As filed with the Securities and Exchange Commission on August 17, 2001
Securities Act File No. 333
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
. Pre-Effective Amendment No. . Post-Effective Amendment No. 8
(Check appropriate box or boxes)
__________________
SUNAMERICA STRATEGIC INVESTMENT
SERIES, INC.
(Exact Name of Registrant as Specified in its Charter)
__________________
1-800-858-8850
(Area Code and Telephone Number)
__________________
733 Third Avenue
Third Floor
New York, NY 10017
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
__________________
Robert M. Zakem, Esq.
c/o SunAmerica Asset Management Corp.
733 Third Avenue
Third Floor
New York, NY 10017
(Name and Address of Agent for Service)
__________________
Copy to:
Counsel for the Fund:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Joel H. Goldberg, Esq.
__________________
Approximate Date of Proposed Public Offering:
As soon as practicable after the Registration Statement becomes effective under
the Securities Act of 1933.
Title of Securities Being Registered: Shares of Common Stock, Par Value $0.0001
per share.
No filing fee is required because of reliance on Section 24(f) under the
Investment Company Act of 1940, as amended.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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[Presidents Letter]
[Q&A]
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NORTH AMERICAN FUNDS
Stock Index Fund
Science & Technology Fund
Aggressive Growth LifeStyle Fund
Moderate Growth LifeStyle Fund
Conservative Growth LifeStyle Fund
286 Congress Street
Boston, Massachusetts 02210
__________________
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
__________________
TO BE HELD ON NOVEMBER 7, 2001
To our Shareholders:
Notice is Hereby Given that a joint special meeting of shareholders (the
"Meeting") of the Stock Index Fund (the "NAF Stock Index Fund"), Science &
Technology Fund (the "NAF Science & Technology Fund"), Aggressive Growth
LifeStyle Fund (the "NAF Aggressive Growth LifeStyle Fund"), Moderate Growth
LifeStyle Fund (the "NAF Moderate Growth LifeStyle Fund") and Conservative
Growth LifeStyle Fund (the "NAF Conservative Growth LifeStyle Fund," and
together with the NAF Stock Index Fund, NAF Science & Technology Fund, NAF
Aggressive Growth LifeStyle Fund and NAF Moderate Growth Lifestyle Fund, the
"Acquired Funds") of North American Funds will be held at the principal
executive offices of North American Funds, 286 Congress Street, Boston,
Massachusetts 02210 on November 7, 2001 at 10:00 a.m. Eastern Time, for the
following purposes:
(1) (a) All Acquired Funds: to approve or disapprove a new investment advisory
agreement (the "New Investment Advisory Agreement") between American General
Asset Management Corp. ("AGAM") and North American Funds on behalf of each of
the Acquired Funds, the terms of which are the same in all material respects to
the previous investment advisory agreement with AGAM;
(b) All Acquired Funds (other than the NAF Science & Technology Fund): to
approve or disapprove a new subadvisory agreement (the "New Subadvisory
Agreement") between AGAM and American General Investment Management, L.P.
("AGIM") or an affiliate thereof, the terms of which are the same in all
material respects as the previous subadvisory agreement between AGAM and AGIM;
(2) (a) NAF Stock Index Fund: to approve or disapprove an Agreement and Plan
of Reorganization (the "Stock Index Funds Agreement and Plan") providing for the
acquisition of substantially all of the assets, and assumption of substantially
all of the liabilities, of the NAF Stock Index Fund by the SunAmerica Stock
Index Fund of SunAmerica Strategic Investment Series, Inc. (the "SunAmerica
Stock Index Fund" or an "Acquiring Fund"), solely in exchange for an equal
aggregate value of newly issued shares of the SunAmerica Stock Index Fund, as
described in the accompanying proxy statement and prospectus. The SunAmerica
Stock Index Fund is a newly created series of SunAmerica Strategic Investment
Series, Inc., created for the purpose of receiving the assets from the NAF Stock
Index Fund. The Stock Index Funds Agreement and Plan also provides for
distribution of the shares of the SunAmerica Stock Index Fund to shareholders of
the NAF Stock Index Fund. A vote in favor of this proposal will constitute a
vote in favor of the termination of the NAF Stock Index Fund as a separate
investment portfolio of North American Funds;
(b) NAF Science & Technology Fund: to approve or disapprove an Agreement
and Plan of Reorganization (the "Science & Technology Funds Agreement and Plan")
providing for the acquisition of substantially all of the assets, and assumption
of substantially all of the liabilities, of the NAF Science & Technology Fund by
the SunAmerica Science & Technology Fund of SunAmerica Strategic Investment
Series, Inc. (the "SunAmerica Science & Technology Fund" or an "Acquiring
Fund"), solely in exchange for an equal aggregate value of newly issued shares
of the SunAmerica Science & Technology Fund, as described in the accompanying
proxy statement and prospectus. The SunAmerica Science & Technology Fund is a
newly created series of SunAmerica Strategic Investment Series, Inc., created
for the purpose of receiving the assets from the NAF Science & Technology Fund.
The Science & Technology Funds Agreement and Plan also provides for distribution
of such shares of the SunAmerica Science & Technology Fund to shareholders of
the NAF Science & Technology Fund. A vote in favor of this proposal will
constitute a vote in favor of the termination of the NAF Science & Technology
Fund as a separate investment portfolio of North American Funds as a separate
investment portfolio of North American Funds;
(c) NAF Aggressive Growth LifeStyle Fund: to approve or disapprove an
Agreement and Plan of Reorganization (the "Aggressive Growth LifeStage Funds
Agreement and Plan") providing for the acquisition of substantially all of the
assets, and assumption of substantially all of the liabilities, of the NAF
Aggressive Growth LifeStyle Fund by the SunAmerica Aggressive Growth LifeStage
Fund of SunAmerica Strategic Investment Series, Inc. (the "SunAmerica Aggressive
Growth LifeStage Fund" or an "Acquiring Fund"), solely in exchange for an equal
aggregate value of newly issued shares of the SunAmerica Aggressive Growth
LifeStage Fund, as described in the accompanying proxy statement and prospectus.
The SunAmerica Aggressive Growth LifeStage Fund is a newly created series of
SunAmerica Strategic Investment Series, Inc., created for the purpose of
receiving the assets of the NAF Aggressive Growth LifeStyle Fund. The Aggressive
Growth LifeStage Funds Agreement and Plan also provides for distribution of such
shares of the SunAmerica Aggressive Growth LifeStage Fund to shareholders of the
NAF Aggressive Growth LifeStyle Fund. A vote in favor of this proposal will
constitute a vote in favor of the termination of the NAF Aggressive Growth
LifeStyle Fund as a separate investment portfolio of North American Funds;
(d) NAF Moderate Growth LifeStyle Fund: to approve or disapprove an
Agreement and Plan of Reorganization (the "Moderate Growth LifeStage Funds
Agreement and Plan") providing for the acquisition of substantially all of the
assets, and assumption of substantially all of the liabilities, of the NAF
Moderate Growth LifeStyle Fund by the SunAmerica Moderate Growth LifeStage Fund
of SunAmerica Strategic Investment Series, Inc. (the "SunAmerica Moderate Growth
LifeStage Fund" or an "Acquiring Fund"), solely in exchange for an equal
aggregate value of newly issued shares of the SunAmerica Moderate Growth
LifeStage Fund, as described in the accompanying proxy statement and prospectus.
The SunAmerica Moderate Growth LifeStage Fund is a newly created series of
SunAmerica Strategic Investment Series, Inc., created for the purpose of
receiving the assets from the NAF Moderate Growth Lifestyle Fund. The Moderate
Growth LifeStage Funds Agreement and Plan also provides for distribution of such
shares of the SunAmerica Moderate Growth LifeStage Fund to shareholders of the
NAF Moderate Growth LifeStyle Fund. A vote in favor of this proposal will
constitute a vote in favor of the termination of the NAF Moderate Growth
LifeStyle Fund as a separate investment portfolio of North American Funds;
(e) NAF Conservative Growth LifeStyle Fund: to approve or disapprove an
Agreement and Plan of Reorganization (the "Conservative Growth LifeStage Funds
Agreement and Plan") providing for the acquisition of substantially all of the
assets, and assumption of substantially all of the liabilities, of the NAF
Conservative Growth LifeStyle Fund by the SunAmerica Conservative Growth
LifeStage Fund of SunAmerica Strategic Investment Series, Inc. (the "SunAmerica
Conservative Growth Lifestage Fund" or an "Acquiring Fund"), solely in exchange
for an equal aggregate value of newly issued shares of the SunAmerica
Conservative Growth LifeStage Fund, as described in the accompanying proxy
statement and prospectus. The SunAmerica Conservative Growth LifeStage Fund is a
newly created series of SunAmerica Strategic Investment Series, Inc., created
for the purpose of receiving the assets from the NAF Conservative Growth
LifeStyle Fund. The Conservative Growth LifeStyle Funds Agreement and Plan also
provides for distribution of such shares of the SunAmerica Conservative Growth
LifeStage Fund to shareholders of the NAF Conservative Growth LifeStyle Fund. A
vote in favor of this proposal will constitute a vote in favor of the
termination of the NAF Conservative Growth LifeStyle Fund ; and
(3) To transact such other business as properly may come before the Meeting or
any adjournment thereof.
The Board of Trustees of North American Funds has fixed the close of
business on September 17, 2001 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the Meeting or any
adjournment thereof.
A complete list of the shareholders of each of the Acquired Funds entitled
to vote at the Meeting will be available and open to the examination of any
shareholders of each Acquired Fund for any purpose germane to such Meeting
during ordinary business hours from and after October 24, 2001 at the offices of
North American Funds, 286 Congress Street, Boston, Massachusetts and at the
Meeting.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed respective form of proxy and return it promptly in the postage-paid
envelope provided for that purpose. Alternatively, you may vote your shares by
calling a specially designated telephone number (toll free 1-888-850-2811) or
via the Internet at http://proxy. ______ .com. Each of the enclosed proxies is
being solicited on behalf of the Board of Trustees of North American Funds.
The Board of Trustees of North American Funds unanimously recommends that
the shareholders of each Acquired Fund approve the New Investment Advisory
Agreement, the New Subadvisory Agreement (if applicable) and the respective
Agreement and Plan of Reorganization.
By Order of the Board of Trustees,
John I. Fitzgerald
Secretary, North American Funds
Boston, Massachusetts
Dated: September __, 2001
SUBJECT TO COMPLETION
COMBINED PROXY STATEMENT AND PROSPECTUS
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
NORTH AMERICAN FUNDS
___________________
JOINT SPECIAL MEETING OF SHAREHOLDERS OF
STOCK INDEX FUND
SCIENCE & TECHNOLOGY FUND
AGGRESSIVE GROWTH LIFESTYLE FUND
MODERATE GROWTH LIFESTYLE FUND
AND
CONSERVATIVE GROWTH LIFESTYLE FUND
OF
NORTH AMERICAN FUNDS
__________________
NOVEMBER 7, 2001
This Proxy Statement and Prospectus describes a proposal to approve or
disapprove (i) a new investment advisory agreement (the "New Investment Advisory
Agreement") between American General Asset Management Corp. ("AGAM") and North
American Funds on behalf of your Fund, the terms of which are the same in all
material respects as the previous investment advisory agreement with AGAM (the
"Previous Investment Advisory Agreement"), and (ii) a new subadvisory agreement
(the "New Subadvisory Agreement") between AGAM and American General Investment
Management, L.P. ("AGIM") or an affiliate thereof (collectively, "New AGIM"),
the terms of which are the same in all material respects as the previous
subadvisory agreement between AGAM and AGIM (the "Previous Subadvisory
Agreement"). The proposal relating to the New Subadvisory Agreement does not
apply to the NAF Science & Technology Fund (as defined below), which is not
advised by AGIM.
The Board of Trustees (the "NAF Board") of North American Funds, a
Massachusetts business trust, is seeking your proxy to vote in favor of these
proposals at the Joint Special Meeting of Shareholders (the "Meeting") to be
held on November 7, 2001.
In addition, the Meeting also has been called to approve or disapprove the
proposed Agreement and Plan of Reorganization (each a "Plan" and collectively,
the "Plans") between North American Funds on behalf of each of its investment
portfolios set forth below (each an "Acquired Fund" and collectively, the
"Acquired Funds") and SunAmerica Strategic Investment Series, Inc., a Maryland
corporation, on behalf of each of its respective investment portfolios set forth
below (each an "Acquiring Fund," and collectively, the "Acquiring Funds"):
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Acquired Fund Acquiring Fund
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Stock Index Fund (the "NAF Stock Index Fund") SunAmerica Stock Index Fund (together with the NAF Stock Index
Fund, the "Stock Index Funds" and following the applicable
Reorganization, the "Stock Index Combined Fund.")
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Science & Technology Fund (the "NAF Science & Technology Fund") SunAmerica Science & Technology Fund (together with the NAF
Science & Technology Fund, the "Science & Technology Funds"
and following the applicable Reorganization, the "Science &
Technology Combined Fund.")
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__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________
The Date of this Proxy Statement and Prospectus is September __, 2001.
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Aggressive Growth LifeStyle Fund (the "NAF Aggressive Growth SunAmerica Aggressive Growth LifeStage Fund (together with the
LifeStyle Fund") NAF Aggressive Growth LifeStyle Fund, the "Aggressive Growth
LifeStage Funds" and following the applicable Reorganization,
the "Aggressive Growth LifeStage Combined Fund.")
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Moderate Growth LifeStyle Fund (the "NAF Moderate Growth SunAmerica Moderate Growth LifeStage Fund (together with the
LifeStyle Fund") NAF Moderate Growth LifeStyle Fund, the "Moderate Growth
LifeStage Funds" and following the applicable Reorganization,
the "Moderate Growth LifeStage Combined Fund.")
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Conservative Growth LifeStyle Fund (the "NAF Conservative SunAmerica Conservative Growth LifeStage Fund (together with
Growth LifeStyle Fund") the NAF Conservative Growth LifeStyle Fund, the "Conservative
Growth LifeStage Funds" and following the applicable
reorganization, the "Conservative Growth LifeStage Combined
Fund.")
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Each Plan provides for the acquisition by an Acquiring Fund of
substantially all of the assets, and assumption of substantially all of the
liabilities, of the respective Acquired Fund, solely in exchange for an equal
aggregate value of newly issued shares (the "Corresponding Shares") of such
Acquiring Fund (each a "Reorganization" and collectively, the
"Reorganizations"). Immediately thereafter, and as part of the respective
Reorganization, such Acquired Fund will distribute the Corresponding Shares
received in such Reorganization to its shareholders. The consummation of one
Reorganization is not conditioned upon the consummation of any other
Reorganization.
Shareholders will receive the same class of Corresponding Shares as the
shares of the respective Acquired Fund held by them immediately prior to the
applicable Reorganization. (However, if a shareholder owns Class C shares of an
Acquired Fund, he or she will receive Class II shares of the respective
Acquiring Fund since the Acquiring Funds do not have a class of shares called
Class C.) The aggregate net asset value of the Corresponding Shares will equal
the aggregate net asset value of a shareholder's Acquired Fund shares. This
means that a shareholder may end up with a different number of shares compared
to what he or she originally held, but the total dollar value of the shares will
remain the same.
The Acquired Funds and the Acquiring Funds sometimes are referred to herein
collectively as the "Funds" and individually as a "Fund," as the context
requires. The Acquiring Funds following the Reorganizations sometimes are
referred to herein collectively as the "Combined Funds" and individually as a
"Combined Fund."
There can be no assurance that, after the Reorganizations, the Combined
Funds will achieve their respective investment goals.
This Proxy Statement and Prospectus serves as a prospectus of SunAmerica
Strategic Investment Series, Inc. under the Securities Act of 1933, as amended
(the "Securities Act"), in connection with the issuance of the Corresponding
Shares by the Acquiring Funds to the Acquired Funds pursuant to the terms of the
Reorganizations.
Both North American Funds and SunAmerica Strategic Investment Series, Inc.
are open-end series management investment companies. North American Funds is
organized as a Massachusetts business trust, and SunAmerica Strategic Series,
Inc. is organized as a Maryland corporation. Each of the Acquiring Funds are
newly created and have not yet commenced operations.
Information about the Acquired Funds and the Acquiring Funds is available
in other documents that have been filed with the Securities and Exchange
Commission (the "Commission"). These other documents are available without
charge by writing North American Funds at 286 Congress Street, Boston,
Massachusetts 02210, or by calling toll-free 1-800-872-8037 if they relate to
the Acquired Funds or by writing SunAmerica Strategic Investment Series, Inc. at
The SunAmerica Center, 733 Third Avenue, New York, New York 10017 or by calling
toll-free 1-800-858-8850 if they relate to the Acquiring Funds. These documents
are:
. The prospectuses relating to the Acquiring Funds, each dated
September __, 2001 (the "Acquiring Funds Prospectuses"). (1)(2)
. The current prospectuses relating to the Acquired Funds, each dated
March 1, 2001, as supplemented (the "Acquired Funds Prospectuses").
(2)
. The statements of additional information relating to the Acquiring
Funds, each dated September __, 2001 (the "Acquiring Funds
Statements").
. A statement of additional information relating to the Acquired Funds,
dated March 1, 2001, as supplemented (the "Acquired Funds Statement").
. The Annual Report to Shareholders of the Acquired Funds for the year
ended October 31, 2000 and the Semi-Annual Report to Shareholders of
the Acquired Funds for the six month period ended April 30, 2001.
(1) Copies are attached to this Proxy Statement and Prospectus as Appendix I
and Appendix II, respectively.
(2) The document is incorporated herein by reference (legally considered to
be a part of this Proxy Statement and Prospectus).
Each of the Acquiring Funds is being organized as a separate investment
portfolio of SunAmerica Strategic Investment Series, Inc. for the purpose of
accomplishing the applicable Reorganization and has not yet commenced
operations. This Proxy Statement and Prospectus sets forth concisely the
information about an Acquiring Fund that shareholders of the respective Acquired
Fund should know before considering the applicable Reorganization and should be
retained for future reference. The Acquired Funds have authorized the
solicitation of proxies solely on the basis of this Proxy Statement and
Prospectus and the accompanying documents.
Additional information contained in a preliminary statement of additional
information relating to this Proxy Statement and Prospectus (the "Statement of
Additional Information"), including pro forma financial statements of each
Combined Fund giving effect to the consummation of the applicable
Reorganization, is on file with the Commission. The Statement of Additional
Information is available without charge, upon request by calling one of the toll
free numbers set forth below or by writing North American Funds or SunAmerica
Strategic Investment Series, Inc. at the addresses set forth below. The
Statement of Additional Information, [dated September __, 2001], is incorporated
by reference into this Proxy Statement and Prospectus.
The Commission maintains a web site (http://www.sec.gov) that contains
the Statement of Additional Information, the Acquiring Funds Prospectuses, the
Acquired Funds Prospectuses, the Acquiring Funds Statements, the Acquired Funds
Statement, other material incorporated by reference and other information
regarding the Funds.
The address of the principal executive offices of SunAmerica Strategic
Investment Series, Inc. is The SunAmerica Center, 733 Third Avenue, New York,
New York 10017, the telephone number is 1-800-858-8850 and the web address is
http://www.sunamericafunds.com. The address of the principal executive offices
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of North American Funds is 286 Congress Street, Boston, Massachusetts 02210, the
telephone number is 1-800-872-8037 and the web address is
http://www.northamericanfunds.com.
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TABLE OF CONTENTS
Page
----
INTRODUCTION................................................................................................... 1
SUMMARY........................................................................................................ 2
THE MERGER AND THE NEW INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS.......................................... 2
THE REORGANIZATIONS............................................................................................ 3
FEE TABLES................................................................................................ 5
EXAMPLES.................................................................................................. 12
THE FUNDS................................................................................................. 19
Business of the Acquired Funds............................................................................ 19
Business of the Acquiring Funds........................................................................... 19
Comparison of the Funds................................................................................... 19
PRINCIPAL RISK FACTORS AND SPECIAL CONSIDERATIONS.............................................................. 24
RISKS OF INVESTING IN THE FUNDS........................................................................... 24
All Funds................................................................................................. 24
Stock Index Funds......................................................................................... 24
Science & Technology Funds................................................................................ 24
Growth LifeStage Funds.................................................................................... 25
PROPOSAL NOS. 1(a) AND (b): APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT AND NEW SUBADVISORY AGREEMENT.. 27
THE MERGER AND THE NEW INVESTMENT ADVISORY AGREEMENT AND NEW SUBADVISORY AGREEMENT............................. 27
Board Considerations...................................................................................... 27
THE NEW INVESTMENT ADVISORY AGREEMENT.......................................................................... 29
Description of the New Investment Advisory Agreement...................................................... 29
Additional Information About AGAM......................................................................... 29
THE NEW SUBADVISORY AGREEMENT.................................................................................. 31
Description of the New Subadvisory Agreement.............................................................. 31
Additional Information About AGIM......................................................................... 32
PROPOSAL NOS. 2(a) - (e): APPROVAL OF THE PLANS............................................................... 33
COMPARISON OF THE FUNDS........................................................................................ 33
Investment Policies....................................................................................... 33
Directors and Officers.................................................................................... 34
Management Arrangements................................................................................... 38
Distribution and Shareholder Servicing Arrangements....................................................... 40
Other Service Agreements with Affiliates.................................................................. 41
Purchase, Exchange and Redemption of Shares............................................................... 42
Performance............................................................................................... 46
Shareholder Rights........................................................................................ 47
Tax Information........................................................................................... 48
Portfolio Transactions.................................................................................... 48
Portfolio Turnover........................................................................................ 48
Additional Information.................................................................................... 48
THE REORGANIZATIONS............................................................................................ 49
General................................................................................................... 49
Terms of the Plans........................................................................................ 50
NAF Board Considerations: Potential Benefits to Shareholders as a Result of the Reorganizations.......... 51
Federal Income Tax Consequences of the Reorganizations.................................................... 54
Capitalization............................................................................................ 55
GENERAL........................................................................................................ 58
INFORMATION CONCERNING THE MEETING............................................................................. 58
Date, Time and Place of Meeting........................................................................... 58
Solicitation, Revocation and Use of Proxies............................................................... 58
Record Date and Outstanding Shares........................................................................ 58
Security Ownership of Certain Beneficial Owners and Management of the Funds............................... 58
Voting Rights and Required Vote........................................................................... 59
ADDITIONAL INFORMATION......................................................................................... 60
LEGAL PROCEEDINGS.............................................................................................. 61
LEGAL OPINIONS................................................................................................. 61
EXPERTS........................................................................................................ 61
SHAREHOLDER PROPOSALS.......................................................................................... 61
INTRODUCTION
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This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Trustees of North American
Funds for use at the Meeting to be held at the principal executive offices of
North American Funds, 286 Congress Street, Boston, Massachusetts 02210 on
November 7, 2001, at 10:00 a.m., Eastern Time. The mailing address for the
Acquired Funds is 286 Congress Street, Boston, Massachusetts 02210. The
approximate mailing date of this Proxy Statement and Prospectus is September
[27], 2001.
The shareholders solicited and entitled to vote on Proposals 1a, 1b, 2a,
2b, 2c, 2d and 2e of this Proxy Statement and Prospectus are outlined in the
following table:
Proposal Fund
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1. (a) Approval of New Investment Advisory Agreement All Acquired Funds, each voting separately
(b) Approval of New Subadvisory Agreement All Acquired Funds (other than the NAF Science
& Technology Fund), each voting separately
2. (a) Approval of Plan relating to the Stock Index NAF Stock Index Fund
Funds
(b) Approval of Plan relating to the Science & NAF Science & Technology Fund
Technology Funds
(c) Approval of Plan relating to the Aggressive NAF Aggressive Growth LifeStyle Fund
Growth LifeStage Funds
(d) Approval of Plan relating to the Moderate NAF Moderate Growth LifeStyle Fund
Growth LifeStage Funds
(e) Approval of Plan relating to the NAF Conservative Growth LifeStyle Fund
Conservative Growth LifeStage Funds
-1-
SUMMARY
-------
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus (including documents incorporated by
reference) and is qualified in its entirety by reference to the more complete
information contained in this Proxy Statement and Prospectus and in the New
Investment Advisory Agreement, the New Subadvisory Agreement and in the form of
the Plans, attached hereto as Exhibits IA, IB and II, respectively.
In this Proxy Statement and Prospectus, the term "Reorganization" refers to
(i) the acquisition of substantially all of the assets, and assumption of
substantially all of the liabilities, of an Acquired Fund by the respective
Acquiring Fund solely in exchange for an equal aggregate value of the
Corresponding Shares of such Acquiring Fund, and (ii) the subsequent
distribution of such Corresponding Shares to the shareholders of the Acquired
Fund. The consummation of one Reorganization is not conditioned on the
consummation of any other Reorganization.
THE MERGER AND THE NEW INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
On ____________, 2001, American International Group, Inc. ("AIG"), the
parent company of SunAmerica Asset Management Corp. ("SAAMCo"), acquired
American General Corporation ("American General"), the parent company of AGAM
and AGIM (the "Merger"). As a result of the Merger, AGAM became a subsidiary of
AIG.
As required by the Investment Company Act of 1940, as amended (the
"Investment Company Act"), both the Previous Investment Advisory Agreement and
the Previous Subadvisory Agreement (collectively, the "Previous Agreements")
provided for automatic termination upon assignment. The consummation of the
Merger constituted an assignment, as that term is defined in the Investment
Company Act, of the Previous Agreements, and, consequently, their termination.
At a meeting of the NAF Board held on July 16-17, 2001, the NAF Board,
including all of the Trustees who are not "interested persons" (within the
meaning of Section 2(a)(19) of the Investment Company Act) ("NAF Independent
Trustees") unanimously approved an interim investment advisory agreement (the
"Interim Investment Advisory Agreement") between AGAM and North American Funds
with respect to the Acquired Funds in order to allow AGAM to continue to serve
as investment adviser for the Acquired Funds after the Merger. Pursuant to the
terms of the Interim Investment Advisory Agreement, AGAM is responsible for the
management of the investment portfolio (and, in connection therewith, selection
of the subadviser(s) (each a "Subadviser") responsible for the direct management
of such investment portfolio) of each Acquired Fund and for providing certain
administrative services to each Acquired Fund. The NAF Board, including all of
the NAF Independent Trustees, also unanimously approved an interim subadvisory
agreement (the "Interim Subadvisory Agreement" and together with the Interim
Investment Advisory Agreement, the "Interim Agreements") between AGAM and New
AGIM, an affiliate of AGAM, in order to allow New AGIM to continue to serve as
the subadviser after the Merger for each of the Acquired Funds (other than the
NAF Science & Technology Fund, which is not subadvised by New AGIM). Pursuant to
the terms of the Interim Subadvisory Agreement, New AGIM is responsible for
managing the investment and reinvestment of the assets of each Acquired Fund
(other than the NAF Science & Technology Fund), subject to the supervision of
the NAF Board. The terms of the Interim Investment Advisory Agreement and
Interim Subadvisory Agreement are similar in all material respects to those of
the Previous Investment Advisory Agreement and Previous Subadvisory Agreement,
respectively. Under the Investment Company Act, however, AGAM and New AGIM may
continue to serve as the investment adviser and subadviser, respectively, for
each Acquired Fund (other than, in the case of New AGIM, the NAF Science &
Technology Fund) beyond an interim period of 150 days only if shareholders of
such Acquired Fund approve a new investment advisory agreement with AGAM and a
new subadvisory agreement with New AGIM. Consequently, the NAF Board unanimously
approved, and recommended shareholder approval of, the New Investment Advisory
Agreement and New Subadvisory Agreement (collectively, the "New Agreements") on
July 16-17, 2001. The New Agreements, if approved by shareholders, would take
effect immediately upon such approval. The terms of each New Agreement,
including advisory fees, are the same in all material respects as those of the
respective Previous Agreement. See "Proposal No. 1(a): Approval of the New
Investment Advisory Agreement -- The Merger and the New Investment Advisory
Agreement -- Description of the New Investment Advisory Agreement" below for a
description of the New Investment Advisory Agreement and the services to be
provided by AGAM thereunder, and "Proposal No. 1(b): Approval of the New
Subadvisory
-2-
Agreement -- The New Subadvisory Agreement -- Description of the New Subadvisory
Agreement" below for a description of the New Subadvisory Agreement and the
services to be provided by New AGIM thereunder.
