SUNAMERICA MONEY MARKET FUNDS INC, 485APOS, 1999-02-18

SUNAMERICA MONEY MARKET FUNDS INC
485APOS, 1999-02-18

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<PAGE>

As filed with the Securities and Exchange Commission on February 18, 1999

Securities Act File No. 2-85370

Investment Company Act File Act No. 811-3807

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

PRE-EFFECTIVE AMENDMENT NO. [X]

POST-EFFECTIVE AMENDMENT NO. 22

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 21

(Check appropriate box or boxes)

SUNAMERICA MONEY MARKET FUNDS, 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)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[X] on April 30, 1999 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>

- --------------------------------------------------------------------------------
___________________, 1999 PROSPECTUS
- --------------------------------------------------------------------------------

SUNAMERICA MONEY MARKET FUND

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............................................. 10

FUND MANAGEMENT............................................................. 22

2
<PAGE>

FUND HIGHLIGHTS

The following questions and answers are designed to give you an overview of, and
to provide you with information about, the Fund and its investment goal,
principal strategies, and principal investment techniques. The goal may be
changed without shareholder approval. However, you will be notified of any
change. There can be no assurance that the Fund's investment goal will be met
or that the net return on an investment in the Fund will exceed what could have
been obtained through other investment or savings vehicles.

Q: What are the Fund's investment goal, strategies and techniques?

A: The Fund seeks as high a level of current income as is consistent with
liquidity and stability of capital. It invests primarily in high-quality
money market instruments, selected primarily on the basis of quality and
yield. The fund is a money market fund and seeks to maintain a stable
share price of $1.00. In order to do this, the Fund must comply with a
rule of the Securities and Exchange Commission that limits the types of
securities in which the Fund may invest.

[Margin note: Money market instruments are high-quality short-term debt
obligations. The money market instruments in which the Fund will invest include
securities issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities; certificates of deposit, bankers'
acceptances and time deposits; commercial paper and other short-term obligations
of U.S. and foreign corporations; repurchase agreements; reverse repurchase
agreements; and asset-backed securities.]

[Margin note: "High-quality" instruments have a very strong capacity to pay
interest and repay principal.]

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

A: While the Fund invests only in high-quality money market instruments, you
should be aware that an investment in the Fund is subject to the risk that
the value of its investments may be subject to changes in interest rates.
Furthermore, although the Fund seeks to maintain a stable share price of
$1.00, there can be no assurance that the Fund will be able to do so. As a
result, it is possible to lose money by investing in the Fund.

Shares of the Fund are not bank deposits and are not guaranteed or insured
by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that the Fund
will be able to achieve its investment goal.

Q: How has the Fund performed historically?

3
<PAGE>

A: The following Risk/Return Bar Chart and Table illustrate the risks of
investing in the Fund by

To be filed by amendment

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

- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
- -------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

</TABLE>

Figure 1

showing changes in the Fund's performance from calendar year to calendar
year, and compare the Fund's 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 the Fund
will perform in the future.

(Class ___)

During the 10-year period shown in the bar chart, the highest return for a
quarter was ____% (quarter ended _______) and the lowest return for a quarter
was -_____% (quarter ended _______).
<TABLE>
<CAPTION>

Average Annual Total Returns (as of the Return Since Inception/*/
-------------------------------
calendar year ended December 31, 1998) Past One Past Five Past Ten
Year Years Years Fund Index**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

- ------------------------------------------------------------------------------------------------------------
SunAmerica Money Market Fund A ______% ______% ______% ______% ______%
- ------------------------------------------------------------------------------------------------------------
B ______% ______% N/A ______% ______%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>

Average Annual Total Returns (as of the
calendar year ended December 31, 1998)

Return Since Inception /*/
Past One Past Five Past Ten -----------------------------
Year Years Years Fund Index**
- --------------------------------------------------------------------------------
II ______% N/A N/A ______% ______%
- --------------------------------------------------------------------------------
Index/**/ ______% ______% ______% See Above
- --------------------------------------------------------------------------------
/*/ Inception Date for Class A shares is ___________; inception date for Class
B shares is September 24, 1993; inception date for Class C, which were
redesignated Class II on December 1, 1998, is October 2, 1997.

/**/ Index to be filed by amendment.

Q: What are the Fund's expenses?

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

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

Class Class
A/(1)/ B Class II
- ---------------------------------------------------
Shareholder Fees
(fees paid directly
from your investment)
- ---------------------------------------------------
Maximum Sales
Charge (Load)
Imposed on Pur
chases (as a per
centage of offering
price)................. None None 1.00%
- ---------------------------------------------------
Maximum
Deferred Sales
Charge (Load) (as
a percentage of
amount
redeemed)/(2)/.......... None 4.00% 1.00%
- ----------------------------------------------------
Maximum Sales
Charge (Load) Im
posed on
Reinvested
Dividends............... None None None
- ---------------------------------------------------
Redemption Fee/(3)/ None None None
- ---------------------------------------------------
Exchange Fee $5.00 $5.00 $5.00
- ---------------------------------------------------
Maximum Account None None None
Fee
- ---------------------------------------------------
Annual Fund
Operating Expenses
(expenses that are
deducted from Fund
assets)
- ---------------------------------------------------

Management Fees 0.50% 0.50% 0.50%
- ---------------------------------------------------
Distribution
(12b-1) Fees/(4)/ 0.15% 0.90% 0.90%
- ---------------------------------------------------
Other Expenses/(5)/
- ---------------------------------------------------
5

<PAGE>

-------------------------------
Class Class
A B Class II
-------------------------------

Total Annual Fund
Operating
Expenses/(5)(6)/
===============================

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

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

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

(4) Because these fees are paid out of the Fund's assets on an on-going basis,
over time these fees will increase the cost of your investment and may cost
you more than paying other types of sales charges.

(5) For the fiscal year ended December 31, 1998, the Total Operating Expenses
for Class A and Class B shares reflect the effect of a gross up of transfer
agent expense credits of ____%, respectively.

Example

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

The Example assumes that you invest $10,000 in the Fund 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
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

1 3 5 10
- - - --
(Class A shares)........................
(Class B shares)/*/.....................
(Class II shares).......................

6
<PAGE>

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

1 3 5 10
- - - --
(Class A shares).............................
(Class B shares)/*/..........................
(Class II shares)............................

_______________________________

* 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.
7

<PAGE>

FINANCIAL HIGHLIGHTS

The Financial Highlights table for the Fund is intended to help you understand
the Fund's financial performance for the past 5 years. 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 (or lost) 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 the Fund's financial statements, are included in
the Fund's annual report to shareholders, which is available upon request.

8
<PAGE>
<TABLE>
<CAPTION>
Net
gain (loss)
Net on invest- Total Dividends Distri-
Net Asset invest- ments (both from from net butions Net Assets Ratio of
Value, ment realized invest- invest- from Total end of expenses
Period beginning income and ment ment capital distri- period to average
Ended of period (loss)(1) unrealized operations income gains butions (000's) net assets
- ------- --------- ----------- ---------- ---------- ---------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

</TABLE>

Ratio of net
investment
income
(loss)
to average Portfolio
net assets turnover
- ---------- ---------

[to be filed by Amendment]

-9-
<PAGE>

SHAREHOLDER ACCOUNT INFORMATION

Selecting a Share Class

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

Each class of shares has its own cost structure, as shown below. If you wish to
purchase shares of the Fund, you will generally be required to purchase Class A
shares, as Class B and Class II shares of the Fund are typically be issued only
in exchange for Class B shares or Class II shares of other SunAmerica Mutual
Funds. Class II shares will also be exchanged for Class C shares of other
SunAmerica Mutual Funds.

- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Class B Class II
- ---------------------------------------------------------------------------------------------------
. No front-end sales charges; . No front-end sales . Front-end sales charge, as
all your money goes to work for charge; all your money goes described below.
you right away. to work for you right away.

. Lower annual expenses than . Higher annual expenses
Class B or Class II shares. than Class A shares. . Higher annual expenses
than Class A shares.
. Deferred sales charge on
shares you sell within six . Deferred sales charge on
years of purchase, as shares you sell within
described below. eighteen months of purchase,
as described below.
. Automatic conversion to
Class A shares after . No conversion to Class A.
approximately seven years,
thus reducing future annual
expenses.

-10-

</TABLE>
<PAGE>

Calculation of Sales Charges

Class A Class A shares are available with no front-end sales charge.

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.

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 eighteen 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

-11-
<PAGE>

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

. within one year of the shareholder's death or becoming disabled
. taxable distributions or loans to participants made by qualified
retirement plans or retirement accounts (not including rollovers) for which
the Adviser serves as a fiduciary

. Directors and other individuals who are affiliated with the Corporation or
other SunAmerica Mutual Funds and their families
. to make taxable distributions from certain retirement plans
. to make payments through the Systematic Withdrawal Plan (subject to
certain conditions)

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

12b-1 Fees

Each class of shares of the Fund 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:

Class Distribution Fee Service Fee
- ------ ----------------- -----------
A None .15%
B .75% .15%
II .75% .15%

Because 12b-1 fees are paid out of the Fund'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.

-12-
<PAGE>

2. Determine how much you want to invest. The minimum initial investments for
the Fund are as follows:
. non-retirement account: $1,000
. retirement account: $250
. dollar cost averaging: $500 to open; you must invest at least $25 a
month

The minimum subsequent investments for the Fund are as follows:

. non-retirement account: $100
. 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.

-13-

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Buying shares
- ------------------------------------------------------------------------------------------------------------
Opening an account Adding to an account
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
By check
- ------------------------------------------------------------------------------------------------------------
. Make out a check for the investment . Make out a check for the investment amount
amount, payable to the Fund or payable to the Fund or SunAmerica Funds.
SunAmerica Funds.
. Deliver the check and your completed Account . Include the stub from your Fund statement or
Application (and Supplemental Account Application, if a note specifying the Fund name, your share
applicable) to your broker or financial advisor, or class, your account number and the name(s) in
mail them to: which the account is registered.

SunAmerica Fund Services, Inc. .Indicate the Fund and account number in the
Mutual Fund Operations, 3rd Floor memo section of your check.
The SunAmerica Center
733 Third Avenue .Deliver the check and your note to your
New York, New York 10017-3204. 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
- ------------------------------------------------------------------------------------------------------------
</TABLE>

-14-

<PAGE>

<S> <C>
.Deliver your completed application to your broker or .Instruct your bank to wire the amount of your
financial advisor or fax it to SunAmerica Fund investment to:
Services, Inc. at 212-551-5585.

.Obtain your account number by referring State Street Bank & Trust Company
to your statement or by calling your Boston, MA
broker or finiancial advisor or ABA #0110-00028
Shareholder/Dealer Services at 1-800-858- DDA # 99029712
8850, ext. 5125.
Specify the Fund name, your share class, your
Fund number, account number and the name(s) in
which the account is registered. Your bank
may charge a fee to wire funds.

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

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

-15-
<PAGE>
<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
<S> <C>
How Requirements
- --------------------------------------------------------------------------------
Through Your Broker or Financial Advisor
- --------------------------------------------------------------------------------
.Accounts of any type. .Call your broker or financial advisor to
.Sales of any amount. place your order to sell shares.

