SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

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North American Funds Variable Product Series II

(Name of Registrant as Specified in Its Charter)

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North American Funds Variable Product Series II

Q&A

Q. Why am I receiving this proxy?

A. This proxy has been mailed to you so that you may vote on several proposals concerning your investment in the North American Funds Variable Product Series II ("NAFV II"). Although you are not directly a shareholder of any Fund in NAFV II, as an owner of a variable annuity contract or variable life policy (a "Contract") issued by Separate Account A of The Variable Annuity Life Insurance Company ("VALIC") or by other insurance company separate accounts belonging to VALIC affiliates, you have the right to instruct VALIC how to vote Fund shares that are attributable to your Contract.

Q. What is being proposed?

A. There are six proposals altogether, as shown in the overview below.

To approve the new investment advisory agreement between the current investment adviser, The Variable Annuity Life Insurance Company ("VALIC"), and NAFV II with respect to each series of NAFV II.

Affected Funds: All

A new agreement is being proposed due to the acquisition of American General Corporation, VALIC's parent company, by the American International Group, Inc. ("AIG"). This is referred to in the Proxy Statement as the "Merger." The Merger was completed on August 29, 2001, and caused the old investment advisory agreement between VALIC and NAFV II to automatically expire due to the change in VALIC's ownership.

To approve the new investment sub-advisory agreement between VALIC and American General Investment Management, L.P. ("AGIM") as sub-adviser.

Affected Funds: North American-AG Core Bond Fund, North American-AG High Yield Bond Fund and North American-AG Strategic Bond Fund

The Merger brings opportunities for integration and consolidation of affiliates. It has been determined that AGIM, the current sub-adviser for the North American-AG Core Bond Fund, North American-AG High Yield Bond Fund and North American-AG Strategic Bond Fund, will consolidate operations with those of another affiliate, AIG Global Investment Corp. ("AIGGIC"), to eliminate duplication and attempt to create economies of scale within the organization. This is addressed in Proposal 4. The purpose of Proposal 2 is to ensure that these three bond funds are sub-advised during the time period from the date of the Shareholder Meeting, December 28, 2001, through the date the AIGGIC Sub-Advisory Agreement would take effect if approved by shareholders (January 1, 2002). Federal law requires that the Board of Trustees and shareholders each approve the sub-advisory agreement because it is with an affiliated sub-adviser.

To approve the new investment sub-advisory agreement between VALIC and SunAmerica Asset Management Corp. ("SAAMCo") as sub-adviser.

Affected Fund: North American-AG 2 Money Market Fund

The Merger could result in personnel and functions being moved from one affiliate (VALIC) to another affiliate (SAAMCo). SAAMCo is a wholly-owned subsidiary of SunAmerica Inc., which is a wholly-owned subsidiary of AIG. The North American-AG 2 Money Market Fund does not currently have a sub-adviser; however, when the portfolio management personnel and functions flow to SAAMCo, a sub-advisory agreement will be necessary. Thus, you are being asked to approve an investment sub-advisory agreement for this affiliated company. VALIC does not expect any change in the nature or quality of services provided as a result of these new investment sub-advisory arrangements.

To approve the new investment sub-advisory agreement between VALIC and AIGGIC as sub-adviser.

Affected Funds: North American-AG Aggressive Growth Lifestyle Fund, North American-AG Conservative Growth Lifestyle Fund, North American-AG Core Bond Fund, North American-AG High Yield Bond Fund, North American-AG Moderate Growth Lifestyle Fund, North American-AG Socially Responsible Fund and North American-AG Strategic Bond Fund

Because of the consolidation of affiliates, discussed above in the overview for Proposal 2, several of the VALIC and AGIM personnel and functions will be moved to another affiliate, AIGGIC, to eliminate duplication and attempt to create economies of scale within the organization. AIGGIC is owned by AIG Global Investment Group, Inc., which in turn is a wholly-owned subsidiary of AIG. VALIC does not expect any change in the nature or quality of services provided as a result of these new investment sub-advisory arrangements.

To approve amended fundamental investment restrictions to: (a) delete restrictions that are no longer required to be fundamental due to changes in laws or which otherwise need not be fundamental; and (b) to standardize the language of those restrictions that are still required to be fundamental.

Affected Funds: All

Many of the current fundamental investment restrictions are more restrictive than federal law. "Fundamental" in this context means that both the Board of Trustees and the Fund shareholders must approve any changes to the restriction. VALIC has recommended to the Board that the investment restrictions of the Funds be changed to conform to, but not be more restrictive than, federal law. This would give each of the Funds more flexibility; however, these changes, if approved, are not expected to affect the way in which the Funds are managed or the securities or instruments in which the Funds invest.

To elect the following as Trustees: Robert P. Condon, Dr. Judith L. Craven, William F. Devin, Dr. Timothy J. Ebner, Judge Gustavo E. Gonzales, Jr., Dr. Norman Hackerman, Peter A. Harbeck, Dr. John Wm. Lancaster, Kenneth J. Lavery, Ben H. Love, Dr. John E. Maupin, Jr., and Dr. F. Robert Paulsen.

Affected Funds: All

It has been several years since Board members have been voted on by shareholders. Recently, new members have been added, expanding the Board's knowledge, background, and experience. Trustees play an important role in governing NAFV II; thus, it is appropriate for you to vote on the complete slate of Trustees at this time.

Q. Are there any other changes as a result of the Merger?

A. Yes, we are changing the Fund names as well. The name of the registered investment company is changing from North American Funds Variable Product Series II to VALIC Company II. Here is the list of the old and new names for the individual Funds:

Q. Are there any changes to current sub-advisers?

A. Yes. In addition to the affiliated sub-advisers as discussed above, effective on or about January 1, 2002, several other sub-advisers will be changing as shown below and in the detailed prospectus supplement enclosed with this proxy statement. In addition, each affected shareholder will receive an information statement concerning these sub-adviser changes. The information statements will be mailed to shareholders during the first quarter of 2002.

Q. How should I vote my shares?

A. First you should read the proxy statement. Please call 1-800-448-2542 if you have any questions. Then you may cast your vote. The Board of Trustees recommends that you vote FOR each of the proposals.

Q. How do I cast my vote?

A. You may cast your vote using one of the following methods:

1. Through the Internet at www.proxyweb.com;
2. By touch-tone telephone: call [____________];
3. By mail: postage-paid envelope enclosed; or
4. In person: Friday, December 28, 2001

No matter how large or small your holdings, your vote counts, since VALIC will vote Fund shares in the same proportions as the instructions it receives from you, the Contract owners. Please cast your vote on these important proposals as soon as possible. Please refer to the proxy card for instructions on how to vote by mail, by telephone or through the internet. If you vote by telephone or through the internet, you do not need to mail the proxy card.

As the contract owner of your deferred compensation plan, you have the option to 1) give voting instructions, or 2) direct us to follow individual participants' instructions for voting. If you opt to give voting instructions, instructions received from participants will be disregarded. You have been provided with two proxy cards to indicate your choice.

Should you opt to give voting instructions, please complete the Voting Instruction Card. We request that you clearly mark your vote for each proposal on the Voting Instruction Card. Alternatively, if you opt to follow the individual participants' voting instructions, you should complete the Group Authorization Card, which will allow us to follow the voting instructions of the individual participants.

Please return the completed card in the enclosed postage paid envelope as soon as possible so we may be certain your vote is counted as part of this process.

