C. Papp                       Ms. Papp has been the Director of
                                        Partner, Portfolio Manager (Papp)      Research of Papp since 1981.

                                        Ronald E. Canakaris  (Investment       Mr. Canakaris has been in the money
                                        Management Team) President and Chief   management business since 1968 and
                                        Investment Officer (Montag &           has served as President and Chief
                                        Caldwell)                              Investment Officer of Montag &
                                                                               Caldwell since 1984.
</TABLE>

                                       40

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
Mid-Cap Growth Portfolio                Arden C. Armstrong                     Ms. Armstrong joined MAS as a
                                        Portfolio Manager (MAS)                Portfolio Manager in 1986.

                                        Brian W. H. Berghuis Investment        Mr. Berghuis has been managing
                                        Advisory Committee Chairman (T. Rowe   investments since joining T. Rowe
                                        Price)                                 Price in 1985.

                                        Marc L. Baylin                         [To be filed by amendment]
                                        Investment Advisory Committee
                                        Portfolio Manager (T. Rowe Price)

                                        James A. C. Kennedy                    [To be filed by amendment]
                                        (Investment Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

                                        John F. Wakeman                        [To be filed by amendment]
                                        (Investment Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

                                        Frank V. Wisneski                      [To be filed by amendment]
                                        Senior Vice President (Wellington)     
                                                                               
Aggressive Growth Portfolio             Scott W. Schoelzel                     [To be filed by amendment]
                                        Portfolio Manager (Janus)              
</TABLE>

                                       41

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        Donna Calder (Domestic Equity          Prior to joining SunAmerica as a
                                        Investment Team)                       Portfolio Manager in February 1998,
                                        Portfolio Manager (SunAmerica)         Ms. Calder served as a General
                                                                               Partner of Manhattan Capital
                                                                               Partners, L.P. from __________.

                                        Elizabeth B. Dater                     [To be filed by amendment]
                                        Managing Director (Warburg)            

                                        Stephen J. Lurito                      [To be filed by amendment]
                                        Managing Director (Warburg)            

Large-Cap Blend Portfolio               Herbert W. Gullquist                   [To be filed by amendment]
                                        (Investment Team)                      
                                        Vice Chairman, Head of Investment
                                        Team (Lazard)

                                        Michael S. Rome (Investment Team)      [To be filed by amendment]
                                        Managing Director (Lazard)             

                                        Kurt A. Feuerman                       Mr. Feuerman has been a Managing
                                        Managing Director (MSDW Investment     Director in MSDW Investment
                                        Management)                            Management's Institutional Equity
                                                                               Group since 1993. From 1990 to 1993,
                                                                               he was a Managing Director in Morgan
                                                                               Stanley & Co.'s Equity Research
                                                                               Department.

                                        Margaret Kinsley Johnson Principal,    Ms. Johnson has been a portfolio
                                        Portfolio Manager (MSDW Investment     manager at MSDW Investment
                                        Management)                            Management since 1989 and is a 
                                                                               Chartered Financial Analyst.
</TABLE>

                                       42

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        Stephen W. Boesel (Investment          Mr. Boesel has been the chairman of
                                        Advisory Committee)                    the Investment Advisory Committee
                                        Chairman (T. Rowe Price)               since 1987.  He has been managing
                                                                               investments since joining T. Rowe
                                                                               Price in 1973.

                                        Andrew M. Brooks (Investment           [To be filed by amendment]
                                        Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

                                        Arthur B. Cecil  III (Investment       [To be filed by amendment]
                                        Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

                                        Gregory A. McCrickard (Investment      [To be filed by amendment]
                                        Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

                                        Mark J. Vaselkiv (Investment           [To be filed by amendment]
                                        Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

                                        Richard T. Whitney (Investment         [To be filed by amendment]
                                        Advisory Committee)
                                        Portfolio Manager (T. Rowe Price)

Large-Cap Value Portfolio               Roland W. Whitridge                    Mr. Whitridge has been employed by
                                        Portfolio Manager (Babson)             Babson in portfolio management for
                                                                               over twenty years.
</TABLE>

                                       43


<PAGE>


<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        Christopher C. Davis                   Mr. Davis joined Davis in September
                                        Portfolio Manager (Davis)              1989 as an assistant portfolio
                                                                               manager and research analyst.

                                        John R. Ryan (Value/Yield Team)        [To be filed by amendment]
                                        Senior Vice President, Managing        
                                        Partner and Head of Value/Yield
                                        Team (Wellington)

Value Portfolio                         Christopher C. Davis                   Mr. Davis joined Davis in September
                                        Portfolio Manager (Davis)              1989 as an assistant portfolio
                                                                               manager and research analyst.

                                        Shelby M. C. Davis                     [To be filed by amendment]
                                        Former Co-Manager (Davis)              
                                                                               
                                        Michael M. Kassen                      Mr. Kassen has been Managing
                                        Portfolio Manager, Managing            Director since January 1994 and a
                                        Director, Vice President and           Vice President and Portfolio Manager
                                        Principal (Neuberger&Berman)           since June 1990, of Neuberger&Berman
                                                                               Management, Inc. and a principal of
                                                                               Neuberger&Berman since January 1993.
</TABLE>


                                       44

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        Robert I. Gendelman                    Mr. Gendelman has been a principal
                                        Senior Portfolio Manager, Assistant    of Neuberger Berman since December
                                        Vice President and Principal           1996.  He was a portfolio manager
                                        (Neuberger Berman)                     for another mutual fund manager from
                                                                               1992 to 1993.

                                        David K. Schafer                       Mr. Schafer has been in the
                                        Founder, President and Portfolio       investment management business for
                                        Manager (Schafer)                      more than twenty-five years.  Mr.
                                                                               Schafer founded Schafer in 1984, and
                                                                               is the President of Schafer and also
                                                                               a minority shareholder of Schafer
                                                                               Cullen Capital Management, Inc.

Small-Cap Value Portfolio               Robert H. Perkins                      [To be filed by amendment]
                                        President,  Chief Investment Officer   
                                        and Director (PWM)                     

                                        Herbert W. Gullquist (Investment       [To be filed by amendment]
                                        Team) Vice Chairman (Lazard)           
                                        

                                        Eileen D. Alexanderson (Investment     [To be filed by amendment]
                                        Team) Managing Director, Portfolio     
                                        Manager (Lazard)                       

                                        Robert J. Mancuso, CFA Portfolio       [To be filed by amendment]
                                        Manager (Glenmede)                     
</TABLE>

                                       45

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        Scott R. Abernethy, CFA                [To be filed by amendment]
                                        Equity Research Analyst (Glenmede)

                                        Thomas R. Angers, CFA                  [To be filed by amendment]
                                        Equity Research Analyst (Glenmede)

                                        Larry R. Bernstein, CFA                [To be filed by amendment]
                                        Equity Research Analyst (Glenmede)

                                        Barry D. Kohout, CFA                   [To be filed by amendment]
                                        Equity Research Analyst (Glenmede)

                                        Robert T. Niemeyer, Sr., CFA           [To be filed by amendment]
                                        Equity Research Analyst (Glenmede)

                                        Anthony J. Albuquerque                 [To be filed by amendment]
                                        Equity Research Analyst (Glenmede)

International Equity Portfolio          Michael Levy (International            Mr. Levy's experience prior to
                                        Equit Team)                            joining BT includes investment
                                        Managing Director of Bankers Trust     banking and equity analysis with
                                        Funds Management, Head of              Oppenheimer & Company, and he has
                                        International Equity Team (BT)         more than twenty-six years of
                                                                               business experience, of which
                                                                               sixteen years have been in the
                                                                               investment industry.
</TABLE>


                                       46

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        Robert L. Reiner                       Mr. Reiner has 16 years of
                                        (International Equity Team)            investment industry experience,
                                        Managing Director of Bankers Trust     previously at Scudder, Stevens &
                                        Funds Management (BT)                  Clark, where he was responsible for
                                                                               providing equity research and
                                                                               macroeconomic/market coverage.

                                        Martin G. Wade                         Mr. Wade joined Rowe-Fleming in 1979
                                        Portfolio Manager (Rowe-Fleming)       and has 27 years of experience with
                                                                               the Fleming Group in research,
                                                                               client service, and investment
                                                                               management (Fleming Group includes
                                                                               Flemings and/or Jardine Fleming)

                                        Peter B. Askew                         Mr. Askew joined Rowe-Fleming in
                                        Portfolio Manager (Rowe-Fleming)       1988 and has 21 years of experience
                                                                               managing multi-currency fixed income
                                                                               portfolios.

                                        Mark J. T. Edwards                     Mr. Edwards joined Rowe-Fleming in
                                        Portfolio Manager (Rowe-Fleming)       1986 and has 15 years of experience
                                                                               in financial analysis.

                                        John R. Ford                           Mr. Ford joined Rowe-Fleming in 1982
                                        Portfolio Manager (Rowe-Fleming)       and has 16 years of experience with
                                                                               Fleming Group in research and
                                                                               portfolio management.

                                        James B. M. Seddon                     Mr. Seddon joined Rowe-Fleming in
                                        Portfolio Manager (Rowe-Fleming)       1987 and has 11 years of
                                                                               experience in portfolio management.
</TABLE>

                                       47

<PAGE>

<TABLE>
<CAPTION>
                                        Name, Title and Affiliation of
Portfolio                               Portfolio Manager                      Experience
- ---------                               ------------------------------         ----------
<S>                                     <C>                                    <C>
                                        David J. L. Warren                     Mr. Warren joined Price-Fleming in
                                        Portfolio Manager (Rowe-Fleming)       1984 and has 16 years of experience
                                                                               in equity research, fixed income
                                                                               research, and portfolio management.

                                        Richard H. King                        [To be filed by amendment]
                                        Co-Portfolio Manager (Warburg)         

                                        P. Nicholas Edwards                    Mr. Edwards has been with the firm
                                        Co-Portfolio Manager (Warburg)         [as a Portfolio Manager] since 1995.
                                                                               Prior to joining Warburg, Mr. Edwards 
                                                                               was a Director at Jardine Fleming 
                                                                               Investment Advisers, Tokyo from 
                                                                               _____________.

                                        Harold W. Ehrlich                      Mr. Ehrlich has been with the firm
                                        Co-Portfolio Manager (Warburg)         [as a Portfolio Manager] since
                                                                               1995.  Prior to joining Warburg, Mr.
                                                                               Ehrlich was a Senior Vice President, 
                                                                               Portfolio Manager and Analyst at 
                                                                               Templeton Investment Counsel, Inc.
                                                                               from ____________.

                                        Vincent J. McBride                     Mr. McBride, a Senior Vice President
                                        Senior Vice President, Co-Portfolio    of Warburg has been with the firm
                                        Manager (Warburg)                      [as a Portfolio Manager] since 1994.
                                                                               Prior to joining Warburg, Mr. McBride 
                                                                               was an International Equity Analyst at
                                                                               Smith Barney Inc. from _____________.
</TABLE>

Distributor SunAmerica Capital Services, Inc. distributes each Portfolio's 
shares. The Distributor, a SunAmerica company, receives the initial and 
deferred sales charges, all or a portion of which may be re-allowed to other 
broker-dealers. In addition, the Distributor receives fees under each 
Portfolio's 12b-1 plans.

                                       48

<PAGE>

The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances, affiliates of the
Distributor) in connection with sales of shares of a Portfolio. This 
compensation may include (i) full re-allowance of the front-end sales charge on
Class A shares; (ii) additional compensation with respect to the sale of Class 
A, Class B or Class II shares; or (iii) financial assistance to broker-dealers 
in connection with conferences, sales or training programs for their employees, 
seminars for the public, advertising campaigns regarding one or more of the 
Portfolios, and/or other broker-dealer sponsored special events. In some 
instances, this compensation will be made available only to certain broker-
dealers whose representatives have sold a significant number of shares of the 
Portfolio. Compensation may also include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered 
representatives for meetings or seminars of a business nature. In addition, the
following types of non-cash compensation may be offered through sales contests: 
(i) travel mileage on major air carriers; (ii) tickets for entertainment events
(such as concerts or sporting events); or (iii) merchandise (such as clothing, 
trophies, clocks, pens or other electronic equipment). Broker-dealers may not 
use sales of the Portfolios' shares to qualify for this compensation to the 
extent receipt of such compensation may be prohibited by applicable law or the 
rules of any self-regulatory agency, such as the National Association of 
Securities Dealers, Inc. Dealers who receive bonuses or other incentives may 
be deemed to be underwriters under the Securities Act of 1933.

Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Distributor 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 Portfolios' 12b-1 plans.
Banks and other financial services firms may be subject to various state laws
regarding these services, and may be required to register as dealers pursuant to
state law.

Administrator SunAmerica Fund Services, Inc. assists the Portfolios' transfer
agent in providing shareholder services. The Administrator, a SunAmerica
company, is paid a monthly fee by each Fund for its services at the annual rate
of .22% of average daily net assets.

SunAmerica, the Distributor and Administrator are all located in The SunAmerica
Center, 733 Third Avenue, New York, New York 10017.

Year 2000 Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way they encode and calculate dates.
This is popularly known as the "Year 2000 Issue." The Year 2000 Issue could
potentially have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing and account services. We recognize
the importance of the Year 2000 Issue and are taking appropriate steps necessary
in preparation for the year 2000. The Fund's management fully anticipates that
their systems will be adapted in time for the year 2000, and to further this
goal they have coordinated a plan to repair, adapt or replace their systems as
necessary. They have also obtained representations from their outside service
providers that they are doing the same. The Fund's management completed their
plan significantly by the end of the 1998 calendar year and expects to perform
appropriate systems testing during the 1999 calendar

                                       49

<PAGE>

year. If the problem has not been fully addressed, however, the Fund could be
negatively impacted. The Year 2000 Issue could also have a negative impact on
the companies in which the Fund invests, which could hurt the Fund's investment
returns.







                                       50

<PAGE>

                              (OUTSIDE BACK COVER)

FOR MORE INFORMATION

     The following documents contain more information about the Portfolios and
are available free of charge upon request:

               Annual/Semi-annual Reports. Contain financial statements,
               performance data and information on portfolio holdings. The
               annual report also contains a written analysis of market
               conditions and investment strategies that significantly affected
               a Portfolio's performance during the last fiscal year.

               Statement of Additional Information (SAI). Contains additional
               information about the Portfolios' policies, investment
               restrictions and business structure. This prospectus incorporates
               the SAI by reference.

     You may obtain copies of these documents or ask questions about the
Portfolios by contacting:

               SunAmerica Fund Services, Inc.
               Mutual Fund Operations
               The SunAmerica Center
               733 Third Avenue
               New York, New York  10017-3204
               1-800-858-8850

     or by calling your broker or financial advisor.

     Information about the Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549-6009.

     You should rely only on the information contained in this prospectus. No
one is authorized to provide you with any different information.




                                       51

<PAGE>

                                [Logo] SunAmerica
                                  Mutual Funds








DISTRIBUTOR:                                 SunAmerica Capital Services



INVESTMENT COMPANY ACT
File No.  811-07797


<PAGE>


================================================================================
                                                      PROSPECTUS

                  ___________________, 1999

================================================================================


style select series(R)

Focus Portfolio:

     A Concentrated Approach to Stock Selection
























The Securities and Exchange Commission
has not approved or disapproved these
securities or passed upon the adequacy
of this prospectus. Any representation
to the contrary is a criminal offense.
                                                             [Logo] SunAmerica 
                                                                    Mutual Funds





<PAGE>




                                TABLE OF CONTENTS



PORTFOLIO HIGHLIGHTS........................................................ 3

FINANCIAL HIGHLIGHTS........................................................ 7

SHAREHOLDER ACCOUNT INFORMATION............................................. 8

MORE INFORMATION ABOUT THE PORTFOLIO........................................20
         Investment Strategies..............................................20
         Glossary ..........................................................22
                  Investment Terminology....................................22
                  Risk Terminology..........................................22

PORTFOLIO MANAGEMENT........................................................23



                                        2

<PAGE>



PORTFOLIO HIGHLIGHTS

The Focus Portfolio is a separate investment Portfolio of Style Select Series,
Inc., a registered mutual fund. The following questions and answers are designed
to give you an overview of the Portfolio and to provide you with information
about the Portfolio's investment goals and principal strategies. These goals and
strategies may be changed without shareholder approval, although you will
receive notice of any change. More complete investment information is provided
in chart form, under "More Information About the Portfolio," which is on page
20, and the glossary that follows on page 22.

Q:   What is Portfolio's investment goal?

A:   The Portfolio seeks long-term growth of capital. There can be no assurance
     that the Portfolio's investment goal will be met or that the net return on
     an investment in the Portfolio will exceed what could have been obtained
     through other investment or savings vehicles.

Q:   How does the Portfolio pursue its goal?

A:   The Portfolio seeks to achieve its goal primarily through long-term
     investment in equity securities.

     The Portfolio provides investors with access to at least three different
     professional Advisers, each with its own distinct investment methodology
     within a particular investment style. Each Adviser manages a separate
     portion of the Portfolio.

     We believe that most investment managers normally own a small number of
     stocks in which they are highly confident, but that, because holding only
     ten or fifteen stocks is not viewed as prudent from a diversification
     standpoint, or practical given the large dollar amounts that most
     successful advisers manage, most stock mutual funds hold more than fifty
     stocks. We feel that, over time, the performance of most investment
     managers' "highest confidence" stocks exceeds that of their more
     diversified portfolios. Therefore, each Adviser will provide its ten
     favorite stock-picking ideas at any given moment.

     SunAmerica will initially allocate the assets of the Portfolio equally
     among the Advisers. SunAmerica will also allocate new cash from share
     purchases and redemption requests equally among the Advisers, unless
     SunAmerica determines, subject to the review of the Board, that a different
     allocation of assets would be in the best interests of the Portfolio and
     its shareholders.

     In general, SunAmerica will not rebalance or reallocate the assets of the
     Portfolio among Advisers. However, SunAmerica reserves the right, subject
     to the review of the Board, to reallocate assets from one Adviser to
     another when it would be in the best interests of the Portfolio and its
     shareholders to do so. In some instances, where a reallocation results in
     any rebalancing of the Portfolio from a previous allocation, the effect of
     the reallocation will be to shift assets from a better performing Adviser
     to a portion of the Portfolio with a relatively lower total return.

                                        3

<PAGE>




Q:   What are the principal risks of investing in the Portfolio?

A:   As with any equity fund, the value of your investment in the Portfolio may
     fluctuate in response to stock market movements, and you could lose money.
     Other principal risks include:

          -    individual stocks selected for the Portfolio may underperform the
               market, generally

          -    stocks of smaller companies may be more volatile than, and not as
               liquid as, those of larger companies

          -    while investing internationally may reduce your risk by
               increasing the diversification of your overall portfolio, the
               value of your investment may be affected by fluctuating currency
               values, changing local and regional economic, political and
               social conditions, and greater market volatility, and, in
               addition, foreign securities may not be as liquid as domestic
               securities

          -    in order to utilize its stock-picking strategy the Portfolio is
               non-diversified, which allows it to invest a larger portion of
               its assets in the stock of a single company than can some other
               mutual funds; by concentrating in a smaller number of stocks, the
               Portfolio's risk is increased because the effect of each stock on
               the Portfolio's performance is greater.

     In addition, shares of the Portfolio are not bank deposits and are not
     guaranteed or insured by any bank, government entity or the Federal Deposit
     Insurance Corporation.

Q:   What are the Portfolio's expenses?

A:   The following table describes the fees and expenses that you may pay if you
     buy and hold shares of the Portfolio:


                                                Focus Portfolio
                                      -----------------------------------
                                       Class         Class         Class
                                         A             B            II
                                      -------        ------       -------
Shareholder Fees (fees paid                                      
directly from your investment)                                   
   Maximum Sales Charge                                          
   (Load) Imposed on Pur-                                        
   chases (as a percentage of                                    
   offering price)(1)........           5.75%          None        1.00%
                                                                  
                                                               

                                        4

<PAGE>



                                                Focus Portfolio
                                      -----------------------------------
                                       Class         Class         Class
                                         A             B            II
                                      -------        ------       -------
   Maximum Deferred Sales                               
   Charge (Load) (as a per-                             
   centage of amount                                    
   redeemed)(2)..............           None           4.00%       1.00%
   Maximum Sales Charge                                 
   (Load) Imposed on                                    
   Reinvested Dividends......           None           None        None
   Redemption Fee(3).........           None           None        None
   Exchange Fee..............           None           None        None

Gross Annual Fund Operating
Expenses (expenses that are
deducted from Portfolio assets)
   Management Fees...........           0.35%          0.35%       0.35%
   Distribution (12b-1) Fees.           0.35%          1.00%       1.00%
   Other Expenses
                                     -------         ------     -------

Total Gross Annual Fund       
   Operating Expenses(4).....                    
                                     =======         ======     =======

(1)  The front-end sales charge on Class A shares decreases with the size of the
     purchase to 0% for purchases of $1 million or more.
(2)  Purchases of Class A shares over $1 million will be subject to a contingent
     deferred sales charge (CDSC) on redemptions made within one year of
     purchase. The CDSC on Class B shares applies only if shares are redeemed
     within six years of their purchase. The CDSC on Class II shares applies
     only if shares are redeemed within eighteen months of their purchase.
(3)  A $15.00 fee may be imposed on wire redemptions.

(4)  The information presented is based on gross expense data for the fiscal
     year ended October 31, 1998. The actual fees borne by an investor are lower
     than those shown in the table due to expense waivers and reimbursements.
     SunAmerica has voluntarily agreed to waive fees or reimburse expenses, if
     necessary, to keep operating expenses at or below the following annual
     rates for the current fiscal year:

                                        5

<PAGE>






                                    Class A          Class B           Class II
Other expenses (net of
     fee waivers/expense
     reimbursements)                 0.25%            .025%              .025%
Total operating
    expenses (net of fee
    waivers/expense
    reimbursements)                  1.45%            2.10%              2.10%

SunAmerica may terminate all such waivers and/or reimbursements at any time.

Example

This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

<TABLE>
<CAPTION>
                                                                          1 Year     3 Years     5 Years      10 Years
                                                                          ------     -------     -------      --------
<S>                                                                       <C>         <C>         <C>           <C>   
Focus Portfolio
     (Class A shares)...................................................
     (Class B shares)*..................................................
     (Class II shares)..................................................
</TABLE>


You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
                                                                          1 Year     3 Years     5 Years      10 Years
                                                                          ------     -------     -------      --------
<S>                                                                       <C>         <C>         <C>           <C>   
Focus Portfolio
     (Class A shares)...................................................
     (Class B shares)*..................................................
     (Class II shares)..................................................
</TABLE>

- -------------------------------

*    Class B shares convert to Class A shares approximately seven years after
     purchase. Therefore, expense information for years 8, 9 and 10 is the same
     for both Class A and B shares.

                                        6

<PAGE>



         The expenses shown in the example are based on gross expense data for
         the fiscal year ended October 31, 1998. Actual expenses were less than
         gross expenses for fiscal year 1998 because of expense waivers and
         reimbursements. If the actual expenses were used in the example rather
         than gross expenses, your costs would be as follows:

         If you redeem your investment at the end of each of the periods
indicated:


<TABLE>
<CAPTION>
                                                                          1 Year     3 Years     5 Years      10 Years
                                                                          ------     -------     -------      --------
<S>                                                                         <C>         <C>         <C>         <C>  
Focus Portfolio
     (Class II shares)..................................................

         If you did not redeem your shares:

<CAPTION>
                                                                          1 Year     3 Years     5 Years      10 Years
                                                                          ------     -------     -------      --------
<S>                                                                         <C>         <C>         <C>         <C>  
Focus Portfolio
     (Class II shares)..................................................
</TABLE>



FINANCIAL HIGHLIGHTS

The Financial Highlights table for the Portfolio is intended to help you
understand the Portfolio's financial performance since inception. Certain
information reflects financial results for a single share. The total returns in
each table represent the rate that an investor would have earned on an
investment in the Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Portfolio's financial statements, are included in
the Statement of Additional Information (SAI), which is available upon request.

                           [to be filed by amendment]


                                        7

<PAGE>



SHAREHOLDER ACCOUNT INFORMATION

Selecting a Share Class

The Portfolio offers three classes of shares: Class A, Class B and Class II
shares.

Each class of shares has its own cost structure, so you can choose the one best
suited to your investment needs. Your broker or financial advisor can help you
determine which class is right for you.

<TABLE>
<CAPTION>
==============================================================================================================
Class A                                    Class B                             Class II
==============================================================================================================
<S>                                        <C>                                 <C>
o        Front-end sales charges,          o        No front-end sales         o         Front-end sales
         as described below.                        charge; all your                     charge, as described
         There are several ways                     money goes to work                   below.
         to reduce these charges,                   for you right away.
         also described below.                                                 o         Higher annual
                                           o        Higher annual                        expenses than Class
o        Lower annual expenses                      expenses than Class                  A shares.
         than Class B or Class II                   A shares.
         shares.                                                               o         Deferred sales charge
                                           o        Deferred sales                       on shares you sell
                                                    charge on shares                     within eighteen months
                                                    you sell within six                  of purchase, as
                                                    years of purchase, as                described below.
                                                    described below.
                                                                               o         No conversion to
                                           o        Automatic                            Class A.
                                                    conversion to Class
                                                    A shares after
                                                    approximately seven
                                                    years, thus reducing
                                                    future annual
                                                    expenses.
</TABLE>



                                        8

<PAGE>



Calculation of Sales Charges

Class A Sales Charges are as follows:

<TABLE>
<CAPTION>
                                                                                                    Concession to
                                                                  Sales Charge                         Dealers
                                                    -----------------------------------------  ------------------------
                                                            % of               % of Net                  % of
                                                          Offering              Amount                 Offering
                  Your Investment                          Price               Invested                 Price
                                                    --------------------  -------------------  ------------------------
<S>                                                        <C>                   <C>                    <C>  
Less than $50,000.............................             5.75%                 6.10%                  5.00%
$50,000 but less than $100,000................             4.75%                 4.99%                  4.00%
$100,000 but less than $250,000...............             3.75%                 3.90%                  3.00%
$250,000 but less than $500,000...............             3.00%                 3.09%                  2.25%
$500,000 but less than $1,000,000.............             2.10%                 2.15%                  1.35%
$1,000,000 or more............................              None                 None                   1.00%
</TABLE>

Investments of $1 million or more Class A shares are available with no front-end
sales charge. However, there is a 1% CDSC on any shares you sell within one year
of purchase.

Class B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC on shares you sell within six
years of buying them. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:

Class B deferred charges:


Years after purchase                CDSC on shares being sold
1st or 2nd year                     4.00%
3rd or 4th year                     3.00%
5th year                            2.00%
6th year                            1.00%
7th year and thereafter             None

For purposes of the CDSC, we count all purchases you make during a calendar
month as having been made on the FIRST day of that month.

                                        9

<PAGE>



Class II Sales Charges are as follows:



                Sales Charge                            Concession to Dealers
- --------------------------------------------------------------------------------
  % of                           % of Net                     % of
Offering                          Amount                     Offering
 Price                           Invested                     Price
- --------------------------------------------------------------------------------
 1.00%                            1.01%                       1.00%

There is also a CDSC of 1% on shares you sell within 18 months after you buy 
them.

Determination of CDSC Each CDSC is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. There is no
CDSC on shares you purchase through reinvestment of dividends. To keep your CDSC
as low as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC. If there are not
enough of these shares available, we will sell shares that have the lowest CDSC.

Sales Charge Reductions and Waivers

Waivers for Certain Investors Various individuals and institutions may purchase
Class A shares without front-end sales charges, including:

o    financial planners, institutions, broker-dealer representatives or
     registered investment advisers utilizing Style Select shares in fee-based
     investment products under an agreement with the Distributor

o    participants in certain retirement plans that meet applicable conditions

o    Style Select Directors and other individuals who are affiliated with Style
     Select or other SunAmerica Mutual Funds and their families

o    selling brokers and their employees and sales representatives

o    participants in "Net Asset Value Transfer Program"

We will generally waive the CDSC for Class B or Class II shares in the following
cases:

o    within one year of the shareholder's death or becoming disabled

o    taxable distributions or loans to participants made by qualified retirement
     plans or retirement accounts (not including rollovers) for which SunAmerica
     serves as a fiduciary

o    Style Select Directors and other individuals who are affiliated with 
     Style Select or other SunAmerica Mutual Funds and their families

o    to make taxable distributions from certain retirement plans

o    to make payments through the Systematic Withdrawal Plan (subject to certain
     conditions)

Reducing your Class A sales charges There are several special purchase plans
that allow you to combine multiple purchases of Class A shares of SunAmerica
Mutual Funds to take advantage of

                                       10

<PAGE>



the breakpoints in the sales charge schedule. For information about the "Rights
of Accumulation," "Letter of Intent," "Combined Purchase Privilege," and
"Reduced Sales Charges for Group Purchases," contact your broker or financial
advisor, or consult the SAI.

To utilize: if you think you may be eligible for a sales charge reduction or
CDSC waiver, contact your broker or financial advisor.

Reinstatement privilege If you sell shares of the Portfolio you may invest some
or all of the proceeds in the same share class of the Portfolio within one year
without a sales charge. If you paid a CDSC when you sold your shares, we will
credit your account with the amount of the CDSC. All accounts involved must be
registered in the same name(s).

12b-1 Fees

Each class of shares of the Portfolio has its own 12b-1 plan that provides for
distribution and account maintenance and service fees (payable to the
Distributor) based on a percentage of average daily net assets, as follows:

                                                      Account Maintenance and
         Class             Distribution Fee                  Service Fee
         -----             ----------------                  -----------

         A                     .10%                            .25%
         B                     .75%                            .25%
         II                    .75%                            .25%

Because 12b-1 fees are paid out of the Portfolio's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.

Opening an Account

1.   Read this prospectus carefully.

2.   Determine how much you want to invest. The minimum initial investments for
     the Portfolio is as follows:

     o    non-retirement account: $500

     o    retirement account: $250

     o    dollar cost averaging: $500 to open; you must invest at least $25 a
          month


                                       11

<PAGE>


     The minimum subsequent investments for the Portfolio are as follows:

     o    non-retirement account: $100

     o    retirement account: $25


3.   Complete the appropriate parts of the Account Application, carefully
     following the instructions. If you have questions, please contact your
     broker or financial advisor or call Shareholder/Dealer Services at
     1-800-858-8850.

4.   Complete the appropriate parts of the Supplemental Account Application. By
     applying for additional investor services now, you can avoid the delay and
     inconvenience of having to submit an additional application if you want to
     add services later.

5.   Make your initial investment using the chart on the next page. You can
     initiate any purchase, exchange or sale of shares through your broker or
     financial advisor.

                                       12

<PAGE>

<TABLE>
=========================================================================================================
Buying shares
=========================================================================================================
    Opening an account                                Adding to an account
=========================================================================================================
By check
=========================================================================================================
<S>                                                   <C>
    o    Make out a check for the investment          o    Make out a check for the investment amount
         amount, payable to the "Focus Portfolio"          payable to the Portfolio or SunAmerica
         or SunAmerica Funds                               Funds.

    o    Deliver the check and your completed         o    Include the stub from your Fund statement or 
         Account Application (and Supplemental             a note specifying the Portfolio name, your
         Account Application, if applicable) to            share class, your account number and the 
         your broker or financial advisor, or mail         name(s) in which the account is registered.
         them to:
                                                      o    Indicate the Portfolio and account number in
         SunAmerica Fund Services, Inc.                    the memo section of your check.
         Mutual Fund Operations, 3rd Floor
         The SunAmerica Center                        o    Deliver the check and your stub or note to your 
         733 Third Avenue                                  broker or financial advisor, or mail them to 
         New York, New York 10017-3204.
                                                           Non-Retirement Accounts:
                                                           SunAmerica Fund Services, Inc.
                                                           c/o NFDS
                                                           P.O. Box 419373
                                                           Kansas City, Missouri  64141-6373

                                                           Retirement Accounts:
                                                           SunAmerica Fund Services, Inc.
                                                           Mutual Fund Operations, 3rd Floor
                                                           The SunAmerica Center
                                                           733 Third Avenue
                                                           New York, New York  10017-3204
=========================================================================================================
By wire
=========================================================================================================
                                                      o    Instruct your bank to wire the amount of your
    o    Deliver your completed application to             investment to:
         your broker or financial advisor or fax it
         to SunAmerica Fund Services, Inc. at              State Street Bank & Trust Company
         212-551-5585.                                     Boston, MA
                                                           ABA #0110-00028
    o    Obtain your account number by referring           DDA # 99029712
         to your statement or by calling your
         broker or financial advisor or                    Specify the Portfolio name, your share class,
         Shareholder/Dealer Services at 1-800-             your Portfolio number, account number and
         858-8850, ext. 5125.                              the name(s) in which the account is registered.
                                                           Your bank may charge a fee to wire funds.
</TABLE>

                                       13

<PAGE>



<TABLE>
<S>                                                   <C>
    o    Instruct your bank to wire the amount of
         your investment to:

         State Street Bank & Trust Company
         Boston, MA
         ABA #0110-00028
         DDA # 99029712

         Specify the Portfolio name, your choice 
         of share class, your new Portfolio number 
         and account number and the name(s) in
         which the account is registered. Your
         bank may charge a fee to wire funds.

To open or add to an account using dollar cost averaging, see "Additional 
Investor Services."


=========================================================================================================
Selling shares
=========================================================================================================
               How                                               Requirements
- ---------------------------------------------------------------------------------------------------------
Through Your Broker or Financial Advisor
- ---------------------------------------------------------------------------------------------------------
    o    Accounts of any type.                        o    Call your broker or financial advisor to place
    o    Sales of any amount.                              your order to sell shares.
=========================================================================================================
By mail
=========================================================================================================
    o    Accounts of any type.                        o    Write a letter of instruction indicating the
    o    Sales of any amount.                              Portfolio name, your share class, your account
                                                           number, the name(s) in which the account is
                                                           registered and the dollar value or number of
                                                           shares you wish to sell.
    o    Include all signatures and any additional 
         documents that may be required (see next 
         page).

    o    Mail the materials to:

         SunAmerica Fund Services, Inc.
         Mutual Fund Operations, 3rd Floor
         The SunAmerica Center
         733 Third Avenue
         New York, New York  10017-3204
                                                      o    A check will normally be mailed on the next
                                                           business day to the name(s) and address in
                                                           which the account is registered, or otherwise
                                                           according to your letter of instruction.
</TABLE>


                                                    14

<PAGE>


<TABLE>
=========================================================================================================
By phone
=========================================================================================================
<S>                                                    <C>
    o    Most accounts.

    o    Sales of less than $100,000.

    o    Call Shareholder/Dealer Services at 1-
         800-858-8850 between 8:30 a.m. and 
         7:00 p.m. (Eastern time) on most business 
         days. State the Portfolio name, the name 
         of the person requesting the redemption, 
         your share class, your account number, 
         the name(s) in which the account is
         registered and the dollar value or number
         of shares you wish  to sell.

    o    A check will be mailed to the name(s) 
         and address in which the account is 
         registered, or to a different address
         indicated in a written authorization 
         previously provided to the Portfolio 
         by the shareholder(s) on the account.
=========================================================================================================
By wire
=========================================================================================================
    o    Request by mail to sell any amount           o    Proceeds will normally be wired on the next
         (accounts of any type).                           business day.  A $15 fee will be deducted
    o    Request by phone to sell less than                from your account.
         $100,000.
</TABLE>

To sell shares through a systematic withdrawal plan, see "Additional Investor
Services."

Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. Corporations, executors, administrators,
trustees or guardians may need to include additional items with a request to
sell shares. You may also need to include a signature guarantee, which protects
you against fraudulent orders. You will need a signature guarantee if:

     o    your address of record has changed within the past 30 days

     o    you are selling more than $100,000 worth of shares

     o    you are requesting payment other than by a check mailed to the address
          of record and payable to the registered owner(s)

You can generally obtain a signature guarantee from the following sources:

     o    a broker or securities dealer

     o    a federal savings, cooperative or other type of bank 

     o    a savings and loan or other thrift institution

     o    a credit union

     o    a securities exchange or clearing agency 

     A notary public CANNOT provide a signature guarantee.

                                       15

<PAGE>


Transaction Policies

Valuation of shares The net asset value per share (NAV) for each class of the
Portfolio is determined each business day at the close of regular trading on the
New York Stock Exchange (generally 4:00 p.m., Eastern time) by dividing the net
assets of each class by the number of such class's outstanding shares.
Investments for which market quotations are readily available are valued at
market at their closing price. All other securities and assets are valued at
fair value following procedures approved by the Directors.

Buy and sell prices When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable CDSCs.

Execution of requests The Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. We execute buy and sell requests at
the next NAV to be calculated after your request is accepted by Style Select. If
Style Select or the Distributor receives your order before Style Select's close
of business (generally 4:00 p.m., Eastern time), you will receive that day's
closing price. If Style Select or the Distributor receives your order after that
time, you will receive the next business day's closing price. If you place your
order through a broker or financial advisor, you should make sure the order is
transmitted to Style Select before its close of business. Style Select and the
Distributor reserve the right to reject any order to buy shares.

During periods of extreme volatility or market crisis, Style Select may 
temporarily suspend the processing of sell requests, or may postpone payment of 
proceeds for up to three business days or longer, as allowed by federal 
securities laws.

If Style Select determines that it would be detrimental to the best interests 
of the remaining shareholders to make payment of redemption proceeds wholly or 
partly in cash, Style Select may pay the redemption price by a distrbution in 
kind of securities from Style Select in lieu of cash. However, Style Select has
made an election that requires it to pay a certain portion of redemption 
proceeds in cash.

Telephone transactions For your protection, telephone requests are recorded in
order to verify their accuracy. In addition, Shareholder/Dealer Services will
take measures to verify the identity of the caller, such as asking for name,
account number, social security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, Style Select is responsible
for any losses that may occur to any account due to an unauthorized telephone
call. Also for your protection, telephone transactions are not permitted on
accounts whose names or addresses have changed within the past 30 days. At times
of peak activity, it may be difficult to place requests by phone. During these
times, consider sending your request in writing.

Exchanges You may exchange shares of the Portfolio for shares of the same class
of any other SunAmerica Mutual Fund. Before making an exchange, you should 
review a copy of the

                                       16
<PAGE>


prospectus of the fund into which you would like to exchange. All exchanges are
subject to applicable minimum investment requirements. A Systematic Exchange
Program is described under "Additional Investor Services." 

If you exchange shares that were purchased subject to a CDSC, the CDSC will
continue to apply following the exchange. In determining the CDSC applicable to
shares being sold after an exchange, we will take into account the length of
time you held those shares prior to the exchange. Your CDSC schedule will not 
change if you exchange Class II shares that you purchased  prior to December 1, 
1998 for another Portfolio or fund's Class II shares (which currently have a 
longer CDSC schedule).

To protect the interests of other shareholders, we may cancel the exchange
privileges of any investors that, in Style Select's opinion, are using
market timing strategies or making excessive exchanges. The Portfolio may change
or cancel its exchange privilege at any time, upon 60 days' written notice to
its shareholders. The Portfolio may also refuse any exchange order.

Certificated shares Most shares are electronically recorded. If you wish to have
certificates for your shares, please call Shareholder/Dealer Services at
1-800-858-8850 for further information. You may sell or exchange certificated
shares only by returning the certificates to Style Select, along with a letter
of instruction and a signature guarantee. Style Select does not issue
certificates for fractional shares.

Multi-party checks Style Select may agree to accept a "multi-party check" in
payment for Portfolio shares. This is a check made payable to the investor by
another party and then endorsed over to Style Select by the investor. If you use
a multi-party check to purchase shares, you may experience processing delays. In
addition, Style Select is not responsible for verifying the authenticity of any
endorsement and assumes no liability for any losses resulting from a fraudulent
endorsement.

Additional Investor Services

To select one or more of these additional services, complete the relevant
part(s) of the Supplemental Account Application. To add a service to an existing
account, contact your broker or financial advisor, or call Shareholder/Dealer
Services at 1-800-858-8850.

Dollar Cost Averaging lets you make regular investments from your bank account
to the SunAmerica Mutual Funds of your choice. You determine the frequency and
amount of your investments, and you can terminate your participation at any
time.

Systematic Withdrawal Plan may be used for routine bill payment or periodic
withdrawals from your account. To use:


                                       17

<PAGE>



     o    Make sure you have at least $5,000 worth of shares in your account.

     o    Make sure you are not planning to invest more money in this account
          (buying shares during a period when you are also selling shares of the
          same fund is not advantageous to you, because of sales charges).

     o    Specify the payee(s) and amount(s). The payee may be yourself or any
          other party, and there is no limit to the number of payees you may
          have, as long as they are all on the same payment schedule. Each
          withdrawal must be at least $50.

     o    Determine the schedule: monthly, quarterly, semi-annually, annually or
          in certain selected months.

     o    Make sure your dividends and capital gains are being reinvested.