- --------------------------------------------------------------------------------
By mail
- --------------------------------------------------------------------------------
.Accounts of any type. .Write a letter of instruction indicating the
.Sales of any amount. Fund 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.

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

.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>

- -------------------------------------------------------------------------------
By phone
- -------------------------------------------------------------------------------

.Most accounts.
.Sales of less than $100,000.

.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 Fund 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.

-16-
<PAGE>

. 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 Fund by the shareholder(s)
on the account.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
By wire
- --------------------------------------------------------------------------------
<S> <C>
.Request by mail to sell any amount (accounts of any .Proceeds will normally be wired on the next
type). business day. A $15 fee will be deducted from
.Request by phone to sell less than $100,000. your account.

</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:

. your address of record has changed within the past 30 days
. you are selling more than $100,000 worth of shares
. 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:

. a broker or securities dealer
. a federal savings, cooperative or other type of bank
. a savings and loan or other thrift institution
. a credit union
. 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 the Fund 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 its shares outstanding. It is the intention of the
Fund to maintain a net asset value per share of $1.00, although there can be no
assurance that the Fund will be able to do so. In accordance with the rules and
regulations of the Securities and Exchange Commission, the Fund intends to value
its portfolio securities based upon their amortized cost. This entails
initially valuing a security at its cost and thereafter assuming a constant

-17-
<PAGE>

amortization to maturity of any premium or discount regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by the amortized cost method, is higher or lower than the
price the Fund would receive if it sold the instrument.

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 Fund 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 received in proper form by the
Fund. If the Fund or the Distributor receives your order before the Fund'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 Fund 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, the Fund 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.

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 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 Fund for shares of the same class of
any other SunAmerica Mutual Fund; however, exchanges of Class A shares may be
subject to applicable sales charge imposed by the acquired 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."

-18-
<PAGE>

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 SunAmerica Mutual 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. The Fund may change or cancel
its exchange privilege at any time, upon 60 days' written notice to its
shareholders. The Fund 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:

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

. 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).

-19-
<PAGE>

. 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.
. Determine the schedule: monthly, quarterly, semi-annually, annually
or in certain selected months.
. 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 Fund
periodically for the same class of shares of one or more other SunAmerica Mutual
Funds. To use:

. Specify the SunAmerica Mutual Fund(s) from which you would like money
withdrawn and into which you would like money invested.
. Determine the schedule: monthly, quarterly, semi-annually, annually or
in certain selected months.
. Specify the amount(s). Each exchange must be worth at least $25.
. 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 Fund 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 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.

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<PAGE>

Retirement plans SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Roth IRAs, Simple 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.

Tax, Dividend and Account Policies

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

. after every transaction that affects your account balance (except a
dividend reinvestment or automatic purchase from your bank account)
. after any changes of name or address of the registered owner(s)
. in all other circumstances, annually.

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

Dividends The Fund generally distributes most or all of its net earnings in the
form of dividends. Ordinary income dividends, if any, are declared daily and
paid monthly by the Fund. Capital gains distributions, if any, are paid annually
by the Fund.

Dividend Reinvestments Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the Fund 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 the Fund meets the requirements for being a
tax-qualified regulated investment company, which the Fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.

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

-21-
<PAGE>

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.

Other Tax Considerations If you are neither a lawful permanent resident nor a
citizen of the U.S. or if you are a foreign entity, ordinary income dividends
paid to you (which include distributions of net short-term capital gains) will
generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate
applies.

By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided a taxpayer identification number or social security number.

This section summarizes some of the consequences under current federal tax law
of an investment in the Fund. It is not a substitute for professional tax
advice. Consult your tax advisor about the potential tax consequences of an
investment in the Fund under all applicable laws.

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 Fund performance or the effects of sales charges.

FUND MANAGEMENT

Adviser SunAmerica Asset Management Corp., which was organized in 1982 under
the laws of Delaware, selects and manages the investments, provides various
administrative services, and supervises the daily business affairs of the Fund.
In addition to managing the Fund, SunAmerica serves as adviser, manager and/or
administrator for SunAmerica Equity Funds, Anchor Pathway Fund, Anchor Series
Trust, Style Select Series, Seasons Series Trust, SunAmerica Income Funds, and
SunAmerica Series Trust. SunAmerica managed, advised or administered assets in
excess of $15 billion as of October 31, 1998.

For the fiscal year ended December 31, 1998, the Fund paid SunAmerica a fee
equal to __% of average daily net assets.

SunAmerica's Fixed-Income Investment Team is responsible for the management of
the Fund.

-22-
<PAGE>

Distributor SunAmerica Capital Services, Inc. distributes the Fund'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 Fund'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 Fund. 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
Funds, 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 Fund.
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 Fund'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 Funds' 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 Funds' transfer agent
in providing shareholder services. The Administrator, a SunAmerica company, is
paid a monthly fee by the Fund for its services at the annual rate of .22% of
average daily net assets. This fee represents the full cost of providing
shareholder and transfer agency services to the Fund.

The Adviser, 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

-23-
<PAGE>

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 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.

-24-
<PAGE>

(OUTSIDE BACK COVER)

FOR MORE INFORMATION

The following documents contain more information about the Fund 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 Fund's performance during the last fiscal year.

Statement of Additional Information (SAI). Contains additional
information about the Fund'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 Funds
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

by calling your broker or financial advisor.

Information about the Fund (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 Fund 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.

[Logo] SunAmerica
Mutual Funds

DISTRIBUTOR: SunAmerica Capital Services

The Fund is a series of SunAmerica Money Market Funds, Inc.
INVESTMENT COMPANY ACT
File No. 811-03807
<PAGE>

SUNAMERICA MONEY MARKET FUND
Statement of Additional Information
dated _______, 1999

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

SunAmerica Money Market Fund (the "Fund") seeks as high a level of current
income as is consistent with liquidity and stability of capital by investing in
a portfolio of high quality, short-term money market instruments. The Fund is
the only series of SunAmerica Money Market Funds, Inc., which is registered as
an open-end diversified management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act") and organized as a Maryland
corporation (the "Corporation").

This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Fund's Prospectus dated _____, 1999. To obtain a
Prospectus, free of charge, please call the Fund at (800) 858-8850. The
Prospectus is incorporated by reference into this Statement of Additional
Information and this Statement of Additional Information is incorporated by
reference into the Prospectus. The Fund's audited financial statements are
incorporated in this Statement of Additional Information by reference to its
1998 annual report to shareholders. You may request a copy of the annual report
at no charge by calling (800) 858-8850 or writing the Fund at SunAmerica Fund
Services, Inc., Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue,
New York, New York 10017-3204. Capitalized terms used herein but not defined
have the meanings assigned to them in the Prospectus.

TABLE OF CONTENTS
Page
----

History of the Fund........................................... B-2
Investment Objective and Policies............................. B-2
Investment Restrictions....................................... B-8
Directors and Officers........................................ B-11
Adviser, Personal Trading, Distributor and Administrator...... B-16
Portfolio Transactions and Brokerage.......................... B-20
Additional Information Regarding Purchase of Shares........... B-21
Additional Information Regarding Redemption of Shares......... B-24
Determination of Net Asset Value.............................. B-26
Performance Data.............................................. B-26
Dividends, Distributions and Taxes............................ B-29
Retirement Plans.............................................. B-31
Description of Shares......................................... B-33
Additional Information........................................ B-34
Financial Statements.......................................... B-34
Appendix......................................................Appendix - 1
<PAGE>

No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Statement of Additional Information or in the Prospectus, and, if given or made,
such other information or representations must not be relied upon as having been
authorized by the Fund, the Adviser or the Distributor. This Statement of
Additional Information and the Prospectus do not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction in which such an offer to sell or solicitation of an offer to buy
may not lawfully be made.

HISTORY OF THE FUND

The Corporation is a diversified open-end management investment company
organized in Maryland in 19__. On September 23, 1993, the Articles of
Incorporation of the Corporation were amended to permit the creation of multiple
series and classes of shares, and on September 24, 1993, the Corporation
reorganized with the SunAmerica Cash Fund ("Cash Fund") and was renamed
SunAmerica Money Market Funds, Inc. (the "Reorganization"). All of the
outstanding shares of the Corporation were redesignated Class A shares of the
Fund in the Reorganization. In addition, in the Reorganization, the
shareholders of Cash Fund received Class B shares of the Fund. Class C shares
commenced offering on October 2, 1997. On December 1, 1998, Class C shares of
the Fund were redesignated as Class II shares.

INVESTMENT OBJECTIVE AND POLICIES

The investment objective and policies of the Fund are described in the
Prospectus. Certain types of securities in which the Fund may invest and
certain investment practices the Fund may employ, which are described in the
Prospectus , are discussed more fully below. The stated percentage limitations
are applied to an investment at the time of purchase unless indicated otherwise.

U.S. government obligations. The Fund may invest in a variety of short-term
debt securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities include a variety of Treasury securities
that differ primarily in their interest rates, the length of their maturities
and dates of issuance. Treasury bills are obligations issued with maturities of
one year or less. Treasury notes are generally issued with maturities of from
one to ten years. Treasury bonds are generally issued with maturities of more
than ten years. Obligations issued by agencies and instrumentalities, which may
be purchased by the Fund, also vary in terms of their maturities at the time of
issuance. However, the Fund invests only in obligations that, at their time of
purchase by the Fund, have remaining maturities of 397 calendar days or
less.

Bank Obligations. Certificates of deposit ("CD's") and bankers' acceptances may
be purchased by the Fund. CD's are securities that represent deposits in a
depository institution (e.g., a commercial

B-2
<PAGE>

bank or savings and loan association) for a specified period at a specified rate
of interest and normally are negotiable. CD's issued by a foreign branch
(usually London) of a U.S. domestic bank, are known as Eurodollar CD's. Although
certain risks may be associated with Eurodollar CD's that are not associated
with CD's issued in the U.S. by domestic banks, the credit risks of these
obligations are similar because U.S. banks generally are liable for the
obligations of their branches. CD's issued through U.S. branches of foreign
banks are known as Yankee CD's. These branches are subject to federal or state
banking regulations. The secondary markets for Eurodollar and Yankee CD's may be
less liquid than the market for CD's issued by domestic branches of U.S. banks.

Bankers' acceptances are short-term credit instruments that represent the
promise of a bank to pay a draft drawn by one of its customers at its
maturity. These obligations are used to finance the import, export, transfer or
storage of goods and represent the obligation of both the accepting bank and its
customer.

Commercial Paper. The commercial paper in which the Fund may invest may be
unsecured or may be backed by letters of credit. Commercial paper backed by a
letter of credit is, in effect, "two party" paper with the issuer of the paper
initially responsible for repayment and a bank guaranteeing the repayment if not
made by the issuer at maturity. The Fund may also invest in variable amount
master demand notes, which represent a direct lending arrangement between the
Fund and a corporate borrower. These notes permit daily changes in the amount
borrowed. The Fund has the right to increase the amount loaned under the note
at any time up to the full amount provided in the loan agreement or to decrease
the amount loaned. The borrower generally has the right to prepay up to the
full amount of the loan without penalty. These notes are generally not traded
in a secondary market; however, the Fund will enter into such arrangements
only where it has the right to redeem the note on not more than seven days
notice.