In addition, the NAF Board also approved the continuation of the
subadvisory agreement with T. Rowe Price Associates, Inc. ("T. Rowe Price") for
the NAF Science & Technology Fund, which had terminated upon termination of the
Previous Investment Advisory Agreement. Such approval was made in accordance
with a "Manager of Managers" order granted by the Commission to North American
Funds (which applies to selection of unaffiliated subadvisers) and therefore the
new subadvisory agreement for the NAF Science & Technology Fund does not require
shareholder approval.
In connection with its approval of the New Agreements, the NAF Board
received a presentation relating to AIG and SAAMCo, as well as a presentation
from AGAM and AGIM. The NAF Board considered that the Merger did not involve any
changes in the overall form of the advisory or subadvisory contracts, the
advisory fees, or any of the Acquired Funds' objectives or policies. As part of
their deliberations, the NAF Board took into account the following, among other
factors: the nature and quality of the services provided or reasonably
anticipated to be provided and the results achieved or reasonably anticipated to
be achieved by AGAM and/or New AGIM; the amount and structure of investment
advisers' fees generally and the fees payable under the New Agreements; the
financial strength of AIG; the management, personnel and operations of AIG and
SAAMCo; the commitment of AIG to the financial services industry; and the
structure of the Merger.
In addition, the NAF Board considered the fact that at some point after
consummation of the Merger, the operations of AGIM might be consolidated with
those of another affiliate within the AIG group of companies to eliminate
duplication and attempt to create economies of scale within the organization.
The NAF Board was assured that any such internal reorganization would not result
in a change in the personnel responsible for providing services to the
applicable Acquired Funds or in the nature or quality of those services.
Accordingly, the NAF Board approved each of the Interim Subadvisory Agreement
and the New Subadvisory Agreement with AGIM or any affiliate that may in the
future conduct the advisory business previously conducted by AGIM (previously
defined collectively as "New AGIM").
AGAM and AGIM are wholly owned subsidiaries of American General. Prior to
the Merger, American General was one of the nation's largest diversified
financial services organizations with assets of approximately $128 billion and
market capitalization of $23 billion at June 30, 2001[confirm]. SAAMCo is the
investment adviser for the Acquiring Funds. SAAMCo has been in the business of
investment management since 1982 and as of June 30, 2001, managed, advised
and/or administered approximately $28.5 billion of assets. AIG, SAAMCo's
parent, a Delaware corporation, is a holding company which, through its
subsidiaries, is engaged in a broad range of insurance and insurance-related
activities and financial services in the United States and abroad.
THE REORGANIZATIONS
On August 2, 2001, the NAF Board unanimously approved, subject to
shareholder approval and completion of the Merger, a proposal that each
Acquiring Fund acquire substantially all of the assets, and assume substantially
all of the liabilities, of the respective Acquired Fund solely in exchange for
an equal aggregate value of such Acquiring Fund's Corresponding Shares to be
distributed to the shareholders of such Acquired Fund. Shareholders holding
Class A, Class B, Class C and Institutional Class I shares of an Acquired Fund
will receive Class A, Class B, Class II and Class I shares, respectively, of the
respective Acquiring Fund. See "Proposals Nos. 2(a) - (e): Approval of the
Plans -- Comparison of the Funds Purchase, Exchange and Redemption of Shares"
below, "Shareholder Account Information" in the Acquiring Funds Prospectuses and
"Section III: Investing in the North American Funds" in the Acquired Funds
Prospectuses for a description of these share classes. No sales charges will be
imposed on the Corresponding Shares issued in connection with the
Reorganizations. Each Reorganization has been structured with the intention
that it qualify for Federal income tax purposes as a tax-free reorganization
under the Internal Revenue Code of 1986, as amended (the "Code").
-3-
In approving the Reorganizations, based upon their evaluation of all
relevant information, and after meeting with counsel to the NAF Independent
Trustees regarding the legal issues involved, the NAF Board identified and
considered certain potential benefits to shareholders that are likely to result
from the Reorganizations. The NAF Board considered that, following each
Reorganization, shareholders of an Acquired Fund will remain invested in a
mutual fund which has substantially the same investment objective and similar,
though not identical, investment techniques. The NAF Board also considered that
Acquired Fund shareholders would benefit from becoming shareholders in the
SunAmerica Mutual Funds complex. Because SunAmerica has broad distribution
channels, it is also possible that the asset base for each Combined Fund will
increase over the long term, which would tend to result in a lower overall
operating expenses. Of course, there is no guarantee that such increases in
asset base would in fact occur. Another advantage to shareholders identified by
the NAF Board with respect to each of the NAF Aggressive Growth LifeStyle, NAF
Moderate Growth LifeStyle and NAF Conservative Growth LifeStyle Funds
(collectively, the "NAF Growth LifeStyle Funds") is the immediate expected
reduction in total combined annual expenses (as a percentage of net assets) that
would be borne by shareholders of these Funds following the Reorganization, as
the underlying SunAmerica Mutual Funds in which they will invest tend to have
lower operating expenses than the underlying North American Funds in which they
currently invest. See "Proposals Nos. 2(a) - (e): Approval of the Plans -- The
Reorganizations -- NAF Board Considerations: Potential Benefits to Shareholders
as a Result of the Reorganizations."
The NAF Board, including all of the NAF Independent Trustees, has
determined that each Reorganization is in the best interests of the respective
Acquired Fund and its shareholders. In addition, the NAF Board, including all of
the NAF Independent Trustees, has determined that the interests of existing
shareholders of each Acquired Fund will not be diluted as a result of effecting
the respective Reorganization because each such shareholder will receive
Corresponding Shares of the Acquiring Fund having an aggregate net asset value
equal to the aggregate net asset value of his or her shares of the Acquired Fund
outstanding as of the Valuation Time (as defined herein). Although, as a result
of the Reorganizations, a shareholder of an Acquired Fund may receive shares of
the respective Acquiring Fund which represent a smaller percentage of ownership
in the respective Combined Fund than he or she held in that Acquired Fund prior
to the respective Reorganization, the total dollar value of the shares will
be the same.
The NAF Board unanimously recommends that you vote FOR the Plan relating to
the Reorganization involving your Fund. Your Board has based this recommendation
on its consideration of the principal reasons underlying each Reorganization,
including the following: the fact that following each reorganization,
shareholders of each Acquired Fund would remain invested in a mutual fund having
substantially the same investment objective and similar investment techniques;
the fees and expenses of the Acquired Funds, the Acquiring Funds and the
Combined Funds; potential benefits to shareholders likely to result from each
Reorganization, such as the potential for reduced operating expenses over time
due to economies of scale; and the fact that the Reorganizations will not result
in dilution of the interests of Acquired Fund shareholders. For a more detailed
discussion of the factors considered by your Board in approving the
Reorganizations, see "Proposals Nos. 2(a) - (e): The Reorganizations - NAF Board
Considerations: Potential Benefits to Shareholders as a result of the
Reorganizations" below.
If all of the requisite approvals are obtained and certain conditions are
either met or waived, it is anticipated that (i) AGAM will continue to serve as
the investment adviser of the Acquired Funds, New AGIM will continue to serve as
Subadviser to each of the Acquired Funds except the NAF Science & Technology
Fund, and T. Rowe Price will continue to serve as Subadviser to the NAF Science
& Technology Fund, until the closing of the Reorganizations (which is currently
anticipated to occur during the fourth calendar quarter of 2001), (ii) the
Reorganizations will occur as soon as practicable thereafter, provided that the
Funds have obtained prior to that time an opinion of counsel concerning the tax
consequences of the Reorganizations as set forth in the Plans, and (iii) after
the consummation of the Reorganizations, SAAMCo will manage the assets of the
Acquired Funds as part of the Combined Funds, with New AGIM serving as
Subadviser to the Stock Index Combined Fund and T. Rowe Price serving as
Subadviser to the Science & Technology Combined Fund. The Plans may be
terminated, and the Reorganizations abandoned, whether before or after the
requisite approval by the shareholders of the Acquired Funds, at any time prior
to the Closing Date (as defined herein), (i) by mutual agreement of the NAF
Board and the Board of Directors of SunAmerica Strategic Investment Series, Inc.
(the "SunAmerica Board"); (ii) by an Acquired Fund if any condition to such
Acquired Fund's obligations has not been fulfilled or waived; or (iii) by an
Acquiring Fund if any condition to such Acquiring Fund's obligations has not
been fulfilled or waived.
-4-
Fee Tables
Actual Fee Table for Shareholders of each of the Acquired Funds+ and each of the Acquiring Funds (as of April 30, 2000) and
Pro Forma Fee Table for each of the Combined Funds (as of April 30, 2001)
NAF Stock Index Fund
Institutional
Class A Class B Class C Class I
------- ------- ------- -------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1)................................ 5.75% None None None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption price, whichever is
lower)(2)....................................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends....................................................... None None None None
Redemption Fee(3)................................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses that are
deducted from Fund assets):
Management Fees................................................ 0.27% 0.27% 0.27% 0.27%
Distribution and/or Service (12b-1) Fees(4).................... 0.35% 1.00% 1.00% None
Other Expenses................................................. 0.55% 0.55% 0.55% 0.80%
Total Annual Fund Operating Expenses Before Expense
Reimbursement.................................................... 1.17% 1.82% 1.82% 1.07%
Expense Reimbursement............................................ 0.42% 0.42% 0.42% 0.42%
Net Expenses(5)(6)............................................... 0.75% 1.40% 1.40% 0.65%
Sun America Stock Index Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1)............................... 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption price, whichever is
lower)(2)....................................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends....................................................... None None None None
Redemption Fee(3)................................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses that are
deducted from Fund assets):
Management Fees................................................ 0.27% 0.27% 0.27% 0.27%
Distribution and/or Service (12b-1) Fees(4).................... 0.35% 1.00% 1.00% None
Other Expenses................................................. 0.74% 0.66% 1.19% 0.99%
Total Annual Fund Operating Expenses Before Expense
Reimbursement................................................... 1.36% 1.93% 2.46% 1.26%
Expense Reimbursement............................................ 0.61% 0.53% 1.06% 0.61%
Net Expenses(5)(6)............................................... 0.75% 1.40% 1.40% 0.65%
Pro Forma Stock Index Combined Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1)................................. 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption price, whichever is
lower)(2)....................................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends....................................................... None None None None
Redemption Fee(3)................................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses that are
deducted from Fund assets):
Management Fees................................................ 0.27% 0.27% 0.27% 0.27%
Distribution and/or Service (12b-1) Fees(4).................... 0.35% 1.00% 1.00% None
Other Expenses................................................. 0.74% 0.66% 1.19% 0.99%
Total Annual Fund Operating Expenses Before Expense
Reimbursement................................................... 1.36% 1.93% 2.46% 1.26%
Expense Reimbursement............................................ 0.61% 0.53% 1.06% 0.61%
Net Expenses(5)(6)............................................... 0.75% 1.40% 1.40% 0.65%
NAF Science & Technology Fund
Institutional
Class A Class B Class C Class I
------------ ----------- ------------ -------------
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1)............................. 5.75% None None None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption price, whichever is
lower)(2).................................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None None None
Redemption Fee(3)............................................. None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses that are
deducted from Fund assets):
Management Fees............................................. 0.90% 0.90% 0.90% 0.90%
Distribution and/or Service (12b-1) Fees(4) 0.35% 1.00% 1.00% None
Other Expenses.............................................. 0.50% 0.50% 0.50% 0.50%
Total Annual Fund Operating Expenses Before Expense
Reimbursement................................................ 1.75% 2.40% 2.40% 1.40%
Expense Reimbursement......................................... 0.25% 0.25% 0.25% --
Net Expenses(5)(6)............................................ 1.50% 2.15% 2.15% 1.40%
SunAmerica Science & Technology Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1)............................. 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption price, whichever is
lower)(2) ................................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends... None None None None
Redemption Fee(3) ............................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses that are
deducted from Fund assets):
Management Fees ............................................ 0.90% 0.90% 0.90% 0.90%
Distribution and/or Service (12b-1) Fees(4) ................ 0.35% 1.00% 1.00% None
Other Expenses ............................................. 1.22% 1.04% 1.71% 5.40%
Total Annual Fund Operating Expenses Before Expense
Reimbursement ............................................... 2.47% 2.94% 3.61% 6.30%
Expense Reimbursement ........................................ 0.97% 0.79% 1.46% 4.90%
Net Expenses(5)(6) ........................................... 1.50% 2.15% 2.15% 1.40%
Pro Forma Science & Technology Combined Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1)............................. 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption price, whichever is
lower)(2).................................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends .. None None None None
Redemption Fee(3) ............................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses that are
deducted from Fund assets):
Management Fees ............................................ 0.90% 0.90% 0.90% 0.90%
Distribution and/or Service (12b-1) Fees(4) ................ 0.35% 1.00% 1.00% None
Other Expenses ............................................. 1.22% 1.04% 1.71% 5.40%
Total Annual Fund Operating Expenses Before Expense
Reimbursement ............................................... 2.47% 2.94% 3.61% 6.30%
Expense Reimbursement ........................................ 0.97% 0.79% 1.46% 4.90%
Net Expenses(5)(6) ........................................... 1.50% 2.15% 2.15% 1.40%
-6-
NAF Aggressive Growth LifeStyle Fund
Institutional
Class A Class B Class C Class I
------- ------- ------- -------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price)(1)................. 5.75% None None None
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or redemption
price, whichever is lower)(2).................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends............................................. None None None None
Redemption Fee(3)................................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses
that are deducted from Fund assets):
Management Fees............................................. 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) Fees(4)................. 0.10% 0.75% 0.75% None
Other Expenses.............................................. None None None None
Total Annual Fund Operating Expenses............................. 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses................................. 1.45% 1.45% 1.45% 1.45%
Total Combined Annual Expenses(7)................................ 1.65% 2.30% 2.30% 1.55%
SunAmerica Aggressive Growth
LifeStage Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price)(1)................. 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or redemption
price, whichever is lower)(2).................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends............................................. None None None None
Redemption Fee(3)................................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses
that are deducted from Fund assets):
Management Fees............................................. 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) Fees(4)................. 0.10% 0.75% 0.75% None
Other Expenses.............................................. None None None None
Total Annual Fund Operating Expenses............................. 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses................................. 1.39% 1.39% 1.39% 1.39%
Total Combined Annual Expenses(7)................................ 1.59% 2.24% 2.24% 1.49%
Pro Forma Aggressive Growth LifeStage
Combined Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price)(1)................. 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or redemption
price, whichever is lower)(2).................................... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends............................................. None None None None
Redemption Fee(3)................................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses
that are deducted from Fund assets):
Management Fees............................................. 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) Fees(4)................. 0.10% 0.75% 0.75% None
Other Expenses.............................................. None None None None
Total Annual Fund Operating Expenses............................. 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses................................. 1.39% 1.39% 1.39% 1.39%
Total Combined Annual Expenses(7)................................ 1.59% 2.24% 2.24% 1.49%
-7-
NAF Moderate Growth LifeStyle Fund
Institutional
Class A Class B Class C Class I
------- ------- ------- -------
Shareholder Fees (fees paid directly from
your investment):
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of offering
price)(1).......................................... 5.75% None None None
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed)(2).................. None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends............................... None None None None
Redemption Fee(3).................................... None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
(expenses that are deducted from Fund
assets):
Management Fees.............................. 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) 0.10% 0.75% 0.75% None
Fees(4).................................
Other Expenses............................... None None None None
Total Annual Fund Operating Expenses................. 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses.................. 1.39% 1.39% 1.39% 1.39%
Total Combined Annual Expenses(7).................... 1.59% 2.24% 2.24% 1.49%
SunAmerica Moderate Growth
LifeStage Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of offering
price)(1).......................................... 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed)(2).................. None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends............................... None None None None
Redemption Fee(3).................................... None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
(expenses that are deducted from Fund assets):
Management Fees................................ 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) 0.10% 0.75% 0.75% None
Fees(4)...................................
Other Expenses................................. None None None None
Total Annual Fund Operating Expenses................. 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses.................... 1.31% 1.31% 1.31% 1.31%
Total Combined Annual Expenses(7).................... 1.51% 2.16% 2.16% 1.41%
Pro Forma Moderate Growth LifeStage
Combined Fund*
Class A Class B Class II Class I
-------- -------- --------- -------
Shareholder Fees (fees paid directly from your
(investment):
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of offering
price)(1).......................................... 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed)(2).................. None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on None None None None
Reinvested Dividends...............................
Redemption Fee(3).................................... None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
(expenses that are deducted from Fund assets):
Management Fees............................... 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) 0.10% 0.75% 0.75% None
Fees(4)..................................
Other Expenses................................ None None None None
Total Annual Fund Operating Expenses................. 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses................... 1.31% 1.31% 1.31% 1.31%
Total Combined Annual Expenses(7).................... 1.51% 2.16% 2.16% 1.41%
NAF Conservative Growth LifeStyle Fund SunAmerica Conservative Growth
Institutional LifeStage Fund*
Class A Class B Class C Class I Class A Class B Class II ClassI
------- ------- ------- ------- ------- ------- -------- ------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)(1)............. 5.75% None None None 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption price, whichever is lower)(2)............ None 5.00% 1.00% None None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends........................................... None None None None None None None None
Redemption Fee(3)................................... None None None None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses
that are deducted from Fund assets):
Management Fees................................... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) Fees(4)....... 0.10% 0.75% 0.75% None 0.10% 0.75% 0.75% None
Other Expenses.................................... None None None None None None None None
Total Annual Fund Operating Expenses................ 0.20% 0.85% 0.85% 0.10% 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses....................... 1.33% 1.33% 1.33% 1.33% 1.20% 1.20% 1.20% 1.20%
Total Combined Annual Expenses(7)................... 1.53% 2.18% 2.18% 1.43% 1.40% 2.05% 2.05% 1.30%
Pro Forma Conservative Growth LifeStage
Combined Fund*
Class A Class B Class II Class I
------- ------- -------- -------
Shareholder Fees (fees paid directly from your
investment):
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)(1)............. 5.75% None 1.00% None
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption price, whichever is lower)(2)........... None 5.00% 1.00% None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends.......................................... None None None None
Redemption Fee(3)................................... None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) (expenses
that are deducted from Fund assets):
Management Fees................................... 0.10% 0.10% 0.10% 0.10%
Distribution and/or Service (12b-1) Fees(4)....... 0.10% 0.75% 0.75% None
Other Expenses.................................... None None None None
Total Annual Fund Operating Expenses................ 0.20% 0.85% 0.85% 0.10%
Estimated Indirect Expenses....................... 1.20% 1.20% 1.20% 1.20%
Total Combined Annual Expenses(7)................... 1.40% 2.05% 2.05% 1.30%
-9-
+ As reflected in the Acquired Funds Prospectuses.
* "Other Expenses," "Total Annual Fund Operating Expenses Before Expense
Reimbursement" (or "Total Fund Operating Expenses," as the case may be),
"Expense Reimbursement" (if applicable) and "Total Combined Annual
Expenses" (if applicable) in connection with each of the Acquiring Funds
and each of the Combined Funds have been estimated, since the Acquiring
Funds have not yet commenced operations.
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
(2) With respect to the Acquired Funds, (i) purchases of Class A shares of $1
million or more are subject to a CDSC of 1.00% on redemptions made within
one year of purchase, (ii) the CDSC on Class B shares applies only if
shares are redeemed within six years of their purchase in accordance with
the Acquired Funds' CDSC schedule set forth under "Proposals Nos. 2(a) -
(e): Approval of the Plans--Comparison of the Funds -- Purchase, Exchange
and Redemption of Shares," and (iii) the CDSC on Class C shares applies
only if shares are redeemed within one year of their purchase. See the
Acquired Funds Prospectuses for more information regarding the CDSCs
applicable to the Acquired Funds. The CDSC schedules applicable to Class B
and Class C shares of an Acquired Fund will continue to apply to the
respective Corresponding Shares received in the applicable Reorganization
by shareholders of a Combined Fund who were shareholders of the
corresponding Acquired Fund as of the date of the closing of such
Reorganization (even if you exchange your shares for shares of another fund
distributed by SACS). Future purchases of Class A, Class B or Class II
shares of a Combined Fund will be subject to the CDSC schedule applicable
to the Combined Fund.
With respect to the Acquiring Funds (and to future purchases of Class A,
Class B or Class II shares of the Combined Funds after the closing of the
Reorganizations), (i) purchases of Class A shares over $1 million are
subject to a CDSC on redemptions made within two years of purchase (1.00%
on shares sold within one year of purchase and 0.50% on shares sold after
the first year and within the second year after purchase), (ii) the CDSC on
Class B shares applies only if shares are redeemed within six years of
their purchase in accordance with the Acquiring Funds' CDSC schedule set
forth under "Proposals Nos. 2(a) - (e): Approval of the Plans -- Comparison
of the Funds -- Purchase, Exchange and Redemption of Shares," and (iii) the
CDSC on Class II shares applies only if shares are redeemed within eighteen
months of their purchase. See the Acquiring Funds Prospectuses for more
information about the CDSCs applicable to the Acquiring Funds and the
Combined Funds.
(3) In the case of the Acquiring Funds (and hence the Combined Funds) a $15.00
fee may be imposed on wire and overnight mail redemptions.
(4) Because these fees are paid out of a 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) With respect to the NAF Stock Index Fund and NAF Science & Technology Fund,
amounts reflect AGAM's contractual obligation to waive, and to the extent
necessary, reimburse certain fees and expenses of such Acquired Fund
through February 28, 2002. If shareholders do not approve the
Reorganizations, there is no assurance AGAM would continue to provide such
fee reductions and expense reimbursements past such date.
(6) With respect to the SunAmerica Stock Index Fund and SunAmerica Science &
Technology Fund (and hence the respective Combined Funds), the SunAmerica
Board, including a majority of the Directors who are not "interested
persons" (within the meaning of Section 2(a)(19) of the Investment Company
Act (the "SunAmerica Independent Directors"), approved the Acquiring Funds'
(and hence the Combined Funds') Investment Advisory and Management
Agreement with SAAMCo subject to the net expense ratios set forth above.
SunAmerica may not increase such ratios, which are contractually required
by agreement with the SunAmerica Board, without the approval of the
SunAmerica Board, including a majority of the SunAmerica Independent
Directors. The expense waivers and fee reimbursements will continue
indefinitely, subject to termination by the SunAmerica Board, including a
majority of the SunAmerica Independent Directors.
(7) Total Combined Annual Expenses for the NAF Growth LifeStyle Funds and the
SunAmerica Aggressive Growth, Moderate Growth and Conservative Growth
LifeStage Funds (collectively, the "SunAmerica Growth LifeStage Funds")
include the estimated indirect expenses borne by each Fund in connection
with its investments in the North American Funds or SunAmerica Mutual
Funds, as the case may be, in which each invests ("Underlying Funds"). The
estimates are based on expenses of the
-10-
Underlying Funds' Class I shares shown in the current prospectus for such
shares, and assume allocation by the Funds of their assets among the
Underlying Funds as set forth in the notes to the fee tables of the
applicable Acquired Funds Prospectus or the Acquiring Funds Prospectuses,
as the case may be.
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder bears directly or indirectly as compared
to the costs and expenses that would be borne by such investors on a pro forma
basis taking into account the consummation of the Reorganizations. All pro
forma amounts are based on what the estimated expenses of the Pro Forma Combined
Funds would be assuming the Reorganizations were completed on April 30, 2001.
-11-
These examples are intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
EXAMPLES:
Cumulative Expenses Paid for the Period of:
-------------------------------------------
1 Year 3 Years 5 Years 10 Years(2)
------- --------- --------- ----------
An investor would pay the following expenses on a $10,000 investment assuming (1)
the Total Annual Fund Operating Expenses set forth in the table above for the
relevant Fund, and (2) a 5% annual return throughout the period.
Expenses if you did redeem your shares at the end of the period:
---
NAF Stock Index Fund(1)
(Class A shares).......................................................... $647 $ 886 $1,143 $1,878
(Class B shares).......................................................... $643 $ 932 $1,146 $1,932
(Class C shares).......................................................... $243 $ 532 $ 946 $2,103
(Institutional Class I shares)............................................ $ 66 $ 299 $ 549 $1,268
SunAmerica Stock Index Fund(1)
(Class A shares).......................................................... $647 $ 801 $ 968 $1,452
(Class B shares).......................................................... $643 $ 743 $ 966 $1,502
(Class II shares)......................................................... $341 $ 539 $ 858 $1,763
(Class I shares).......................................................... $ 66 $ 208 $ 362 $ 810
Pro Forma Stock Index Combined Fund*/(1)/
(Class A shares).......................................................... $647 $ 801 $ 968 $1,452
(Class B shares).......................................................... $643 $ 743 $ 966 $1,502
(Class II shares)......................................................... $341 $ 539 $ 858 $1,763
(Class I shares).......................................................... $ 66 $ 208 $ 362 $ 810
NAF Science & Technology Fund
(Class A shares)(1)....................................................... $719 $1,022 $1,346 $2,263
(Class B shares)(1)....................................................... $718 $1,073 $1,354 $2,318
(Class C shares)(1)....................................................... $318 $ 673 $1,154 $2,483
(Institutional Class I shares)............................................ $143 $ 443 $ 766 $1,680
SunAmerica Science & Technology Fund(1)
(Class A shares).......................................................... $719 $1,022 $1,346 $2,263
(Class B shares).......................................................... $718 $ 973 $1,354 $2,318
(Class II shares)......................................................... $416 $ 766 $1,243 $2,558
(Class I shares).......................................................... $143 $ 443 $ 766 $1,680
-12-
Cumulative Expenses Paid for the Period of:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years(2)
--------- --------- --------- ----------------
An investor would pay the following expenses on a $10,000 investment assuming
(1) the Total Annual Fund Operating Expenses set forth in the table
above for the relevant Fund, and (2) a 5% annual return throughout the
period.