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the North American Funds Variable Product Series II ("NAFV II") will be held in Meeting Room 1, at the Plaza Level of The Woodson Tower Building, 2919 Allen Parkway, Houston, Texas, at 10:00 a.m. on Friday, December 28, 2001, for the following purposes:

1. All Funds: To approve the investment advisory agreement between The Variable Annuity Life Insurance Company ("VALIC") and NAFV II with respect to each series of NAFV II;
2. North American-AG Core Bond Fund, North American-AG High Yield Bond Fund and North American-AG Strategic Bond Fund: To approve the Investment Sub-Advisory Agreement between VALIC and American General Investment Management, L.P. as sub-adviser;
3. North American-AG 2 Money Market Fund: To approve the Investment Sub-Advisory Agreement between VALIC and SunAmerica Asset Management Corp. as sub-adviser;
4. North American-AG Aggressive Growth Lifestyle Fund, North American-AG Conservative Growth Lifestyle Fund, North American-AG Core Bond Fund, North American-AG High Yield Bond Fund, North American-AG Moderate Growth Lifestyle Fund, North American-AG Socially Responsible Fund and North American-AG Strategic Bond Fund: To approve the Investment Sub-Advisory Agreement between VALIC and AIG Global Investment Corp. as sub-adviser;
5. All Funds: To approve amended fundamental investment restrictions to: (a) delete restrictions that are no longer required to be fundamental due to changes in laws or which otherwise need not be fundamental; and (b) to standardize the language of those restrictions that are still required to be fundamental;
6. All Funds: To elect the following as Trustees: Robert P. Condon, Dr. Judith L. Craven, William F. Devin, Dr. Timothy J. Ebner, Judge Gustavo E. Gonzales, Jr., Dr. Norman Hackerman, Peter A. Harbeck, Dr. John Wm. Lancaster, Kenneth J. Lavery, Ben H. Love, Dr. John E. Maupin, Jr. and Dr. F. Robert Paulsen; and
7. To transact any other business that may properly come before the Special Meeting or any adjournment or adjournments thereof.

Only shareholders of record at the close of business on October 22, 2001, are entitled to vote at this meeting and any adjournment thereof.

By Order of the Board of Trustees,

Nori L. Gabert, Esq.

Vice President and Secretary

This statement is furnished in connection with the solicitation of proxies by the Board of Trustees (the "Board") of North American Funds Variable Product Series II ("NAFV II") to be used at the Special Meeting of Shareholders. NAFV II is an open-end management investment company organized as a Delaware business trust on May 6, 1998. NAFV II is authorized to issue shares of beneficial interest. Issued shares are fully paid and non-assessable and have no preemptive or conversion rights. Shareholder voting rights are not cumulative. NAFV II has 15 separate series, or "Funds." Fund names will be changing as of January 1, 2002. For your convenience, both the old and new names are shown below. New names will be used for the remainder of this proxy statement.

Although you are not directly a shareholder of any Fund in NAFV II, as an owner of a variable annuity contract or variable life policy (a "Contract") issued by Separate Account A of The Variable Annuity Life Insurance Company ("VALIC") or by other insurance company separate accounts belonging to VALIC affiliates, you have the right to instruct VALIC how to vote Fund shares that are attributable to your Contract. VALIC will vote Fund shares in accordance with instructions received from Contract owners. Interests in Contracts for which no timely instructions are received will be voted in proportion to the instructions which have been received from other Contract owners.

The approximate date on which this proxy statement and form of proxy are first being mailed to shareholders, Contract owners and participants is [November 5], 2001.

We are asking you to consider and vote on several proposals. Some of the proposals only affect certain Funds, as shown in the table below.

VALIC and SunAmerica Asset Management Corp. ("SAAMCo") as sub-adviser.

These four Proposals are related as a result of the acquisition of American General Corporation ("American General") by American International Group, Inc. ("AIG"), on August 29, 2001 (the "Merger"). American General shareholders received 0.5790 of a share of AIG common stock in exchange for each share of American General common stock. American General, VALIC, AGIM, SAAMCo and AIGGIC are affiliated companies as a result of the Merger. For more information about AIG, VALIC, AGIM, SAAMCo and AIGGIC, please see the "Information About . . ." sections below.

VALIC is an investment adviser registered with the Securities and Exchange Commission ("SEC"). It is engaged in the business of rendering investment advisory and management services to various investment companies. NAFV II previously contracted with VALIC (the "Previous Advisory Agreement") to furnish these services to each of the Funds and is paid an annual management fee, based on each of the Fund's average daily net assets. Accordingly, VALIC provides ongoing management supervision, policy direction and legal services to the Funds. Legal services include the preparation of registration statements, prospectuses, reports to shareholders, proxy solicitation materials, fund compliance services and recordkeeping. The Board (including all of the Trustees who are not "interested persons" of the investment company (the "Independent Trustees") within the meaning of Section 2(a)(19) of the Investment Company Act of 1940 (the "1940 Act")), most recently unanimously approved the continuance of the Previous Advisory Agreement on July 17, 2001 for the earlier of a one year period or through the Merger date. The initial sole shareholder of the Funds, VALIC Separate Account A, approved the Previous Advisory Agreement on August 26, 1998.

As investment adviser to NAFV II, VALIC has overall responsibility for the general management and day-to-day operations of the Funds, but may employ one or more investment sub-advisers to make the investment decisions for a Fund. VALIC previously contracted with American General Investment Management, L.P. ("AGIM"), an affiliate, to manage the Core Bond Fund, High Yield Bond Fund and Strategic Bond Fund (the "Previous Sub-Advisory Agreement"). The Board, including the Independent Trustees, most recently unanimously approved the continuance of the Previous Sub-Advisory Agreement on July 17, 2001 for the earlier of a one year period or through the Merger date.

The consummation of the Merger constituted an assignment of the Previous Advisory and Previous Sub-Advisory Agreements under the 1940 Act. Thus, the Previous Advisory Agreement and Previous Sub-Advisory Agreement automatically terminated as of the Merger.

As a result of the Merger, VALIC and AGIM have become associated with AIG's asset management operations, which offer a wide variety of investment vehicles and services, including variable annuities, mutual funds and investment asset management. Such products and services are offered to individuals and institutions both domestically and internationally. AIG's three principal asset management operations are SAAMCo's asset management operations, AIG Global Investment Group, Inc. ("Global Investment") and its subsidiaries and AIG Capital Partners, Inc. ("Cap Partners"). SAAMCo develops and sells mutual funds and variable annuities and other investment products and provides financial services. Global Investment manages third-party institutional, retail and private equity fund assets on a global basis and provides custodial services. Cap Partners organizes and manages the invested assets of institutional investment funds and may also invest in such funds. Each of these subsidiary operations receives fees for investment products and services provided.

This association also brings opportunities for integration and consolidation of affiliates. AGIM will consolidate operations with those of another affiliate, AIGGIC, to eliminate duplication and attempt to create economies of scale within the organization. Thus, VALIC recommended that the Board approve the appointment of affiliated companies, AIGGIC and SAAMCo, as sub-advisers for the Funds listed above in Proposal 2 and 3. Both Board approval and shareholder approval are generally required whenever an investment company seeks to appoint an affiliate of the adviser as a sub-adviser.

At meetings of the Board held on July 16-17, 2001, the Board, including Independent Trustees, unanimously approved an interim advisory agreement (the "Interim Advisory Agreement") between NAFV II, on behalf of each Fund and VALIC, which became effective as of the Merger. The Board also approved an interim sub-advisory agreement between VALIC and AGIM for the Core Bond Fund, High Yield Bond Fund and Strategic Bond Fund (the "Interim Sub-Advisory Agreement"). The terms of the Interim Sub-Advisory Agreement are the same as those of the Previous Sub-Advisory Agreement, except for the effective date and term. The Interim Advisory Agreement and Interim Sub-Advisory Agreement (collectively, the Interim Agreements") were each approved by the Board pursuant to Rule 15a-4 under the 1940 Act, to ensure the uninterrupted receipt by the Funds of investment advisory services during the period between the Merger and the Shareholder Meeting. This Rule, under certain circumstances, allows interim advisory and sub-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 Agreements. The Interim Agreements require all fees earned to be escrowed pending shareholder approval of the new investment advisory agreement between NAFV II and VALIC (the "New Advisory Agreement"). If a New Advisory Agreement is not approved, VALIC and AGIM will be entitled to receive from escrow the lesser of any costs incurred in performing their duties in the Interim Agreements (plus interest earned on the amount while in escrow), or 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 Advisory or Sub-Advisory Agreements or 150 days after the Merger.