Corporate Obligations. These obligations include bonds, debentures and notes
issued by corporations to finance long-term credit needs. Although issued with
maturities in excess of one year, the Fund's investments in corporate
obligations are limited to obligations having remaining maturities of 397
calendar days or less at the time of purchase by the Fund.

Illiquid Securities. The Fund may invest up to 10% of its net assets,
determined as of the date of purchase, in illiquid securities including
repurchase agreements that have a maturity of longer than seven days or in
other securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), securities
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 not 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

B-3
<PAGE>

an adverse effect on the marketability of portfolio securities, and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. There generally will be a lapse of time between a
mutual fund's decision to sell an unregistered security and the registration of
such security promoting sale. Adverse market conditions could impede a public
offering of such securities. When purchasing unregistered securities, the Fund
will seek to obtain the right of registration at the expense of the issuer.

In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act for which there is a readily available market will not be deemed
to be illiquid. The Fund's investment adviser, SunAmerica Asset Management
Corp. ("SunAmerica," or the "Adviser"), will monitor the liquidity of such
restricted securities subject to the supervision of the Board of Directors of
the Corporation (the "Directors"). In reaching liquidity decisions the Adviser
will consider, inter alia, pursuant to guidelines and procedures established by
the Directors, the following factors: (1) the frequency of trades and quotes
for the security; (2) the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the security; and (4) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the transfer).

Commercial paper issues in which the Fund may invest include securities
issued by major corporations without registration under the Securities Act in
reliance on the exemption from such registration afforded by Section 3(a)(3)
thereof, and commercial paper issued in reliance on the so-called private
placement exemption from registration 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. The Fund's 10%
limitation on investments in illiquid securities includes Section 4(2) paper
other than Section 4(2) paper that the Adviser has determined to be liquid
pursuant to guidelines established by the Directors. The Directors have
delegated to the Adviser the function of making day-to-day determinations of
liquidity with respect to Section 4(2) paper, pursuant to guidelines approved by

B-4
<PAGE>

the Directors that require the Adviser to take into account the same factors
described above for other restricted securities and require the Adviser to
perform the same monitoring and reporting functions.

Repurchase Agreements. The Fund may enter into repurchase agreements with
banks, brokers or securities dealers. In such agreements, the seller agrees to
repurchase a security from the Fund at a mutually agreed-upon time and price.
The period of maturity is usually quite short, either overnight or a few days
although it may extend over a number of months. The repurchase price is in
excess of the purchase price by an amount which reflects an agreed-upon rate of
return effective for the period of time the Fund's money is invested in the
security. Whenever the Fund enters into a repurchase agreement, it obtains
collateral having a value at least equal to 102% (100% if such collateral is
in the form of cash) of the repurchase price. The instruments held as
collateral are valued daily and if the value of the instruments declines, the
Fund will require additional collateral. If the seller defaults and the value of
the collateral securing the repurchase agreements declines, the Fund will
incur a loss. In addition, if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited. The Directors have established guidelines to be used by the
Adviser in connection with transactions in repurchase agreements and will
regularly monitor the Fund's use of repurchase agreements. The Fund will not
invest in repurchase agreements maturing in more than seven days if the
aggregate of such investments along with other illiquid securities exceeds 10%
of the value of its net assets. However, there is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements having a maturity
of seven days or less for temporary defensive purposes.

Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements with brokers, dealers and other financial institutions determined
by the Adviser to be creditworthy. A reverse repurchase agreement involves the
sale of a security held by the Fund, subject to an agreement by the Fund to
repurchase that security at a mutually agreed upon price, date and interest
payment. The Fund uses the proceeds of the reverse repurchase agreement to make
additional investments that mature on or prior to the repurchase date and
will enter into a reverse repurchase agreement when it anticipates that the
interest income to be earned from investing the proceeds of the reverse
repurchase agreement will exceed the interest expense of the transaction.
During the time a reverse repurchase agreement is outstanding, the Fund will
maintain with the Custodian a segregated account containing cash or liquid
securities having a value at least equal to the repurchase price under the
agreement. In the event that the other party to the reverse repurchase
agreement defaults on its obligation to resell to the Fund the underlying
securities because of insolvency or otherwise, the Fund could experience delays
and costs in gaining access to the securities and could suffer a loss to the
extent that the value of the proceeds of the agreement fell below the value of
the underlying securities. Reverse repurchase agreements are considered to be
borrowings and are subject to the percentage limitations on borrowings. See
"Investment Restrictions."

Asset-Backed Securities. The Fund may invest up to 15% of its net assets in
asset-backed securities rated in conformance with both the Fund's credit quality
restrictions and Rule 2a-7 under the 1940 Act. These securities, issued by
trusts and special purpose corporations, are backed by a pool of

B-5
<PAGE>

assets, such as credit card and automobile loan receivables, representing the
obligations of a number of different parties. The Fund may also invest in
privately issued asset-backed securities.

Asset-backed securities present certain risks. For instance, in the case
of credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.

Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors to make payments on underlying assets, the securities may
contain elements of credit support, which fall into two categories: (i)
liquidity protection and (ii) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses resulting from ultimate default
ensures payment through insurance policies or letters of credit obtained by the
issuer or sponsor from third parties. The Fund will not pay any additional or
separate fees for credit support. The degree of credit support provided for
each issue is generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquency or loss in
excess of that anticipated or failure of the credit support could adversely
affect the return on an investment in such a security.

Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend portfolio securities in amounts up to 20% of
total assets to brokers, dealers and other financial institutions, provided,
that such loans are callable at any time by the Fund and are at all times
secured by cash or equivalent collateral. In lending its portfolio securities,
a Fund receives income while retaining the securities' potential for capital
appreciation. The advantage of such loans is that a Fund continues to receive
the interest and dividends on the loaned securities while at the same time
earning interest on the collateral, which will be invested in short-term
obligations. Where securities instead of cash are delivered to the Fund as
collateral, the Fund earns its return in the form of a loan premium paid by the
borrower. A loan may be terminated by the borrower on one business day's notice
or by the Fund at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Fund can use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over collateral. As with any

B-6
<PAGE>

extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Adviser to be creditworthy. On termination of the loan, the
borrower is required to return the securities to the Fund; and any gain or loss
in the market price of the loaned security during the loan would inure to the
Fund. The Fund will pay reasonable finders', administrative and custodial fees
in connection with a loan of its securities or may share the interest earned on
collateral with the borrower.

Since voting or consent rights that accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loan, in whole or
in part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in the
securities that are the subject of the loan.

Borrowings. As noted in the Prospectus, the Fund may borrow for temporary or
emergency purposes or to meet redemption requests. The consequence of such
borrowings might be to reduce the Fund's yield below that which would have been
realized in the absence of such borrowings.

When-Issued and Delayed-Delivery Securities. From time to time, in the ordinary
course of business, the Fund may purchase securities on a when-issued or
delayed-delivery basis - i.e., delivery and payment can take place a month or
more after the date of the transactions. Such agreements might be entered into,
for example, when the Fund anticipates a decline in the yield of securities of a
given issuer and is able to obtain a more advantageous yield by committing
currently to purchase securities to be issued later. The securities so
purchased are subject to market fluctuation and no interest accrues to the
purchaser during this period. At the time of delivery of the securities, the
value may be more or less than the purchase price. The Fund will establish and
maintain until the date of delivery of such when-issued securities, a segregated
account with the Fund's Custodian in which it will maintain cash or liquid
securities at least equal in value to commitments for such when-issued or
delayed-delivery securities. The Fund will make payment for such when-issued
securities on the delivery date utilizing then-available cash and, if cash is
not available, or if it is not disadvantageous to the Fund, utilizing the
proceeds of the liquidation of portfolio securities held in such segregated
account.

Special Risk Factors. In the case of bank obligations not insured by the
Federal Deposit Insurance Corporation ("FDIC") or the Federal Savings and Loan
Insurance Corporation ("FSLIC"), the Fund will be dependent solely on the
financial resources of the issuing bank for payment of principal and interest.
The Fund's investments in commercial paper issued by foreign corporations and
securities of foreign branches of domestic banks and domestic branches of
foreign banks involve certain investment risks in addition to those affecting
obligations of U.S. domestic issuers. These risks include the possibility of
adverse political and economic developments, and the risk of: imposition of
foreign withholding taxes on the interest payable on such securities; seizure,
expropriation or nationalization of foreign deposits; and adoption of foreign
governmental restrictions, such as exchange controls, which might adversely
affect the payment of principal and interest on such securities. In addition,
certain reserve requirements and other regulations to which domestic banks

B-7
<PAGE>

are subject may not apply to foreign branches or foreign banks, which also may
use accounting methods different from those used by U.S. domestic banks. Non-
negotiable time deposits, unlike negotiable certificates of deposit, cannot be
sold in a secondary market and may be subject to penalties for early withdrawal.

INVESTMENT RESTRICTIONS

The Fund is subject to a number of investment restrictions that are
fundamental policies and may not be changed without the approval of the holders
of a majority of the Fund's outstanding voting securities. As defined in the
1940 Act, a "majority of the outstanding voting securities" of the Fund means
the lesser of (i) 67% of the shares of the Fund represented at a meeting at
which more than 50% of the outstanding shares are present in person or
represented by proxy or (ii) more than 50% of the outstanding shares. Unless
otherwise indicated, all percentage limitations apply only at the time the
investment is made; any subsequent change in any applicable percentage resulting
from fluctuations in value will not be deemed an investment contrary to these
restrictions. Under these restrictions, the Fund may not:

1. Purchase securities other than those described under "Investment
Objective and Policies."

2. Enter into reverse repurchase agreements exceeding in the aggregate 1/3
of the value of the Fund's total assets, less liabilities other than
obligations under such reverse repurchase agreements.

3. Purchase the securities of issuers conducting their principal business
activity in the same industry if immediately after such purchase the
value of its investments in such industry would exceed 25% of the value
of the Fund's total assets, provided that there is no limitation with
respect to investments in securities issued by domestic branches of U.S.
banks or the U.S. Government, its agencies or instrumentalities.

4. Invest more than 5% of its assets in the securities of any one issuer
(exclusive of securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities) except that up to 25% of the value of
the Fund's total assets may be invested without regard to such 5%
limitation, subject to applicable limitations imposed by Rule 2a-7 under
the 1940 Act.

5. Make loans, except through the purchase or holding of debt obligations
in accordance with the Fund's investment objective and policies (see
"Investment Objective and Policies"), or as otherwise permitted by
exemptive order of the Securities and Exchange Commission.

B-8
<PAGE>

6. Lend its portfolio securities in excess of 20% of its total assets
provided that such loans are made according to the guidelines of the
Securities and Exchange Commission and the Fund's Board of Directors,
including maintaining collateral from the borrower equal at all times
to the current market value of the securities loaned.

7. Borrow money except for temporary or emergency purposes to meet
redemption requests which might otherwise require the untimely
disposition of securities (not for the purpose of increasing income),
provided that borrowings in the aggregate may not exceed 10% of the
value of the Fund's total assets, including the amount borrowed, at the
time of such borrowing.

8. Purchase or sell puts, calls, straddles, spreads or any combination
thereof, real estate, commodities, commodity contracts or interests in
oil, gas and/or mineral exploration or development programs, provided
that the Fund may purchase bonds or commercial paper issued by
companies, including real estate investment trusts, which invest in
real estate or interests therein.