You cannot elect the systematic withdrawal plan if you have requested
certificates for your shares.

Systematic Exchange Program may be used to exchange shares of the Portfolio
periodically for the same class of shares of one or more other SunAmerica Mutual
Funds. To use:

     o    Specify the SunAmerica Mutual Fund(s) from which you would like money
          withdrawn and into which you would like money invested.

     o    Determine the schedule: monthly, quarterly, semi-annually, annually or
          in certain selected months.

     o    Specify the amount(s). Each exchange must be worth at least $25.

     o    Accounts must be registered identically; otherwise a signature
          guarantee will be required.

Asset Protection Plan (optional) Anchor National Life Insurance Company offers
an Asset Protection Plan to certain investors in the Portfolio. The benefits of
this optional coverage payable at death will be related to the amounts paid to
purchase Portfolio shares and to the value of the Portfolio shares held for the
benefit of the insured persons. However, to the extent the purchased shares are
redeemed prior to death, coverage with respect to these shares will terminate.

Purchasers of the Asset Protection Plan are required to authorize periodic
redemptions of Portfolio shares to pay the premiums for this coverage. These
redemptions will not be subject to CDSCs, but will have the same tax
consequences as any other Portfolio redemptions.

The Asset Protection Plan will be available to eligible persons who enroll for
the coverage within a limited time period after shares in any Portfolio are
initially purchased or transferred. In addition, coverage cannot be made
available unless Anchor National knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of

                                       18

<PAGE>



your broker unless the broker provides Anchor National with information
regarding the beneficial owners of the shares. In addition, coverage is
available only to shares purchased on behalf of natural persons between 21 and
75 years of age; coverage is not available with respect to shares purchased for
a retirement account. Other restrictions on the coverage apply. This coverage
may not be available in all states and may be subject to additional restrictions
or limitations. Purchasers of shares should also make themselves familiar with
the impact on the Asset Protection Plan coverage of purchasing additional
shares, reinvestment of dividends and capital gains distributions and
redemptions.

Anchor National is a SunAmerica company.

Please call 1-800-858-8850 for more information, including the cost of the Asset
Protection Plan option.

Retirement plans SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Simple IRAs, Roth IRAs, SARSEPs, 401(k) plans, 403(b) 
plans and other pension and profit-sharing plans. Using these plans, you can
invest in any SunAmerica Mutual Fund with a low minimum investment of $250 or,
for some group plans, no minimum investment at all. To find out more, call
Shareholder/Dealer Services at 1-800-858-8850.

Dividend and Account Policies

Account statements In general, you will receive account statements as follows:

     o    after every transaction that affects your account balance (except a
          dividend reinvestment or automatic purchase from your bank account)

     o    after any changes of name or address of the registered owner(s)

     o    in all other circumstances, quarterly or annually, depending upon the
          Portfolio

Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

Dividends The Portfolio generally distributes most or all of its net earnings in
the form of dividends. Income dividends and capital gains distributions, if any,
are paid annually.

Dividend Reinvestments Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same share class of the
Portfolio on which they were paid. Alternatively, dividends and distributions
may be reinvested in any other SunAmerica Mutual Fund or paid in cash

                                       19

<PAGE>



(if more than $10). You will need to complete the relevant part of the Account
Application to elect one of these other options. For existing accounts, contact
your broker or financial advisor or call Shareholder/Dealer Services at
1-800-858-8850 to change dividend and distribution payment options.

Taxability of dividends As long as the Portfolio meets the requirements for
being a tax-qualified regulated investment company, which the Portfolio has in
the past and intends to in the future, it pays no federal income tax on the
earnings it distributes to shareholders.

Consequently, dividends you receive from the Portfolio, whether reinvested or
taken as cash, are generally considered taxable. Distributions of the
Portfolio's long-term capital gains are taxable as capital gains; dividends from
other sources are generally taxable as ordinary income.

Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.

The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions. If you hold Class B shares, you will not have a taxable event when
they convert into Class A shares.

Small accounts If you draw down an account so that its total value is less than
$500 ($250 for retirement plan accounts), you may be asked to purchase more
shares within 60 days. If you do not take action, Style Select may close out
your account and mail you the proceeds. Alternatively, you may be charged a
$2.00 monthly charge to maintain your account. Your account will not be closed
if its drop in value is due to Portfolio performance or the effects of sales
charges.

MORE INFORMATION ABOUT THE PORTFOLIO

Investment Strategies


                                       20

<PAGE>



The Portfolio has its own investment goal and a strategy for pursuing it. The
chart summarizes information about the Portfolio's investment approach. We have
included a glossary to define the investment and risk terminology used in the
chart.

- --------------------------------------------------------------------------------
                                                       Focus Portfolio
- --------------------------------------------------------------------------------
What is the Portfolio's                       Long-term growth of capital
investment goal?
- --------------------------------------------------------------------------------
What are the Portfolio's principal            Long-term investment in equity
investments (under normal                     securities, including common
market conditions)?                           stocks and other securities with
                                              the characteristics of common
                                              stock
- --------------------------------------------------------------------------------
What are the Portfolio's principal            o  market volatility
risks?                                        o  securities selection
                                              o  non-diversification
- --------------------------------------------------------------------------------
What other investment strategies 
can the Portfolio use?
- --------------------------------------------------------------------------------
o  Small company stocks                                     Yes
- --------------------------------------------------------------------------------
o  Borrowing for temporary or                               Yes
   emergency purposes                                  (up to 33 1/3%)
- --------------------------------------------------------------------------------
o  Foreign securities                                       Yes
                                                        (up to 30%)
- --------------------------------------------------------------------------------
   ADRs/EDRs/GDRs                                           Yes
- --------------------------------------------------------------------------------
o  Illiquid securities                                      Yes
                                                        (up to 15%)
- --------------------------------------------------------------------------------
o  Defensive investments                                    Yes
- --------------------------------------------------------------------------------
o  Short-term investments                                   Yes
                                                        (up to 25%)
- --------------------------------------------------------------------------------
What other potential risks can                o  foreign exposure
affect the Portfolio?                         o  emerging markets
                                              o  illiquidity
                                              o  small market capitalization
- --------------------------------------------------------------------------------



                                       21

<PAGE>



Glossary

Investment Terminology

Growth of capital is growth of the value of an investment.

Equity securities include common and preferred stocks, convertible securities,
warrants and rights.

Small companies have market capitalizations of $1 billion or less.

The Portfolio may borrow for temporary or emergency purposes including to meet
redemptions. Borrowing will cost the Portfolio interest expense and other fees.

Foreign securities are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary
Receipts (ADRs) or other similar securities that convert into foreign
securities, such as European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs).

Illiquid securities are subject to legal or contractual restrictions that may
make them difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid. Certain restricted securities (such
as Rule 144A securities) are not generally considered illiquid because of their
established trading market.

Defensive investments include high quality fixed income securities and money
market instruments. The Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When the
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, the Portfolio may not achieve its
investment goal.

Short-term investments include money market securities such as short-term U.S.
Government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide the Portfolio
with sufficient liquidity to meet redemptions and cover expenses.

Risk Terminology

Market volatility: The stock market as a whole could go up or down (sometimes
dramatically). This could affect the value of the securities in the Portfolio's
portfolio.

Securities selection: A strategy used by the Portfolio, or securities selected
by an Adviser, may fail to produce the intended return.

                                       22

<PAGE>



Small market capitalization: Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. It may be difficult to obtain reliable
information and financial data about these companies. Consequently, the
securities of smaller companies may not be as readily marketable and may be
subject to more abrupt or erratic market movements.

Foreign exposure: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as in the U.S.
Foreign investments will also be affected by local political or economic
developments and governmental actions. Consequently, foreign securities may be
less liquid, more volatile and more difficult to price than U.S. securities.
These risks are heightened when the issuer is in an emerging market country.

Emerging Market: An emerging market country is one that the World Bank, the
International Finance Corporation, or the United Nations or its authorities has
determined to have a low or middle income economy. Historical experience
indicates that the markets of emerging market countries have been more volatile
than more developed markets; however, such markets can provide higher rates of
return to investors.

Illiquidity: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.

PORTFOLIO MANAGEMENT

Manager SunAmerica Asset Management Corp. selects the Advisers for the
Portfolio, provides various administrative services, and supervises the daily
business affairs of the Portfolio. The Advisers are responsible for decisions to
buy and sell securities for the Portfolio, selection of broker-dealers and
negotiation of commission rates for their respective portion of the Portfolio. 
SunAmerica may terminate any agreement with an Adviser without shareholder
approval. Moreover, SunAmerica has received an exemptive order from the
Securities and Exchange Commission that permits SunAmerica, subject to certain
conditions, to enter into agreements relating to the Portfolio with Advisers
approved by the Board of Directors without obtaining shareholder approval. The
exemptive order also permits SunAmerica, subject to the approval of the Board
but without shareholder approval, to employ new Advisers for the Portfolio,
change the terms of

                                       23

<PAGE>



particular agreements with Advisers or continue the employment of existing
Advisers after events that would otherwise cause an automatic termination of a
subadvisory agreement. Shareholders of the Portfolio have the right to terminate
an agreement with an Adviser at any time by a vote of the majority of the
outstanding voting securities. Shareholders will be notified of any Adviser
changes. The order also permits Style Select to disclose to shareholders the
Advisers' fees only in the aggregate for the Portfolio. For the fiscal year
ended October 31, 1998, the Portfolio paid SunAmerica a fee equal to 0.85% of
average daily net assets.

SunAmerica, which was organized in 1982 under the laws of Delaware, managed,
advised or administered assets in excess of $15 billion as of October 31, 1998.
In addition to managing Style Select, SunAmerica serves as adviser, manager
and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Anchor Series
Trust, Seasons Series Trust, SunAmerica Income Funds, SunAmerica Money Market
Funds, Inc., and SunAmerica Series Trust.

The Advisers for the Focus Portfolio are Bramwell Capital Management, Inc.
("Bramwell"), Jennison Associates LLC ("Jennison") and Marsico Capital
Management, LLC ("Marsico").

Bramwell Capital Management, Inc. Bramwell is a Delaware corporation located at
745 Fifth Avenue, New York, NY 10151. As of April 30, 1998, Bramwell had under
management approximately $605 million in assets.

Elizabeth R. Bramwell serves as the Portfolio Manager for Bramwell's portion of
the Portfolio. Ms. Bramwell founded Bramwell in 1994 and has been the Chief
Executive Officer ever since. From 1987 until February 1994, Ms. Bramwell was
President, Chief Investment Officer, Portfolio Manager and Trustee of The
Gabelli Growth Fund.

Jennison Associates LLC Jennison is a Delaware limited liability company located
at 466 Lexington Avenue, New York, NY 10017. As of April 30, 1998, Jennison had
approximately $42.5 billion in assets under management for institutional and
mutual fund clients.

Spiros "Sig" Segalas serves as the Portfolio Manager for Jennison's portion of
the Portfolio. Mr. Segalas is a founding director of Jennison, which was
established in 1969, and he has been the Director and Equity Portfolio Manager
ever since. In addition, Mr. Segalas has served as President and Chief
Investment Officer of Jennison since 1993 and 1971, respectively.

Marsico Capital Management, LLC Marsico is a Colorado limited liability company
located at 1200 17th Street, Suite 1300, Denver, CO 80202. As of April 30, 1998,
Marsico had approximately $1 billion in assets under management.

Thomas F. Marsico serves as the Portfolio Manager for Marsico's portion of the
Portfolio. Mr. Marsico has been the Chairman and Chief Executive Officer of
Marsico since he formed Marsico

                                       24

<PAGE>



in 1997. From 1988 through 1997, Mr. Marsico served as the portfolio manager of
the Janus Twenty Fund and from 1991 through 1997, Mr. Marsico served as the
portfolio manager of the Janus Growth & Income Fund.

Distributor SunAmerica Capital Services, Inc. distributes the Portfolio's
shares. The Distributor, a SunAmerica company, receives the initial and deferred
sales charges, all or a portion of which may be re-allowed to other
broker-dealers. In addition, the Distributor receives fees under the Portfolio's
12b-1 plans.

The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances, affiliates of the
Distributor) in connection with sales of shares of the Portfolio. This
compensation may include (i) full re-allowance of the front-end sales charge on
Class A shares; (ii) additional compensation with respect to the sale of Class
A, Class B or Class II shares; or (iii) financial assistance to broker-dealers
in connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding the Portfolio, and/or
other broker-dealer sponsored special events. In some instances, this
compensation will be made available only to certain broker-dealers whose
representatives have sold a significant number of shares of Style Select.
Compensation may also include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
for meetings or seminars of a business nature. In addition, the following types
of non-cash compensation may be offered through sales contests: (i) travel
mileage on major air carriers; (ii) tickets for entertainment events (such as
concerts or sporting events); or (iii) merchandise (such as clothing, trophies,
clocks, pens or other electronic equipment). Broker-dealers may not use sales of
the Portfolio's shares to qualify for this compensation to the extent receipt of
such compensation may be prohibited by applicable law or the rules of any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. Dealers who receive bonuses or other incentives may be deemed to be
underwriters under the Securities Act of 1933.

Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Distributor 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 Portfolio's 12b-1 plans.
Banks and other financial services firms may be subject to various state laws
regarding these services, and may be required to register as dealers pursuant to
state law.

Administrator SunAmerica Fund Services, Inc. assists the Portfolio's transfer
agent in providing shareholder services. The Administrator, a SunAmerica
company, is paid a fee, accrued daily and

                                       25

<PAGE>



payable monthly, by the Portfolio for its services at the annual rate of .22% of
average daily net assets.

SunAmerica, the Distributor and Administrator are all located in The SunAmerica
Center, 733 Third Avenue, New York, New York 10017.

Year 2000 Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way they encode and calculate dates.
This is popularly known as the "Year 2000 Issue." The Year 2000 Issue could
potentially have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing and account services. We recognize
the importance of the Year 2000 Issue and are taking appropriate steps necessary
in preparation for the year 2000. Style Select's management fully anticipates
that their systems will be adapted in time for the year 2000, and to further
this goal they have coordinated a plan to repair, adapt or replace their systems
as necessary. They have also obtained representations from their outside service
providers that they are doing the same. Style Select's management completed
their plan significantly by the end of the 1998 calendar year and expects to
perform appropriate systems testing during the 1999 calendar year. If the
problem has not been fully addressed, however, Style Select, and the Portfolio,
could be negatively impacted. The Year 2000 Issue could also have a negative
impact on the companies in which the Portfolio invests, which could hurt the
Portfolio's investment returns.

                                       26

<PAGE>



                              (OUTSIDE BACK COVER)

FOR MORE INFORMATION


         The following documents contain more information about the Portfolio
and are available free of charge upon request:

                           Annual/Semi-annual Reports. Contain financial
                           statements, performance data and information on
                           portfolio holdings. The annual report also contains a
                           written analysis of market conditions and investment
                           strategies that significantly affected the
                           Portfolio's performance during the last fiscal year.

                           Statement of Additional Information (SAI). Contains
                           additional information about the Portfolio's
                           policies, investment restrictions and business
                           structure. This prospectus incorporates the SAI by
                           reference.

     You may obtain copies of these documents or ask questions about the
Portfolio by contacting:

                           SunAmerica Fund Services, Inc.
                           Mutual Fund Operations
                           The SunAmerica Center
                           733 Third Avenue
                           New York, New York  10017-3204
                           1-800-858-8850

         or by calling your broker or financial advisor.

     Information about the Portfolio (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolio is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549-6009.

     You should rely only on the information contained in this prospectus. No
one is authorized to provide you with any different information.

                                       27

<PAGE>


                                [Logo] SunAmerica
                                  Mutual Funds








DISTRIBUTOR:                                  SunAmerica Capital Services



INVESTMENT COMPANY ACT
File No.  811-07797



<PAGE>


================================================================================
                                                         PROSPECTUS

                             ____________________, 1999

================================================================================



style select series(R)

Aggressive Growth Portfolio
Large-Cap Value Portfolio
Value Portfolio
Small-Cap Value Portfolio
International Equity Portfolio
(Class Z Shares)















The  Securities and Exchange  Commission  has not approved or disapproved  these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.

                                                               [Logo] SunAmerica
                                                                    Mutual Funds

<PAGE>

                                TABLE OF CONTENTS


FUND HIGHLIGHTS............................................................... 3

FINANCIAL HIGHLIGHTS.......................................................... 8

SHAREHOLDER ACCOUNT INFORMATION............................................... 9

MORE INFORMATION ABOUT THE PORTFOLIOS.........................................11
            Investment Strategies.............................................11
            Glossary    ......................................................15
                        Investment Terminology................................15
                        Risk Terminology......................................17

FUND MANAGEMENT...............................................................19


                                        2

<PAGE>

FUND HIGHLIGHTS

The following  questions and answers are designed to give you an overview of the
Fund,  and to provide  you with  information  about five of the Fund's  separate
Portfolios and their investment goals and principal strategies. Each goal may be
changed without  shareholder  approval,  although you will receive notice of any
change.  More complete  investment  information is provided in chart form, under
"More Information  About the Portfolios,"  which is on page 11, and the glossary
that follows on page 15.

Q:   What are the Portfolios' investment goals?

A:   Each Portfolio seeks long-term growth of capital. There can be no assurance
     that any Portfolio's investment goal will be met or that the net return on
     an investment in a Portfolio will exceed what could have been obtained
     through other investment or savings vehicles.

Q:   How do the Portfolios pursue their goals?

A:   Each Portfolio provides investors with access to at least three different
     professional Advisers, each with its own distinct investment methodology
     within a particular investment style. Each Adviser manages a separate
     portion of a Portfolio.

          The Aggressive Growth Portfolio invests primarily in equity securities
          selected on the basis of growth criteria.

          [Margin note: "growth" companies are considered to have a historical
          record of above-average growth rate; to have significant growth
          potential; to have above-average earnings growth or value or the 
          ability to sustain earnings growth; to offer proven or unusual 
          products or services; or to operate in industries experiencing 
          increasing demand.]

          The Large-Cap Value, Value and Small-Cap Value Portfolios invest  
          primarily in equity securities selected on the basis of value 
          criteria.

          [Margin note: A "value" oriented philosophy - that of investing
          principally in securities believed to be undervalued in the market -
          reflects a contrarian approach, in that the potential for superior
          relative performance is believed to be highest when stocks of
          fundamentally solid companies are out of favor. The selection criteria
          is calculated to identify stocks of large, well-known companies with
          solid financial strength and generous dividend yields that have low
          price-earnings ratios and have been generally overlooked by the
          market.]

          The International Equity Portfolio invests primarily in equity 
          securities and other securities with equity characteristics of 
          non-U.S. issuers located in at least three countries other than the 
          U.S.


                                        3

<PAGE>

     In addition to the difference in the investment style of the Portfolios,
     the Portfolios may purchase securities issued by companies of different
     sizes as measured by their market capitalizations.

     [Margin note: Market capitalization represents the total market value of
     the outstanding securities of a corporation.]

          For the Large-Cap Value Portfolio, the companies will
          generally have market capitalizations of over $5
          billion.

          For the Value Portfolio, the Advisers may select
          companies without regard to market capitalizations.
          However, the Value Portfolio as a whole generally
          expects to have a significant portion of its total
          assets invested in securities of companies with market
          capitalizations between $1 billion and $5 billion.

          For the Aggressive Growth Portfolio, the Advisers may
          select companies without regard to market
          capitalizations. However, the companies will generally
          have market capitalizations of less than $1 billion or
          between $1 billion and $5 billion.

          For the Small-Cap Value Portfolio, the companies will
          generally have market capitalizations of less than $1
          billion.

          For the International Equity Portfolio, the Advisers
          may select companies without regard to their market
          capitalizations.

     SunAmerica will initially allocate the assets of each Portfolio
     equally among the Advisers. SunAmerica will also allocate new cash
     from share purchases and redemption requests equally among the
     Advisers, unless SunAmerica determines, subject to the review of the
     Board, that a different allocation of assets would be in the best
     interests of the Portfolio and its shareholders.

     SunAmerica intends, on a quarterly basis, to review the asset
     allocation in each Portfolio to ensure that no portion of assets
     managed by an Adviser exceeds that portion managed by any other
     Adviser to the Portfolio by more than 5%. If such a condition exists,
     SunAmerica will then re-allocate cash flows among the three Advisers,
     differently from the manner described above, in an effort to effect a
     re-balancing of the Portfolio's asset allocation. SunAmerica does not
     intend, but reserves the right, subject to the review of the Board, to
     reallocate assets from one Adviser to another when it would be in the
     best interests of the Portfolio and its shareholders to do so. In some
     instances, the effect of the reallocation will be to shift

                                        4

<PAGE>

     assets from a better performing Adviser to a portion of the Portfolio
     with a relatively lower total return.

Q:   What are the principal risks of investing in the Portfolios?

A:   As with any equity fund, the value of your investment in each of the
     Portfolios may fluctuate in response to stock market movements, and you
     could lose money. Other principal risks include:

          -    individual stocks selected for a Portfolio may underperform the
               market generally

          -    stocks of smaller companies may be more volatile than, and not as
               liquid as, those of larger companies. This will particularly
               affect the Aggressive Growth Portfolio and Small-Cap Value
               Portfolio.

          -    while investing internationally may reduce your risk by
               increasing the diversification of your overall portfolio, the
               value of your investment may be affected by fluctuating currency
               values, changing local and regional economic, political and
               social conditions, and greater market volatility, and, in
               addition, foreign securities may not be as liquid as domestic
               securities. This will particularly affect the International
               Equity Portfolio.

          -    each Portfolio is non-diversified, which means that it can invest
               a larger portion of its assets in the stock of a single company
               than can some other mutual funds; by concentrating in a smaller
               number of stocks, the Portfolio's risk is increased because the
               effect of each stock on the Portfolio's performance is greater.

     In addition, shares of the Portfolios are not bank deposits and are not
     guaranteed or insured by any bank, government entity or the Federal Deposit
     Insurance Corporation.


                                        5

<PAGE>


Q:   What are the Portfolios' expenses?

A:   The following table describes the fees and expenses that you may pay if you
     buy and hold Class Z Shares of the Portfolios.


                                        6

<PAGE>

<TABLE>
<CAPTION>
                          Aggressive Growth      Large-Cap Value                           Small-Cap Value    International Equity
                              Portfolio             Portfolio         Value Portfolio         Portfolio            Portfolio
                          --------------------------------------------------------------------------------------------------------
<S>                              <C>                   <C>                  <C>                  <C>                  <C>
Shareholder Fees
(fees paid directly
from your investment)

      Maximum Sales
      Charge (Load)
      Imposed on
      Purchases (as a
      percentage of
      offering price)            None                  None                 None                 None                 None

      Maximum
      Deferred Sales
      Charge (Load)
      (as a percentage
      of amount
      redeemed)                  None                  None                 None                 None                 None

      Maximum Sales
      Charge (Load)
      Imposed on
      Reinvested
      Dividends                  None                  None                 None                 None                 None

      Redemption Fee             None                  None                 None                 None                 None

      Exchange Fee               None                  None                 None                 None                 None

Gross Annual Fund
Operating Expenses
(expenses that are
deducted from Fund
assets)

      Management
      Fees                      0.75%                 0.75%                0.75%                0.75%                0.75%

      Distribution
      (12b-1) Fees               None                  None                 None                 None                 None

      Other Expenses
                          --------------------------------------------------------------------------------------------------------

Total Gross Annual
      Fund Operating
      Expenses
                          ========================================================================================================
</TABLE>

Example

This  Example is  intended  to help you  compare  the cost of  investing  in the
Portfolios with the cost of investing in other mutual funds.

The Example  assumes that you invest $10,000 in a Portfolio for the time periods
indicated  and then redeem all of your shares at the end of those  periods.  The
Example also assumes that your investment has a 5% return each year and that the
Portfolio's operating expenses remain the same.

                                        7

<PAGE>

Although  your actual costs may be higher or lower,  based on these  assumptions
your costs would be:

                                          1 Year  3 Years  5 Years  10 Years
                                          ------  -------  -------  --------
Aggressive Growth Portfolio
       (Class Z shares)..................
Large Cap Value Portfolio
       (Class Z shares)..................
Value Portfolio
       (Class Z shares)..................
Small-Cap Value Portfolio
       (Class Z shares)..................
International Equity Portfolio
       (Class Z shares)..................

FINANCIAL HIGHLIGHTS

The  Financial  Highlights  table for each  Portfolio  is  intended  to help you
understand  the  Portfolio's  financial  performance  since  inception.  Certain
information  reflects  financial  results  for a single  Fund  share.  The total
returns in each table  represent the rate that an investor  would have earned on
an  investment  in  the  Fund  (assuming   reinvestment  of  all  dividends  and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with each Portfolio's financial statements,  are included in
the Statement of Additional Information (SAI), which is available upon request.

                           [to be filed by amendment]


                                        8

<PAGE>

SHAREHOLDER ACCOUNT INFORMATION

Selecting a Share Class

Each Portfolio offers Class Z shares through this prospectus. Class Z shares are
offered  exclusively for sale to  participants in the SunAmerica  Profit Sharing
and Retirement Plan, an employee benefit plan sponsored by Fidelity  Investments
(the "401(k) Plan" or the "Plan").

Opening an Account

Class Z shares of the Portfolio are offered exclusively for sale to participants
in the 401(k) Plan.  Such shares may be purchased or redeemed only by the 401(k)
Plan on behalf of individual  Plan  participants  at net asset value without any
sales or  redemption  charge.  Class Z shares  are not  subject  to any  minimum
investment requirements.  The Plan purchases and redeems shares to implement the
investment  choices  of  individual  Plan  participants  with  respect  to their
contributions  in the Plan.  All purchases of Portfolio  shares through the Plan
will be of Class Z shares.

Inquiries  regarding the  purchase,  redemption or exchange of Class Z shares or
the making or  changing  of  investment  choices in the  401(k)  Plan  should be
directed to the Fidelity Participant Center at (800) 835-5098.

Transaction Policies

Valuation of shares The net asset value per share (NAV) for each  Portfolio  and
class is determined each business day at the close of regular trading on the New
York Stock  Exchange  (generally  4:00 p.m.,  Eastern  time) by dividing the net
assets of each class by the number of such class's outstanding shares.

Because Class Z shares are not subject to any  distribution or service fees, the
net asset  value per share of the Class Z shares will  generally  be higher than
the net asset value per share of each of Class A, Class B and Class II shares of
each Portfolio, except following the payment of dividends and distributions.

Buy and sell prices When you buy Class Z shares,  you pay the NAV. When you sell
Class Z shares, you receive the NAV.

Execution  of requests  Each  Portfolio  is open on those days when the New York
Stock Exchange is open for regular  trading.  Buy and sell requests are executed
at the  next  NAV  to be  calculated  after  your  request  is  accepted  by the
Portfolio.  If your order is received by the Portfolio or the Distributor before
the Portfolio's close of business  (generally 4:00 p.m., Eastern time), you will
receive that day's closing price. If your order is received after that time, you
will receive the next  business  day's  closing  price.  The  Portfolio  and the
Distributor reserve the right to reject any order to buy shares.


                                        9

<PAGE>

The net asset value per share at which shares of the  Portfolio are purchased or
redeemed by the Plan for the accounts of individual Plan  participants  might be
more or less than the net asset value per share prevailing at the time that such
participants  made their investment  choices or made their  contributions to the
Plan.

During periods of extreme volatility or market crisis, a Portfolio may 
temporarily suspend the processing of sell requests, or may postpone payment of 
proceeds for up to three business days or longer, as allowed by federal 
securities laws.

If the Fund  determines  that  it  would  be  detrimental to the best interests 
of the remaining shareholders of the Fund to make payment of redemption proceeds
wholly  or  partly  in  cash,  the  Fund  may  pay  the  redemption  price by a
distribution in kind of securities from the Fund in lieu of cash.  However, the
Fund  has  made  an  election  that  requires  it  to  pay  a certain portion of
redemption proceeds in cash. 

Exchanges  Class Z  shareholders  of one Portfolio may exchange their shares for
Class Z shares of another  SunAmerica  Mutual Fund on the basis of relative  net
asset value per share.

Tax, Dividend and Account Policies

Account  statements In general, a shareholder will receive account statements as
follows:

     o    after every transaction that affects your account balance (except a
          dividend reinvestment)
     o    after any changes of name or address of the registered owner(s)
     o    in all other circumstances, quarterly or annually, depending upon the
          Portfolio

Every year you should also receive,  if applicable,  a Form 1099 tax information
statement, mailed by January 31.

Dividends The Portfolios  generally distribute most or all of their net earnings
in the form of dividends.  Income dividends and capital gains distributions , if
any, are paid annually by the Portfolios.

Dividend  Reinvestments  Your  dividends  and  distributions,  if  any,  will be
automatically  reinvested in additional  shares of the same  Portfolio and share
class on which they were paid. Alternatively, dividends and distributions may be
reinvested  in  any  other SunAmerica Mutual Fund that offers Class Z. You will 
need to complete the relevant part of the Account Application  to elect one of 
these  other options.  For existing accounts,  contact your broker or financial 
advisor  or  call  Shareholder/Dealer  Services at  1-800-858-8850  to  change 
dividend and distribution payment options.

The per share  dividends on Class Z shares will generally be higher than the per
share dividends on Class A, Class B and Class II of the same Portfolio shares as
a result of the fact that Class Z shares are not subject to any  distribution or
service fee.

Taxes As a qualified plan, the 401(k) Plan generally pays no federal income tax.
Individual  participants  in the 401(k) Plan should  consult Plan  documents and
their own tax advisers for information on the tax  consequences  associated with
participating in the 401(k) Plan.


                                       10

<PAGE>

MORE INFORMATION ABOUT THE PORTFOLIOS

Investment Strategies

Each Portfolio has its own  investment  goal and a strategy for pursuing it. The
chart summarizes information about each Portfolio's investment approach. We have
included a glossary to define the  investment and risk  terminology  used in the
chart.


                                       11

<PAGE>

<TABLE>
<CAPTION>
                                       Aggressive                     Large-Cap                                        
                                     Growth Portfolio              Value Portfolio                Value Portfolio      
                               ----------------------------------------------------------------------------------------
<S>                            <C>                          <C>                             <C>
What is the Portfolio's        Long-term growth of          Long-term growth of             Long-term growth of        
investment goal?               capital                      capital                         capital                    

What are the                   equity securities of         equity securities of            equity securities of       
Portfolio's principal          companies selected           large companies (at             companies selected         
investments (under             through a growth             least 65% of total              through a value            
normal market                  strategy; generally          assets) selected through        strategy; a                
conditions)?                   invests in small and         a value strategy                significant portion of     
                               medium-sized                                                 Portfolio as a whole       
                               companies                                                    will generally be          
                                                                                            invested in medium-
                                                                                            sized companies

What are the                   o  stock                     o  stock market                 o  stock                   
Portfolio's principal             market                       volatility                      market                  
risks?                            volatility                o  securities                      volatility              
                               o  securities                   selection                    o  securities              
                                  selection                 o  non-diversification             selection               
                               o  small market                                              o  non-diversification    
                                  capitalization                                                                  
                                                                                                                   
                               o  non-diversification                                                                              
What other                                                                                                             
investment strategies                                                                                                  
can the Portfolio use?                                                                                                 

o  Large
   company                              Yes                      see principal                       Yes               
   stocks                                                      investments above

o  Medium-
   sized                           see principal                      Yes                       see principal          
   company                       investments above                                            investments above
   stocks

<CAPTION>
                                        Small-Cap                   International
                                     Value Portfolio               Equity Portfolio
                               -----------------------------------------------------------
<S>                            <C>                          <C>
What is the Portfolio's        Long-term growth of          Long-term growth of
investment goal?               capital                      capital

What are the                   equity securities of         equity and other
Portfolio's principal          small companies (at          securities with equity
investments (under             least 65% of total           characteristics
normal market                  assets) selected             securities of issuers in
conditions)?                   through a value              at least 3 countries
                               strategy                     other than the United
                                                            States

What are the                   o  stock                     o  stock market
Portfolio's principal             market                       volatility
risks?                            volatility                o  securities
                               o  securities                   selection
                                  selection                 o  foreign
                               o  small                        exposure
                                  market                    o  emerging
                                  capitaliza                   markets
                                  tion                      o  non-diversification
                               o  non-diversification                         
                                                    
What other                                               
investment strategies                                    
can the Portfolio use?                          

o  Large
   company                              Yes                           Yes
   stocks                      

o  Medium-
   sized                                Yes                           Yes
   company                     
   stocks
</TABLE>


                                       12

<PAGE>
<TABLE>
<CAPTION>
                                       Aggressive                     Large-Cap                                        
                                     Growth Portfolio              Value Portfolio                Value Portfolio      
                               ----------------------------------------------------------------------------------------
<S>                            <C>                          <C>                             <C>
o  Small
   company                         see principal                      Yes                            Yes               
   stocks                        investments above                                                                     

o  Active                               Yes                           Yes                            Yes               
   trading

o  Fixed income
   securities

      Investment
      grade                             Yes                           Yes                            Yes               

      Junk bonds                        Yes                            No                            Yes               

      Asset-backed
      securities                        Yes                           Yes                            Yes               

o  REITs                                No                            Yes                            Yes               

o  Short-term                                                                                                          
   investments                    Yes (up to 25%)               Yes (up to 25%)                Yes (up to 25%)         

o  Defensive
   investments                          Yes                           Yes                            Yes               

o  Foreign securities             Yes (up to 30%)               Yes (up to 30%)                Yes (up to 30%)         
                                                                                                                       
      ADRs/EDRs/                        Yes                           Yes                            Yes               
      GDRs

      Foreign                                                                           
      investment                                                                        
      companies                   Yes (up to 10%)                      No                            No                

o  Currency                             Yes                           Yes                            Yes               
   transactions
<CAPTION>
                                        Small-Cap                   International
                                     Value Portfolio               Equity Portfolio
                               -----------------------------------------------------------
<S>                            <C>                          <C>
o  Small
   Company                           see principal                      Yes
   stocks                          investments above

o  Active                                 Yes                           Yes
   Trading

o  Fixed income
   securities

      Investment
      grade                               Yes                           Yes

      Junk bonds                          Yes                           Yes

      Asset-backed
      Securities                          Yes                           Yes

o  REITs                                  Yes                            No

o  Short-term
   investments                      Yes (up to 25%)               Yes (up to 25%)

o  Defensive
   investments                            Yes                           Yes

o  Foreign securities               Yes (up to 30%)                See principal
                                                                 investments above

      ADRs/EDRs/                          Yes                           Yes
      GDRs

      Foreign
      investment
      companies                           No                      Yes (up to 10%)

o  Currency                               Yes                           Yes
   transactions
</TABLE>

                                       13
<PAGE>

<TABLE>
<CAPTION>
                                       Aggressive                     Large-Cap                                        
                                     Growth Portfolio              Value Portfolio                Value Portfolio      
                               ----------------------------------------------------------------------------------------
<S>                            <C>                          <C>                             <C>
o  Illiquid securities            Yes (up to 15%)               Yes (up to 15%)                Yes (up to 15%)          

o  Securities lending           Yes (up to 331/3%)             Yes (up to 331/3%)            Yes (up to 331/3%)         

o  Borrowing for                Yes (up to 331/3%)             Yes (up to 331/3%)            Yes (up to 331/3%)         
   temporary or
   emergency purposes

o  Options and                          Yes                           Yes                            Yes                
   futures

o  Hybrid                               Yes                           Yes                            Yes                
   Instruments

o  Short sales                    Yes (up to 25%)               Yes (up to 25%)                Yes (up to 25%)          

o  Short sales                                          
   (against-the-box)              Yes (up to 25%)               Yes (up to 25%)                Yes (up to 25%)          

o  Special Situations                   Yes                            Yes                           Yes                

What other potential
risks can affect a             o   interest rate            o   interest rate               o   interest rate           
Portfolio?                         fluctuations                 fluctuations                    fluctuations            
                               o   foreign exposure         o   small market                o   small market            
                               o   illiquidity                  capitalization                  capitalization          
                               o   derivatives              o   foreign exposure            o   foreign exposure        
                               o   emerging                 o   illiquidity                 o   illiquidity             
                                   markets                  o   derivatives                 o   derivatives             
                               o   euro conversion          o   emerging markets            o   emerging                
                                                            o   euro conversion                 markets
                                                                                            o   euro conversion

<CAPTION>
                                        Small-Cap                   International
                                     Value Portfolio               Equity Portfolio
                               -----------------------------------------------------------
<S>                            <C>                          <C>
o  Illiquid securities             Yes (up to 15%)               Yes (up to 15%)

o  Securities lending            Yes (up to 331/3%)             Yes (up to 331/3%)

o  Borrowing for temporary        Yes (up to 331/3%)             Yes (up to 331/3%)
   or emergency purposes

o  Options and                           Yes                           Yes
   futures

o  Hybrid                                Yes                           Yes
   Instruments

o  Short sales                     Yes (up to 25%)               Yes (up to 25%)

o  Short sales                 
   (against-the-box)               Yes (up to 25%)               Yes (up to 25%)

o  Special Situations                    Yes                            Yes

What other potential
risks can affect a              o   interest rate            o   small market
Portfolio?                          fluctuations                 capitalizations
                                o   foreign exposure         o   interest rate
                                o   illiquidity                  fluctuations
                                o   derivatives              o   illiquidity
                                o   emerging                 o   derivatives
                                    markets                  o   euro conversion
                                o   euro conversion
</TABLE>


                                       14

<PAGE>

Glossary

Investment Terminology

Growth of capital is growth of the value of an investment.

Equity securities include common and preferred stocks,  convertible  securities,
warrants and rights.

Convertible  securities are bonds or preferred  stocks that may be exchanged for
common stock of the same or a different company.

Large companies have market capitalizations of over $5 billion.

Medium-sized companies have market capitalizations ranging from $1 billion to $5
billion.

Small companies have market capitalizations of $1 billion or less.

[Margin  note:  Large  companies and  medium-sized  companies  generally  have a
substantial record of operations (i.e., in business for at least five years) and
are listed for  trading on the New York Stock  Exchange  or another  national or
international  stock  exchange  or, in some cases,  are traded over the counter.
Small  companies  generally  will be companies  that have been in business for a
shorter period of time.]

Active  trading  means  that a  Portfolio  may  engage in  frequent  trading of
portfolio  securities  to achieve its investment goal. Because a Portfolio  may
sell a  security  without  regard to how long it has held the security,  active 
trading may have tax consequences for certain shareholders, involving a possible
increase  in  short-term  capital gains  or losses.  Active  trading  involving
high  portfolio  turnover  and  correspondingly  greater  brokerage commissions
and  other transaction  costs, which  will  be  borne directly  by  a Portfolio
During periods  of  increased  market  volatility,  active  trading may be more 
pronounced.

Fixed income securities provide consistent  interest or dividend payments.  They
include  corporate  bonds,  notes,  debentures,  preferred  stocks,  convertible
securities,  U.S.  Government  securities and  mortgage-backed  and asset-backed
securities.  The issuer of a senior fixed  income  security is obligated to make
payments  on this  security  ahead of other  payments to  security  holders.  An
investment  grade fixed income  security is rated in one of the top four ratings
categories by a debt rating  agency (or is  considered of comparable  quality by
SunAmerica).

[Margin note: The two best-known debt rating agencies are Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc. and Moody's
Investors Service, Inc. "Investment grade" refers to any security rated "BBB" or
above by Standard & Poor's or "Baa" or above by Moody's.]


                                       15

<PAGE>

A "junk  bond" is a high  yield,  high risk  bond that does not meet the  credit
quality standards of investment grade securities.

Asset-backed  securities  represent  an  interest in a pool of consumer or other
types of loans.  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.

Real estate  investment  trusts  ("REITs")  are trusts that invest  primarily in
commercial real estate or real estate related loans. The value of an interest in
a REIT may be affected by the value and the cash flows of the  properties  owned
or the quality of the mortgages held by the trust.

Short-term  investments  include money market securities such as short-term U.S.
government  obligations,   repurchase  agreements,  commercial  paper,  bankers'
acceptances and certificates of deposit.  These  securities  provide a Portfolio
with sufficient liquidity to meet redemptions and cover expenses.

Defensive  investments  include high quality fixed income  securities  and money
market  instruments.  A Portfolio will make temporary  defensive  investments in
response to adverse  market,  economic,  political or other  conditions.  When a
Portfolio   takes  a  defensive   position,   it  may  miss  out  on  investment
opportunities  that could have  resulted from  investing in accordance  with its
principal  investment  strategy.  As a result,  a Portfolio  may not achieve its
investment goal.

Foreign securities are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary 
Receipts  (ADRs)  or  other  similar  securities  that  convert  into  foreign 
securities, such as European Depositary  Receipts (EDRs) and  Global Depositary 
Receipts (GDRs).