Pursuant to the terms of the Interim Advisory Agreement, VALIC is responsible for the management of the investment portfolio of each Fund. The provisions of the Interim Advisory Agreement are the same as those of the Previous Advisory Agreement, except that the provision concerning administrative services was deleted from the Interim Advisory Agreement and moved to be part of a separate Administrative Services Agreement and with respect to the effective date, the term and the escrow conditions relating to VALIC's fees, as described above. Under the 1940 Act, VALIC may continue to serve as the investment adviser for a Fund beyond an interim period of 150 days only if shareholders approve a New Advisory Agreement with VALIC. Consequently, the Board, including all Independent Trustees, unanimously approved and recommended shareholder approval of, the New Advisory Agreement. The New Advisory Agreement, if approved by shareholders, will take effect immediately upon such approval. The terms of the New Advisory Agreement are the same in all material respects as those of the Interim Advisory Agreement, except for the effective date and the termination date.

In connection with its approval of the New Advisory Agreement, the Board considered that the Merger did not involve any changes in the overall form of the advisory contract or any of the Funds' objectives or policies and observed that the fees remained the same. As part of their deliberations, the 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 VALIC; the amount and structure of investment advisers' fees generally and the fees payable under the New Advisory Agreement; the financial strength of AIG; the management, personnel and operations of AIG; the commitment of AIG to the financial services industry; and the terms of the Merger.

The Board also considered that the terms of the New Advisory Agreement are the same in all material respects as those of the Interim Advisory Agreement and that the New Advisory Agreement is essentially a continuation of the Previous Advisory Agreement, except as discussed above. The Board, including all of the Independent Trustees, determined that the terms of the New Advisory Agreement are fair and reasonable and that the approval of the New Advisory Agreement is necessary and in the best interests of NAFV II, on behalf of each Fund and its shareholders, to ensure the continued receipt of the same quality of services as is currently provided.

The Board then considered a new sub-advisory agreement for AGIM (the "New AGIM Sub-Advisory Agreement"), for the Core Bond Fund, High Yield Bond Fund and the Strategic Bond Fund, to cover the period from December 28 through December 31, 2001. The Board reviewed information regarding the AGIM investment processes and the sub-advisory fees for the Core Bond Fund, High Yield Bond Fund and the Strategic Bond Fund in connection with the New AGIM Sub-Advisory Agreement. Subsequently, the Board, including all Independent Trustees, unanimously approved and recommended shareholder approval of, the New AGIM Sub-Advisory Agreement. If approved by shareholders, the New AGIM Sub-Advisory Agreement would take effect immediately upon such approval. The terms of the New AGIM Sub-Advisory Agreement are the same in all material respects as those of the Interim Advisory Agreement, except for the effective date and termination date.

In connection with its approval of the New AGIM Sub-Advisory Agreement, the Board considered the following, among other factors: that any internal reorganization of AGIM would not result in a change in the personnel responsible for providing services to the Core Bond Fund, High Yield Bond Fund and the Strategic Bond Fund; 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 AGIM; and the amount and structure of the fees payable under the New AGIM Sub-Advisory Agreement.

The Board, including all of the Independent Trustees, also considered the terms of the New AGIM Sub-Advisory Agreement and determined that the terms of the New AGIM Sub-Advisory Agreement are fair and reasonable and that the approval of the New AGIM Sub-Advisory Agreement is necessary and in the best interests of NAFV I, on behalf of the Core Bond Fund, High Yield Bond Fund and the Strategic Bond Fund and each Fund's shareholders, to ensure the continued receipt of the same quality of services as is currently provided.

At the Board meeting of October 22 and 23, 2001, the Board reviewed the recommendation from VALIC that SAAMCo be appointed as the sub-adviser for the Money Market II Fund. The Board considered a new investment sub-advisory agreement for SAAMCo (the "SAAMCo Sub-Advisory Agreement"). The terms of the SAAMCo Sub-Advisory Agreement were based on the Previous Sub-Advisory Agreement (between VALIC and AGIM), though with different entities and fees. The Board reviewed information regarding the investment processes of SAAMCo and considered the historical performance it achieved in connection with a similar fund. In connection with its approval of the SAAMCo Sub-Advisory Agreement, the Board considered, 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 SAAMCo; the amount and structure of investment sub-advisory fees generally and the sub-advisory fees payable under the SAAMCo Sub-Advisory Agreement; and the investment management experience of the personnel who would be managing the Money Market II Fund.

Considering the terms of the SAAMCo Sub-Advisory Agreement, the Board, including all of the Independent Trustees, determined that the terms of the SAAMCo Sub-Advisory Agreement are fair and reasonable and that the approval of the SAAMCo Sub-Advisory Agreement is necessary and in the best interests of NAFV II, on behalf of the Money Market II Fund and its shareholders.

The Board also considered a sub-advisory agreement for AIGGIC (the "AIGGIC Sub-Advisory Agreement") relating to VALIC's recommendation that AIGGIC be appointed as the sub-adviser for the Aggressive Growth Lifestyle Fund, Conservative Growth Lifestyle Fund, Core Bond Fund, High Yield Bond Fund, Moderate Growth Lifestyle Fund, Socially Responsible Fund and Strategic Bond Fund. Previously, these Funds did not have a sub-adviser, except for Core Bond Fund, High Yield Bond Fund and Strategic Bond Fund, which were sub-advised by AGIM. VALIC recommended that additional Funds be sub-advised by AIGGIC because internal reorganizations due to the Merger could result in personnel being moved from one affiliated company to another affiliated company; however, there would be no change in the nature or quality of services provided. The Board reviewed information regarding the AIGGIC investment processes and the sub-advisory fees for each affected Fund in connection with the AIGGIC Sub-Advisory Agreement. Subsequently, the Board, including all Independent Trustees, unanimously approved and recommended shareholder approval of, the AIGGIC Sub-Advisory Agreement. If approved by shareholders, the AIGGIC Sub-Advisory Agreement will take effect on or about January 1, 2002. The terms of the AIGGIC Sub-Advisory Agreement are substantially similar to those of the Interim Sub-Advisory Agreement, except for the effective date and term and the addition of Funds as discussed above. The AIGGIC Sub-Advisory Agreement fees for the affected Funds are shown below in the "Information About AIGGIC" section.

In connection with its approval of the AIGGIC Sub-Advisory Agreement, the Board considered the following, among other factors: that any internal reorganizations could result in personnel being moved from one affiliated company to another affiliated company; the nature and quality of the services reasonably anticipated to be provided and the results reasonably anticipated to be achieved by AIGGIC; the amount and structure of the fees payable under the AIGGIC Sub-Advisory Agreement; and the investment management experience of the personnel who would be managing the affected Funds.

The Board, including all of the Independent Trustees, also considered the terms of the AIGGIC Sub-Advisory Agreement and determined that the terms of the AIGGIC Sub-Advisory Agreement are fair and reasonable and that the approval of the AIGGIC Sub-Advisory Agreement is necessary and in the best interests of NAFV II, on behalf of each affected Fund and its shareholders.

A description of the New Advisory Agreement, the New AGIM Sub-Advisory Agreement, the AIGGIC Sub-Advisory Agreement and the SAAMCo Sub-Advisory Agreement (collectively, the "New Agreements") and the services to be provided by each entity is set forth below. If you would like a copy of any of the New Agreements, please write to Nori L. Gabert, Esq., A36-02, American General, 2929 Allen Parkway, Houston, Texas 77019.

