19
[begin red ink]
SUBJECT TO COMPLETION
Preliminary Prospectus dated March 1, 2000
The information in this prospectus is not
complete and may be changed. We may not sell
these securities until the registration
statement filed with the Securities and
Exchange Commission is effective. This
prospectus is not an offer to sell these
securities and is not soliciting an offer to
buy these securities in any state where the
offer or sale is not permitted.
[end red ink]
American General Series Portfolio Company 2
Class A Shares
Class B Shares
March 1, 2000
In this prospectus, "we", "us", and "our"
refers to the American General Fund Group.
Neither the Securities and Exchange
Commission ("SEC") nor any state securities
commission has approved or disapproved of
these securities or determined if this
prospectus is truthful or complete. Any
representation to the contrary is a criminal
offense.
The SEC maintains an internet website at
http://www.sec.gov that contains the
Statement of Additional Information ("SAI"),
material incorporated by reference, and
other information regarding registrants that
file electronically with the SEC.
TABLE OF CONTENTS
Topic Page
Risk/Return Summaries: Investments, Risks,
and Performance 1
More About Portfolio Investments __
Welcome to American General Corporation
(Advisor and Sub-Advisor Information) __
Shareholder Account Information __
RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND
PERFORMANCE
SCIENCE & TECHNOLOGY FUND
INVESTMENT CATEGORY
Growth
INVESTMENT ADVISOR
VALIC
INVESTMENT SUB-ADVISOR
T. Rowe Price Associates, Inc.
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through
investment primarily in the common stocks
and equity-related securities of companies
that are expected to benefit from the
development, advancement and use of science
and technology. This investment objective
can be changed by the Board of Trustees,
without the approval of the Fund
shareholders.
INVESTMENT STRATEGY
At least 65% of the Fund is invested in the
common stocks of companies that are expected
to benefit from scientific breakthroughs and
advancements in technology. Some of the
industries that are likely to be included in
the portfolio are:
o Chemicals and synthetic materials,
including pharmaceuticals
o Computers, including hardware and software
o Defense and aerospace
o E-Commerce
o Electronics
o Media and information services
o Telecommunications
The Fund may invest up to 30% of its assets
in foreign securities, including American
Depositary Receipts ("ADRs") and other
dollar-denominated foreign securities. ADRs
are certificates issued by a U.S. depositary
bank, representing foreign shares held by
the bank. ADRs carry the same currency,
political and economic risks as the
underlying foreign shares.
INVESTMENT RISKS
Because of the following principal risks,
the value of your investment may fluctuate
and you may lose money:
Foreign Securities Risks:
Currency Risk: The risk that
fluctuations in foreign exchange rates
will decrease the value of a fund's
investment.
Limited Information Risk: The risk that
foreign companies may not be subject to
accounting standards or governmental
supervision comparable to U.S. companies
and that less public information about
their operations may exist.
Liquidity Risk: Foreign markets may be
less liquid and more volatile than U.S.
markets and offer less protection to
investors.
Political Risk: The risk that a change in
a foreign government will occur and that
the assets of a company in which the Fund
has invested will be affected.
Settlement and Clearance Risk: The risks
associated with the clearance and
settlement procedures in non-U.S.
markets, which may be unable to keep pace
with the volume of securities
transactions and may cause delays.
Sovereign Risk: The risk that a foreign
government will interfere with currency
trading or transferring money out of the
country.
Manager Risk: There is a risk that the
Fund's management strategy may not achieve
the desired results and the Fund's
performance may lag behind that of similar
funds.
Market Risk: Market risk refers to the
potential loss of capital resulting from
changes in the prices of investments. For
example, market risk occurs when
expectations of lower corporate profits in
general cause the broad market of stocks or
bonds to fall in price. When this happens,
even though a company is experiencing growth
in profits, the price of its stock or bonds
could fall.
Tech Company Volatility and Risk: Companies
in the rapidly changing fields of science
and technology often face unusually high
price volatility, both in terms of gains and
losses. The potential for wide variation in
performance is based on the special risks
common to these stocks. For example,
products or services that at first appear
promising may not prove commercially
successful or may become obsolete quickly.