It may be  necessary  under  certain  foreign  laws,  less  expensive,  or  more
expedient  to invest in foreign  investment  companies,  which invest in certain
foreign markets, including emerging markets. Investing through such vehicles may
involve  frequent or layered fees or expenses,  and the Advisers will not invest
in such investment  companies unless, in their judgment,  the potential benefits
justify the payment of any associated fees and expenses.

Currency  transactions include the purchase and sale of currencies to facilitate
securities transactions and forward currency contracts,  which are used to hedge
against changes in currency exchange rates.

Illiquid  securities are subject to legal or contractual  restrictions  that may
make them  difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid.  Certain restricted securities (such
as Rule 144A  securities) are not generally  considered  illiquid  because of
their established trading market.

                                       16

<PAGE>

Securities  lending involves a loan of securities by a Portfolio in exchange for
cash or  collateral.  The  Fund  earns  interest  on the  loan  while  retaining
ownership of the security.

The  Fund  may  borrow  for  temporary  or  emergency  purposes included to meet
redemptions.  Borrowing  will cost  the  Fund  interest expense and other fees. 

Options and futures are  contracts  involving the right to receive or obligation
to  deliver  assets  or  money  depending  on the  performance  of  one or  more
underlying assets or a market or economic index.

Hybrid Instruments,  including indexed or structured securities, can combine the
characteristics of securities,  futures, and options. For example, the principal
amount,  redemption,  or conversion  terms of a security could be related to the
market price of some commodity,  currency,  or securities index. Such securities
may bear interest or pay dividends at below market (or even relatively  nominal)
rates.  Under certain  conditions,  the  redemption  value of such an investment
could be zero.

A short sale is the sale of a security that you do not own, but which you intend
to borrow in order to make  delivery.  A short sale is "against  the box" when a
Portfolio  sells  short a  security  that it  owns in its  portfolio  to lock in
appreciation on that security.

A special  situation  arises  when, the opinion of the Adviser, the  securities
of  a  particular  issuer  will  be  recognized  and  appreciated in  value due 
to a specific  development with respect to that issuer.  Developments  creating 
a special  situation might include,  among others,  a new  product or  process, 
a  technological  breakthrough,  a  management  change  or  other extraordinary 
corporate event, or differences in market supply of and demand for the security.
Investments  in  special situations may carry an additional risk of loss in the 
event  that the  anticipated  development  does  not  occur or does not attract 
the expected attention.

Risk Terminology

Market volatility:  The stock and/or bond markets as a whole could go up or down
(sometimes  dramatically).  This could affect the value of the  securities  in a
Portfolio's portfolio.

Securities selection: A strategy used by a Portfolio,  or securities selected by
its Adviser, may fail to produce the intended return.

Small  market  capitalization:  Companies  with smaller  market  capitalizations
(particularly  under $1 billion) tend to be at early stages of development  with
limited product lines, market access for products,  financial resources,  access
to new capital,  or depth in management.  It may be difficult to obtain reliable
information  and  financial  data  about  these  companies.   Consequently,  the
securities  of smaller  companies  may not be as readily  marketable  and may be
subject to more abrupt or erratic market movements.

Foreign exposure: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about


                                       17

<PAGE>

a foreign  company  and it may not be  subject to the same  uniform  accounting,
auditing  and  financial  reporting   standards  as  U.S.   companies.   Foreign
governments may not regulate securities markets and companies to the same degree
as in the U.S.  Foreign  investments will also be affected by local political or
economic developments and governmental actions. Consequently, foreign securities
may be less  liquid,  more  volatile  and  more  difficult  to price  than  U.S.
securities.  These  risks are  heightened  when the  issuer  is in an  emerging
market.

Emerging  Market:  An emerging  market  country is one that the World Bank,  the
International  Finance  Corporation or the United Nations or its authorities has
determined  to  have  a low or middle  income  economy.  Historical  experience 
indicates that the markets of emerging market countries have been more volatile 
than more developed  markets;  however, such markets can provide higher rates 
of return to investors.

Interest rate fluctuations:  Volatility of the bond market is due principally to
changes in interest rates.  As interest rates rise, bond prices  typically fall;
and as interest rates fall, bond prices  typically  rise.  Longer-term and lower
coupon bonds tend to be more sensitive to changes in interest rates.

Illiquidity: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.

Derivatives:  In  addition  to  general  risks  relating  to market  volatility,
interest rate fluctuations,  and creditworthiness  of the counterparty to  the 
option or futures  transactions, options and futures contracts are subject  to 
certain  special  risks.  To the extent a contract  is used to  hedge  another  
position in the portfolio,  there is a risk that  changes  in the value of the 
contract will  not  match  those  of  the  hedged  position.  Moreover,  while  
hedging can reduce or eliminate  losses,  it can also reduce or eliminate 
gains.  To the  extent an  option or futures contract is used to enhance return,
rather  than as a hedge, a  Portfolio  will  be directly  exposed to the  risks
of the  contract.  Gains or losses from non-hedging  positions  may  be 
substantially  greater than the cost of the position.

Credit  quality:  The  creditworthiness  of the  issuer  is  always a factor  in
analyzing fixed income securities.  An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise  become unable to
honor its financial  obligations.  This type of issuer will typically issue junk
bonds. In addition to the risk of default, junk bonds may be more volatile, less
liquid,  more  difficult  to value  and more  susceptible  to  adverse  economic
conditions or investor perceptions than other bonds.

Euro  Conversion:   Effective  January  1,  1999,   several  European  countries
irrevocably  fixed their existing  national  currencies to a new single European
currency  unit,  the  "euro."  Certain  European  investments  may be subject to
additional risks as a result of this conversion. These risks include adverse tax
and accounting  consequences,  as well as difficulty in processing transactions.
SunAmerica is aware of such potential  problems and is  coordinating  efforts to
prevent or alleviate  their adverse  impact on the  Portfolios.  There can be no
assurance that a Portfolio will not suffer any adverse  consequences as a result
of the euro conversion.


                                       18

<PAGE>

Hedging:  Hedging is a strategy in which the Adviser uses a derivative to offset
the risk that other instruments held by a Fund may decrease in value. Gains on a
derivative  that  reacts  in  an  opposite   manner  to  market   movements  may
substantially  reduce losses on the other  investment.  While hedging can reduce
losses, it can also reduce or eliminate gains if the market moves in a different
manner than the Adviser  anticipates or if the cost of the derivative  outweighs
the benefit of the hedge.  Hedging  also  involves  the risk that changes in the
value of the derivative will not match those of the instruments  being hedged as
expected,  in which case any losses on the  instruments  being hedged may not be
reduced.

FUND MANAGEMENT

Manager   SunAmerica  Asset  Management  Corp.  selects  the  Advisers  for  the
Portfolios,  may  manage  certain  portions  of  Portfolios,   provides  various
administrative  services,  and  supervises  the daily  business  affairs of each
Portfolio. The Advisers are responsible for decisions to buy and sell securities
for the Portfolios,  selection of  broker-dealers  and negotiation of commission
rates for their  respective  portion of the relevant  Portfolio.  SunAmerica may
terminate any  agreement  with another  Adviser  without  shareholder  approval.
Moreover,  SunAmerica  has received an exemptive  order from the  Securities and
Exchange Commission that permits SunAmerica,  subject to certain conditions,  to
enter into agreements  relating to the Fund with Advisers  approved by the Board
of Directors without obtaining  shareholder  approval.  The exemptive order also
permits SunAmerica, subject to the approval of the Board but without shareholder
approval,  to employ new  Advisers  for new or existing  Portfolios,  change the
terms of  particular  agreements  with  Advisers or continue the  employment  of
existing   Advisers  after  events  that  would  otherwise  cause  an  automatic
termination  of a subadvisory  agreement.  Shareholders  of a Portfolio have the
right to terminate an agreement  with an Adviser for that  Portfolio at any time
by a  vote  of the  majority  of  the  outstanding  voting  securities  of  such
Portfolio.  Shareholders will be notified of any Adviser changes. The order also
permits the Fund to  disclose to  shareholders  the  Advisers'  fees only in the
aggregate for each  Portfolio.  For the fiscal year ended October 31, 1998, each
Portfolio  paid  SunAmerica  a fee equal to 1.00% of  average  daily net  assets
except the International  Equity  Portfolio,  which paid a fee equal to 1.10% of
average daily net assets.

SunAmerica,  which was  organized in 1982 under the laws of  Delaware,  managed,
advised or administered assets in excess of $15 billion as of October 31, 1998.
In  addition  to  managing the Portfolios, SunAmerica serves as adviser, manager
and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Seasons
Series  Trust, SunAmerica  Income  Funds, SunAmerica Money Market Funds, Inc.,
and SunAmerica Series Trust.

The Advisers and Portfolio Managers for each Portfolio are described below:

Portfolio                           Portfolio management allocated among the
- ---------                           following Advisers
                                    ------------------

Aggressive Growth Portfolio         Janus Capital Corporation ("Janus")
                                    SunAmerica
                                    Warburg Pincus Asset Management, Inc.
                                    ("Warburg")


                                       19

<PAGE>

Large-Cap Value Portfolio           David J. Babson & Co., Inc. ("Babson")
                                    Davis Selected Advisers, L.P. ("Davis")
                                    Wellington Management Company ("Wellington
                                    Management")

Value Portfolio                     Davis
                                    Neuberger Berman, LLC ("Neuberger Berman")
                                    American Century Investment Management, Inc.
                                    ("American Century")

Small-Cap Value Portfolio           Berger Associates, Inc. ("Berger") 
                                    (subcontracted to Perkins, Wolf, McDonnell &
                                    Company ("PWM")
                                    The Glenmede Trust Company ("Glenmede")
                                    Lazard

International Equity Portfolio      Bankers Trust Company ("BT")
                                    Rowe Price-Fleming International, Inc.
                                    ("Rowe-Fleming")
                                    Warburg

Information about Advisers


                           Description of the Advisers


AMERICAN CENTURY  INVESTMENT,  INC.  American Century is a Delaware  corporation
with principal offices at the American Century Tower,  4500 Main Street,  Kansas
City, Missouri 64111. As of October 28, 1998, American Century had approximately
$70 billion in total assets under management.

DAVID J. BABSON & CO., INC. Babson is a Massachusetts corporation, located at
One Memorial Drive, Cambridge, Massachusetts 02142. Babson provides investment
advisory services to a substantial number of institutional and other investors,
including other registered investment companies. As of [March 31], 1998, Babson
had over $[20.3] billion in assets under management.

BANKERS  TRUST  COMPANY.  BT has  principal  offices at 130 Liberty  Street (One
Bankers  Trust  Plaza),  New York 10006.  BT is a worldwide  merchant  bank that
provides investment  management  services for the nation's largest  corporations
and  institutions.  As of [March  31],  1998,  BT managed  approximately  $[330]
billion in assets globally.

BERGER  ASSOCIATES,  INC.  Berger  is a  Delaware  corporation,  located  at 210
University Boulevard, Suite 900, Denver Colorado 80206, and serves as investment
adviser, sub-adviser,  administrator,  or sub-administrator to mutual funds, and
institutional and private investors.


                                       20

<PAGE>

DAVIS SELECTED ADVISERS,  L.P. Davis is a Colorado limited partnership,  located
at 124 East Marcy Street,  Santa Fe, New Mexico 87501.  As of [March 31],  1998,
Davis had assets under management of approximately $[17.9] billion.

THE GLENMEDE TRUST COMPANY.  Glenmede is a  privately-owned,  independent  trust
company  devoted  exclusively  to  investment  management  and  trust  services.
Glenmede  is located at One  Liberty  Place,  1650  Market  Street,  Suite 1200,
Philadelphia,   Pennsylvania  19103.  As  of  [March  31],  1998,  Glenmede  had
approximately $[14.0] billion in assets under management.

JANUS  CAPITAL  CORPORATION.  Janus is a  Colorado  corporation  located  at 100
Fillmore Street, Denver,  Colorado 80206-4923,  and serves as investment adviser
or  subadviser  to  mutual  funds  and  individual,  corporate,  charitable  and
retirement  accounts.  As of  [March  31,  1998],  Janus  had  under  management
approximately [$80] billion.

LAZARD ASSET MANAGEMENT.  Lazard is a division of Lazard Freres & Co. LLC, a New
York limited liability  company.  Located at 30 Rockefeller Plaza, New York, New
York 10112,  Lazard provides  investment  management  services to individual and
institutional  clients.  As of  [March  31],  1998,  Lazard  and its  affiliated
companies   managed   client   discretionary   accounts  with  assets   totaling
approximately $[67] billion.

NEUBERGER BERMAN, LLC. Neuberger Berman  is a Delaware limited liability company
located at 605 Third Avenue, New York, New York 10158-0180. Neuberger Berman has
been in the  investment  advisory  business  since 1939. As of [March 31], 1998,
Neuberger Berman and its affiliates had assets under management of approximately
$[59] billion.

PERKINS,  WOLF, MCDONNELL & COMPANY.  PWM, located at 53 West Jackson Boulevard,
Suite 818, Chicago,  Illinois 60604, was organized as a Delaware  corporation in
1980. PWM is a member of the National  Association of Securities  Dealers,  Inc.
and, in 1984,  registered  with the  Securities  and Exchange  Commission  as an
investment  adviser.  As of [March 31], 1998, PWM had assets under management of
approximately $[325] million.

ROWE PRICE-FLEMING INTERNATIONAL, INC. Rowe-Fleming is a Maryland corporation,
incorporated in 1979. It is located at 100 East Pratt Street, Baltimore,
Maryland 21202. As of [March 31], 1998, Rowe-Fleming managed over $[32] billion
of foreign assets.

WARBURG PINCUS ASSET MANAGEMENT, INC. Warburg is a professional investment
advisory  firm which  provides  investment  services  to  investment  companies,
employee benefit plans, endowment funds,  foundations and other institutions and
individuals.  As of [April 30],  1998,  Warburg  managed  approximately  $[21.8]
billion in assets.  Warburg is located at 466  Lexington  Avenue,  New York,  NY
10017-3147.


                                       21

<PAGE>

WELLINGTON MANAGEMENT COMPANY, LLP.  Wellington Management is a
Massachusetts limited liability partnership, located at 75 State Street, Boston,
Massachusetts  02109.   Wellington  Management  is  a  professional   investment
counseling  firm which  provides  investment  services to investment  companies,
employee  benefit plans,  endowments,  foundations,  and other  institutions and
individuals.  As of [March  31,  1998],  Wellington  Management  had  investment
management authority with respect to approximately $[193.9] billion of assets.


<TABLE>
<CAPTION>
Portfolio                             Name, Title and Affiliation of              Experience
- ---------                             ------------------------------              ----------
                                      Portfolio Manager
                                      -----------------
<S>                                   <C>                                         <C>
Aggressive Growth Portfolio           Scott W. Schoelzel                          [To be filed by amendment]
                                      Portfolio Manager (Janus)                   

                                      Donna Calder (Domestic                      Prior to joining SunAmerica
                                      Equity Investment Team)                     as a Portfolio Manager in
                                      Portfolio Manager                           February 1998, Ms. Calder
                                      (SunAmerica)                                served as a General Partner of
                                                                                  Manhattan Capital Partners,
                                                                                  L.P. from ____________.

                                      Elizabeth B. Dater                          [To be filed by amendment]
                                      Managing Director (Warburg)                

                                      Stephen J. Lurito                           [To be filed by amendment]
                                      Managing Director (Warburg)                 

Large-Cap Value Portfolio             Roland W. Whitridge                         Mr. Whitridge has been
                                      Portfolio Manager (Babson)                  employed by Babson in
                                                                                  portfolio management for
                                                                                  over twenty years.

                                      Christopher C. Davis                        Mr. Davis joined Davis in
                                      Portfolio Manager (Davis)                   September 1989 as an
                                                                                  assistant portfolio manager
                                                                                  and research analyst.
</TABLE>

                                       22

<PAGE>

<TABLE>
<CAPTION>
Portfolio                             Name, Title and Affiliation of              Experience
- ---------                             ------------------------------              ----------
                                      Portfolio Manager
                                      -----------------
<S>                                   <C>                                         <C>
                                      John R. Ryan (Value/Yield                   [To be filed by amendment]
                                      Team)                                      
                                      Senior Vice President,
                                      Managing Partner and Head
                                      of Value/Yield Team
                                      (Wellington)

Value Portfolio                       Christopher C. Davis                        Mr. Davis joined Davis in
                                      Portfolio Manager (Davis)                   September 1989 as an
                                                                                  assistant portfolio manager
                                                                                  and research analyst.

                                      Shelby M. C. Davis                          [To be filed by amendment]
                                      Former Co-Manager (Davis)                   

                                      Michael M. Kassen                           Mr. Kassen has been
                                      Portfolio Manager, Managing                 Managing Director since
                                      Director, Vice President and                January 1994 and a Vice
                                      Principal                                   President and Portfolio
                                      (Neuberger Berman)                          Manager since June 1990, of
                                                                                  Neuberger Berman
                                                                                  Management, Inc. and a
                                                                                  principal of
                                                                                  Neuberger Berman since
                                                                                  January 1993.

                                      Robert I. Gendelman                         Mr. Gendelman has been a
                                      Senior Portfolio Manager,                   principal of
                                      Assistant Vice President and                Neuberger Berman since
                                      Principal                                   December 1996.  He was a
                                      (Neuberger Berman)                          portfolio manager for another
                                                                                  mutual fund manager from
                                                                                  1992 to 1993.
</TABLE>
                                       23

<PAGE>

<TABLE>
<CAPTION>
Portfolio                             Name, Title and Affiliation of              Experience
- ---------                             ------------------------------              ----------
                                      Portfolio Manager
                                      -----------------
<S>                                   <C>                                         <C>
                                      David K. Schafer                            Mr. Schafer has been in the
                                      Founder, President and                      investment management
                                      Portfolio Manager (Schafer)                 business for more than
                                                                                  twenty-five years.  Mr.
                                                                                  Schafer founded Schafer in
                                                                                  1984, and is the President of
                                                                                  Schafer and also a minority
                                                                                  shareholder of Schafer Cullen
                                                                                  Capital Management, Inc.

Small-Cap Value Portfolio             Robert H. Perkins                           [To be filed by amendment]
                                      President,  Chief Investment                
                                      Officer and Director (PWM)                  
                                                                                  
                                      Herbert W. Gullquist                        [To be filed by amendment]
                                      (Investment Team)                          
                                      Vice Chairman (Lazard) 

                                      Eileen D. Alexanderson                      [To be filed by amendment]
                                      (Investment Team) Managing                  
                                      Director, Portfolio Manager                 
                                      (Lazard)                                    
                                                                                  
                                      Robert J. Mancuso, CFA                      [To be filed by amendment]
                                      Portfolio Manager                           
                                      (Glenmede)                                  
                                                                                  
                                      Scott R. Abernethy, CFA                     [To be filed by amendment]
                                      Equity Research Analyst
                                      (Glenmede)

                                      Thomas R. Angers, CFA                       [To be filed by amendment] 
                                      Equity Research Analyst
                                      (Glenmede)
</TABLE>


                                       24

<PAGE>

<TABLE>
<CAPTION>
Portfolio                             Name, Title and Affiliation of              Experience
- ---------                             ------------------------------              ----------
                                      Portfolio Manager
                                      -----------------
<S>                                   <C>                                         <C>
                                      Larry R. Bernstein, CFA                     [To be filed by amendment]
                                      Equity Research Analyst
                                      (Glenmede)

                                      Barry D. Kohout, CFA                        [To be filed by amendment]
                                      Equity Research Analyst
                                      (Glenmede)

                                      Robert T. Niemeyer, Sr., CFA                [To be filed by amendment]
                                      Equity Research Analyst
                                      (Glenmede)

                                      Anthony J. Albuquerque                      [To be filed by amendment]
                                      Equity Research Analyst
                                      (Glenmede)

International Equity Portfolio        Michael Levy (International                 Mr. Levy's experience prior to
                                      Equity Team)                                joining BT includes
                                      Managing Director of Bankers                investment banking and
                                      Trust Funds Management,                     equity analysis with
                                      Head of International Equity                Oppenheimer & Company,
                                      Team (BT)                                   and he has more than twenty-
                                                                                  six years of business experience,   
                                                                                  of which sixteen years have been in 
                                                                                  the investment industry. 


                                      Robert L. Reiner                            Mr. Reiner has 16 years of
                                      (International Equity Team)                 investment industry
                                      Managing Director of Bankers                experience, previously at 
                                      Trust Funds Management                      Scudder, Stevens & Clark,
                                      (BT)                                        where he was responsible for 
                                                                                  providing equity research and 
                                                                                  macroeconomic/market coverage.
</TABLE>

                                       25

<PAGE>

<TABLE>
<CAPTION>
Portfolio                             Name, Title and Affiliation of              Experience
- ---------                             ------------------------------              ----------
                                      Portfolio Manager
                                      -----------------
<S>                                   <C>                                         <C>
                                      Martin G. Wade                              Mr. Wade joined Rowe-
                                      Portfolio Manager (Rowe-                    Fleming in 1979 and has 27
                                      Fleming)                                    years of experience with the
                                                                                  Fleming Group in research, client  
                                                                                  service, and investment management 
                                                                                  (Fleming Group includes Flemings   
                                                                                  and/or Jardine Fleming)            

                                      Peter B. Askew                              Mr. Askew joined Rowe-
                                      Portfolio Manager (Rowe-                    Fleming in 1988 and has 21
                                      Fleming)                                    years of experience managing
                                                                                  multi-currency fixed income
                                                                                  portfolios.

                                      Mark J. T. Edwards                          Mr. Edwards joined Rowe-
                                      Portfolio Manager (Rowe-                    Fleming in 1986 and has 15
                                      Fleming)                                    years of experience in
                                                                                  financial analysis.

                                      John R. Ford                                Mr. Ford joined Rowe-
                                      Portfolio Manager (Rowe-                    Fleming in 1982 and has 16
                                      Fleming)                                    years of experience with
                                                                                  Fleming Group in research and
                                                                                  portfolio management.

                                      James B. M. Seddon                          Mr. Seddon joined Rowe-
                                      Portfolio Manager (Rowe-                    Fleming in 1987 and has 11
                                      Fleming)                                    years of experience in
                                                                                  portfolio management.

                                      David J. L. Warren                          Mr. Warren joined Price-
                                      Portfolio Manager (Rowe-                    Fleming in 1984 and has 16
                                      Fleming)                                    years of experience in equity
                                                                                  research, fixed income
                                                                                  research, and portfolio
                                                                                  management.

                                      Richard H. King                             [To be filed by amendment]
                                      Co-Portfolio Manager                        
                                      (Warburg)
</TABLE>

                                       26

<PAGE>

<TABLE>
<CAPTION>
Portfolio                             Name, Title and Affiliation of              Experience
- ---------                             ------------------------------              ----------
                                      Portfolio Manager
                                      -----------------
<S>                                   <C>                                         <C>
                                      P. Nicholas Edwards                         Mr. Edwards has been with
                                      Co-Portfolio Manager                        the firm [as a Portfolio Manager]
                                      (Warburg)                                   since 1995.  Prior to joining
                                                                                  Warburg Mr. Edwards was a Director 
                                                                                  at Jardine Fleming Investment
                                                                                  Advisers, Tokyo from ___________.

                                      Harold W. Ehrlich                           Mr. Ehrlich has been with the
                                      Co-Portfolio Manager                        firm [as a Portfolio Manager] since 
                                      (Warburg)                                   1995.  Prior to joining Warburg, 
                                                                                  Mr. Ehrlich was a Senior Vice 
                                                                                  President, Portfolio Manager and
                                                                                  Analyst at Templeton Investment 
                                                                                  Counsel, Inc. from _____________.

                                      Vincent J. McBride                          Mr. McBride, a Senior Vice
                                      Senior Vice President, Co-                  President of Warburg has
                                      Portfolio Manager (Warburg)                 been with the firm [as a 
                                                                                  Portfolio Manager] since 1994.
                                                                                  Prior to joining Warburg, Mr.
                                                                                  McBride was an International
                                                                                  Equity Analyst at Smith
                                                                                  Barney Inc. from _____________.
</TABLE>


Distributor SunAmerica Capital Services, Inc. serves as the Distributor of Class
Z shares and incurs the expenses of distributing the Portfolios'  Class Z shares
under a Distribution Agreement with respect to the Portfolios, none of which are
reimbursed by or paid for by the Portfolios.  There is no  distribution  plan in
effect for the Class Z shares.

Administrator  SunAmerica Fund Services, Inc., serves as the Administrator for
Class Z shares and receives reimbursement from the Fund of its costs, which
include all direct transfer agency fees and out-of-pocket expenses allocated to
providing services to Class Z shares.

Year 2000 Many computer and  computer-based  systems cannot distinguish the year
2000 from the year 1900 because of the way they encode and calculate dates. This
is  popularly  known  as  the  "Year  2000  Issue."  The  Year 2000 Issue  could
potentially  have an adverse  impact on the  handling  of security  trades,  the
payment of interest and dividends,  pricing and account  services.  We recognize
the importance of the Year 2000 Issue and are taking appropriate steps necessary
in preparation for the year 2000. The Fund's  management fully  anticipates that
their  systems  will be adapted in time for the year 2000,  and to further  this
goal they have coordinated a plan to repair, adapt or replace their

                                       27

<PAGE>

systems as necessary. They have also obtained representations from their outside
service providers that they are doing the same. The Fund's management  completed
their plan  significantly  by the end of the 1998  calendar  year and expects to
perform  appropriate  systems  testing  during the 1999  calendar  year.  If the
problem  has not been fully  addressed,  however,  the Fund could be  negatively
impacted. The Year 2000 Issue could also have a negative impact on the companies
in which the Fund invests, which could hurt the Fund's investment returns.




                                       28

<PAGE>

                              (OUTSIDE BACK COVER)

FOR MORE INFORMATION


     The following documents contain more information about the Portfolios and
are available free of charge upon request:

     Annual/Semi-annual Reports. Contain financial statements, performance data
     and information on portfolio holdings. The annual report also contains a
     written analysis of market conditions and investment strategies that
     significantly affected a Portfolio's performance during the last fiscal
     year.

     Statement of Additional Information (SAI). Contains additional information
     about the Portfolios' policies, investment restrictions and business
     structure. This prospectus incorporates the SAI by reference.

     You may obtain copies of these documents or ask questions about the
Portfolios by contacting:

     SunAmerica Fund Services, Inc.
     Mutual Fund Operations
     The SunAmerica Center
     733 Third Avenue
     New York, New York  10017-3204
     1-800-858-8850

     or by calling your broker or financial advisor.

     Information about the Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549- 6009.

     You should rely only on the information contained in this prospectus. No
one is authorized to provide you with any different information.


                                       29

<PAGE>


                                [Logo] SunAmerica
                                  Mutual Funds








DISTRIBUTOR:                                         SunAmerica Capital Services



INVESTMENT COMPANY ACT
File No.  811-07797


<PAGE>


   
                               STYLE SELECT SERIES
                       Statement of Additional Information
                                  dated ______
    

The SunAmerica Center                              General Marketing and
733 Third Avenue                                   Shareholder Information
New York, NY  10017-3204                           (800) 858-8850

   
     Style Select Series, Inc. (the "Fund") is a mutual fund consisting of nine
different investment portfolios: the Large-Cap Growth Portfolio, the Mid-Cap
Growth Portfolio, the Aggressive Growth Portfolio, the Large-Cap Blend
Portfolio, the Large-Cap Value Portfolio, the Value Portfolio, the Small-Cap
Value Portfolio, the International Equity Portfolio and the Focus Portfolio
(each, a "Portfolio"). Each Portfolio is managed by SunAmerica Asset Management
Corp. ("SunAmerica"). The assets of each Portfolio are normally allocated among
at least three investment advisers (each, an "Adviser"), each of which is
independently responsible for advising its respective portion of the Portfolio's
assets. The Advisers may include SunAmerica, and otherwise will consist of
professional investment advisers selected by SunAmerica subject to the review
and approval of the Fund's Board of Directors. In choosing Advisers, SunAmerica
will seek to obtain, within each Portfolio's overall objective, a distinct
investment style. 
    

   
     This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Fund's Prospectus dated ______. To obtain a
Prospectus free of charge, please call the Fund at (800) 858-8850. Each
Prospectus is incorporated by reference into this Statement of Additional
Information. Capitalized terms used herein but not defined have the meanings
assigned to them in the Prospectus.
    

                               TABLE OF CONTENTS
   
<TABLE>
<CAPTION>
                                                                                                                Page 
                                                                                                                ---- 
<S>                                                                                                              <C>
The Fund ........................................................................................................B-3
Investment Objectives and Policies...............................................................................B-3
Investment Restrictions......................................................................................... B-41
Directors and Officers...........................................................................................B-43
Advisers, Distributor and Administrator..........................................................................B-47
Portfolio Transactions and Brokerage.............................................................................B-57
Additional Information Regarding Purchase of Shares..............................................................B-59
Additional Information Regarding Redemption of Shares............................................................B-67
Determination of Net Asset Value.................................................................................B-69
Performance Data.................................................................................................B-70
Dividends, Distributions and Taxes...............................................................................B-76
Retirement Plans.................................................................................................B-82
Description of Shares............................................................................................B-83
Additional Information...........................................................................................B-85
Financial Statements.............................................................................................B-89
Appendix.................................................................................................Appendix-1
</TABLE>
    

     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

                                       B-1

<PAGE>



as having been  authorized  by the Fund,  SunAmerica,  any Adviser or SunAmerica
Capital Services (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.


                                       B-2

<PAGE>


                                    THE FUND
   
     The Fund, organized as a Maryland corporation on July 3, 1996, is a 
non-diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). On March 31, 1998,
the Directors approved the creation of the Focus Portfolio. The Fund consists
of nine Portfolios; each offers Class A, Class B and Class II shares. Class A
and Class B shares of the Mid-Cap Growth Portfolio, Aggressive Growth Portfolio,
the Value Portfolio and the International Equity Portfolio commenced offering on
November 19, 1996. Class C of those Portfolios commenced offering  March 16,
1997. Class A, B and C shares of the Large-Cap Growth Portfolio, the Large-Cap
Blend Portfolio, the Large-Cap Value Portfolio and Small-Cap Value Portfolio
commenced offering October 15, 1997. On March 31, 1998, the Directors approved
the creation of the Focus Portfolio, which commenced offering on June 1, 1998.
On December 1, 1998, Class C shares of each of the Portfolios except Focus
Portfolio were redesignated as Class II shares. The Aggressive Growth Portfolio,
Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value Portfolio and
International Equity Portfolio each also offers Class Z shares, which commenced
offering on April 1, 1998.   
    

                       INVESTMENT OBJECTIVES AND POLICIES
   
     The investment objective and policies of each of the Portfolios are
described in the Fund's Prospectus. Certain types of securities in which the
Portfolios may invest and certain investment practices the Portfolios may
employ, which are described under "More Information about the Portfolios -
Investment Strategies" in the Prospectus, are discussed more fully below. Unless
otherwise specified, each Portfolio may invest in the following securities. The
stated percentage limitations are applied to an investment at the time of
purchase unless indicated otherwise.
    

   
     Warrants and Rights. A Portfolio may invest in warrants, which give the
holder of the warrant a right to purchase a given number of shares of a
particular issue at a specified price until expiration. Such investments
generally can provide a greater potential for profit or loss than investments of
equivalent amounts in the underlying common stock. The prices of warrants do not
necessarily move with the prices of the underlying securities. If the holder
does not sell the warrant, he risks the loss of his entire investment if the
market price of the underlying stock does not, before the expiration date,
exceed the exercise price of the warrant plus the cost thereof. Investment in
warrants is a speculative activity. Warrants pay no dividends and confer no
rights (other than the right to purchase the underlying stock) with respect to
the assets of the issuer. Rights represent a preemptive right of stockholders to
purchase additional shares of a stock at the time of a new issuance before the
stock is offered to the general public, allowing the stockholder to retain the
same ownership percentage after the new stock offering. 
    

   
     Convertible Securities and Preferred Stocks. Convertible securities may be
debt securities or preferred stock with a conversion feature. Traditionally,
convertible securities have paid dividends or interest at rates higher than
common stocks but lower than non-convertible securities. They generally
participate in the appreciation or depreciation of the underlying stock into
which they are convertible, but to a lesser degree. In recent years,
convertibles have been developed that combine higher or lower current income
with options and other features. Generally, preferred stock has a specified
dividend and ranks after bonds and before common stocks in its claim on income
for dividend payments and on assets should the company be liquidated. While most
preferred stocks pay a dividend, a Portfolio may purchase preferred stock

                                       B-3

<PAGE>



where the issuer has omitted, or is in danger of omitting, payment of its
dividend. Such investments would be made primarily for their capital
appreciation potential.
    

   
     Investment in Small, Unseasoned Companies. As described in the Prospectus,
each Portfolio may invest in the securities of small companies having market
capitalizations under $1 billion. While such companies may realize more
substantial growth than larger, more established companies, they may also be
subject to some additional risks. It may be difficult to obtain reliable
information and financial data on such companies and the securities of these
small companies may not be readily marketable, making it difficult to dispose of
shares when desirable. A risk of investing in smaller, emerging companies is
that they often are at an earlier stage of development and therefore have
limited product lines, market access for such products, financial resources and
depth in management as compared to larger, more established companies, and their
securities may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, certain smaller issuers may face difficulties in obtaining
the capital necessary to continue in operation and may go into bankruptcy, which
could result in a complete loss of an investment. Smaller companies also may be
less significant factors within their industries and may have difficulty
withstanding competition from larger companies. If other investment companies
and investors who invest in such issuers trade the same securities when a
Portfolio attempts to dispose of its holdings, the Portfolio may receive lower
prices than might otherwise be obtained.
    

     Companies with a market capitalization of $1 billion to $5 billion
("Mid-Cap Companies") may also suffer more significant losses as well as realize
more substantial growth than larger, more established issuers. Thus, investments
in such companies tend to be more volatile and somewhat speculative.

     Foreign Securities. Investments in foreign securities offer potential
benefits not available from investments solely in securities of domestic issuers
by offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets.

   
     Each Portfolio may invest in securities of foreign issuers in the form of
American Depositary Receipts (ADRs). Each Portfolio except the Focus Portfolio
may also invest in securities of foreign issuers in the form of European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) or other similar
securities convertible into securities of foreign issuers. The Focus Portfolio
may invest in U.S. dollar denominated securities of foreign companies. ADRs are
securities, typically issued by a U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by a foreign
issuer and deposited with the depository. ADRs may be sponsored or unsponsored.
A sponsored ADR is issued by a depository that has an exclusive relationship
with the issuer of the underlying security. An unsponsored ADR may be issued by
any number of U.S. depositories. Holders of unsponsored

                                       B-4

<PAGE>



ADRs generally bear all the costs associated with establishing the unsponsored
ADR. The depository of an unsponsored ADR is under no obligation to distribute
shareholder communications received from the underlying issuer or to pass
through to the holders of the unsponsored ADR voting rights with respect to the
deposited securities or pool of securities. A Portfolio may invest in either
type of ADR. Although the U.S. investor holds a substitute receipt of ownership
rather than direct stock certificates, the use of the depository receipts in the
United States can reduce costs and delays as well as potential currency exchange
and other difficulties. The Portfolio may purchase securities in local markets
and direct delivery of these ordinary shares to the local depository of an ADR
agent bank in the foreign country. Simultaneously, the ADR agents create a
certificate that settles at the Fund's custodian in three days. The Portfolio
may also execute trades on the U.S. markets using existing ADRs. A foreign
issuer of the security underlying an ADR is generally not subject to the same
reporting requirements in the United States as a domestic issuer. Accordingly,
the information available to a U.S. investor will be limited to the information
the foreign issuer is required to disclose in its own country and the market
value of an ADR may not reflect undisclosed material information concerning the
issuer of the underlying security. For purposes of a Portfolio's investment
policies, the Portfolio's investments in these types of securities will be
deemed to be investments in the underlying securities. Generally ADRs, in
registered form, are dollar denominated securities designed for use in the U.S.
securities markets, which represent and may be converted into the underlying
foreign security. EDRs, in bearer form, are designed for use in the European
securities markets. Each Portfolio except the Focus Portfolio also may invest in
securities denominated in European Currency Units (ECUs). An ECU is a "basket"
consisting of specified amounts of currencies of certain of the twelve member
states of the European Community. In addition, each Portfolio may invest in
securities denominated in other currency "baskets." 
     
   
     Investments in foreign securities, including securities of emerging market
countries, present special additional investment risks and considerations not
typically associated with investments in domestic securities, including
reduction of income by foreign taxes; fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than the U.S.;
greater difficulties in commencing lawsuits; higher brokerage commission rates
and custodian fees than the U.S.; increased possibilities in some countries of
expropriation, confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; the imposition of foreign taxes on
investment income derived from such countries; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign economies.
    
   
     The performance of investments in securities denominated in a foreign
currency ("non-dollar securities") will depend on, among other things, the
strength of the foreign currency against the dollar and the interest rate
environment in the country issuing the foreign currency. Absent other events
that could otherwise affect the value of non-dollar securities (such as a change
in the political climate or an issuer's credit quality), appreciation in the
value of the
    

                                       B-5

<PAGE>


   
foreign currency generally can be expected to increase the value of a
Portfolio's non-dollar securities in terms of U.S. dollars. A rise in foreign
interest rates or decline in the value of foreign currencies relative to the
U.S. dollar generally can be expected to depress the value of the Portfolio's
non-dollar securities. Currencies are evaluated on the basis of fundamental
economic criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. 
     

   
     Foreign Investment Companies. Each Portfolio except the Focus Portfolio may
invest in domestic closed-end investment companies that invest in certain
foreign markets, including developing countries or emerging markets. The
Large-Cap Growth, Aggressive Growth and International Equity Portfolios may also
invest in foreign investment companies that invest in such markets. Some of the
countries in which the Portfolios invest may not permit direct investment by
foreign investors such as the Portfolios. Investments in such countries may be
permitted only through foreign government-approved or authorized investment
vehicles, which may include other investment companies. In addition, it may be
less expensive and more expedient for the Portfolios to invest in investment
companies in a country that permits direct foreign investment. Investing through
such vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the 1940 Act. Under the 1940 Act, a fund may invest
up to 10% of its assets in shares of other investment companies and up to 5% of
its assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.
The Portfolios do not intend to invest in such investment companies unless, in
the judgment of the Advisers, the potential benefits of such investments justify
the payment of any associated fees and expenses.
    
   
     The Large-Cap Growth Portfolio, Aggressive Growth Portfolio and
International Equity Portfolio may invest in Passive Foreign Investment
Companies ("PFICs"), which are any foreign corporations that generate certain
amounts of passive income or hold certain amounts of assets for the production
of passive income. Passive income includes dividends, interest, royalties, rents
and annuities. To the extent that a Portfolio invests in PFICs, income tax
regulations may require the Portfolio to elect to recognize income associated
with the PFIC prior to the actual receipt of any such income in order to avoid
adverse tax consequences.
    
   
     Fixed Income Securities. Fixed income securities are broadly characterized
as those that provide for periodic payments to the holder of the security at a
stated rate. Most fixed income securities, such as bonds, represent indebtedness
of the issuer and provide for repayment of principal at a stated time in the
future. Others do not provide for repayment of a principal amount, although they
may represent a priority over common stockholders in the event of the issuer's
liquidation. Many fixed income securities are subject to scheduled retirement,
or may be retired or "called" by the issuer prior to their maturity dates. The
interest rate on certain fixed income securities, known as "variable rate
obligations," is determined by reference to or is a percentage of an objective
standard, such as a bank's prime rate, the 90-day Treasury bill rate, or the
rate of return on commercial paper or bank certificates of deposit, and is
periodically adjusted. Certain variable rate obligations may have a demand
feature entitling the holder to resell the securities at a predetermined amount.
The interest rate on certain fixed income

                                       B-6

<PAGE>



securities, called "floating rate instruments," changes whenever there is a
change in a designated base rate.
    
   
     The market values of fixed income securities tend to vary inversely with
the level of interest rates -- when interest rates rise, their values will tend
to decline; when interest rates decline, their values generally will tend to
rise. The potential for capital appreciation with respect to variable rate
obligations or floating rate instruments will be less than with respect to
fixed-rate obligations. Long-term instruments are generally more sensitive to
these changes than short-term instruments. The market value of fixed income
securities and therefore their yield are also affected by the perceived ability
of the issuer to make timely payments of principal and interest.
     
   
     The Large-Cap Growth Portfolio, Mid-Cap Growth Portfolio and Aggressive
Growth Portfolio may invest in debt securities that the Advisers
expect have the potential for capital appreciation and which are rated as low as
"BBB" by Standard & Poor's Corporation, a division of the McGraw-Hill Companies
("Standard & Poor's"), or "Baa" by Moody's Investors Service, Inc. ("Moody's")
or, if unrated, determined by the Adviser to be of equivalent quality. The
Large-Cap Growth Portfolio and the Aggressive Growth Portfolio may also invest
in debt securities rated below "BBB" or "Baa" or unrated securities of
comparable quality (junk bonds). 
    