Section 15(f) of the 1940 Act provides that an investment adviser (such as VALIC) 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/trustees of the investment company are not interested persons of the new investment adviser or its predecessor; and (2) no "unfair burden" (as defined in the 1940 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 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 NAFV II Trustees to be interested persons of VALIC.

With respect to the second condition of Section 15(f), an "unfair burden" on an investment company is defined in the 1940 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 Board that it will not take or recommend any action that would constitute an unfair burden on NAFV II within the meaning of Section 15(f).

Under the New Advisory Agreement, VALIC will provide an investment program for each Fund and will be responsible for the investment and reinvestment of each Fund's assets, including maintaining a trading desk to place all orders for the purchase and sale of portfolio securities. Under the New Advisory Agreement, VALIC, at its own expense, will perform research, statistical analysis and continuous supervision of each Fund's investment portfolio and furnish office space, equipment and personnel for managing the day-to-day operations. Under the New Advisory Agreement, VALIC will use its best efforts to obtain any tender and exchange offer solicitation fees, other fees and similar payments available in connection with portfolio transactions. VALIC will remit promptly to a Fund any commissions, tender and exchange offer solicitation fees, other fees or similar payments received by VALIC, or any affiliated person of VALIC in connection with a Fund's portfolio transactions, less the amount of any direct expenses incurred by VALIC or any affiliated person of VALIC in obtaining such commissions, fees or payments.

In accordance with the New Advisory Agreement, VALIC will bear the cost of the fees, salaries and other remuneration of Trustees and officers of the Fund who also serve as directors, officers or employees of VALIC.

As compensation for VALIC's services under the New Advisory Agreement, NAFV II will pay VALIC amounts as shown in the chart below. All fees are the same as in the Previous Advisory Agreement.

VALIC has voluntarily agreed to cap certain Fund expenses by waiving a portion of its advisory fee or reimbursing certain expenses, as shown below. Expense caps are net of any expense reduction realized through the use of directed brokerage commissions. Fund expenses shall be limited for the Funds shown below (expressed as a percentage of average annual net assets) through August 31, 2001 (through August 31, 2002 for those marked with an asterisk):

The New Advisory Agreement provides that VALIC shall not be liable to any Fund, or any Fund shareholder, for any act or failure to act in connection with the rendering of services under the New Advisory Agreement or for any losses that may be sustained in the purchase, holding or sale of any security in the absence of willful misfeasance, bad faith, negligence, or reckless disregard of obligations or duties by VALIC. By its terms, the New Advisory Agreement terminates automatically unless its continuance after an initial two-year term is approved annually by (i) the Board or the affirmative vote of the holders of a majority of the outstanding shares of the Funds and (ii) the Independent Trustees. The New Advisory Agreement is terminable without penalty, by either party on not more than 60 nor less than 30 days' written notice. Termination has to be authorized by the Board or by the vote of a majority of the outstanding voting securities of the Fund.

Under the New AGIM Sub-Advisory Agreement, AGIM will provide an investment program for the Core Bond Fund, High Yield Bond Fund and Strategic Bond Fund and will be responsible for the investment and reinvestment of the Fund's assets for the period from the shareholder meeting (December 28) through the date the New AIGGIC Sub-Advisory Agreement would become effective (if approved by shareholders) at the close of business on December 31, 2001. AGIM has broad latitude in selecting securities for these three Funds, subject to VALIC's oversight. AGIM may place trades through brokers of its choosing and will take into consideration the quality of the brokers' services and execution, as well as services such as research and providing equipment or paying any Fund expenses, in setting the amount of commissions paid to a broker. AGIM shall not be subject to liability to VALIC, these Funds, or to any shareholder of the Funds for any act or omission in rendering services under the New AGIM Sub-Advisory Agreement, or for any losses sustained in the purchase, holding, or sale of any portfolio security, as long as there has been no willful misfeasance, bad faith, gross negligence, or reckless disregard of the AGIM's obligations or duties. The New AGIM Sub-Advisory Agreement provides for automatic termination unless at least annually, its continuance is approved by (i) the Board or the affirmative vote of the holders of a majority of the outstanding shares of a Fund and (ii) the Independent Trustees. The New AGIM Sub-Advisory Agreement terminates automatically upon its assignment or the termination of the New Advisory Agreement and is terminable at any time, without penalty, by the Board, VALIC, or the holders of a majority of the outstanding shares of a Fund, upon 30 to 60 days' written notice.

As compensation for AGIM's services under the New AGIM Sub-Advisory Agreement, VALIC will pay AGIM amounts as shown in the chart below.

Under the SAAMCo Sub-Advisory Agreement, SAAMCo will provide an investment program for the Money Market II Fund and will be responsible for the investment and reinvestment of its assets. SAAMCo will have broad latitude in selecting securities for the Money Market II Fund, subject to VALIC's oversight. SAAMCo shall not be subject to liability to VALIC, the Funds it advises, or to any shareholder of the Funds for any act or omission in rendering services under the SAAMCo Sub-Advisory Agreement, or for any losses sustained in the purchase, holding, or sale of any portfolio security, as long as there has been no willful misfeasance, bad faith, gross negligence, or reckless disregard of the SAAMCo's obligations or duties. The SAAMCo Sub-Advisory Agreement provides for automatic termination unless at least annually, its continuance is approved by (i) the Board or the affirmative vote of the holders of a majority of the outstanding shares of the Fund and (ii) the Independent Trustees. The SAAMCo Sub-Advisory Agreement terminates automatically upon its assignment or the termination of the New Advisory Agreement and is terminable at any time, without penalty, by the Board, VALIC, or the holders of a majority of the outstanding shares of the Fund, upon 30 to 60 days' written notice.

VALIC will pay SAAMCo amounts as shown in the chart below as compensation for SAAMCo's services under the SAAMCo Sub-Advisory Agreement:

Under the AIGGIC Sub-Advisory Agreement, AIGGIC will provide an investment program for the Aggressive Growth Lifestyle Fund, Conservative Growth Lifestyle Fund, Core Bond Fund, High Yield Bond Fund, Moderate Growth Lifestyle Fund, Socially Responsible Fund and Strategic Bond Fund and will be responsible for the investment and reinvestment of each Fund's assets. AIGGIC has broad latitude in selecting securities for the Funds, subject to VALIC's oversight. AIGGIC may place trades through brokers of its choosing and will take into consideration the quality of the brokers' services and execution, as well as services such as research and providing equipment or paying any Fund expenses, in setting the amount of commissions paid to a broker. AIGGIC shall not be subject to liability to VALIC, the Funds, or to any shareholder of the Funds for any act or omission in rendering services under the AIGGIC Sub-Advisory Agreement, or for any losses sustained in the purchase, holding, or sale of any portfolio security, as long as there has been no willful misfeasance, bad faith, gross negligence, or reckless disregard of AIGGIC's obligations or duties. The AIGGIC Sub-Advisory Agreement provides for automatic termination unless at least annually, its continuance is approved by (i) the Board or the affirmative vote of the holders of a majority of the outstanding shares of the Fund and (ii) the Independent Trustees. The AIGGIC Sub-Advisory Agreement terminates automatically upon its assignment or the termination of the New Advisory Agreement and is terminable at any time, without penalty, by the Board, VALIC, or the holders of a majority of the outstanding shares of the Funds, upon 30 to 60 days' written notice.

As compensation for AIGGIC's services under the AIGGIC Sub-Advisory Agreement, VALIC will pay AIGGIC amounts as shown in the chart below.

Approval of each of the New Agreements requires the affirmative vote of a "majority of the outstanding voting securities" of each Fund which, as defined in the 1940 Act, means the affirmative vote of the lesser of (i) more than 50% of the outstanding shares of the Fund or (ii) 67% or more of the shares of the Fund present at the Meeting if more than 50% of the outstanding shares of the Fund are represented at the Meeting in person or by proxy. However, the approval for New Agreements for any Fund is not dependent on the approval of the New Agreements for any other Fund. If shareholders of a Fund do not approve the New Agreements for that Fund, the Board will consider what actions to take to assure the receipt of advisory services.