Earnings disappointments can result in sharp
price declines. A portfolio focused
primarily on these stocks is, therefore,
likely to be much more volatile than one
with broader diversification that includes
investments in more economic sectors.
Temporary Defensive Investment Risk: From
time to time, the Fund may take temporary
defensive positions that are inconsistent
with its principal investment strategies, in
attempting to respond to adverse market,
economic, political, or other conditions. If
the Fund takes such a temporary defensive
position, it may not achieve its investment
objective.
Young Company Risk: Smaller companies or
companies that are less than three years old
may have new products that are not
established in the market place, or less-
experienced management.
PERFORMANCE INFORMATION - Prior Performance
of Similar Accounts
Because this is a new Fund for American
General Series Portfolio Company ("AGSPC")
2, the Fund has no investment performance
record. However, the Fund's investment
objective, policies, and strategies are
substantially similar to those employed by
T. Rowe Price Associates, Inc. for the AGSPC
(1) Science & Technology Fund.
The performance information shown below is
for the AGSPC 1 Science & Technology Fund,
and not that of the new Fund, AGSPC 2
Science & Technology Fund. The AGSPC 1
Science & Technology Fund is sold as an
annuity only to registered and unregistered
separate accounts of VALIC and its
affiliates or employee thrift plans
maintained by VALIC or American General
Corporation. The returns shown reflect
investment management fees and other Fund
expenses, and do not reflect any charges
included in the annuity contract or variable
life insurance policy for mortality and
expenses guarantees, administrative fees or
surrender charges.
Investments made by the new Fund, AGSPC 2
Science & Technology Fund, may not be the
same as those made by the AGSPC 1 Science &
Technology Fund. The Funds will have
different performance results, due to
factors such as the cash flow in and out,
different fees and expenses, and diversity
in portfolio size and positions. Past
performance shown below is no guarantee of
similar future performance for the AGSPC 2
Science & Technology Fund.
The bar chart below shows the annual returns
and performance for each full calendar year
since inception of the AGSPC 1 Science &
Technology Fund, assuming reinvestment of
dividends and distributions.
[bar chart here with plot points as shown
below]
199561.66%
199613.81%
1997 2.61%
199842.13%
199998.96%
Best quarter Q __, Year ___._%
Worst quarter Q __, Year ___._%
The table below compares the performance of
the AGSPC 1 Science & Technology Fund for
calendar year 1999 to that of the S&P 500
Index (the "Index"). The Index is composed
of 500 common stocks which are chosen by
Standard & Poor's Corporation. It
approximates the general distribution of
industries in the U.S. economy and captures
the price performance of a large cross-
section of the publicly traded stock market.
No sales charges have been applied to the
Index, and an investor cannot invest
directly in it.
1 Year
AGSPC 1 Science & Technology Fund 98.96%
S&P 500 Index 21.04%
5 Years
AGSPC 1 Science & Technology Fund 38.68%
S&P 500 Index 28.56%
Since inception,
4/29/94
AGSPC 1 Science & Technology Fund 38.73%
S&P 500 Index 18.21%
FEES AND EXPENSES
This table describes the fees and expenses
that you may pay if you buy and hold shares
of the Fund. Shareholder fees are paid
directly from your account, while annual
Fund operating expenses are deducted from
Fund assets.
Shareholder fees Class A
Maximum sales charge (load)
imposed on purchases
(as a percentage of offering price)5.75%
Maximum deferred sales charge (load)
(as a percentage of purchase or redemption
proceeds, whichever is lower)Footnote 1
Maximum account fee None
Annual Fund operating expenses Class A
Management fees 0.90%
Distribution and service (12b-1) fees0.25%
Other expenses _.__%
Total annual fund operating expenses_.__%
Fee waiver and/or expense reimbursement_.__%
Net Expenses _.__%
Footnote 1: A CDSC is imposed on the
proceeds of Class B shares redeemed within 5
years, subject to certain exceptions. The
charge is a percentage of net asset value at
the time of purchase or redemption,
whichever is less, and declines from 5% in
the first year that shares are held, to 4%
in the second year, 3% in the third year, 2%
in the fourth year, and 1% in the fifth
year.