   
     The Large-Cap Blend Portfolio may invest up to 35% of its total assets in
securities of issuers other than Large-Cap Companies, which may include debt
securities that the Advisers expect to have the potential for capital
appreciation, including debt securities rated below "BBB" by Standard & Poor's,
or "Baa" by Moody's, or, if unrated, determined by the Advisers to be of
equivalent quality (junk bonds).
     
   
     The Large-Cap Value Portfolio, Value Portfolio and Small-Cap Value
Portfolio may invest in debt securities that the Advisers expect to have the
potential for capital appreciation and which are rated as low as "BBB" by
Standard & Poor's, or "Baa" by Moody's, or, if unrated, determined by the
Advisers to be of equivalent quality. The Value Portfolio and Small Cap Value
Portfolio may also invest in debt securities rated below "BBB" or "Baa" or
unrated securities of comparable quality (junk bonds).  
     
   
     The International Portfolio may invest up to 35% of its total assets in
debt securities that the Advisers expect have the potential for capital
appreciation. The Portfolio may invest in such debt securities rated below
investment grade, that is below "BBB" by Standard & Poor's, or below "Baa" by
Moody's or, if unrated, determined by the Advisers to be of equivalent quality
(junk bonds).
     
   
     The Focus Portfolio currently invests only in corporate bonds or notes of
issuers having outstanding short-term securities rated in the top two rating
categories by Standard & Poor's and

                                       B-7

<PAGE>



Moody's or in instruments issued, guaranteed or insured by the U.S. government,
its agencies or instrumentalities.
    
   
     Corporate Debt Instruments. These instruments, such as bonds, represent the
obligation of the issuer to repay a principal amount of indebtedness at a stated
time in the future and, in the usual case, to make periodic interim payments of
interest at a stated rate. The Focus Portfolio may purchase corporate
obligations that mature or that may be redeemed in one year or less. These
obligations originally may have been issued with maturities in excess of one
year.
    
   
     Investment Grade. A designation applied to intermediate and long-term
corporate debt securities rated within the highest four rating categories
assigned by Standard & Poor's (AAA, AA, A or BBB) or by Moody's (Aaa, Aa, A or
Baa), or, if unrated, considered by the Adviser to be of comparable quality. The
ability of the issuer of an investment grade debt security to pay interest and
to repay principal is considered to vary from extremely strong (for the highest
ratings) through adequate (for the lowest ratings given above), although the
lower-rated investment grade securities may be viewed as having speculative
elements as well.
    
   
     U.S. Government Securities. A Portfolio may invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances. For these securities, the payment
of principal and interest is unconditionally guaranteed by the U.S. government.
They are of the highest possible credit quality. These securities are subject to
variations in market value due to fluctuations in interest rates, but if held to
maturity, are guaranteed by the U.S. government to be paid in full.
    
   
     A Portfolio may also invest in securities issued by agencies of the U.S.
government or instrumentalities of the U.S. government. These obligations,
including those guaranteed by federal agencies or instrumentalities, may or may
not be backed by the "full faith and credit" of the United States. Obligations
of the Government National Mortgage Association ("GNMA"), the Farmers Home
Administration ("FMHA") and the Export-Import Bank are backed by the full faith
and credit of the United States.
     
   
     Each Portfolio may also invest in securities issued by U.S. government
instrumentalities and certain federal agencies that are neither direct
obligations of, nor are they guaranteed by, the U.S. Treasury. However, they
involve federal sponsorship in one way or another. For example, some are backed
by specific types of collateral; some are supported by the issuer's right to
borrow from the Treasury; some are supported by the discretionary authority of
the Treasury to purchase certain obligations of the issuer; and others are
supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, the Federal National Mortgage Association ("FNMA"), the Federal Home

                                       B-8

<PAGE>



Loan  Mortgage  Corporation  ("FHLMC"),  Federal  Land Banks,  Central  Bank for
Cooperatives,  Federal Intermediate Credit Banks and Federal Home Loan Banks. In
the case of  securities  not  backed by the full  faith and credit of the United
States,  a Portfolio must look principally to the agency issuing or guaranteeing
the  obligation  for  ultimate  repayment  and may not be able to assert a claim
against  the United  States if the agency or  instrumentality  does not meet its
commitments.
     
   
     A Portfolio may, in addition to the U.S. government securities noted above,
invest in mortgage-backed securities (including private mortgage-backed
securities), such as GNMA, FNMA or FHLMC certificates (as defined below), which
represent an undivided ownership interest in a pool of mortgages. The mortgages
backing these securities include conventional thirty-year fixed-rate mortgages,
fifteen-year fixed-rate mortgages, graduated payment mortgages and adjustable
rate mortgages. The U.S. government or the issuing agency guarantees the payment
of interest and principal of these securities. However, the guarantees do not
extend to the securities' yield or value, which are likely to vary inversely
with fluctuations in interest rates. These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments, including prepayments, on the mortgages
underlying the certificate, net of certain fees.
     
   
     The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through certificates.
Mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. Thus, the
actual life of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally result from
the sale of the underlying property or the refinancing or foreclosure of
underlying mortgages. The occurrence of prepayments is affected by a wide range
of economic, demographic and social factors and, accordingly, it is not possible
to predict accurately the average life of a particular pool. Yield on such pools
is usually computed by using the historical record of prepayments for that pool,
or, in the case of newly-issued mortgages, the prepayment history of similar
pools. The actual prepayment experience of a pool of mortgage loans may cause
the yield realized by the Portfolio to differ from the yield calculated on the
basis of the expected average life of the pool. 
     

     Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as does the value of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise on a comparable basis with other debt securities because of the
prepayment feature of pass-through securities. The reinvestment of scheduled
principal payments and unscheduled prepayments that the Portfolio receives may
occur at higher or lower rates than the original investment, thus affecting the
yield of the Portfolio. Monthly interest payments received by the Portfolio have
a compounding effect, which may increase the yield to shareholders more than
debt obligations

                                       B-9

<PAGE>



that pay interest semi-annually. Because of those factors, mortgage-backed
securities may be less effective than U.S. Treasury bonds of similar maturity at
maintaining yields during periods of declining interest rates. Accelerated
prepayments adversely affect yields for pass-through securities purchased at a
premium (i.e., at a price in excess of principal amount) and may involve
additional risk of loss of principal because the premium may not have been fully
amortized at the time the obligation is repaid. The opposite is true for
pass-through securities purchased at a discount. A Portfolio may purchase
mortgage-backed securities at a premium or at a discount.

     The following is a description of GNMA, FNMA and FHLMC certificates, the
most widely available mortgage-backed securities:

   
     GNMA Certificates. GNMA Certificates are mortgage-backed securities that
evidence an undivided interest in a pool or pools of mortgages. GNMA
Certificates that a Portfolio may purchase are the modified pass-through type,
which entitle the holder to receive timely payment of all interest and principal
payments due on the mortgage pool, net of fees paid to the issuer and GNMA,
regardless of whether or not the mortgagor actually makes the payment.
    
   
     GNMA guarantees the timely payment of principal and interest on securities
backed by a pool of mortgages insured by the Federal Housing Administration or
the FMHA, or guaranteed by the Veterans Administration. The GNMA guarantee is
authorized by the National Housing Act and is backed by the full faith and
credit of the United States. The GNMA is also empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments required
under its guarantee.
    

     The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosure will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that a Portfolio
has purchased the certificates at a premium in the secondary market.

   
     FHLMC Certificates. FHLMC issues two types of mortgage pass-through
securities: mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs") (collectively, "FHLMC Certificates"). PCs resemble GNMA
Certificates in that each PC represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. The FHLMC guarantees
timely monthly payment of interest (and, under certain circumstances, principal)
of PCs and the ultimate payment of principal.
    

     GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.

                                      B-10

<PAGE>



   
     FNMA Certificates. FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates represent a pro rata share
of all interest and principal payments made and owed on the underlying pool.
FNMA guarantees timely payment of interest and principal on FNMA Certificates.
The FNMA guarantee is not backed by the full faith and credit of the U.S.
Government.
    
     Conventional mortgage pass-through securities ("Conventional Mortgage
Pass-Throughs") represent participation interests in pools of mortgage loans
that are issued by trusts formed by originators of the institutional investors
in mortgage loans (or represent custodial arrangements administered by such
institutions). These originators and institutions include commercial banks,
savings and loans associations, credit unions, savings banks, insurance
companies, investment banks or special purpose subsidiaries of the foregoing.
For federal income tax purposes, such trusts are generally treated as grantor
trusts or REMICs and, in either case, are generally not subject to any
significant amount of federal income tax at the entity level.

     The mortgage pools underlying Conventional Mortgage Pass-Throughs consist
of conventional mortgage loans evidenced by promissory notes secured by first
mortgages or first deeds of trust or other similar security instruments creating
a first lien on residential or mixed residential and commercial properties.
Conventional Mortgage Pass-Throughs (whether fixed or adjustable rate) provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees or other amount paid to any
guarantor, administrator and/or servicer of the underlying mortgage loans. A
trust fund with respect to which a REMIC election has been made may include
regular interests in other REMICs which in turn will ultimately evidence
interests in mortgage loans.

     Conventional mortgage pools generally offer a higher rate of interest than
government and government-related pools because of the absence of any direct or
indirect government or agency payment guarantees. However, timely payment of
interest and principal of mortgage loans in these pools may be supported by
various forms of insurance or guarantees, including individual loans, title,
pool and hazard insurance and letters of credit. The insurance and guarantees
may be issued by private insurers and mortgage poolers. Although the market for
such securities is becoming increasingly liquid, mortgage-related securities
issued by private organizations may not be readily marketable.

   
     Another type of mortgage-backed security in which each Portfolio may invest
is a collateralized mortgage obligation ("CMO"). CMOs are fully collateralized
bonds that are the general obligations of the issuer thereof (e.g., the U.S.
government, a U.S. government instrumentality, or a private issuer). Such bonds
generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e., the character of payments of principal and interest is not passed
through, and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily

                                      B-11

<PAGE>



constitute income and return of capital, respectively, to such holders), but
such payments are dedicated to payment of interest on and repayment of principal
of the CMOs.
    
     Principal and interest on the underlying mortgage assets may be allocated
among the several classes of CMOs in various ways. In certain structures (known
as "sequential pay" CMOs), payments of principal, including any principal
prepayments, on the mortgage assets generally are applied to the classes of CMOs
in the order of their respective final distribution dates. Thus, no payment of
principal will be made on any class of sequential pay CMOs until all other
classes having an earlier final distribution date have been paid in full.

   
     Additional structures of CMOs include, among others, "parallel pay" CMOs.
Parallel pay CMOs are structured to apply principal payments and prepayments of
the mortgage assets to two or more classes concurrently on a proportionate or 
disproportionate basis. These simultaneous payments are taken into account in 
calculating the final distribution date of each class.
     
   
     A wide variety of CMOs may be issued in the parallel pay or sequential pay
structures. These securities include accrual certificates (also known as
"Z-Bonds"), which accrue interest at a specified rate only until all other
certificates having an earlier final distribution date have been retired and are
converted thereafter to an interest-paying security, and planned amortization
class ("PAC") certificates, which are parallel pay CMOs that generally require
that specified amounts of principal be applied on each payment date to one or
more classes of CMOs (the "PAC Certificates"), even though all other principal
payments and prepayments of the mortgage assets are then required to be applied
to one or more other classes of the certificates. The scheduled principal
payments for the PAC Certificates generally have the highest priority on each
payment date after interest due has been paid to all classes entitled to receive
interest currently. Shortfalls, if any, are added to the amount payable on the
next payment date. The PAC Certificate payment schedule is taken into account in
calculating the final distribution date of each class of PAC. In order to create
PAC tranches, one or more tranches generally must be created to absorb most of
the volatility in the underlying mortgage assets. These tranches tend to have
market prices and yields that are much more volatile than the PAC classes.
    
     Each Portfolio may also invest in stripped mortgage-backed securities.
Stripped mortgage-backed securities are often structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. Stripped mortgage-backed securities have greater market
volatility than other types of U.S. Government securities in which a Portfolio
invests. A common type of stripped mortgage-backed security has one class
receiving some of the interest and all or most of the principal (the "principal
only" class) from the mortgage pool, while the other class will receive all or
most of the interest (the "interest only" class). The yield to maturity on an
interest only class is extremely sensitive not only to changes in prevailing
interest rates, but also to the rate of principal payments, including principal
prepayments, on the underlying pool of mortgage assets, and a rapid rate of
principal payment may have a material adverse effect on a Portfolio's yield.
While interest-only and principal-only securities are generally regarded as
being illiquid, such securities may be deemed

                                      B-12

<PAGE>



to be liquid if they can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of a
Portfolio's net asset value per share. Only government interest only and
principal only securities backed by fixed-rate mortgages and determined to be
liquid under guidelines and standards established by the Directors may be
considered liquid securities not subject to a Portfolio's limitation on
investments in illiquid securities.

     Certain Risk Factors Relating to High-Yield Bonds. These bonds present
certain risks which are discussed below:

          Sensitivity to Interest Rate and Economic Changes - High-yield bonds
     are very sensitive to adverse economic changes and corporate developments.
     During an economic downturn or substantial period of rising interest rates,
     highly leveraged issuers may experience financial stress that would
     adversely affect their ability to service their principal and interest
     payment obligations, to meet projected business goals, and to obtain
     additional financing. If the issuer of a bond defaults on its obligations
     to pay interest or principal or enters into bankruptcy proceedings, a
     Portfolio may incur losses or expenses in seeking recovery of amounts owed
     to it. In addition, periods of economic uncertainty and changes can be
     expected to result in increased volatility of market prices of high-yield
     bonds and the Portfolio's net asset value.

          Payment Expectations - High-yield bonds may contain redemption or call
     provisions. If an issuer exercises these provisions in a declining interest
     rate market, a Portfolio would have to replace the security with a lower
     yielding security, resulting in a decreased return for investors.
     Conversely, a high-yield bond's value will decrease in a rising interest
     rate market, as will the value of the Portfolio's assets. If the Portfolio
     experiences unexpected net redemptions, this may force it to sell
     high-yield bonds without regard to their investment merits, thereby
     decreasing the asset base upon which expenses can be spread and possibly
     reducing the Portfolio's rate of return.

          Liquidity and Valuation - There may be little trading in the secondary
     market for particular bonds, which may affect adversely a Portfolio's
     ability to value accurately or dispose of such bonds. Adverse publicity and
     investor perceptions, whether or not based on fundamental analysis, may
     decrease the values and liquidity of high-yield bonds, especially in a thin
     market.

     Asset-Backed Securities. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose corporations,
are backed by a pool of assets, such as credit card and automobile loan
receivables, representing the obligations of a number of different parties.

     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

                                      B-13

<PAGE>



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 that fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default by
an obligor on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of assets,
to ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Protection against losses resulting from ultimate default ensures
payment through insurance policies or letters of credit obtained by the issuer
or sponsor from third parties. A Portfolio 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. 
     
    
     Zero Coupon Bonds, Step-Coupon Bonds, Deferred Interest Bonds and PIK
Bonds. Fixed income securities in which a Portfolio may invest also include zero
coupon bonds, step-coupon bonds, deferred interest bonds and bonds on which the
interest is payable in kind ("PIK bonds"). Zero coupon and deferred interest
bonds are debt obligations issued or purchased at a significant discount from
face value. A step-coupon bond is one in which a change in interest rate is
fixed contractually in advance. PIK bonds are debt obligations that provide that
the issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments may experience greater
volatility in market value due to changes in interest rates and other factors
than debt obligations that make regular payments of interest. A Portfolio will
accrue income on such investments for tax and accounting purposes, as required,
that is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
under disadvantageous circumstances to satisfy the Portfolio's distribution
obligations.
    
     Loan Participations. Each Portfolio may invest in loan participations. Loan
participations are loans sold by the lending bank to an investor. The loan
participant borrower may be a company with highly-rated commercial paper that
finds it can obtain cheaper funding through a loan participation than with
commercial paper and can also increase the company's

                                      B-14

<PAGE>



name recognition in the capital markets. Loan participations often generate
greater yield than commercial paper.

   
     The borrower of the underlying loan will be deemed to be the issuer except
to the extent the Portfolio derives its rights from the intermediary bank that
sold the loan participations. Because loan participations are undivided
interests in a loan made by the issuing bank, the Portfolio may not have the
right to proceed against the loan participations borrower without the consent of
other holders of the loan participations. In addition, loan participations will
be treated as illiquid if, in the judgment of the Adviser, they can not be sold
within seven days.
    
   
     Short-Term Debt Securities. As described in the Prospectus, in addition to
its primary investments, each Portfolio may also invest up to 25% of its total
assets in both U.S. and non-U.S. dollar denominated money market instruments
(except that the Focus Portfolio may not invest in non-U.S. dollar denominated
money market instruments) (a) for liquidity purposes (to meet redemptions and
expenses) or (b) to generate a return on idle cash held in a Portfolio's
portfolio during periods when an Adviser is unable to locate favorable
investment opportunities. For temporary defensive purposes, each Portfolio may
invest up to 100% of its total assets in cash and short-term fixed income
securities, including corporate debt obligations and money market instruments
rated in one of the two highest categories by a nationally recognized
statistical rating organization (or determined by the Adviser to be of
equivalent quality). The types of short-term and temporary defensive investments
in which a Portfolio may invest are described below:
     
   
          Money Market Securities - Money Market securities may include
     securities issued or guaranteed by the U.S. government, its agencies or
     instrumentalities, repurchase agreements, commercial paper, bankers'
     acceptances, time deposits and certificates of deposit. In addition, Janus
     Capital Corporation and Neuberger Berman, LLC may invest idle cash of the
     assets of the Portfolios under their control in money market mutual funds
     that they manage. Such an investment may entail additional fees.
    
          Commercial Bank Obligations - Certificates of deposit
     (interest-bearing time deposits), including Eurodollar certificates of
     deposit (certificates of deposit issued by domestic or foreign banks
     located outside the U.S.) and Yankee certificates of deposit (certificates
     of deposit issued by branches of foreign banks located in the U.S.),
     domestic and foreign bankers' acceptances (time drafts drawn on a
     commercial bank where the bank accepts an irrevocable obligation to pay at
     maturity) and documented discount notes (corporate promissory discount
     notes accompanied by a commercial bank guarantee to pay at maturity)
     representing direct or contingent obligations of commercial banks with
     total assets in excess of $1 billion, based on the latest published
     reports. A Portfolio may also invest in obligations issued by U.S.
     commercial banks with total assets of less than $1 billion if the principal
     amount of these obligations owned by the Portfolio is fully

                                      B-15

<PAGE>



insured by the Federal Deposit Insurance Corporation ("FDIC"). A Portfolio may
also invest in notes and obligations issued by foreign branches of U.S. and
foreign commercial banks.

          Savings Association Obligations - Certificates of deposit
     (interest-bearing time deposits) issued by mutual savings banks or savings
     and loan associations with assets in excess of $1 billion and whose
     deposits are insured by the FDIC. A Portfolio may also invest in
     obligations issued by mutual savings banks or savings and loan associations
     with total assets of less than $1 billion if the principal amount of these
     obligations owned by the Portfolio is fully insured by the FDIC.

   
          Commercial Paper - Short-term notes (up to 12 months) issued by
     domestic and foreign corporations or governmental bodies. A Portfolio may
     only purchase commercial paper judged by the Adviser to be of suitable
     investment quality. This includes commercial paper that is (a) rated in the
     two highest categories by Standard & Poor's and by Moody's, or (b) other
     commercial paper deemed on the basis of the issuer's creditworthiness to be
     of a quality appropriate for the Portfolio. See the Appendix for a
     description of the ratings. A Portfolio will not purchase commercial paper
     described in (b) above if such paper would in the aggregate exceed 15% of
     its total assets after such purchase. The commercial paper in which a
     Portfolio may invest includes variable amount master demand notes. Variable
     amount master demand notes permit a Portfolio to invest varying amounts at
     fluctuating rates of interest pursuant to the agreement in the master note.
     These are direct lending obligations between the lender and borrower, they
     are generally not traded, and there is no secondary market. Such
     instruments are payable with accrued interest in whole or in part on
     demand. The amounts of the instruments are subject to daily fluctuations as
     the participants increase or decrease the extent of their participation.
     Investments in these instruments are limited to those that have a demand
     feature enabling the Portfolio unconditionally to receive the amount
     invested from the issuer upon seven or fewer days' notice. In connection
     with master demand note arrangements, the Adviser, subject to the direction
     of the Directors, monitors on an ongoing basis, the earning power, cash
     flow and other liquidity ratios of the borrower, and its ability to pay
     principal and interest on demand. The Adviser also considers the extent to
     which the variable amount master demand notes are backed by bank letters of
     credit. These notes generally are not rated by Moody's or Standard & Poor's
     and a Portfolio may invest in them only if it is determined that at the
     time of investment the notes are of comparable quality to the other
     commercial paper in which the Portfolio may invest. Master demand notes are
     considered to have a maturity equal to the repayment notice period unless
     the Adviser has reason to believe that the borrower could not make timely
     repayment upon demand.
    
   
          Corporate Bonds and Notes - A Portfolio may purchase corporate
     obligations that mature or that may be redeemed in one year or less. These

                                      B-16

<PAGE>



     obligations originally may have been issued with maturities in excess of
     one year. A Portfolio may invest only in corporate bonds or notes of
     issuers having outstanding short-term securities rated in the top two
     rating categories by Standard & Poor's and Moody's. See the Appendix for
     description of investment-grade ratings by Standard & Poor's and Moody's.
    
          Government Securities - Debt securities maturing within one year of
     the date of purchase include adjustable-rate mortgage securities backed by
     GNMA, FNMA, FHLMC and other non-agency issuers. Although certain floating
     or variable rate obligations (securities whose coupon rate changes at least
     annually and generally more frequently) have maturities in excess of one
     year, they are also considered short-term debt securities. See "U.S.
     Government Securities" above. A Portfolio may also purchase securities
     issued or guaranteed by a foreign government, its agencies or
     instrumentalities. See "Foreign Securities" above.

   
     Repurchase Agreements. A Portfolio may enter into repurchase agreements
involving only securities in which it could otherwise invest and with selected
banks, brokers and securities dealers whose financial condition is monitored by
the Adviser, subject to the guidance of the Board of Directors. In such
agreements, the seller agrees to repurchase the security 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 that
reflects an agreed-upon rate of return effective for the period of time a
Portfolio's money is invested in the security. Whenever a Portfolio enters into
a repurchase agreement, it obtains collateral having a value equal to at least
102% (100% if such collateral is in the form of cash) of the repurchase price,
including accrued interest. The instruments held as collateral are valued daily
and if the value of the instruments declines, the Portfolio will require
additional collateral. If the seller under the repurchase agreement defaults,
the Portfolio may incur a loss if the value of the collateral securing the
repurchase agreements has declined and may incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Portfolio 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 each Portfolio's use of
repurchase agreements. A Portfolio will not invest in repurchase agreements
maturing in more than seven days if the aggregate of such investments along with
other illiquid securities exceeds 15% of the value of its net assets. However,
there is no limit on the amount of a Portfolio's net assets that may be subject
to repurchase agreements having a maturity of seven days or less for temporary
defensive purposes. 
     
    
     Diversification. Each Portfolio is classified as "non-diversified" for
purposes of the 1940 Act, which means that it is not limited by the 1940 Act
with regard to the portion of assets that may be invested in the securities of a
single issuer. To the extent any such Portfolio makes investments in excess of
5% of its assets in the securities of a particular issuer, its exposure to the
risks associated with that issuer is increased.
    
                                      B-17

<PAGE>




   
     Because each Portfolio may invest, and the Focus Portfolio invests, in a
limited number of issuers, the performance of particular securities may
adversely affect the Portfolio's performance or subject the Portfolio to greater
price volatility than that experienced by diversified investment companies. Each
Portfolio intends to maintain the required level of diversification and
otherwise conduct its operations in order to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a regulated investment company under the Code, a
Portfolio must, among other things, diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of the
Portfolio's assets is represented by cash, U.S. government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Portfolio's
total assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities or the
securities of other regulated investment companies).
     
   
     In the unlikely event application of a Portfolio's strategy would result in
a violation of these requirements of the Code, the Portfolio would be required
to deviate from its strategy to the extent necessary to avoid losing its status
as a regulated investment company.
    
   
     Derivatives Strategies. Each Portfolio may write (i.e., sell) call options
("calls") on securities that are traded on U.S. and foreign securities exchanges
and over-the-counter markets to enhance income through the receipt of premiums
from expired calls and any net profits from closing purchase transactions,
except that the Focus Portfolio will not write calls on securities that are
traded on foreign securities exchanges. After writing such a covered call, up to
25% of a Portfolio's total assets may be subject to calls. All such calls
written by a Portfolio must be "covered" while the call is outstanding (i.e.,
the Portfolio must own the securities subject to the call or other securities
acceptable for applicable escrow requirements). Calls on Futures (defined below)
used to enhance income must be covered by deliverable securities or by liquid
assets segregated to satisfy the Futures contract. If a call written by the
Portfolio is exercised, the Portfolio forgoes any profit from any increase in
the market price above the call price of the underlying investment on which the
call was written.
     
   
     In addition, the Portfolio could experience capital losses which might
cause previously distributed short-term capital gains to be re-characterized as
a non-taxable return of capital to shareholders.
     
   
     Each Portfolio may also write put options ("puts"), which give the holder
of the option the right to sell the underlying security to the Portfolio at the
stated exercise price. A Portfolio

                                      B-18

<PAGE>



will receive a premium for writing a put option that increases the Portfolio's
return. A Portfolio writes only covered put options, which means that so long as
the Portfolio is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash or liquid securities denominated
in U.S. dollars or non-U.S. currencies with a securities depository with a value
equal to or greater than the exercise price of the underlying securities. Puts
on Futures (defined below) will be considered "covered" if the Portfolio owns an
option to sell that Futures contract having a strike price equal to or greater
than the strike price of the "covered" option, or if the Portfolio segregates
for the term of the option cash or other liquid assets at all times equal in
value to the exercise price of the put (less any initial margin deposited by the
Portfolio with its custodian with respect to such option).
     
   
     Primarily for hedging purposes, and from time to time for income
enhancement, each Portfolio may use interest rate futures contracts, foreign
currency futures contracts and stock and bond index futures contracts, including
futures on U.S. government securities (together, "Futures"); forward contracts
on foreign currencies; and call and put options on equity and debt securities,
Futures, stock and bond indices and foreign currencies, except that the Focus
Portfolio will not use foreign currency futures contracts or forward contracts
on foreign currencies. All puts and calls on securities, interest rate Futures
or stock and bond index Futures or options on such Futures purchased or sold by
a Portfolio will normally be listed on either (1) a national securities or
commodities exchange or (2) over-the-counter markets. However, each such
Portfolio may buy and sell options and Futures on foreign equity indexes and
foreign fixed income securities. Because the markets for these instruments are
relatively new and still developing, the ability of such a Portfolio to engage
in such transactions may be limited. Derivatives may be used to attempt to: (i)
protect against possible declines in the market value of a Portfolio's portfolio
resulting from downward trends in the equity and debt securities markets
(generally due to a rise in interest rates); (ii) protect a Portfolio's
unrealized gains in the value of its equity and debt securities that have
appreciated; (iii) facilitate selling securities for investment reasons; (iv)
establish a position in the equity and debt securities markets as a temporary
substitute for purchasing particular equity and debt securities; or (v) reduce
the risk of adverse currency fluctuations.
     
   
     Forward foreign currency exchange contracts, currency options and currency
swaps may be entered into for non-hedging purposes when an Adviser anticipates
that a foreign currency will appreciate or depreciate in value, but securities
denominated in that currency do not present attractive investment opportunities
or are not included in such portfolio. A Portfolio may use currency contracts
and options to cross-hedge, which involves selling or purchasing instruments in
one currency to hedge against changes in exchange rates for a different currency
with a pattern of correlation. To limit any leverage in connection with currency
contract transactions for non-hedging purposes, a Portfolio will segregate cash
or liquid securities in an amount sufficient to meet its payment obligations in
these transactions or otherwise "cover" the obligation. Initial margin deposits
made in connection with currency futures transactions or premiums paid for
currency options traded over-the-counter or on a commodities exchange may each
not exceed 5% of a Portfolio's total assets in the case of non-bona fide hedging
transactions. Each such Portfolio may enter into currency swaps. Currency swaps
involve the exchange by a Portfolio with another

                                      B-19

<PAGE>



party of their respective rights to make or receive payments in specified
currencies. Currency swaps usually involve the delivery of the entire principal
value of one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery
obligations. A Portfolio will segregate, cash or liquid securities equal to the
net amount, if any, of the excess of the Portfolio's obligations over its
entitlement with respect to swap transactions. To the extent that the net amount
of a swap is held in a segregated account consisting of cash or liquid
securities, the Fund believes that swaps do not constitute senior securities
under the 1940 Act and, accordingly, they will not be treated as being subject
to the Portfolio's borrowing restrictions. The use of currency swaps is a highly
specialized activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If an
Adviser is incorrect in its forecasts of market values and currency exchange
rates, the investment performance of a Portfolio would be less favorable than it
would have been if this investment technique were not used.
     
   
     A Portfolio's use of Futures and options on Futures will be incidental to
its activities in the underlying cash market. When hedging to attempt to protect
against declines in the market value of the portfolio, to permit a Portfolio to
retain unrealized gains in the value of portfolio securities that have
appreciated, or to facilitate selling securities for investment reasons, a
Portfolio could: (i) sell Futures; (ii) purchase puts on such Futures or
securities; or (iii) write calls on securities held by it or on Futures. When
hedging to attempt to protect against the possibility that portfolio securities
are not fully included in a rise in value of the debt securities market, a
Portfolio could: (i) purchase Futures, or (ii) purchase calls on such Futures or
on securities. When hedging to protect against declines in the dollar value of a
foreign currency-denominated security, a Portfolio could: (i) purchase puts on
that foreign currency and on foreign currency Futures; (ii) write calls on that
currency or on such Futures; or (iii) enter into forward contracts on foreign
currencies at a lower rate than the spot ("cash") rate. Additional information
about the derivatives the Portfolio may use is provided below.
    
Options

     Options on Securities. As noted above, each Portfolio may write and
purchase call and put options on equity and debt securities.

     When a Portfolio writes a call on a security, it receives a premium and
agrees to sell the underlying security to a purchaser of a corresponding call on
the same security during the call period (usually not more than 9 months) at a
fixed price (which may differ from the market price of the underlying security),
regardless of market price changes during the call period. A Portfolio has
retained the risk of loss should the price of the underlying security decline
during the call period, which may be offset to some extent by the premium.

     To terminate its obligation on a call it has written, a Portfolio may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A

                                      B-20

<PAGE>



profit may also be realized if the call expires unexercised, because a Portfolio
retains the underlying security and the premium received. If a Portfolio could
not effect a closing purchase transaction due to lack of a market, it would hold
the callable securities until the call expired or was exercised.

     When a Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period at a fixed exercise price. A Portfolio benefits only if the call
is sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the transaction
costs and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and a Portfolio will lose its premium payment and the right to
purchase the underlying investment.

     A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise price
during the option period. Writing a put covered by segregated liquid assets
equal to the exercise price of the put has the same economic effect to a
Portfolio as writing a covered call. The premium a Portfolio receives from
writing a put option represents a profit as long as the price of the underlying
investment remains above the exercise price. However, a Portfolio has also
assumed the obligation during the option period to buy the underlying investment
from the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put expires unexercised, a
Portfolio (as the writer of the put) realizes a gain in the amount of the
premium. If the put is exercised, a Portfolio must fulfill its obligation to
purchase the underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that case, a
Portfolio may incur a loss, equal to the sum of the sale price of the underlying
investment and the premium received minus the sum of the exercise price and any
transaction costs incurred.

     A Portfolio may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit a Portfolio to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Portfolio. A Portfolio
will realize a profit or loss from a closing purchase transaction if the cost of
the transaction is less or more than the premium received from writing the
option.

     When a Portfolio purchases a put, it pays a premium and has the right to
sell the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment a Portfolio owns enables the Portfolio to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not exercised
or resold, the put will become worthless at its expiration date, and the
Portfolio will lose its premium payment and the right to

                                      B-21

<PAGE>



sell the underlying investment pursuant to the put. The put may, however, be
sold prior to expiration (whether or not at a profit).

     Buying a put on an investment a Portfolio does not own permits the
Portfolio either to resell the put or buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not exercised,
the put will become worthless on its expiration date. In the event of a decline
in the stock market, a Portfolio could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio securities.

     When writing put options on securities, to secure its obligation to pay for
the underlying security, a Portfolio will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying securities.
A Portfolio therefore forgoes the opportunity of investing the segregated assets
or writing calls against those assets. As long as the obligation of a Portfolio
as the put writer continues, it may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring a Portfolio to take
delivery of the underlying security against payment of the exercise price. A
Portfolio has no control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time prior to the
termination of its obligation as the writer of the put. This obligation
terminates upon expiration of the put, or such earlier time at which a Portfolio
effects a closing purchase transaction by purchasing a put of the same series as
that previously sold. Once a Portfolio has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.

   
     Each Portfolio may use spread transactions for any lawful purpose
consistent with the Portfolio's investment objective. A Portfolio may purchase
covered spread options from securities dealers. Such covered spread options are
not presently exchange-listed or exchange-traded. The purchase of a spread
option gives a Portfolio the right to put, or sell, a security that it owns at a
fixed dollar spread or fixed yield spread in relationship to another security
that the Portfolio does not own, but which is used as a benchmark. The risk to a
Portfolio in purchasing covered spread options is the cost of the premium paid
for the spread option and any transaction costs. In addition, there is no
assurance that closing transactions will be available. The purchase of spread
options will be used to protect a Portfolio against adverse changes in
prevailing credit quality spreads, i.e., the yield spread between high quality
and lower quality securities. Such protection is provided only during the life
of the spread option.
     
   
     Options on Foreign Currencies. Each Portfolio except the Focus Portfolio
may write and purchase puts and calls on foreign currencies. A call written on a
foreign currency by a Portfolio is "covered" if the Portfolio owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by the Portfolio)
upon conversion or exchange of other foreign currency held in its portfolio. A
put option is "covered" if the Portfolio segregates cash or liquid securities
with a value at least equal to the

                                      B-22

<PAGE>



exercise price of the put option. A call written by a Portfolio on a foreign
currency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security the
Portfolio owns or has the right to acquire and is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, a Portfolio collateralizes the option by segregating cash or
liquid securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.
     
   
     As with other kinds of option transactions, the writing of an option on
currency will constitute only a partial hedge, up to the amount of the premium
received. A Portfolio could be required to purchase or sell currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on currency may constitute an effective hedge against exchange rate
fluctuations; however, in the event of exchange rate movements adverse to a
Portfolio's position, the Portfolio may forfeit the entire amount of the premium
plus related transaction costs.
    
     Options on Securities Indices. As noted above, each Portfolio may write and
purchase call and put options on securities indices. Puts and calls on
broadly-based securities indices are similar to puts and calls on securities
except that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the securities market
generally) rather than on price movements in individual securities or Futures.
When a Portfolio buys a call on a securities index, it pays a premium. During
the call period, upon exercise of a call by a Portfolio, a seller of a
corresponding call on the same investment will pay the Portfolio an amount of
cash to settle the call if the closing level of the securities index upon which
the call is based is greater than the exercise price of the call. That cash
payment is equal to the difference between the closing price of the index and
the exercise price of the call times a specified multiple (the "multiplier")
which determines the total dollar value for each point of difference. When a
Portfolio buys a put on a securities index, it pays a premium and has the right
during the put period to require a seller of a corresponding put, upon the
Portfolio's exercise of its put, to deliver to the Portfolio an amount of cash
to settle the put if the closing level of the securities index upon which the
put is based is less than the exercise price of the put. That cash payment is
determined by the multiplier, in the same manner as described above as to calls.

Futures and Options on Futures

     Futures. Upon entering into a Futures transaction, a Portfolio will be
required to deposit an initial margin payment with the futures commission
merchant (the "futures broker"). The initial margin will be deposited with the
Fund's custodian in an account registered in the futures broker's name; however
the futures broker can gain access to that account only under specified
conditions. As the Future is marked-to-market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis. Prior to expiration of the Future, if a
Portfolio elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is required to
be paid by or released to the Portfolio, and any loss or gain is realized for
tax purposes. All

                                      B-23

<PAGE>



Futures transactions are effected through a clearinghouse associated with the
exchange on which the Futures are traded.

     Interest rate futures contracts are purchased or sold for hedging purposes
to attempt to protect against the effects of interest rate changes on a
Portfolio's current or intended investments in fixed-income securities. For
example, if a Portfolio owned long-term bonds and interest rates were expected
to increase, that Portfolio might sell interest rate futures contracts. Such a
sale would have much the same effect as selling some of the long-term bonds in
that Portfolio's portfolio. However, since the Futures market is more liquid
than the cash market, the use of interest rate futures contracts as a hedging
technique allows a Portfolio to hedge its interest rate risk without having to
sell its portfolio securities. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of that
Portfolio's interest rate futures contracts would be expected to increase at
approximately the same rate, thereby keeping the net asset value of that
Portfolio from declining as much as it otherwise would have. On the other hand,
if interest rates were expected to decline, interest rate futures contracts may
be purchased to hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Since the fluctuations in the value of the interest rate
futures contracts should be similar to that of long-term bonds, a Portfolio
could protect itself against the effects of the anticipated rise in the value of
long-term bonds without actually buying them until the necessary cash became
available or the market had stabilized. At that time, the interest rate futures
contracts could be liquidated and that Portfolio's cash reserves could then be
used to buy long-term bonds on the cash market.

     Purchases or sales of stock or bond index futures contracts are used for
hedging purposes to attempt to protect a Portfolio's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Portfolio may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Portfolio's securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the Futures position. When a Portfolio is not fully invested
in the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Portfolio intends to purchase. As such purchases are made,
the corresponding positions in stock or bond index futures contracts will be
closed out.

   
     As noted above, each Portfolio except the Focus Portfolio may purchase and
sell foreign currency futures contracts for hedging or income enhancement
purposes to attempt to protect its current or intended investments from
fluctuations in currency exchange rates. Such fluctuations could reduce the
dollar value of portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be acquired, even if the
value of such securities in the currencies in which they are denominated remains
constant. A Portfolio may sell futures contracts on a foreign currency, for
example, when it holds securities denominated in such currency and it
anticipates a decline in the value of such currency relative to the dollar. In
the event such decline occurs, the resulting adverse effect on the value of
foreign-denominated securities may be offset, in whole or in part, by gains on
the Futures contracts. However, if the value of the foreign currency increases
relative to the dollar, the Portfolio's loss on the foreign

                                      B-24

<PAGE>



currency futures contract may or may not be offset by an increase in the value
of the securities since a decline in the price of the security stated in terms
of the foreign currency may be greater than the increase in value as a result of
the change in exchange rates.
    
   
     Conversely, a Portfolio could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing Futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When a Portfolio purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Portfolio will sustain
losses on its futures position which could reduce or eliminate the benefits of
the reduced cost of portfolio securities to be acquired.
    
   
     Options on Futures. As noted above, Portfolios may purchase and write
options on interest rate futures contracts, stock and bond index futures
contracts, forward contracts and foreign currency futures contracts, except that
the Focus Portfolio will not purchase or write options on foreign currency
futures contracts. (Unless otherwise specified, options on interest rate futures
contracts, options on stock and bond index futures contracts and options on
foreign currency futures contracts are collectively referred to as "Options on
Futures.")
     
   
     The writing of a call option on a Futures contract constitutes a partial
hedge against declining prices of the securities in the portfolio. If the
Futures price at expiration of the option is below the exercise price, the
Portfolio will retain the full amount of the option premium, which provides a
partial hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a Futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures contract. If the Futures
price at expiration of the put option is higher than the exercise price, a
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities the Portfolio
intends to purchase. If a put or call option a Portfolio has written is
exercised, the Portfolio will incur a loss which will be reduced by the amount
of the premium it receives. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
Options on Futures positions, a Portfolio's losses from exercised Options on
Futures may to some extent be reduced or increased by changes in the value of
portfolio securities.
     