9. Invest in securities of other registered investment companies, except
by purchases in the open market involving only customary brokerage
commissions and as a result of which the Fund will not hold more than
3% of the outstanding voting securities of any one investment company,
will not have invested more than 5% of its total assets in any one
investment company and will not have invested more than 10% of its
total assets in such securities of one or more investment companies
(each of the above percentages to be determined at the time of
investment), or except as part of a merger, consolidation or other
acquisition.

10. Act as an underwriter of securities.

11. Make short sales of securities or maintain a short position, provided
that this restriction shall not be deemed to be applicable to the
purchase or sale of "when-issued" securities or of securities for
delivery at a future date.

12. Invest in or hold securities of any issuer if those officers and
Directors of the Fund or the Adviser owning individually more than 1/2
of 1% of the securities of such issuer together own more than 5% of the
securities of such issuer.

In addition to the foregoing, the Fund has adopted a non-fundamental policy
(which may be changed by the Directors without shareholder approval) of not
investing more than 10% of its net assets in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days, time
deposits with a maturity of longer than seven days, securities with legal or
contractual restrictions on resale and securities that are not readily
marketable in securities markets either within or without the United States.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act that have a readily available market, and commercial paper
exempted

B-9
<PAGE>

from registration under the Securities Act pursuant to Section 4(2) of
the Securities Act that may be offered and sold to "qualified institutional
buyers" as defined in Rule 144A, which the Adviser has determined to be liquid
pursuant to guidelines established by the Directors, will not be considered
illiquid for purposes of this 10% limitation on illiquid securities.

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

B-10
<PAGE>

DIRECTORS AND OFFICERS

The following table lists the Directors and executive officers of the
Corporation, their ages, business addresses, and principal occupations during
the past five years. The SunAmerica Mutual Funds ("SAMF") consist of
SunAmerica Equity Funds, SunAmerica Income Funds, SunAmerica Money Market Funds,
Inc. and Style Select Series, Inc. An asterisk indicates those Directors who
are interested persons of the Fund within the meaning of the 1940 Act.

<TABLE>
<CAPTION>
Principal Occupations
During Past 5 Years
Position with the ----------------------------
Name, Age and Address Trust
- ---------------------- ------------------
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
S. James Coppersmith, 65 Director Retired ; formerly, President and
7 Elmwood Road General Manager, WCVB-TV, a
Marblehead, MA 01945 division of the Hearst Corp. (1982 to
1994); Director/Trustee of SAMF
and Anchor Series Trust ("AST").
- -----------------------------------------------------------------------------------------------
Samuel M. Eisenstat, 58 Director Attorney, solo practitioner, Of
430 East 86th Street Counsel, Kramer, Levin, Naftalis &
New York, NY 10028 Frankel ; Chairman of the Boards of
Directors/Trustees of SAMF and
AST.
- -----------------------------------------------------------------------------------------------
Stephen J. Gutman, 55 Director Partner and Managing Member of
515 East 79th Street B.B. Associates LLC (menswear
New York, NY 10021 specialty retailing and other activities)
since June 1988; Director/Trustee of
SAMF and AST.

-----------------------------------------------------------------------------------------------
Peter A. Harbeck*, 44 Director and President Director and President, the Adviser;
The SunAmerica Center Director, SunAmerica Capital Services,
733 Third Avenue Inc. ("SACS"), since August 1993;
New York, NY Director and President, SunAmerica
10017-3204 Fund Services, Inc.("SAFS"), since
May 1988; President, SAMF and AST;
Executive Vice President and Chief
Operating Officer, the Adviser, from
May 1988 to August 1995; Executive
Vice President, SACS, from November
1991 to August 1995; Director,
Resources Trust Company.
- -----------------------------------------------------------------------------------------------
</TABLE>
B-11
<PAGE>

[CAPTION]
<TABLE>
Prinicipal Occupations
Name Age and Address Position with the During Past 5 Years
Trust
- --------------------------------------------------------------------------------
<S> <C> <C>
Sebastiano Sterpa, 69 Director Founder and Chairman of the Board
73473 Mariposa Drive of the Sterpa Group (real estate),
Palm Desert, CA 92260 since 1962; Director, Real Estate
Business Service and
Countrywide Financial;
Director/Trustee of SAMF.

- -----------------------------------------------------------------------------------------------
J. Steven Neamtz*, 38 Vice President Executive Vice President of the
The SunAmerica Center Adviser, since April 1996;
733 Third Avenue Director and President , SACS, since
New York, NY 10017-3204 April 1996; formerly, Executive
Vice President, New England Funds,
L.P. from July 1990 to April 1996.

- -----------------------------------------------------------------------------------------------
Peter C. Sutton*, 34 Treasurer Senior Vice President, the Adviser,
The SunAmerica Center since April 1997; Treasurer,
733 Third Avenue SAMF and AST, since February
New York, NY 10017-3204 1996; Vice President and Assistant
Treasurer of SAST and APF since
1994; Vice President, Seasons Series
Trust, since April 1997; formerly,
Vice President, the Adviser, 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-12
<PAGE>

<TABLE>
<CAPTION>
Principal Occupations
Name Age and Address Position with the During Past 5 Years
Trust
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert M. Zakem, 41 Secretary and Chief Senior Vice President and General
The SunAmerica Center Compliance Officer Counsel, the Adviser, since April
733 Third Avenue 1993; Executive Vice President,
New York, NY 10017-3204 General 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, the
Adviser, from March 1992 to
April 1993.
- -----------------------------------------------------------------------------------------
</TABLE>

Directors and officers of the Corporation are also directors or trustees
and officers of some or all of the other investment companies managed,
administered or advised by the Adviser and distributed by SunAmerica Capital
Services, Inc. ("SACS" or the "Distributor") and other affiliates of SunAmerica
Inc.

The Corporation pays each Director who is not an interested person of the
Corporation or the Adviser (each a "disinterested" Director) annual compensation
in addition to reimbursement of out-of-pocket expenses in connection with
attendance at meetings of the Directors. Specifically, each disinterested
Director receives a pro rata portion (based upon the Corporation's net assets)
of the $40,000 in annual compensation for acting as a director or trustee to all
the retail funds in the SAMF. In addition, Mr. Eisenstat receives an aggregate
of $2,000 in annual compensation for serving as Chairman of the Boards of the
retail funds in the SAMF. Officers of the Corporation receive no direct
remuneration in such capacity from the Corporation or the Fund.

In addition, each disinterested Director also serves on the Audit Committee
of the Board of Directors. The Audit Committee is charged with recommending to
the full Board the engagement or discharge of the Fund's independent
accountants; directing investigations into matters within the scope of the
independent accountants' duties; reviewing with the independent accountants the
audit plan and results of the audit; approving professional services provided by
the independent accountants and other accounting firms prior to the performance
of such services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; and preparing and submitting
Committee minutes to the full Board. Each member of the Audit Committee
receives an aggregate of $5,000 in annual compensation for serving on the Audit
Committees of all of the SAMF as well

B-13
<PAGE>

as AST. With respect to the Corporation, each member of the Audit Committee
receives a pro rata portion of the $5,000 annual compensation, based on the
relative net assets of the Corporation. The Corporation also has a Nominating
Committee, composed solely of disinterested Directors, which recommends to the
Directors those persons to be nominated for election as Directors by
shareholders and selects and proposes nominees for election by Directors between
shareholders' meetings. Members of the Nominating Committee serve without
compensation.

The Directors (and Trustees) of the SAMF have adopted the SunAmerica
Disinterested Trustees' and Directors' Retirement Plan (the "Retirement Plan")
effective January 1, 1993 for the disinterested Directors of the SAMF. The
Retirement Plan provides generally that if a disinterested Director who has at
least 10 years of consecutive service as a disinterested Director of any of the
SAMF (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 of the SAMF with respect to which he or she is an
Eligible Director. With respect to Sebastiano Sterpa, the Disinterested Trustees
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 of
the SAMF 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.

B-14
<PAGE>

The following table sets forth information summarizing the compensation of
each disinterested Director as defined herein of the Corporation for his
services as Director for the fiscal year ended December 31, 1998.

COMPENSATION TABLE

PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
AGGREGATE BENEFITS ANNUAL FROM REGISTRANT
COMPENSATION ACCRUED AS BENEFITS AND FUND
FROM PART OF FUND UPON COMPLEX PAID TO
DIRECTOR REGISTRANT EXPENSES* RETIREMENT 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 the SAMF
and AST.
** Mr. Sterpa is not a trustee of AST.

As of ________, 1999 the Directors and officers of the Fund owned in the
aggregate, less than 1% of the Fund's total outstanding shares.

The following shareholders owned of record or beneficially 5% or more of the
SunAmerica Money Market Fund's shares outstanding as of _____, 1999: [to be
filed by amendment]

B-15
<PAGE>

ADVISER, PERSONAL TRADING, DISTRIBUTOR AND ADMINISTRATOR

The Adviser. The Adviser, organized as a Delaware corporation in 1982, is
located at The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204, and
serves as adviser to the Fund pursuant to the Investment Advisory and Management
Agreement dated ____, 1999 (the "Advisory Agreement") with the Corporation, on
behalf of the Fund. SunAmerica is a wholly-owned subsidiary of SunAmerica ,
Inc., which is 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 services 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.

Under the Advisory Agreement, the Adviser selects and manages the investments
of the Fund, provides various administrative services and supervises the Fund's
daily business affairs, subject to general review by the Directors.

Except to the extent otherwise specified in the Advisory Agreement, the Fund
pays, or causes to be paid, all other expenses of the Corporation and the Fund,
including, without limitation, charges and expenses of any registrar, custodian,
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing of share certificates; registration costs of the Fund and its
shares under federal and state securities laws; the cost and expense of
printing, including typesetting and distributing Prospectuses and Statements of
Additional Information respecting the Fund, and supplements thereto, to the
shareholders of the Fund; all expenses of shareholders' and Directors' meetings
and of preparing, printing and mailing proxy statements and reports to
shareholders; all expenses incident to any dividend, withdrawal or redemption
options; fees and expenses of legal counsel and independent accountants;
membership dues of industry associations; interest on borrowings of the Fund;
postage; insurance premiums on property or personnel (including Officers and
Directors) of the Corporation 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
Corporation's operation.

As compensation for its services to the Fund, the Adviser receives a fee from
the Fund, payable monthly, computed daily at the annual rate of .50% on the
first $600 million of the Fund's average daily net assets, .45% on the next $900
million of net assets and .40% on net assets over $1.5 billion.

B-16
<PAGE>

The following table sets forth the total advisory fees paid to the Adviser by
the Fund for the fiscal years ended December 31, 1998, 1997 and 1996 ,pursuant
to the Advisory Agreement.

<TABLE>
<CAPTION>
ADVISORY FEES
<S> <C>
1998 1997 1996
----------------------------------------
$2,497,734 $1,923,536
----------------------------------------
</TABLE>

In accordance with the terms of the Advisory Agreement, if the expenses of
the Fund exceed the amount of the fees paid by the Fund to the Adviser, then the
Adviser will reimburse the Fund the amount of such excess. For the fiscal years
ended December 31, 1998, 1997 and 1996 , expense reimbursements were not
required.