Expenses if you did redeem your shares at the end of the period:
---
Pro Forma Science & Technology Combined Fund*
(Class A shares)...................................................... $719 $1,022 $1,346 $2,263
(Class B shares)...................................................... $718 $ 973 $1,354 $2,318
(Class II shares)..................................................... $416 $ 766 $1,243 $2,558
(Class I shares)...................................................... $413 $ 443 $ 766 $1,680
NAF Aggressive Growth LifeStyle Fund
(Class A shares)...................................................... $733 $1,119 $1,529 $2,669
(Class B shares)...................................................... $733 $1,174 $1,541 $2,726
(Class C shares)...................................................... $333 $ 774 $1,341 $2,885
(Institutional Class I shares)........................................ $158 $ 546 $ 960 $2,115
SunAmerica Aggressive Growth LifeStage Fund
(Class A shares)...................................................... $727 $1,048 $1,391 $2,356
(Class B shares)...................................................... $727 $1,000 $1,400 $2,411
(Class II shares)..................................................... $425 $ 793 $1,288 $2,649
(Class I shares)...................................................... $152 $ 471 $ 813 $1,779
Pro Forma Aggressive Growth LifeStage Combined Fund*
(Class A shares)...................................................... $727 $1,048 $1,391 $2,356
(Class B shares)...................................................... $727 $1,000 $1,400 $2,411
(Class II shares)..................................................... $425 $ 793 $1,288 $2,649
(Class I shares)...................................................... $152 $ 471 $ 813 $1,779
NAF Moderate Growth LifeStyle Fund
(Class A shares)...................................................... $727 $1,088 $1,471 $2,544
(Class B shares)...................................................... $727 $1,141 $1,483 $2,600
(Class C shares)...................................................... $327 $ 741 $1,283 $2,761
(Institutional Class I shares)........................................ $152 $ 513 $ 899 $1,981
-13-
Cumulative Expenses Paid for the Period of:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years(2)
--------- --------- --------- ----------------
An investor would pay the following expenses on a $10,000 investment assuming
(1) the Total Annual Fund Operating Expenses set forth in the table
above for the relevant Fund, and (2) a 5% annual return throughout the
period.
Expenses if you did redeem your shares at the end of the period:
---
SunAmerica Moderate Growth LifeStage Fund
(Class A shares)..................................................... $720 $1,025 $1,351 $2,273
(Class B shares)..................................................... $719 $ 976 $1,359 $2,328
(Class II shares).................................................... $417 $ 769 $1,248 $2,568
(Class I shares)..................................................... $144 $ 446 $ 771 $1,691
Pro Forma Moderate Growth LifeStage Combined Fund*
(Class A shares)..................................................... $720 $1,025 $1,351 $2,273
(Class B shares)..................................................... $719 $ 976 $1,359 $2,328
(Class II shares).................................................... $417 $ 769 $1,248 $2,568
(Class I shares)..................................................... $144 $ 446 $ 771 $1,691
NAF Conservative Growth LifeStyle Fund
(Class A shares)..................................................... $722 $1,060 $1,422 $2,436
(Class B shares)..................................................... $721 $1,113 $1,432 $2,492
(Class C shares)...................................................... $321 $ 713 $1,232 $2,654
(Institutional Class I shares)........................................ $146 $ 484 $ 846 $1,866
Sun America Conservative Growth LifeStage Fund
(Class A shares)..................................................... $709 $ 993 $1,297 $2,158
(Class B shares)..................................................... $708 $ 943 $1,303 $2,213
(Class II shares).................................................... $406 $ 736 $1,192 $2,455
(Class I shares)..................................................... $132 $ 412 $ 713 $1,568
Pro Forma Conservative Growth LifeStage Combined Fund*
(Class A shares)..................................................... $709 $ 993 $1,297 $2,158
(Class B shares)..................................................... $708 $ 943 $1,303 $2,213
(Class II shares).................................................... $406 $ 736 $1,192 $2,455
(Class I shares)..................................................... $132 $ 412 $ 713 $1,568
-14
Cumulative Expenses Paid for the Period of:
--------------------------------------------
1 Year 3 Years 5 Years 10 Years(2)
--------- --------- --------- ----------
An investor would pay the following expenses on a $10,000 investment assuming (1)
the Total Annual Fund Operating Expenses set forth in the table above for the
relevant Fund, and (2) a 5% annual return throughout the period.
Expenses if you did not redeem your shares at the end of the period:
-------
NAF Stock Index Fund(1)
(Class A shares)......................................................... $647 $ 886 $1,143 $1,878
(Class B shares)......................................................... $143 $ 532 $ 946 $1,932
(Class C shares)......................................................... $143 $ 532 $ 946 $2,103
(Institutional Class I shares)........................................... $ 66 $ 299 $ 549 $1,268
SunAmerica Stock Index Fund(1)
(Class A shares)......................................................... $647 $ 801 $ 968 $1,452
(Class B shares)......................................................... $143 $ 443 $ 766 $1,502
(Class II shares)........................................................ $241 $ 539 $ 858 $1,763
(Class I shares)......................................................... $ 66 $ 208 $ 362 $ 810
Pro Forma Stock Index Combined Fund*/(1)/
(Class A shares)......................................................... $647 $ 801 $ 968 $1,452
(Class B shares)......................................................... $143 $ 443 $ 766 $1,502
(Class II shares)........................................................ $241 $ 539 $ 858 $1,763
(Class I shares)......................................................... $ 66 $ 208 $ 362 $ 810
NAF Science & Technology Fund
(Class A shares)(1)...................................................... $719 $1,022 $1,346 $2,263
(Class B shares)(1)...................................................... $218 $ 673 $1,154 $2,318
(Class C shares)(1)...................................................... $218 $ 673 $1,154 $2,483
(Institutional Class I shares)........................................... $143 $ 443 $ 766 $1,680
SunAmerica Science & Technology Fund(1)
(Class A shares)......................................................... $719 $1,022 $1,346 $2,263
(Class B shares)......................................................... $218 $ 673 $1,154 $2,318
(Class II shares)........................................................ $316 $ 766 $1,243 $2,558
(Class I shares)......................................................... $143 $ 443 $ 766 $1,680
-15-
Cumulative Expenses Paid for the Period of:
--------------------------------------------
1 Year 3 Years 5 Years 10 Years(2)
--------- --------- --------- ----------
An investor would pay the following expenses on a $10,000 investment assuming (1)
the Total Annual Fund Operating Expenses set forth in the table above for the
relevant Fund, and (2) a 5% annual return throughout the period.
Expenses if you did not redeem your shares at the end of the period:
-------
Pro Forma Science & Technology Combined Fund*/(1)/
(Class A shares)......................................................... $719 $1,022 $1,346 $2,263
(Class B shares)......................................................... $218 $ 673 $1,154 $2,318
(Class II shares)........................................................ $316 $ 766 $1,243 $2,558
(Class I shares)......................................................... $143 $ 443 $ 766 $1,680
NAF Aggressive Growth LifeStyle Fund
(Class A shares)......................................................... $733 $1,119 $1,529 $2,669
(Class B shares)......................................................... $233 $ 774 $1,341 $2,726
(Class C shares)......................................................... $233 $ 774 $1,341 $2,885
(Institutional Class I shares)........................................... $158 $ 546 $ 960 $2,115
SunAmerica Aggressive Growth LifeStage Fund
(Class A shares)......................................................... $727 $1,048 $1,391 $2,356
(Class B shares)......................................................... $227 $ 700 $1,200 $2,411
(Class II shares)........................................................ $325 $ 793 $1,288 $2,649
(Class I shares)......................................................... $152 $ 471 $ 813 $1,779
Pro Forma Aggressive Growth LifeStage Combined Fund*
(Class A shares)......................................................... $727 $1,048 $1,391 $2,356
(Class B shares)......................................................... $227 $ 700 $1,200 $2,411
(Class II shares)........................................................ $325 $ 793 $1,288 $2,649
(Class I shares)......................................................... $152 $ 471 $ 813 $1,779
NAF Moderate Growth LifeStyle Fund
(Class A shares)......................................................... $727 $1,088 $1,471 $2,544
(Class B shares)......................................................... $227 $ 741 $1,283 $2,600
(Class C shares)......................................................... $227 $ 741 $1,283 $2,761
(Institutional Class I shares)........................................... $152 $ 513 $ 899 $1,981
-16-
Cumulative Expenses Paid for the Period of:
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years(2)
--------- ----------- ----------- ---------------
An investor would pay the following expenses on a $10,000 investment
assuming (1) the Total Annual Fund Operating Expenses set
forth in the table above for the relevant Fund, and (2) a 5%
annual return throughout the period.
Expenses if you did not redeem your shares at the end of the period:
-------
SunAmerica Moderate Growth LifeStage Fund
(Class A shares)................................................... $720 $1,025 $1,351 $2,273
(Class B shares)................................................... $219 $ 676 $1,159 $2,328
(Class II shares).................................................. $317 $ 769 $1,248 $2,568
(Class I shares)................................................... $144 $ 446 $ 771 $1,691
Pro Forma Moderate Growth LifeStage Combined Fund*
(Class A shares)................................................... $720 $1,025 $1,351 $2,273
(Class B shares)................................................... $219 $ 676 $1,159 $2,328
(Class II shares).................................................. $317 $ 769 $1,248 $2,568
(Class I shares)................................................... $144 $ 446 $ 771 $1,691
NAF Conservative Growth LifeStyle Fund
(Class A shares)................................................... $722 $1,060 $1,422 $2,436
(Class B shares)................................................... $221 $ 713 $1,232 $2,492
(Class C shares)................................................... $221 $ 713 $1,232 $2,654
(Institutional Class I shares)..................................... $146 $ 484 $ 846 $1,866
Sun America Conservative Growth LifeStage Fund
(Class A shares)................................................... $709 $ 993 $1,297 $2,158
(Class B shares)................................................... $208 $ 643 $1,103 $2,213
(Class II shares).................................................. $306 $ 736 $1,192 $2,455
(Class I shares)................................................... $132 $ 412 $ 713 $1,568
Pro Forma Conservative Growth LifeStage Combined Fund*
(Class A shares)................................................... $709 $ 993 $1,297 $2,158
(Class B shares)................................................... $208 $ 643 $1,103 $2,213
(Class II shares).................................................. $306 $ 736 $1,192 $2,455
(Class I shares)................................................... $132 $ 412 $ 713 $1,568
______________________
* Assuming the Reorganization had taken place on April 30, 2001.
-17-
(1) Expenses used for the example include fee waivers and expense
reimbursements described in footnotes (5) and/or (6) above under "--Fee
Tables."
(2) Class B shares generally convert to Class A shares approximately eight
years after purchase. Therefore, expense information for years 9 and 10 is
the same for both Class A and Class B shares.
The Examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by Commission
regulations. The Examples should not be considered a representation of past or
future expenses or annual rates of return, and actual expenses or annual rates
of return may be more or less than those assumed for purposes of the Examples.
See "Proposals Nos. 2(a) - (e): Approval of the Plans -- The Reorganizations --
Potential Benefits to Shareholders as a Result of the Reorganizations,"
"Proposals Nos. 2(a) - (e): Approval of the Plans -- Comparison of the Funds --
Management Arrangements," and "-- Purchase, Exchange and Redemption of Shares."
-18-
The Funds
Business of the Acquired Funds
Each Acquired Fund is organized as a separate investment portfolio or
series of North American Funds, a Massachusetts business trust, which was
established on September 28, 1988 pursuant to its Declaration of Trust.
Business of the Acquiring Funds
Each Acquiring Fund is a separate investment portfolio or series of
SunAmerica Strategic Investment Series, Inc., a Maryland corporation, which was
incorporated on December 16, 1998. Each of the Acquiring Funds is newly created
and has not yet commenced operations. Each of the Stock Index Funds and the
Science & Technology Funds is diversified within the meaning of the Investment
Company Act.
Comparison of the Funds
A discussion of the investment objectives and principal investment policies
of the Funds is set forth below. Those objectives and policies that are
identified as fundamental may not be changed without shareholder approval.
The discussion below uses the term "growth" approach. A growth approach
refers to a strategy of investing in securities believed to offer the potential
for capital appreciation.
Stock Index Funds
Investment Objectives
- ---------------------
Both Stock Index Funds seek to provide shareholders with investment results
that are similar to the total return of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500 Index" or the "Index"). The investment
objectives of both Funds are non-fundamental.
Investment Policies
- -------------------
Both Stock Index Funds invest in equity securities of companies included in
the S&P 500 Index. In doing so, both use a statistical sampling technique known
as "optimization" to invest in a sampling of stocks included in the Index. This
process selects stocks for each Fund so that various industry weightings, market
capitalizations and fundamental characteristics (e.g., price-to-book, price-to-
earnings, debt-to-asset ratios and dividend yields) closely approximate those of
the Index as a whole. Each Fund is compared to the Index monthly to identify
"tracking errors." If a Fund does not accurately track the Index, the Fund's
portfolio is rebalanced by selecting securities, using this statistical sampling
technique, that will provide a more representative sampling of the securities in
the Index as a whole or sector diversification within the Index, as appropriate.
Each may invest in fixed income securities (up to 15% of total assets in the
case of the SunAmerica Stock Index Fund), although each does so primarily with
respect to short-term investments to meet liquidity needs. Both Funds are
diversified.
Science & Technology Funds
Investment Objectives
- ---------------------
The NAF Science & Technology Fund seeks to provide its shareholders with
long-term capital appreciation. The SunAmerica Science & Technology Fund seeks
to provide its shareholders with long-term growth of capital. The two investment
objectives are substantially similar. The investment objectives of both Funds
are non-fundamental.
-19-
Investment Policies
- -------------------
Both Funds, under normal market conditions, invest primarily in the common
stocks of companies expected to benefit from the development, advancement and
use of science and technology. Stock selection for each reflects a growth
approach, and each is permitted to invest in companies regardless of market
capitalization. Each Fund is permitted to engage in active trading. Each Fund
may also invest up to 30% of its assets in foreign securities. Each may invest
in fixed-income securities, primarily to meet liquidity needs or with respect to
fixed income securities having similar growth of capital potential to the equity
securities in which it invests. Both Funds are diversified.
Growth LifeStage Funds
Investment Objectives
- ---------------------
The NAF Aggressive Growth LifeStyle Fund seeks to provide its shareholders
with growth. The SunAmerica Aggressive Growth LifeStage Fund seeks to provide
its shareholders with growth of capital. The two investment objectives are
substantially similar. The investment objectives of both Funds are non-
fundamental.
The NAF Moderate Growth LifeStyle Fund seeks to provide its shareholders
with growth and current income. The SunAmerica Moderate Growth LifeStage Fund
seeks to provide its shareholders with growth of capital and current income. The
two investment objectives are substantially similar. The investment objectives
of both Funds are non-fundamental.
The NAF Conservative Growth LifeStyle Fund seeks to provide its
shareholders with current income and low to moderate growth of capital. The
SunAmerica Conservative Growth LifeStage Fund seeks to provide its shareholders
with current income and growth of capital, with reduced volatility. The two
investment objectives are substantially similar. The investment objectives of
both Funds are non-fundamental.
Investment Policies
- -------------------
Each Growth LifeStage Fund follows a fund of funds investment strategy
based on the allocation of Fund assets among a combination of mutual funds
("Underlying Funds"). Each NAF Growth LifeStyle Fund invests in a combination of
North American Funds, while the SunAmerica Growth LifeStage Funds invest in a
combination of SunAmerica Mutual Funds. The specific Underlying Funds differ
between a NAF Growth LifeStyle Fund and the corresponding SunAmerica Growth
LifeStage Fund, but the allocation among Underlying Funds investing in domestic
equities, international equities and bonds is expected to be the same for each
pair of Funds (and will also be the same with respect to the respective Combined
Fund), as follows:
- ---------------------------------------------------------------------------------------------------------------------
Aggressive Growth Moderate Growth LifeStage Conservative Growth
LifeStage Funds Funds LifeStage Funds
- ---------------------------------------------------------------------------------------------------------------------
Domestic Equity Securities 60 - 80% 35 - 65% 20 - 50%
- ---------------------------------------------------------------------------------------------------------------------
Foreign Equity Securities 15 - 35% 10 - 20% 5 - 15%
- ---------------------------------------------------------------------------------------------------------------------
Bonds 5 - 15% 25 - 45% 45 - 65%
- ---------------------------------------------------------------------------------------------------------------------
Each Growth LifeStage Fund is non-diversified.
All Funds
Principal Risk Factors
- ----------------------
For a discussion of the principal risks of investing in each Fund, see
"Principal Risk Factors and Special Considerations."
-20-
Trustees/Directors and Officers
- --------------------------------
Each of North American Funds and SunAmerica Strategic Investment Series,
Inc. is governed by a Board of Trustees/Directors that meets regularly to review
its respective Funds' investments, performance, expenses, and other business
affairs. Each Board of Trustees/Directors elects its respective Funds'
officers.
Management Arrangements
- -----------------------
Comparison of Management and Administrative Arrangements and Fees. AGAM
serves as the investment adviser for the Acquired Funds and SAAMCo serves as the
investment adviser for the Acquiring Funds. Each of AGAM and SAAMCo is
responsible for the management of the investment portfolio (or, as the case may
be, selection of the Subadviser responsible for the direct management of such
investment portfolio) of each Acquired Fund and Acquiring Fund, respectively,
and for providing certain administrative services to such Fund. See "Proposals
Nos. 2(a) - (e): Approval of the Plans -- Comparison of the Funds -- Management
Arrangements -- Comparison of Management and Administrative Arrangements and
Fees" for more detailed information regarding the advisory arrangements of the
Funds.
The table below sets forth the fees, as a percentage of average daily net
assets, payable by each Acquired Fund to AGAM for its management and
administrative services:
-------------------------------------------------------------------------------------------------------------------
Acquired Fund: Advisory Fee:
--------------------------------------------------------
First $500 Million Excess over $500 Million
-------------------------------------------------------------------------------------------------------------------
NAF Stock Index Fund 0.27% 0.26%
-------------------------------------------------------------------------------------------------------------------
NAF Science & Technology Fund 0.90% 0.90%
-------------------------------------------------------------------------------------------------------------------
NAF Aggressive Growth LifeStyle Fund 0.10% 0.10%
-------------------------------------------------------------------------------------------------------------------
NAF Moderate Growth LifeStyle Fund 0.10% 0.10%
-------------------------------------------------------------------------------------------------------------------
NAF Conservative Growth LifeStyle Fund 0.10% 0.10%
-------------------------------------------------------------------------------------------------------------------
As compensation for its management and administrative services to each of
the Acquiring Funds and each of the Combined Funds, SAAMCo will receive a fee at
the same annual rates set forth for the respective Acquired Funds.
Investment Advisory Agreements. The investment advisory agreement between
SunAmerica Strategic Investment Series, Inc. on behalf of the Acquiring Funds
and SAAMCo (the "SunAmerica Investment Advisory Agreement") is similar to both
the New and Previous Investment Advisory Agreements applicable to the Acquired
Funds (collectively, the "NAF Investment Advisory Agreement"), except for
certain matters including the effective dates and the identity of the adviser.
See "Proposals Nos. 2(a) - (e): Approval of the Plans -- Comparison of the
Funds--Management Arrangements - Comparison of Management and Administrative
Arrangements and Fees --Comparison of the NAF Investment Advisory Agreement and
SunAmerica Investment Advisory Agreement" for further discussion regarding these
agreements.
Subadvisory Arrangements. Under a "Manager of Managers" order granted to
the North American Funds by the Commission, AGAM is permitted to change
unaffiliated subadvisers or the fees paid to Subadvisers without obtaining
shareholder approval. AGAM has ultimate responsibility under the "Manager of
Managers" structure to oversee the Subadvisers, including making recommendations
to the NAF Board regarding the hiring, termination and replacement of such
Subadvisers. However, the "Manager of Managers" order does not apply if the
Subadviser is an affiliate of AGAM. Since AGAM is affiliated with the Subadviser
of each Acquired Fund other than the NAF
-21-
Science & Technology Fund, AGAM may not change the Subadviser of any Acquired
Fund other than the NAF Science & Technology Fund without obtaining the approval
of the shareholders of that Fund. All subadvisory fees are paid out of AGAM's
advisory fee at no additional cost to the Acquired Funds or their shareholders.
SAAMCo is also authorized to appoint and change unaffiliated Subadvisers for
SunAmerica Strategic Investment Series, Inc. under a separate "Manager of
Managers" order granted by the Commission. As of the date hereof, SAAMCo has
appointed New AGIM as Subadviser to the SunAmerica Stock Index Fund and T. Rowe
Price as Subadviser to the SunAmerica Science & Technology Fund, each pursuant
to a subadvisory agreement with SAAMCo (each a "SunAmerica Subadvisory
Agreement" and collectively the "SunAmerica Subadvisory Agreements") that is
similar to both the New and Previous Subadvisory Agreements applicable to the
respective Acquired Funds, except for certain matters including the effective
dates and the identity of the investment adviser. The appointment of New AGIM is
not pursuant to SAAMCo's "Manager of Managers" order and is subject to
shareholder approval. See "Proposal No. 1(b): Approval of the New Subadvisory
Agreement." SAAMCo will directly manage the investment portfolio of each
SunAmerica Growth LifeStage Fund. If shareholders approve the Reorganizations,
the portfolios of the Acquired Funds will be managed by SAAMCo, or the
respective Subadviser, as part of the Combined Funds following completion of the
Reorganizations. See "Proposals Nos. 2(a) -- (e): Approval of the Plans--
Comparison of the Funds --Management Arrangements -- Comparison of Management
and Administrative Arrangements and Fees -- Comparison of the NAF Subadvisory
Agreement and SunAmerica Subadvisory Agreement" for additional information
regarding the Acquired Funds' subadvisory arrangements.
Distribution and Shareholder Servicing Arrangements
- ---------------------------------------------------
Distributor. American General Funds Distributors, Inc. ("AGFD" or the "NAF
Distributor"), an affiliate of AGAM, acts as the distributor of the shares of
the Acquired Funds. SunAmerica Capital Services, Inc. ("SACS" or the "SunAmerica
Distributor"), an affiliate of SAAMCo, acts as the distributor of the shares of
the Acquiring Funds. See "Proposals Nos. 2(a) - (e): Approval of the Plans --
Comparison of the Funds -- Distribution Arrangements" for additional information
regarding the Funds' distribution arrangements.
Shareholder Servicing Fees for Class I. AGAM provides certain recordkeeping
and shareholder services to retirement and employee benefit plans and the NAF
Growth LifeStyle Funds, each of which invest in Institutional Class I shares of
certain of the Acquired Funds. SACS will provide these services after the
Reorganization with respect to Class I shares of the Combined Funds. See
"Proposals Nos. 2(a)--(e): Approval of the Plans -- Comparison of the Funds--
Distribution and Shareholder Servicing Arrangements - Shareholder Servicing Fees
for Class I" for additional information regarding these services.
Other Service Agreements with Affiliates
- ----------------------------------------
SunAmerica Fund Services, Inc. ("SAFS"), an affiliate of SAAMCo, acts as a
servicing agent assisting State Street Bank and Trust Company ("State Street"),
the transfer agent and custodian of the Acquiring Funds, in connection with
certain services offered to the shareholders of the Acquiring Funds. See
"Proposals Nos. 2(a) - (e): Approval of the Plans -- Comparison of the Funds --
Other Service Agreements with Affiliates" for additional information regarding
these service agreements.
Other
- -----
Shares. As with all mutual funds, investors purchase shares when they
invest in the Funds. Share certificates are not generally issued.
Each full share and fractional share entitles the shareholder to receive a
proportional interest in the respective Fund's capital gain distributions and
cast one vote per share on certain Fund matters, including the election of
trustees, changes in fundamental policies, or approval of changes in investment
advisory agreements.
Class Structure. Each of the Acquired Funds offers four classes of shares
(Class A, Class B, Class C and Institutional Class I). After consummation of the
Reorganizations, each of the Acquiring Funds, and each of the Combined Funds,
will offer four classes of shares (Class A, Class B, Class II and Class I).
-22-
Purchase of Shares. The procedures for purchasing shares are similar, but
not identical, for all Funds. See "Proposals Nos. 2(a) - (e): Approval of the
Plans -- Comparison of the Funds -- Purchase, Exchange and Redemption of Shares"
below, "Investing in the North American Funds" in the Acquired Funds
Prospectuses and "Shareholder Account Information" in the Acquiring Funds
Prospectuses.
Redemption of Shares. The procedures for redeeming shares are similar, but
not identical, for all Funds. See "Comparison of the Funds -- Purchase, Exchange
and Redemption of Shares" below. "Investing in the North American Funds" in the
Acquired Funds Prospectuses and "Shareholder Account Information" in the
Acquiring Funds Prospectuses.
Exchanges of Shares. The procedures for exchanging shares are similar, but
not identical, for all Funds. See "Comparison of the Funds -- Purchase, Exchange
and Redemption of Shares" below, "Account Services" and "Section III: Investing
in the North American Funds Institutional Classes of Shares" in the Acquired
Funds Prospectuses and "Transaction Policies" in the Acquiring Funds
Prospectuses.
Dividends. The Funds currently have the same or similar policies with
respect to dividends. See "Proposals Nos. 2(a) - (e): Approval of the Plans --
Comparison of the Funds -- Dividend Distribution and Account Policies --
Dividends" below, "Pricing of Shares" and "Dividends and Distributions from
North American Funds" in the Acquired Funds Prospectuses and "Tax, Dividend,
Distribution and Account Policies" in the Acquiring Funds Prospectuses.
Net Asset Value. The price at which each Fund's shares are purchased or
redeemed is the Fund's next determined net asset value per share after receipt
of the purchase or redemption order. The net asset value per share is calculated
once daily as of the close of regular trading on the New York Stock Exchange
("NYSE") (currently 4:00 p.m., Eastern time). For further discussion on net
asset value and how it is determined, see "Proposals Nos. 2(a) - (e): Approval
of the Plans -- Comparison of the Funds -- Purchase, Exchange and Redemption of
Shares -- Dividend Distribution and Account Policies--Valuation of Fund Shares"
below, "Pricing of Fund Shares" in the Acquired Funds Prospectuses and
"Transaction Policies" in the Acquiring Funds Prospectuses.
Tax Considerations. The tax consequences associated with an investment in
shares of an Acquired Fund are substantially the same as the tax consequences
associated with an investment in shares of the respective Acquiring Fund. See
"Taxes" in the Acquired Funds Prospectuses and "Tax, Dividend, Distribution and
Account Policies" in the Acquiring Funds Prospectuses.
For a more detailed discussion regarding potential tax consequences of the
Reorganizations, see "Proposals Nos. 2(a) - (e): Approval of the Plans -- The
Reorganizations -- Federal Income Tax Consequences of the Reorganizations."
-23-
PRINCIPAL RISK FACTORS AND SPECIAL CONSIDERATIONS
-------------------------------------------------
RISKS OF INVESTING IN THE FUNDS
Many of the investment risks associated with an investment in an Acquired
Fund are substantially the same as those associated with an investment in the
respective Acquiring Fund. A discussion of certain risks of investing in the
Funds is set forth below. See the Acquired Funds Prospectuses, the Acquiring
Funds Prospectuses, the Acquired Funds Statement and the Acquiring Funds
Statements for more detailed discussions of investment risks associated with an
investment in the Funds. There is no guarantee that the investment objective of
a Fund will be achieved or that the value of a shareholder's investment in the
Fund will not decrease.