   
     A Portfolio may purchase Options on Futures for hedging purposes, instead
of purchasing or selling the underlying Futures contract. For example, where a
decrease in the value of portfolio securities is anticipated as a result of a
projected market-wide decline or changes in interest or exchange rates, a
Portfolio could, in lieu of selling a Futures contract, purchase put options
thereon. In the event that such decrease occurs, it may be offset, in whole or
part, by a

                                      B-25

<PAGE>



profit on the option. If the market decline does not occur, the Portfolio will
suffer a loss equal to the price of the put. Where it is projected that the
value of securities to be acquired by a Portfolio will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates, a
Portfolio could purchase call Options on Futures, rather than purchasing the
underlying Futures contract. If the market advances, the increased cost of
securities to be purchased may be offset by a profit on the call. However, if
the market declines, the Portfolio will suffer a loss equal to the price of the
call but the securities the Portfolio intends to purchase may be less expensive.
     
    
Forward contracts on foreign currencies 
     
   
     A forward contract on foreign currencies involves bilateral obligations of
one party to purchase, and another party to sell, a specific currency at a
future date (which may be any fixed number of days from the date of the contract
agreed upon by the parties), at a price set at the time the contract is entered
into. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
No price is paid or received upon the purchase or sale of a forward contract on
foreign currencies . The Focus Portfolio does not utilize forward contracts on
foreign currencies.
     
   
     A Portfolio may use forward contracts on foreign currencies to protect
against uncertainty in the level of future exchange rates. The use of forward
contracts on foreign currencies does not eliminate fluctuations in the prices of
the underlying securities a Portfolio owns or intends to acquire, but it does
fix a rate of exchange in advance. In addition, although forward contracts on
foreign currencies limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
     
   
     A Portfolio may enter into forward contracts on foreign currencies with
respect to specific transactions. For example, when a Portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, or when a Portfolio anticipates receipt of dividend payments in a
foreign currency, the Portfolio may desire to "lock-in" the U.S. dollar price of
the security or the U.S. dollar equivalent of such payment by entering into a
forward contract on foreign currencies , for a fixed amount of U.S. dollars per
unit of foreign currency, for the purchase or sale of the amount of foreign
currency involved in the underlying transaction. A Portfolio will thereby be
able to protect itself against a possible loss resulting from an adverse change
in the relationship between the currency exchange rates during the period
between the date on which the security is purchased or sold, or on which the
payment is declared and the date on which such payments are made or received.
    

                                      B-26

<PAGE>



   
     A Portfolio may also use forward contracts on foreign currencies to lock in
the U.S. dollar value of portfolio positions ("position hedge"). In a position
hedge, for example, when a Portfolio believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
contract on foreign currencies to sell an amount of that foreign currency
approximating the value of some or all of the portfolio securities denominated
in (or affected by fluctuations in, in the case of ADRs) such foreign currency,
or when a Portfolio believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward contract on
foreign currencies to buy that foreign currency for a fixed dollar amount. In
this situation a Portfolio may, in the alternative, enter into a forward
contract on foreign currencies to sell a different foreign currency for a fixed
U.S. dollar amount where the Portfolio believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. dollar value of the currency in which portfolio
securities of the Portfolio are denominated ("cross-hedged"). A Portfolio may
also hedge investments denominated in a foreign currency by entering into
forward currency contracts with respect to a foreign currency that is expected
to correlate to the currency in which the investments are denominated ("proxy
hedging").
     
   
     The Portfolio will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency being hedged. To the extent that a
Portfolio is not able to cover its forward currency positions with underlying
portfolio securities, the Portfolio will segregate cash or liquid securities
having a value equal to the aggregate amount of the Portfolio's commitments
under forward contracts on foreign currencies entered into with respect to
position hedges and cross-hedges. If the value of the segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the value of the segregated assets will equal the amount of the Portfolio's
commitments with respect to such contracts. As an alternative to segregating
assets, a Portfolio may purchase a call option permitting the Portfolio to
purchase the amount of foreign currency being hedged by a forward sale contract
at a price no higher than the forward contract on foreign currencies price or
the Portfolio may purchase a put option permitting the Portfolio to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the forward contract on foreign currencies price.
Unanticipated changes in currency prices may result in poorer overall
performance for a Portfolio than if it had not entered into such contracts.
    
   
     The precise matching of the forward contract on foreign currencies amounts
and the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between the
date the forward contract on foreign currencies is entered into and the date it
is sold. Accordingly, it may be necessary for a Portfolio to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of such
purchase), if the market value of the security is less than the amount of
foreign currency a Portfolio is obligated to deliver

                                      B-27

<PAGE>



and if a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency a Portfolio is obligated to
deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts on foreign currencies involve the risk that
anticipated currency movements will not be accurately predicted, causing a
Portfolio to sustain losses on these contracts and transactions costs. 
     
   
     At or before the maturity of a forward contract on foreign currencies
requiring a Portfolio to sell a currency, the Portfolio may either sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Portfolio will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, a Portfolio may close out a forward contract on
foreign currencies requiring it to purchase a specified currency by entering
into a second contract entitling it to sell the same amount of the same currency
on the maturity date of the first contract. A Portfolio would realize a gain or
loss as a result of entering into such an offsetting forward contract on foreign
currencies under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and offsetting contract.
    
   
     The cost to a Portfolio of engaging in forward contracts on foreign
currencies varies with factors such as the currencies involved, the length of
the contract period and the market conditions then prevailing. Because forward
contracts on foreign currencies are usually entered into on a principal basis,
no fees or commissions are involved. Because such contracts are not traded on an
exchange, a Portfolio must evaluate the credit and performance risk of each
particular counterparty under a forward contract on foreign currencies .
    
     Although a Portfolio values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. A Portfolio may convert foreign currency from time to time,
and investors should be aware of the costs of currency conversion. Foreign
exchange dealers do not charge a fee for conversion, but they do seek to realize
a profit based on the difference between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.

   

                                      B-28

<PAGE>



Additional Information About Derivatives and Their Use
    
     The Fund's custodian, or a securities depository acting for the custodian,
will act as the Portfolios' escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the securities on which the Portfolio has
written options or as to other acceptable escrow securities, so that no margin
will be required for such transaction. OCC will release the securities on the
expiration of the option or upon a Portfolio's entering into a closing
transaction.

   
     An option position may be closed out only on a market that provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. A Portfolio's
option activities may affect its turnover rate and brokerage commissions. The
exercise by a Portfolio of puts on securities will result in the sale of related
investments, increasing portfolio turnover. Although such exercise is within a
Portfolio's control, holding a put might cause the Portfolio to sell the related
investments for reasons that would not exist in the absence of the put. A
Portfolio will pay a brokerage commission each time it buys a put or call, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those that would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts of
leverage. The leverage offered by trading in options could result in a
Portfolio's net asset value being more sensitive to changes in the value of the
underlying investments.
     
   
     In the future, each Portfolio may employ strategies that are not presently
contemplated but which may be developed, to the extent such investment methods
are consistent with a Portfolio's investment objectives, legally permissible and
adequately disclosed.
    
   
Regulatory Aspects of Derivatives
    
     Each Portfolio must operate within certain restrictions as to its long and
short positions in Futures and options thereon under a rule (the "CFTC Rule")
adopted by the Commodity Futures Trading Commission (the "CFTC") under the
Commodity Exchange Act (the "CEA"), which excludes the Portfolio from
registration with the CFTC as a "commodity pool operator" (as defined in the
CEA) if it complies with the CFTC Rule. In particular, the Portfolio may (i)
purchase and sell Futures and options thereon for bona fide hedging purposes, as
defined under CFTC regulations, without regard to the percentage of the
Portfolio's assets committed to margin and option premiums, and (ii) enter into
non-hedging transactions, provided that the Portfolio may not enter into such
non-hedging transactions if, immediately thereafter, the sum of the amount of
initial margin deposits on the Portfolio's existing Futures positions and option
premiums would exceed 5% of the fair value of its portfolio, after taking into
account unrealized

                                      B-29

<PAGE>



profits and unrealized losses on any such transactions. Margin deposits may
consist of cash or securities acceptable to the broker and the relevant contract
market.


   
     Transactions in options by a Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors acting in
concert, regardless of whether the options were written or purchased on the same
or different exchanges or are held in one or more accounts or through one or
more exchanges or brokers. Thus, the number of options a Portfolio may write or
hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain other
sanctions. Due to requirements under the 1940 Act, when a Portfolio purchases a
Future, the Portfolio will segregate cash or liquid securities in an amount
equal to the market value of the securities underlying such Future, less the
margin deposit applicable to it.
    

Possible Risk Factors in Hedging

   
     Participation in the options or Futures markets and in currency exchange
transactions involves investment risks and transaction costs to which a
Portfolio would not be subject absent the use of these strategies. If the
Adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to a
Portfolio may leave the Portfolio in a worse position than if such strategies
were not used. There is also a risk in using short hedging by selling Futures to
attempt to protect against decline in value of the portfolio securities (due to
an increase in interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of the
Portfolio's securities. The ordinary spreads between prices in the cash and
Futures markets are subject to distortions due to differences in the natures of
those markets. First, all participants in the Futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close Futures contracts through
offsetting transactions that could distort the normal relationship between the
cash and Futures markets. Second, the liquidity of the Futures markets depends
on participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the Futures markets could be reduced, thus producing distortion.
Third, from the point-of-view of speculators, the deposit requirements in the
Futures markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the Futures
markets may cause temporary price distortions.
     

                                      B-30

<PAGE>


   
     If a Portfolio establishes a position in the debt securities markets as a
temporary substitute for the purchase of individual debt securities (long
hedging) by buying Futures and/or calls on such Futures or on debt securities,
it is possible that the market may decline; if the Adviser then determines not
to invest in such securities at that time because of concerns as to possible
further market decline or for other reasons, the Portfolio will realize a loss
on the derivatives that is not offset by a reduction in the price of the debt
securities purchased.
    
   
     Illiquid and Restricted Securities. No more than 15% of the value of a
Portfolio's net assets determined as of the date of purchase, may be invested in
illiquid securities including repurchase agreements that have a maturity of
longer than seven days, interest-rate swaps, currency swaps, caps, floors and
collars, 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 that 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 that
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 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 will generally 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, each of
the Portfolios will seek to obtain the right of registration at the expense of
the issuer (except in the case of Rule 144A securities, as described below).
    
     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.

   
     For example, restricted securities that the Board of Directors, or the
Adviser pursuant to guidelines established by the Board of Directors, has
determined to be marketable, such as

                                      B-31

<PAGE>



securities eligible for sale under Rule 144A promulgated under the Securities
Act, or certain private placements of commercial paper issued in reliance on an
exemption from such Act pursuant to Section 4(2) thereof, may be deemed to be
liquid for purposes of this restriction. This investment practice could have the
effect of increasing the level of illiquidity in the Portfolio to the extent
that qualified institutional buyers (as defined in Rule 144A) become for a time
uninterested in purchasing these restricted securities. In addition, a
repurchase agreement that by its terms can be liquidated before its nominal
fixed-term on seven days or less notice is regarded as a liquid instrument. The
Adviser will monitor the liquidity of such restricted securities subject to the
supervision of 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). Subject to the
applicable limitation on illiquid securities investments, a Portfolio may
acquire securities issued by the U.S. government, its agencies or
instrumentalities in a private placement.
     
    
     Commercial paper issues in which a Portfolio's net assets may be invested
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 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. 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. A Portfolio's 15%
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 have
delegated to the Advisers 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 Advisers to take into account the same factors
described above for other restricted securities and require the Advisers to
perform the same monitoring and reporting functions.
     
    
     Short Sales. Each Portfolio may sell a security it does not own in
anticipation of a decline in the market value of that security (short sales). To
complete such a transaction, a Portfolio must borrow the security to make
delivery to the buyer. The Portfolio then is obligated to replace the security
borrowed by purchasing it at market price at the time of replacement. The price
at such time may be more or less than the price at which the security was sold
by the

                                      B-32

<PAGE>



Portfolio. Until the security is replaced, the Portfolio is required to pay to
the lender any dividends or interest that accrue during the period of the loan.
To borrow the security, the Portfolio also may be required to pay a premium,
which would increase the cost of the security sold. The proceeds of the short
sale will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out. Until the Portfolio
replaces a borrowed security, the Portfolio will maintain daily a segregated
account, containing cash or liquid securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short. A Portfolio will incur a loss as a result of the
short sale if the price of the security increases between the date of the short
sale and the date on which the Portfolio replaces the borrowed security. A
Portfolio will realize a gain if the security declines in price between those
dates. This result is the opposite of what one would expect from a cash purchase
of a long position in a security. The amount of any gain will be decreased, and
the amount of any loss increased, by the amount of any premium, dividends or
interest the Portfolio may be required to pay in connection with a short sale.
     
   
     Each Portfolio may make "short sales against the box." A short sale is
against the box to the extent that the Portfolio contemporaneously owns, or has
the right to obtain without payment, securities identical to those sold short. A
Portfolio may not enter into a short sale, including a short sale against the
box, if, as a result, more than 25% of its net assets would be subject to such
short sales. 
     
    
     Hybrid Instruments; Indexed/Structured Securities. Hybrid Instruments,
including indexed or structured securities, combine the elements of futures
contracts or options with those of debt, preferred equity or a depository
instrument. The Focus Portfolio does not intend to invest in Hybrid Instruments.
Generally, a Hybrid Instrument will be a debt security, preferred stock,
depository share, trust certificate, certificate of deposit or other evidence of
indebtedness on which a portion of or all interest payments, and/or the
principal or stated amount payable at maturity, redemption or retirement, is
determined by reference to prices, changes in prices, or differences between
prices, of securities, currencies, intangibles, goods, articles or commodities
(collectively "Underlying Assets") or by another objective index, economic
factor or other measure, such as interest rates, currency exchange rates,
commodity indices, and securities indices (collectively "Benchmarks"). Thus,
Hybrid Instruments may take a variety of forms, including, but not limited to,
debt instruments with interest or principal payments or redemption terms
determined by reference to the value of a currency or commodity or securities
index at a future point in time, preferred stock with dividend rates determined
by reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity.
    

                                      B-33

<PAGE>



     Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing total
return. For example, a Portfolio may wish to take advantage of expected declines
in interest rates in several European countries, but avoid the transactions
costs associated with buying and currency-hedging the foreign bond positions.
One solution would be to purchase a U.S. dollar-denominated Hybrid Instrument
whose redemption price is linked to the average three year interest rate in a
designated group of countries. The redemption price formula would provide for
payoffs of greater than par if the average interest rate was lower than a
specified level, and payoffs of less than par if rates were above the specified
level. Furthermore, the Portfolio could limit the downside risk of the security
by establishing a minimum redemption price so that the principal paid at
maturity could not be below a predetermined minimum level if interest rates were
to rise significantly. The purpose of this arrangement, known as a structured
security with an embedded put option, would be to give the Portfolio the desired
European bond exposure while avoiding currency risk, limiting downside market
risk, and lowering transactions costs. Of course, there is no guarantee that the
strategy will be successful and the Portfolio could lose money if, for example,
interest rates do not move as anticipated or credit problems develop with the
issuer of the Hybrid.

   
     The risks of investing in Hybrid Instruments reflect a combination of the
risks of investing in securities, options, futures and currencies. Thus, an
investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has a
fixed principal amount, is denominated in U.S. dollars or bears interest either
at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks or
the prices of Underlying Assets to which the instrument is linked. Such risks
generally depend upon factors unrelated to the operations or credit quality of
the issuer of the Hybrid Instrument and which may not be readily foreseen by the
purchaser, such as economic and political events, the supply and demand for the
Underlying Assets and interest rate movements. In recent years, various
Benchmarks and prices for Underlying Assets have been highly volatile, and such
volatility may be expected in the future. Reference is also made to the
discussion of futures, options, and forward contracts herein for a discussion of
the risks associated with such investments. 
    

     Hybrid Instruments are potentially more volatile and carry greater market
risks than traditional debt instruments. Depending on the structure of the
particular Hybrid Instrument, changes in a Benchmark may be magnified by the
terms of the Hybrid Instrument and have an even more dramatic and substantial
effect upon the value of the Hybrid Instrument. Also, the prices of the Hybrid
Instrument and the Benchmark or Underlying Asset may not move in the same
direction or at the same time.

     Hybrid Instruments may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. Alternatively, Hybrid Instruments may
bear interest at above market

                                      B-34

<PAGE>



rates but bear an increased risk of principal loss (or gain). The latter
scenario may result if "leverage" is used to structure the Hybrid Instrument.
Leverage risk occurs when the Hybrid Instrument is structured so that a given
change in a Benchmark or Underlying Asset is multiplied to produce a greater
value change in the Hybrid Instrument, thereby magnifying the risk of loss as
well as the potential for gain.

   
     Hybrid Instruments may also carry liquidity risk since the instruments are
often "customized" to meet the portfolio needs of a particular investor, and
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. Under certain conditions, the redemption (or sale)
value of such an investment could be zero. In addition, because the purchase and
sale of Hybrid Instruments could take place in an over-the-counter market
without the guarantee of a central clearing organization or in a transaction
between the Portfolio and the issuer of the Hybrid Instrument, the
creditworthiness of the counterparty or issuer of the Hybrid Instrument would be
an additional risk factor the Portfolio would have to consider and monitor.
Hybrid Instruments also may not be subject to regulation of the CFTC, which
generally regulates the trading of commodity futures by U.S. persons, the
Securities and Exchange Commission (the "SEC"), which regulates the offer and
sale of securities by and to U.S. persons, or any other governmental regulatory
authority.
    
     The various risks discussed above, particularly the market risk of such
instruments, may in turn cause significant fluctuations in the net asset value
of the Portfolio. Accordingly, each Portfolio will limit its investments in
Hybrid Instruments to 10% of total assets at the time of purchase. However,
because of their volatility, it is possible that a Portfolio's investment in
Hybrid Instruments will account for more than 10% of the Portfolio's return
(positive or negative).

   
     When-Issued Securities and Firm Commitment Agreements. Each Portfolio 
except the Focus Portfolio may purchase or sell securities on a "when-issued" or
"delayed delivery" basis and may purchase securities on a firm commitment basis.
Although a Portfolio will enter into such transactions for the purpose of
acquiring securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Portfolio may dispose of a commitment prior
to settlement. "When-issued" or "delayed delivery" refers to securities whose
terms and indenture are available and for which a market exists, but which are
not available for immediate delivery. When such transactions are negotiated, the
price (which is generally expressed in yield terms) is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. During the period between commitment by a Portfolio and settlement
(generally within two months but not to exceed 120 days), no payment is made for
the securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such
    

                                      B-35

<PAGE>


   
securities are subject to market fluctuation, and the value at delivery may be
less than the purchase price. A Portfolio will maintain a segregated account
with its Custodian, consisting of cash or liquid securities at least equal to
the value of purchase commitments until payment is made. A Portfolio will
likewise segregate liquid assets in respect of securities sold on a delayed
delivery basis.
    
     A Portfolio will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When a Portfolio engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure to do so may result in a Portfolio losing
the opportunity to obtain a price and yield considered to be advantageous. If a
Portfolio chooses to (i) dispose of the right to acquire a when-issued security
prior to its acquisition or (ii) dispose of its right to deliver or receive
against a firm commitment, it may incur a gain or loss. (At the time a Portfolio
makes a commitment to purchase or sell a security on a when-issued or firm
commitment basis, it records the transaction and reflects the value of the
security purchased, or if a sale, the proceeds to be received in determining its
net asset value.)

     To the extent a Portfolio engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objectives and policies and not for the purposes
of investment leverage. A Portfolio enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above) when-issued securities and firm commitments may be sold prior to the
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Adviser before settlement of a purchase will affect
the value of such securities and may cause a loss to a Portfolio.

   
     When-issued transactions and firm commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Portfolio might sell securities in
its portfolio on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and rising
prices, a Portfolio might sell portfolio securities and purchase the same or
similar securities on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields. One form of when-issued
or delayed delivery security that each Portfolio may purchase is a "to be
announced" or "TBA" mortgage-backed security. A TBA mortgage-backed security
transaction arises when a mortgage-backed security is purchased or sold with the
specific pools to be announced on a future settlement date.
     
   
     Borrowing. As a matter of fundamental policy each Portfolio is authorized
to borrow up to 33 1/3% of its total assets for temporary or emergency purposes.
In seeking to enhance investment performance, each Portfolio (except the Focus
Portfolio, notwithstanding fundamental Investment Restriction number 5) may
borrow money for investment purposes and may pledge assets to secure such
borrowings. This is the speculative factor known as leverage. This practice may
help increase the net asset value of the assets of a Portfolio in an amount
greater than would otherwise be the case when the market values of the
securities purchased through borrowing increase. In the event the return on an
investment of borrowed monies does

                                      B-36

<PAGE>



not fully recover the costs of such borrowing, the value of the Portfolio's
assets would be reduced by a greater amount than would otherwise be the case.
The effect of leverage will therefore tend to magnify the gains or losses to the
Portfolio as a result of investing the borrowed monies. During periods of
substantial borrowings, the value of the Portfolio's assets would be reduced due
to the added expense of interest on borrowed monies. Each Portfolio is
authorized to borrow, and to pledge assets to secure such borrowings, up to the
maximum extent permissible under the 1940 Act (i.e., presently 50% of net
assets). The time and extent to which a Portfolio may employ leverage will be
determined by the Adviser in light of changing facts and circumstances,
including general economic and market conditions, and will be subject to
applicable lending regulations of the Board of Governors of the Federal Reserve
Board.
    
   
     In seeking to enhance investment performance, each Portfolio except the
Focus Portfolio may increase their ownership of securities by borrowing at fixed
rates of interest up to the maximum extent permitted under the 1940 Act
(presently 50% of net assets) and investing the borrowed funds, subject to the
restrictions stated in the respective Prospectus. Any such borrowing will be
made only pursuant to the requirements of the 1940 Act and will be made only to
the extent that the value of each Fund's assets less its liabilities, other than
borrowings, is equal to at least 300% of all borrowings including the proposed
borrowing. If the value of a Portfolio's assets, so computed, should fail to
meet the 300% asset coverage requirement, the Portfolio is required, within
three business days, to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a time
when independent investment judgment would not dictate such sale. Interest on
money borrowed is an expense the Portfolio would not otherwise incur, so that it
may have little or no net investment income during periods of substantial
borrowings. Since substantially all of a Portfolio's assets fluctuate in value,
but borrowing obligations are fixed when the Portfolio has outstanding
borrowings, the net asset value per share of a Portfolio correspondingly will
tend to increase and decrease more when the Portfolio's assets increase or
decrease in value than would otherwise be the case. A Portfolio's policy
regarding use of leverage is a fundamental policy, which may not be changed
without approval of the shareholders of the Portfolio.
     
   
     Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio may lend portfolio securities in amounts up to
33 1/3% of total assets to brokers, dealers and other financial institutions,
provided, that such loans are callable at any time by the Portfolio and are at
all times secured by cash or equivalent collateral. In lending its portfolio
securities, a Portfolio receives income while retaining the securities'
potential for capital appreciation. The advantage of such loans is that a
Portfolio 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 high-quality short-term debt securities, including repurchase
agreements. A loan may be terminated by the borrower on one business day's
notice or by a Portfolio at any time. If the borrower fails to maintain the
requisite amount of collateral, the loan automatically terminates, and the
Portfolio could 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 be made only to
firms deemed by the Adviser to be creditworthy. On termination of the loan, the

                                      B-37

<PAGE>



borrower is required to return the securities to a Portfolio; and any gain or
loss in the market price of the loaned security during the loan would inure to
the Portfolio. Each Portfolio 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 that accompany loaned securities pass to the
borrower, each Portfolio 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 have a material effect on the Portfolio's investment in
the securities that are the subject of the loan.
    
     Reverse Repurchase Agreements. A Portfolio may enter into reverse
repurchase agreements with brokers, dealers, domestic and foreign banks or other
financial institutions that have been determined by the Adviser to be
creditworthy. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price, reflecting
the interest rate effective for the term of the agreement. It may also be viewed
as the borrowing of money by the Portfolio. The Portfolio's investment of the
proceeds of a reverse repurchase agreement is the speculative factor known as
leverage. A Portfolio will enter into a reverse repurchase agreement only if the
interest income from investment of the proceeds is expected to be greater than
the interest expense of the transaction and the proceeds are invested for a
period no longer than the term of the agreement. The Portfolio will maintain
with the Custodian a separate account with a segregated portfolio of cash or
liquid securities in an amount at least equal to its purchase obligations under
these agreements (including accrued interest). In the event that the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the buyer or its trustee or receiver may receive an extension of time
to determine whether to enforce the Portfolio's repurchase obligation, and the
Portfolio's use of proceeds of the agreement may effectively be restricted
pending such decision. Reverse repurchase agreements are considered to be
borrowings and are subject to the percentage limitations on borrowings. See
"Investment Restrictions."

   
     Dollar Rolls. Each Portfolio may enter into "dollar rolls" in which a
Portfolio sells mortgage or other asset-backed securities ("Roll Securities")
for delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Portfolio foregoes principal and
interest paid on the Roll Securities. The Portfolio is compensated by the
difference between the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. The Portfolio also could be
compensated through the receipt of fee income equivalent to a lower forward
price. A "covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position that matures on
or before the forward settlement date of the dollar roll transaction. A
Portfolio will enter into only covered rolls. Because "roll" transactions
involve both the sale and purchase of a security, they may cause the reported
portfolio turnover rate to be higher than that reflecting typical portfolio
management activities. 
     

                                      B-38

<PAGE>


   
     Dollar rolls involve certain risks including the following: if the
broker-dealer to whom the Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the security subject to the dollar
roll may be restricted and the instrument the Portfolio is required to
repurchase may be worth less than an instrument the Portfolio originally held.
Successful use of dollar rolls will depend upon the Adviser's ability to predict
correctly interest rates and in the case of mortgage dollar rolls, mortgage
prepayments. For these reasons, there is no assurance that dollar rolls can be
successfully employed.
    
     Standby Commitments. Standby commitments are put options that entitle
holders to same day settlement at an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. A Portfolio may acquire standby commitments to enhance the liquidity
of portfolio securities, but only when the issuers of the commitments present
minimal risk of default. Ordinarily, the Portfolio may not transfer a standby
commitment to a third party, although it could sell the underlying municipal
security to a third party at any time. A Portfolio may purchase standby
commitments separate from or in conjunction with the purchase of securities
subject to such commitments. In the latter case, the Portfolio would pay a
higher price for the securities acquired, thus reducing their yield to maturity.
Standby commitments will not affect the dollar-weighted average maturity of the
Portfolio, or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. The Adviser may
rely upon its evaluation of a bank's credit in determining whether to support an
instrument supported by a letter of credit. Standby commitments are subject to
certain risks, including the ability of issuers of standby commitments to pay
for securities at the time the commitments are exercised; the fact that standby
commitments are not marketable by the Portfolio; and the possibility that the
maturities of the underlying securities may be different from those of the
commitments.

   
     Interest-Rate Swaps, Mortgage Swaps, Caps, Collars and Floors. In order to
protect the value of portfolios from interest rate fluctuations and to hedge
against fluctuations in the fixed income market in which certain of the
Portfolios' investments are traded, the Portfolio may enter into interest-rate
swaps and mortgage swaps or purchase or sell interest-rate caps, floors or
collars. The Portfolio will enter into these hedging transactions primarily to
preserve a return or spread on a particular investment or portion of the
portfolio and to protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date. The Portfolio may also enter
into interest-rate swaps for non-hedging purposes. Interest-rate swaps are
individually negotiated, and the Portfolio expects to achieve an acceptable
degree of correlation between its portfolio investments and interest-rate
positions. A Portfolio will enter into interest-rate swaps only on a net basis,
which means that the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest-rate swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest-rate swaps is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make. If the other party to an
interest-rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that the Portfolio is contractually entitled to
receive. The use of interest-rate swaps is a highly specialized activity, which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. All of these investments may be

                                      B-39

<PAGE>



deemed to be illiquid for purposes of the Portfolio's limitation on investment
in such securities. Inasmuch as these investments are entered into for good
faith hedging purposes, and inasmuch as segregated accounts will be established
with respect to such transactions, SunAmerica believes such obligations do not
constitute senior securities and accordingly will not treat them as being
subject to its borrowing restrictions. The net amount of the excess, if any, of
the Portfolio's obligations over its entitlements with respect to each
interest-rate swap will be accrued on a daily basis and an amount of cash or
liquid securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by a custodian that
satisfies the requirements of the 1940 Act. The Portfolio will also establish
and maintain such segregated accounts with respect to its total obligations
under any interest-rate swaps that are not entered into on a net basis and with
respect to any interest-rate caps, collars and floors that are written by the
Portfolio.
    
     A Portfolio will enter into these transactions only with banks and
recognized securities dealers believed by the Adviser to present minimal credit
risk in accordance with guidelines established by the Board of Directors. If
there is a default by the other party to such a transaction, the Portfolio will
have to rely on its contractual remedies (which may be limited by bankruptcy,
insolvency or similar laws) pursuant to the agreements related to the
transaction.

     The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps, collars and floors are more
recent innovations for which documentation is less standardized, and
accordingly, they are less liquid than swaps.

   
     Mortgage swaps are similar to interest-rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, upon
which the value of the interest payments is based, is tied to a reference pool
or pools of mortgages.
    
     The purchase of an interest-rate cap entitles the purchaser, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest-rate cap. The purchase of an interest-rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest-rate floor.

   
     Special Situations. A "special situation" arises when, in the opinion of
the Adviser, the securities of a particular issuer will be recognized and
appreciate in value due to a specific development with respect to that issuer.
Developments creating a special situation might include, among others, a new
product or process, a technological breakthrough, a management change or other
extraordinary corporate event, or differences in market supply of and demand for
the security. Investment in special situations may carry an additional risk of
loss in the event that the anticipated development does not occur or does not
attract the expected attention.
    


                                      B-40

<PAGE>

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

                             INVESTMENT RESTRICTIONS

     The Fund has adopted for each Portfolio certain investment restrictions
that are fundamental policies and cannot be changed without the approval of the
holders of a majority of that Portfolio's outstanding shares. Such majority is
defined as the vote of the lesser of (i) 67% or more of the outstanding shares
present at a meeting, if the holders of more than 50% of the outstanding shares
are present in person or by proxy or (ii) more than 50% of the outstanding
shares. All percentage limitations expressed in the following investment
restrictions are measured immediately after the relevant transaction is made.
Each Portfolio may not:

     1. Invest more than 25% of the Portfolio's total assets in the securities
of issuers in the same industry. Obligations of the U.S. Government, its
agencies and instrumentalities are not subject to this 25% limitation on
industry concentration.

     2. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts, that
deal in real estate or interests therein); provided that a Portfolio may hold or
sell real estate acquired as a result of the ownership of securities.

     3. Purchase or sell commodities or commodity contracts, except to the
extent that the Portfolio may do so in accordance with applicable law and the
Prospectus and Statement of Additional Information, as they may be amended from
time to time, and without registering as a commodity pool operator under the
Commodity Exchange Act. Any Portfolio may engage in transactions in put and call
options on securities, indices and currencies, spread transactions, forward and
futures contracts on securities, indices and currencies, put and call options on
such futures contracts, forward commitment transactions, forward foreign
currency exchange contracts, interest rate, mortgage and currency swaps and
interest rate floors and caps and may purchase hybrid instruments.

   
     4. Make loans to others except for (a) the purchase of debt securities; (b)
entering into repurchase agreements; (c) the lending of its portfolio
securities; and (d) as otherwise permitted by exemptive order of the SEC. 
    
   
     5. Borrow money, except that (i) each Portfolio may borrow in amounts up to
331/3% of its total assets for temporary or emergency purposes, (ii) each
Portfolio may borrow for investment purposes to the maximum extent permissible
under the 1940 Act (i.e., presently 50% of net assets), and (iii) a Portfolio
may obtain such short-term credit as may be necessary for the

                                      B-41

<PAGE>



clearance of purchases and sales of portfolio securities. This policy shall not
prohibit a Portfolio's engaging in reverse repurchase agreements, dollar rolls
and similar investment strategies described in the Prospectus and Statement of
Additional Information, as they may be amended from time to time. 
    


   
     6. Issue senior securities as defined in the 1940 Act, except that each
Portfolio may enter into repurchase agreements, reverse repurchase agreements,
dollar rolls, lend its portfolio securities and borrow money, as described
above, and engage in similar investment strategies described in the Prospectus
and Statement of Additional Information, as they may be amended from time to
time.
    
     7. Engage in underwriting of securities issued by others, except to the
extent that the Portfolio may be deemed to be an underwriter in connection with
the disposition of portfolio securities of the Portfolio.

     The following additional restrictions are not fundamental policies and may
be changed by the Directors without a vote of shareholders. Each Portfolio may
not:

     8. Purchase securities on margin, provided that margin deposits in
connection with futures contracts, options on futures contracts and other
derivative instruments shall not constitute purchasing securities on margin.

     9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and, to the extent related to the
segregation of assets in connection with the writing of covered put and call
options and the purchase of securities or currencies on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to forward contracts, options, futures contracts and
options on futures contracts. In addition, a Portfolio may pledge assets in
reverse repurchase agreements, dollar rolls and similar investment strategies
described in the Prospectus and Statement of Additional Information, as they may
be amended from time to time.

     10. 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 not more than 10% of its total assets (determined at
the time of investment) would be invested in such securities, or except as part
of a merger, consolidation or other acquisition.

     11. Enter into any repurchase agreement maturing in more than seven days or
investing in any other illiquid security if, as a result, more than 15% of a
Portfolio's net assets would be so invested. 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 that 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 15% limitation on illiquid
securities.

                                      B-42

<PAGE>


                             DIRECTORS AND OFFICERS

   
         The following  table lists the Directors and executive officers of the
Fund, their ages, business addresses, and principal occupations during the past
five years. The SunAmerica Mutual Funds ("SAMF") consist of SunAmerica Equity
Funds, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc. and the 
Fund. An asterisk indicates those Directors who are interested persons of the 
Fund within the meaning of the 1940 Act. 
     

   
<TABLE>
<CAPTION>
                                        Position                     Principal Occupations
Name, Age and Address                   with the Fund                During Past 5 Years
- ---------------------                   -------------                -------------------
<S>                                     <C>                          <C>
S. James Coppersmith, 65                Director                     Retired; formerly, President and General
7 Elmwood Road                                                       Manager, WCVB-TV, a division of the
Marblehead, MA 01945                                                 Hearst Corporation, (1982 to 1994);
                                                                     Director/ Trustee of SAMF and Anchor
                                                                     Series Trust ("AST").

Samuel M. Eisenstat, 58                 Chairman of the              Attorney, solo practitioner; Of Counsel,
430 East 86th Street                    Board                        Kramer, Levin, Naftalis & Frankel;
New York, NY  10028                                                  Chairman of the Boards of Directors/Trustees
                                                                     of SAMF and AST.

Stephen J. Gutman, 55                   Director                     Partner and Managing Member of B.B.
515 East 79th Street                                                 Associates LLC (menswear specialty
New York, NY 10021                                                   retailing and other activities) since June
                                                                     1988; Director/Trustee of SAMF and
                                                                     AST.

Peter A. Harbeck,*44                    Director and                 Director and President, SunAmerica Asset
The SunAmerica Center                   President                    Management Corp. ("SunAmerica");
733 Third Avenue                                                     Director, SunAmerica Capital Services,
New York, NY  10017-3204                                             Inc. ("SACS"), since August 1993;
                                                                     Director and President, SunAmerica Fund
                                                                     Services, Inc. ("SAFS"), since May 1988;
                                                                     President, SAMF and AST; 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.
</TABLE>
    

                                      B-43

<PAGE>

   
<TABLE>
<CAPTION>
                                        Position                     Principal Occupations
Name, Age and Address                   with the Fund                During Past 5 Years
- ---------------------                   -------------                -------------------
<S>                                     <C>                          <C>
Sebastiano Sterpa, 69                   Director                     Founder and Chairman of the Board of the
73473 Mariposa Drive                                                 Sterpa Group (real estate) since 1962;
Palm Desert, CA 92260                                                Director, Real Estate Business Service
                                                                     and Countrywide Financial; Director/
                                                                     Trustee of SAMF.

J. Steven Neamtz,* 38                   Vice President               Executive Vice President, SunAmerica,
The SunAmerica Center                                                since April 1996; Director and President, SACS, since
733 Third Avenue                                                     April 1996; formerly, Executive Vice
New York, NY 10017-3204                                              President, New England Funds, L.P. from
                                                                     July   1990 to April 1996.

Peter C. Sutton,  *34                   Treasurer                    Senior Vice President, SunAmerica, since 
The SunAmerica Center                                                April 1997; Treasurer, SAMF and AST, since February
733 Third Avenue                                                     1996; Vice President and Assistant Treasurer of
New York, NY 10017-3204                                              SAST and APF, since 1994; Vice President,
                                                                     Seasons, since April 1997; formerly, Vice
                                                                     President, SunAmerica, from 1994 to 1997;
                                                                     Controller, SAMF and AST, from March  1993
                                                                     to February 1996; Assistant Controller,
                                                                     SAMF and AST, from 1990 to 1993.

</TABLE>
    

                                      B-44

<PAGE>

   
<TABLE>
<CAPTION>
                                        Position                     Principal Occupations
Name, Age and Address                   with the Fund                During Past 5 Years
- ---------------------                   -------------                -------------------
<S>                                     <C>                          <C>
Robert M. Zakem, 40                     Secretary and Chief          Senior Vice President and General
The SunAmerica Center                   Compliance Officer           Counsel, SunAmerica, since April 1993;
733 Third Avenue                                                     Executive Vice President, General
New York, NY 10017-3204                                              Counsel and Director, SACS, since
                                                                     August 1993; Vice President, General
                                                                     Counsel and Assistant Secretary,
                                                                     SAFS, since January 1994; Vice President,
                                                                     SunAmerica Series Trust, Anchor Pathway and
                                                                     Seasons Series Trust; Assistant Secretary,
                                                                     SunAmerica Series Trust and Anchor
                                                                     Pathway Fund, since September 1993; Assistant
                                                                     Secretary, Seasons Series Trust, since April
                                                                     1997; formerly, Vice President and Associate
                                                                     General Counsel, SunAmerica, from March
                                                                     1992 to April 1993.
</TABLE>
    

   
     The Directors of the Fund are responsible for the overall supervision of
the operation of the Fund and each Portfolio and perform various duties imposed
on directors of investment companies by the 1940 Act and under the Fund's
articles of incorporation. Directors and officers of the Fund are also Directors
and officers of some or all of the other investment companies managed,
administered or advised by SunAmerica, and distributed by SunAmerica Capital
Services ("SACS" or the "Distributor") and other affiliates.
    

   
     The Fund pays each Director who is not an interested person of the Fund,
SunAmerica or any Adviser, nor a party to any Management Agreement or
Subadvisory Agreement (collectively, the "Disinterested Directors") 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 an aggregate of up to $60,000 in annual
compensation for acting as director or trustee to SAMF, and/or AST, a pro rata
portion of which, based on relative net assets, is borne by 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 up to $5,000 in annual compensation for serving on the Audit
Committees of SAMF, and/or AST, a pro rata portion of which, based on relative
net assets, is borne by the Fund. The Fund also has a Nominating Committee,
comprised solely of Disinterested Directors, which recommends to the Directors
those persons to be nominated for election as Directors by shareholders and
selects and proposes nominees for election by Directors between shareholders'
meetings. Members of the Nominating Committee serve without compensation.
    


                                      B-45

<PAGE>



   
     The Directors (and Trustees) of SAMF and AST have adopted the
SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the
"Retirement Plan") effective January 1, 1993 for the Disinterested Directors.
The Retirement Plan provides generally that if a Disinterested Director who has
at least 10 years of consecutive service as a Disinterested Director of any of
SAMF or AST (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. With respect to Sebastiano Sterpa, 
the Disinterested Directors have determined to make an exception to existing 
policy and allow Mr. Sterpa to remain on the Board past age 70, until
he has served for ten years. Mr. Sterpa will cease accruing retirement benefits
upon reaching age 70, although such benefits will continue to accrue interest as
provided for in the Retirement Plan.  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
that the Fund paid each Disinterested Director for his services as Director for
the fiscal year ended October 31, 1998. The Directors who are interested persons
of the Fund receive no compensation.
    
   
                                                   COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                     Pension or                                            Total Compensation
                                Aggregate            Retirement Benefits         Estimated Annual          from Registrant
                                Compensation         Accrued as Part of          Benefits Upon             and Fund Complex
Director                        from Fund            Fund Expenses*              Retirement*+              Paid to Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                     <C>                       <C>                       <C>  
S. James Coppersmith
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel M. Eisenstat**
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen J. Gutman
- ------------------------------------------------------------------------------------------------------------------------------------
Sebastiano Sterpa***
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

    
   
*    Information is for the five investment companies in the complex that pay
     fees to these directors/trustees. The complex consists of SAMF and AST.

**   Mr. Eisenstat receives additional compensation for serving as Chairman of
     each of the boards in the complex, $300 of which is payable by the Fund.