The Advisory Agreement continues in effect with respect to the Fund for an
initial two-year term, 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 Fund's outstanding voting securities. Any such continuation also
requires approval by a majority of the Directors who are not parties to the
Advisory Agreement or "interested persons" of any such party as defined in the
1940 Act by vote cast in person at a meeting called for such purpose. The
Advisory Agreement may be terminated with respect to the Fund at any time,
without penalty, on 60 days' written notice by the Directors, by the holders of
a majority of the Fund's outstanding voting securities or by the Adviser. The
Advisory Agreement automatically terminates with respect to the Fund in the
event of its assignment (as defined in the 1940 Act and the rules thereunder).

Under the terms of the Advisory Agreement, the Adviser is not liable to the
Fund or its shareholders for any act or omission by it or for any losses
sustained by the Fund or its shareholders, except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.

Personal Trading. The Fund and the Adviser have adopted a written Code of
Ethics which prescribes general rules of conduct and sets forth guidelines with
respect to personal securities trading by "Access Persons" thereof. An Access
Person as defined in the Code of Ethics is an individual who is a trustee,
director, officer, general partner or advisory person of the Fund or the
Adviser. The guidelines on personal securities trading include: (i) securities
being considered for purchase or sale, or purchased or sold, by any Investment
Company advised by the Adviser, (ii) Initial Public Offerings, (iii) private
placements, (iv) blackout periods, (v) short-term trading profits, (vi) gifts,
and (vii) services as a director. These guidelines are substantially similar to
those contained in the Report of the Advisory Group on Personal Investing issued
by the Investment Company Institute's Advisory Panel. The Adviser reports to
the Board of Directors on a quarterly basis, as to whether there were any
violations of the Code of Ethics by Access Persons of the Fund or the Adviser
during the quarter.

The Distributor. The Corporation, on behalf of the Fund, has entered into a
distribution agreement (the "Distribution Agreement") with the Distributor, a
registered broker-dealer and an indirect wholly owned subsidiary of SunAmerica
Inc., to act as the principal underwriter of the shares of the Fund. The
address

B-17
<PAGE>

of the Distributor is The SunAmerica Center, 733 Third Avenue, New York, NY
10017-3204. The Distribution Agreement provides that the Distributor has the
exclusive right to distribute shares of the Fund through its registered
representatives and authorized broker-dealers. The Distribution Agreement also
provides that the Distributor will pay the promotional expenses, including the
incremental cost of printing prospectuses, annual reports and other periodic
reports respecting the Fund, for distribution to persons who are not
shareholders of the Fund and the costs of preparing and distributing any other
supplemental sales literature. However, certain promotional expenses may be
borne by the Fund (see "Distribution Plans" below).

The Distribution Agreement continues in effect for an initial two-year term
and thereafter from year to year with respect to the Fund if such continuance is
approved at least annually by the Directors, including a majority of the
Directors who are not "interested persons" of the Corporation. The Corporation
or the Distributor each has the right to terminate the Distribution Agreement
with respect to the Fund on 60 days' written notice, without penalty. The
Distribution Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).

Distribution Plans. As indicated in the Prospectus, the Directors of the
Corporation and the shareholders of each class of shares of the Fund have
adopted Distribution Plans (the "Class A Plan," the "Class B Plan," and the
"Class II Plan," and collectively, the "Distribution Plans"). Reference is
made to "Management of the Corporation - Distribution Plans" in the Prospectus
for certain information with respect to the Distribution Plans.

Under the Class B and Class II Plans, the Distributor may receive payments
from the Fund at the annual rate of up to 0.75% of the average daily net assets
of the Fund's Class B and Class II shares, to compensate the Distributor and
certain securities firms for sales and promotional activities for distributing
each such class of shares. The distribution costs for which the Distributor may
be reimbursed out of such distribution fees include fees paid to broker-dealers
that have sold Fund shares, commissions and other expenses such as sales
literature, prospectus printing and distribution and compensation to
wholesalers. It is possible that in any given year the amount paid to the
Distributor under the Class B and Class II Plans will exceed the Distributor's
distribution costs as described above. The Class A Plan does not provide for a
distribution fee. The Distribution Plans, however, provide that each class of
shares of the Fund may pay the Distributor an account maintenance and service
fee of up to 0.15% of the aggregate average daily net assets of such class of
shares for payments to broker-dealers for providing continuing account
maintenance. In this regard, some payments are used to compensate broker-dealers
with account maintenance and service fees in an amount up to 0.15% per year of
the net assets maintained in the Fund by their customers.

The following table sets forth the distribution fees received by the
Distributor from each class of the Fund's shares for the fiscal years ended
December 31, 1998, 1997 and 1996 .

B-18
<PAGE>

DISTRIBUTION FEES

<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------
Class A Class B Class II Class A Class B Class Class A Class B
II*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$700,579 $291,401 $1,023 $513,979 $378,491

* The Fund commenced offering Class II shares (previously designated
Class C shares) on October 2, 1997.
- --------------------------------------------------------------------------------
</TABLE>

Continuance of the Distribution Plans with respect to the Fund is subject to
annual approval by vote of the Directors, including a majority of the
Independent Directors. A Distribution Plan may not be amended to increase
materially the amount authorized to be spent thereunder with respect to a class
of shares of the Fund, without approval of the shareholders of the affected
class of shares of the Fund. In addition, all material amendments to the
Distribution Plans must be approved by the Directors in the manner described
above. A Distribution Plan may be terminated at any time with respect to the
Fund without payment of any penalty by vote of a majority of the Independent
Directors or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the affected class of shares of the Fund. So long
as the Distribution Plans are in effect, the election and nomination of the
Independent Directors of the Corporation shall be committed to the discretion of
the Independent Directors. In the Directors' quarterly review of the
Distribution Plans, they will consider the continued appropriateness of, and the
level of, compensation provided in the Distribution Plans. In their
consideration of the Distribution Plans with respect to the Fund, the Directors
must consider all factors they deem relevant, including information as to the
benefits of the Fund and the shareholders of the relevant class of the Fund.

The Administrator. The Corporation has entered into a Service Agreement, under
the terms of which SunAmerica Fund Services, Inc. ("SAFS"), an indirect wholly-
owned subsidiary of SunAmerica Inc. and 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 the Fund. Under the terms of the
Service Agreement, SAFS may receive reimbursement of its costs in providing such
shareholder services. SAFS is located at The SunAmerica Center, 733 Third
Avenue, New York, NY 10017-3204.

The Service Agreement continues in effect from year to year provided that
such continuance is approved annually by vote of the Directors including a
majority of the disinterested Directors.

Pursuant to the Service Agreement, as compensation for services rendered,
SAFS receives a fee from the Corporation, computed and payable monthly based
upon an annual rate of 0.22% of average daily net assets subject to review and
approval by the Directors. This fee represents the full cost of providing
shareholder and transfer agency services to the Corporation. From this fee,
SAFS pays a fee to State Street, and its affiliate, National Financial Data
Services ("NFDS" and with State Street, the "Transfer Agent")(other than out-of-
pocket charges of the Transfer Agent which are paid by the Corporation). For
further information regarding the Transfer Agent see the section entitled
"Additional Information" below.

B-19
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

As discussed in the Prospectus, the Adviser is responsible for decisions to
buy and sell securities for the Fund, selection of broker-dealers and
negotiation of commission rates. Purchases and sales of securities on a
securities exchange are effected through brokers-dealers who charge a negotiated
commission for their services. Orders may be directed to any broker-dealer
including, to the extent and in the manner permitted by applicable law, an
affiliated brokerage subsidiary of SunAmerica Inc.

In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission (although the price of the security usually includes a profit to the
dealer). In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.

The Adviser's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order.
However, the Adviser may select broker-dealers that provide it with research
services and may cause the Fund to pay broker-dealers commissions that
exceed those other broker-dealers may have charged, if in its view the
commissions are reasonable in relation to the value of the brokerage and/or
research services provided by the broker-dealer. Certain research services
furnished by brokers may be useful to the Adviser with clients other than the
Corporation. No specific value can be determined for research services furnished
without cost to the Adviser by a broker. The Adviser is of the opinion that
because the material must be analyzed and reviewed by its staff, its receipt
does not tend to reduce expenses, but may be beneficial in supplementing the
Adviser's research and analysis. Therefore, it may tend to benefit the Fund by
improving the quality of the Adviser's investment advice. The investment
advisory fees paid by the Fund are not reduced because the Adviser receives such
services. When making purchases of underwritten issues with fixed underwriting
fees, the Adviser may designate the use of broker-dealers who have agreed to
provide the Adviser with certain statistical, research and other
information.

Subject to applicable law and regulations, consideration may also be given to
the willingness of particular brokers to sell shares of the Fund as a factor in
the selection of brokers for transactions effected on behalf of the Fund,
subject to the requirement of best price and execution.

Although the objectives of other accounts or investment companies that the
Adviser manages may differ from those of the Fund, it is possible that, at
times, identical securities will be acceptable for purchase by the Fund and one
or more other accounts or investment companies 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 the Fund and one or more of these other accounts or
companies is considered at or about the same time, transactions in such
securities will be allocated in a manner deemed equitable by the Adviser. The
Adviser may combine such

B-20
<PAGE>

transactions, in accordance with applicable laws and regulations, where the size
of the transaction would enable it to negotiate a better price or reduced
commission. However, simultaneous transactions could adversely affect the
ability of the Fund to obtain or dispose of the full amount of a security, which
it seeks to purchase or sell, or the price at which such security can be
purchased or sold.

For the fiscal years ended December 31, 1998, 1997 and 1996 , no brokerage
commissions were paid by the Fund.

ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES

Class A shares of the Fund are sold at net asset value next-determined
after receipt of a purchase order, without a sales charge. Class B and Class
II shares are sold at the respective net asset value next calculated after
receipt of a purchase order, plus a sales charge, which, at the election of the
investor, either may (i) be imposed on a deferred basis (Class B shares) or (ii)
contain certain elements of a sales charge imposed at the time of purchase and
deferred (Class II shares). Reference is made to "Purchase of Shares" in the
Prospectus for certain information as to the purchase of Fund shares.

The Distributor advised the Fund that it received no contingent deferred
sales charges, with respect to Class II shares of the Fund[, for the fiscal
year ended December 31, 1998] and the period October 2, 1997 (commencement of
operations for Class II shares, previously designated Class C shares) through
December 31, 1997. The Distributor advised the Fund that it received the
following contingent deferred sales charges, with respect to Class B shares of
the Fund, for the fiscal years ended December 31, 1998, 1997 and 1996 .

CONTINGENT DEFERRED SALES CHARGES - CLASS B

<TABLE>
<CAPTION>
-------------------------------------------------
1998 1997 1996
-------------------------------------------------
<S> <C> <C>
$169,724 $339,999
-------------------------------------------------

</TABLE>

Contingent Deferred Sales Charges ("CDSCs") Applicable to Certain Class B
Shares. Class B shares of the Fund issued to shareholders in exchange for shares
of the Cash Fund in the Reorganization are subject to the CDSC schedule, if any,
that applied to such shares at the time of Reorganization. In the event that the
shares were originally acquired in an exchange from another SunAmerica Mutual
Fund that imposes a CDSC (a "CDSC Fund"), the CDSC schedule applicable to such
shares at the time of the exchange will continue to apply; provided, that in
determining the holding period for such shares, the holding period prior to such
exchange and the holding period following the date of the Reorganization will be
"tacked" or combined. No credit toward the holding period is given for the time
during which the Cash Fund shares were held. For example, if shares of a CDSC
Fund were held by a shareholder for two years prior to an exchange for shares of
Cash Fund, Cash Fund shares were held for one year prior to the Reorganization,
and the Class B shares of the Fund were held for one year prior to redemption,
when the Class B shares are redeemed by the shareholder, they will be subject to
a contingent deferred sales charge as though they were redeemed from the CDSC
Fund three years after the initial investment in the CDSC Fund without regard to
the length of time that the Cash Fund shares were actually held.