All Funds
Stock Market Volatility/Equity Risk
- -----------------------------------
All Funds (or, in the case of the Growth LifeStage Funds, certain of the
Underlying Funds in which they invest) invest significantly in equity
securities. As with any equity fund, the value of your investment in a Fund may
fluctuate in response to stock market movements. In addition, individual stocks
selected for any of the Funds may underperform the market generally. With
respect to the Growth LifeStage Funds, this type of risk is expected to be more
significant as a Fund's allocation to Underlying Funds investing in equities
increases.
Securities Selection
- --------------------
All Funds (or, in the case of the Growth LifeStage Funds, the Underlying
Funds in which they invest) are subject to securities selection risk. Securities
selection risk is when a strategy used by a Fund, or securities selected by its
portfolio manager, may fail to produce the intended return.
Stock Index Funds
Index Tracking Variations
- -------------------------
Index funds generally try to mirror a target index and its performance. An
index fund's performance will not exactly match that of an index because the
index fund incurs operating expenses and investment overhead as part of its
normal operations. An index is an unmanaged group of securities, so it does not
have these expenses. The factors that cause an index fund to perform differently
from the index it tries to track are called tracking differences. There is no
assurance that an index fund can track its index.
In addition, an index fund may not buy every single stock in its index or
in the same proportions as the index. The subadviser to each Stock Index Fund
may rely on a statistical selection technique to figure out, of the stocks
tracked by the Fund's index, how many and which ones to buy. Statistical
sampling offers an efficient strategy to mirror an index, but may also increase
tracking differences if the sampled stocks do not accurately reflect the
industry weightings, market capitalizations or other fundamental characteristics
of those in the index as a whole.
Derivatives Risk
- ----------------
The Stock Index Funds are subject to the risks associated with investments
in derivatives. Derivatives have heightened sensitivity to market volatility,
interest rate fluctuations, illiquidity and creditworthiness of the counterparty
to the derivatives transaction. In particular, financial futures used by the
Funds track their underlying index fairly closely, but there is the risk that,
at times, their results will diverge from the index.
-24-
Science & Technology Funds
Technology Company Risk
- -----------------------
Each Science & Technology Fund is subject to the risk that the prices of
securities of science and technology companies may be particularly volatile.
Technology companies may react similarly to certain market pressures and events.
They may also be significantly affected by short product cycles, aggressive
pricing of products and services, competition from new market entrants and
obsolescence of existing technology.
Small Cap Risk
- --------------
Each Science & Technology Fund is subject to the risk associated with
investing in small capitalization issuers. Companies with smaller market
capitalizations (particularly under $1 billion) tend to be at early stages of
development with limited product lines, market access for products, financial
resources, access to new capital, or depth in management. It may be difficult to
obtain reliable information and financial data about such companies.
Consequently, securities of smaller companies may not be as readily marketable
and may be subject to more abrupt or erratic market movements.
Foreign Exposure
- ----------------
Each Science & Technology Fund is subject to the risks associated with the
Fund's foreign investments. One such risk is that fluctuations in the exchange
rates between the U.S. dollar and foreign currencies may negatively affect an
investment. In addition, there may be less publicly available information about
a foreign company and it may not be subject to the same uniform accounting,
auditing and financial reporting standards as U.S. companies. Foreign
governments may not regulate securities markets and companies to the same degree
as the U.S. government. Foreign investments will also be affected by local,
political or economic developments and governmental actions. Consequently,
foreign securities may be less liquid, more volatile and more difficult to price
than U.S. securities. These risks are heightened when the issuer is in an
emerging market.
Liquidity Risk
- --------------
An investment in each of the Science & Technology Funds is subject to the
risk that the Fund may be unable to sell a security because there are too few
people who actively trade that security on a regular basis.
Hedging Risk
- ------------
Hedging is a strategy that involves the use of a derivative security in an
effort to reduce certain risk characteristics of an underlying security or
portfolio of securities. While hedging strategies can be very useful and
inexpensive ways of reducing risk, they are sometimes ineffective due to
unexpected changes in the market or exchange rates. Moreover, while hedging can
reduce or eliminate losses, it can also reduce or eliminate gains.
Growth LifeStage Funds
Non-Diversification Risk
- ------------------------
Each Growth LifeStage Fund is non-diversified, which means it can invest a
larger portion of its assets in the stock of a single company (i.e., one of the
Underlying Funds) than can some other mutual funds. By concentrating in a
smaller number of holdings, a Fund's risk is increased because the effect of
each holding on the Fund's performance is greater.
Foreign Exposure
- ----------------
Each Growth LifeStage Fund is subject to the risks associated with the
Underlying Funds' foreign investments. One such risk is that fluctuations in
the exchange rates between the U.S. dollar and foreign currencies may negatively
affect an investment. In addition, there may be less publicly available
information about a foreign company and it may not be subject to the same
uniform accounting, auditing and financial reporting standards as U.S.
companies. Foreign governments may not regulate securities markets and
companies to the same degree as the U.S. government. Foreign investments will
also be affected by local, political or economic developments and
-25-
governmental actions. Consequently, foreign securities may be less liquid, more
volatile and more difficult to price than U.S. securities. These risks are
heightened when the issuer is in an emerging market.
Interest Rate Risk
- ------------------
Each Growth LifeStage Fund is subject to interest rate risk due to the
Underlying Funds' investments. As with any bond fund, the value of your
investment in each Growth LifeStage Fund may go up or down in response to
changes in interest rates. As interest rates rise, bond prices typically fall.
Movements in the bond market generally may affect each Fund's performance. This
type of risk is expected to be more significant as a Fund's allocation to
Underlying Funds investing in bonds and other fixed-income securities increases
("Underlying Income Funds").
Credit Risk
- -----------
Each Growth LifeStage Fund is subject to credit risk, which is the risk
that the companies in which the Underlying Funds invest will fail financially or
otherwise fail to honor their obligations. This type of risk is expected to be
more significant as a Fund's allocation to Underlying Income Funds increases.
Prepayment Risk
- ---------------
The Conservative Growth LifeStage Funds and Moderate Growth LifeStage Funds
invest in Underlying Income Funds that invest significantly in mortgage-backed
securities. This entails the risk that the underlying principal may be "prepaid"
at any time. As a result of prepayments, in periods of declining interest rates
the Underlying Income Funds may be required to reinvest their assets in
securities with lower interest rates. In periods of increasing interest rates,
prepayments generally may decline, with the effect that the securities subject
to prepayment risk held by the Underlying Income Funds may exhibit price
characteristics of longer-term debt securities.
Derivatives Risk
- ----------------
The Growth LifeStage Funds are subject to the risks associated with the
Underlying Funds' derivative investments. Derivatives have heightened
sensitivity to market volatility, interest rate fluctuations, illiquidity and
creditworthiness of the counterparty to the derivatives transaction.
Small Cap Risk
- --------------
The Aggressive Growth LifeStage Funds also invest in stocks of small
capitalization issuers. Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. It may be difficult to obtain reliable
information and financial data about such companies. Consequently, securities of
smaller companies may not be as readily marketable and may be subject to more
abrupt or erratic market movements.
Technology Company Risk
- -----------------------
The Aggressive Growth LifeStage Funds may at times invest in Underlying
Funds that significantly invest in technology companies. Technology companies
may react similarly to certain market pressures and events. They may be
significantly affected by short product cycles, aggressive pricing of products
and services, competition from new market entrants, and obsolescence of existing
technology. As a result, these Underlying Funds' returns may be considerably
more volatile than a fund that does not invest in technology companies.
Hedging Risk
- ------------
Hedging is a strategy used by certain of the Underlying Funds that involves
the use of a derivative security in an effort to reduce certain risk
characteristics of an underlying security or portfolio of securities. While
hedging strategies can be very useful and inexpensive ways of reducing risk,
they are sometimes ineffective due to unexpected changes in the market or
exchange rates. Moreover, while hedging can reduce or eliminate losses, it can
also reduce or eliminate gains.
-26-
PROPOSAL NOS. 1(a) AND (b): APPROVAL OF THE NEW INVESTMENT
-----------------------------------------------------------
ADVISORY AGREEMENT AND NEW SUBADVISORY AGREEMENT
------------------------------------------------
THE MERGER AND THE NEW INVESTMENT ADVISORY AGREEMENT AND
NEW SUBADVISORY AGREEMENT
Board Considerations
On _________, 2001, the Merger, pursuant to which AIG acquired American
General, was consummated. As a result of the Merger, AGAM became a subsidiary
of AIG.
As required by the Investment Company Act, the Previous Investment Advisory
Agreement provided for automatic termination upon its assignment. The
consummation of the Merger constituted an assignment, as that term is defined in
the Investment Company Act, of the Previous Investment Advisory Agreement, and,
consequently, its termination.
At a meeting held on July 16-17, 2001, the NAF Board, including all of the
NAF Independent Trustees, unanimously approved the Interim Investment Advisory
Agreement and Interim Subadvisory Agreement (previously defined collectively as
the "Interim Agreements") pursuant to Rule 15a-4 under the Investment Company
Act in order to allow AGAM and New AGIM to continue to serve as investment
adviser and Subadviser, respectively, for the Acquired Funds (other than the NAF
dollars, Science & Technology Fund, in the case of New AGIM) after the Merger.
This Rule allows, under certain circumstances, interim advisory agreements to
take effect, and to remain in effect for up to 150 days, without receiving prior
shareholder approval, as long as the fees payable under such agreement do not
exceed the fees payable under the predecessor agreement that had been approved
by the shareholders and certain other contractual provisions are included in the
interim agreement. The Interim Agreements require all advisory fees earned by
AGAM and New AGIM to be escrowed pending shareholder approval of the New
Agreements. If the New Agreements are not approved, AGAM and New AGIM will be
entitled to receive from escrow the lesser of any costs incurred in performing
the Interim Agreements (plus interest earned on the amount while in escrow), and
the total amount in the escrow account (plus interest earned). The Interim
Agreements will terminate on the earlier of the effective date of the New
Agreements or 150 days after the completion of the Merger.
Pursuant to the terms of the Interim Investment Advisory Agreement, AGAM is
responsible for the management of the investment portfolio of each Acquired Fund
(and, in connection therewith, selection of the Subadviser responsible for the
direct management of such investment portfolio) and for providing certain
administrative services to each Acquired Fund. The NAF Board, including all of
the NAF Independent Trustees, also unanimously approved the Interim Subadvisory
Agreement between AGAM and New AGIM, an affiliate of AGAM, in order to allow New
AGIM to continue to serve as the subadviser after the Merger for each of the
Acquired Funds (other than the NAF Science & Technology Fund, which is not
subadvised by AGIM). Pursuant to the terms of the Interim Subadvisory Agreement,
New AGIM is responsible for managing the investment and reinvestment of the
assets of each Acquired Fund (other than the NAF Science & Technology Fund),
subject to the supervision of the NAF Board. The terms of the Interim Investment
Advisory Agreement and Interim Subadvisory Agreement are similar in all material
respects as those of the respective Previous Agreement. Under the Investment
Company Act, however, AGAM and New AGIM may continue to serve as the investment
adviser and subadviser, respectively, for each Acquired Fund (other than, in the
case of New AGIM, the NAF Science & Technology Fund) beyond an interim period of
150 days only if shareholders of such Acquired Fund approve a new investment
advisory agreement with AGAM and subadvisory agreement with New AGIM.
Consequently, the NAF Board unanimously approved, and recommended shareholder
approval of, the New Agreements on July 16-17, 2001. The New Agreements, if
approved by shareholders, would take effect immediately upon such approval. The
terms of each New Agreement, including advisory fees, are the same in all
material respects as those of the respective Previous Agreement.
In addition, the NAF Board also approved the continuation of the
subadvisory agreement with T. Rowe Price for the NAF Science & Technology Fund,
which terminated upon termination of the Previous Investment Advisory Agreement.
Such approval was made in accordance with a "Manager of Managers" order granted
by the Commission to North American Funds and therefore the subadvisory
agreement for the NAF Science & Technology Fund does not require shareholder
approval.
-27-
In connection with its approval of the New Agreements, the NAF Board
received a presentation relating to AIG and SAAMCo, as well as a presentation
from AGAM and AGIM. The NAF Board considered that the Merger did not involve any
changes in the overall form of the advisory or subadvisory contract, the
advisory fees, or any of the Acquired Funds' objectives or policies. As part of
their deliberations, the NAF Board took into account the following, among other
factors: the nature and quality of the services provided or reasonably
anticipated to be provided and the results achieved or reasonably anticipated to
be achieved by AGAM and/or New AGIM; the amount and structure of investment
advisers' fees generally and the fees payable under the New Agreements; the
financial strength of AIG; the management, personnel and operations of AIG and
SAAMCo; the commitment of AIG to the financial services industry; and the
structure of the Merger.
In addition, the NAF Board considered the fact that at some point after
consummation of the Merger, the operations of AGIM might be consolidated with
those of another affiliate within the AIG group of companies to eliminate
duplication and attempt to create economies of scale within the organization.
The NAF Board was assured that any such internal reorganization would not result
in a change in the personnel responsible for providing services to the
applicable Acquired Funds or in the nature or quality of those services.
Accordingly, the NAF Board approved each of the Interim Subadvisory Agreement
and the New Subadvisory Agreement with New AGIM.
Section 15(f) of the Investment Company Act provides that an investment
adviser (such as AGAM or New AGIM) to a registered investment company, and the
affiliates of such adviser, may receive any amount or benefit in connection with
a sale of any interest in such investment adviser which results in an assignment
of an investment advisory contract if the following two conditions are
satisfied: (1) for a period of three years after such assignment, at least 75%
of the board of directors of the investment company are not "interested persons"
(within the meaning of Section 2(a)(19) of the Investment Company Act) of the
new investment adviser or its predecessor; and (2) no "unfair burden" (as
defined in the Investment Company Act) may be imposed on the investment company
as a result of the assignment or any express or implied terms, conditions or
understandings applicable thereto. Consistent with the first condition of
Section 15(f), AIG advised the NAF Board that for a period of three years after
the Merger, it will not take or recommend any action that would cause more than
25% of the NAF Board (or SunAmerica Board) to be interested persons of SAAMCo,
AGAM or New AGIM. With respect to the second condition of Section 15(f), an
"unfair burden" on an investment company is defined in the Investment Company
Act to include any arrangement during the two-year period after any such
transaction occurs whereby the investment adviser or its predecessor or
successor, or any interested person of such adviser, predecessor or successor,
receives or is entitled to receive any compensation of two types, either
directly or indirectly. The first type is compensation from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company, other than bona fide ordinary compensation
as principal underwriter for such company. The second type is compensation from
the investment company or its security holders for other than bona fide
investment advisory or other services. AIG advised the NAF Board that it will
not take or recommend any action that would constitute an unfair burden on North
American Funds (or the Acquiring Funds) within the meaning of Section 15(f).
-28-
PROPOSAL NO. 1(a): APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT
THE NEW INVESTMENT ADVISORY AGREEMENT
Description of the New Investment Advisory Agreement
As a proposal separate from the proposals to approve a New Subadvisory
Agreement (if applicable) and a Reorganization, shareholders of each Acquired
Fund are being asked to approve the New Investment Advisory Agreement with AGAM
to cover the period subsequent to the shareholder approval and prior to
consummation of the Reorganization (which is currently anticipated to occur
during the fourth calendar quarter of 2001). The terms of the New Investment
Advisory Agreement are the same in all material respects as those of the
Previous Investment Advisory Agreement. The New Investment Advisory Agreement
differs from the Previous Investment Advisory Agreement only with respect to the
effective date. The Previous Investment Advisory Agreement is dated June 1, 2000
and was last approved by the shareholders of the Acquired Funds at a meeting
held on the same date in connection with its initial approval. A description of
the New Investment Advisory Agreement and the services to be provided by AGAM is
set forth below. This description is qualified in its entirety by reference to
the form of the New Investment Advisory Agreement attached to this Proxy
Statement and Prospectus as Exhibit IA.
As compensation for its services under the New Investment Advisory
Agreement, the Acquired Funds will pay to AGAM the same fee, as a percentage of
average daily net assets, that was payable to AGAM under the Previous Investment
Advisory Agreement. Such fee will be payable monthly and accrued daily. See
"Summary -- The Funds -- All Funds -- Management Arrangements" for a description
of the fee payable to AGAM under the Previous Investment Advisory Agreement.
AGAM has agreed, until February 28, 2002, to reduce fees payable to it by, or
reimburse expenses to, the Acquired Funds. See "Summary -- Fee Tables" or
"Proposals Nos. 2(a) - (e): Approval of the Plans -- The Reorganizations -- NAF
Board Considerations: Potential Benefits to Shareholders as a Result of the
Reorganizations."
For the fiscal year ended October 31, 2000, North American Funds paid total
advisory fees to AGAM of $7,339,733. Of such amount, $27,616, $53,172, $6,966,
$6,368 and $5,736 (in each case for the period July 7, 2000 to October 31, 2000)
were attributable to the NAF Stock Index Fund, the NAF Science & Technology
Fund, the NAF Aggressive Growth LifeStyle Fund, the NAF Moderate Growth
LifeStyle Fund and the NAF Conservative Growth LifeStyle Fund, respectively.
From November 1, 1999 to July 7, 2000, The Variable Annuity Life Insurance
Company ("VALIC"), an affiliate of AGAM, served as investment adviser to each of
the Acquired Funds. During this period, North American Funds paid total advisory
fees to VALIC of $540,574. Of such amount, $48,901, $31,018, $10,087, $9,978 and
$9,390 were attributable to the NAF Stock Index Fund, NAF Science & Technology
Fund (for the period March 1, 2000 to July 7, 2000), NAF Aggressive Growth
LifeStyle Fund, NAF Moderate Growth LifeStyle Fund and NAF Conservative Growth
LifeStyle Fund, respectively. These amounts do not reflect certain fee waivers
and expense reimbursements for which the Acquired Funds were reimbursed.
The Board of Trustees of North American Funds unanimously recommends
that the shareholders of each Acquired Fund approve the New Investment Advisory
Agreement. If the New Investment Advisory Agreement is not approved by
shareholders of an Acquired Fund, the NAF Board will determine the appropriate
actions in the best interests of the shareholders to be taken with respect to
such Acquired Fund's advisory arrangements at that time.
Additional Information About AGAM
General
-------
CypressTree Investments, Inc. ("CypressTree") and its affiliates were
formed in 1996 to acquire, advise and distribute mutual funds through broker-
dealers and other intermediaries. CypressTree Asset Management Corporation, Inc.
("CAM") was CypressTree's wholly owned advisory subsidiary and CypressTree Funds
Distributors, Inc. ("CFD") was CypressTree's wholly owned distribution
subsidiary. On March 10, 2000, CypressTree sold substantially all of its assets,
including all of the stock of CAM and CFD, to American General. Thereafter, CAM
was renamed American General Asset Management Corp. and CFD was renamed American
General Funds Distributors, Inc. Pursuant to the Previous Advisory Agreement,
AGAM oversaw the administration
-29-
of all aspects of the business and affairs of the Acquired Funds, and selected,
contracted with and compensated Subadvisers to manage the assets of the Acquired
Funds. AGAM has continued to perform these functions under the Interim
Investment Advisory agreement since the completion of the Merger.
AGAM is located at 286 Congress Street, Boston, Massachusetts 02210. Prior
to the Merger, AGAM was wholly owned by American General, which is located at
2929 Allen Parkway, Houston, Texas 77019. As a result of the Merger, American
General is wholly owned by AIG. The principal address of AIG is 70 Pine Street,
New York, New York 10270.
The directors and principal executive officer of AGAM, their business
addresses, position(s) with AGAM and a description of their principal
occupations are set forth below.
------------------------------------------------------------------------------------------------------------------
Name and Address Position with AGAM and Principal Occupation(s)
---------------- ----------------------------------------------
------------------------------------------------------------------------------------------------------------------
Alice T. Kane Chief Executive Officer, President and Chairman of the Board of
390 Park Avenue Directors; Executive Vice President, American General Fund
New York, NY 10022 Group; Executive Vice President, The Variable Annuity Life
Insurance Company and American General Annuity Insurance
Company. Ms. Kane also serves as the Chairman of the Board,
Trustee and President of North American Funds.
------------------------------------------------------------------------------------------------------------------
John A. Graf Director; Senior Vice Chairman, Asset Accumulation, American
2929 Allen Parkway General.
Houston, TX 77019
------------------------------------------------------------------------------------------------------------------
Kent E. Barrett Director and Treasurer; Senior Vice President and General
2929 Allen Parkway Auditor, American General.
Houston, TX 77019
------------------------------------------------------------------------------------------------------------------
In addition, the following officers of North American Funds also are
employees of AGAM:
Thomas J. Brown, Treasurer and Vice President of North American Funds and
Chief Financial Officer and Chief Administrative Officer of AGAM.
John I. Fitzgerald, Secretary and Vice President of North American Funds
and Assistant Secretary and Counsel of AGAM.
John N. Packs, Vice President of North American Funds and Director of
Research of AGAM.
Additional Payments to AGAM and its affiliates by Acquired Funds
----------------------------------------------------------------
The Previous Investment Advisory Agreement provided for reimbursement to
AGAM for various expenses related to financial, accounting and administrative
services provided to the Acquired Funds. For the fiscal year ended October 31,
2000, North American Funds paid in the aggregate $1,387,842 to AGAM for such
services. Of such amount, $10,338 $5,184, $0, $0 and $0 (in each case for the
period July 7, 2000 to October 31, 2000) were attributable to the NAF Stock
Index Fund, the NAF Science & Technology Fund, the NAF Aggressive Growth
LifeStyle Fund, the NAF Moderate Growth LifeStyle Fund and the NAF Conservative
Growth LifeStyle Fund, respectively. From November 1, 1999 to July 7, 2000,
VALIC, an affiliate of AGAM, served as investment adviser to each of the
Acquired Funds, but was not similarly reimbursed.
For the fiscal year ended October 31, 2000, AGAM was paid fees on
Institutional Class I shares of each Acquired Fund under the NAF Services
Agreement (as defined below) of $381 by the NAF Science & Technology Fund and $0
by each of the NAF Stock Index Fund, the NAF Aggressive Growth LifeStyle Fund,
the NAF Moderate Growth LifeStyle Fund and the NAF Conservative Growth LifeStyle
Fund (in each case for the period
-30-
July 7, 2000 to October 31, 2000), respectively. From November 1, 1999 to July
7, 2000, VALIC Retirement Services Company ("VRSCO") and/or VALIC Investment
Services Company ("VISCO"), affiliates of VALIC, were paid fees under a
comparable agreement of $528 by the NAF Science & Technology Fund (for the
period March 1, 2000 to July 7, 2000) and $0 by each of the NAF Stock Index
Fund, NAF Aggressive Growth LifeStyle Fund, NAF Moderate Growth LifeStyle Fund
and NAF Conservative Growth LifeStyle Fund, respectively. In addition, from
November 1, 1999 to July 7, 2000, VALIC was paid fees under a separate agreement
to provide accounting services to each of the Acquired Funds. For this period,
VALIC was paid fees under this agreement of $5,433, $1,033, $0, $0 and $0
attributable to the NAF Stock Index Fund, NAF Science & Technology Fund (for the
period March 1, 2000 to July 7, 2000), NAF Aggressive Growth LifeStyle Fund, NAF
Moderate Growth Lifestyle Fund and NAF Conservative Growth LifeStyle Fund,
respectively.
For the fiscal year ended October 31, 2000, the Acquired Funds paid the NAF
Distributor the following distribution and service fees (in each case for the
period July 7, 2000 to October 31, 2000):
Distribution and Service Fees
-----------------------------
Class A Class B Class C
------- ------- -------
NAF Stock Index Fund $8,638 $74,799 $ 549
NAF Science & Technology Fund $4,218 $43,890 $1,345
NAF Aggressive Growth LifeStyle Fund $1,213 $29,870 $ 175
NAF Moderate Growth LifeStyle Fund $ 479 $26,882 $ 107
NAF Conservative Growth LifeStyle Fund $ 454 $24,671 $ 79
For the period November 1, 1999 to July 7, 2000, the NAF Stock Index Fund
paid American General Distributors, Inc., a separate affiliated distributor,
distribution period and service fees in connection with its Class A and Class B
shares of $11,985 and $135,685, respectively. For the March 1, 2000 to July 7,
2000, the NAF Science & Technology Fund paid the same distributor distribution
and service fees in connection with its Class A and Class B shares of $2,052 and
$24,120, respectively.
For the fiscal year ended October 31, 2000, the Acquired Funds did not pay
brokerage commissions to any affiliated brokers.
PROPOSAL NO. 1(b): APPROVAL OF THE NEW SUBADVISORY AGREEMENT
THE NEW SUBADVISORY AGREEMENT
Description of the New Subadvisory Agreement
As a proposal separate from the proposals to approve the New Investment
Advisory Agreement and a Reorganization, shareholders of each Acquired Fund
(other than the NAF Science & Technology Fund) are being asked to approve the
New Subadvisory Agreement between AGAM and New AGIM to ensure that the
applicable Acquired Funds receive subadvisory services during the period prior
to consummation of the Reorganization. This Proposal No. 1(b) does not apply to
the NAF Science & Technology Fund, because it is not subadvised by an affiliate
of AGAM. The terms of the New Subadvisory Agreement are the same in all
material respects to those of the Previous Subadvisory Agreement. The New
Subadvisory Agreement differs from the Previous Subadvisory Agreement only with
respect to the effective date and the potential for the subadvisory services to
be rendered by an affiliate through New AGIM. The Previous Subadvisory
Agreement is dated June 1, 2000 and was last approved by the shareholders of the
applicable Acquired Funds at a meeting held on the same date in connection with
its initial approval. A description of the New Subadvisory Agreement and the
services to be provided by New AGIM is set forth below. This description is
qualified in its entirety by reference to the form of the New Subadvisory
Agreement attached to this Proxy Statement and Prospectus as Exhibit IB.
Under the terms of the New Subadvisory Agreement between AGAM and New AGIM,
New AGIM will manage the investment and reinvestment of the assets of each
applicable Acquired Fund, subject to the supervision of the NAF Board. New AGIM
will formulate a continuous investment program for each such Acquired Fund
-31-
consistent with its investment objectives and policies. New AGIM will implement
such programs by purchases and sales of securities and will regularly report to
AGAM and the NAF Board with respect to their implementation.
As compensation for its services under the New Subadvisory Agreement, New
AGIM will receive a fee, as a percentage of average daily net assets payable
monthly and accrued daily as set forth in the table below. This fee is payable
by AGAM at no additional cost to Acquired Fund shareholders.
Acquired Fund Subadvisory Fee
--------------------------------------------------------------------------------
NAF Stock Index Fund 0.20% of the first $2 billion and
0.10% on the excess over $2 billion
--------------------------------------------------------------------------------
NAF Aggressive Growth LifeStyle Fund 0.10%
--------------------------------------------------------------------------------
NAF Moderate Growth LifeStyle Fund 0.10%
--------------------------------------------------------------------------------
NAF Conservative Growth LifeStyle
Fund 0.10%
--------------------------------------------------------------------------------
For the fiscal year ended October 31, 2000, AGAM paid total subadvisory
fees of $3,194,477. Of such amount, $2,047, $6,996, $6,368 and $5,736 (in each
case for the period July 7, 2000 to October 31, 2000) were attributable to
payments to AGIM in connection with the NAF Stock Index Fund, NAF Aggressive
Growth LifeStyle Fund, NAF Moderate Growth LifeStyle Fund and NAF Conservative
Growth LifeStyle Fund, respectively. From November 1, 1999 to July 7, 2000,
VALIC, an affiliate of AGAM, served as investment adviser to each of the
Acquired Funds. During this period, VALIC paid total subadvisory fees of
$276,034. Of such amount, $0 was attributable to payments to AGIM in connection
with the Acquired Funds.