***  Mr. Sterpa is not a trustee of AST.

+    Assuming participant elects to receive benefits in 15 yearly installments.
    
   
     As of June 1, 1998,  the  Directors  and  officers of the Fund owned in the
aggregate  less  than 1% of each  class of each  Portfolio's  total  outstanding
shares.
    

                                      B-46

<PAGE>



   
     The following shareholders owned of record or beneficially 5% or more of
the indicated Portfolio Class' shares outstanding as of December 31, 1998: [to
be filed by amendment] A shareholder who owns beneficially, directly or
indirectly, 25% or more of a Portfolio's outstanding voting securities may be
deemed to "control" (as defined in the 1940 Act) that Portfolio.
    
                     ADVISERS, DISTRIBUTOR AND ADMINISTRATOR

   
SunAmerica Asset Management Corp. SunAmerica, organized as a Delaware
corporation in 1982, is located at The SunAmerica Center, 733 Third Avenue, New
York, NY 10017-3204, and acts as the investment manager to each of the
Portfolios pursuant to the Investment Advisory and Management Agreement (the
"Management Agreement") with the Fund, on behalf of each Portfolio. As of
January __, 1999, SunAmerica became a wholly-owned subsidiary of American  
International Group, Inc. ("AIG"), the leading U.S.-based international 
insurance organization. AIG, a Delaware corporation, is a holding company that
through its subsidiaries is primarily engaged in a broad range of insurance and
insurance related activities and financial services in the United States and
abroad. AIG, through its subsidiaries, is also engaged in a range of financial
service activities. AIG's asset management operations are carried out primarily
by AIG Global Investment Group, Inc., a direct wholly-owned subsidiary of AIG,
and its affiliates (collectively, "AIG Global"). AIG Global manages the
investment portfolios of various AIG subsidiaries, as well as third party
assets, and is responsible for product design and origination, marketing and
distribution of third party asset management products, including offshore and
private investment funds and direct investment. As of June 30, 1998, AIG Global
managed more than $86 billion of assets, of which approximately $10.8 billion
represented assets of unaffiliated third parties. AIG Capital Management Corp.,
an indirect wholly-owned subsidiary of AIG Global Investment Group, Inc., serves
as investment adviser to The AIG Money Market Fund, a separate series of The
Advisors' Inner Circle Fund, a registered investment company. In addition, AIG
Global Investment Corp., an AIG Global group company, serves as the
sub-investment adviser to an unaffiliated registered investment company. AIG
companies do not otherwise provide investment advice to any registered
investment companies.  
    

                                      B-47

<PAGE>


     Under the Management Agreement, and except as delegated to the Advisers
under the Subadvisory Agreements (as defined below), SunAmerica manages the
investment of the assets of each Portfolio and obtains and evaluates economic,
statistical and financial information to formulate and implement investment
policies for each Portfolio. Any investment program undertaken by SunAmerica
will at all times be subject to the policies and control of the Directors.
SunAmerica also provides certain administrative services to each Portfolio.

   
     Except  to the extent  otherwise  specified  in the  Management Agreement,
each Portfolio pays, or causes to be paid, all other expenses of the  Fund  and 
each of the Portfolios, 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  Portfolios  and their  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 Portfolios,
and supplements thereto, to the shareholders of the Portfolios;  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  Portfolios;  postage;  insurance  premiums on property or
personnel  (including  Officers  and  Directors)  of the Fund that  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 Fund's operation.
    
     The annual rate of the investment advisory fees that apply to each
Portfolio are set forth in the Prospectus.

   
     With respect to the Mid-Cap Growth Portfolio, Aggressive Growth Portfolio,
Value Portfolio and International Equity Portfolio, and the date of commencement
of operations with respect to the Large-Cap Growth Portfolio, Large-Cap Blend
Portfolio, Large-Cap Value Portfolio and Small-Cap Value Portfolio; SunAmerica
has voluntarily agreed to waive fees or reimburse expenses, if necessary, to
keep operating expenses at or below an annual rate of 1.78% of the assets of
Class A shares and 2.43% of the assets of Class B and Class II shares for each
such Portfolio (other than the International Equity Portfolio) and 2.03% of the
assets of Class A shares and 2.68% of the assets of Class B and Class II shares
for the International Equity Portfolio. With respect to the Focus Portfolio,
SunAmerica has voluntarily agreed to waive fees or reimburse expenses, if
necessary, to keep operating expenses at or below an annual rate of 1.45% of the
assets of Class A shares and 2.10% of the assets of Class B and Class II shares
for the Portfolio. SunAmerica also may voluntarily waive or reimburse additional
amounts to increase the investment return to a Portfolio's investors. SunAmerica
may terminate all such waivers and/or reimbursements at any time. Further, any
waivers or reimbursements made by SunAmerica with respect to a Portfolio are
subject to recoupment from that Portfolio within the following two years,
provided that the Portfolio is able to
    

                                      B-48

<PAGE>


   
effect such payment to SunAmerica and remain in compliance with the foregoing
expense limitations. The potential reimbursements are accounted for as possible
contingent liabilities that are not recordable on the balance sheet of a
Portfolio until collection is probable, but appear as footnote disclosure to
each Portfolio's financial statements. At such time as it appears probable that
a Portfolio is able to effect such reimbursement and that SunAmerica intends to
seek such reimbursement, the amount of the reimbursement will be accrued as an
expense of the Portfolio for that current period.
     
   
     The Management Agreement continues in effect with respect to each
Portfolio, for a period of two years from the date of execution unless
terminated sooner, and thereafter 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 respective Portfolio's outstanding voting securities. Any such
continuation also requires approval by a majority of the Disinterested Directors
by vote cast in person at a meeting called for such purpose. The Management
Agreement may be terminated with respect to a Portfolio at any time, without
penalty, on 60 days' written notice by the Directors, by the holders of a
majority of the respective Portfolio's outstanding voting securities or by
SunAmerica. The Management Agreement automatically terminates with respect to
each Portfolio in the event of its assignment (as defined in the 1940 Act and
the rules thereunder).
    
     Under the terms of the Management Agreement, SunAmerica is not liable to
the Portfolios, or their shareholders, for any act or omission by it or for any
losses sustained by the Portfolios or their shareholders, except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

The Advisers.

   
American Century Investment Management, Inc. ("American Century"), Bankers Trust
Company ("BT"), Berger Associates, Inc. ("Berger"), David L. Babson & Co., Inc.
("Babson"), Davis Selected Advisers, L.P. ("Davis"), Bramwell Capital
Management, Inc. ("Bramwell"), The Glenmede Trust Company ("Glenmede"), Janus
Capital Corporation ("Janus"), Jennison Associates LLC ("Jennison"), Lazard
Asset Management ("Lazard"), L. Roy Papp & Associates ("Papp"), Marsico Capital
Management, LLC ("Marsico"), Miller Anderson & Sherrerd, LLP ("MAS"), Montag &
Caldwell, Inc. ("Montag & Caldwell"), Morgan Stanley Dean Witter Investment
Management ("MSDW Investment Management"), Neuberger Berman, LLC ("Neuberger
Berman") Rowe Price- Fleming International, Inc. ("Rowe-Fleming"), T. Rowe Price
Associates, Inc. ("T. Rowe Price"), Warburg Pincus Asset Management, Inc.
("Warburg"), and Wellington Management Company, LLP ("Wellington Management")
act as Advisers to certain of the portfolios pursuant to various subadvisory
agreements with SunAmerica. SunAmerica advises a portion of the Aggressive
Growth Portfolio. 
    




                                      B-49

<PAGE>



   

- --------------------------------------------------------------------------------
           PORTFOLIO                              PORTFOLIO MANAGEMENT ALLOCATED
                                                   AMONG THE FOLLOWING ADVISERS
- --------------------------------------------------------------------------------
Large-Cap Growth Portfolio                      Janus
                                                Papp
                                                Montag & Caldwell
- --------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                        MAS
                                                T. Rowe Price
                                                Wellington Management
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio                     Janus
                                                SunAmerica
                                                Warburg
- --------------------------------------------------------------------------------
Large-Cap Blend Portfolio                       Lazard
                                                MSDW Investment Management
                                                T. Rowe Price
- --------------------------------------------------------------------------------
Large-Cap Value Portfolio                       Babson
                                                Davis
                                                Wellington Management
- --------------------------------------------------------------------------------
Value Portfolio                                 American Century
                                                Davis
                                                Neuberger Berman
- --------------------------------------------------------------------------------
Small-Cap Value Portfolio                       Berger*
                                                Lazard
                                                Glenmede
- --------------------------------------------------------------------------------
International Equity Portfolio                  BT
                                                Rowe-Fleming
                                                Warburg
- --------------------------------------------------------------------------------
Focus Portfolio                                 Bramwell
                                                Jennison
                                                Marsico
- --------------------------------------------------------------------------------
    


   
*    Pursuant to an agreement between Berger and Perkins, Wolf, McDonnell &
     Company ("PWM"), PWM manages Berger's portion of the Small Cap Value
     Portfolio.
    
   
Each of the other Advisers is independent of SunAmerica and discharges its
responsibilities subject to the policies of the Directors and the oversight of
supervision of SunAmerica, which pays the other

                                      B-50

<PAGE>



    
   
Advisers' fees. American Century is a wholly-owned subsidiary of American
Century Companies, Inc. Babson is a wholly-owned subsidiary of DLB Acquisition
Corp., a holding company controlled by MassMutual Holding Company, a holding
company, and wholly-owned subsidiary of Massachusetts Mutual Life Insurance, a
mutual life insurance company. Berger is a wholly-owned subsidiary of KCSI. BT
is a wholly-owned subsidiary of Bankers Trust New York Corporation. Bramwell is
wholly-owned by Elizabeth R. Bramwell who owns all of the outstanding capital
stock. Davis' sole general partner is Venture Advisers, Inc. Shelby M.C. Davis
is the controlling shareholder of the general partner. Glenmede is a
wholly-owned subsidiary of The Glenmede Corporation. Janus is controlled by
Kansas City Southern Industries, Inc. ("KCSI"), which owns approximately 83% of
the outstanding voting stock of Janus. KCSI is a publicly traded holding company
with principal operations in rail transportation and financial asset management
businesses. Thomas H. Bailey, President and Chairman of the Board of Janus owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus' Board. Jennison is wholly-owned by The Prudential Insurance
Company of America. Lazard is a division of Lazard Freres & Co. LLC, a New York
limited liability company. Papp is controlled by its partners, L. Roy Papp and
Rosellen C. Papp. Thomas F. Marsico has voting control of Marsico. MAS is a 
wholly-owned  indirect subsidiary of Morgan Stanley Dean Witter & Co., a 
financial services company. MSDW Investment Management is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. Montag & Caldwell is an indirect
wholly-owned subsidiary of Alleghany Corporation. Neuberger Berman is _________.
Robert H. Perkins owns 49% of PWM's outstanding common stock. Rowe-Fleming is
owned by T. Rowe Price, Flemings and Jardine Fleming Group Limited. T. Rowe
Price is a publicly traded company. Warburg is indirectly controlled by Warburg,
Pincus & Co., which has no businesses other than being a holding company of
Warburg and its affiliates. The following persons are managing partners of
Wellington Management: Robert W. Doran, Duncan M. McFarland and John R. Ryan.
    
   
     As described in the Prospectus, SunAmerica will initially allocate the
assets of each Portfolio equally among the Advisers for that Portfolio, and
subsequently allocations of new cash flow and of redemption requests will be
made equally among the Advisers of each Portfolio unless SunAmerica determines,
subject to the review of the Directors, that a different allocation of assets
would be in the best interests of a Portfolio and its shareholders. The Fund
expects that differences in investment returns among the portions of a Portfolio
managed by different Advisers will cause the actual percentage of a Portfolio's
assets managed by each Adviser to vary over time. In general, a Portfolio's
assets once allocated to one Adviser will not be reallocated (or "rebalanced")
to another Adviser for the Portfolio. However, SunAmerica reserves the right,
subject to the review of the Board, to reallocate assets from one Adviser to
another when deemed in the best interests of a Portfolio and its shareholders
including when the assets managed by an Adviser exceed that portion managed by
any other Adviser to the Portfolio. In some instances, where a reallocation
results in any rebalancing of the Portfolio from a previous allocation, the
effect of the reallocation will be to shift assets from a better performing
Adviser to a portion of the Portfolio with a relatively lower total return. 
    
   
     Each Adviser is paid monthly by SunAmerica a fee equal to a percentage of
the average daily

                                      B-51

<PAGE>



net assets of the Portfolio allocated to the Adviser. In addition, with respect
to the Focus Portfolio, SunAmerica has agreed to pay an additional $50,000 to
the Adviser with the highest total return for its portion of the Portfolio for
each calendar year. The aggregate annual rates, as a percentage of daily net
assets, of the fees payable by SunAmerica to the Advisers for each Portfolio may
vary according to the level of assets of each Portfolio. For the fiscal year
ended October 31, 1998, SunAmerica paid fees to the Advisers equal to the
following aggregate annual rates, expressed as a percentage of the assets of
each Portfolio: Large-Cap Growth Portfolio, ___%; Mid-Cap Growth Portfolio,
___%; Aggressive Growth Portfolio, ___%; Large-Cap Blend Portfolio, ___%;
Large-Cap Value Portfolio, ___%; Value Portfolio, ___%; Small-Cap Value
Portfolio, ___%; International Equity Portfolio, ___% and Focus Portfolio __%.
     
   
     The following table sets forth the total advisory fees incurred by each
Portfolio pursuant to the Management Agreement, or waived by the Adviser, for
the fiscal years ended October 31, 1998 and 1997.
    

                                  ADVISORY FEES
   
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    ADVISORY FEES
PORTFOLIO                                                ADVISORY FEES*                                  WAIVED
- ------------------------------------------------------------------------------------------------------------------------------------
                                                      1998             1997                  1998                       1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                 <C>                <C>                          <C>
Large-Cap Growth Portfolio                        $                    $11,611           $                              $6,846
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                          $                   $390,221           $                            $132,696
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio                       $                   $533,055           $                            $136,500
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio                         $                    $11,730           $                              $6,854
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio                         $                    $11,729           $                              $6,854
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio                                   $                   $671,560           $                            $188,985
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio                         $                    $12,079           $                              $6,891
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio                    $                   $440,671           $                            $147,973
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio*                                  $                   $                        --                         --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                               
- ----------------------
   
*    [Without giving effect to voluntary fee waivers.]
    
   
**   From date of inception of June 1, 1998.
    


                                      B-52

<PAGE>



   
     The Subadvisory Agreements continue in effect for a period of two years
from the date of their execution, unless terminated sooner. Thereafter, they may
be renewed from year to year, so long as continuance is specifically approved at
least annually in accordance with the requirements of the 1940 Act. The
Subadvisory Agreements provide that they will terminate in the event of an
assignment (as defined in the 1940 Act) or upon termination of the Management
Agreement. Under the terms of the Subadvisory Agreements, no Adviser is liable
to the Portfolios, or their shareholders, for any act or omission by it or for
any losses sustained by the Portfolios or their shareholders, except in the case
of willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties. SunAmerica may terminate any agreement with an Adviser
without shareholder approval. Moreover, SunAmerica has received an exemptive
order from the SEC that permits SunAmerica, subject to certain conditions, to
enter into agreements relating to the Fund with Advisers approved by the Board
of Directors without obtaining shareholder approval. The exemptive order also
permits SunAmerica, subject to the approval of the Board but without shareholder
approval, to employ new Advisers for new or existing Funds, change the terms of
particular agreements with Advisers or continue the employment of existing
Advisers after events that would otherwise cause an automatic termination of a
subadvisory agreement. Shareholders will be notified of any Adviser changes. 
     
   
     The following table sets forth the total subadvisory fees incurred by each
Portfolio pursuant to the Subadvisory Agreements, for the fiscal years ended
October 31, 1998 and 1997.
    
                                SUBADVISORY FEES
   
- --------------------------------------------------------------------------------
PORTFOLIO                                              SUBADVISORY FEES
- --------------------------------------------------------------------------------
                                                   1998                1997
- --------------------------------------------------------------------------------
Large-Cap Growth Portfolio                                               $5,613
- --------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                                               $195,077
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio                                            $199,051
- --------------------------------------------------------------------------------
Large-Cap Blend Portfolio                                                $3,714
- --------------------------------------------------------------------------------
Large-Cap Value Portfolio                                                $4,769
- --------------------------------------------------------------------------------
Value Portfolio                                                        $333,308
- --------------------------------------------------------------------------------
Small-Cap Value Portfolio                                                $6,649
- --------------------------------------------------------------------------------
International Equity Portfolio                                         $259,404
- --------------------------------------------------------------------------------
Focus Portfolio*                                                          --
- --------------------------------------------------------------------------------
    
- ----------------------
   
*    From date of inception of June 1, 1998.
    
   
Personal Trading. The Fund and SunAmerica have adopted a written Code of Ethics
(the "Code"), 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 is an individual who is a
trustee, director, officer, general partner or advisory person of the Fund or
SunAmerica. 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 SunAmerica, (ii) Initial Public

                                      B-53

<PAGE>



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. SunAmerica reports to the Board of Directors on a quarterly basis, as to
whether there were any violations of the Code by Access Persons of the Fund or
SunAmerica during the quarter.
    
     The Advisers have each adopted a written Code of Ethics, and have
represented that the provisions of such Code of Ethics are substantially similar
to those in the Code. Further, the Advisers report to SunAmerica on a quarterly
basis, as to whether there were any Code of Ethics violations by employees
thereof who may be deemed Access Persons of the Fund insofar as such violations
related to the Fund. In turn, SunAmerica reports to the Board of Directors as to
whether there were any violations of the Code by Access Persons of the Fund or
SunAmerica.

   
The Distributor. The Fund, on behalf of each Portfolio, has entered into a
distribution agreement (the "Distribution Agreement") with the Distributor, a
registered broker-dealer and an indirect wholly owned subsidiary of AIG, to 
act as the principal underwriter of the shares of each Portfolio. 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 Portfolios 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 each Portfolio, for distribution to persons who are not
shareholders of such Portfolio and the costs of preparing and distributing any
other supplemental sales literature. However, certain promotional expenses may
be borne by the Portfolio (see "Distribution Plans" below).
    
   
     SACS serves as Distributor of Class Z shares, with respect to the
Aggressive Growth Portfolio, Large-Cap Value Portfolio, Value Portfolio,
Small-Cap Value Portfolio and International Equity Portfolio, and incurs the
expenses of distributing the Portfolios' Class Z shares under the Distribution
Agreement, none of which are reimbursed or paid by the Fund.
    

     The Distribution Agreement with respect to each Portfolio will remain in
effect for two years from the date of execution unless terminated sooner, and
thereafter from year to year if such continuance is approved at least annually
by the Directors, including a majority of the Disinterested Directors. The Fund
and the Distributor each has the right to terminate the Distribution Agreement
with respect to a Portfolio on 60 days' written notice, without penalty. The
Distribution Agreement will terminate automatically in the event of its
assignment as defined in the 1940 Act and the rules thereunder.

     The Distributor may, from time to time, pay additional commissions or
promotional incentives to brokers, dealers or other financial services firms
that sell shares of the Portfolios. In some instances, such additional
commissions, fees or other incentives may be offered only to certain

                                      B-54

<PAGE>



firms, including Royal Alliance Associates, SunAmerica Securities, Inc., Koegler
Morgan & Company, Financial Service Corporation and Advantage Capital
Corporation, affiliates of the Distributor, that sell or are expected to sell
during specified time periods certain minimum amounts of shares of the
Portfolios, or of other funds underwritten by the Distributor. In addition, the
terms and conditions of any given promotional incentive may differ from firm to
firm. Such differences will, nevertheless, be fair and equitable, and based on
such factors as size, geographic location, or other reasonable determinants, and
will in no way affect the amount paid to any investor.

   
Distribution Plans. As indicated in the Prospectus, the Directors of the Fund
have adopted Distribution Plans (the "Class A Plan," the "Class B Plan" and the
"Class II Plan" and collectively, the "Distribution Plans") pursuant to Rule
12b-1 under the 1940 Act. There is no Distribution Plan in effect for Class Z
shares. Reference is made to "Fund Management - Distributor" in the Prospectus
for certain information with respect to the Distribution Plans.
    
   
     Under the Class A Plan, the Distributor may receive payments from a
Portfolio at an annual rate of up to 0.10% of average daily net assets of such
Portfolio's Class A shares to compensate the Distributor and certain securities
firms for providing sales and promotional activities for distributing that class
of shares. Under the Class B and Class II Plans, the Distributor may receive
payments from a Portfolio at the annual rate of up to 0.75% of the average daily
net assets of such Portfolio's Class B and Class II shares 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 Portfolio 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 A Plan, the Class B Plan
or the Class II Plan will exceed the Distributor's distribution costs as
described above. The Distribution Plans provide that each class of shares of
each Portfolio may also pay the Distributor an account maintenance and service
fee of up to 0.25% 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 trail commissions or account maintenance and service fees in an amount up
to 0.25% per year of the assets maintained in a Portfolio by their customers.
    
              DISTRIBUTION AND ACCOUNT MAINTENANCE AND SERVICE FEES
   
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO                                                                      SUBADVISORY FEES
- ------------------------------------------------------------------------------------------------------------------------------------
                                                              1998                                     1997
- ------------------------------------------------------------------------------------------------------------------------------------
                                                 Class       Class       Class       Class A         Class B         Class C*
                                                   A           B          II*
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>             <C>    <C>             <C>             <C>
Large-Cap Growth Portfolio                                                            $3,983           $173            $59
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                                                             $73,691         $164,888        $14,787
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      B-55

<PAGE>



<TABLE>
<S>                                          <C>              <C>             <C>    <C>             <C>             <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio                                                          $106,377        $209,795        $19,327
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio                                                             $4,000           $239            $63
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio                                                             $3,986           $281            $60
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio                                                                      $116,913        $309,027        $28,306
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio                                                             $3,849           $900            $184
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio                                                       $77,057         $162,796        $17,650
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio**
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
    
 -------------------
   
*    Class II shares of all Portfolios except the Focus Portfolio were
     previously designated as Class C until December 1, 1998. 
    
   
**   From date of inception of June 1, 1998.
    

   
     Continuance of the Distribution Plans with respect to each Portfolio is
subject to annual approval by vote of the Directors, including a majority of the
Disinterested Directors who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans (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 a Portfolio, without approval of the shareholders of the affected
class of shares of the Portfolio. 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 a
Portfolio 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
Portfolio. So long as the Distribution Plans are in effect, the election and
nomination of the Independent Directors of the Fund 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 a Portfolio, the
Directors must consider all factors they deem relevant, including information as
to the benefits of the Portfolio and the shareholders of the relevant class of
the Portfolio.
    

   
The Administrator. The Fund has entered into a Service Agreement, under the
terms of which SunAmerica Fund Services ("SAFS"), an indirect wholly owned
subsidiary of AIG, acts as a servicing agent assisting State Street Bank and
Trust Company ("State Street") in connection with certain services offered to
the shareholders of each of the Portfolios. 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 will remain in effect for two years from the date of
approval with respect to each Portfolio and from year to year thereafter
provided its continuance is approved

                                      B-56

<PAGE>



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 Fund, computed and payable monthly based upon an
annual rate of 0.22% of average daily net assets. This fee represents the full
cost of providing shareholder and transfer agency services to the Fund. 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 that would be paid by the Fund). No portion of such fee is
paid or reimbursed by Class Z shares. Class Z shares, however, will pay all
direct transfer agency fees and out-of-pocket expenses. For the fiscal year
ending October 31, 1998, the total amount paid to the Administrator by the Fund
was $1,449,722. For further information regarding the Transfer Agent see the 
section entitled "Additional Information" below. 
     
                      PORTFOLIO TRANSACTIONS AND BROKERAGE

     As discussed in the Prospectus, the Advisers are responsible for decisions
to buy and sell securities for each respective Portfolio, selection of
broker-dealers and negotiation of commission rates. Purchases and sales of
securities on a securities exchange are effected through broker-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 or another Adviser.

   
     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.
    
   
     An 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 that provide it with research
services and may cause a Portfolio to pay such broker-dealers commissions that
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. The research services consist
of assessments and analysis of the business or prospects of a company, industry
or economic sector. Certain research services furnished by brokers may be
useful to the Adviser with respect to clients other than the Fund and not all
of these services may be used by the Adviser in connection with the Fund. No
specific value can be determined for research services furnished without cost to
the Adviser by a broker. The Advisers are 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 Portfolio by
improving the quality of the Adviser's investment advice. The investment
advisory fees paid by the Portfolio are not reduced because the Adviser receives
such services. When making purchases of underwritten issues with fixed
underwriting fees, the Adviser may designate the use of broker-dealers who have
agreed to provide the Adviser with certain statistical, research and other
information. 
    

                                      B-57

<PAGE>



     Subject to applicable law and regulations, consideration may also be given
to the willingness of particular brokers to sell shares of a Portfolio as a
factor in the selection of brokers for transactions effected on behalf of a
Portfolio, subject to the requirement of best price and execution.

   
     Although the objectives of other accounts or investment companies that the
Adviser manages may differ from those of the Portfolio, it is possible that, at
times, identical securities will be acceptable for purchase by one or more of
the Portfolios and one or more other accounts or investment companies that 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 one or more of the Portfolios 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. However, simultaneous
transactions could adversely affect the ability of a Portfolio 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. Because each of the
Advisers to each Portfolio manages its portion of the Portfolio's assets
independently, it is possible that the same security may be purchased and sold
on the same day by two or more Advisers to the same Portfolio, resulting in
higher brokerage commissions for the Portfolio. 
     
   
[For the fiscal year ended October 31, 1998, the ____ Portfolios acquired no
securities of brokers or dealers that executed its portfolio transactions during
the year, and the _____ Portfolios acquired $___________ from the following
brokers or dealers that executed its portfolio transactions: 
    
   
[to be filed by amendment]
    
    
     The following tables set forth the brokerage commissions paid by the
Portfolios and the amounts of the brokerage commissions paid to affiliated
broker-dealers by the Portfolios for the fiscal years ended October 31, 1998 and
1997.     

   
                              BROKERAGE COMMISSIONS
                                      1998
    
                                                   

   
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                Percentage of           Percentage of
                                       Aggregate       Amount Paid to         Commissions Paid     Amount of Transactions
PORTFOLIO                              Brokerage      Affiliated Broker-        to Affiliated       Involving Payment of
                                      Commissions         Dealers               Broker-Dealers           Commissions
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>                     <C>                  <C>
Large-Cap Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
    

                                      B-58

<PAGE>


   
<TABLE>
<S>                                <C>                        <C>                              <C>                           <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
    

   
*    From date of inception of June 1, 1998.
    

   
<TABLE>
<CAPTION>
                                                         1997
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Percentage Paid
                                                Aggregate                    Amount Paid to               to Affiliated
PORTFOLIO                                       Brokerage                  Affiliated Broker-             Broker-Dealers
                                               Commissions                      Dealers
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                            <C>                            <C>          
Large-Cap Growth Portfolio                       $14,945                           --                           --
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                         $86,452                           --                           --
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio                      $128,678                          --                           --
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio                        $17,998                           --                           --
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio                        $20,352                           --                           --
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio                                  $218,608                       $47,675                       21.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio                        $30,356                           --                           --
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio                   $338,366                       $61,259                       18.10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
    

               ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES

   
     Upon making an investment in shares of a Portfolio, an open account will be
established under which shares of such Portfolio and additional shares acquired
through reinvestment of dividends and distributions will be held for each
shareholder's account by the Transfer Agent. Shareholders will not be issued
certificates for their shares unless they specifically so request in writing but
no certificate is issued for fractional 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.
     
   
     Shareholders who have met the Portfolio's minimum initial investment may
elect to have periodic purchases made through a dollar cost averaging program.
At the shareholder's election, such purchases may be made from their bank
checking or savings account on a monthly, quarterly, semi-annual or annual
basis. Purchases can be made via electronic funds transfer through the

                                      B-59

<PAGE>



Automated Clearing House or by physical draft check. Purchases made via physical
draft check  require an  authorization  card to be filed with the  shareholder's
bank.
    
   
     Shares of the Portfolios are sold at the respective net asset value next
determined after receipt of a purchase order, plus a sales charge, which, at the
election of the investor, (i) may be imposed at the time of purchase (Class A
shares), (ii) may be deferred (Class B shares, and purchases of Class A shares
in excess of $1 million) or (iii) may contain with elements of a sales charge
that is both imposed at the time of purchase and deferred (Class II shares).
Class C shares, now designated as Class II shares, had sales charges imposed on
a deferred basis with no front-end sales load prior to their redesignation.
Reference is made to "Shareholder Account Information" in the Prospectus for
certain information as to the purchase of Portfolio shares. 
     
   
     The following table sets forth the front-end sales concessions with respect
to Class A shares of each Portfolio, the amount of the front-end sales
concessions that was reallowed to affiliated broker-dealers, and the contingent
deferred sales charges with respect to Class B and Class II shares of each
Portfolio, received by the Distributor for the fiscal years ended October 31,
1998 and 1997.
    

                                      B-60

<PAGE>




   
                                      1998
    
   
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  Contingent
                                                              Amount            Amount            Contingent        Deferred
                      Front-End Sales   Front-End Sales     Reallowed         Reallowed         Deferred Sales   Sales Charge-
                       Concessions-      Concessions-     to Affiliated    to Non-Affiliated       Charge-          Class II
Portfolio             Class A Shares   Class II Shares*   Broker-Dealers     Broker-Dealers     Class B Shares      Shares**
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>                 <C>                <C>                  <C>              <C>
Large-Cap Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio***
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
    

   
*    Prior to December 1, 1998, only Focus Portfolio's Class II shares carried a
     front-end sales charge, while Class II shares with respect to the other
     Portfolios (then designated as Class C shares) carried no such charge.
    
   
**   Previously designated as Class II shares other than for the Focus
     Portfolio.
    
   
***  For the period from June 1, 1998 (commencement of offering of shares of
     Focus Portfolio.
    
   
                                      1997
    
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Contingent
                             Front-End Sales     Amount Reallowed     Amount Reallowed      Contingent Deferred          Deferred
Portfolio                      Concessions-       to Affiliated       to Non-Affiliated        Sales Charge-          Sales Charge-
                              Class A Shares      Broker-Dealers       Broker-Dealers          Class B Shares         Class C Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>                  <C>                     <C>                      <C>   
Large-Cap Growth Portfolio       $15,599              $2,885               $10,059                   --                     --
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio         $802,237            $257,754             $440,666                $25,643                  $268
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      B-61

<PAGE>


<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                  <C>                  <C>                     <C>                      <C> 
Aggressive Growth Portfolio     $1,394,623           $545,170             $668,387                $26,249                  $937
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio        $22,528              $9,732               $9,440                    --                     --
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio        $38,564              $6,352               $25,006                   --                     --
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio                 $1,925,092           $715,034             $949,290                $30,795                  $945
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio        $59,419             $18,399               $32,100                   --                     --
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio
                                 $699,157            $225,890             $383,626                $18,872                  $426
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   
Waiver of Contingent Deferred Sales Charges. As discussed under "Shareholder
Account Information" in the Prospectus, the CDSC may be waived on redemptions of
Class B and Class II 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
Class B shares are not redeemed within one year of the death, they will remain
Class B shares and be subject to the applicable CDSC, when redeemed.

   
     Disability. A CDSC 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 Code). To be eligible for such waiver, (i) the disability must arise after
the purchase of shares and (ii) the disabled shareholder must have been under
age 65 at the time of the initial determination of disability. If the account is
transferred to a new registration and then a redemption is requested, the
applicable CDSC will be charged.
    
   
Purchases through the Distributor. An investor may purchase shares of a
Portfolio through dealers who have entered into selected dealer agreements with
the Distributor. An investor's dealer who has entered into a distribution
arrangement with the Distributor is expected to forward purchase orders and
payment promptly to the Portfolio. Orders received by the Distributor before the
close of business will be executed at the offering price determined at the close
of regular trading on the New York Stock Exchange (the "NYSE") that day. Orders
received by the Distributor after the close of business will be executed at the
offering price determined after the close of regular trading of the NYSE on the
next trading day. The Distributor reserves the right to cancel any purchase
order for which payment has not been received by the fifth business day
following the investment. A Portfolio will not be responsible for delays caused
by dealers. 
    

                                      B-62

<PAGE>



   
Purchase by Check. Checks should be made payable to the specific Portfolio or to
"SunAmerica Funds." If the payment is for a retirement plan account for which
SunAmerica serves as fiduciary, please note 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 Portfolio 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 applicable Portfolio at the net asset value next
computed after the check is received, plus the applicable sales charge.
Subsequent purchases of shares of each Portfolio may be purchased directly
through the Transfer Agent. 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 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 "Shareholder
Account Information" in the Prospectus.)
    
   
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 $500
investment requirement for wire orders). If such order is received at or prior
to the Fund's close of business, the purchase of shares of a Fund will be
effected on that day. If the order is received after the Fund's close of
business, the order will be effected on the next business day.
     
    
Purchase by Federal Funds Wire. An investor may make purchases by having his or
her bank wire federal funds to the Fund's Transfer Agent. Federal funds purchase
orders will be accepted only on a day on which the Fund and the Transfer Agent
are open for business. In order to insure prompt receipt of a federal funds
wire, it is important that these steps be followed:
    

   
     1.   You must have an existing SunAmerica Fund Account before wiring funds.
          To establish an account, complete the New Account Application and send
          it via facsimile to SAFS at: (212) 551-5585.
    
                                      B-63

<PAGE>



     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 Portfolio, Class __] (include
          shareholder name and account number).

   
Waiver of Sales Charges with Respect to Certain Purchases of Class A Shares. To
the extent that sales are made for personal investment purposes, the sales
charge is waived as to Class A shares purchased by current or retired officers,
directors, and other full-time employees of SunAmerica and its affiliates, as
well as members of the selling group and family members of the foregoing. In
addition, the sales charge is waived with respect to shares purchased by certain
qualified retirement plans or employee benefit plans (other than IRAs), which
are sponsored or administered by SunAmerica or an affiliate thereof. Such plans
may include certain employee benefit plans qualified under Sections 401 or 457
of the Code, or employee benefit plans created pursuant to Section 403(b) of the
Code and sponsored by nonprofit organizations defined under Section 501(c)(3) of
the Code (collectively, "Plans"). A Plan will qualify for purchases at net asset
value provided that (a) the initial amount invested in one or more of the
Portfolios (or in combination with the shares of other SAMF) is at least
$1,000,000, (b) the sponsor signs a $1,000,000 Letter of Intent, (c) such shares
are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (d) the purchases are by trustees or other fiduciaries for certain
employer-sponsored plans, the trustee, fiduciary or administrator that has an
agreement with the Distributor with respect to such purchases and all such
transactions for the plan are executed through a single omnibus account.
Further, the sales charge is waived with respect to shares purchased by "wrap
accounts" for the benefit of clients of broker-dealers, financial institutions,
financial planners or registered investment advisers adhering to the following
standards established by the Distributor: (i) the broker-dealer, financial
institution or financial planner charges its client(s) an advisory fee based on
the assets under management on an annual basis, and (ii) such broker-dealer,
financial institution or financial planner does not advertise that shares of the
Portfolio may be purchased by clients at net asset value. Shares purchased under
this waiver may not be resold except to the Portfolio. Shares are offered at net
asset value to the foregoing persons because of anticipated economies in sales
effort and sales related expenses. Reductions in sales charges apply to
purchases or shares by a "single person" including an individual; members of a
family unit comprising husband, wife and minor children; or a trustee or other
fiduciary purchasing for a single fiduciary account. Complete details concerning
how an investor may purchase shares at reduced sales charges may be obtained by
contacting the Distributor.
    
   
Reduced Sales Charges (Class A Shares only). As discussed under "Shareholder
Account Information" in the Prospectus, investors in Class A shares of a
Portfolio may be entitled to reduced sales charges pursuant to the following
special purchase plans made available by the Fund.
    
     Combined Purchase Privilege. The following persons may qualify for the
sales charge reductions or eliminations by combining purchases of Portfolio
shares into a single transaction:


                                      B-64

<PAGE>



   
     (i) an individual, or a "company" as defined in Section 2(a)(8) of the 1940
Act (which includes corporations that are corporate affiliates of each other);
    
     (ii) an individual, his or her spouse and their minor children, purchasing
for his, her or their own account;

     (iii) a trustee or other fiduciary purchasing for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code);

     (iv) tax-exempt organizations qualifying under Section 501(c)(3) of the
Code (not including 403(b) plans);

     (v) employee benefit plans of a single employer or of affiliated employers,
other than 403(b) plans; and

     (vi) group purchases as described below.

   
     A combined purchase currently may also include shares of other funds in 
SAMF (other than money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares directly with
the Distributor.
    
     Rights of Accumulation. A purchaser of Portfolio shares may qualify for a
reduced sales charge by combining a current purchase (or combined purchases as
described above) with shares previously purchased and still owned; provided the
cumulative value of such shares (valued at cost or current net asset value,
whichever is higher), amounts to $50,000 or more. In determining the shares
previously purchased, the calculation will include, in addition to other Class A
shares of the particular Portfolio that were previously purchased, shares of the
other classes of the same Portfolio, as well as shares of any class of any other
Portfolio or of any of the other Portfolios advised by SunAmerica, as long as
such shares were sold with a sales charge or acquired in exchange for shares
purchased with such a sales charge.

     The shareholder's dealer, if any, or the shareholder, must notify the
Distributor at the time an order is placed of the applicability of the reduced
charge under the Right of Accumulation. Such notification must be in writing by
the dealer or shareholder when such an order is placed by mail. The reduced
sales charge will not be granted if: (a) such information is not furnished at
the time of the order; or (b) a review of the Distributor's or the Transfer
Agent's records fails to confirm the investor's represented holdings.

   
     Letter of Intent. A reduction of sales charges is also available to an
investor who, pursuant to a written "Letter of Intent," establishes a total
investment goal in Class A shares of one or more Portfolios to be achieved
through any number of investments over a thirteen-month period, of $50,000 or
more. Each investment in such Portfolios
    

                                      B-65

<PAGE>


   
made during the period will be subject to a reduced sales charge applicable to
the goal amount. The initial purchase must be at least 5% of the stated
investment goal and shares totaling 5% of the dollar amount of the Letter of
Intent will be held in escrow by the Transfer Agent, in the name of the
investor. Shares of any class of shares of any Portfolio, or of other funds
advised by SunAmerica that impose a sales charge at the time of purchase, which
the investor intends to purchase or has previously purchased during a 30-day
period prior to the date of execution of the Letter of Intent and still owns,
may also be included in determining the applicable reduction; provided, the
dealer or shareholder notifies the Distributor of such prior purchase(s). 
    

     The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amounts of the investment goal. In the event the
investment goal is not achieved within the thirteen-month period, the investor
is required to pay the difference between the sales charge otherwise applicable
to the purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the Distributor
is authorized by the Letter of Intent to liquidate a sufficient number of
escrowed shares to obtain such difference. If the goal is exceeded and purchases
pass the next sales charge break-point, the sales charge on the entire amount of
the purchase that results in passing that break-point, and on subsequent
purchases, will be subject to a further reduced sales charge in the same manner
as set forth above under "Rights of Accumulation," but there will be no
retroactive reduction of sales charges on previous purchases. At any time while
a Letter of Intent is in effect, a shareholder may, by written notice to the
Distributor, increase the amount of the stated goal. In that event, shares of
the applicable Portfolio purchased during the previous 90-day period and still
owned by the shareholder will be included in determining the applicable sales
charge. The 5% escrow and the minimum purchase requirement will be applicable to
the new stated goal. Investors electing to purchase shares of one or more of the
Portfolios pursuant to this purchase plan should carefully read such Letter of
Intent.

     Reduced Sales Charge for Group Purchases. Members of qualified groups may
purchase Class A shares of the Portfolios under the combined purchase privilege
as described above.

     To receive a rate based on combined purchases, group members must purchase
Class A shares of a Portfolio through a single investment dealer designated by
the group. The designated dealer must transmit each member's initial purchase to
the Distributor, together with payment and completed New Account Application.
After the initial purchase, a member may send funds for the purchase of Class A
shares directly to the Transfer Agent. Purchases of a Portfolio's shares are
made at the public offering price based on the net asset value next determined
after the Distributor or the Transfer Agent receives payment for the Class A
shares. The minimum investment requirements described above apply to purchases
by any group member.