B-21
<PAGE>

The following CDSC schedule applies to shares originally acquired (prior to
the date of the Reorganization) in an exchange from one of the four series of
shares of the SunAmerica Fund Group (i.e., SunAmerica U.S. Government Securities
Fund, SunAmerica High Income Fund, SunAmerica Emerging Growth Fund and
SunAmerica Balanced Assets Fund) or from the SunAmerica Federal Securities Fund:

<TABLE>
<CAPTION>
Contingent Deferred Sales Charges as a
Year Since Purchase Percentage of Dollars Invested or Redemption
Payment Was Made Proceeds
- ----------------

- ---------------------------------------------------------------------
<S> <C>
First 5%
- ---------------------------------------------------------------------
Second 4%
- ---------------------------------------------------------------------
Third 3%
- ---------------------------------------------------------------------
Fourth 2%
- ---------------------------------------------------------------------
Fifth 1%
- ---------------------------------------------------------------------
Sixth and thereafter 0%
- ---------------------------------------------------------------------
</TABLE>

Shares originally acquired (prior to the date of the Reorganization) in
an exchange from the SunAmerica Diversified Income Fund series of SunAmerica
Multi-Asset Portfolios, Inc. is no longer subject to CDSC.

Any Class B shares purchased after the date of the Reorganization (other
than through the reinvestment of dividends and distributions, which are not
subject to the CDSC) will be subject to the CDSC schedule reflected in the
Prospectus. After the Reorganization, in calculating the contingent deferred
sales charge due upon redemption of Class B shares of the Fund acquired through
an exchange from a CDSC Fund or in the Reorganization, a shareholder will
receive credit toward the holding period for the period of time they held Class
B shares of the Fund.

Conversion Feature Applicable to Class B Shares. Class B shares (including a
pro rata portion of the Class B shares purchased through reinvestment of
dividends and distributions) will convert automatically to Class A shares on the
first business day of the month following the seventh anniversary of issuance of
such Class B shares or, in the case of Class B shares acquired pursuant to the
Reorganization, seven years after the issuance of a shareholder's original CDSC
Fund shares (which were subsequently exchanged for the Cash Fund shares which
were in turn exchanged for Class B shares of the Fund in the Reorganization),
provided, that in calculating such seven-year period, any time during which the
shareholder held the Cash Fund shares will be excluded. For example, if shares
of a CDSC Fund were held by a shareholder for four years and then exchanged for
shares of Cash Fund which were then held for two years as of the date of the
Reorganization, such shareholder's Class B shares of the Fund received in the
Reorganization will convert to Class A shares of the Fund at the end of the
third year following consummation of the Reorganization.

B-22
<PAGE>

The conversion to Class A shares will be on the basis of the relative net asset
values of Class B shares and Class A shares, without the imposition of any sales
load, fee or charge.

Waiver of Contingent Deferred Sales Charges. As discussed under "Purchase of
Shares" in the Prospectus, CDSCs may be waived on redemptions of Class B and
Class 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
the Class B or Class II shares are not redeemed within one year of the death,
they will remain subject to the applicable CDSC, when redeemed.

Disability. CDSCs may be waived on redemptions occurring within one year
----------
after the sole shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, as amended (the "Code")). To be eligible for
such waiver, (i) the disability must arise after the purchase of shares and (ii)
the disabled shareholder must have been under age 65 at the time of the initial
determination of disability. If the account is transferred to a new
registration and then a redemption is requested, the applicable CDSC will be
charged.

Purchase through SAFS. SAFS will effect a purchase order on behalf of a
customer who has an investment account upon confirmation of a verified credit
balance at least equal to the amount of the purchase order (subject to the
minimum investment requirements set forth in the Prospectus). Orders for
purchases of shares received by the Distributor by wire transfer in the form of
Federal Funds will be effected at the next-determined net asset value if
received at or prior to the Fund's close of business. Orders for purchases
accompanied by check or other negotiable bank draft will be accepted and
effected as of the Fund's close of business on the next business day following
receipt of such order. Shares will be entitled to receive a dividend, if any,
commencing on the next business day after the day the purchase is effected.

Purchase by Check. Checks should be made payable to the Fund or to "SunAmerica
Funds." If the payment is for a retirement plan account for which the Adviser
serves as fiduciary, please indicate on the check that payment is for such an
account. In the case of a new account, purchase orders by check must be
submitted directly by mail to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, New York 10017-
3204, together with payment for the purchase price of such shares and a
completed New Account Application. Payment for subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas
City, Missouri 64141-6373 and the shareholder's account number should appear
on the check. For fiduciary retirement plan accounts, both initial and
subsequent purchases should be mailed to SunAmerica Fund Services, Inc., Mutual
Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204. Certified checks are not necessary but checks are accepted subject
to collection at full face value in United States

B-23
<PAGE>

funds and must be drawn on a bank located in the United States. Upon receipt of
the completed New Account Application and payment check, the Transfer agent will
purchase full and fractional shares of the Fund at the net asset value next
computed after the check is received. Subsequent purchases of shares of the Fund
may be purchased directly through the Transfer Agent. Orders for purchases
accompanied by check or other negotiable bank draft will be accepted and
effected as of the Fund's lose of business on the next business day following
receipt of such order and such shares will receive the dividend for the business
day following the day the purchase is effected. SAFS reserves the right to
reject any check made payable other than in the manner indicated above. Under
certain circumstances, the Fund will accept a multi-party check (e.g., a check
made payable to the shareholder by another party and then endorsed by the
shareholder to the Fund in payment for the purchase of shares); however, the
processing of such a check may be subject to a delay. The Fund does not verify
the authenticity of the endorsement of such multi-party check, and acceptance of
the check by the Fund should not be considered verification thereof. Neither the
Fund nor its affiliates will be held liable for any losses incurred as a result
of a fraudulent endorsement. There are restrictions on the redemption of shares
purchased by check for which funds are being collected. (See "Redemption of
Shares")

Purchase by Federal Funds Wire. An investor may make purchases by having his or
her bank wire federal funds to the Corporation's Transfer Agent. Federal funds
purchase orders will be accepted only on a day on which the Corporation and the
Transfer Agent are open for business. Orders for purchase of shares received by
wire transfer in the form of federal funds will be effected at the next-
determined net asset value if received at or prior to the Fund's close of
business. Such shares will receive the dividend for the next business day. In
order to insure prompt receipt of a Federal funds wire, it is important that
these steps be followed:

1. You must have an existing SunAmerica Fund Account before wiring funds.
To establish an account, complete the New Account Application and send
it via facsimile to SunAmerica Fund Services, Inc. at: (212) 551-5343.

2. Call SunAmerica Fund Services' Shareholder/Dealer Services, toll free at
(800) 858-8850, extension 5125 to obtain your new account number.

3. Instruct the bank to wire the specified amount to the Transfer Agent:
State Street Bank and Trust Company, Boston, MA, ABA# 0110-00028; DDA#
99029712, SunAmerica [name of Fund, Class __] (include shareholder name
and account number).

ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES

Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption of Fund shares.

If the Directors determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Corporation, having filed with the Securities and Exchange
Commission ("SEC") a notification of election pursuant to Rule 18f-1 on behalf

B-24
<PAGE>

of the Fund, may pay the redemption price in whole, or in part, by a
distribution in kind of securities from the Fund in lieu of cash. In conformity
with applicable rules of the SEC, the Fund is committed to pay in cash all
requests for redemption of Fund shares, by any shareholder of record, limited in
amount with respect to each shareholder during any 90-day period to the lesser
of (i) $250,000, or (ii) 1% of the net asset value of the Fund at the beginning
of such period. If shares are redeemed in kind, the redeeming shareholder would
incur brokerage costs in converting the assets into cash. The method of valuing
portfolio securities is described below in the section entitled "Determination
of Net Asset Value," and such valuation will be made as of the same time the
redemption price is determined.

B-25
<PAGE>

DETERMINATION OF NET ASSET VALUE

The Fund is open for business on any day the New York Stock Exchange
("NYSE")is open for regular trading. Shares are valued each day as of the close
of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). The Fund
calculates the net asset value of each class of its shares separately by
dividing the total value of each class's net assets by the shares outstanding of
such class. The net asset value may not be computed on a day in which no orders
to purchase, sell or redeem Fund shares have been received.

Under applicable rules of the SEC, the valuation of the Fund's investments
is based upon their amortized cost. This entails valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any premium
or discount regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which the value of an instrument, as determined by
the amortized cost method, is higher or lower than the price the Fund would
receive if it sold the instrument. During periods of rising interest rates, the
daily yield on shares of the Fund computed on an amortized cost basis may tend
to be higher than the like computation made by a mutual fund with identical
investments utilizing a method of valuation based upon market prices. The
converse would apply in a period of declining rates. The purpose of this method
of valuation is to facilitate the maintenance of a constant net asset value per
share of $1.00. There can be no assurance, however, that the Fund will be able
to maintain a stable net asset value of $1.00 per share.

Certain conditions must be met in connection with the application of
valuation rules to the Fund. These conditions include maintaining a dollar-
weighted average portfolio maturity of 90 days or less, purchasing instruments
having remaining maturities of 397 calendar days or less, and investing only in
securities determined by the Adviser under procedures adopted by the Directors
to present minimal credit risks and which are of high quality as determined by
the requisite number of nationally recognized statistical rating organizations
or, in the case of any instrument that is not rated, determined to be of
comparable quality by the Adviser under procedures adopted by the Directors. In
accordance with the applicable regulations, the Directors have established
procedures designed to stabilize at $1.00 the Fund's net asset value per share
to the extent reasonably possible. Such procedures include review of the Fund's
portfolio holdings at such intervals as appropriate to determine whether the
Fund's net asset value, calculated by using available market quotations,
deviates from $1.00 per share based on amortized cost. If such deviation
exceeds .5% of the Fund's $1.00 per share net asset value, the Directors will
promptly consider what action, if any, will be initiated. In the event that the
Directors determine that a deviation exists that may result in material
dilution or other unfair results to investors or existing shareholders, they
will take such corrective action as they deem necessary and appropriate, which
may include selling portfolio instruments, withholding dividends or establishing
a net asset value per share based upon available market quotations.

PERFORMANCE DATA

The Fund may advertise performance data that reflects various measures of
yield. An explanation of the data presented and the methods of computation that
will be used are as follows.

The Fund's performance may be compared to the historical returns of various
investments, performance indices of those investments or economic indicators,
including, but not limited to, stocks,

B-26
<PAGE>

bonds, certificates of deposit, money market deposit accounts, money market
funds and U.S. Treasury Bills. Certain of these alternative investments may
offer fixed rates of return and guaranteed principal and may be insured.