VALIC, an affiliate of AGIM, also manages the investment portfolio of the
Stock Index Fund of North American Funds Variable Products I (the "NAFVPI Stock
Index Fund"), a mutual fund with a substantially similar investment objective to
the NAF Stock Index Fund. As compensation for its advisory services in
connection with the NAFVPI Stock Index Fund, VALIC receives advisory fees of
0.35% of average daily net assets (0.25% on assets over $500 million) payable
monthly and accrued daily. For the fiscal year ended May 31, 2000, AGIM
received total advisory fees of $13,283,779 in connection therewith. VALIC also
receives payments in connection with the NAFVPI Stock Index Fund pursuant to an
accounting services agreement. For the fiscal year ended May 31, 2000, VALIC
received total fees of $1,534,054 in connection therewith.
The Board of Trustees of North American Funds unanimously recommends
that the shareholders of each applicable Acquired Fund approve the New
Subadvisory Agreement. If the New Subadvisory Agreement is not approved by
shareholders of such an Acquired Fund, the NAF Board will determine the
appropriate actions to be taken with respect to such Acquired Fund's subadvisory
arrangements at that time.
Additional Information About AGIM
AGIM has been the subadviser to the NAF Stock Index Fund, NAF Aggressive
Growth LifeStyle Fund, NAF Moderate Growth LifeStyle Fund and NAF Conservative
Growth LifeStyle Fund since July 7, 2000. AGIM was formed in 1998 as a
successor to the investment management division of American General. Pursuant
to the Previous Subadvisory Agreement, AGIM managed the investment and
reinvestment of the assets of each such Acquired Fund subject to the supervision
of the NAF Board. AGIM has continued to perform these functions under the
Interim Subadvisory Agreement since the completion of the Merger.
AGIM is located at 2929 Allen Parkway, Houston, Texas 77019. The directors
and principal executive officer of AGIM, their position(s) with AGIM and a
description of their principal occupations are set forth below. Unless
otherwise indicated, the business address of each is 2929 Allen Parkway,
Houston, Texas 77019. [Principal occupations to come].
-32-
----------------------------------------------------------------------------------------------------
Name and Address Position with AGIM and Principal Occupation(s)
---------------- ----------------------------------------------
----------------------------------------------------------------------------------------------------
Richard W. Scott Director, President and Chief Executive Officer
----------------------------------------------------------------------------------------------------
Julia S. Tucker Director and Executive Vice President
----------------------------------------------------------------------------------------------------
Albert Guiterez Director and Executive Vice President
----------------------------------------------------------------------------------------------------
In addition, the following officers of North American Funds also are
employees of AGIM: [to come]
PROPOSAL NOS. 2(a) - (e): APPROVAL OF THE PLANS
COMPARISON OF THE FUNDS
Investment Policies
In addition to the principal investment policies set forth under "Summary -
- - The Funds -- Comparison of the Funds" above, the Funds may also employ the
following investment policies:
All Funds
Derivatives. All Funds (other than the NAF Growth LifeStyle Funds) may
invest in derivatives, including options and futures. The NAF Growth LifeStyle
Funds may not invest in derivatives, and the SunAmerica Growth LifeStage Funds
have no present intention of doing so. A derivative instrument is a contract
whose value is based on the performance of an underlying asset. A Fund will use
derivatives for hedging purposes. Unlike the Acquired Funds, however, the
Acquiring Funds may also write (i.e., sell) covered call and put options to
enhance income through the receipt of premiums. With respect to an Acquiring
Fund, up to 25% of such Fund's total assets (100% in the case of the SunAmerica
Science & Technology Fund) may be subject to calls. An Acquired Fund may not
sell put options if, as a result, the Acquired Fund would be required to
segregate more than 50% of its assets to cover its potential obligations under
put options other than those with respect to futures contracts.
Certain of the Underlying Funds may make investments in derivative
instruments and similar considerations apply to these investments. Each
Underlying Fund is subject to varying restrictions with respect to these
investments.
Illiquid Securities. As a non-fundamental restriction, each Fund may
invest up to 15% of its net assets in illiquid securities (other than the Growth
LifeStage Funds, which, as a non-fundamental restriction, may not invest in
illiquid securities).
Certain of the Underlying Funds may make investments in illiquid securities
apply to these investments. Each Underlying Fund is subject to varying
restrictions with respect to these investments.
Borrowing. All Funds may borrow for temporary or emergency purposes and in
connection with reverse repurchase agreements, mortgage rolls and similar
transactions. When borrowing for temporary or emergency purposes, each Fund may
borrow up to 33% of the value of its respective total assets (including amounts
borrowed) less liabilities (other than borrowing). The NAF Stock Index Fund and
the NAF Growth LifeStyle Funds may not purchase additional securities if
borrowing exceeds 5% of each Fund's total assets. Only the Growth LifeStage
Funds may borrow for other than temporary or emergency purposes. Each Fund's
policy regarding the use of leverage is a fundamental policy.
Each Underlying Fund is subject to varying restrictions with respect to the
use of borrowing.
-33-
Lending. The Funds may not make loans, except through repurchase
agreements and the purchase of portfolio securities consistent with a Fund's
investment objectives and policies. In addition, each Fund (other than the
Growth LifeStage Funds) may lend portfolio securities subject to comparable
restrictions.
Each Underlying Fund is subject to varying restrictions with respect to
lending.
Short Sales. As a non-fundamental policy, no Fund may engage in short
sales, except, in the case of the Stock Index Funds and Science & Technology
Funds, short sales "against the box." A short sale is against the box to the
extent that the Fund contemporaneously owns, or has the right to obtain without
payment, securities identical to those sold short. An Acquiring Fund (other
than the SunAmerica Science & Technology Fund) may not enter into a short sale
against the box, if, as a result, more than 25% of its total assets would be
subject to such short sales. Up to 100% of the SunAmerica Science & Technology
Fund's assets may be subject to such short sales.
Each Underlying Fund is subject to varying restrictions with respect to the
use of short sales.
Cash and Short-Term Securities. Each Fund may invest in money market
instruments for liquidity purposes. Certain of the Acquiring Funds are subject
to the following percentage of asset limitations with respect to their short-
term investments: 35% of total assets in the case of the SunAmerica Stock Index
Fund; and 10% of total assets in the case of the SunAmerica Growth Life Stage
Funds.
The Underlying Funds may make similar short-term investments under similar
circumstances.
Defensive Investments. Each Fund may make temporary defensive investments
without limitation in response to adverse market, economic, political or other
conditions.
The Underlying Funds may make similar investments for temporary defensive
purposes.
Science & Technology Funds
Fixed-Income Securities. Each Science & Technology Fund may invest in
fixed income securities, although each does so primarily with respect to short-
term investments to meet liquidity needs or with respect to fixed income
securities having similar growth of capital potential to the equity securities
in which it invests. The SunAmerica Science & Technology Fund generally will
not invest in debt securities in the lowest rating categories (rated "CC" or
lower by Standard & Poor's Rating Services, a Division of The McGraw Hill
Companies, Inc. or "Ca" by Moody's Investors Service, Inc.).
Foreign Securities. Each Science & Technology Fund may invest in the
securities of issuers located outside of the United States, including American
Depository Receipts ("ADRs") or similar securities convertible into foreign
securities, such as European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs").
Directors and Officers
SunAmerica Strategic Investment Series, Inc. is governed by the SunAmerica
Board, which currently consists of five individuals, four of whom are SunAmerica
Independent Directors.
The SunAmerica Board is responsible for the overall supervision of
SunAmerica Strategic Investment Series, Inc. and performs various duties imposed
on directors of investment companies by the Investment Company Act and under
SunAmerica Strategic Investment Series, Inc.'s Articles of Incorporation.
Directors and officers of SunAmerica Strategic Investment Series, Inc. are also
directors (or trustees) and officers of some or all of the other investment
companies managed, administered or advised by SAAMCo, and distributed by SACS
and other affiliates. The SunAmerica Board elects the Acquiring Funds'
officers. See "Directors and Officers" in the Acquiring Funds Statements.
The following table lists the Directors and executive officers of SunAmerica
Strategic Investment Series, Inc., their ages and principal occupations during
the past five years. The business address of each Director and executive
-34-
officer is The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204. For
the purposes of this Proxy Statement and Prospectus, the SunAmerica Mutual Funds
("SAMF") consist of SunAmerica Equity Funds, SunAmerica Income Funds, SunAmerica
Money Market Funds, Inc., SunAmerica Style Select Series, Inc. and SunAmerica
Strategic Investment Series, Inc. An asterisk indicates that the Director is an
interested person of the SunAmerica Strategic Investment Series, Inc. within the
meaning of Section 2(a)(19) of the Investment Company Act.
Position Principal Occupations
Name, Age and Address with the Corporation During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------
S. James Coppersmith, 67 Director Retired; formerly, President and General Manager,
WCVB-TV, a division of the Hearst Corp. (1982 to
1994); Director/Trustee of SAMF and Anchor Series
Trust ("AST")
- ----------------------------------------------------------------------------------------------------------------------
Samuel M. Eisenstat, 60 Chairman of the Board Attorney, solo practitioner, Chairman of the Boards of
Directors/Trustees of SAMF and AST.
- ----------------------------------------------------------------------------------------------------------------------
Stephen J. Gutman, 57 Director Partner and Managing Member of B.B. Associates LLC
(menswear specialty retailing and other activities)
since June 1988; Director/Trustee of SAMF and AST.
- ----------------------------------------------------------------------------------------------------------------------
Peter A. Harbeck*, 47 Director and President Director and President, SAAMCo, since August 1995;
Director, AIG Asset Management International, Inc.
("AIGAMI") since February 2000; Managing Director,
John McStay Investment Counsel, L.P. ("JMIC") since
June 1999; Director, SACS, since August 1993; Director
and President, SunAmerica Fund Services, Inc.
("SAFS"), since May 1988; President, SAMF and AST.
- ----------------------------------------------------------------------------------------------------------------------
Sebastiano Sterpa, 71 Director Founder and Chairman of the Board of the Sterpa Group
(real estate) since 1962; Director, Real Estate
Business Service and Countrywide Financial;
Director/Trustee of SAMF.
- ----------------------------------------------------------------------------------------------------------------------
J. Steven Neamtz, 42 Vice President Executive Vice President, SAAMCo since April 1996;
Director and Chairman of the Board, AIGAMI, since
February 2000; Vice President, SAMF, since November
1999; Director and President, SACS, since April 1996.
- ----------------------------------------------------------------------------------------------------------------------
Peter C. Sutton, 36 Treasurer Senior Vice President, SAAMCo since April 1997; Vice
President, AIGAMI, since February 2000; Treasurer and
Controller of Seasons Series Trust ("Seasons"),
SunAmerica Series Trust ("SAST") and Anchor Pathway
Fund ("APF") since February 2000; Treasurer of SAMF
and AST since February 1996; Vice President of SAST
and APF since 1994; formerly Assistant Treasurer of
SAST and APF from 1994 to February 2000; Vice
President, Seasons, since April 1997; formerly Vice
President, SAAMCo, from 1994 to 1997.
- ----------------------------------------------------------------------------------------------------------------------
-35-
Position Principal Occupations
Name, Age and Address with the Corporation During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------
Robert M. Zakem, 43 Secretary and Chief Senior Vice President and General Counsel, SAAMCo,
Compliance Officer since April 1993; Vice President, General Counsel and
Assistant Secretary, AIGAMI, since February 2000;
Executive Vice President, General Counsel and
Director, SACS, since August 1993; Vice President,
General Counsel and Assistant Secretary, SAFS, since
January 1994; Vice President, SAST, APF and Seasons;
Assistant Secretary, SAST and APF, since September
1993; Assistant Secretary, Seasons, since April 1997.
- ----------------------------------------------------------------------------------------------------------------------
At a meeting of the SunAmerica Board held on August 22, 2001, the
SunAmerica Board elected Dr. Judith L. Craven and William F. Devin to the
SunAmerica Board, effective on or about November 9, 2001. Dr. Craven and Mr.
Devin are currently members of the NAF Board. Dr. Craven and Mr. Devin would
join the SunAmerica Board as SunAmerica Independent Directors and as members of
the Audit and Nominating Committees.
The following table lists the ages, business addresses and principal
occupations during the past five years of Dr. Craven and Mr. Devin.
----------------------------------------------------------------------------------------------------
Dr. Judith L. Craven, 55 Retired Administrator. Trustee, North American
3212 Ewing Street Funds Variable Product Series II, 15 investment
Houston, TX 77004 portfolios (November 1998 to present); Director,
North American Funds Variable Product Series I, 21
investment portfolios (August 1998 to present);
Director, USLIFE Income Fund, Inc. (November 1998
to present); Director, Compaq Computer Corporation
(1992 to present); Director, A.G. Belo Corporation,
a media company (1992 to present); Director, Sysco
Corporation, a food marketing and distribution
company (1996 to present); Director, Luby's Inc., a
restaurant chain (1998 to present); Director,
University of Texas Board of Regents (May 2001 to
present). Formerly, Director, CypressTree Senior
Floating Rate Fund, Inc. (June 2000 to May 2001);
Formerly, President, United Way of the Texas Gulf
Coast, a not for profit organization (1992-1998);
Formerly, Director, Houston Branch of the Federal
Reserve Bank of Dallas (1992-2000); Formerly, Board
Member, Sisters of Charity of the Incarnate Word
1996-1999).
- --------------------------------------------------------------------------------------------------------
William F. Devin, 62 Member of the Board of Governors, Boston Stock
44 Woodland Road Exchange (1985 to present); Formerly, Executive
Braintree, MA 02184 Vice President, Fidelity Capital Markets, a
division of National Financial Services Corporation
(1966-1996); Formerly, Director, CypressTree Senior
Floating Rate Fund, Inc. (October 1997 to May 2001).
- --------------------------------------------------------------------------------------------------------
-36-
SunAmerica Strategic Investment Series, Inc. pays each SunAmerica
Independent Director annual compensation in addition to reimbursement of out-of-
pocket expenses in connection with attendance at meetings of the SunAmerica
Board. Specifically, each SunAmerica Independent Director received a pro rata
portion (based upon the SunAmerica Strategic Investment Series, Inc.'s net
assets) of an aggregate of $40,000 in annual compensation for acting as director
or trustee to SAMF. In addition, each SunAmerica Independent Director received
$20,000 in annual compensation for acting as trustee for AST. Beginning January
1, 2001 each SunAmerica Independent Director of the retail funds in SAMF
receives an additional $2,500 per quarterly meeting. 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 SAMF. Officers of SunAmerica Strategic
Investment Series, Inc. receive no direct remuneration in such capacity from
SunAmerica Strategic Investment Series, Inc. or any of the Acquiring Funds.
In addition, each SunAmerica Independent Director also serves on the Audit
Committee of the SunAmerica Board. The Audit Committee is charged with
recommending to the full SunAmerica Board the engagement or discharge of
SunAmerica Strategic Investment Series, Inc.'s independent accountants;
directing investigations into matters within the scope of the independent
accountant's 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; 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 SunAmerica
Board. Each member of the Audit Committee receives an aggregate of $5,000 in
annual compensation for serving on the Audit Committee of SAMF and AST. With
respect to SunAmerica Strategic Investment Series, Inc., each member of the
Committee receives a pro rata portion of the $5,000 annual compensation, based
on the relative net assets of SunAmerica Strategic Investment Series, Inc..
SunAmerica Strategic Investment Series, Inc. also has a Nominating Committee,
comprised solely of SunAmerica Independent Directors, which recommends to the
SunAmerica Board 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 SAMF and AST have adopted the SunAmerica
Disinterested Directors' and Trustees' Retirement Plan (the "Retirement Plan")
effective January 1, 1993 for the SunAmerica Independent Directors. The
Retirement Plan provides generally that if a SunAmerica Independent Director (or
Trustee) who has at least 10 years of consecutive service as a disinterested
Director (or Trustee) of any SAMF or AST (an "Eligible Director") retires after
reaching age 60 but before age 70 or dies while a Director, such person will be
eligible to receive a retirement or death benefit from each SAMF with respect to
which he or she is an Eligible Director. With respect to Sebastiano Sterpa, the
SunAmerica Independent Directors have determined to make an exception to
existing policy and allow Mr. Sterpa to remain on the SunAmerica 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 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.
The following table sets forth information summarizing the aggregate
compensation of each SunAmerica Independent Director for his services as a
member of the SunAmerica Board for the fiscal year ended October 31, 2000,
except as otherwise indicated. Neither the Directors who are interested persons
of SunAmerica Strategic Investment Series, Inc. nor any officers of SunAmerica
Strategic Investment Series, Inc. receive any compensation.
- ------------------------------------------------------------------------------------------------------------------------------------
Pension or
Retirement
Benefits Accrued Total Compensation
Aggregate as Part of Estimated Annual From Registrant and
Compensation from Corporation Benefits Upon Fund Complex Paid to
Director Registrant Expenses Retirement* Directors**
- --------------------------------------------------------------------------------------------------------------------------
S. James Coppersmith $764 $48,315 $29,670 $67,500
- --------------------------------------------------------------------------------------------------------------------------
Samuel M. Eisenstat $804 $41,033 $46,083 $71,500
- --------------------------------------------------------------------------------------------------------------------------
Stephen J. Gutman $764 $42,230 $60,912 $67,500
- --------------------------------------------------------------------------------------------------------------------------
-37-
- --------------------------------------------------------------------------------------------------------------------------
Pension or
Retirement
Benefits Accrued Total Compensation
Aggregate as Part of Estimated Annual From Registrant and
Compensation from Corporation Benefits Upon Fund Complex Paid to
Director Registrant Expenses Retirement* Directors**
- --------------------------------------------------------------------------------------------------------------------------
Sebastiano Sterpa*** $797 $10,579 $7,900 $45,833
- --------------------------------------------------------------------------------------------------------------------------
* Assuming participant elects to receive benefits in 15 yearly installments.
** Information is as of March 31, 2001 for the five investment companies
in the complex that pay fees to these directors/trustees. The complex
consists of SAMF and AST.
*** Mr. Sterpa is not a trustee of AST.
Management Arrangements
Comparison of Management and Administrative Arrangements and Fees
-----------------------------------------------------------------
AGAM serves as the investment adviser for the Acquired Funds and SAAMCo
serves as the investment adviser for the Acquiring Funds. Each of AGAM and
SAAMCo is responsible for the management of the investment portfolio of each
Acquired Fund and Acquiring Fund, respectively, and for providing certain
administrative services to such Fund.
AGAM was organized as a Delaware corporation in 1996 and is located at 286
Congress Street, Boston, Massachusetts, 02210. Prior to the Merger, AGAM and
the NAF Distributor were both wholly owned subsidiaries of American General.
Prior to the Merger, American General was one of the nation's largest
diversified financial services organizations with assets of approximately $128
billion and market capitalization of $23 billion at June 30, 2001. AGAM is now
a subsidiary of AIG.
SAAMCo was organized as a Delaware corporation in 1982 and is located at
The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204. SAAMCo is a
wholly owned subsidiary of SunAmerica Inc., which in turn is a wholly owned
subsidiary of AIG. AIG, a Delaware corporation, is a holding company which
through its subsidiaries is engaged in a broad range of insurance and insurance-
related activities and financial services in the United States and abroad.
AIG's primary activities include both general and life insurance operations.
Other significant activities include financial services and asset management.
At June 30, 2001, SAAMCo managed, advised and/or administered more than $28.5
billion of assets.
Comparison of the NAF Investment Advisory Agreement and SunAmerica
Investment Advisory Agreement. The SunAmerica Investment Advisory Agreement is
similar to the NAF Investment Advisory Agreement, except for certain matters,
including the effective dates and the identity of the adviser. The effective
advisory fees payable by each Acquiring Fund to SAAMCo under the SunAmerica
Investment Advisory Agreement are at the same annual rate as the advisory fees
payable by the respective Acquired Fund under the NAF Investment Advisory
Agreement.
The advisory fees payable by the Acquired Funds to AGAM are discussed above
under "Proposal No. 1(a): Approval of the New Investment Advisory Agreement --
Description of the New Investment Advisory Agreement." The effective advisory
fee rate payable by each Combined Fund after consummation of the Reorganizations
will be the same as the advisory fee rates payable by the Acquired Funds.
The SunAmerica Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
SAAMCo's (and its affiliates') obligations or duties thereunder ("disabling
conduct"), SAAMCo is not subject to liability to an Acquiring Fund (or to any
shareholder thereof) for any act or omission in the course of rendering services
to such Acquiring Fund (except to the extent specified in the Investment Company
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services). The SunAmerica Investment Advisory
Agreement also provides that except for such disabling conduct, an Acquiring
Fund will indemnify SAAMCo (and its affiliates) from any liability arising from
-38-
SAAMCo's conduct under the SunAmerica Investment Advisory Agreement. The NAF
Investment Advisory Agreement does not contain similar provisions.
Both the NAF Investment Advisory Agreement and the SunAmerica Investment
Advisory Agreement provide that the adviser may, at its own cost and expense and
subject to the requirements of the Investment Company Act, retain one or more
Subadvisers to manage all or a portion of the investment portfolio of an
Acquired Fund or Acquiring Fund, respectively. Each of AGAM and SAAMCo is
authorized to retain (or change) such unaffiliated Subadviser(s) without
shareholder approval pursuant to separate "Manager of Managers" orders granted
by the Commission. SAAMCo and AGAM are ultimately responsible under their
respective "Manager of Managers" order to oversee any Subadvisers for the
Acquired Funds and Acquiring Funds, respectively. AGAM has retained T. Rowe
Price as Subadviser for the NAF Science & Technology Fund pursuant to the
Acquired Funds' "Manager of Managers" order. See "--Comparison of Subadvisory
Arrangements" below. As of the date hereof, SAAMCo has also appointed T. Rowe
Price as Subadviser to the SunAmerica Science & Technology Fund pursuant to the
Acquiring Funds' "Manager of Managers" order. AGAM has retained New AGIM for
each of the other Acquired Funds, subject to shareholder approval; and SAAMCo
has retained New AGIM for the SunAmerica Stock Index Fund. Accordingly, if
shareholders approve the Reorganizations, following consummation of the
Reorganizations, the portfolios of the Acquired Funds will be managed by SAAMCo
as part of the Combined Funds (although New AGIM and T. Rowe Price will be
responsible for management of the investment portfolios of the Stock Index
Combined Fund and the Science & Technology Combined Fund, respectively).
Comparison of Subadvisory Arrangements. The current Subadvisers of the
Acquired Funds as well as certain information regarding each Subadviser are set
forth below:
- ---------------------------------------------------------------------------------------------------------------------------
Acquired Fund: Subadviser: Information:
- ---------------------------------------------------------------------------------------------------------------------------
NAF Stock Index Fund, NAF AGIM, 2929 Allen Parkway, Houston, Texas AGIM is a registered investment adviser
Aggressive Growth LifeStyle Fund, 77019 and a wholly owned subsidiary of AGAM. As
NAF Moderate Growth LifeStyle of June 30, 2001, AGIM had approximately
Fund and NAF Conservative Growth $77 billion under management.
LifeStyle Fund
- ---------------------------------------------------------------------------------------------------------------------------
NAF Science & Technology Fund T. Rowe Price, 100 East Pratt Street, T. Rowe Price is a registered investment
Baltimore, Maryland 21202 adviser. As of June 30, 2001, T. Rowe
Price and its affiliates served as
investment adviser to more than 80 stock,
bond and money market funds, and managed
approximately $158.6 billion.
- ---------------------------------------------------------------------------------------------------------------------------
Under the terms of each of the Subadvisory Agreements between AGAM and a
Subadviser (the "NAF Subadvisory Agreements"), the Subadviser for the respective
Acquired Fund manages the investment and reinvestment of the assets of such
Acquired Fund, subject to the supervision of the NAF Board. Under the terms of
each SunAmerica Subadvisory Agreement, the Subadviser for the respective
Acquiring Fund manages the investment and reinvestment of the assets of such
Acquiring Fund, subject to the oversight and review of SAAMCo. Under both the
NAF and the SunAmerica Subadvisory Agreements, the Subadviser formulates a
continuous investment program for the applicable Acquired Fund consistent with
its investment objectives and policies. The Subadviser implements such programs
by purchases and sales of securities and regularly reports to AGAM and the NAF
Board or SAAMCo and the SunAmerica Board, as the case may be, with respect to
their implementation.
Each of the SunAmerica Subadvisory Agreements provides that in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
Subadviser's (and its affiliates') obligations or duties thereunder ("disabling
conduct"), the Subadviser is not subject to liability to an Acquiring Fund (or
to any shareholder thereof) for any act or omission in the course of rendering
services to such Acquiring Fund (except to the extent specified in
-39-
the Investment Company Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services). The SunAmerica
Subsadvisory Agreements also provide that except for such disabling conduct, an
Acquiring Fund will indemnify the Subadviser (and its affiliates) from any
liability arising from the Subadviser's conduct under the agreement. With
respect to indemnification, the NAF Subadvisory Agreements do not contain a
similar provision.
As compensation for their services, the Subadvisers receive fees from AGAM
computed separately for each Acquired Fund. Such fees are paid out of AGAM's
advisory fee at no additional cost to the Acquired Funds or their shareholders.
The subadvisory fees paid by AGAM in connection with the Acquired Funds are
discussed above under "Proposal No. 1(b): Approval of the New Subadvisory
Agreement--Description of the New Subadvisory Agreement." Absent any applicable
fee waivers, the fee rate that AGAM is obligated to pay to each Subadviser under
its respective Subadvisory Agreement is as follows:
- ------------------------------------------------------------------------------------------
Acquired Fund Subadvisory Fee
- ------------------------------------------------------------------------------------------
NAF Stock Index Fund 0.20% of the first $2 billion and 0.10% on
the excess over $2 billion
- ------------------------------------------------------------------------------------------
NAF Science & Technology Fund 0.60% of the first $500 million and 0.55%
on the excess over $500 million
- ------------------------------------------------------------------------------------------
NAF Aggressive Growth LifeStyle Fund 0.10%
- ------------------------------------------------------------------------------------------
NAF Moderate Growth LifeStyle Fund 0.10%
- ------------------------------------------------------------------------------------------
NAF Conservative Growth LifeStyle Fund 0.10%
- ------------------------------------------------------------------------------------------
SAAMCo will directly manage the investment portfolios of each of the
SunAmerica Growth LifeStage Funds and will directly manage the investment
portfolios of each of the Growth LifeStage Combined Funds after the
Reorganizations. SAAMCO has retained New AGIM as Subadviser to manage the
investment portfolio of the SunAmerica Stock Index Fund and T. Rowe Price as
Subadviser to manage the investment portfolio of the SunAmerica Science &
Technology Fund. Accordingly, New AGIM will manage the investment portfolio of
the Stock Index Combined Fund and T. Rowe Price will manage the investment
portfolio of the Science & Technology Combined Fund. SunAmerica will pay New
AGIM and T. Rowe Price advisory fees in connection with these duties at the same
rate as each was paid by AGAM under the Previous Subadvisory Agreement
applicable to each.