   
     Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or other
organized groups of persons (the members of which may include other qualified
groups) provided that: (i) the group has at least 25 members of which at least
ten members participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some purpose in addition
to the purchase of investment company shares at a reduced sales charge; (iv) the
group's sole organizational nexus or connection is

                                      B-66

<PAGE>



not that the members are credit card customers of a bank or broker-dealer,
clients of an investment adviser or security holders of a company; (v) the group
agrees to provide its designated investment dealer at least annually access to
the group's membership by means of written communication or direct presentation
to the membership at a meeting; (vi) the group or its investment dealer will
provide annual certification, in form satisfactory to the Transfer Agent, that
the group then has at least 25 members and that at least ten members
participated in group purchases during the immediately preceding 12 calendar
months; and (vii) the group or its investment dealer will provide periodic
certification, in form satisfactory to the Transfer Agent, as to the eligibility
of the purchasing members of the group.
     
   
     Members of a qualified group include: (i) any group that meets the
requirements stated above and is a constituent member of a qualified group; (ii)
any individual purchasing for his or her own account who is carried on the
records of the group or on the records of any constituent member of the group as
being a good standing employee, partner, member or person of like status of the
group or constituent member; or (iii) any fiduciary purchasing shares for the
account of a member of a qualified group or a member's beneficiary. For example,
a qualified group could consist of a trade association that would have as its
members individuals, sole proprietors, partnerships and corporations. The
members of the group would then consist of the individuals, the sole proprietors
and their employees, the members of the partnership and their employees, and the
corporations and their employees, as well as the trustees of employee benefit
trusts acquiring a Portfolio's shares for the benefit of any of the foregoing.
    
     Interested groups should contact their investment dealer or the
Distributor. The Fund reserves the right to revise the terms of or to suspend or
discontinue group sales with respect to shares of the Portfolio at any time.

              ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES

   
     Reference is made to "Shareholder Account Information" in the Prospectus
for certain information as to the redemption of Portfolio shares.
    
     If the Directors determine that it would be detrimental to the best
interests of the remaining shareholders of a Portfolio to make payment wholly or
partly in cash, the Fund, having filed with the SEC a notification of election
pursuant to Rule 18f-1 on behalf of each of the Portfolios, may pay the
redemption price in whole, or in part, by a distribution in kind of securities
from a Portfolio in lieu of cash. In conformity with applicable rules of the
SEC, the Portfolios are committed to pay in cash all requests for redemption, 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 applicable Portfolio 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.


                                      B-67

<PAGE>



   
     The Distributor is authorized, as agent for the Portfolios, to offer to
repurchase shares that 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 a Portfolio next-determined after the repurchase order is received,
less any applicable CDSC. Repurchase orders received by the Distributor after
the Portfolio'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 Portfolios nor the Distributor imposes any such
charge. The offer to repurchase may be suspended at any time.
    

   
                               EXCHANGE PRIVILEGE
    

   
     Shareholders in any of the Portfolios may exchange their shares for the
same class of shares of any other SunAmerica Mutual Funds that offer such class
at the respective net asset value per share. 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 or 
subsequent investment requirements. Notwithstanding the foregoing, shareholders
may elect to make periodic exchanges on a monthly, quarterly, semi-annual and 
annual basis through the Systematic Exchange Program. Through this program, 
the minimum exchange amount is $25 and there is no fee for exchanges made. All 
exchanges can be effected only 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
SunAmerica Mutual Fund where 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 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 II shares through an exchange
from another SunAmerica fund will retain liability for any deferred sales charge
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" with the
holding period of the shares acquired in the exchange for purposes of
    

                                      B-68

<PAGE>


   
determining what, if any, CDSC is applicable upon a redemption of any of such
shares and the timing of conversion of Class B shares to Class A. A
shareholder's CDSC schedule will not change if such shareholder exchanges Class
C or Class II shares purchased prior to December 1, 1998 for Class II shares
(which currently have a longer CDSC schedule).
    
   
     Because excessive trading (including short-term "market timing" trading)
can hurt a Portfolio's performance, each Portfolio may refuse any exchange sell
order (1) if it appears to be a market timing transaction involving a
significant portion of a Portfolio's assets or (2) 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 indications, will be
considered one account for this purpose.
    
   
     In addition, a Portfolio reserves the right to refuse any exchange purchase
order if, in the judgment of the Adviser, the Portfolio 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 Portfolio receives or anticipates
simultaneous orders affecting significant portions of the Portfolio's assets. In
particular, a pattern of exchanges that coincide with a "market timing" strategy
may be disruptive to the Portfolio and may therefore be refused. 
    

                        DETERMINATION OF NET ASSET VALUE

     The Fund is open for business on any day the 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). Each Portfolio 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.

   
     Stocks are valued based upon closing sales prices reported on recognized
securities exchanges or, for listed securities having no sales reported and for
unlisted securities, upon last reported bid prices. Non-convertible bonds,
debentures, other long-term debt securities and short-term securities with
original or remaining maturities in excess of 60 days, are normally valued at
prices obtained for the day of valuation from a bond pricing service of a major
dealer in bonds, when such prices are available; however, in circumstances in
which the Adviser deems it appropriate to do so, an over-the-counter or
exchange quotation at the mean of representative bid or asked prices may be
used. Securities traded primarily on securities exchanges outside the United
States are valued at the last sale price on such exchanges on the day of
valuation, or if there is no sale on the day of valuation, at the last-reported
bid price. If a security's price is available from more than one foreign
exchange, a Portfolio uses the exchange that is the primary market for the
security. Short-term securities with 60 days or less to maturity are amortized
to maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund on the 60th day, are amortized to
maturity based on the value determined on the 61st day. Options traded on
national securities exchanges are valued as of the close of the exchange on
which they are traded. Futures and options traded on commodities exchanges are
valued at their last sale price as of the close of such

                                      B-69

<PAGE>



exchange. Other securities are valued on the basis of last sale or bid price (if
a last sale price is not available) in what is, in the opinion of the
Adviser, the broadest and most representative market, that may be either a
securities exchange or the over-the-counter market. Where quotations are not
readily available, securities are valued at fair value as determined in good
faith in accordance with procedures adopted by the Board of Directors. The fair
value of all other assets is added to the value of securities to arrive at the
respective Portfolio's total assets.
    

     A Portfolio's liabilities, including proper accruals of expense items, are
deducted from total assets.

                                PERFORMANCE DATA

     Each Portfolio may advertise performance data that reflects various
measures of total return and each Portfolio may advertise data that reflects
yield. An explanation of the data presented and the methods of computation that
will be used are as follows.

     A Portfolio'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 funds and U.S. Treasury Bills. Certain of these
alternative investments may offer fixed rates of return and guaranteed principal
and may be insured.

   
     Average annual total return is determined separately for Class A, Class B,
Class II and Class Z shares in accordance with a formula specified by the SEC.
Average annual total return is computed by finding the average annual compounded
rates of return for the 1-, 5-, and 10-year periods or for the lesser included
periods of effectiveness. The formula used is as follows:
    
                                 P(1 + T)n = ERV

               P   = a hypothetical initial purchase payment of $1,000
               T   = average annual total  return 
               N   = number of years
               ERV = ending  redeemable value of a hypothetical $1,000 
                     payment made at the beginning  of the 1-,  5-,  or 10- year
                     periods at the end of the 1-, 5-, or 10-year periods (or 
                     fractional portion thereof).


         The above formula assumes that:

   
               1.   The maximum sales load (i.e., either the front-end sales
                    load in the case of the Class A or Class II shares or the
                    deferred sales load that would be applicable to a complete
                    redemption of the investment at the end of the specified
                    period in the case of the Class B or Class II shares) is
                    deducted from the initial $1,000 purchase payment;

                                      B-70

<PAGE>



    
               2.   All dividends and distributions are reinvested at net asset
                    value; and

               3.   Complete redemption occurs at the end of the 1-, 5-, or 10-
                    year periods or fractional portion thereof with all
                    nonrecurring charges deducted accordingly.


   
     Each Portfolios' average annual total return for the 1-, 5- and 10-year
periods (or from date of inception, if sooner) ended October 31, 1998 is as
follows:
    
   
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
                                             Since                 One                 Five                  Ten
Class A Shares                             Inception               Year                Years                Years
- --------------                             ---------               ----                -----                -----
- -------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                     <C>                  <C>                  <C> 
Large-Cap Growth Portfolio                  _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                                                                N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio                                                             N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio                   _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio                   _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Value Portfolio                                                                         N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio                   _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
International Equity Portfolio                                                          N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Focus Portfolio(2)                          _______(2)             N/A                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
    
- ----------------

(1)  From date of inception of October 15, 1997.
    
(2)  From date of inception of June 1, 1998.
    
   
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------

                                             Since                 One                 Five                  Ten
Class B Shares                             Inception               Year                Years                Years
- --------------                             ---------               ----                -----                -----
- -------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                  <C>                    <C>                  <C>
Large-Cap Growth Portfolio                  _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                                                                N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio                                                             N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio                   _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio                   _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


                                     B-71

<PAGE>



<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                    <C>                  <C>                  <C>
Value Portfolio                                                                         N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio                   _______(1)                                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
International Equity Portfolio              (0.96%)                N/A                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Focus Portfolio(2)                          _______(2)             N/A                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
    
- ----------------

(1)  From date of inception of October 15, 1997.
    
(2)  From date of inception of June 1, 1998.
    

   
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
                                             Since                 One                 Five                  Ten
Class II Shares(1)                         Inception               Year                Years                Years
- ---------------                            ---------               ----                -----                -----
- -------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                   <C>                  <C>                  <C>
Large-Cap Growth Portfolio                   ____(2)                                    N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio                                                                N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio                                                             N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio                    _____(2)                                   N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio                    _____(2)                                   N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Value Portfolio                              17.99%                                     N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio                    _____(2)                                   N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
International Equity Portfolio                                                          N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
Focus Portfolio(3)                           _____(2)              N/A                  N/A                  N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

    
 ________________

   
(1)  Previously designated as Class C shares other than for the Focus Portfolio.

(2)  From date of inception of October 15, 1997. 

(3)  From date of inception of June 1, 1998.
    

     Each Portfolio may advertise cumulative, rather than average return, for
each class of its shares for periods of time other than the 1-, 5-, and 10-year
periods or fractions thereof, as discussed above. Such return data will be
computed in the same manner as that of average annual total return, except that
the actual cumulative return will be computed.

                                      B-72

<PAGE>

Comparisons

     Each Portfolio may compare its total return or yield to similar measures as
calculated by various publications, services, indices, or averages. Such
comparisons are made to assist in evaluating an investment in a Portfolio. The
following references may be used:

     a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks (Dow Jones Utilities Average),
and 20 transportation company stocks (Dow Jones Transportation Average).
Comparisons of performance assume reinvestment of dividends.

   
     b) Standard & Poor's 500 Composite Stock Price Index or its component
indices -- an unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks. Comparisons of
performance assume reinvestment of dividends.
    
   
     c) Standard & Poor's 100 Stock Index -- an unmanaged index based on the
prices of 100 blue chip stocks, including 92 industrials, one utility, two
transportation companies, and five financial institutions. The Standard & Poor's
100 Stock Index is a smaller, more flexible index for options trading.
     
   
     d) The NYSE composite or component indices -- unmanaged indices of all 
industrial, utilities, transportation, and finance stocks listed on the NYSE.
    
   
     e) Wilshire 5000 Equity Index or its component indices -- represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.
     
   
     f) 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.
     
   
     g) CDA Mutual Fund Report, published by CDA Investment Technologies,
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.
    
   
     h) Mutual Fund Source Book, Principia and other publications and
information services

                                      B-73

<PAGE>



provided by Morningstar, Inc. -- analyzes price, risk and total return for the
mutual fund industry.
    
   
     i) Financial publications: Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Pension and Investment Age,
United Mutual Fund Selector, and Wiesenberger Investment Companies Service, and
other publications containing financial analyses that rate mutual fund
performance over specified time periods.
     
   
     j) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of periodic change in the
price of goods and services in major expenditure groups.
     
   
     k) 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.
     
   
     l) Savings and Loan Historical Interest Rates as published in the U.S.
Savings & Loan League Fact Book.
    
   
     m) Shearson-Lehman Municipal Bond Index and Government/Corporate Bond Index
- --unmanaged indices that track a basket of intermediate and long-term bonds.
Reflect total return and yield and assume dividend reinvestment.
     
   
     n) Salomon GNMA Index published by Salomon Brothers Inc. -- Market value of
all outstanding 30-year GNMA Mortgage Pass-Through Securities that includes
single family and graduated payment mortgages.
    
   
     o) Salomon Mortgage Pass-Through Index published by Salomon Brothers Inc.
- --Market value of all outstanding agency mortgage pass-through securities that
includes 15- and 30-year FNMA, FHLMC and GNMA Securities.
    
   
     p) Value Line Geometric Index -- broad based index made up of approximately
1700 stocks each of which have an equal weighting.
    
   
     q) Morgan Stanley Capital International EAFE Index -- an arithmetic, market
value-weighted average of the performance of over 900 securities on the stock
exchanges of countries in Europe, Australia and the Far East.
    

                                      B-74

<PAGE>



   
     r) Goldman Sachs 100 Convertible Bond Index -- currently includes 67 bonds
and 33 preferred stocks. The original list of names was generated by screening
for convertible issues of $100 million or more in market capitalization. The
index is priced monthly.
    
   
     s) Salomon Brothers High Grade Corporate Bond Index -- consists of publicly
issued, non-convertible corporate bonds rated "AA" or "AAA." It is a
value-weighted, total return index, including approximately 800 issues.
     
   
     t) Salomon Brothers Broad Investment Grade Bond Index -- is a
market-weighted index that contains approximately 4700 individually priced
investment grade corporate bonds rated "BBB" or better, U.S. Treasury/agency
issues and mortgage pass-through securities.
    
   
     u) Salomon Brothers World Bond Index -- measures the total return
performance of high-quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
    
              Australian Dollars                        Netherlands Guilders
              Canadian Dollars                          Swiss Francs
              European Currency Units                   UK Pound Sterling
              French Francs                             U.S. Dollars
              Japanese Yen                              German Deutsche Marks

   
     v) J.P. Morgan Global Government Bond Index -- a total return, market
capitalization-weighted index, rebalanced monthly, consisting of the following
countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
The Netherlands, Spain, Sweden, the United Kingdom, and the United States.
    
   
     w) Shearson Lehman Long-Term Treasury Bond Index -- is comprised of all
bonds covered by the Shearson Lehman Hutton Treasury Bond Index with maturities
of 10 years or greater.
    
   
     x) NASDAQ Industrial Index -- is comprised of more than 3,000 industrial
issues. It is a value-weighted index calculated on pure change only and does not
include income.
    
   
     y) The MSCI Combined Far East Free ex Japan Index -- a market
capitalization weighted index comprised of stocks in Hong Kong, Indonesia,
Korea, Malaysia, Philippines, Singapore and Thailand. Korea is included in this
index at 20% of its market capitalization.
    

                                      B-75

<PAGE>



   
     z) First Boston High Yield Index -- generally includes over 180 issues with
an average maturity range of seven to ten years with a minimum capitalization of
$100 million. All issues are individually trader-priced monthly.
     
   
     aa) Morgan Stanley Capital International World Index -- An arithmetic,
market value-weighted average of the performance of over 1,470 securities listed
on the stock exchanges of countries in Europe, Australia, the Far East, Canada
and the United States.
    
   
     bb) Russell 2000 and 3000 Indices -- represents the top 2,000 and the top
3,000 stocks, respectively, traded on the NYSE, American Stock Exchange and 
National Association of Securities Dealers Automated Quotations, by market
capitalizations. 
    
   
     cc) Russell Midcap Growth Index -- contains those Russell Midcap securities
with a greater-than-average growth orientation. The stocks are also members of
the Russell 1000 Growth Index, the securities in which tend to exhibit higher
price-to-book and price earnings ratios, lower dividend yields and higher
forecasted growth values than the Value universe.
     
   
     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 a Portfolio'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 a Portfolio to calculate
its figures. Specifically, a Portfolio may compare its performance to that of
certain indices that include securities with government guarantees. However, a
Portfolio's shares do not contain any such guarantees. In addition, there can be
no assurance that a Portfolio will continue its performance as compared to such
other standards.
    

                       DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions. Each Portfolio intends to distribute to the
registered holders of its shares 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. Each Portfolio intends to distribute
any net capital gains from the sale of assets held for more than 12 months in
excess of any net short-term capital losses. The current policy of each
Portfolio other than the Large-Cap Blend Portfolio, is to pay investment income
dividends, if any, at least annually. Large-Cap Blend Portfolio's current policy
is to pay investment income dividends, if any, on a quarterly basis. Each
Portfolio intends to pay net capital gains, if any, annually. In determining
amounts of capital gains to be distributed, any capital loss carry-forwards from
prior years will be offset against capital gains.
   
     Distributions will be paid in additional Portfolio shares based on the net
asset value at the close of business on the ex-dividend or reinvestment date, 
unless the dividends total in excess of $10.00 per
    
                                      B-76

<PAGE>

distribution period and the shareholder notifies the Portfolio 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. Each Portfolio intends to qualify and elect to be taxed as a regulated
investment company under Subchapter M of the Code for each taxable year. In
order to be qualified as a regulated investment company, each Portfolio
generally must, among other things, (a) derive at least 90% of its gross income
from the sales or other disposition of securities, dividends, interest, 
proceeds from loans of stock or securities and certain other related income; 
and (b) diversify its holdings so that, at the end of each fiscal quarter, (i) 
50% of the market value of each Portfolio's assets is represented by cash, 
government securities, securities of other regulated investment companies and 
other securities limited, in respect of any one issuer, to an amount no greater
than 5% of each Portfolio'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, each Portfolio will not be subject to
U.S. Federal income tax on its income and capital 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. Each Portfolio 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, each Portfolio 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
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 the previous years that were not distributed during such years. To
avoid application of the excise tax, each Portfolio intends to make
distributions in accordance with the calendar year distribution requirement. A
distribution will be treated as paid during the calendar year if actually paid
during such year. Additionally, a distribution will be treated as paid on
December 31 of a calender year if it is declared by a Portfolio in October,
November or December of such year, payable to shareholders of record on a date
in such month and paid by such Portfolio during January of the following year.
Any such distributions paid during January of the following year will be taxable
to shareholders as of such December 31, rather than the date on which the
distributions are received.

   
     Distributions of net investment income and short-term capital gains are  
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. The
portion of such dividends received from each Portfolio that will be eligible for
the dividends received deduction for corporations will be determined on the
basis of the amount of each Portfolio's gross income, exclusive of capital gains
from sales of stock or securities, which is derived as dividends from domestic
corporations, other than certain tax-exempt corporations and certain real estate
investment trusts, and will be designated as such in a written notice to
shareholders mailed not later than 60 days after the end of each fiscal year. It
is not anticipated that the dividends paid by the International Equity Portfolio
will be eligible for the dividends-received deduction. Distributions of net
capital gains (i.e., the excess of net capital gains  from the sale of assets
held for more than 12 months over net short-term capital losses, and including
such gains from certain transactions in futures and options), if any, are
taxable as capital gains to the shareholders, whether or not reinvested and
regardless of the length of time a shareholder has owned his or her shares. The
maximum capital gains rate for individuals is 20% with respect to assets held
for more than 12 months. The maximum capital gains rate for corporate
shareholders currently is the same as the maximum tax rate for ordinary income. 
     

                                     B-77

<PAGE>

   
     Upon a sale or exchange of its shares, a shareholder will realize a taxable
gain or loss depending on 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, any such capital gain will be
treated as short-term capital gain, taxable at the same rates as ordinary income
if the shares were held for not more than 12 months and capital gain taxable at
the maximum rate of 20% if such shares were held for more than 12 months. In the
case of a corporation, any such capital gain will be treated as long-term
capital gain, taxable at the same rates as ordinary income, if such shares were
held for more than 12 months. Any such loss will be treated as long-term capital
loss if such shares were held for more than 12 months. A loss recognized on the
sale or exchange of shares held for six months or less, however, will be treated
as long-term capital loss to the extent of any long-term capital gains
distribution with respect to such shares. 
    

   
     Generally, any loss realized on a sale or exchange of shares of a Fund will
be disallowed if other shares of such Fund are acquired (whether through the
automatic reinvestment of dividends or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
    

     Under certain circumstances (such as the exercise of an exchange
privilege), 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 a Portfolio 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 a Portfolio will be subject, since the amount of that
Portfolio's assets to be invested in various countries is not known. Only the
International Equity Portfolio is anticipated to qualify to pass through to 
its shareholders the ability to claim as a foreign tax credit their respective
shares of foreign taxes paid by such Portfolio. If more than 50% in value of 
the Portfolio's total assets at the close of its taxable year consists of 
securities of foreign corporations, the Portfolio will be eligible, and 
intends, to file an election with the Internal Revenue Service pursuant to 
which shareholders of the Portfolio will be required to include their 
proportionate share of such foreign taxes in their U.S. income tax returns as 
gross income, treat such proportionate share as taxes paid by them, and deduct 
such proportionate share in computing their taxable incomes or, alternatively, 
subject to certain limitations and the Portfolio and the shareholders 
satisfying certain holding period requirements, use them as foreign tax
    
                                      B-78

<PAGE>



credits against their U.S. income taxes. No deductions for foreign taxes,
however, may be claimed by non-corporate shareholders who do not itemize
deductions. Of course, certain retirement accounts which are not subject to tax
cannot claim foreign tax credits on investments in foreign securities held in
the Portfolio. A shareholder that is a nonresident alien individual or a foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the Portfolio's election described in this paragraph but may not be able to
claim a credit or deduction against such U.S. tax for the foreign taxes treated
as having been paid by such shareholder.

     Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Portfolio accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time such Portfolio actually collects such receivables or pays
such liabilities are treated as ordinary income or ordinary loss. Similarly,
gains or losses on forward foreign currency exchange contracts, foreign currency
gains or losses from futures contracts that are not "regulated futures
contracts" and from unlisted non-equity options, gains or losses from sale of
currencies or dispositions of debt securities denominated in a foreign currency
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition generally also
are treated as ordinary gain or loss. These gains, referred to under the Code as
"Section 988" gains or losses, increase or decrease the amount of each
Portfolio's investment company taxable income available to be distributed to its
shareholders as ordinary income. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, a Portfolio would
not be able to make any ordinary dividend distributions, and any distributions
made in the same taxable year may be recharacterized as a return of capital to
shareholders, thereby reducing the basis of each shareholder's Portfolio shares.
In certain cases, a Portfolio may be entitled to elect to treat foreign currency
gains on forward or futures contracts, or options thereon, as capital gains.

     The Code includes special rules applicable to the listed non-equity
options, regulated futures contracts, and options on futures contracts which a
Portfolio may write, purchase or sell. Such options and contracts are classified
as Section 1256 contracts under the Code. The character of gain or loss
resulting from the sale, disposition, closing out, expiration or other
termination of Section 1256 contracts, except forward foreign currency exchange
contracts, is generally treated as long-term capital gain or loss to the extent
of 60% thereof and short-term capital gain or loss to the extent of 40% thereof
("60/40 gain or loss"). Such contracts, when held by a Portfolio at the end of a
fiscal year, generally are required to be treated as sold at market value on the
last day of such fiscal year for Federal income tax purposes
("marked-to-market"). Over-the-counter options are not classified as Section
1256 contracts and are not subject to the marked-to-market rule or to 60/40 gain
or loss treatment. Any gains or losses recognized by a Portfolio from
transactions in over-the-counter options generally constitute short-term capital
gains or losses. When call options written, or put options purchased, by a
Portfolio are exercised, the gain or loss realized on the sale of the underlying
securities may be either short-term or long-term, depending on the holding
period of the securities. In determining the amount of gain or loss, the sales
proceeds are reduced by the premium paid for the puts or increased by the
premium received for calls.

     A substantial portion of each Portfolio's transactions in options, futures
contracts and options on futures contracts, particularly its hedging
transactions, may constitute "straddles" which are

                                      B-79

<PAGE>



defined in the Code as offsetting positions with respect to personal property. A
straddle consisting of a listed option, futures contract, or option on a futures
contract and of U.S. Government securities would constitute a "mixed straddle"
under the Code. The Code generally provides with respect to straddles (i) "loss
deferral" rules which may postpone recognition for tax purposes of losses from
certain closing purchase transactions or other dispositions of a position in the
straddle to the extent of unrealized gains in the offsetting position, (ii)
"wash sale" rules which may postpone recognition for tax purposes of losses
where a position is sold and a new offsetting position is acquired within a
prescribed period, (iii) "short sale" rules which may terminate the holding
period of securities owned by a Portfolio when offsetting positions are
established and which may convert certain losses from short-term to long-term,
and (iv) "conversion transaction" rules which recharacterize capital gains as
ordinary income. The Code provides that certain elections may be made for mixed
straddles that can alter the character of the capital gain or loss recognized
upon disposition of positions which form part of a straddle. Certain other
elections also are provided in the Code; no determination has been reached to
make any of these elections.

   
     Code Section 1259 requires the recognition of gain (but not loss) if a 
Portfolio makes a "constructive sale" of an appreciated financial position
(e.g., stock). A Portfolio generally will be considered to make a constructive
sale of an appreciated financial position if it sells the same or substantially
identical property short, enters into a futures or forward contract to deliver
the same or substantially identical property, or enters into certain other
similar transactions. 
    

   
     Each Portfolio may purchase debt securities (such as zero-coupon or
pay-in-kind securities) that contain original issue discount. Original issue
discount that accrues in a taxable year is treated as earned by a Portfolio and
therefore is subject to the distribution requirements of the Code. Because the
original issue discount earned by the Portfolio in a taxable year may not be
represented by cash income, the Portfolio may have to dispose of other
securities and use the proceeds to make distributions to shareholders.
    
     A Portfolio 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. Any distributions of net investment income or short-term
capital gains made to a foreign shareholder will be subject to U.S. withholding
tax of 30% (or a lower treaty rate if applicable to such shareholder).

     Each of the Large-Cap Growth Portfolio, Aggressive Growth Portfolio and
International Equity Portfolio may, from time to time, invest in "passive
foreign investment companies" (PFICs). A PFIC is a foreign corporation that, in
general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If any such Portfolio acquires
and holds stock in a PFIC beyond the end of the year of its acquisition, the
Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the stock

                                      B-80

<PAGE>

   
(collectively, PFIC income), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. A Portfolio may make a
"mark-to-market" election with respect to any stock it holds of a PFIC. If the 
election is in effect, at the end of the Fund's taxable year, the Portfolio 
will recognize the amount of gains, if any, with respect to PFIC stock. Any
gains resulting from such elections will be treated as ordinary income. No loss
will be recognized on PFIC stock. Alternatively, the Portfolio may elect to
treat any PFIC in which it invests as a "qualified electing fund," in which
case, in lieu of the foregoing tax and interest obligation, the Portfolio will
be required to include in income each year its pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain, even if they are
not distributed to the Portfolio; those amounts would be subject to the
distribution requirements applicable to the Portfolio described above. It may
be very difficult, if not impossible, to make this election because of certain 
requirements thereof.
    

     Each of the Large-Cap Blend and Value Portfolios may invest in real estate
investment trusts ("REITs") that hold residual interests in real estate mortgage
investment conduits ("REMICs"). Under Treasury regulations that have not yet
been issued, but may apply retroactively, a portion of the Portfolio's income
from a REIT that is attributable to the REIT's residual interest in a REMIC
(referred to in the Code as an "excess inclusion") will be subject to federal
income tax. These regulations are also expected to provide that excess inclusion
income of a regulated investment company, such as the Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or
other tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations.

     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 advisors regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisors regarding the particular tax
consequences to them of an investment in each Portfolio. Qualification as a
regulated investment company under the Code for tax purposes does not entail
government supervision of management and investment policies.

                                      B-81

<PAGE>

                                RETIREMENT PLANS
   
     Shares of each Portfolio 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 a
Portfolio 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 a Portfolio 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 a Portfolio 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. Section 408A
of the Code treats Roth IRAs as IRAs subject to certain special rules applicable
thereto. IRAs are subject to limitations with respect to the amount that may be
contributed, the eligibility of individuals to make contributions, the amount if
any, entitled to be contributed on a deductible basis, 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 IRA"). This plan was
introduced by a provision of the Small Business Job Protection Act of 1996 to
provide small employers with a simplified tax-favored retirement plan.
Contributions are deducted from the employee's paycheck before taxes and are
deposited into a SIMPLE IRA by the employer, who must make either matching
contributions or non-elective contributions. Contributions are tax-deductible
for the employer and participants do not pay taxes on contributions on earnings
until they are withdrawn.
    

                                      B-82

<PAGE>



   
Roth IRA. This plan, introduced by Section 302 of the Taxpayer Relief Act of
1997, generally permits individuals with adjusted gross income of up to $95,000,
and married couples with joint adjusted gross income of up to $150,000, to
contribute to a "Roth IRA." Contributions are not tax-deductible, but
distribution of assets (contributions and earnings) held in the account for at
least five years may be distributed tax-free under certain qualifying
conditions.
    

Education IRA. Established by the Taxpayer Relief Act of 1997, under Section 530
of the Code, this plan permits individuals to contribute to an IRA on behalf of
any child under the age of 18. Contributions are not tax-deductible but
distributions are tax-free if used for qualified educational expenses.

                              DESCRIPTION OF SHARES

   
     Ownership of the Fund is represented by shares of common stock. The total
number of shares that the Fund has authority to issue is one billion
(1,000,000,000) shares of common stock (par value $0.0001 per share), amounting
in aggregate par value to one hundred thousand dollars ($100,000.00).
     
   
     Currently, nine Portfolios of shares of the Fund have been authorized
pursuant to the Fund's Articles of Incorporation ("Articles"): the Large-Cap
Growth Portfolio, the Mid-Cap Growth Portfolio, the Aggressive Growth Portfolio,
the Large-Cap Blend Portfolio, the Large-Cap Value Portfolio, the Value
Portfolio, the Small-Cap Value Portfolio, International Equity Portfolio and the
Focus Portfolio. The Large-Cap Growth Portfolio, the Mid-Cap Growth Portfolio,
the Large-Cap Blend Portfolio and the Focus Portfolio are divided into three
classes of shares, designated as Class A, Class B and Class II. The Aggressive
Growth Portfolio, Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value
Portfolio and International Equity Portfolio are divided into four classes of
shares, designated as Class A, Class B, Class II and Class Z. The Directors may
authorize the creation of additional Portfolios of shares so as to be able to
offer to investors additional investment portfolios within the Fund that would
operate independently from the Fund's present Portfolios, or to distinguish
among shareholders, as may be necessary, to comply with future regulations or
other unforeseen circumstances. Each Portfolio of the Fund's shares represents
the interests of the shareholders of that Portfolio in a particular portfolio of
Fund assets. In addition, the Directors may authorize the creation of additional
classes of shares in the future, which may have fee structures different from
those of existing classes and/or may be offered only to certain qualified
investors.
    
     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 Fund need
not hold annual meetings of shareholders, the Directors may call special
meetings of

                                      B-83

<PAGE>


   
shareholders for action by shareholder vote as may be required by the 1940 Act.
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 Fund. In
addition, the Directors may be removed by the action of the holders of record of
two-thirds or more of the outstanding shares. All Portfolios of shares will vote
with respect to certain matters, such as election of Directors. When all
Portfolios are not affected by a matter to be voted upon, such as approval of
investment advisory agreements or changes in a Portfolio's policies, only
shareholders of the Portfolios affected by the matter may be entitled to vote.
    

   
     The classes of shares of a given Portfolio 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 initial sales charge, a
distribution fee and an ongoing account maintenance and service fee, (iii) Class
B shares are subject to a CDSC, 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) Class II shares are subject to an initial sales
charge, a distribution fee, an ongoing account maintenance and service fee and a
CDSC, (vi) 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, (vii) Class Z shares are not subject to
any sales charge or any distribution, account maintenance or service fee, and
(viii) each class of shares will be exchangeable only into the same class of
shares of any other Portfolio or other SunAmerica Funds that offer that class.
All shares of the Fund issued and outstanding and all shares offered by the
Prospectus when issued, are fully paid and non-assessable. Shares have no
preemptive or other subscription rights and are freely transferable on the books
of the Fund. In addition, shares have no conversion rights, except as described
above. 
    

   
     The Articles provide, to the fullest extent permitted by Maryland statutory
or decisional law, as amended or interpreted (as limited by the 1940 Act)
that no Director or officer of the Fund shall be personally liable to the Fund
or to stockholders for money damages. The Articles provide that the Fund shall
indemnify (i) the Directors and officers, whether serving the Fund or its
request any other entity, to the full extent required or permitted by the
General Laws of the State of Maryland now or hereafter in force (as limited by
the 1940 Act), including the advance of expenses under the procedures and to the
full extent permitted by law, and (ii) other employees and agents to such extent
as shall be authorized by the Board of Directors or the Fund's By-Laws and be
permitted by law. The duration of the Fund shall be perpetual.
    

                                      B-84

<PAGE>

                             ADDITIONAL INFORMATION

Computation of Offering Price per Share

   
     The following is the offering price calculation for each Class of shares of
the Portfolios. The Class A, Class B and Class II calculations are based on the
value of each Portfolio's net assets and number of shares outstanding on October
31, 1998.
     
   
<TABLE>
<CAPTION>
                                     Large-Cap Growth Portfolio                        Mid-Cap Growth Portfolio
                              ------------------------------------------       ------------------------------------------
                              Class A          Class B        Class II +       Class A          Class B        Class II +
                              -------          -------        ----------       -------          -------        ----------
<S>                            <C>               <C>               <C>           <C>              <C>               <C>
Net Assets...............

Number of Shares                                                                                                            
Outstanding..............                                                                                                   

Net Asset Value Per                                                                                                         
Share (net assets                                                                                                           
divided by number of                                                                                                        
shares) .................                                                                                                   

Sales charge for                                                                                                            
Class A Shares:                                                                                                             
5.75% of offering                                                                                                           
price (6.10% of net                                                                                                         
asset value per                                                                                                             
share)*..................                               **               -                                **              -

Sales charge for                                                                                                            
Class II Shares:                                                                                                            
1.00% of offering                                                                                                           
price (1.01% of net                                                                                                         
asset value per                                                                                                             
share)*                                                 **                                                **                

Offering Price...........                               --               -                                 -             --
</TABLE>

    
- -----------------------
*    Rounded to nearest one-hundredth percent; assumes maximum sales charge is
     applicable.

   
**   Class B shares are not subject to an initial charge but may be subject to a
     contingent deferred sales charge on redemption of shares within six years
     of purchase.
    

   
+    Class II shares (previously designated as Class C shares other than for the
     Focus Portfolio) may be subject to a contingent deferred sales charge on
     redemption of shares within eighteen months of purchase.
    



                                      B-85

<PAGE>



   
<TABLE>
<CAPTION>
                                    Aggressive Growth Portfolio                       Large-Cap Blend Portfolio
                              -----------------------------------------        -----------------------------------------
                              Class A          Class B        Class II+        Class A          Class B        Class II+
                              -------          -------        ---------        -------          -------        ---------
<S>                            <C>              <C>            <C>               <C>             <C>                <C>
Net Assets...............

Number of Shares                                                                                                            
Outstanding .............                                                                                                   

Net Asset Value Per                                                                                                         
Share (net assets                                                                                                           
divided by number of                                                                                                        
shares) .................                                                                                                   

Sales charge for                                                                                                            
Class A Shares:                                                                                                             
5.75% of offering                                                                                                           
price (6.10 of net                                                                                                          
asset value per                                                                                                             
share)* .................                               **               -                                **              -

Sales charge for                                                                                                            
Class II Shares:                                                                                                            
1.00% of offering                                                                                                           
price (1.01% of net                                                                                                         
asset value per                                                                                                             
share)*                                                 **                                                **                

Offering Price...........                               --               -                                --             --
</TABLE>

    
- -----------------------
*    Rounded to nearest one-hundredth percent; assumes maximum sales charge is
     applicable.

   
**   Class B shares are not subject to an initial charge but may be subject to a
     contingent deferred sales charge on redemption of shares within six years
     of purchase.
    
   
+    Class II shares (previously designated as Class C shares other than for the
     Focus Portfolio) may be subject to a contingent deferred sales charge on
     redemption of shares within eighteen months of purchase.
    

   
<TABLE>
<CAPTION>
                                     Large-Cap Value Portfolio                             Value Portfolio
                              -----------------------------------------        -----------------------------------------
                              Class A          Class B        Class II+        Class A          Class B        Class II+
                              -------          -------        ---------        -------          -------        ---------
<S>                             <C>             <C>            <C>              <C>               <C>               <C>
Net Assets...............

Number of Shares                                                                                                            
Outstanding .............                                                                                                   

Net Asset Value Per                                                                                                         
Share (net assets                                                                                                           
divided by number of                                                                                                        
shares) .................                                                                                                   
</TABLE>


                                      B-86

<PAGE>



<TABLE>
<S>                              <C>                    <C>           <C>               <C>              <C>             <C>
Sales charge for                                                                                                            
Class A Shares:                                                                                                             
5.75% of offering                                                                                                           
price (6.10 of net                                                                                                          
asset value per                                                                                                             
share)* .................        $   0.72               **              --                                **              -

Sales charge for                                                                                                            
Class II Shares:                                                                                                            
1.00% of offering                                                                                                           
price (1.01% of net                                                                                                         
asset value per                                                                                                             
share)*                                                 **                                                **                

Offering Price...........                               --               -                                --              -
</TABLE>

    
- -----------------------

*    Rounded to nearest one-hundredth percent; assumes maximum sales charge is
     applicable.

   
**   Class B shares are not subject to an initial charge but may be subject to a
     contingent deferred sales charge on redemption of shares within six years
     of purchase.
    
   
+    Class II shares (previously designated as Class C shares other than for the
     Focus Portfolio) may be subject to a contingent deferred sales charge on
     redemption of shares within eighteen months of purchase.
    


   
<TABLE>
<CAPTION>
                                     Small-Cap Value Portfolio                      International Equity Portfolio
                              -----------------------------------------        -----------------------------------------
                              Class A          Class B        Class II+        Class A          Class B        Class II+
                              -------          -------        ---------        -------          -------        ---------
<S>                           <C>               <C>            <C>               <C>              <C>               <C>
Net Assets...............

Number of Shares                                                                                                            
Outstanding .............                                                                                                   

Net Asset Value Per                                                                                                         
Share (net assets                                                                                                           
divided by number of                                                                                                        
shares) .................                                                                                                   

Sales charge for                                                                                                            
Class A Shares:                                                                                                             
5.75% of offering                                                                                                           
price (6.10 of net                                                                                                          
asset value per                                                                                                             
share)* .................                               **               -                                **              -
</TABLE>


                                      B-87

<PAGE>





<TABLE>
<S>                                <C>               <C>               <C>                  <C>         <C>             <C>
Sales charge for                                                                                                            
Class II Shares:                                                                                                            
1.00% of offering                                                                                                           
price (1.01% of net                                                                                                         
asset value per                                                                                                             
share)*                                                 **                                                **                

Offering Price...........                               --               -                                --              -
</TABLE>

    
- -----------------------

*    Rounded to nearest one-hundredth percent; assumes maximum sales charge is
     applicable.

   
**   Class B shares are not subject to an initial charge but may be subject to a
     contingent deferred sales charge on redemption of shares within six years
     of purchase.
    
   
+    Class II shares (previously designated as Class C shares other than for the
     Focus Portfolio) may be subject to a contingent deferred sales charge on
     redemption of shares within eighteen months of purchase.
    

   
                                          Focus Portfolio
                              -----------------------------------------
                              Class A          Class B        Class II+
                              -------          -------        ---------
Net Assets...............

Number of Shares                                                           
Outstanding .............                                                  

Net Asset Value Per                                                        
Share (net assets                                                          
divided by number of                                                       
shares) .................                                                  

Sales charge for                                                           
Class A Shares:                                                            
5.75% of offering                                                          
price (6.10 of net                                                         
asset value per                                                            
share)* .................                               **                 

Sales charge for                                                           
Class II Shares:                                                           
1.00% of offering                                                          
price (1.01% of net                                                        
asset value per                                                            
share)*                                                 **                 

Offering Price...........                               --
    

                                      B-88
<PAGE>

- -----------------------
   
*    Rounded to nearest one-hundredth percent; assumes maximum sales charge is
     applicable.
    
   
**   Class B shares are not subject to an initial charge but may be subject to a
     contingent deferred sales charge on redemption of shares within six years
     of purchase.
    
   
+    Class II shares (previously designated as Class C shares other than for the
     Focus Portfolio) may be subject to a contingent deferred sales charge on
     redemption of shares within eighteen months of purchase.
    
Reports to Shareholders. The Fund sends audited annual and unaudited semi-annual
reports to shareholders of each of the Portfolios. 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 Agency. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Portfolios and in those capacities maintains certain financial and
accounting books and records pursuant to agreements with the Fund. Transfer
agent functions are performed for State Street by National Financial Data
Services, P.O. Box 419572, Kansas City, MO 64141-6572, an affiliate of State
Street.