Yield is determined separately for Class A, Class B and Class II shares
of the Fund in accordance with a standardized formula prescribed by the SEC and
is not indicative of the amounts which were or will be paid to shareholders.
The yield quoted in the Fund's advertisements is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical pre-
existing account having a balance of one share at the beginning of the 7-day
period. A hypothetical charge reflecting deductions for shareholder accounts is
subtracted from the above net change and the difference is divided by the value
of the account at the beginning of the 7-day period. The resulting figure is
multiplied by 365 divided by seven and carried to the nearest one hundredth of
one percent.

Effective yield quoted in the Fund's advertisements is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the 7-day period. A hypothetical charge reflecting deductions from
shareholder accounts is subtracted from the above net change and the difference
is divided by the value of the account at the beginning of the 7-day period.
The resulting figure is then compounded by adding one, raising the sum to a
power equal to 365 divided by seven, and subtracting one. The following formula
illustrates the effective yield computation.

[(Base period return + 1) /365/7/] - 1

The following table sets forth the Fund's yield and effective yield for the
Class A, Class B and Class II shares for the 7-day periods ended December 31,
1998, 1997 and 1996 .

B-27
<PAGE>

<TABLE>
<CAPTION>
1998 1997 1996

- ----------------------------------------------------------------------------------------------------
Class Class B Class Class A Class B Class II* Class A Class B
A
II
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield 4.84% 4.08% 4.15% 4.55% 3.76%
- ----------------------------------------------------------------------------------------------------
Effective Yield 4.96% 4.16% 4.24% 4.65% 3.83%
- ----------------------------------------------------------------------------------------------------
* The Fund commenced offering Class II shares (previously designated
Class C shares) on October 2, 1997.
</TABLE>

Comparisons
- -----------

The Fund may compare its yield to similar measures as calculated by various
publications, services, indices, or averages. Such comparisons are made to
assist in evaluating an investment in the Fund. The following references may be
used:

a) Lipper: Mutual Fund Performance Analysis, Fixed Income Analysis, and
Mutual Fund Indices -- measures total return and average current yield for the
mutual fund industry. Ranks individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
charges.

b) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc., analyzes price, current yield, risk, total return, and average rate of
return (average annual compounded growth rate) over specified time periods for
the mutual fund industry.

c) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates
- -- historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, treasury bills, and inflation.

d) IBC/Donoghue's Inc. Money Fund Report -- comprehensive evaluation of
money market funds which monitors portfolio characteristics on a weekly basis.
The Report provides the information with respect to yield, average maturity,
security selection (asset allocation) and credit quality.

In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
figures. Specifically, the Fund may compare its performance to that of certain
indices that include securities with government guarantees. However, the
Fund's shares do not contain any such guarantees. In addition, there can be no
assurance that the Fund will continue its performance as compared to such other
standards.

B-28
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions. The Fund intends to distribute to the registered
holders of its shares all or substantially all of its net investment income,
which includes dividends, interest and net short-term capital gains, if any, in
excess of any net long-term capital losses. The Fund intends to distribute any
long-term capital gains in excess of any net short-term capital losses.
Dividends from net investment income are declared daily and paid monthly.
Dividends are paid on or about the fifteenth day of the month. Net capital
gains, if any, will be paid annually. In determining amounts of capital gains
to be distributed, any capital loss carry-forwards from prior years will be
offset against capital gains. At December 31, 1998, the Fund had a capital
loss carry-forward of $______, which is available to the extent not utilized
to offset future gains from 2002 through 2004. The utilization of such losses
will be subject to annual limitations under the Code and the regulations
thereunder.

Dividends and distributions are paid in additional Fund shares based on the
net asset value at the close of business on the record date, unless the
dividends total in excess of $10 per distribution period and the shareholder
notifies the Fund at least five business days prior to the payment date to
receive such distributions in cash.

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

Taxes. The Fund is qualified and intends to remain qualified and elects to be
treated as a regulated investment company under Subchapter M of the Code for
each taxable year. In order to remain qualified as a regulated investment
company, the Fund generally must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, proceeds from loans of stock or
securities and certain other related income; and (b) diversify its holdings so
that, at the end of each fiscal quarter, (i) 50% of the market value of the
Fund's assets is represented by cash, government securities, securities of other
regulated investment companies and other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the Fund's assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than government securities or the securities of other
regulated investment companies).

As a regulated investment company, the Fund will not be subject to U.S.
federal income tax on its income and gains which it distributes as dividends or
capital gains distributions to shareholders provided that it distributes to
shareholders at least 90% of its investment company taxable income for the
taxable year. The Fund intends to distribute sufficient income to meet this
qualification requirement.

Under the Code, amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To avoid the tax, the Fund must distribute during each calendar
year (1) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (2) at least 98% of its net
capital gains, i.e., capital gains in excess of its capital losses for the 12-
month period ending on October 31 of the calendar year, and (3) all ordinary
income and net capital gains for previous years that were not distributed during
such years. To avoid application of the excise tax, the Fund intends to make
distributions in accordance with the calendar year distribution requirement.
Generally, a distribution will be subject to tax in the year it is received.

B-29
<PAGE>

However, distribution will be treated as paid on December 31 of the calendar
year if declared by the Fund in October, November or December of such year,
payable to shareholders of record on a date in such month and paid by the Fund
during January of the following year. Any such distributions paid during
January of the following year will be taxable to shareholders as of December 31,
rather than the date on which the distributions are received.

Distributions of net investment income and short-term capital gains
("ordinary income dividends") are taxable to a shareholder as ordinary dividend
income regardless of whether the shareholder receives such distributions in
additional shares or in cash. Distributions of net capital gains, if any, are
taxable as capital gains regardless of whether the shareholder receives such
distributions in additional shares or in cash or how long the investor has held
his or her shares. Dividends and distributions paid by the Fund will not be
eligible for the dividends received deduction for corporations.

Upon a sale or exchange of its shares, a shareholder may realize a taxable
gain or loss depending upon its basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. In the case of an individual, any such capital gain will be
treated as short-term capital gain if the shares were held for not more than 12
months, and long term 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 capital loss will be long-term capital gain or loss if the shares have been
held for more than one year. The amount of any CDSC will reduce the amount
realized on the sale or exchange of shares for purposes of determining gain or
loss. Generally, any loss realized on a sale or exchange will be disallowed to
the extent the shares disposed of are replaced within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of.
Any loss realized by a shareholder on the sale of shares of the Fund held by the
shareholder for six months or less will be treated for tax purposes as a long-
term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.

Under certain circumstances (such as the exercise of an exchange privilege
in certain cases), the tax effect of sales load charges imposed on the purchase
of shares in a regulated investment company is deferred if the shareholder does
not hold the shares for at least 90 days.

Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries is not known. It is not anticipated
that the Fund will qualify to pass through to shareholders the ability to claim
as a foreign tax credit their respective shares of foreign taxes paid by the
Fund.

The Fund may be required to backup withhold U.S. Federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail to
provide their correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's U.S. Federal
income tax liability.

B-30
<PAGE>

Foreign shareholders generally will be subject to a withholding tax at the
rate of 30% (or lower treaty rate) on any ordinary income dividends pay by the
Fund.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisers regarding the particular tax
consequences, including foreign tax consequences, to them of an investment in
the Fund. Qualification as a regulated investment company under the Code for
tax purposes does not entail government supervision of management or investment
policies.

RETIREMENT PLANS

Shares of the Fund are eligible to be purchased in conjunction with various
types of qualified retirement plans. The summary below is only a brief
description of the federal income tax laws for each plan and does not purport
to be complete. Further information or an application to invest in shares of
the Fund by establishing any of the retirement plans described below may be
obtained by calling Retirement Plans at (800) 858-8850. However, it is
recommended that a shareholder considering any retirement plan consult a tax
advisor before participating.

B-31
<PAGE>

Pension and Profit-Sharing Plans. Sections 401(a) and 401(k) of the Code permit
business employers and certain associations to establish pension and profit
sharing plans for employees. Shares of the Fund may be purchased by those who
would have been covered under the rules governing old H.R. 10 (Keogh) Plans, as
well as by corporate plans. Each business retirement plan provides tax
advantages for owners and participants. Contributions made by the employer are
tax-deductible, and participants do not pay taxes on contributions or earnings
until withdrawn.

Tax-Sheltered Custodial Accounts. Section 403(b)(7) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code, to purchase
shares of the Fund and, subject to certain limitations, exclude the amount of
purchase payments from gross income for tax purposes.

Individual Retirement Accounts (IRA). Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program, including
Simplified Employee Pension Plans, commonly referred to as SEP-IRA. 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.

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.

B-32
<PAGE>

DESCRIPTION OF SHARES

Ownership of the Corporation is represented by transferable shares of
common stock, having a par value of $.001 per share. The Articles of
Incorporation, as amended to date (the "Articles of Incorporation"), authorize
the Corporation to issue 10 billion shares of common stock and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate interests of shareholders of the Corporation.

Currently, one series of shares of the Corporation, the Fund, has been
authorized pursuant to the Articles of Incorporation. This series has been
divided into three classes of shares, designated as Class A, Class B and Class
II shares. The Directors may authorize the creation of additional series of
shares so as to be able to offer to investors additional investment portfolios
within the Corporation that would operate independently from the Corporation's
present portfolio, or to distinguish among shareholders, as may be necessary, to
comply with future regulations or other unforeseen circumstances. Each series of
the Corporation's shares, in the event that more than one series is authorized,
will represent the interests of the shareholders of that series in a particular
portfolio of the Corporation's assets. In addition, the Directors may authorize
the creation of additional classes of shares in the future.

Shareholders are entitled to a full vote for each full share held. The
Directors have terms of unlimited duration (subject to certain removal
procedures) and have the power to alter the number of Directors, and appoint
their own successors, provided that at all times at least a majority of the
Directors have been elected by shareholders. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Directors being elected, while the holders of the
remaining shares would be unable to elect any Directors. Although the
Corporation need not hold annual meetings of shareholders, the Directors may
call special meetings of shareholders for action by shareholder vote as may be
required by the 1940 Act, Maryland law, the Articles of Incorporation or the By-
Laws of the Corporation (the "By-Laws"). Also, a shareholders meeting must be
called, if so requested in writing by the holders of record of 10% or more of
the outstanding shares of the Corporation. In addition, the Directors may be
removed only for cause by the action of the holders of record of at least a
majority of all outstanding shares entitled to vote for election of Directors.
All series of shares will vote with respect to certain matters, such as election
of Directors. When all series of shares, to the extent that more than one
series is authorized, are not affected by a matter to be voted upon, such as
approval of investment advisory agreements or changes in a series' policies,
only shareholders of the series affected by the matter may be entitled to vote.

All classes of shares of the Fund are identical in all respects, except
that (i) each class may bear differing amounts of certain class-specific
expenses, (ii) Class A shares are subject to an 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 II shares are subject to an initial
sales charge, a CDSC, a distribution fee and an ongoing account maintenance and
service fee; (v) 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, (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, and (vii) each class of shares will be
exchangeable only into the same class of shares of any

B-33
<PAGE>

of the other SunAmerica Mutual Funds. 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 Corporation. In addition, shares
have no conversion rights, except as described above.