Distribution and Shareholder Servicing Arrangements
Distributor
-----------
American General Funds Distributors, Inc. (previously defined as "AGFD" or
the "NAF Distributor"), an affiliate of AGAM, acts as the principal distributor
of the shares of the Acquired Funds. SunAmerica Capital Services, Inc.
(previously defined as "SACS" or the "SunAmerica Distributor"), an affiliate of
SAAMCo, acts as the distributor of the shares of the Acquiring Funds. As
compensation for their respective services, AGFD and SACS receive the initial
and deferred sales charges in respect of the Acquired Funds and Acquiring Funds,
respectively. In addition, AGFD and SACS receive fees under each respective
Acquired Fund's and Acquiring Fund's plan pursuant to Rule 12b-1 under the
Investment Company Act. The address of the NAF Distributor is 286 Congress
Street, Boston, Massachusetts 02210. The address of the SunAmerica Distributor
is The SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204.
After consummation of the Reorganizations, the SunAmerica Distributor will
continue to provide distribution services to each Combined Fund.
-40-
Distribution and Service (12b-1) Fees
-------------------------------------
Each of the Acquired Funds and Acquiring Funds have adopted a plan under
Rule 12b-1 under the Investment Company Act that allows it to pay distribution
and other fees for the sale and distribution of its shares. Class A, Class B
and Class C shares of each Acquired Fund and Class A, Class B and Class II
shares of each Acquiring Fund are subject to the same respective distribution
and account maintenance and service fees pursuant to the applicable plan under
Rule 12b-1. The table below sets forth the distribution and account maintenance
and service fees for each of these classes.
NAF Stock Index Fund
NAF Science & Technology Fund
Account
Acquired Acquiring Maintenance
Fund Class Fund Class Distribution Fee and Service Fee
- ------------------------------- ---------------------- ---------------------- ---------------------
A A 0.10% 0.25%
B B 0.75% 0.25%
C II 0.75% 0.25%
NAF Aggressive Growth LifeStyle Fund
NAF Moderate Growth LifeStyle Fund
NAF Conservative Growth LifeStyle Fund
Account
Acquired Acquiring Maintenance
Fund Class Fund Class Distribution Fee and Service Fee
- ------------------------------- ---------------------- --------------------- --------------------
A A 0.10% None
B B 0.75% None
C II 0.75% None
Because these fees are paid out of a Fund's assets on an ongoing basis,
over time they will increase the cost of your investment and may cost you more
than paying other types of sales charges.
Shareholder Servicing Fees for Class I
--------------------------------------
The Acquired Funds have entered into a Services Agreement (the "NAF
Services Agreement") with AGAM for the provision of recordkeeping and
shareholder services to retirement and employee benefit plans and the NAF Growth
LifeStyle Funds, each of which invest in Institutional Class I shares of certain
of the Acquired Funds. Under the NAF Services Agreement, as compensation for
services rendered, AGAM receives a fee on Institutional Class I shares of each
Acquired Fund equal to 0.25% of average net assets of such class. SACS will
provide these services after the Reorganizations with respect to Class I shares
of the Combined Funds for the same fee.
Other Service Agreements with Affiliates
SAFS acts as a servicing agent assisting State Street in connection with
certain services offered to the shareholders of each of the Acquiring Funds
pursuant to the terms of a Service Agreement (the "SunAmerica Service
Agreement"). Under the SunAmerica Service Agreement, as compensation for
transfer agency services rendered, SAFS receives a fee from each Acquiring Fund,
computed and payable monthly based upon an annual rate
-41-
of 0.22% of average daily net assets of each Acquiring Fund with respect to
Class A, Class B and Class II shares. Upon completion of the Reorganizations,
SAFS will receive the same fee with respect to Class I shares of each Acquiring
Fund. From this fee, SAFS pays a fee to State Street, and its affiliate,
National Financial Data Services. In addition, pursuant to the Service
Agreement, SAFS may receive reimbursement of its costs in providing shareholder
services on behalf of the Acquiring Funds. SAFS is located at The SunAmerica
Center, 733 Third Avenue, New York, New York 10017-3204.
Purchase, Exchange and Redemption of Shares
The following chart highlights the purchase, redemption and exchange
features of the Acquired Funds as compared to such features of the Acquiring
Funds.
Purchase, Redemption
and Exchange Features Acquired Funds Acquiring Funds
- ------------------------------------ ------------------------------------- --------------------------------------
Minimum initial investment . non-retirement accounts: $1000 . non-retirement accounts: $500
. retirement accounts: $50 . retirement accounts: $250
. automatic investment programs: $50 . dollar cost averaging: $500 to open
Class B shares are available for
purchases of $250,000 or less.
Class C shares are available for
purchases under $1 million.
Institutional Class I shares are
available for purchases of $1
million or more.
Minimum subsequent investments $50 . non-retirement account: $100
. retirement account: $25
. dollar cost averaging: you must
invest at least $25 per month
-42-
Purchase, Redemption
and Exchange Features Acquired Funds Acquiring Funds
- ------------------------------------ ------------------------------------- --------------------------------------
Initial Sales Charge Class A: 5.75% Class A: 5.75%
(as a percentage of offering price) Class B: None Class B: None
Class C: None Class II: 1.00%
Institutional Class I: None Class I: None)
Purchases over $1 million are sold Initial sales charge is waived for
without an initial sales charge certain investors
Deferred Sales Charge Class A: Purchases of shares worth Class A: Purchases of Class A shares
over $1 million that are sold over $1 million that are redeemed
without an initial sales charge and within a certain period of time are
redeemed within 1 year are subject subject to a CDSC (1% for redemptions
to a 1% CDSC at redemption. within one year of purchase and 0.50%
for redemptions after the first year
Class B: Shares redeemed within 6 and within the second year of
years are subject to a CDSC.(a)(b) purchase).
Class C: Shares redeemed within one Class B: Shares redeemed within 6
year are subject to a 1% CDSC(b). years are subject to a CDSC. (a)(b)
Institution Class I: None. Class II: Shares redeemed within 18
months after purchase are subject to
a 1% CDSC. (b)
Class I: None
Purchases By mail (check), wire or through By mail (check), wire or through a
broker-dealers broker or financial advisor
Redemption Classes A, B and C: By mail, wire Classes A, B and II: By mail, wire
(if a minimum of $1,000), telephone (any amount for requests by mail and
or through broker-dealers less than $100,000 for requests by
telephone), telephone (for amounts
less than $100,000) or through a
broker or financial advisor
Class I: contact the financial Class I: contact the financial
intermediary (or other organization) intermediary (or other organization)
from whom shares were purchased. from whom shares were purchased.
Conversion Class B shares automatically convert Class B shares automatically convert
into Class A shares eight years into Class A shares approximately
after purchase eight years after purchase
Exchanges Shares of an Acquired Fund may be Shares of an Acquiring Fund may be
exchanged for shares of the same exchanged for shares of the same
class of any other Acquired Fund or class of any other fund distributed
other series of North American Funds by SACS
For Institutional Class I shares,
all or part of an existing plan
balance may be exchanged from one
investment option to another if
permitted by an employer retirement
plan.
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_________________
(a) The CDSC of Class B shares of the Acquiring Funds is either the same as or
less than the CDSC relating to Class B shares of the Acquired Funds. The
table below sets forth the schedule of Class B CDSC for all Funds.
CDSC on shares being sold
-----------------------------------------------------------------------
Years after Purchase Acquired Funds Acquiring Funds
---------------------- ---------------- -----------------
1/st/ year 5.00% 5.00%
2/nd/ year 5.00% 4.00%
3/rd/ year 4.00% 3.00%
4/th/ year 3.00% 3.00%
5/th/ year 2.00% 2.00%
6/th/ year 1.00% 1.00%
7/th/ year and thereafter None None
(b) The CDSC schedules applicable to Class B and Class C shares of an Acquired
Fund will continue to apply to the respective Corresponding Shares
received in the applicable Reorganization by shareholders of a Combined
Fund who were shareholders of the respective Acquired Fund as of the date
of the closing of such Reorganization (even if you exchange your shares
for shares of another fund distributed by SACS). Each CDSC is based on
the original purchase cost or the current market value of the shares being
sold, whichever is less. Future purchases of Class A, Class B or Class II
Shares of a Combined Fund will be subject to the CDSC schedule applicable
to the Combined Fund. There is no CDSC on Combined Fund shares that are
purchased through reinvestment of dividends. In the case of a partial
redemption of Combined Fund shares, those shares in the shareholder's
account that are not subject to a CDSC will be sold first. If there are
not enough of these shares available, shares that have the lowest CDSC
will be sold next.
Dividend Distribution and Account Policies
------------------------------------------
The following is a summary of the dividend distribution and account
policies of each of the Funds and is qualified in its entirety by the more
complete information contained in the Acquired Funds Prospectuses, Acquiring
Funds Prospectuses, Acquired Funds Statement and Acquiring Funds Statements.
Valuation of Fund Shares. The net asset value per share for each Fund and
class is determined once daily as of the close of regular trading on the New
York Stock Exchange (generally 4 p.m. Eastern time) by dividing the net assets
(the value of all assets less liabilities) of each class by the number of its
shares outstanding. See "Purchase, Redemption and Pricing -- Determination of
Net Asset Value" in the Acquired Funds Statement and "Determination of Net Asset
Value" in the Acquiring Funds Statements.
Buy and Sell Prices. When you buy shares of a Fund, you pay the net asset
value plus any applicable sales charges. When you sell shares of a Fund, you
receive the net asset value minus any applicable CDSCs.
Dividends. Each of the Funds declares and pays capital gains and income
dividends, if any, annually. See "Pricing of Fund Shares" in the Acquired Funds
Prospectus and "Dividends, Distributions and Taxes -- Dividends and
Distributions" in the Acquiring Funds Statements.
Dividend Reinvestments. The policy relating to dividend reinvestments is
substantially the same for all Funds. Unless cash payment is requested (and
such payment is more than $10 in the case of the Acquiring Funds), all dividends
and distributions, if any, will be reinvested. Alternatively, in the case of
the Acquiring Funds,
-44-
dividends and distributions may be reinvested in any fund distributed by SACS.
See "Pricing of Fund Shares" in the Acquired Funds Prospectus and "Dividends,
Distributions and Taxes -- Dividends and Distributions" in the Acquiring Funds
Statements.
Redemptions-in-kind. Each Acquired Fund reserves the right to pay
redemption proceeds in whole or in part by a distribution "in kind" of
securities held by the Acquired Fund, subject to the limitation that each
Acquired Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Acquired Fund during any 90-day
period for any one account. Each Acquiring Fund also may pay redemption
proceeds by a distribution "in kind" of securities held by the Acquiring Fund,
if it determines that it would be detrimental to the best interests of the
remaining shareholders of the Acquiring Fund to make payment of redemption
proceeds wholly or partly in cash. See "Purchase Redemption and Pricing --
Redemption in Kind" in the Acquired Funds Statement and "Additional Information
Regarding Redemption of Shares" in the Acquiring Funds Statements.
Payment Following Redemption. Each Fund will normally send the proceeds
from a redemption (less any applicable CDSC) on the next business day, but may
delay payment for up to seven days. Payment may be delayed if the shares to be
redeemed were purchased by a check that has not cleared. During periods of
extreme volatility or market crisis, each Fund may temporarily suspend the right
to redemption and may postpone the payment of proceeds, as allowed by the
federal securities laws. See "Shareholder Account Information -- Transaction
Policies" and "Additional Information Regarding Redemption of Shares" in the
Acquiring Funds Prospectuses and Acquiring Funds Statements, respectively, and
"Section II: Investing in the North American Funds" and "Purchase, Redemption
and Pricing -- Payment for the Shares Presented" in the Acquired Funds
Prospectuses and Acquired Funds Statement, respectively.
Programs that Reduce Sales Charges. Each of the Funds offer programs
pursuant to which shareholders pay reduced sales charges. With respect to the
Acquiring Funds, these programs are only applicable to purchases of Class A
shares. Under the Rights of Accumulation program, a shareholder pays the sales
charge applicable to the shareholder's total account balance in all classes of
shares. Under a Letter of Intent (or statement of intention), a shareholder
agrees to invest a certain amount over 13 months and will pay the sales charge
based on the shareholder's goal. In addition, the Acquiring Funds also offer
reduced sales charges for group purchases, pursuant to which members of
qualified groups may purchase Class shares of an Acquiring Fund under the
Rights of Accumulation program described above. The Acquiring Funds also offer
a Combined Purchase Privilege, pursuant to which certain persons may qualify for
sales charge reductions or elimination by combining purchases of Acquiring Fund
shares into a single transaction. See "Section II: Investing in the North
American Funds" in the Acquired Funds Prospectuses and "Additional Information
Regarding Purchase of Shares" in the Acquiring Funds Statements for more
information regarding these programs.
Reinstatement Privileges. Each of the Funds offers a reinstatement
privilege. In the case of the Acquired Funds, if a shareholder redeems Class A
shares (under $1 million) and reinvests within 90 days, the shareholder will not
have to pay a sales charge. If a shareholder redeems Class shares over $1
million, or Class or Class shares and pays a CDSC and then reinvests within 90
days, the shareholder's account will be credited the amount of the CDSC. In the
case of the Acquiring Funds, a shareholder may redeem shares of an Acquiring
Fund and within one year after the sale invest some or all of the proceeds in
the same share class of the same Acquiring Fund without a sales charge. A
shareholder may use the reinstatement privilege only one time after redeeming
such shares. If a shareholder paid a CDSC on the redemption of his or her
shares, the shareholder's account will be credited with the dollar amount of the
CDSC at the time of redemption. See "Account Services" in the Acquired Funds
Prospectus relating to Class , Class , and Class shares and "Shareholder
Account Information" in the Acquiring Funds Prospectuses for more information
regarding this privilege.
Other Shareholder Services. Each of the Acquired Funds and Acquiring Funds
offers other shareholder services which are similar, although not identical,
such as automatic investment plans and systematic withdrawal plans. In
addition, Anchor National Life Insurance Company offers an Asset Protection Plan
to certain investors in the Acquiring Funds, which provides for benefits payable
at death that relate to the amounts paid to purchase Acquiring Fund shares (and
not subsequently redeemed prior to death) and to the value of Acquiring Fund
shares held for the benefit of insured persons. Anchor National Life Insurance
company charges a premium for this coverage. For additional information
regarding these additional shareholder services, see "Account Services" in the
-45-
Acquired Funds Prospectuses and "Shareholder Account Information" and
"Additional Information Regarding Purchase of Shares" in the Acquiring Funds
Prospectuses and Acquiring Funds Statements, respectively.
Small Accounts. The Acquired Funds require that you maintain a minimum
account balance of $500, or $50 for retirement plans and other automatic
investing programs. The Acquiring Funds require that you maintain a minimum
account balance of $500, or $250 for retirement plan accounts. If your account
with an Acquiring Fund falls below the minimum requirement due to withdrawals,
you may be asked to purchase more shares within 60 days. If you do not take
action, the Acquiring 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 with an Acquiring Fund. Your account with an Acquiring Fund will not be
closed if its drop in value is due to performance of the Acquiring Fund or the
effects of sales charges.
Performance
General
-------
The following tables provide performance information for shares of the
Funds for the periods indicated.Past performance is not indicative of future
performance. Each Acquiring Fund has been recently created and has not yet
commenced operations; consequently, it does not have an investment performance
record. After the Reorganizations, each Combined Fund, as a successor to its
respective Acquired Fund, will assume and publish the investment performance
record of the Acquired Fund.
Average annual total return is determined separately for each Class in
accordance with a formula specified by the Commission. Average annual total
return is computed by finding the average annual compounded rates of return for
the 1-, 5-, and 10-year periods or for the lesser included periods of
effectiveness. The calculation assumes that:
(a) The maximum sales load (i.e., either the front-end sales load or the
CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period) is deducted from the
initial $1,000 purchase payment;
(b) All dividends and distributions are reinvested at net asset value; and
(c) Complete redemption occurs at the end of the 1-, 5-, or 10-year
periods or fractional portion thereof with all nonrecurring charges
deducted accordingly.
-46-
Acquired Funds
Average Annual Total Returns
(Periods Ended June 30, 2001)
-------------------------------------------------------------------------------------
One Three Five Ten
Year Years Years Years Since Inception Year to Date
--------- ----------- ---------- --------- ----------------- -------------
NAF Stock Index Fund
Class A...................... -20.26% N/A N/A N/A 2.11% (1) -12.30%
Class B...................... -20.20% N/A N/A N/A 1.93% (1) -12.02%
Class C...................... N/A N/A N/A N/A -20.46% (2) -8.11%
Institutional Class I* N/A N/A N/A N/A N/A(1) N/A
NAF Science & Technology Fund
Class A...................... -51.69% N/A N/A N/A -47.67% (3) -29.98%
Class B...................... -51.74% N/A N/A N/A -47.80% (3) -29.74%
Class C...................... N/A N/A N/A N/A -50.73% (4) -26.77%
Institutional Class I........ -48.63% N/A N/A N/A -45.19% (3) -25.66%
NAF Aggressive Growth
LifeStyle Fund
Class A...................... -21.54% N/A N/A N/A 4.30% (1) -15.72%
Class B...................... -21.34% N/A N/A N/A 5.02% (1) -15.30%
Class C...................... N/A N/A N/A N/A -17.41% (5) -11.75%
Institutional Class I........ -16.62% N/A N/A N/A 6.68% (1) -10.37%
NAF Moderate Growth
LifeStyle Fund
Class A...................... -14.23% N/A N/A N/A 4.55% (1) -11.31%
Class B...................... -13.94% N/A N/A N/A 5.40% (1) -10.86%
Class C...................... N/A N/A N/A N/A -12.32% (4) -7.19%
Institutional Class I........ -8.97% N/A N/A N/A 6.95% (1) -5.81%
NAF Conservative Growth
LifeStyle Fund
Class A...................... -9.70% N/A N/A N/A 4.61% (1) -8.75%
Class B...................... -9.39% N/A N/A N/A 5.40% (1) -8.38%
Class C...................... N/A N/A N/A N/A -6.59% (6) -4.71%
Institutional Class I........ -4.16% N/A N/A N/A 6.96% (1) -3.18%
___________________
* No Class I performance is shown for the NAF Stock Index Fund, because no
Class I shares are currently outstanding for this Fund.
(1) Since 11/2/98.
(2) Since 7/17/00.
(3) Since 3/1/00.
(4) Since 7/12/00.
(5) Since 8/10/00.
(6) Since 7/20/00.
For the periods shown above, AGAM waived certain fees in respect of the NAF
Stock Index Fund and NAF Science & Technology Fund. Absent such waivers, the
returns shown above would be lower.
Shareholder Rights
Shareholder rights are the same in all of the Funds. Each full share and
fractional share of a Fund entitles the shareholder to receive a proportional
interest in the respective Fund's capital gain distributions and cast one vote
per share on certain Fund matters, including the election of directors, changes
in fundamental policies, or approval of changes in the Fund's investment
advisory
-47-
agreement. Corresponding Shares issued in the Reorganizations will be fully paid
and nonassessable and will have no preemptive rights. In the event of the
liquidation of a Fund, shareholders of such Fund are entitled to share pro rata
in the net assets of such Fund available for distribution to shareholders.
The Funds are not required to hold annual meetings and do not intend to do
so except when certain matters, such as a change in a Fund's fundamental
policies, are to be decided. In addition, shareholders representing at least
10% of all eligible votes may call a special meeting if they wish, for the
purpose of voting on the removal of any Fund trustee/director.
Tax Information
The tax consequences associated with an investment in shares of an Acquired
Fund are substantially the same as the tax consequences associated with an
investment in shares of the respective Acquiring Fund. See "Taxes" in the
Acquired Funds Prospectuses and "Dividend, Distribution and Account Policies" in
the Acquiring Funds Prospectuses.
Portfolio Transactions
The procedures for engaging in portfolio transactions are generally the
same for the Acquired Funds and the Acquiring Funds. Each of the Acquired
Funds' subadvisers and SAAMCo may consider the nature and extent of research
services provided when brokers are selected and may cause a Fund to pay such
broker-dealer's commissions that exceed those that other broker-dealers may have
charged, if in their view the commissions are reasonable in relation to the
value of the brokerage and/or research services provided. For further
discussion of these procedures, see "Portfolio Brokerage" in the Acquired Funds
Statement and "Portfolio Transactions and Brokerage" in the Acquiring Funds
Statements.
Portfolio Turnover
None of the Funds has placed a limit on its portfolio turnover and
portfolio changes are made when the Fund's investment adviser (or subadviser)
believes they are advisable, usually without reference to the length of time
that a security has been held.
Additional Information
Independent Auditors
--------------------
Currently ____________________ serves as the independent auditors of the
NAF Science & Technology Fun and each of the Acquiring Funds, while _________
serves as the independent auditors of the NAF Stock Index Fund and each of the
NAF Growth Lifestyle Funds. If the Reorganizations are completed, it is
currently anticipated that _____________________ will serve as the independent
auditors of the Combined Funds. The principal business address of______________
______________________ is___________________.
Custodian
---------
State Street acts as the custodian of the assets of the Acquired Funds and
Acquiring Funds. If the Reorganizations are completed, it is currently
anticipated that State Street will continue to serve as the custodian of the
Combined Funds. The principal business address of State Street is 1776 Heritage
Drive, North Quincy, Massachusetts 02171.
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Transfer Agent
--------------
Boston Financial Data Services, Inc., 66 Brooks Drive, Braintree,
Massachusetts 02184 serves as the transfer agent with respect to each Acquired
Fund. State Street, 1776 Heritage Drive, North Quincy, Massachusetts 02171
serves as the transfer agent with respect to each Acquiring Fund. Transfer
agent functions are performed for State Street by National Financial Data
Services, P.O. Box 219572, Kansas City, MO 64121-5972, an affiliate of State
Street. Each transfer agent is responsible for the issuance, transfer and
redemption of shares and the opening, maintenance and servicing of shareholder
accounts for the respective Fund. If the Reorganizations are completed, it is
currently anticipated that State Street will continue to serve as the transfer
agent of the Combined Funds.
Capital Stock
-------------
Each Acquired Fund is authorized to issue an unlimited number of full and
fractional shares of beneficial interest, par value $0.001 per share, divided
into four classes designated Class A, Class B, Class C and Institutional Class
I. Each Acquiring Fund is authorized to issue one hundred million (100,000,000)
shares of common stock, par value $0.0001 per share, divided into four classes
designated Class A, Class B, Class II and Class I. See "-- Shareholder Rights"
above and "Capital Stock" in the Acquired Funds Statement and "Description of
Shares" in the Acquiring Funds Statements for further discussion of the rights
and preferences attributable to shares of each Acquired Fund and each Acquiring
Fund, respectively. See "Summary -- Fee Tables" above and "Section II: Fees
and Expenses" (in the case of Class A, Class B and Class C shares) and "Section
II: Fees and Expenses of the North American Funds -- Institutional Class I
Shares" (in the case of Institutional Class I shares) in the Acquired Funds
Prospectuses and "Fund Highlights -- What are the Fund's Expenses?" in the
Acquiring Funds Prospectuses for further discussion on the expenses attributable
to shares of the Acquired Funds and the Acquiring Funds, respectively. See "--
Terms of the Plans -- Issuance and Distribution of Corresponding Shares" for a
description of the classes of Corresponding Shares to be issued in the
Reorganizations.
North American Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for its obligations. However, the Declaration of Trust of North American Funds
contains an express disclaimer of shareholder liability for acts or obligations
of each Acquired Fund and provides for indemnification and reimbursement of
expenses out of that Fund's property for any shareholder held personally liable
for the obligations of that Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Funds themselves would be unable to meet their obligations. Given
the above limitations on shareholder personal liability and the nature of the
Acquired Funds' assets and operations, the possibility that a Fund would be
unable to meet its obligations is remote, and each of the Acquired Funds
believes that the risk of a personal liability to shareholders is also therefore
remote. SunAmerica Strategic Investment Series, Inc. is a corporation organized
under Maryland law. In contrast to the laws governing Massachusetts business
trusts as described above, there is no provision under Maryland law governing
corporations providing for shareholder liability for obligations of a
corporation.
Shareholder Inquiries
---------------------
Shareholder inquiries with respect to the Acquired Funds may be addressed
to each Acquired Fund at 286 Congress Street, Boston, Massachusetts 02210 or by
calling toll free 1-800-872-8037. Shareholder inquiries with respect to the
Acquiring Funds may be addressed to each Acquiring Fund at The SunAmerica
Center, 733 Third Avenue, New York, NY 10017-3204 or by calling toll free 1-800-
858-8850.
THE REORGANIZATIONS
General
Under each Plan, the applicable Acquiring Fund will acquire substantially
all of the assets, and assume substantially all of the liabilities, of the
respective Acquired Fund solely in exchange for an equal aggregate value of
Corresponding Shares of such Acquiring Fund. Upon receipt by an Acquired Fund
of Corresponding Shares, such Acquired Fund will distribute such Corresponding
Shares to its shareholders, as described below. All issued and
-49-
outstanding shares of the Acquired Funds will be cancelled, and each Acquired
Fund's existence as a separate investment portfolio of North American Funds will
be terminated as soon as practicable following consummation of the respective
Reorganization.
Generally, the assets transferred by an Acquired Fund to the respective
Acquiring Fund will include all investments of such Acquired Fund held in its
portfolio as of the Valuation Time (as defined in the Plans) and all other
assets of such Acquired Fund as of such time.
In the course of each Reorganization, each holder, if any, of Class A,
Class B, Class C and Institutional Class I shares of an Acquired Fund will
receive Class A, Class B, Class II and Class I Corresponding Shares,
respectively, of the respective Acquiring Fund. No sales charges will be
imposed on the Corresponding Shares issued in connection with the
Reorganizations.
Each Acquired Fund will distribute the Corresponding Shares received by it
in connection with its Reorganization pro rata to its shareholders in exchange
for such shareholders' proportional interests in such Acquired Fund. The
Corresponding Shares received by an Acquired Fund's shareholders will have the
same aggregate net asset value as each such shareholder's interest in such
Acquired Fund as of the Valuation Time. See "-- Terms of the Plans -- Valuation
of Assets and Liabilities" for information concerning the calculation of net
asset value.
Since the Corresponding Shares will be issued at net asset value in
exchange for the net assets of an Acquired Fund having a value equal to the
aggregate net asset value of the shares of such Acquired Fund as of the
Valuation Time, the net asset value per share of the respective Acquiring Fund
should remain virtually unchanged solely as a result of the applicable
Reorganization. Thus, the Reorganizations should not result in dilution of the
net asset value of the Acquired Funds or the Acquiring Funds immediately
following consummation of the Reorganizations. However, as a result of the
Reorganizations, a shareholder of an Acquired Fund would hold a smaller
percentage of ownership in the respective Acquiring Fund than he or she did in
the Acquired Fund prior to the Reorganizations. In addition, a shareholder of
an Acquired Fund may end up with a different number of shares compared to what
he or she originally held, but the total dollar value of shares held will remain
the same.
If the shareholders of the Acquired Funds approve the Reorganizations at
the Meeting, all required regulatory approvals are obtained, and certain
conditions are either met or waived, it is expected that the Reorganizations
will take place during the fourth calendar quarter of 2001. One Reorganization
is not dependent on the consummation of any other Reorganization. If an
Acquired Fund's shareholders do not approve the respective Reorganization, the
NAF Board will consider other possible courses of action which may be in the
best interests of shareholders.