AIG, a Delaware corporation, is a publicly-traded 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. AIG's general insurance subsidiaries are multiple line companies writing substantially all lines of property and casualty insurance. One or more of these companies is licensed to write substantially all of these lines in all states of the United States and in approximately 70 foreign countries. AIG's life insurance subsidiaries offer a wide range of traditional insurance and financial and investment products. One or more of these subsidiaries is licensed to write life insurance in all states in the United States and in over 70 foreign countries. AIG's financial services subsidiaries engage in diversified financial products and services including aircraft, consumer and premium financing and banking services. AIG's asset management operations offer a wide variety of investment vehicles and services, including variable annuities, mutual funds and investment asset management. The principal executive offices of AIG are located at 70 Pine Street, New York, New York 10270.

VALIC is a stock life insurance company and is a wholly-owned subsidiary of American General Life Insurance Company, which is itself a wholly-owned subsidiary of AGC Life Insurance Company, a wholly-owned subsidiary of American General. The Variable Annuity Marketing Company ("VAMCO") serves as the principal underwriter to NAFV II. VALIC, VAMCO, AGC Life Insurance Company, American General Life Insurance Company and American General are located at 2929 Allen Parkway, Houston, Texas 77019. As a result of the Merger, American General became a wholly-owned subsidiary of AIG.

The following chart lists the principal executive officers and directors of VALIC and their principal occupations, if different from their positions with VALIC. The business address of each officer is 2929 Allen Parkway, Houston, Texas 77019.

VALIC is the investment adviser for NAFV II and another registered investment company, North American Funds Variable Product Series I ("NAFV I"). Some of the NAFV I Funds have investment objectives that are similar to Funds in NAFV II. The name of each such Fund, together with information concerning the Fund's assets and the annual fees paid (as a percentage of average net assets) to VALIC for its services, are set forth below.

VALIC has voluntarily agreed to cap certain Fund expenses by waiving a portion of its advisory fee or reimbursing certain expenses for the above NAFV I Funds. Expense caps are net of any expense reduction realized through the use of directed brokerage commissions. Fund expenses (expressed as a percentage of average annual net assets) shall be limited through May 31, 2002 (through December 8, 2002 for those marked with an asterisk):

NAFV II has service agreements with VALIC and SAAMCo to provide certain accounting and administrative services to the Funds and to provide transfer agent services. Transfer agent services also include shareholder servicing and dividend disbursements.

Pursuant to the Administrative Services Agreement, NAFV II pays SAAMCo an annual fee of 0.07% based on average daily net assets, except for the Lifestyle Funds. Prior to May 1, 2001, the fee was 0.03%. Prior to October 1, 2001, the fee was paid to VALIC. In addition, NAFV II has entered into a recordkeeping agreement with VALIC, for which the Funds, other than the Lifestyle Funds, pay annual fees of 0.25%. Effective October 1, 2001, NAFV II will pay VALIC for transfer agent and shareholder services, [at cost].

For the fiscal year ended August 31, 2001, the Funds paid VALIC the following accounting and administrative services fees (the Lifestyle Funds are not shown because each is a "Fund of Funds" and each has no direct expenses other than the advisory fee):

SAAMCo was organized as a Delaware corporation in 1982 and is located at The SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204. SAAMCo is a wholly-owned subsidiary of SunAmerica Inc., located at 1 SunAmerica Center, Century City, Los Angeles, California 90067-6022, which in turn is a wholly-owned subsidiary of AIG. As of June 30, 2001, SAAMCo managed, advised and/or administered more than $28.5 billion of assets. SAAMCo serves as adviser, manager and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Brazos Mutual Funds, SunAmerica Style Select Series, Inc., Seasons Series Trust, SunAmerica Equity Funds, SunAmerica Money Market Funds, Inc., SunAmerica Series Trust, SunAmerica Strategic Investment Series, Inc. and SunAmerica Senior Floating Rate Fund, Inc.

The following chart lists the principal executive officers and directors of SAAMCo and their principal occupations, if different from their positions with SAAMCo. The business address of each person, other than Mr. Wintrob and Ms. Nixon, is The SunAmerica Center, 733 Third Avenue, New York, New York 10017- 3204. The business address of Mr. Wintrob and Ms. Nixon is 1 SunAmerica Center, Century City, Los Angeles, California 90067-6022.

SAAMCo is the investment adviser for other mutual funds, shown below, whose investment objectives are similar to the Money Market II Fund in NAFV II. The name of each such Fund, together with information concerning its assets, the annual fees paid and the waiver or reimbursement percentage (as a percentage of average net assets) to SAAMCo for its services, are set forth below.

AIGGIC was organized as a New Jersey corporation in ____ and is located at 175 Water Street, New York, New York 10038. AIGGIC is a wholly-owned subsidiary of AIG Global Investment Group, Inc., located at ______________________________________, which in turn is a wholly-owned subsidiary of AIG. As of August 31, 2001, AIGGIC managed, advised and/or administered more than $58.6 billion of assets. AIGGIC serves as adviser, manager and/or administrator for ____________________________________________________.

The following chart lists the principal executive officers and directors of AIGGIC and their principal occupations, if different from their positions with AIGGIC. The business address of each person is 175 Water Street, New York, New York 10038.

VALIC and its affiliates, AGIM, SAAMCo and AIGGIC, have provided information about each firm's brokerage selection practices, including soft dollars, directed brokerage and transactions with affiliated brokers. These are important practices to evaluate when deciding to hire or continue a contract with an adviser and are subject to extensive regulation under the federal securities laws. VALIC reviews these practices and will also evaluate any conflicts of interest inherent in the adviser's policies and practices. Soft dollars: The term "soft dollars" is often used to describe that part of the basic trade commission which exceeds the lowest rate available from other broker-dealers and which is used by the adviser to obtain research and other services from broker-dealers. Soft dollars have not been used to offset expenses of any of the Funds. Directed brokerage: A directed brokerage agreement is another form of a soft dollar arrangement and includes those arrangements under which products or services (other than execution of securities transactions), expense reimbursements, or commissions are recaptured for a client from or through a broker-dealer, in exchange for directing the client's brokerage transactions to that broker-dealer. The Board has determined that a directed brokerage arrangement with State Street Brokerage, Lynch Jones and Ryan and/or any other comparable broker-dealer is in the best interest of each Fund and its shareholders and therefore has conveyed the information to sub-advisers. A Fund may participate in directed brokerage arrangements consistent with the requirements of best execution, subject to a limit of 20% of a Fund's eligible commissions. Thus, a Fund may benefit from the products or services or recaptured commissions obtained through the directed brokerage arrangement, although there may be other transaction costs, greater spreads, or less favorable net prices on transactions. As long as the trader executing the transaction for a Fund indicates that this is a directed brokerage transaction, the Fund will get a percentage of commissions paid on either domestic trades or international trades credited back to the Fund. These credits are in hard dollars and could be used to offset the Fund's custody expenses or to pay other Fund expenses (excluding expenses payable to affiliates). By entering into a brokerage/service arrangement, a Fund can reduce expenses reported to shareholders in its statement of operations, fee table and expense ratio and can increase its reported yield. Any such transactions will be disclosed in the registration statement for the Funds. Transactions with affiliated brokers: VALIC and its affiliates do not typically participate in transactions with affiliated brokers. There is no affiliation between VALIC or any person affiliated with VALIC, NAFV I or the Funds and any broker-dealer that may execute a transaction for the Funds.