Shareholder fees Class B
Maximum sales charge (load)
imposed on purchases
(as a percentage of offering price)None
Maximum deferred sales charge (load)
(as a percentage of purchase or redemption
proceeds, whichever is lower) 5%
Footnote 2
Maximum account fee None
Annual Fund operating expenses Class B
Management fees 0.90%
Distribution and service (12b-1) fees1.00%
Other expenses _.__%
Total annual fund operating expenses_.__%
Fee waiver and/or expense reimbursement_.__%
Net Expenses _.__%
Footnote 2: A CDSC is imposed on the
proceeds of Class B shares redeemed within 5
years, subject to certain exceptions. The
charge is a percentage of net asset value at
the time of purchase or redemption,
whichever is less, and declines from 5% in
the first year that shares are held, to 4%
in the second year, 3% in the third year, 2%
in the fourth year, and 1% in the fifth
year.
Annual Fund operating expenses are based on
expenses for the Fund's most recent fiscal
year. The Fund's Rule 12b-1 fees include an
asset-based sales charge, as discussed in
the Distribution and Service Plan section of
this Prospectus.
Example
This example is intended to help you compare
the cost of investing in the Fund with the
cost of investing in other mutual funds. The
example assumes that:
o You invest $10,000 in the Fund for the
time periods indicated;
o You redeem all your shares at the end of
those periods;
o Your investment has a 5% return each year;
and
o The Fund's operating expenses remain the
same.
Class A 1 Year 3 Years
$___ $___
Class B 1 Year 3 Years
$___ $___
Without redemptions, your costs would be:
Class A 1 Year 3 Years
$___ $___
Class B 1 Year 3 Years
$___ $___
More About Portfolio Investments
The Fund's principal investment strategies
and risks are shown above. The section below
explains more about certain types of
investments and the Fund's strategies that
are not key strategies. Please refer to the
SAI for more information about investments.
Secondary Strategies
The Fund may invest up to 25% may be
invested in other equity-related securities
of science and technology companies,
including convertible debt securities and
convertible preferred stock. In addition,
the fund may invest in futures and options
in accordance with the Fund's objective.
Equity Securities
Equity securities represent an ownership
position in a company. The prices of equity
securities fluctuate based on changes in the
financial condition of the issuing company
and on market and economic conditions. If
you own an equity security, you own a part
of the company that issued it. Companies
sell equity securities to get the money they
need to grow.
Stocks are one type of equity security. Each
share of stock represents a part of the
ownership of the company. The holder of
stock participates in the growth of the
company through the stock price and receipt
of dividends. All the Funds may invest in
equities except for the Money Market Fund
and the Municipal Money Market Fund, though
equities may not be a primary strategy for
each Fund.
Generally, there are three types of stocks:
1. Common stock - Common stock usually has
voting rights, which allow an investor to
vote for the company Board of Directors.
Common stock also gives each owner a share
in a company's profits through dividend
payments or the capital appreciation of the
security.
2. Preferred stock - Each share of
preferred stock allows the holder to get a
fixed dividend before the common stock
shareholders receive any dividends on their
shares.
3. Convertible preferred stock - A stock
with a fixed dividend which the holder may
exchange for a certain amount of common
stock.
Stocks are not the only type of equity
security. Other equity securities include
but are not limited to convertible
securities, depository receipts, warrants,
rights and partially paid shares, investment
company securities, real estate securities,
convertible bonds and foreign equity
securities, such as ADRs, Global Depositary
Receipts and European Depositary Receipts.
Futures and Options
Futures and options are considered
derivative securities, since the value of
the future or option is derived in part from
the value and characteristics of another
security. A "future" is a contract which
involves the sale of a security for future
delivery. An "option" gives the buyer the
opportunity to buy or sell a security at a
set price on or before a date specified in
the contract. A call option buyer thinks the
stock price may go up in the future, while a
put option buyer thinks the stock price may
go down. All of the Funds except for
International Growth Fund, Mid Cap Growth
Fund, Money Market Fund and Municipal Money
Market Fund may invest in derivatives.