Terms of the Plans
The following is a summary of the significant terms of the Plans. This
summary is qualified in its entirety by reference to the Plans, a form of which
is attached hereto as Exhibit II.
Valuation of Assets and Liabilities
-----------------------------------
The respective assets and liabilities of the Acquired Funds and the
Acquiring Funds will be valued as of the Valuation Time. The assets in each
Fund will be valued according to the procedures set forth under "Transaction
Policies -- Valuation of Shares" and "Determination of Net Asset Value" in the
Acquiring Funds Prospectuses and the Acquiring Funds Statements, respectively.
Purchase orders for an Acquired Fund's shares which have not been confirmed as
of the Valuation Time will be treated as assets of such Acquired Fund for
purposes of the respective Reorganization; redemption requests with respect to
an Acquired Fund's shares which have not settled as of the Valuation Time will
be treated as liabilities of such Acquired Fund for purposes of the respective
Reorganization.
-50-
Issuance and Distribution of Corresponding Shares
-------------------------------------------------
On the next full business day following the Valuation Time (the "Closing
Date"), each Acquiring Fund will issue to the respective Acquired Fund a number
of full and fractional Corresponding Shares the aggregate net asset value of
which will equal the aggregate net asset value of shares of such Acquired Fund
as of the Valuation Time. Such Acquired Fund will then distribute the
Corresponding Shares received by it pro rata to its shareholders of record as of
the Valuation Time in exchange for such shareholders' proportional interests in
such Acquired Fund. Such issuance and distribution will be done as follows:
each holder, if any, of Class A, Class B, Class C and Institutional Class I
shares of an Acquired Fund will receive Class A, Class B, Class II and Class I
Corresponding Shares, respectively, of the respective Acquiring Fund. The
Corresponding Shares received by an Acquired Fund's shareholder will have the
same aggregate net asset value as such shareholder's interest in such Acquired
Fund as of the Valuation Time.
Expenses
--------
All costs of the Reorganizations will be borne by AIG or an affiliate
thereof, regardless of whether the Reorganizations are consummated. No portion
of the expenses of the Reorganizations will be borne directly or indirectly by
the Funds or their shareholders.
Required Approvals
------------------
The completion of each Reorganization is conditioned upon, among other
things, the receipt of certain regulatory approvals. In addition, the
Declaration of Trust of North American Funds (as amended to date) requires
approval of each Reorganization by the affirmative vote of the respective
Acquired Fund's shareholders representing no less than a majority of the
outstanding voting securities of that Fund, voting together as a single class,
cast at a meeting at which a quorum is present. "Majority" for this purpose
under the Investment Company Act means the lesser of (i) more than 50% of the
outstanding shares of the applicable Acquired Fund and (ii) 67% or more of the
shares of that Acquired Fund represented at the Meeting if more than 50% of such
shares are represented.
Amendments and Conditions
-------------------------
The Plans may be amended at any time prior to the Closing Date with respect
to any of the terms therein. The obligations of each Acquired Fund and
Acquiring Fund pursuant to the respective Plan are subject to various
conditions, including the requisite approval of the respective Reorganization by
such Acquired Fund's shareholders, the receipt of an opinion of counsel as to
tax matters and the confirmation by the respective Acquired Fund and Acquiring
Fund of the continuing accuracy of their respective representations and
warranties contained in such Plan.
Termination, Postponement and Waivers
-------------------------------------
Each Plan may be terminated, and the respective Reorganization abandoned at
any time, whether before or after adoption thereof by the respective Acquired
Fund's shareholders, prior to the Closing Date or the Closing Date may be
postponed: (i) by mutual agreement of the NAF Board and the SunAmerica Board;
(ii) by an Acquired Fund if any condition to such Acquired Fund's obligations
has not been fulfilled or waived; or (iii) by an Acquiring Fund if any condition
to such Acquiring Fund's obligations has not been fulfilled or waived.
NAF Board Considerations: Potential Benefits to Shareholders as a Result of the
Reorganizations
In approving the Reorganizations, based upon their evaluation of all
relevant information, and after meeting with counsel to the NAF Independent
Trustees regarding the legal issues involved, the NAF Board considered that,
following each Reorganization, shareholders of an Acquired Fund will remain
invested in a mutual fund which has substantially the same investment objective
and similar, though not identical, investment techniques. In addition, the NAF
Board considered the following, among other things:
. Terms and conditions of the Reorganizations.
-51-
. The fact that the Acquiring Funds will assume substantially all the
liabilities of the respective Acquired Funds.
. The gross and net expense ratios of the Acquired Funds before the
Reorganizations and the estimated expense ratios of the Combined Funds on a
pro forma basis after the Reorganizations.
. The relative annual rates of advisory fees payable by the Acquired Funds
and the Combined Funds.
. The fact that the Reorganizations would not result in dilution of Acquired
Fund shareholders' interests.
. That fact that AGAM has agreed to waive fees or reimburse expenses for the
NAF Stock Index Fund and the NAF Science & Technology Fund, but there is no
assurance that the current fee waivers and expense reimbursements would
continue after February 28, 2002.
. The fact that SAAMCo has contractually agreed to waive fees or reimburse
expenses for certain classes of shares of the SunAmercia Stock Index Fund
and SunAmerica Science & Technology Fund.
. The investment experience, expertise and resources of SAAMCo and other
service providers to the Acquiring Funds in the areas of distribution,
investment, and shareholder services.
. The service and distribution resources available to the Acquiring Funds and
compatibility of the Fund's service features available to shareholders.
. The fact that each Reorganization has been structured with the intention
that it qualify for Federal income tax purposes as a tax-free
reorganization under the Code.
. The fact that AIG or an affiliate thereof will bear all expenses relating
to the Reorganizations.
. The effect of the Reorganizations on Acquired Fund shareholders and the
value of their interests.
. Alternatives available to Acquired Fund shareholders, including the ability
to redeem their shares.
The NAF Board also identified and considered certain potential benefits to
shareholders that are likely to result from the Reorganizations, including
benefits to Acquired Fund Shareholders from becoming shareholders in the
SunAmerica Mutual Funds complex. Because SunAmerica has broad distribution
channels, it is possible that the asset base of each Combined Fund will increase
over the long term, which would tend to result in a lower overall operating
expenses. Of course, there is no guarantee that such increases in the asset
base would in fact occur. Another advantage to shareholders identified by the
NAF Board with respect to each of the NAF Growth LifeStyle Funds is the
immediate expected reduction in total combined annual expenses (as a percentage
of net assets) that would be borne by shareholders of these Funds following the
Reorganization as a result of the relatively lower operating expenses of the
SunAmerica Underlying Funds.
The table below sets forth the total net assets of each of the Acquiring
Funds and each of the Acquired Funds, in each case as of April 30, 2001, as well
as the net assets of each of the Combined Funds, on a pro forma basis, assuming
the Reorganizations had been completed on such date. Each of the Acquiring
Funds is newly created and has not yet commenced operations. Accordingly, each
of the Acquiring Funds had no assets as of such date.
Total Net Assets
as of April 30, 2001
NAF Stock Index Fund SunAmerica Stock Index Fund Pro Forma Stock Index Combined Fund
Class A $ 8,374,116 Class A N/A Class A $ 8,374,116
Class B $24,812,313 Class B N/A Class B $24,812,313
-52-
Total Net Assets
as of April 30, 2001
Class C $ 1,269,806 Class II N/A Class C $ 1,269,806
Institutional Class I N/A Class I $ 0
Class I $ 0 Total N/A Total $34,456,235
Total $34,456,235
NAF Science & Technology Fund SunAmerica Science & Technology Fund Pro Forma Science & Technology Combined
Class A $ 3,887,416 Class A N/A Fund
Class B $13,463,381 Class B N/A Class A $ 3,887,416
Class C $ 1,336,929 Class II N/A Class B $13,463,381
Institutional Class I N/A Class II $ 1,336,929
Class I $ 332,897 Total N/A Class I $ 332,897
Total $19,020,623 Total $19,020,623
NAF Aggressive Growth LifeStyle SunAmerica Aggressive Growth LifeStyle Pro Forma Aggressive Growth LifeStage
Fund Fund Combined Fund
Class A $ 3,720,436 Class A N/A Class A $ 3,720,436
Class B $14,011,636 Class B N/A Class B $14,011,636
Class C $ 181,147 Class II N/A Class II $ 181,147
Institutional Class I N/A Class I $ 5,322,847
Class I $ 5,322,847 Total N/A Total $23,236,066
Total $23,236,066
NAF Moderate Growth LifeStyle SunAmerica Moderate Growth LifeStage Fund Pro Forma Moderate Growth LifeStage
Fund Class A N/A Combined Fund
Class A $ 4,208,417 Class B N/A Class A $ 4,208,417
Class B $13,585,890 Class II N/A Class B $13,585,890
Class C $ 599,878 Class I N/A Class II $ 599,878
Institutional Total N/A Class I $ 7,553,467
Class I $ 7,553,467 Total $25,947,652
Total $25,947,652
NAF Conservative Growth SunAmerica Conservative Growth LifeStage Pro Forma Conservative Growth LifeStage
LifeStyle Fund Fund Combined Fund
Class A $ 3,364,276 Class A N/A Class A $ 3,364,276
Class B $10,098,087 Class B N/A Class B $10,098,087
Class C $ 536,973 Class C N/A Class II $ 536,973
Institutional Class I N/A Class I $ 5,112,079
Class I $ 5,112,079 Total N/A Total $19,111,415
Total $19,111,415
The NAF Board also considered the fees and expenses applicable to the
Acquiring Funds and the Acquired Funds, especially the fact that the fees and
net expenses (total combined annual expenses, in the case of the Growth
LifeStage Funds) applicable to Acquired Fund shareholders will not increase
after the Reorganizations. This is because the fees and net expenses (total
combined annual expenses, in the case of the Growth LifeStage Funds) of each
Combined Fund are generally expected to be the same as those of the
corresponding Acquired Fund, with the exception of the Growth LifeStage Combined
Funds for which total combined annual expenses are expected to be lower than
those of the corresponding Acquired Funds. To illustrate this, see the total
and net operating expenses (total combined annual expenses, in the case of the
Growth LifeStage Funds), as a percentage of net assets, for the Acquired Funds
and the Acquiring Funds as of April 30, 2001, and the total and net operating
expenses (total combined annual expenses, in the case of the Growth LifeStage
Funds), as a percentage of net assets, for the Combined Funds, on a pro forma
basis, assuming the Reorganizations had been completed as of such date, under
"Fee Tables" above. In addition, because SunAmerica has broad distribution
channels, it is also possible that the
-53-
asset base for the Combined Funds will increase over the long term, which would
tend to result in a lower overall operating expense ratio. Of course, there is
no guarantee that such increases in asset base would in fact occur.
In addition to the potential economies of scale which may be realized
through combination of the Funds, the NAF Board also considered the advantage of
eliminating the competition and duplication of effort inherent in marketing
funds having similar investment objectives.
AGAM is contractually obligated to provide the fee reductions and expense
reimbursements referenced in footnote [5] under "Fee Tables" above through
February 28, 2002. If shareholders do not approve the Reorganizations, each
Acquired Fund will continue with its current fee structure except that there is
no assurance that AGAM would continue to provide such fee reductions and
reimbursements to the NAF Stock Index Fund and NAF Science & Technology Fund
past this date. If shareholders approve the Reorganizations, the respective
Combined Funds' expense structure will apply. It should be noted that the
Combined Fund expense waivers and fee reimbursements will continue indefinitely
subject to termination by the SunAmerica Board, including a majority of the
SunAmerica Independent Directors. SunAmerica may not increase such ratios, which
are contractually required by agreement with the SunAmerica Board, without the
approval of the SunAmerica Board, including a majority of the SunAmerica
Independent Directors.
Based on the foregoing, together with other factors and information
considered to be relevant and recognizing that there can be no assurance that
any operating efficiencies or other benefits will in fact be realized, the NAF
Board concluded that the Reorganizations present no significant risks or costs
(including legal, accounting and administrative costs) that would outweigh the
benefits discussed above. In connection with the approval of the
Reorganizations, the NAF Board also approved directed brokerage arrangements
with certain brokers to reduce the costs that might otherwise be incurred to
align the portfolio of each of the Acquired Funds with those of the respective
Acquiring Fund to facilitate a smooth transition upon consummation of the
Reorganizations. Because the Acquired Funds and the Acquiring Funds have
substantially similar investment objectives and similar investment strategies,
it is not anticipated that the securities held by an Acquired Fund will be sold
in significant amounts in order to comply with the objectives and investment
policies of the respective Acquiring Fund in connection with the applicable
Reorganization. The Acquired Funds will not dispose of assets to an extent or
in a manner that would jeopardize the tax-free nature of the Reorganizations
under the Code. However, the disposition of assets by an Acquired Fund may
result in the realization of taxable gains or losses by Acquired Fund
shareholders.
In approving the Reorganizations, the NAF Board, including all of the NAF
Independent Trustees, determined that each Reorganization is in the best
interests of the respective Acquired Fund and its shareholders. In addition,
the NAF Board, including all of the NAF Independent Trustees, also determined
that the interests of the shareholders of each Acquired Fund would not be
diluted as a result of effecting the respective Reorganization because each such
shareholder will receive Corresponding Shares of the Acquiring Fund having an
aggregate net asset value equal to the aggregate net asset value of his or her
shares of the Acquired Fund outstanding as of the Valuation Time. Consequently,
the NAF Board approved the Plans and directed that each Plan be submitted to the
shareholders of each respective Acquired Fund for approval.
The Board of Trustees of North American Funds unanimously recommends that
the shareholders of each Acquired Fund approve the respective Plan.
The SunAmerica Board has also approved the Plans on behalf of the Acquiring
Funds.
Federal Income Tax Consequences of the Reorganizations
General
-------
Each Reorganization has been structured with the intention that it qualify
for Federal income tax purposes as a tax-free reorganization under Section
368(a) of the Code. As a condition to the closing of each Reorganization, each
of the Acquired Funds and Acquiring Funds will receive an opinion of Shearman &
Sterling, counsel to the Acquiring Funds, substantially to the effect that,
among other things, for Federal income tax purposes, upon consummation of each
Reorganization (i) no gain or loss will be recognized by an Acquired Fund or an
Acquiring Fund as a result of its respective Reorganization, (ii) no gain or
loss will be recognized by a shareholder of an Acquired Fund upon his or her
receipt of Corresponding Shares in the respective Reorganization solely in
exchange for his or her shares of such Acquired Fund, (iii) each Acquired Fund
and Acquiring Fund will be a "party to a reorganization," (iv) the holding
period of the assets of an Acquired Fund acquired by the respective Acquiring
Fund
-54-
will include the period during which such assets were held by the Acquired Fund,
(v) the holding period for Corresponding Shares of an Acquiring Fund received by
each shareholder of the respective Acquired Fund in exchange for its shares in
the Acquired Fund will include the period during which such shareholder held
shares of the Acquired Fund (provided the Acquired Fund shares were held as
capital assets on the date of the exchange), and (vi) immediately after a
Reorganization, the tax basis of the Corresponding Shares received by
shareholders of the respective Acquired Fund in the Reorganization will be
equal, in the aggregate, to the tax basis of the shares of such Acquired Fund
surrendered in exchange therefor. Shearman & Sterling's opinion will be based
upon certain representations made by the parties to the Reorganizations.
An opinion of counsel does not have the effect of a private letter ruling
from the Internal Revenue Service ("IRS") and is not binding on the IRS or any
court. If a Reorganization is consummated but fails to qualify as a
reorganization within the meaning of Section 368 of the Code, the Reorganization
would be treated as a taxable sale of assets followed by a taxable liquidation
of the respective Acquired Fund, and the Acquired Fund shareholders would
recognize a taxable gain or loss equal to the difference between their basis in
the Acquired Fund shares and the fair market value of the Corresponding Shares
received.
To the extent an Acquiring Fund has unrealized capital gains at the time of
the respective Reorganization, the respective Acquired Fund's shareholders may
incur taxable gains in the year that such Acquiring Fund realizes and
distributes those gains. This will be true notwithstanding that the unrealized
gains were reflected in the price of such Acquiring Fund's shares at the time
they were exchanged for assets of such Acquired Fund in the respective
Reorganization. Conversely, shareholders of an Acquiring Fund would share in
unrealized capital gains of the respective Acquired Fund after the respective
Reorganization and bear a tax consequence on the subsequent realization of such
gains. Shareholders should consult their tax advisers regarding the effect of
the Reorganizations in light of their individual circumstances. As the
foregoing relates only to Federal income tax consequences, shareholders also
should consult their tax advisers as to the foreign, state, local and other tax
consequences of the Reorganizations.
Status as a Regulated Investment Company
----------------------------------------
The Acquired Funds have elected and qualified, and each Acquiring Fund
intends to qualify and continue to qualify, to be taxed as regulated investment
companies under Sections 851-855 of the Code, and after the Reorganizations, the
Combined Funds intend to operate so as to qualify as regulated investment
companies. An Acquired Fund's existence as a separate investment portfolio of
North American Funds will be terminated as soon as practicable following the
consummation of the applicable Reorganization.
Capitalization
The following table sets forth the capitalization of each Acquired Fund and
each Acquiring Fund as of April 30, 2001, and the capitalization of each
Combined Fund, on a pro forma basis, as if the Reorganizations had occurred on
that date. As a newly created portfolio of SunAmerica Strategic Investment
Series, Inc., each Acquiring Fund had no assets as of such date.
-55-
NAF Stock Index Fund SunAmerica Stock Index Fund*
Institutional
Class A Class B Class C Class I** Class A Class B Class II Class I
---------- ----------- ----------- --------- ------- ------- -------- -------
Total Net Assets $ 8,374,116 $24,812,213 $ 1,269,806 $ 0 N/A N/A N/A N/A
Shares 758,061 2,254,865 116,080 0 N/A N/A N/A N/A
Outstanding
Net Asset Value $ 11.05 $ 11.00 $ 10.94 $ 0 N/A N/A N/A N/A
Per Share
Pro Forma Stock Index Combined Fund
Class A Class B Class II Class I
----------- --------- ---------- -------
Total Net Assets $ 8,374,116 $24,812,313 $ 1,269,806 $ 0
Shares 758,061 2,254,865 116,080 $ 0
Outstanding
Net Asset Value $ 11.05 $ 11.00 $ 10.94 $ 0
Per Share
NAF Science & Technology Fund SunAmerica Science & Technology Fund*
Institu-
tional
Class A Class B Class C Class I Class A Class B Class II Class I
--------- --------- --------- --------- --------- --------- ---------- --------
Total Net Assets $3,887,416 $13,463,381 $1,336,929 $332,897 N/A N/A N/A N/A
Shares 779,767 2,726,669 277,392 66,676 N/A N/A N/A N/A
Outstanding
Net Asset Value $4.99 $4.94 $4.82 $4.99 N/A N/A N/A N/A
Per Share
Pro Forma Science & Technology Combined Fund
Class A Class B Class II Class I
--------- --------- --------- --------
Total Net Assets $3,887,416 $13,463,381 $1,336,929 $ 332,897
Shares 779,767 2,726,669 277,392 66,676
Outstanding
Net Asset Value $4.99 $4.94 $4.82 $4.99
Per Share
NAF Aggressive Growth LifeStyle Fund SunAmerica Aggressive Growth LifeStage Fund*
Institu-
tional
Class A Class B Class C Class I Class A Class B Class II Class I
--------- --------- --------- -------- --------- --------- ---------- --------
Total Net Assets $3,720,436 $14,011,636 $181,147 $5,322,847 N/A N/A N/A N/A
Shares 408,408 1,535,560 19,700 583,083 N/A N/A N/A N/A
Outstanding
Net Asset Value $9.11 $9.12 $9.20 $9.13 N/A N/A N/A N/A
Per Share
Pro Forma Aggressive Growth LifeStage
Combined Fund
Class A Class B Class II Class I
--------- --------- --------- --------
Total Net Assets $3,720,436 $14,011,636 $181,147 $ 5,322,847
Shares 408,408 1,535,560 19,700 583,083
Outstanding
Net Asset Value $9.11 $9.12 $9.20 $9.13
Per Share
-56-
NAF Moderate Growth LifeStyle Fund SunAmerica Moderate Growth
LifeStage Fund*
Institutional
Class A Class B Class C Class I Class A Class B Class II Class I
------- ------- ------- ------- ------- ------- -------- -------
Total Net Assets $4,208,417 $13,585,890 $599,878 $7,553,467 N/A N/A N/A N/A
Shares Outstanding 433,247 1,395,980 61,564 778,228 N/A N/A N/A N/A
Net Asset Value $ 9.71 $ 9.73 $ 9.74 $ 9.71 N/A N/A N/A N/A
Per Share
Pro Forma Moderate Growth LifeStage
Combined Fund
Class A Class B Class II Class I
------- ------- -------- -------
Total Net Assets $4,208,417 $13,585,890 $599,878 $7,553,467
Shares Outstanding 433,247 1,395,980 61,564 778,228
Net Asset Value $ 9.71 $ 9.73 $ 9.74 $ 9.71
Per Share
NAF Conservative Growth SunAmerica Conservative Growth
LifeStyle Fund LifeStage Fund*
Institutional
Class A Class B Class C Class I Class A Class B Class II Class I
--------- ------- ------- ------- ------- ------- -------- -------
Total Net Assets $3,364,276 $10,098,087 $536,973 $5,112,079 N/A N/A N/A N/A
Shares Outstanding 343,639 1,026,961 54,503 521,695 N/A N/A N/A N/A
Net Asset Value $ 9.79 $ 9.83 $ 9.85 $ 9.80 N/A N/A N/A N/A
Per Share
Pro Forma Conservative Growth LifeStage
Combined Fund
Class A Class B Class II Class I
------- ------- -------- -------
Total Net Assets $3,364,276 $10,098,087 $536,973 $5,112,079
Shares Outstanding 343,639 1,026,961 54,503 521,695
Net Asset Value $ 9.79 $ 9.83 $ 9.85 $ 9.80
Per Share
____________
* The Acquiring Funds were not operating at April 30, 2001.
** No Class I information is shown for the NAF Stock Index Fund, because no
Class I shares are currently outstanding for this Fund.
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganizations; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the applicable Reorganization.
-57-
GENERAL
-------
INFORMATION CONCERNING THE MEETING
Date, Time and Place of Meeting
The Meeting will be held on November 7, 2001, at the principal executive
offices of North American Funds, 286 Congress Street, Boston, Massachusetts
02210, at 10:00 a.m., Eastern time.
Solicitation, Revocation and Use of Proxies
A shareholder executing and returning a proxy has the power to revoke it at
any time prior to its exercise by executing a superseding proxy (i.e., later-
dated and signed), by submitting a notice of revocation to the Secretary of
North American Funds or by subsequently registering his or her vote by telephone
or via the Internet. In addition, although mere attendance at the Meeting will
not revoke a proxy, a shareholder present at the Meeting may withdraw his or her
proxy and vote in person.
All shares represented by properly executed proxies received at or prior to
the Meeting, unless such proxies previously have been revoked, will be voted at
the Meeting in accordance with the directions on the proxies; if no direction is
indicated on a properly executed proxy, such shares will be voted "FOR" approval
of the New Investment Advisory Agreement, the New Subadvisory Agreement (if
applicable) and the respective Plan.
It is not anticipated that any matters other than the approval of the New
Agreements and approval of the respective Plan will be brought before the
Meeting. If, however, any other business properly is brought before the
Meeting, proxies will be voted in accordance with the judgment of the persons
designated on such proxies.
Record Date and Outstanding Shares
Only holders of record of shares of the Acquired Funds at the close of
business on September 17, 2001 (the "Record Date") are entitled to vote at the
Meeting or any adjournment thereof. The following chart sets forth the shares
of each class of the Acquired Funds issued and outstanding and entitled to vote
at the close of business on the Record Date.
Institutional
Class A Shares Class B Shares Class C Shares Class I Shares
-------------- --------------- -------------- --------------
NAF Stock Index Fund
NAF Science & Technology Fund
NAF Aggressive Growth LifeStyle Fund
NAF Moderate Growth LifeStyle Fund
NAF Conservative Growth LifeStyle Fund
Security Ownership of Certain Beneficial Owners and Management of the Funds
To the knowledge of each Fund, as of August 31, 2001, the following
shareholders, if any, owned beneficially or of record more than 5% of the
outstanding voting securities of such Fund:
Name of Fund Name and Address of Percentage and type of Percentage of class of shares After
Shareholder ownership Reorganization on a pro forma basis*
NAF Stock Index Fund [Insert shareholder(s)] [Insert % and type of [Insert %]
ownership]
NAF Science & Technology Fund [Insert shareholder(s)] [Insert % and type of [Insert %]
ownership]
-58-
Name of Fund Name and Address of Percentage and type of Percentage of class of shares After
Shareholder ownership Reorganization on a pro forma basis
NAF Aggressive Growth LifeStyle Fund [Insert shareholder(s)] [Insert % and type of [Insert %]
ownership]
NAF Moderate Growth LifeStyle Fund [Insert shareholder(s)] [Insert % and type of [Insert %]
ownership]
NAF Conservative Growth LifeStyle Fund [Insert shareholder(s)] [Insert % and type of [Insert %]
ownership]
SunAmerica Aggressive Growth [Insert shareholder(s)] [Insert % and type of [Insert %]
LifeStage Fund ownership]
SunAmerica Moderate Growth LifeStage [Insert shareholder(s)] [Insert % and type of [Insert %]
Fund ownership]
SunAmerica Conservative Growth [Insert shareholder(s)] [Insert % and type of [Insert %]
LifeStage Fund ownership]
____________
* Assuming that [shareholder] owns the same number of shares of the [Fund] on
the date of consummation of the applicable Reorganization as on August 31,
2001.
At August 31, 2001, the directors and officers of North American Funds as a
group (___ persons) owned an aggregate of less than 1% of the outstanding shares
of each Acquired Fund and owned an aggregate of less than 1% of the outstanding
shares of common stock of North American Funds. [confirm]
At August 31, 2001, the directors and officers of SunAmerica Strategic
Investment Series, Inc. as a group (___ persons) owned an aggregate of less than
1% of the outstanding shares of each Acquiring Fund and owned an aggregate of
less than 1% of the outstanding shares of common stock of SunAmerica Strategic
Investment Series, Inc. [confirm]
Voting Rights and Required Vote
Each share of an Acquired Fund is entitled to one vote with fractional
shares voting proportionally. Shareholders of each Acquired Fund vote separately
on whether to approve the New Agreements and approval with respect to one
Acquired Fund is not dependent on approval with respect to any other Acquired
Fund. Shareholders of each applicable Acquired Fund also vote separately on
whether to approve the New Subadvisory Agreement, and approval with respect to
one Acquired Fund is not dependent on approval with respect to any other
Acquired Fund. Approval of the Plan with respect to one Acquired Fund is not
dependent on approval of the Plan with respect to any other Acquired Fund.
Approval of the New Agreements and each Plan with respect to an Acquired Fund
requires the affirmative vote of a majority of the outstanding voting securities
of that Fund, voting together as a single class, cast at a meeting at which a
quorum is present. "Majority" for this purpose under the Investment Company Act
means the lesser of (i) more than 50% of the outstanding shares of the
applicable Acquired Fund and (ii) 67% or more of the shares of that Acquired
Fund represented at the Meeting if more than 50% of such shares are represented.