Each Fund invests its assets in accordance with its investment objective, strategies and investment restrictions. Investment restrictions are designated as fundamental or nonfundamental. Anything designated as fundamental, such as the fundamental investment restrictions, can only be changed with approval from the Board and Fund shareholders. By contrast, anything designated as nonfundamental may be changed upon Board approval. Each Fund's investment objective and strategies and the nonfundamental investment restrictions have been designated as nonfundamental policies and therefore may be changed without shareholder approval.

Fund policies and whether they are fundamental or nonfundamental are designated as such when the Fund is created. Generally, the policies are reflective of the laws or styles of the time. Some of the Funds' fundamental investment restrictions that are not required to be fundamental under the 1940 Act were adopted in the past to reflect certain regulatory, business, or industry conditions which are no longer in effect. Further, federal and state laws governing mutual funds have been changed numerous times in the last several years. The NAFV II Prospectus and Statement of Additional Information ("SAI") now contain fundamental investment restrictions that are more restrictive than the current law. This can restrict a Fund's investments and could potentially impair its performance. No Fund intends to change its investment style or the securities or instruments in which it may invest.

As explained above, federal law, in many cases, controls what a mutual fund can purchase. Federal law also specifies which investment policies or restrictions must be fundamental. The policies that are required by law to be fundamental are those concerning fund diversification, borrowing money, the issuance of senior securities, underwriting of securities issued by other persons, the purchase and sale of real estate and commodities, the policy about making loans to other persons and the concentration of investments in a particular industry or group of industries.

Under the Funds' current fundamental restrictions, most of the Funds may borrow only under certain circumstances, such as for temporary or emergency purposes. The proposed restriction would permit each Fund to engage in borrowing in a manner and to the full extent permitted under the 1940 Act, any rule, regulation, or order under the 1940 Act, or any SEC staff interpretation of the 1940 Act.

The 1940 Act generally permits the Funds to borrow money under the following circumstances: (1) a Fund may borrow an amount equal to or less than 33 1/3% of its total assets (including the amount borrowed) from banks; or (2) a Fund may borrow an amount equal to or less than 5% of its total assets for temporary or emergency purposes from any person.

The Funds are prohibited from concentrating investments in one industry. For most of the Funds, this means that the Fund cannot invest more than 25% of total assets in the securities of companies engaged primarily in any one industry, other than the U.S. Government, its agencies and instrumentalities. This is more restrictive than current federal law, which does not specify a percentage limitation for this restriction.

Each Fund is required to state whether it will have a diversified portfolio or a non-diversified portfolio. All of the Funds in NAFV II are diversified. A fund that is diversified under the 1940 Act must invest in several different companies and adhere to the federal diversification rule. The diversification rule states that at least 75% of the value of total assets (the "diversified portion") must be represented by cash and cash items (including receivables), U.S. Government securities, securities of other investment companies and other securities. This is further limited in that with respect to the diversified portion of a Fund's assets, a Fund may not have an amount greater in value than 5% of the value of total assets invested in any one issuer and not more than 10% of the outstanding voting securities of an issuer. Currently, for several of the Funds, the current diversification policy statement applies the 5% and 10% limitations to 100% of the value of the total assets of each Fund, which is more restrictive than the law.

Under the 1940 Act and the Funds' fundamental restriction stated below, the Funds are restricted from issuing senior securities, with certain exceptions. A "senior security" is an obligation of a fund with respect to its earnings or assets that takes precedence over the claims of the fund's shareholders with respect to the same earnings or assets. The 1940 Act generally prohibits a fund from issuing senior securities, in order to limit the use of leverage. In general, a fund uses leverage when it enters into securities transactions without being required to make payment until a later time. Current SEC staff interpretations regarding the 1940 Act allow a fund to engage in a number of types of transactions which might otherwise be considered creating "senior securities" or "leverage," so long as the fund meets certain segregation requirements designed to protect shareholders. In order to ensure that the Funds' restrictions with respect to issuing senior securities are consistent with the provisions of the 1940 Act, it is proposed that the restriction on issuing senior securities be revised to state that the Funds may not issue senior securities, except to the extent permitted under the 1940 Act, any rule, regulation, or order under the 1940 Act, or any SEC staff interpretation of the 1940 Act.

If the proposed change is adopted, the following activities will not be considered to be issuing senior securities with respect to the Funds: (i) collateral arrangements in connection with any type of option, future contract, forward contract, or swap; (ii) collateral arrangements in connection with initial and variation margin; or (iii) a pledge, mortgage, or hypothecation of a fund's assets to secure its borrowings.

Funds may not loan cash, generally, but may occasionally choose to lend portfolio securities or make other lending arrangements as permitted by law or exemptive relief, such as interfund lending. During the period of such a loan, the Fund typically receives the income on both the loaned securities and the loan collateral, or a flat fee, thereby increasing the portfolio yield. The primary purpose of this standardized restriction is to expand the current exceptions to the fundamental investment restriction to include lending arrangements permitted by the 1940 Act, any rule, regulation or order under the 1940 Act, or any SEC staff interpretation of the 1940 Act.

Funds generally do not purchase real estate due to its illiquidity, but may want to invest in a security that is backed by real estate or interests in real estate. The purpose of this proposed standardized investment restriction is to clarify what can be purchased.

Each Fund is currently prohibited from underwriting securities of other issuers. An underwriter brings securities to the market through a selling or distribution agreement. A selling agreement allows the underwriter to buy the securities from a company and then resell the securities to investors. It is proposed that the fundamental restriction be clarified to allow the Funds to underwrite securities to the extent that the Fund may be deemed to be an underwriter under certain federal securities laws.

The current fundamental investment restrictions for the Funds, excerpted from the SAI, are shown in Appendix 1. The standardized fundamental investment restrictions proposed for shareholder approval are shown below.

All Funds: Each Fund may borrow money in amounts up to 33 1/3% of the value of its total assets for temporary or emergency purposes, or as permitted by law. Each Fund may also borrow money for investment purposes, up to the maximum extent permissible under the 1940 Act. A Fund may also obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. In order to secure any permitted borrowings and reverse repurchase agreements under this section, a Fund may pledge, mortgage or hypothecate its assets. This policy shall not prohibit a Fund from engaging in reverse repurchase agreements, dollar rolls, or similar investment strategies described in the Prospectus and the Statement of Additional Information, as amended from time to time.

All Funds: No Fund may purchase or sell physical commodities except that each Fund may (i) hold and sell physical commodities acquired as a result of the Fund's ownership of securities or other instruments; (ii) purchase or sell securities or other instruments backed by physical commodities; or (iii) purchase or sell commodity options and futures contracts in accordance with its nonfundamental or operating policies.

All Funds: Each Fund may not concentrate its investments in the securities of issuers primarily engaged in any particular industry (other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities and repurchase agreements secured thereby), or domestic bank money market instruments.

All Funds: Each Fund may not make any investment inconsistent with its classification as a diversified investment company under the 1940 Act.

All Funds: No Fund may issue senior securities except as permitted by the 1940 Act, any rule, regulation, or order under the 1940 Act or any SEC staff interpretation of the 1940 Act.

All Funds: No Fund may make loans, except that each Fund may, in accordance with its nonfundamental or operating policies, (i) engage in repurchase agreements; (ii) lend portfolio securities; (iii) purchase debt securities; (iv) purchase commercial paper; and (v) enter into any other lending arrangement, including interfund lending, as permitted by the 1940 Act, any rule, regulation or order under the 1940 Act, by exemptive relief, or by any SEC staff interpretation of the 1940 Act.

All Funds: No Fund may purchase or sell real estate except that each Fund may (i) hold and sell real estate acquired as a result of the Fund's ownership of securities or other instruments; (ii) purchase or sell securities or other instruments backed by real estate, or interests in real estate; and (iii) purchase or sell securities of entities or investment vehicles, including real estate investment trusts, that invest, deal, or otherwise engage in the business of real estate.