The Funds use stock and bond futures to
invest cash and cash equivalents to:
o Write (sell) exchange traded covered put
and call options on securities and stock
indices.
o Purchase exchange traded put and call
options on securities and stock indices.
o Purchase and sell exchange traded
financial futures contracts.
o Write (sell) covered call options and
purchase exchange traded put and call
options on financial futures contracts.
o Write (sell) covered call options and
purchase non-exchange traded call and put
options on financial futures contracts.
Derivatives Risk: The risk that loss may
result from the Fund's investments in
futures or options. Futures and options may
be risky if the market moves in a way the
Fund manager did not predict. Thus, small
changes in the price of a security may be
magnified in the futures or options
contract, and cause volatility in the Fund's
share price.
Money Market Securities
A money market security is high quality when
it is rated in one of the two highest credit
categories by Moody's or S&P or another
nationally recognized rating service or if
unrated, deemed high quality by VALIC or a
Sub-Advisor. All the Funds may invest in
money market securities, though it is not a
primary strategy for all Funds.
Examples of high quality money market
securities include:
o Cash and cash equivalents
o Securities issued or guaranteed by the
U.S. Government, its agencies or
instrumentalities
o Certificates of deposit and other
obligations of domestic banks having
total assets in excess of $1 billion
o Commercial paper sold by corporations and
finance companies
o Corporate debt obligations with remaining
maturities of 13 months or less
o Repurchase agreements, money market
securities of foreign issuers if payable
in U.S. dollars, asset-backed securities,
loan participations, and adjustable rate
securities.
Welcome to American General Corporation
American General Corporation, with assets of
$___ billion and shareholders' equity of
$___ billion as of December 31, 1999, is the
parent company of one of the nation's
largest diversified financial services
organizations. American General's operating
divisions deliver a wide range of retirement
services, life insurance, and consumer
finance products and services to diverse
markets through focused distribution
channels. American General, headquartered in
Houston, was incorporated as a general
business corporation in Texas in 1980 and is
the successor to American General Insurance
Company, an insurance company incorporated
in Texas in 1926.
American General Fund Group is the mutual
fund division of American General
Corporation. The address of American General
Corporation and its subsidiaries, including
VALIC, is 2929 Allen Parkway, Houston, Texas
77019.
Investment Advisor
VALIC, a stock life insurance company, has
been in the investment advisory business
since 1960, and is the investment Advisor
for American General Fund Group. VALIC had
$____ billion in assets under management, as
of December 31, 1999. VALIC is a member of
the American General Corporation group of
companies, and is a registered investment
Advisor with the SEC.
As Investment Advisor, VALIC oversees the
Fund's day to day operations, supervises the
purchase and sale of Fund investments, and
performs the cash management function. VALIC
employs Investment Sub-Advisors who make
investment decisions for several of the
Funds.
How VALIC is Paid for Its Services
The Fund pays VALIC an annual advisory fee
of 0.90%, based on its average daily net
assets. From time to time VALIC, the Sub-
Advisors and/or the Distributor may
voluntarily undertake to reduce a Fund's
expenses by reducing the fees payable to
them or bearing certain expenses.
Investment Sub-Advisor
The Sub-Advisor for the Science & Technology
Fund is T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe
Price")
Founded in 1937 by Thomas Rowe Price, Jr.,
the Baltimore-based investment management
firm is one of the nation's leading
providers of no-load mutual funds for
individual investors and corporate
retirement programs. As of September 30,
1999, T. Rowe Price and its affiliates
served as investment Advisor to more than 75
stock, bond, and money market funds and
managed about $157.4 billion.
The Fund is managed by an investment
advisory committee, chaired by Charles A.
Morris. Mr. Morris has day-to-day
responsibility for managing the portfolio
and works with the committee to develop and
execute the Fund's investment program. Mr.