   
Independent Accountants and Legal Counsel. PricewaterhouseCoopers LLP, 1177
Avenue of the Americas, New York, NY 10036, has been selected to serve as the
Fund's independent accountants and in that capacity examines the annual
financial statements of the Fund. The firm of Swidler Berlin Shereff Friedman,
LLP, 919 Third Avenue, New York, NY 10022, has been selected as legal counsel to
the Fund.
    

                              FINANCIAL STATEMENTS

   
     Set forth following this Statement of Additional Information are the
financial statements of Style Select Series, Inc. with respect to the
Registrant's fiscal year ended October 31, 1998. 
    


                                      B-89

<PAGE>


                                    APPENDIX

                   CORPORATE BOND AND COMMERCIAL PAPER RATINGS

   
Description of Moody's Corporate Ratings
    
   
     Aaa    Bonds rated Aaa are judged to be of the best quality. They carry the
            smallest degree of investment risk and are generally referred to as
            "gilt edge." Interest payments are protected by a large or by an
            exceptionally stable margin and principal is secure. While the
            various protective elements are likely to change, such changes as
            can be visualized are most unlikely to impair the fundamentally
            strong position of such issues.
    
   
     Aa     Bonds rated Aa are judged to be of high quality by all standards.
            Together with the Aaa group they comprise what are generally known
            as high grade bonds. They are rated lower than the best bonds
            because margins of protection may not be as large as in Aaa
            securities or fluctuation of protective elements may be of greater
            amplitude or there may be other elements present that make the
            long-term risks appear somewhat larger than in Aaa securities.
    
   
     A      Bonds rated A possess many favorable investment attributes and are
            considered as upper medium grade obligations. Factors giving
            security to principal and interest are considered adequate, but
            elements may be present that suggest a susceptibility to impairment
            sometime in the future.
    
   
     Baa    Bonds rated Baa are considered as medium grade obligations; i.e.,
            they are neither highly protected nor poorly secured. Interest
            payments and principal security appear adequate for the present but
            certain protective elements may be lacking or may be
            characteristically unreliable over any great length of time. Such
            bonds lack outstanding investment characteristics and in fact have
            speculative characteristics as well.
    
   
     Ba     Bonds rated Ba are judged to have speculative elements; their future
            cannot be considered as well assured. Often the protection of
            interest and principal payments may be very moderate, and therefore
            not well safeguarded during both good and bad times over the future.
            Uncertainty of position characterizes bonds in this class.
    

                                   Appendix-1

<PAGE>



   
     B      Bonds rated B generally lack characteristics of desirable
            investments. Assurance of interest and principal payments or of
            maintenance of other terms of the contract over any long period of
            time may be small.
    
   
     Caa    Bonds rated Caa are of poor standing. Such issues may be in default
            or there may be present elements of danger with respect to principal
            or interest.
    
   
     Ca     Bonds rated Ca represent obligations that are speculative in a high
            degree. Such issues are often in default or have other marked
            shortcomings.
    
   
     C      Bonds rated C are the lowest rated class of bonds, and issues so
            rated can be regarded as having extremely poor prospects of ever
            attaining any real investment standing.
    
     Note: Moody's may apply numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of the generic rating
category.

Description of Moody's Commercial Paper Ratings

     The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the Securities Act.

     Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act, nor does it represent that
any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:

     Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

          --   Leading market positions in well established industries

          --   High rates of return on funds employed

                                   Appendix-2

<PAGE>


          --   Conservative capitalization structures with moderate reliance on
               debt and ample asset protection

          --   Broad margins in earnings coverage of fixed financial charges and
               high internal cash generation

          --   Well established access to a range of financial markets and
               assured sources of alternate liquidity.

     Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

     Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
level of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.

     Issuers rated Not Prime do not fall within any of the Prime rating
categories.

     If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal validity or enforceability of any support arrangement. You are cautioned
to review with your counsel any questions regarding particular support
arrangements.

   
     Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks that may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships that exist with the issuer; and (8) recognition by management of
obligations that may be present or may arise as a result of public interest
questions and preparations to meet such obligations. 
    

                                   Appendix-3

<PAGE>



Description of Standard & Poor's Corporate Debt Ratings

   
     A Standard & Poor's corporate or municipal rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
    
     The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

     The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other reasons.

     The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

     AAA    Debt rated AAA has the highest rating assigned by Standard & Poor's.
            Capacity to pay interest and repay principal is extremely strong.

     AA     Debt rated AA has a very strong capacity to pay interest and repay
            principal and differs from the highest-rated issues only in small
            degree.

     A      Debt rated A has a strong capacity to pay interest and repay
            principal although it is somewhat more susceptible to the adverse
            effects of changes in circumstances and economic conditions than
            debt in higher-rated categories.

     BBB    Debt rated BBB is regarded as having an adequate capacity to pay
            interest and repay principal. Whereas it normally exhibits adequate
            protection parameters, adverse economic conditions or changing
            circumstances are more likely to lead to a weakened capacity to pay
            interest and repay principal for debt in this category than for debt
            in higher-rated categories.

            Debt rated BB, B, CCC, CC and C are regarded as having predominantly
            speculative characteristics with respect to capacity to pay interest
            and repay principal. BB indicates the least degree of speculation 
            and  C the highest degree of speculation.

                                   Appendix-4

<PAGE>



            While such debt will likely have some quality and protective
            characteristics, these are outweighed by large uncertainties or
            major risk exposure to adverse conditions.

   
     BB     Debt rated BB has less near-term vulnerability to default than other
            speculative grade debt. However, it faces major ongoing
            uncertainties or exposure to adverse business, financial or economic
            conditions that could lead to inadequate capacity to meet timely
            interest and principal payment. The BB rating category is also used
            for debt subordinated to senior debt that is assigned an actual or
            implied BBB- rating.
    
     B      Debt rated B has a greater vulnerability to default but presently
            has the capacity to meet interest payments and principal repayments.
            Adverse business, financial or economic conditions would likely
            impair capacity or willingness to pay interest and repay principal.
            The B rating category is also used for debt subordinated to senior
            debt that is assigned an actual or implied BB or BB- rating.

     CCC    Debt rated CCC has a current identifiable vulnerability to default,
            and is dependent upon favorable business, financial and economic
            conditions to meet timely payments of interest and repayments of
            principal. In the event of adverse business, financial or economic
            conditions, it is not likely to have the capacity to pay interest
            and repay principal. The CCC rating category is also used for debt
            subordinated to senior debt that is assigned an actual or implied B
            or B- rating.

   
     CC     The rating CC is typically applied to debt subordinated to senior
            debt that is assigned an actual or implied CCC rating.
    
   
     C      The rating C is typically applied to debt subordinated to senior
            debt that is assigned an actual or implied CCC- debt rating. The C
            rating may be used to cover a situation where a bankruptcy petition
            has been filed but debt service payments are continued.
    
     CI     The rating CI is reserved for income bonds on which no interest is
            being paid.

     D      Debt rated D is in default. The D rating is assigned on the day an
            interest or principal payment is missed. The D rating also will be
            used upon the filing of a bankruptcy petition if debt service
            payments are jeopardized.

     Plus (+) or minus (-): The ratings of AA to CCC may be modified by the
     addition of a plus or minus sign to show relative standing within these
     ratings categories.

     Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and

                                   Appendix-5

<PAGE>



indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood or risk of default upon failure of
such completion. The investor should exercise judgment with respect to such
likelihood and risk.

          L    The letter "L" indicates that the rating pertains to the
               principal amount of those bonds to the extent that the underlying
               deposit collateral is insured by the Federal Savings & Loan
               Insurance Corp. or the Federal Deposit Insurance Corp. and
               interest is adequately collateralized.

          *    Continuance of the rating is contingent upon Standard & Poor's
               receipt of an executed copy of the escrow agreement or closing
               documentation confirming investments and cash flows.

          NR   Indicates that no rating has been requested, that there is
               insufficient information on which to base a rating or that
               Standard & Poor's does not rate a particular type of obligation
               as a matter of policy.

     Debt Obligations of Issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the credit-worthiness of the obligor but do not take into
account currency exchange and related uncertainties.

   
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA," "AA," "A," "BBB," commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally. 
     

Description of Standard & Poor's Commercial Paper Ratings.

     A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of not more
than 365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest.

          A    Issues assigned this highest rating are regarded as having the
               greatest capacity for timely payment. Issues in this category are
               delineated with the numbers 1, 2 and 3 to indicate the relative
               degree of safety.




                                   Appendix-6

<PAGE>


   
          A-1  This designation indicates that the degree of safety regarding
               timely payment is either overwhelming or very strong. Those
               issues designated "A-1" that are determined to possess
               overwhelming safety characteristics are denoted with a plus (+)
               sign designation.
    
   
          A-2  Capacity for timely payment on issues with this designation is
               strong. However, the relative degree of safety is not as high as
               for issues designated "A-1."
    
          A-3  Issues carrying this designation have a satisfactory capacity for
               timely payment. They are, however, somewhat more vulnerable to
               the adverse effect of changes in circumstances than obligations
               carrying the higher designations.

          B    Issues rated "B" are regarded as having only adequate capacity
               for timely payment. However, such capacity may be damaged by
               changing conditions or short-term adversities.

          C    This rating is assigned to short-term debt obligations with a
               doubtful capacity for payment.

          D    This rating indicates that the issue is either in default or is
               expected to be in default upon maturity.

     The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.

                                   Appendix-7

<PAGE>
                                    PART C

                               OTHER INFORMATION

Item 23:          Exhibits.

(a)      (i)      Articles of Incorporation, as Amended. Incorporated
                  herein by reference to Exhibit 1(A) of the Registrant's
                  Registration Statement on Form N-1A (File No. 33-11283)
                  filed on August 30, 1996.

         (ii)     Articles Supplementary dated August 1, 1996. Incorporated
                  herein by reference to Exhibit 1(B) of the Registrant's
                  Registration Statement on Form N-1A (File No. 33- 11283)
                  filed on August 30, 1996.

         (iii)    Articles of Amendment dated August 19, 1996. Incorporated
                  herein by reference to Exhibit 1(C) of the Registrant's
                  Registration Statement on Form N-1A (File No. 33- 11283)
                  filed on August 30, 1996.

         (iv)     Articles of Amendment dated November 13, 1996. Incorporated
                  herein by reference to Exhibit 1(D) of Pre-Effective
                  Amendment No. 1 to the Registrant's Registration Statement
                  on Form N-1A (File No. 33-11283) filed on November 14, 1996.

(b)      By-Laws. Incorporated herein by reference to Exhibit 2 of the
         Registrant's Registration Statement on Form N-1A (File No. 33-11283)
         filed on August 30, 1996.

(c)      Instruments Defining Rights of Shareholders. Incorporated herein by
         reference to Exhibits (a) and (b) above.

(d)      (i)      Investment Advisory and Management Agreement between 
                  Registrant and SunAmerica Asset Management Corp 
                  ("SunAmerica").*

         (ii)     Subadvisory Agreement between SunAmerica and American Century
                  Investment Management, Inc.*

         (iii)    Subadvisory Agreement between SunAmerica and Bankers Trust
                  Company.*

         (iv)     Subadvisory Agreement between SunAmerica and Berger
                  Associates, Inc.*

         (v)      Subadvisory Agreement between SunAmerica and David L. Babson &
                  Co., Inc.*

         (vi)     Subadvisory Agreement between SunAmerica and Davis Selected
                  Advisers, L.P.*

         (vii)    Subadvisory Agreement between SunAmerica and Bramwell Capital
                  Management, Inc.*

         (viii)   Subadvisory Agreement between SunAmerica and The Glenmede
                  Trust Company.*

         (ix)     Subadvisory Agreement between SunAmerica and Janus Capital
                  Corporation.*

         (x)      Subadvisory Agreement between SunAmerica and Jennison
                  Associates LLC.*

         (xi)     Subadvisory Agreement between SunAmerica and Lazard Asset
                  Management.*

         (xii)    Subadvisory Agreement between SunAmerica and L. Roy Papp &
                  Associates.* (xiii) Subadvisory Agreement between SunAmerica
                  and Marsico Capital Management, LLC.*

         (xiv)    Subadvisory Agreement between SunAmerica and Miller Anderson
                  & Sherrerd, LLP.*

         (xv)     Subadvisory Agreement between SunAmerica and Montag &
                  Caldwell, Inc.*

         (xvi)    Subadvisory Agreement between SunAmerica and Morgan Stanley
                  Asset Management Inc. (now known as Morgan Stanley Dean Witter
                  Investment Management).*

         (xvii)   Subadvisory Agreement between SunAmerica and Neuberger Berman,
                  LLC.*

         (xviii)  Subadvisory Agreement between SunAmerica and Rowe
                  Price-Fleming 

                                       C-1
<PAGE>

                  International, Inc.*

         (xix)    Subadvisory Agreement between SunAmerica and T. Rowe Price
                  Associates, Inc.*

         (xx)     Subadvisory Agreement between SunAmerica and Warbug Pincus
                  Asset Management, Inc.*

         (xxi)    Subadvisory Agreement between SunAmerica and Wellington
                  Management Company, LLP.*

(e)      (i)      Distribution Agreement. Incorporated herein by reference to
                  Exhibit 6 of Pre- Effective Amendment No. 1 to the
                  Registrant's Registration Statement on Form N-1A (File No.
                  33-11283) filed on November 14, 1996.
   
         (ii)     Form of Selling Agreement.
    
(f)      Disinterested Trustees and Directors' Retirement Plan. Incorporated
         herein by reference to Exhibit 7 of Pre-Effective Amendment No. 1 to
         the Registrant's Registration Statement on Form N-1A (File No.
         33-11283) filed on November 14, 1996.

(g)      Custodian Agreement. Incorporated herein by reference to Exhibit 8 of
         Pre-Effective Amendment No. 1 to the Registrant's Registration
         Statement on Form N-1A (File No. 33-11283) filed on November 14, 1996.

(h)      (i)      Service Agreement. Incorporated herein by reference to Exhibit
                  9(a) of Pre-Effective Amendment No. 1 to the Registrant's
                  Registration Statement on Form N-1A (File No. 33-11283) filed
                  on November 14, 1996.

         (ii)     Transfer Agency Agreement. Incorporated herein by reference to
                  Exhibit 9(b) of Pre-Effective Amendment No. 1 to the
                  Registrant's Registration Statement on Form N-1A (File No.
                  33-11283) filed on November 14, 1996.

(i)      Not applicable.

(j)      Not applicable.

(k)      Not applicable.

(l)      Not applicable.

(m)      (i)      Rule 12b-1 Plan for Class A Shares and Class B Shares.
                  Incorporated herein by reference to Exhibit 15 of
                  Pre-Effective Amendment No. 1 to the Registrant's Registration
                  Statement on Form N-1A (File No. 33-11283) filed on November
                  14, 1996.

         (ii)     Rule 12b-1 Plan for Class II Shares.*

(n)      Not applicable.

(o)      (i)      18f-3 Plan. Incorporated herein by reference to Exhibit
                  5(b)(15) of Post-Effective Amendment No. 11 to the
                  Registrant's Registration Statement on Form N-1A (File No.
                  33-11283) filed on June 15, 1998.

                                       C-2

<PAGE>

         (ii)     Powers of Attorney. Incorporated herein by reference to
                  Exhibit 17(a) of Pre-Effective Amendment No. 1 to the
                  Registrant's Registration Statement on Form N-1A (File No.
                  33-11283) filed on November 14, 1996.

- ----------
*        To be filed by amendment.

Item 24.          Persons Controlled by or Under Common Control with Registrant

   
         To be filed by amendment.
    

Item 25.          Indemnification

         5.01 Indemnification of Directors and Officers. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than a proceeding by
or in the right of the Corporation in which such person shall have been
adjudged to be liable to the Corporation), by reason of being or having been a
director or officer of the Corporation, or serving or having served at the
request of the Corporation as a director, officer, partner, trustee, employee
or agent of another entity in which the Corporation has an interest as a
shareholder, creditor or otherwise (a "Covered Person"), against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable expenses
(including attorney's fees) actually incurred by the Covered Person in
connection with any such action, suit or proceeding, except (i) liability in
connection with any proceeding in which it is determined that (A) the act or
omission of the Covered Person was material to the matter giving rise to the
proceeding, and was committed in bad faith or was the result of active and
deliberate dishonesty, or (B) the Covered Person actually received an improper
personal benefit in money, property or services, or (C) in the case of any
criminal proceeding, the Covered Person had reasonable cause to believe that
the act or omission was unlawful, and (ii) liability to the Corporation or its
security holders to which the Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office (any or all of
the conduct referred to in clauses (i) and (ii) being hereinafter referred to
as "Disabling Conduct").

         5.02 Procedure for Indemnification. Any indemnification under Section
5.01 shall (unless ordered by a court) be made by the Corporation only as
authorized for a specific proceeding by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of the proceeding against the Covered Person for insufficiency of
evidence of any Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, by a majority of a quorum of the directors who are
neither "interested persons" of the Corporation as defined in the Investment
Company Act of 1940 nor parties to the proceeding ("Disinterested Non-Party
Directors"), or an independent legal counsel in a written opinion, that the
Covered Person was not liable by reason of Disabling Conduct. The termination
of any proceeding by judgment, order or settlement shall not create a
presumption that the Covered Person did not meet the required standard of
conduct; the termination of any proceeding by conviction, or a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, shall create a rebuttable presumption that the Covered Person did
not meet the required standard of conduct. Any determination pursuant to this
Section 5.02 shall not prevent recovery from any Covered Person of any amount
paid to him in accordance with this By-Law as indemnification if such Covered
Person is subsequently adjudicated by a court of competent jurisdiction to be
liable by reason of Disabling Conduct.

         5.03 Advance Payment of Expenses. Reasonable expenses (including
attorneys' fees) incurred by a Covered Person may be paid or reimbursed by the
Corporation in advance of the final disposition of an action, suit



                                       C-3

<PAGE>

or proceeding upon receipt by the Corporation of (i) a written affirmation by
the Covered Person of his good faith belief that the standard of conduct
necessary for indemnification under this By-Law has been met and (ii) a written
undertaking by or on behalf of the Covered Person to repay the amount if it is
ultimately determined that such standard of conduct has not been met, so long as
either (A) the Covered Person has provided a security for his undertaking, (B)
the Corporation is insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of the Disinterested Non-Party
Directors, or an independent legal counsel in a written opinion, has determined,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Covered Person ultimately
will be found entitled to indemnification.

         5.04 Exclusivity, Etc. The indemnification and advance of expenses
provided by this By-Law shall not be deemed exclusive of any other rights to
which a Covered Person seeking indemnification or advance or expenses may be
entitled under any law (common or statutory), or any agreement, vote of
stockholders or disinterested directors, or other provision that is consistent
with law, both as to action in an official capacity and as to action in
another capacity while holding office or while employed by or acting as agent
for the Corporation, shall continue in respect of all events occurring while
the Covered Person was a director or officer after such Covered Person has
ceased to be a director or officer, and shall inure to the benefit of the
estate, heirs, executors and administrators of such Covered Person. The
Corporation shall not be liable for any payment under this By-Law in
connection with a claim made by a director or officer to the extent such
director or officer has otherwise actually received payment, under an
insurance policy, agreement, vote or otherwise, of the amounts otherwise
indemnifiable hereunder. All rights to indemnification and advance of expenses
under the Charter and hereunder shall be deemed to be a contract between the
Corporation and each director or officer of the Corporation who serves or
served in such capacity at any time while this By-Law is in effect. Nothing
herein shall prevent the amendment of this By-Law, provided that no such
amendment shall diminish the rights of any Covered Person hereunder with
respect to events occurring or claims made before its adoption or as to claims
made after its adoption in respect of events occurring before its adoption.
Any repeal or modification of this By-Law shall not in any way diminish any
rights to indemnification or advance of expenses of a Covered Person or the
obligations of the Corporation arising hereunder with respect to events
occurring, or claims made, while this By-Law or any provision hereof is in
force.

         5.05 Insurance. The Corporation may purchase and maintain insurance
on behalf of any Covered Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such;
provided, however, that the Corporation shall not purchase insurance to
indemnify any Covered Person against liability for Disabling Conduct.

         5.06 Severability: Definitions. The invalidity or unenforceability of
any provision of this Article V shall not affect the validity or
enforceability of any other provision hereof. The phrase "this By-Law" in this
Article V means this Article V in its entirety.

                  Section 8 of the Article of Incorporation provides as
follows:

                  (5) The Corporation shall indemnify (i) its directors and
officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under
the procedures and to the full extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the By-Laws of the Corporation and as permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other rights
to which those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from time to
time such By-Laws, resolutions or contracts implementing such provisions or
such further indemnification arrangements as may be permitted by law. The
right of indemnification provided hereunder shall not be construed to protect
any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

                                       C-4

<PAGE>

                  (6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that this provision shall not be
construed to protect any director or officer against any liability to the
Corporation or its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. No amendment,
modification or repeal of this provision shall adversely affect any right or
protection provided hereunder that exists at the time of such amendment,
modification or repeal.

Item 26. Business and other Connections of Investment Adviser

         SunAmerica is primarily in the business of providing investment
         management, advisory and administrative services. Reference is made
         to the most recent Form ADV and schedules thereto of SunAmerica on
         file with the Commission (File No. 801-19813) for a description of
         the names and employment of the directors and officers of SunAmerica
         and other required information.

         American Century Investment Management, Inc.; Bankers Trust Company;
         Berger Associates, Inc.; David L. Babson & Co., Inc.; Davis Selected
         Advisers, L.P.; Bramwell Capital Management, Inc.; The Glenmede Trust
         Company; Janus Capital Corporation; Jennison Associates LLC; Lazard
         Asset Management; L. Roy Papp & Associates; Marsico Capital
         Management, LLC; Miller Anderson & Sherrerd, LLP; Montag & Caldwell,
         Inc.; Morgan Stanley Dean Witter Investment Management; Neuberger
         Berman, LLC.; Rowe-Price Fleming International, Inc.; T. Rowe Price
         Associates, Inc.; Warburg Pincus Asset Management, Inc.; and
         Wellington Management Company, LLP; the Advisers of certain of the
         Portfolios of the Registrant, are primarily engaged in the business
         of rendering investment advisory services. Reference is made to the
         recent Form ADV and schedules thereto on file with the Commission for
         a description of the names and employment of the directors and
         officers of the following Advisers, and other required information:

                                                                     File No.

         American Century Investment Management, Inc.                801-08174
         Berger Associates, Inc.                                     801-09451
         David L. Babson & Co., Inc.                                 801-00241
         Davis Selected Advisers, L.P.                               801-31648
         Bramwell Capital Management, Inc.                           801-46036
         Janus Capital Corporation                                   801-13991
         Jennison Associates LLC                                     801-05608
         Lazard Asset Management                                     801-6568
         L. Roy Papp & Associates                                    801-35594
         Marsico Capital Management, LLC                             801-54914
         Miller Anderson & Sherrerd, LLP                             801-10437
         Montag & Caldwell, Inc.                                     801-15398
         Morgan Stanley Dean Witter Investment Management            801-15757
         Neuberger Berman, LLC                                       801-03908
         Rowe-Price Fleming International, Inc                       801-14713
         T. Rowe Price Associates, Inc.                              801-00856
         Warburg, Pincus Asset Management, Inc.                      801-07321
         Wellington Management Company, LLP                          801-15908

         Reference is made to Post-Effective Amendment No. 26 to BT Investment
         Funds' Registration Statement on Form N-1A (File No. 33-07404) filed on
         October 26, 1998 for a description of the names and employment of the
         directors and officers of Bankers Trust Company.

                                       C-5


<PAGE>



         Reference is made to Post-Effective Amendment No. 26 to The Glenmede
         Fund, Inc.'s Registration Statement on Form N-1A (File No. 33-22884)
         filed on March 2, 1998 for a description of the names and employment of
         the directors and officers of The Glenmede Trust Company.

Item 27. Principal Underwriters

         (a) The principal underwriter of the Registrant also acts as
principal underwriter for:

                  SunAmerica Income Funds
                  SunAmerica Money Market Funds, Inc.
                  SunAmerica Equity Funds

         (b)      The following persons are the officers and directors of
                  SunAmerica Capital Services, Inc., the principal underwriter
                  of Registrant's Shares:

<TABLE>
<CAPTION>
          Name and Principal
           Business Address                   Position With Underwriter              Position with the Registrant
          ------------------                  -------------------------              ----------------------------
<S>                                     <C>                                     <C>
Peter A. Harbeck                        Director                                Director and President
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204

J. Steven Neamtz                        President and Director                  Vice President
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204

Robert M. Zakem                         Executive Vice President, General       Secretary and Chief Compliance
The SunAmerica Center                   Counsel and Director                    Officer
733 Third Avenue
New York, NY 10017-3204

Susan L. Harris                         Secretary                               None
SunAmerica, Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022

Debbie Potash-Turner                    Controller                              None
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204

</TABLE>


         (c)      Not applicable.

Item 28.          Location of Accounts and Records

         State Street Bank and Trust Company, 225 Franklin Street, Boston,
         Massachusetts 02110, and its affiliate, National Financial Data
         Services, collectively, act as custodian, transfer agent and dividend
         paying agent. They maintain books, records and accounts pursuant to
         the instructions of the Fund.

                                       C-6


<PAGE>



         SunAmerica Asset Management Corp., ("SunAmerica") is located at The
         SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204.
         SunAmerica has contracted with Callan Associates, Inc. ("Callan") to
         compile historical performance data relating to the Advisers, both
         individually and on a composite basis. Registrant's records relating
         thereto are maintained by Callan. Callan is located at 71 Stevenson
         Street, Suite 1300, San Francisco, CA 94105.

         American Century Investment Management, Inc. is located at the American
         Century Tower, 4500 Main Street, Kansas City, Missouri 64111.

         Bankers Trust Company is located at 130 Liberty Street (One Bankers
         Trust Plaza), New York 10006.

         Berger Associates, Inc. is located at 210 University Boulevard, Suite
         900, Denver, Colorado 80206.

         David L. Babson & Co., Inc. is located at One Memorial Drive,
         Cambridge, Massachusetts 02142-1300.

         Davis Selected Advisers, L.P. is located at 124 East Marcy Street,
         Santa Fe, New Mexico 87501.

         Bramwell Capital Management, Inc. is located at 745 Fifth Avenue, New
         York, NY 10151.

         The Glenmede Trust Company is located at One Liberty Place, 1650
         Market Street, Suite 1200, Philadelphia, Pennsylvania 19103-7391.

         Janus Capital Corporation is located at 100 Fillmore Street, Denver,
         Colorado 80206-4923.

         Jennison Associates LLC is located at 466 Lexington Avenue, New York,
         NY 10017.

         Lazard Asset Management is located at 30 Rockefeller Plaza, New York,
         New York 10112.

         L. Roy Papp & Associates is located at 4400 North 32nd Street, Suite
         280, Phoenix, Arizona 85018.

         Marsico Capital Management, LLC is located at 1200 17th Street, Suite
         1300, Denver, CO 80202.

         Miller Anderson & Sherrerd, LLP is located at One Tower Bridge, West
         Conshohocken, Pennsylvania 19428.

         Montag & Caldwell, Inc. is located at 3343 Peachtree Road, NE, Suite
         1100, Atlanta, Georgia 30326-1022.

         Morgan Stanley Dean Witter Investment Management is located at 1221
         Avenue of the Americas, New York, NY 10020.

         Neuberger Berman, LLC is located at 605 Third Avenue, New York, New
         York 10158-0180.

         Rowe Price-Fleming International, Inc. is located at 100 East Pratt
         Street, Baltimore, Maryland 21202.

         T. Rowe Price Associates, Inc. is located at 100 East Pratt Street,
         Baltimore, Maryland 21202.

         Warburg Pincus Asset Management, Inc. is located at 466 Lexington
         Avenue, New York, New York, 10017-3147.

         Wellington Management Company, LLP is located at 75 State Street,
         Boston, Massachusetts 02109.


                                       C-7


<PAGE>


Each of the Advisers maintains the books, accounts and records required to be
maintained pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder.

Item 29.   Management Services

           Not applicable.

Item 30.   Undertakings

           Not applicable.

                                       C-8


<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as
amended, (the "1933 Act") and the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the December 30, 1998.

                                                      Style Select Series, Inc.

                                                      By:  /s/ Peter A. Harbeck
                                                           --------------------
                                                           Peter A. Harbeck
                                                           President

         Pursuant to the requirements of the 1933 Act, the Post-Effective
Amendment to the Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the date
indicated:

   
<TABLE>
<S>                                  <C>                                            <C>

/s/ Peter A. Harbeck                 President and Director                         December 30, 1998
- ------------------------------------ (Principal Executive Officer)
Peter A. Harbeck                     

                  *                  Treasurer                                      December 30, 1998
- ------------------------------------ (Principal Financial and
Peter C. Sutton                      Accounting Officer)     
                                     

                  *                  Director                                       December 30, 1998
- ------------------------------------
S. James Coppersmith

                  *                  Director                                       December 30, 1998
- ------------------------------------
Samuel M. Eisenstat

                  *                  Director                                       December 30, 1998
- ------------------------------------
Stephen J. Gutman

                  *                  Director                                       December 30, 1998
- ------------------------------------
Sebastiano Sterpa

*By: /s/ Robert M. Zakem                                                            December 30, 1998
- ------------------------
Attorney-in-Fact
Robert M. Zakem

</TABLE>
    

                                      C-9


<PAGE>



                           STYLE SELECT SERIES, INC.

                                 EXHIBIT INDEX
   
Exhibit (e)(ii)            Form of Selling Agreement.
    
                                      C-10



<PAGE>



- ------------------------------------------
Name of Firm

- ------------------------------------------
City             State            Zip Code

RE:  SELLING AGREEMENT

Gentlemen:

         We are the national distributor and principal underwriter of the
shares of mutual funds sponsored, managed and/or advised by SunAmerica Asset
Management Corp. (hereinafter referred to individually as a "Fund", or
collectively as the "Funds"). The Funds and each individual investment series
thereof are set forth on Schedule A, which may be amended from time to time.
We invite you to participate in making available to your customers shares of
the Funds on the following terms:

         1a. Non-Bank Participants only. You represent and warrant that you
are a member of the National Association of Securities Dealers, Inc. (the
"NASD"). You agree to abide by the Rules of Fair Practice, the Constitution
and By-Laws of the NASD and to all other rules and regulations that are now or
may become applicable to transactions thereunder.

         b. Bank Participants only. You represent and warrant to us that
(i)(a) you are a "Bank" as such term is defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or (b) you
are a "bank holding company" as such term is defined in the Bank Holding Act
of 1956, as amended (the "Act"); (ii) you are duly organized and an existing
"bank" or "bank holding company" in good standing under the laws of
jurisdiction in which you were organized; (iii) all authorization (if any)
required for your lawful execution of this Agreement and your performance
hereunder have been obtained; and (iv) upon execution and delivery by you, and
assuming due and valid execution and delivery by us, this Agreement will
constitute a valid and binding agreement, enforceable against you in
accordance with its terms. In the event you are a "bank holding company" as
such term is defined in the Act, you shall attach as an exhibit, and which
will be made a part of this Agreement, which sets forth the names and
addresses of the "banks" on whose behalf you are authorized to execute this
Agreement. You agree to give written notice to us promptly in the event you
shall cease to be a "bank" as such term is defined in Section 3(a)(6) of the
Exchange Act or a "bank holding company" as such term is defined in the Act.
In such event, this Agreement shall be automatically terminated upon such
written notice. You also agree to abide by all of the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. applicable to the sale
of investment company shares to your customers.

         We recognize that you may be subject to the provisions of
the Glass-Steagall Act and other laws governing, among other things, the
conduct of activities by federally chartered and supervised banks and
affiliated organizations. Because you will be the only one having a direct
relationship with the customer, you will comply and are complying with all
laws and regulations, including those of the applicable regulatory authorities
and any federal or state regulatory body having jurisdiction over you or your
customers, to the extent applicable to securities purchases hereunder for the
account of your customer.

         2.a Orders for shares received from you and accepted by a Fund will
be priced at its next-determined net asset value, plus the applicable sales
charge, if any, at the time of such acceptance as established pursuant to the
then-current prospectus of the Fund. You hereby agree that, in the event you
receive customer purchase or redemption orders for a fund after the time of
day that such fund prices its shares, you will have adequate internal controls
designed to prevent such orders from being aggregated with orders received
before such time. If you designate another entity to receive customer purchase
and redemption orders, you hereby agree to ensure that such designee has

<PAGE>

adopted and implemented its own adequate internal controls. Procedures
relating to the handling of orders, including the Policies and Procedures With
Respect to Sales of SunAmerica Mutual Funds Under the Multiple Pricing
Structure, as may be amended from time to time, set forth in Schedule B
hereto, shall be subject to instructions which we shall forward from time to
time to all firms (the "Participants") through which we make available shares
of the Funds. All orders are subject to acceptance by the applicable Fund,
which reserves the right in its sole discretion to reject any order in whole
or in part.

         b. We will confirm transactions for each of your customers, it
being understood in all cases that (a) you are acting as the agent for the
customer; (b) the transactions are without recourse against you by the
customer except to the extent that (i) your failure to transmit orders in a
timely fashion results in a loss to your customer, or (ii) in the event you do
not receive a confirmation of the transaction within ten (10) business days
following the order date, your failure to inquire as to the status of the
transaction during such time period results in a loss to your customer; (c) as
between you and the customer, the customer shall have beneficial ownership of
the Fund shares; (d) each transaction is initiated solely upon the order of
the customer; and (e) each transaction is for the account of the customer and
not for your account.

         3. As a Participant, you agree to purchase shares of the Funds
only through us or from your customers. Purchases through us shall be made
only for the purpose of covering purchase orders already received from your
customers or for your own bona fide investment.

         4. You agree to sell shares of the Funds only (a) to your
customers at the net asset value plus applicable sales charge, if any, then in
effect as established by the then-current prospectus of the applicable Fund or
(b) to us as agent for the Fund or the Fund itself at the redemption price as
described in the prospectus.

         5. We reserve the right in our discretion, and without notice to
you, to suspend sales or withdraw the offering of shares entirely, or to
modify or cancel this Agreement. All sales shall be subject to the terms and
provisions set forth in the Funds' then-current prospectuses.

         6. No person is authorized to make any representations concerning
a Fund or its shares except those contained in its prospectus and any other
information (including any applicable "Statement of Additional Information")
as may be approved by a Fund as information supplemental to its prospectus. In
purchasing shares through us, you shall rely solely on the representations
contained in the then-effective Prospectus and supplemental information
above-mentioned. You agree to hold us harmless and indemnify the Funds and us
in the event that you, or any of your sales representatives, should violate
any law, rule or regulation, or any provisions of this Agreement, which may
result in liability to the Funds or us. Additional copies of any prospectus
and/or supplemental information (including any applicable "Statement of
Additional Information") will be supplied by us to you in reasonable
quantities upon request.

         7. You shall have no authority whatever to act as agent of the
Funds or us, or any other Participant, and nothing in this Agreement shall
constitute you or the Funds as the agent of the other. In all transactions in
these shares between you and us, we are acting as agent for the Funds and not
as principal.

         8. All communications to us shall be sent to SunAmerica Capital
Services, Inc., The SunAmerica Center, 733 Third Avenue, New York, NY
10017-3204. Any notice to you shall be duly given if mailed or telegraphed to
you at your address set forth below, unless you give us written instructions
otherwise. It is your responsibility to provide us with updated information
concerning where written communications should be sent.

         9. This Agreement may be terminated without penalty upon written
notice by either party at any time, and shall automatically terminate upon its
assignment, or upon any event that terminates a Fund's Distribution Agreement
with us. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The indemnification provision in Section 6
hereof shall survive any termination of this Agreement hereunder.

<PAGE>

         10. Non-Bank Participants Only. By accepting this Agreement, you
represent that you are (i) registered as a broker-dealer under the Securities
Exchange Act of 1934; (ii) are qualified to act as a dealer in the states or
other jurisdictions where you transact business; and (iii) are a member in
good standing of the NASD. You agree that you will maintain such registration,
qualifications, and membership in full force and effect throughout the terms
of this Agreement. You further agree to comply with all applicable federal
laws, the laws of the states or other jurisdictions concerned, and the rules
and regulations promulgated thereunder, and with the Constitution, By-Laws and
Rules of Fair Practice, of the NASD and that you will not offer or sell the
shares of the Funds in any state or jurisdiction where they may not lawfully
be offered or sold, or where you are not registered as a broker-dealer.

         11.a Service Fees. We expect you to provide administration and
marketing services in the promotion of the Funds' shares, including services
and assistance to your customers who own Fund shares. For such services, you
will be entitled to compensation as set forth on Schedule A, as may be amended
from time to time, and in the Funds' current prospectuses. You hereby agree to
waive payment of such compensation until such time that we are in receipt of
the commissions or concessions due for such Fund shares. Our liability for
payment of such compensation is limited solely to the proceeds of such
concessions receivable. No commission or concession shall be payable with
respect to shares purchased through reinvestment of dividends or
distributions, or that had been acquired through one or more exchange
transactions which had been the subject of payments under this paragraph. In
addition, no commission or concession shall be payable with respect to Shares
that had been subject to a waiver of the sales charge except as set forth in
the Funds' current prospectuses.

         b. Contingent Deferred Sales Charge ("CDSC"). For purchases of
Class B and Class II shares (or for certain purchases of Class A shares), we
advance commissions with the presumption that assets will remain in the
Fund(s) long enough for expenses to be recouped. In the event of a redemption
of shares purchased before the holding period expires, a CDSC is deducted from
the redemption proceeds as described in the Funds' prospectuses.

         c. CDSC Waivers. An exemptive order issued by the Securities and
Exchange Commission provides for a waiver of the CDSC on the following
redemptions: (a) CDSC Shares (Class B, Class II shares and certain Class A
shares) requested to be redeemed within one year of the death or initial
determination of disability, as defined in Section 72(m)(7) of the Internal
Revenue Code of 1986 (the "Code"), of a shareholder; (b) Class B shares
representing taxable distributions made by qualified retirement plans or
retirement accounts (not including rollovers) for which SunAmerica Asset
Management Corp. serves as fiduciary; provided that, the plan participant or
account holder has attained the age of 591/2 at the time the redemption is
made; (c) Class B and Class II shares being redeemed up to the limit specified
in the Funds' prospectuses made pursuant to any systematic withdrawal plan
established by the Funds. The CDSC waiver, with respect to (a) above (i.e.;
death or disability), is only applicable in cases where the shareholder
account is registered (i) in the name of an individual person, (ii) as a joint
tenancy with rights of survivorship, (iii) as community property, or (iv) in
the name of a minor under the Uniform Gift or Uniform Transfer to Minors Acts.
Notwithstanding the foregoing, we reserve the right to terminate any or all of
these waiver provisions in the future.

         d. Commission Reclaims. With respect to shares redeemed on which
the CDSC is waived pursuant to (b) above (i.e.; taxable distributions from the
qualified retirement plans as described therein), 100% of the commission
advanced to the selling Broker/Dealer in respect of such shares is subject to
reclaim in the event the redemption occurs within the first year from the date
of purchase, and 50% of the commission advanced if the redemption occurs in
the second year from the date of purchase. With respect to Class A shares
purchased at net asset value (which were part of a purchase of $1 million or
more, and which were subject to a CDSC if redeemed within one year of
purchase), 50% of the commission advanced is subject to reclaim if the
redemption occurs during the second year from the date of purchase. For all
other purchases of Class A shares at net asset value, the entire commission
advanced is subject to reclaim for any redemption occurring within the first
two years from the date of purchase. The foregoing reclamations will be
subtracted from dealer 

<PAGE>


concession payments payable according to Schedule A and, if sufficient dealer
concession payments are not available to offset these reclamations, you will
reimburse us for these amounts.

         12. This Agreement shall become effective upon receipt by us of a
signed copy hereof, and shall continue in effect until and unless terminated
(i) pursuant to Section 9, above, or (ii) on account of your violation of any
representation contained herein. This Agreement shall supersede all prior
Selling Agreements with you relating to the shares of the Funds. This
Agreement may be amended in writing signed by each of the parties hereto,
except that we may amend Schedule A in our sole discretion upon notice to you.
Any such amendment shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors.

                                             SunAmerica Capital Services, Inc.

                                          By:
                                               ---------------------------------
                                        Name:
                                               ---------------------------------
           Date:                       Title:
                -----------------              ---------------------------------

         The undersigned accepts your invitation to make available to its
customers the shares of the Funds and agrees to abide by the foregoing terms
and conditions. The undersigned acknowledges receipt of prospectuses of the
Funds in connection with this offering.

- ------------------------------------      --------------------------------------
Firm Name                                 Authorized Signatory

- ------------------------------------      --------------------------------------
Address                                   Print Name

- ------------------------------------      --------------------------------------
                                          Title of Signatory

- ------------------------------------      --------------------------------------
Telephone Number                          Date

- ------------------------------------      
Fax Number





                                                                     Rev. 12/98




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