All Funds: No Fund may underwrite the securities of other issuers, except as permitted by the Board within applicable law and except to the extent that in connection with the sale or disposition of its portfolio securities, a Fund may be deemed to be an underwriter.

VALIC has recommended to the Board that the investment restrictions of the Funds be changed to conform to, but not be more restrictive than, the federal law. VALIC believes that the proposed standardization of the fundamental investment restrictions will give it the flexibility to respond to future changes in the regulatory or investment environment without incurring the costs and delay associated with a shareholder vote. Adoption of the standardized fundamental investment restrictions is not expected to affect the way in which the Funds are managed or the securities or instruments in which the Funds invest.

After careful consideration and with the advice of outside counsel, the Board has approved the standardization of the fundamental investment restrictions, subject to shareholder approval. By reducing to a minimum those policies that can be changed only with a shareholder vote, the Board believes that VALIC would be able to minimize the costs and delay associated with holding future shareholder meetings to revise fundamental policies that become outdated or inappropriate. Although the proposed changes in fundamental restrictions will allow the portfolio managers greater investment flexibility to respond to future investment opportunities, the Board does not anticipate that the changes, individually or in the aggregate, will result in a material change in the level of investment risk associated with an investment in any of the Funds.

Approval of the proposed standardized fundamental investment restrictions requires the affirmative vote of a "majority of the outstanding voting securities" of each Fund of NAFV II, which, as defined in the 1940 Act, means the affirmative vote of the lesser of (i) more than 50% of the outstanding shares of the Fund or (ii) 67% or more of the shares of the Fund present at the Meeting if more than 50% of the outstanding shares of the Fund are represented at the Meeting in person or by proxy. The approval of this Proposal by any Fund is not dependent or conditioned on the approval of any other Fund.

The Board consists of 12 Trustees, subject to the provisions of the 1940 Act, Delaware law, the NAFV II Declaration of Trust, as amended and the NAFV II Bylaws.

If any of the nominees named below shall be unable or unwilling to stand for election, it is the intention of the persons named in the accompanying form of proxy to vote for the election of such other person or persons as shall be determined by the Board in accordance with its judgment. NAFV II, however, has no reason to believe that it will be necessary to designate a substitute nominee.

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The Board has appointed an Audit Committee and a Nominating Committee. The Nominating Committee currently consists of the following Independent Trustees: Mr. Love (Chairman), Dr. Craven, Judge Gonzales and Dr. Hackerman. The Audit Committee currently consists of the following Independent Trustees: Dr. Lancaster (Chairman), Dr. Hackerman, Dr. Maupin, Dr. Paulsen and Mr. Love.

Shareholders may submit written recommendations to the Board regarding nominees for Trustee, although the Board expects to be able to identify an ample number of qualified candidates. Any such recommendations will be referred to the Nominating Committee for consideration.

During the fiscal year ended August 31, 2001, the Board met four times at special and regularly scheduled meetings. During the fiscal year ended August 31, 2001, the Audit Committee met two times and the Nominating Committee met two times. During NAFV II's last fiscal year, all incumbent members of the Board attended at least 75% of the aggregate meetings of the Board and its committees on which they serve.

The duties and responsibilities of the Audit Committee are set forth in a written charter adopted by the Board, a copy of which is attached as Appendix 2 to the Proxy Statement. The Audit Committee's Charter was renewed by the Board on April 17, 2001.

The Audit Committee also has (a) received written disclosures and the letter required by Independence Standards Board Standard No. 1 from Ernst & Young LLP ("E&Y"), NAFV II's independent auditors and (b) discussed certain matters required to be discussed by the Statements on Auditing Standards No. 61 with E&Y.

Selection of Independent Auditors. The 1940 Act requires that the independent auditors to NAFV II be selected by a majority of the Independent Trustees. One of the purposes of the Audit Committee is to recommend to the Board the selection, retention or termination of independent auditors for the Funds. At a meeting held on July 16-17, 2001, the Audit Committee recommended and the Board, including all the Independent Trustees, approved the selection of E&Y as independent auditors for NAFV II for the fiscal year ending August 31, 2002.

E&Y has no direct or material indirect financial interest in NAFV II. Representatives of E&Y will be present at the Meeting and will have the opportunity, at their discretion, to make a statement and to respond to appropriate shareholder questions.

Audit Fees. For the fiscal year ended August 31, 2001, E&Y billed NAFV II $8,760 for services rendered for the audit of the NAFV II annual financial statements.

Financial Information Systems Design and Implementation. E&Y was not engaged by NAFV II, its investment adviser, or any entity controlling, controlled by, or under common control with the investment adviser that provides services to NAFV II, to provide financial information systems design or implementation services.

All Other Fees. The aggregate fees billed for all other services by E&Y and paid by NAFV II, the Adviser, or any entity controlling, controlled by, or under common control with the Adviser that provides services to NAFV II was $920,100, consisting of $76,425 for tax compliance services and $843,675 for audit-related services to the Adviser. Audit related services include fees relating to the audit of the Adviser, the separate entity regulatory audits of the Adviser's subsidiaries, review of SEC registration statements and issuance of a SAS 70 Report (Reports on the Processing of Transactions by Service Organizations). The Audit Committee has considered whether the provision of non-audit services provided by E&Y were compatible with maintaining the independence of E&Y and concluded they were.

Members of the Board receive an annual retainer of $20,000, $1,000 for each Board meeting attended in person and $250 for each Board meeting conducted by telephone. Audit Committee and Nominating Committee members receive an additional $250 for each committee meeting attended. Committee chairs receive an additional $250 for each committee meeting chaired. Interested Trustees (those who are affiliated with the Funds) and officers of the Funds are not compensated for their service on the Board.

The following table sets forth information regarding compensation and benefits earned by the Trustees who are not affiliated with VALIC for the fiscal year ending August 31, 2001. Messrs. Devin and Lavery were elected to the Board on October 22, 2001 and thus are not shown in the table below. Interested Trustees (Messrs. Condon and Harbeck) are not eligible for compensation or retirement benefits from NAFV II and therefore are not shown below.

Fiscal Year Ending August 31, 2001

Effective January 1, 2001, the Board approved a Deferred Compensation Plan (the "Plan") for its Independent Trustees who are not officers, directors, or employees of VALIC or an affiliate of VALIC. The purpose of the Plan is to permit such Independent Trustees to elect to defer receipt of all or some portion of the fees payable to them for their services to NAFV II, therefore allowing postponement of taxation of income and tax-deferred growth on the earnings. Under the Plan, an Independent Trustee may make an annual election to defer all or a portion of his/her future compensation from NAFV II. NAFV II is responsible for the payment of the retirement benefits as well as all expenses of administration of the Plan. Benefits vested under the Plan are payable for a ten-year period upon retirement based upon the Trustee's years of service and compensation at the time of retirement. Estimated benefits are shown below.

The following table sets forth certain information concerning the executive officers of NAFV II, other than those officers previously named as Trustees above. The business address of each officer, except for Mr. Guterman, is 2929 Allen Parkway, Houston, Texas 77019. Mr. Guterman's business address is 390 Park Avenue, New York, New York 10022.

The election of Trustees requires the affirmative vote of a majority of the votes cast at the Meeting, provided a quorum is present.

The Board does not intend to present any other business at the meeting. If, however, any other matters are properly brought before the meeting, Nori L. Gabert, Esq. and Gregory R. Kingston will vote on the matters in accordance with their judgment.

The audited Annual Report to Shareholders of NAFV II is incorporated by reference into this proxy statement. Copies of the most recent Annual Report may be obtained without charge if you:

NAFV II is not required to hold annual shareholder meetings. Shareholders who would like to submit Proposals for consideration at future shareholder meetings should send written Proposals to Nori L. Gabert, Esq., Vice President and Secretary of NAFV II, 2929 Allen Parkway, A36-02, Houston, Texas 77019.