Morris has been chairman of the AGSPC 1
Science & Technology Fund committee since
1994, and has chaired the AGSPC 2 Science &
Technology Fund committee since its
inception.
More About Investment Sub-Advisors
For some of the Funds in the American
General Fund Group, VALIC works with
investment Sub-Advisors through an agreement
each entered into with VALIC. Sub-Advisors
are financial service companies that
specialize in certain types of investing.
However, VALIC still retains ultimate
responsibility for managing the Funds. The
Sub-Advisor's role is to make investment
decisions for the Funds according to each
Fund's investment objectives and
restrictions.
According to the agreements we have with the
Sub-Advisors, we will receive investment
advice for each sub-advised Fund. Under
these agreements we give the Sub-Advisors
the authority to buy and sell securities for
these Funds. We retain the responsibility
for the overall management of these Funds.
The Sub-Advisors may buy and sell securities
for each Fund with broker-dealers and other
financial intermediaries that they select.
The Sub-Advisors may place orders to buy and
sell securities of these Funds with a broker-
dealer affiliated with the Sub-Advisor as
allowed by law. This could include any
affiliated futures commission merchants.
The 1940 Act permits Sub-Advisors, under
certain conditions, to place an order to buy
or sell securities with an affiliated
broker. One of these conditions is that the
commission received by the affiliated broker
cannot be greater than the usual and
customary brokers commission if the sale was
completed on a securities exchange. The
Series Company has adopted procedures, as
required by the 1940 Act, which provide that
any commissions received by a Sub-Advisor's
affiliated broker may be considered
reasonable and fair if compared to the
commission received by other brokers for the
same type of securities transaction.
The Securities Exchange Act of 1934
prohibits members of national securities
exchanges from effecting exchange
transactions for accounts that they or their
affiliates manage, except as allowed under
rules adopted by the SEC. The Series Company
and the Sub-Advisors have entered into
written contracts, as required by the 1940
Act, to allow the Sub-Advisor's affiliate to
effect these type of transactions for
commissions. The 1940 Act generally
prohibits a Sub-Advisor or a Sub-Advisor's
affiliate, acting as principal, from
engaging in securities transactions with a
Fund, without an exemptive order from the
SEC.
VALIC and the Sub-Advisors may enter into
simultaneous purchase and sale transactions
for the Funds or affiliates of the Funds.
In selecting Sub-Advisors, the Trustees of
the Series Company carefully evaluated: (i)
the nature and quality of the services
expected to be rendered to the Fund(s) by
the Sub-Advisor, (ii) the distinct
investment objective and policies of the
Fund(s); (iii) the history, reputation,
qualification and background of the Sub-
Advisors' personnel and its financial
condition; (iv) its performance track
record; and (v) other factors deemed
relevant. The Trustees also reviewed the
fees to be paid by VALIC to each Sub-
Advisor. The Sub-Advisory fees are not paid
by the Funds.
The Series Company relies upon an exemptive
order from the SEC which permits VALIC,
subject to certain conditions, to select new
sub-Advisors or replace existing sub-
Advisors without first obtaining shareholder
approval for the change. The Board of
Trustees, including a majority of the
"independent" Trustees, must approve each
new sub-advisory agreement. This allows
VALIC to act more quickly to change sub-
Advisors when it determines that a change is
beneficial to shareholders by avoiding the
delay of calling and holding shareholder
meetings to approve each change. In
accordance with the exemptive order, the
Series Company will provide investors with
information about each new sub-Advisor and
its sub-advisory agreement within 90 days of
the hiring of a new sub-Advisor. VALIC is
responsible for selecting, monitoring,
evaluating and allocating assets to the Sub-
Advisors and oversees the Sub-Advisors'
compliance with the relevant Fund's
investment objective, policies and
restrictions.
Shareholder Account Information
There are several references below to
Customer Service or the Transfer Agent.
Customer Service and all Transfer Agent
functions are provided by National Financial
Data Systems, Inc., in Kansas City,
Missouri.