The By-Laws provide that the Corporation shall indemnify any person who was
or is a Director, officer or employee of the Corporation to the maximum extent
permitted by Maryland law and the 1940 Act upon a determination, made in
accordance with the terms of the By-Laws, that indemnification is proper in the
circumstances. In addition, the By-Laws provide that the Corporation may
maintain insurance on behalf of any person who is or was a director or officer,
employee or agent of the Corporation or who is or was serving at the request of
the Corporation as director, officer, agent or employee of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted or incurred in connection with serving in such capacity. However, no
Director or officer of the Corporation will be protected by indemnification,
insurance or otherwise from any liability to the Corporation or its shareholders
to which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in his
or her office.

ADDITIONAL INFORMATION

Reports to Shareholders. The Fund sends audited annual and unaudited semi-
annual reports to shareholders of the Fund. In addition, the Transfer Agent
sends a statement to each shareholder having an account directly with the Fund
to confirm transactions in the account.

Custodian and Transfer Agent. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Fund and in those capacities maintains certain financial and accounting
books and records pursuant to agreements with the Corporation. Transfer agent
functions are performed for State 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, serves as the Corporation's
independent accountants and in that capacity examines the annual financial
statements of the Fund. The firm of Shereff, Friedman, Hoffman & Goodman, LLP,
919 Third Avenue, New York, NY 10022, serves as legal counsel to the
Corporation.

FINANCIAL STATEMENTS

The Fund's audited financial statements are incorporated in this
Statement of Additional Information by reference to its 1998 annual report to
shareholders. You may request a copy of the annual report at no charge by
calling (800) 858-8850 or writing the Fund at SunAmerica Fund Services, Inc.,
Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New
York 10017-3204.

B-34
<PAGE>

APPENDIX

BOND, NOTE AND COMMERCIAL PAPER RATINGS

Description of Applicable Moody's Investors Service, Inc.'s ("Moody's")
Corporate Bond 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 which make the long-term risks
appear somewhat larger than in Aaa securities.

Note: Moody's may apply numerical modifiers 1, 2 and 3 to issues rated Aa
to denote relative strength within such classification. The modifier 1
indicates that the security ranks in the higher end of the Aa rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of the Aa rating category.

Description of Applicable Moody's Note Ratings

MIG 1 Notes bearing the designation MIG 1 are judged to be of the best
quality, enjoying strong protection from established cash flows of
funds for their servicing or from established and broad-based
access to the market for refinancing, or both.

MIG 2 Notes bearing the designation MIG 2 are judged to be of high
quality, with margins of protection ample although not so large as
in the preceding group.

Description of Applicable Moody's Commercial Paper Ratings

The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the Securities Act.

Appendix-1
<PAGE>

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations
are exempt from registration under the Securities Act, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law.

Issuers rated P-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. P-1 repayment
capacity will normally be evidenced by the following characteristics:

-- Leading market positions in well established industries
-- High rates of return on funds employed
-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated P-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal validity or enforceability of any support arrangement. You are cautioned
to 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-2
<PAGE>

Description of Applicable Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc. ("S&P") Bond Ratings

An S&P corporate rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. This assessment may take into
consideration 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 S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information, or for other
reasons.

The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.

Plus (+) or minus (-): The rating of "AA" may be modified by the addition
of a plus or minus sign to show relative standing within these ratings
categories.

Provisional ratings:

P The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed
by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project,
makes no comment on the likelihood or risk of default upon failure of
such completion. The investor should exercise judgment with respect to
such likelihood and risk.

L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is insured by the Federal Savings & Loan

Appendix-3
<PAGE>

Insurance Corp. or the Federal Deposit Insurance Corp. and interest is
adequately collateralized.

* Continuance of the rating is contingent upon S&P receipt of an
executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.

NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that S&P does
not rate a particular type of obligation as a matter of policy.

Debt Obligations of Issuers outside the United States and its territories
are rated on the same basis as domestic corporate issues. The ratings measure
the credit worthiness of the obligor but do not take into account currency
exchange and related uncertainties.

Applicable Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated "AAA" or "AA"
(commonly known as "investment grade" ratings) are generally regarded as
eligible for bank investment. In addition, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance companies
and fiduciaries generally.

Description of Applicable S&P Note Ratings

SP-1 The designation "SP-1" indicates a very strong capacity to pay
principal and interest. A "+" is added for those issues determined to
possess overwhelming safety characteristics.

SP-2 An "SP-2" designation indicates a satisfactory capacity to pay
principal and interest.

Appendix-4
<PAGE>

Description of Applicable S&P Commercial Paper Ratings.

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of not more than 365 days.

A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree
of safety.

A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues designated
"A-1" that are determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.

The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to S&P by the
issuer or obtained from other sources it considers reliable. The ratings may be
changed, suspended, or withdrawn as a result of changes in or unavailability of
such information.

Appendix-5
<PAGE>

PART C

OTHER INFORMATION

Item 23: Exhibits.

(a) (i) Articles of Incorporation. Incorporated herein by reference to
Exhibit 1(A) of Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (File No. 2-85370) filed on April
26, 1996.

(ii) Articles of Amendment. Incorporated herein by reference to Exhibit
1(B) of Post-Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (File No. 2-85370) filed on April 26,
1996.

(b) By-Laws, as amended. Incorporated herein by reference to Exhibit 2 of Post-
Effective Amendment No. 17 to Registrant's Registration Statement on Form
N-1A (File No. 2-85370) filed on April 26, 1996.

(d) Investment Advisory and Management Agreement between Registrant and
SunAmerica Asset Management Corp ("SunAmerica").*

(e) (i) Distribution Agreement between the Registrant and SunAmerica Capital
Services, Inc.*

(ii) Dealer Agreement. Incorporated herein by reference to Exhibit 6(B) of
Post-Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (File No. 2-85370) filed on April 26,
1996.

(f) Directors'/Trustees' Retirement Plan. Incorporated herein by reference to
Exhibit 7 of Post-Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (File No. 2-85370) filed on April 26, 1996.

(g) Custodian Agreement between Registrant and State Street Bank and Trust
Company. Incorporated herein by reference to Exhibit 8 of Post-Effective
Amendment No. 16 to Registrant's Registration Statement on Form N-1A (File
No. 2-85370) filed on April 27, 1995.

(h)(ii) Transfer Agency and Service Agreement between Registrant and State
Street Bank and Trust Company. Incorporated herein by reference to
Exhibit 9(a) of Post-Effective Amendment No. 16 to Registrant's
Registration Statement on Form N-1A (File No. 2-85370) filed on April
27, 1995.

(i) Service Agreement between Registrant and SunAmerica Fund Services, Inc.
Incorporated herein by reference to Exhibit 9(b) of Post-Effective
Amendment No. 17 to Registrant's Registration Statement on Form N-1A
(File No. 2-85370) filed on April 26, 1996.

(i) Inapplicable.

(j) Consent of Independent Accountants.*

C-1
<PAGE>

(k) Inapplicable.

(l) Inapplicable.

(m) (i) Distribution Plan pursuant to Rule 12b-1 (Class A Shares).*

(ii) Distribution Plan pursuant to Rule 12b-1 Plan (Class B
Shares).*

(iii) Distribution Plan pursuant to Rule 12b-1 (Class II Shares)*

(n) Financial Data Schedules.*

(o) (i) 18f-3 Plan. Incorporated herein by reference to Exhibit 18(B) of
Post-Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (File No. 2-85370) filed on July 21,
1997.

(ii) Powers of Attorney. Incorporated herein by reference to Exhibit 24 of
Post-Effective Amendment No. 16 to Registrant's Registration
Statement on Form N-1A (File No. 2-85370) filed on April 27,
1995.

* to be filed by amendment

Item 24. Persons Controlled by or under Common Control with Registrant.

There are no persons controlled by or under common control with
Registrant.

Item 25. Indemnification.

Registrant's policy with respect to indemnification is as follows:

To the maximum extent permitted by the laws of the State of Maryland
as from time to time amended, Registrant shall indemnify its currently
acting and its former directors and officers and those persons who, at
the request of the Registrant, serve or have served another
corporation, partnership, joint venture, trust or other enterprise in
one or more of such capacities.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been advised, that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act, and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether

C-2
<PAGE>

such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.

Item 26. Business and Other Connections of the Investment Adviser.

Information concerning the business and other connections of
SunAmerica is incorporated herein by reference to SunAmerica's Form
ADV (File No. 801-19813) and is currently on file with the Securities
and Exchange Commission.

Reference is also made to the caption "Fund Management"
in the Prospectus constituting Part A of the Registration Statement
and "Adviser, Personal Trading, Distributor and Administrator" and
"Directors and Officers" constituting Part B of the Registration
Statement.

Item 27. Principal Underwriters.

(a) The principal underwriter of the Registrant also acts as principal
underwriter for:

SunAmerica Equity Funds
SunAmerica Income Funds
Style Select Series, Inc.

(b) The following persons are the officers and directors of SunAmerica
Capial Services, Inc., the prinicpal underwriter of Registrant's
shares:

Name and Principal Position with Position with
Business Address Underwriter 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 Vice President
The SunAmerica Center Director
733 Third Avenue
New York, NY 10017-3204

Robert M. Zakem Executive Vice Secretary & Chief
The SunAmerica Center President, General Compliance Officer
733 Third Avenue Counsel and
New York, NY 10017-3204 Director

</TABLE>

C-3
<PAGE>

<TABLE>
<S> <C> <C>
Susan L. Harris Secretary None
SunAmerica, Inc.
1 Sun America Center
Los Angeles, CA 90067-6022

Debbie E. Potash-Turner Controller None
733 Third Avenue
New York, NY 10017-3204

</TABLE>

Item 28. Location of Accounts and Records

SunAmerica Asset Management Corp., The SunAmerica Center, 733 Third
Avenue, New York, 10017-3204, or an affiliate thereof, will maintain
physical possession of each such accounts, books or other documents of
Registrant, except for those maintained by Registrant's custodian, State
Street Bank and Trust Company, 1776 Heritage Drive, North Quincy, MA
02171, and its affiliate, National Financial Data Services, P.O. Box
419572, Kansas City, MO 64141-6572.

Item 29. Management Services.

Inapplicable.

Item 30. Undertakings.

Registrant hereby undertakes to furnish an investor to whom a
prospectus is delivered with a copy of Registrant's latest annual
report to shareholders, upon request and without charge.

C-4
<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 No. 22 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 18/th/, of February 1999.

SunAmerica Money Market Funds, Inc.

/s/ Peter A. Harbeck
By:_____________________________
Peter A. Harbeck
President and Director

Pursuant to the requirements of the 1933 Act, the Post-Effective
Amendment No.22 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:

/s/ Peter A. Harbeck
- ------------------------ President and Director February 18, 1999
Peter A. Harbeck (Principal Executive Officer)

*
- ------------------------ Treasurer
Peter C. Sutton (Principal Financial and
Accounting Officer)

* Director
- ------------------------
S. James Coppersmith

* Director
- ------------------------
Samuel M. Eisenstat

* Director
- ------------------------
Stephen J. Gutman

* Director
- ------------------------
Sebastiano Sterpa

*By: /s/ Robert M. Zakem February 18, 1999
- ------------------------
Attorney-in-Fact

Robert M. Zakem
</TABLE>