Broker-dealer firms holding shares of any of the Acquired Funds in "street
name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares before
the Meeting. Broker-dealer firms will not be permitted to grant voting authority
without instructions with respect to the approval of the Plans. Each of the
Acquired Funds will include shares held of record by broker-dealers as to which
such authority has been granted in its tabulation of the total number of shares
present for purposes of
-59-
determining whether the necessary quorum of shareholders exists. Properly
executed proxies that are returned but that are marked "abstain" or with respect
to which a broker-dealer has declined to vote on any proposal ("broker non-
votes") will be counted as present for the purposes of determining a quorum.
Assuming the presence of a quorum, abstentions and broker non-votes will have
the same effect as a vote against approval of the New Investment Advisory
Agreement or of the applicable Plan, as the case may be.
A quorum for each Acquired Fund for purposes of the Meeting consists of
thirty percent of the shares of such Acquired Fund entitled to vote at the
Meeting, present in person or by proxy. If, by the time scheduled for each
Meeting, a quorum of the applicable Acquired Fund's shareholders is not present
or if a quorum is present but sufficient votes in favor of approval of the New
Agreements or of the applicable Plan are not received from the shareholders of
the applicable respective Acquired Fund, the persons named as proxies may
propose one or more adjournments of such Meeting to permit further solicitation
of proxies from shareholders. Any such adjournment will require the affirmative
vote of less than thirty percent of the shares of the applicable Acquired Fund
present in person or by proxy and entitled to vote at the session of the Meeting
to be adjourned. The persons named as proxies will vote in favor of any such
adjournment if they determine that adjournment and additional solicitation are
reasonable and in the interests of the shareholders of such Acquired Fund.
The votes of shareholders of the Acquiring Funds are not being solicited by
this Proxy Statement and Prospectus and are not required to carry out the
respective Reorganizations.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus will be
borne by AIG or an affiliate thereof. Such expenses are currently estimated to
be approximately $______ in the aggregate.
AIG or an affiliate thereof will reimburse banks, brokers and others for
their reasonable expenses in forwarding proxy solicitation materials to
beneficial owners of the Acquired Funds and will reimburse certain persons that
it may employ for their reasonable expenses in assisting in the solicitation of
proxies from such beneficial owners.
In order to obtain the necessary quorums at the Meetings, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of the Acquired Funds. North American Funds has retained Georgeson
Shareholder, 17 State Street, New York, New York 10004 to aid in the
solicitation of proxies at a cost estimated not to exceed $4,000, plus out-of-
pocket expenses. The cost of soliciting proxies will be borne by AIG or an
affiliate thereof.
This Proxy Statement and Prospectus does not contain all of the information
set forth in the registration statements and the exhibits relating thereto which
North American Funds and SunAmerica Strategic Investment Series, Inc. have filed
on behalf of their respective Funds with the Commission under the Securities Act
and the Investment Company Act, to which reference is hereby made.
The Funds are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the Investment Company Act, and in
accordance therewith file reports and other information with the Commission.
Proxy material, reports and other information filed by the Funds (or by North
American Funds on behalf of the Acquired Funds or SunAmerica Strategic
Investment Series, Inc. on behalf of the Acquiring Funds) can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the New York Regional Office
of the Commission at Seven World Trade Center, New York, New York 10048. Copies
of such materials also can be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains the Statements of
Additional Information and Prospectuses of the Acquired Funds and Acquiring
Funds, as well as other material incorporated by reference and other information
regarding the Funds.
-60-
LEGAL PROCEEDINGS
There are no material legal proceedings to which any of the Funds is a
party.
LEGAL OPINIONS
Certain legal matters in connection with the issuance of Corresponding
Shares have been passed upon by Robert M. Zakem, Esq., General Counsel for
SAAMCo. Certain tax matters in connection with the Reorganizations will be
passed upon for the Acquiring Funds by Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022, counsel for the Acquiring Funds.
EXPERTS
The financial highlights of the Acquired Funds and Acquiring Funds included
in this Proxy Statement and Prospectus have been so included in reliance on the
reports of _________________, independent auditors, given on their authority as
experts in auditing and accounting. The principal business address of
_________________ is_________________.
SHAREHOLDER PROPOSALS
A shareholder proposal intended to be presented at any subsequent meeting
of shareholders of an Acquired Fund must be received by such Acquired Fund in a
reasonable time before the solicitation by the Board of Trustees of North
American Funds relating to such meeting is to be made in order to be considered
in such Acquired Fund's proxy statement and form of proxy relating to the
meeting. If proposal Nos. 2(a)-(e) are approved at the Meeting, there will
likely not be any future shareholders meetings of the Acquired Funds.
By Order of the Board of Trustees of North
American Funds
John I. Fitzgerald
_____________________________________
Secretary, North American Funds
-61-
SUBJECT TO COMPLETION
STATEMENT OF ADDITIONAL INFORMATION
SUNAMERICA STRATEGIC INVESTMENT SERIES, INC.
733 Third Avenue, Third Floor
New York, NY 10017
[(800) 858-8850]
_________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Proxy Statements and Prospectuses (the
"Proxy Statements and Prospectuses"), each dated September __, 2001, which have
been filed by SunAmerica Strategic Investment Series, Inc. (sometimes referred
to herein as the "Registrant"). Copies of the Proxy Statements and Prospectuses
may be obtained at no charge by writing to the Registrant at the address
indicated above or by calling toll-free [(800)-858-8850]. This Statement of
Additional Information has been incorporated by reference into each Proxy
Statement and Prospectus.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Proxy
Statements and Prospectuses.
Further information about the Acquiring Funds is contained in the
Acquiring Funds' Preliminary Prospectuses and combined Preliminary Statements of
Additional Information, each dated August 9, 2001. Further information about
the Acquired Funds is contained in the Acquired Funds' Prospectuses and
Statements of Additional Information, each dated March 1, 2001, the Annual
Report to Shareholders of the Acquired Funds for the year ended October 31, 2000
and the Semi-Annual Report to Shareholders of the Acquired Funds for the six
months ended April 30, 2001.
The following documents are incorporated herein by reference and
accompany this Statement of Additional Information:
. The Prospectuses of the Acquiring Funds, each dated
September __, 2001.
. The Preliminary Statements of Additional Information of the
Acquiring Funds, each dated September __, 2001.
. The Prospectus of the Acquired Funds, dated March 1, 2001.
. The Statement of Additional Information of the Acquired Funds,
dated March 1, 2001.
. The Annual Report to Shareholders of the Acquired Funds for the
year ended October 31, 2000.
. The Semi-Annual Report to Shareholders of the Acquired Funds
for the six months ended April 30, 2001.
The date of this Statement of Additional Information is September __,
2001. The Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains the prospectuses and combined statements of
additional information of the Funds, other material incorporated by reference
and other information regarding the Funds.
B-1
TABLE OF CONTENTS
General Information .................................................................................. B-3
Financial Statements ................................................................................. B-4
The date of this Statement of Additional Information is September __, 2001
B-2
GENERAL INFORMATION
The shareholders of each separate investment portfolio of North American
Funds, a Massachusetts business trust, set forth below (each an "Acquired Fund",
collectively, the "Acquired Funds"), are being asked to approve or disapprove on
behalf of each Acquired Fund (other than, in the case of the New Subadvisory
Agreement, the NAF Science & Technology Fund, which has a different subadviser
than the other Acquired Funds): (i) a new investment advisory agreement (the
"New Investment Advisory Agreement") between American General Asset Management
Corp. ("AGAM") and North American Funds, the terms of which are the same in all
material respects to the previous investment advisory agreement with AGAM, and
(ii) a new subadvisory agreement (the "New Subadvisory Agreement") between AGAM
and American General Investment Management, L.P. ("AGIM"), the terms of which
are the same in all material respects to the previous subadvisory agreement with
AGIM. In addition, Shareholders of the Acquired Funds are being asked to approve
or disapprove an Agreement and Plan of Reorganization (each, a "Plan") between
each of the Acquired Funds and each investment portfolio of SunAmerica Strategic
Investment Series, Inc., a Maryland corporation, set forth below (each, an
"Acquiring Fund," and collectively, the "Acquiring Funds").
- ------------------------------------------------------------------------------------------------------------------------------------
Acquired Fund Acquiring Fund
- ------------- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Index Fund (the "NAF Stock Index Fund") SunAmerica Stock Index Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Science & Technology Fund (the "NAF Science & Technology Fund") SunAmerica Science & Technology Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth LifeStyle Fund (the "NAF Aggressive Growth LifeStyle Fund") SunAmerica Aggressive Growth LifeStage Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Moderate Growth LifeStyle Fund (the "NAF Moderate Growth LifeStyle Fund") SunAmerica Moderate Growth LifeStage Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Conservative Growth LifeStyle Fund (the "NAF Conservative Growth LifeStyle Fund") SunAmerica Conservative Growth LifeStage Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Each Plan provides for the acquisition by an Acquiring Fund of
substantially all of the assets, and assumption of substantially all of the
liabilities, of the respective Acquired Fund, solely in exchange for an equal
aggregate value of newly issued shares (the "Corresponding Shares") of such
Acquiring Fund. Each such transaction is referred to herein as a
"Reorganization" and collectively, as the "Reorganizations." Immediately
thereafter, and as part of the respective Reorganization, such Acquired Fund
will distribute the Corresponding Shares received in such Reorganization to its
shareholders. The consummation of one Reorganization is not conditioned upon
the consummation of any other Reorganization. The Acquired Funds and the
Acquiring Funds are sometimes collectively referred to herein as the "Funds."
Shareholders will receive the same class of corresponding shares as the
shares of the respective Acquired Fund held by them immediately prior to the
applicable Reorganization, although the name of the class may be different. For
example, if a shareholder owns Class C shares of an Acquired Fund, he or she
will receive Class II shares of the respective Acquiring Fund since the
Acquiring Funds do not have a class of shares called Class C. The aggregate net
asset value of the Corresponding Shares will equal the aggregate net asset value
of a shareholder's Acquired Fund shares. This means that a shareholder may end
up with a different number of shares compared to the number that he or she
originally held, but the total dollar value of the shares will be the same.
A Joint Special Meeting of the Acquired Funds' shareholders to consider the
New Investment Advisory Agreement and the Reorganizations will be held at the
offices of North American Funds, 286 Congress Street, Boston, Massachusetts
02210 on November 7, 2001, at 10 A.M., Eastern Time. The approximate mailing
date of the Proxy Statement and Prospectus is September [27], 2001.
B-3
For further information about the Reorganizations, see the Proxy Statements
and Prospectuses.
FINANCIAL STATEMENTS
Unaudited pro forma financial statements reflecting consummation of each
Reorganization are included herein.
Acquired Funds
Audited financial statements and accompanying notes for the fiscal year
ended October 31, 2000 for the Acquired Funds and the independent auditor's
reports thereon are incorporated herein by reference from the Acquired Funds'
Annual Report to Shareholders, which accompany this Statement of Additional
Information. Unaudited financial statements and accompanying notes for the six
months ended April 30, 2001 for the Acquired Funds are incorporated herein by
reference from the Acquired Funds' Semi-Annual Report to Shareholders, which
accompanies this Statement of Additional Information.
B-4
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Reference is made to Article VII of the Registrant's By-Laws which is
set forth below.
VII Indemnification of Directors, Officers, Employees And Agents
(a) The Registrant shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Registrant or any
of its shareholders) by reason of the fact that he is or was a Director,
officer, employee or agent of the Registrant. The indemnification shall be
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him in connection with the
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendre or its equivalent, shall not, of itself, create a
presumption that, the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had
reasonable cause to believe\ that his conduct was unlawful.
(b) The Registrant shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or on behalf of the Registrant or any of its shareholders to
obtain a judgment or decree in its favor by reason of the fact that he is or was
a Director, officer, employee or agent of the Registrant. The indemnification
shall be against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of the action or
suit, if acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant; except that such
indemnification shall preclude payment upon any liability, whether or not there
is an adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in Section
17(h) and (i) of the Investment Company Act of 1940 (the "Investment Company
Act").
(c) To the extent that a Director, officer, employee or agent of the
Registrant has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) or (b) or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) above may be made by the Registrant only as authorized in
the specific case after a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) or (b).
(2) The determination shall be made:
(i) by the Directors, by a majority vote of a quorum which consists
of Directors who were not parties to the action, suit or proceeding; or
(ii) if the required quorum is not obtainable, or if a quorum of
disinterested Directors so directs, by independent legal counsel in a
written opinion; or
(iii) by the Shareholders.
(3) Notwithstanding the provisions of Article VII of the
Registrant's By-Laws, no person shall be entitled to indemnification for any
liability, whether or not there is an adjudication of liability, arising by
reason of willful malfeasance, bad faith, gross negligence or reckless disregard
of duties as described in Section
C-1
17(h) and (i) of the Investment Company Act ("Disabling Conduct"). A person
shall be deemed not liable by reason of Disabling Conduct if, either:
(i) a final decision on the merits is made by a court or other
body before whom the proceeding was brought that the person to be
indemnified ("Indemnitee") was not liable by reason of Disabling Conduct;
or
(ii) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Indemnitee was
not liable by reason of Disabling Conduct, is made by either:
(A) a majority of a quorum of Directors who are neither
"interested persons" of the Registrant, as defined in section
2(a)(19) of the Investment Company Act, nor parties to the
action, suit or proceeding;
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a
Director, officer, employee or agent of the Registrant in defending a civil or
criminal action, suit or proceeding may be paid by the Registrant in advance of
the final disposition thereof if:
(1) authorized in the specific case by the Directors; and
(2) the Registrant receives an undertaking by or on behalf of
the Director, officer, employee or agent of the Registrant to repay the
advance if it is not ultimately determined that such person is entitled to
be indemnified by the Registrant; and
(3) either,
(i) such person provides a security for his undertaking; or
(ii) the Registrant is insured against losses by reason of any
lawful advances; or
(iii) a determination, based on a review or readily available
facts, that there is reason to believe that such person ultimately will be
found entitled to indemnification, is made by either
(A) A majority of a quorum which consists of Directors who
are neither "interested persons" of the Registrant, as defined in
section 2(a)(19) of the Investment Company Act, nor parties to
the action, suit or proceeding; or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by Article VII of the
Registrant's By-Laws shall not be deemed exclusive of any other rights to which
a person may be entitled under any by-law, agreement, vote of Shareholders or
disinterested Directors or otherwise, both as to action in his official capacity
and as to action in another application while holding office, and shall continue
as to a person who has ceased to be a Director, officer, employee or agent and
inure to the benefit of the heirs, executors and administrators of such person;
provided that no person may satisfy any right of indemnity or reimbursement
granted herein or to which he may be otherwise entitled except out of the
property of the Registrant, and no Shareholder, as such, shall be personally
liable with respect to any claim for indemnity or reimbursement or otherwise.
(g) The Registrant may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Registrant, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such. However, in no event
will the Registrant pay that portion of insurance premiums, if any, attributable
to coverage which would indemnify any officer or Director against liability for
Disabling Conduct.
C-2
(h) Nothing contained in Section 7.01 of the Registrant's By-laws
shall be construed to protect any Director or officer of the Registrant against
any liability to the Registrant or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Reference is made to Section 8 of the Registrant's Articles of
Incorporation which provides that Directors shall provide for indemnification by
the Registrant of any person who is, or has been a Director, officer, employee
or agent of the Registrant against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been a Director, officer, employee or agent and against amounts
paid or incurred by him in the settlement thereof, in such manner as the
Directors may provide from time to time in the By-Laws of the Registrant.
The words "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Reference is made to Section [5] of the Distribution Agreement (the
"Distribution Agreement") between SunAmerica Capital Services, Inc. (the
"Distributor") and the Registrant which is set forth below:
(a) The Registrant will indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor within the meaning of the
Investment Company Act against any losses, claims, damages or liabilities to
which the Distributor or such controlling person may become subject, under the
Investment Company Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registrant's Registration Statement, Prospectus or Statement Additional
Information or any other written sales material prepared by the Registrant or
the separate investment portfolios of the Registrant (the " Funds") which is
utilized by the Distributor in connection with the sale of shares of beneficial
interest of a Fund (the "Shares") or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or (in the case of the Registrant's Registration Statement, Prospectus
and Statement of Additional Information) necessary to make the statement therein
not misleading or (in the case of such other sales material) necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made; and will reimburse the Distributor and each such
controlling person for any legal or other expenses reasonably incurred by the
Distributor or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Registrant or the Funds will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement, Prospectus or Statement of
Additional Information in conformity with written information furnished to the
Registrant by the Distributor specifically for use therein; and provided,
further, that nothing in the Distribution Agreement shall be so construed as to
protect the Distributor against any liability to the Registrant or the Funds, or
the security holders of the Funds to which the Distributor would otherwise be
subject by reason of Disabling Conduct. This indemnity provision will be in
addition to any liability which the Registrant may otherwise have.
(b) The Distributor will indemnify and hold harmless the Registrant, each
of its Directors and officers and each person, if any, who controls the
Registrant within the meaning of the Investment Company Act, against any losses,
claims, damages or liabilities to which the Registrant or any such Director,
officer or controlling person may become subject under the Investment Company
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registrant's
Registration Statement, Prospectus or Statement of Additional Information or any
sales material not prepared by the Registrant or the Funds which is utilized in
connection with the sale of the Shares or arise out of or are based upon the
omissions or the alleged omission to state therein a material fact required to
be stated therein or (in the case of the Registrant's Registration Statement,
Prospectus and Statement of Additional Information) necessary to make the
statement therein not misleading or (in the case of such other sales material)
necessary to make the statement therein not misleading in the light of the
circumstances under which they were made, in the case of the Registrant's
Registration Statement, Prospectus and
C-3
Statement of Additional Information to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in conformity with written information furnished to the
Registrant by the Distributor specifically for use therein; and the Distributor
will reimburse any legal or other expensed reasonably incurred by the Registrant
or any such Director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
This indemnity provision will be in addition to any liability which the
Distributor may otherwise have.
Reference is made to Section 7 of the Investment Advisory and
Management Agreement (the "Advisory Agreement") between the Registrant and
SunAmerica Asset Management Corp. ("SAAMCo") which is set forth below.
7. Liability of Adviser. In the absence of Disabling Conduct on the
part of SAAMCo (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with SAAMCo)
SAAMCo shall not be subject to liability to the Registrant or to any shareholder
of the Registrant for any act or omission in the course of, or connected with,
rendering services under the Advisory Agreement, including without limitation,
any error of judgment or mistake of law or for any loss suffered by any of them
in connection with the matters to which the Advisory Agreement relates, except
to the extent specified in Section 36(b) of the Investment Company Act
concerning loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services. Except for such Disabling Conduct, the
Registrant shall indemnify SAAMCo (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with SAAMCo) (collectively, the "Indemnified Parties") from
any liability arising from SAAMCo's conduct under the Advisory Agreement.
Indemnification to SAAMCo or any of its personnel or affiliates shall
be made when (i) a final decision on the merits rendered, by a court or other
body before whom the proceeding was brought, that the person to be indemnified
was not liable by reason of Disabling Conduct or, (ii) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that the
person to be indemnified was not liable by reason of Disabling Conduct, by (a)
the vote of a majority of a quorum of the Directors who are neither "interested
persons" of the Registrant as defined in section 2(a)(19) of the Investment
Company Act nor parties to the proceeding ("disinterested, non-party Directors")
or (b) an independent legal counsel in a written opinion. The Registrant may,
by vote of a majority of the disinterested, non-party Directors advance
attorneys' fees or other expenses incurred by an Indemnified Party in defending
a proceeding upon the undertaking by or on behalf of the Indemnified Party to
repay the advance unless it is ultimately determined that he is entitled to
indemnification. Such advance shall be subject to at least one of the
following: (1) the person to be indemnified shall provide a security for his
undertaking, (2) the Registrant shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a quorum of the
disinterested, non-party Directors or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts, that
there is reason to believe that the person to be indemnified ultimately will be
found entitled to indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
Directors, officers and controlling persons of the Registrant and the principal
underwriter pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities 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
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted by such Director, officer or controlling
person or the principal underwriter in connection with the shares being
registered, the 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 such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
C-4
ITEM 16: EXHIBITS.
(1) (a) Articles of Incorporation of Registrant. Incorporated by
reference to Exhibit (a) to the Registrant's initial Registration
Statement on Form N-1A, filed on December 22, 1998.
(b) Articles Supplementary dated June 7, 2000.***
(c) Articles Supplementary dated [_____], 2001. To be filed by
amendment.
(2) By-Laws of Registrant.*
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization. To be filed by
amendment.
(5) Instruments Defining Rights of Shareholders. Incorporated by reference
to Exhibits (a) and (b) above.
(6) (a) Investment Advisory and Management Agreement between the
Registrant and SunAmerica Asset Management Corp. ("SAAMCo"). To
be filed by amendment.
(b) Subadvisory Agreement between the Registrant and J.P. Morgan
Investment Management, Inc. ("J.P. Morgan")*
(c) Subadvisory Agreement between the Registrant and T. Rowe Price
Associates, Inc. ("T. Rowe Price"). To be filed by amendment.
(d) Subadvisory Agreement between the Registrant and American General
Investment Management, L.P. ("AGIM"). To be filed by Amendment.
(7) (a) Distribution Agreement between the Registrant and SunAmerica
Capital Services, Inc.*
(b) [Form of] Selling Agreement. To be filed by amendment.
(8) Disinterested Directors Retirement Plan*
(9) Custodian Contract between the Registrant and State Street Bank and
Trust Company.*
(10) (a) Distribution Plan pursuant to Rule 12b-1 (Class A Shares).**
(b) Distribution Plan pursuant to Rule 12b-1 (Class B Shares).**
(c) Plan pursuant to Rule 12b-1 (Class II Shares).**
(d) Rule 18f-3 Plan. To be filed by amendment.
(11) Opinion and Consent of Robert M. Zakem, Esq. To be filed by amendment.
(12) (a) Opinion and consent of Shearman & Sterling, counsel to the
Registrant, regarding certain tax matters relating to the
Reorganization between the Stock Index Fund of North American
Funds and the SunAmerica Stock Index Fund of SunAmerica Strategic
Investment Series, Inc. To be filed by amendment.
(b) Opinion and consent of Shearman & Sterling, counsel to the
Registrant, regarding certain tax matters relating to the
Reorganization between the Science & Technology Fund of
C-5
North American Funds and the SunAmerica Science & Technology Fund
of SunAmerica Strategic Investment Series, Inc. To be filed by
amendment.
(c) Opinion and consent of Shearman & Sterling counsel to the
Registrant, regarding certain tax matters relating to the
Reorganization between the Aggressive Growth LifeStyle Fund of
North American Funds and the SunAmerica Aggressive Growth
LifeStage Fund of SunAmerica Strategic Investment Series, Inc.
To be filed by amendment.
(d) Opinion and consent of Shearman & Sterling, counsel to the
Registrant, regarding certain tax maters relating to the
Reorganization between the Moderate Growth LifeStyle Fund of
North American Funds and the SunAmerica Moderate Growth LifeStage
Fund of SunAmerica Strategic Investment Series, Inc. To be filed
by amendment.
(e) Opinion and consent of Shearman & Sterling, counsel to the
Registrant, regarding certain tax matters relating to the
Reorganization between the Conservative Growth LifeStyle Fund of
North American Funds and the SunAmerica Conservative Growth
LifeStage Fund of SunAmerica Strategic Investment Series, Inc.
To be filed by amendment.
(13) (a) Transfer Agency and Service Agreement between the Registrant and
State Street Bank and Trust Company.*
(e) Service Agreement between the Registrant and SunAmerica Fund
Services, Inc.*
(f) Service Agreement between the Registrant and SunAmerica Capital
Services, Inc. To be filed by amendment.
(14) (a) Auditor's Consent. To be filed by amendment.
(b) Auditor's Consent. To be filed by amendment.
(15) Not Applicable.
(16) Power of Attorney. To be filed by amendment.
(17) (a) Prospectuses, dated September __, 2001 of SunAmerica
Strategic Investment Series, Inc. (Class A shares, Class B
shares, Class II shares and Class I shares).****
(b) Prospectus dated March 1, 2001 of North American Funds (Class A
shares, Class B Shares and Class C shares).*****
(c) Prospectus dated March 1, 2001 of North American Funds
(Institutional Class I shares.*****
(d) Statements of Additional Information, each dated September __,
2001 of SunAmerica Strategic Investment Series, Inc.****
(e) Statement of Additional Information dated March 1, 2001 of North
American Funds.*****
(f) Semi-Annual Report to Shareholders of North American Funds for
the six-month period ended April 30, 2001.******
(g) Annual Report to Shareholders of North American Funds for the
year ended October 31, 2000.*******
C-6
(h) President's Letter. To be filed by amendment.
(i) Q&A. To be filed by amendment.
(j) Form of Proxy Cards. Filed herewith.
- ------------------
* Incorporated herein by reference to identically numbered Exhibit of
the Registrant's Post-Effective Amendment #1 to Registration Statement
on Form N-1A (File No. 333-69517), filed on February 26, 1999.
** Incorporated herein by reference to identically numbered Exhibit of
the Registrant's Post-Effective Amendment #4 to Registration Statement
on Form N-1A (File No. 333-69517), filed on June 14, 2000.
*** Incorporated herein by reference to identically numbered Exhibit of
the Registrant's Post-Effective Amendment #5 to Registration Statement
on Form N-1A (File No. 333-69517), filed on February 28, 2001.
**** Incorporated by reference to Registrant's Post-Effective Amendment #7
to Registration Statement on Form N-1A (File No. 333-69517), filed on
August [15], 2001.
***** Incorporated by reference to North American Funds' Post-Effective
Amendment #35 to Registration Statement on Form N-1A (File No. 333-
27958), filed on March 1, 2001.
****** Incorporated by reference to North American Funds' Form N-30D (File
No. 333-27958), filed on July 3, 2001.
******* Incorporated by reference to North American Funds' Form N-30D (File
No. 333-27958), filed on January 17, 2001.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant agrees to prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(b) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (a) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act, each post-
effective amendment shall be deemed to be a new registration statement for the
securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(c) The undersigned Registrant undertakes to file, by post-effective
amendment, the opinion of counsel received as to certain tax matters, within a
reasonable time after receipt of such opinion.
C-7
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the city of New York, and State of
New York, on the 16/th/ day of August, 2001.
SUNAMERICA STRATEGIC INVESTMENT
SERIES, INC.
(Registrant)
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck,
President and Trustee
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
---------- ----- ----
/s/ Peter A. Harbeck President and Director (Principal Executive Officer) August 16, 2001
- -----------------------
Peter A. Harbeck
/s/ Peter C. Sutton
- ----------------------- Treasurer (Principal Financial and Accounting Officer) August 16, 2001
Peter C. Sutton
- ----------------------- Director
S. James Coppersmith
/s/ Samuel M. Eisenstat
- ----------------------- Director August 16, 2001
Samuel M. Eisenstat
/s/ Stephen J. Gutman
- ----------------------- Director August 16, 2001
Stephen J. Gutman
/s/ Sebastiano Sterpa
- ----------------------- Director August 16, 2001
Sebastiano Sterpa
C-8
EXHIBIT INDEX
Exhibit No.
- -----------
17. (j) Form of Proxy Cards.