Proxies are solicited by mail. The expenses of preparation, printing and mailing of the enclosed form of proxy, the accompanying Notice and this Proxy Statement will be borne by AIG or an affiliate thereof. None of the costs will be borne by a Fund. By voting as soon as possible, we will be able to save the expense of follow-up mailings and calls.

NAFV II shareholders of record at the close of business on Monday, October 22, 2001 ("Record Date"), are entitled to notice of and to vote at the Special Meeting or any adjournment thereof. Shareholders are entitled to one vote for each share held on that date, as described on the first page of this Proxy Statement. When a matter comes up for vote, VALIC Separate Account A and the separate accounts of the VALIC affiliates will vote all shares in the same proportion as the unit votes actually received.

To VALIC's knowledge, no person owns a Contract or interests therein entitling them to give voting instructions regarding as much as 5% of the outstanding shares of any Fund. The Trustees and officers of NAFV II and members of their families as a group, beneficially owned less than 1% of the common stock of each Fund outstanding as of August 31, 2001.

A proxy may be revoked at any time before the meeting or during the meeting by oral or written notice to Nori L. Gabert, Esq., 2929 Allen Parkway, A36-02, Houston, Texas 77019. Unless revoked, all valid proxies will be voted in accordance with the specification thereon or, in the absence of specification, for approval of the Proposal.

As of October 22, 2001, as shown on the books of the Funds, shares were issued and outstanding as shown in the chart below:

There are no material legal proceedings to which any of the Funds is a party.

In the event that sufficient votes in favor of the Proposal set forth in the Notice of Meeting and Proxy Statement are not received by the time scheduled for the meeting, Nori L. Gabert, Esq. and Gregory R. Kingston may move one or more adjournments of the meeting to permit further solicitation of proxies with respect to any such Proposal. Any such adjournment will require the affirmative vote of a majority of the shares present at the meeting. Ms. Gabert and Mr. Kingston will vote in favor of such adjournment those shares that they are entitled to vote which have voted in favor of such Proposal. They will vote against any such adjournment on behalf of those proxies that have voted against any such Proposal.

The undersigned, revoking previous proxies, hereby appoint(s) Nori L. Gabert, Esq. and Gregory R. Kingston, attorneys, with full power of substitution, to vote all shares that the undersigned is entitled to vote at the Special Meeting of Shareholders of the North American Funds Variable Product Series II ("NAFV II") to be held in the Meeting Room 1 of The Woodson Tower Building, 2919 Allen Parkway, Houston Texas, on Friday, December 28, 2001, at 10:00 a.m. and at any adjournment thereof. All powers may be exercised by a majority of the proxy holders or substitutes voting or acting or, if only one votes and acts, then by that one. This Proxy shall be voted on the Proposal described in the Proxy Statement. Receipt of the Notice of the Meeting and the accompanying Proxy Statement is hereby acknowledged.

You may cast your vote using one of the following methods:

1. Through the Internet at www.proxyweb.com;
2. By touch-tone telephone: call [____________];
3. By mail: postage-paid envelope enclosed; or
4. In person: Friday, December 28, 2001

Please follow the instructions on the proxy card to vote by telephone or through the internet. If you vote by telephone or through the internet, you do not need to mail the proxy card.

NOTE: If you plan to vote by mail, please sign the proxy card exactly as your name appears on the card. When signing in a fiduciary capacity, such as executor, administrator, director, guardian, etc., please sign your name and indicate your title. Corporate and partnership proxies should be signed by an authorized person, indicating the person's title.

Date: ________________________, 2001

__________________________________

__________________________________

Signature(s) (and Title(s), if applicable)

IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSAL. As to any other matter, the attorneys shall vote in accordance with their best judgment.

Appendix 1

Appendix 2

North American Funds Variable Product Series I

North American Funds Variable Product Series II

USLIFE Income Fund, Inc.

MEMBERSHIP

The Board of Trustees/Directors, acting by resolution adopted by a majority of the full Board, shall elect from among its members an audit committee of not fewer than three (3) nor more than ten (10) members, each of whom shall be a trustee/director who is not an interested person (as defined by the Investment Company Act of 1940). No member will have a relationship with any American General registered investment company, American General Corporation, or any affiliates that, in the opinion of the Board of Trustees/Directors, would interfere with the exercise of independent judgment as a committee member. The chairman of the committee shall be elected by a majority of the full Board of Trustees/Directors at the time the committee is elected or at such time as it becomes necessary to elect a new chairman because of the chairman's death, resignation or removal. Each member of the committee shall be financially literate, or shall undertake to become financially literate within a reasonable period of time after being elected to the committee and at least one member shall have accounting or related financial management expertise, as these qualifications are determined in the opinion of the Board of Trustees/Directors.

PROCESS

The audit committee shall meet at such times and places as may be fixed by the committee, or on the call of its chairman, at such times and places as may be designated in the call of such meetings. The committee shall also meet promptly upon the request of a registered investment company's outside auditors. The committee shall maintain a record of its proceedings and shall report to the Board of Trustees/Directors a summary of its activities not less frequently than twice each fiscal year, along with such recommendations as the committee deems appropriate.

RESPONSIBILITIES

The audit committee shall have the following powers and duties:

(a) subject to confirmation by the Board of Trustees/Directors, to select, evaluate and, where appropriate, replace the outside auditors (or to nominate the outside auditors to be proposed for shareholder approval in any proxy statement);

(b) to make clear to the outside auditors that the outside auditors are ultimately accountable to the Board of Trustees/Directors and the audit committee;

(c) to review at regular intervals audit arrangements for each registered investment company and the reports to be rendered;

(d) to review in advance the plan and scope of the audit of each registered investment company to be performed by the outside auditors and the related estimate of fees and to recommend such audit plan, scope and fee estimate for board approval;

(e) to review non-audit services and fees of each registered investment company's outside auditors, giving appropriate consideration to the possible effect on the auditors' independence of each non-audit service provided;

(f) to ensure that the outside auditors submit to the committee at least annually a formal written statement delineating all relationships between the outside auditors and each registered investment company and American General Corporation and its affiliates and to review with the outside auditors any disclosed relationships or services that may impact the objectivity and independence of the outside auditors for the purpose of recommending, as necessary, that the Board of Trustees/Directors take appropriate action to satisfy itself of the outside auditors' independence;

(g) to review periodically with each registered investment company's outside auditors the accounting principles and policies of each registered investment company, including any matters required to be discussed by Statement on Auditing Standards No. 61, as it may be amended or supplemented;

(h) to review periodically with each registered investment company's management, internal auditors and independent auditors the adequacy and effectiveness of accounting and financial controls, including the investment company's system to monitor and manage business risk and legal and ethical compliance programs, including compliance with the Investment Company Act of 1940 and qualification as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as the committee or the Board of Trustees/Directors may determine to be necessary or desirable;

(i) to review periodically the coordination between each registered investment company's outside auditors and each registered investment company's internal audit staff and to review with each registered investment company's outside auditors, upon completion of their audit, their findings and recommendations and the responses of management to such findings and recommendations;

(j) to review and discuss with management each registered investment company's audited financial statements;

(k) to recommend to the Board of Trustees/Directors that the audited financial statements presented to the audit committee be included in each registered investment company's annual report;

(l) to conduct from time to time, or cause to be conducted, such investigations or inquiries relating to the committee's responsibilities, including accounting or audit matters, as the facts presented to the committee warrant and as the committee may deem necessary or appropriate in the interest of each registered investment company and its shareholders;

(m) to confer with and direct the officers of each registered investment company to the extent necessary to exercise the committee's powers and to carry out its duties;

(n) to meet with representatives of the outside auditors of each registered investment company and/or the internal audit staff of each registered investment company in the absence of management, whenever the committee deems such to be appropriate; and

(o) to perform such additional duties as may be assigned to the committee by the Board of Trustees/Directors.