Types of Accounts
The different ways you may set up an account
are listed below.
Individual
Individual accounts are owned by one person.
You can designate a beneficiary for the
account if you choose to have a Transfer on
Death account ("TOD").
Joint Tenants
Joint accounts can have two or more owners.
You can set the account up as joint tenants
with rights of survival ("JTWROS"), which
means that if one owner dies, the other
owner will receive the funds without going
through probate court.
You can also choose joint tenants in common
("JTIC"). This means that each tenant owns a
specific portion of the account. We assume
50/50 ownership unless we are otherwise
notified. When one tenant dies, that portion
of the account belongs to the estate of the
deceased.
Retirement Plans
Retirement plans provide individuals with
tax-advantaged ways to save for retirement,
either with tax-deductible contributions, or
tax-deferred growth. Retirement accounts
require special applications and have a
lower initial purchase requirement.
Retirement accounts include:
Traditional Individual Retirement
Accounts ("IRAs")
Roth IRAs
Roth Conversion IRAs
Rollover IRAs
Profit-Sharing or Money Purchase Pension
Plans
Simplified Employee Pension ("SEP") IRAs
SIMPLE IRAs
401(k) Plans
Transfer or Gift to Minor
You can set up a custodial account for a
child under your state's Uniform Transfer or
Gift to Minors Act ("UTMA" or "UGMA"). Any
individual can give the child up to $10,000
each year without paying the federal gift
tax. The gift to the child is irrevocable,
meaning that it cannot be taken back. In
addition, the account and all the money in
it must be conveyed to the child upon
reaching the age of majority, which is 18-21
in most states.
Trust
The trust must be established before the
account is open. We need to know the date of
establishment and the name of the trustee.
Businesses or Organizations
You may open an account for your
corporation, association, or partnership.
The application must be accompanied by a
corporate resolution so that we know who is
authorized to transact on the account.
Investment Minimums
The table below illustrates the minimum
investment requirements for initial and
subsequent investments for any of the Funds.
Initial
Subsequent
Type of Account Investment
Investment
Retirement Plans $500 $50
UTMA/UGMA $250 $50
Automatic Investment Program $50 $50
All other accounts $2,000 $50
Available Classes of Shares
You may choose to purchase either Class A
and Class B shares. The decision as to which
class is best for you depends on your
investment goals, how much you want to
invest and how long you plan to keep the
investment. The fees and expenses are
different for each Class and affect a Fund's
total return. The fees and expenses are
shown in the Fee Table and Example of
Expenses earlier in this Prospectus.
Class A features.
o Front-end sales charge, except for money
market funds
o Reduced sales charges for larger purchases
o Cumulative purchase discount (see Rights
of Accumulation below)
o No sales charges for purchases of $1
million or more
Class A Sales Charge Tables
If you choose Class A shares, you will pay a
sales charge at the time of each purchase.
These tables show the charges both as a
percentage of offering price and as a
percentage of the amount you invest. The
term "offering price" includes the front-end
sales charge. If you invest more, the sales
charge will be lower.
Your Sales charge as a
percentage of:
Investment Net Investment Offering Price
Less than $25,000 6.10% 5.75%
$25,000 - $49,999 5.82% 5.50%
$50,000 - $99,999 4.99% 4.75%
$100,000 - $249,999 3.90% 3.75%
$250,000 - $499,999 2.56% 2.50%
$500,000 - $999,999 2.04% 2.00%
$1,000,000 or more No sales charge, but
subject to CDSC*
Your Maximum Commission
Investment to Broker-Dealer
Less than $25,000 5.25%
$25,000 - $49,999 5.00%
$50,000 - $99,999 4.25%
$100,000 - $249,999 3.25%
$250,000 - $499,999 2.00%
$500,000 - $999,999 1.75%
$1,000,000 or more See Payments to Broker-
Dealers below
*Purchases of $1 million or more which are
redeemed within one year will be charged a
1% CDSC. Redemptions within 2 years will be
charged a CDSC of 0.50%.
When the sales charge on Class A Shares will
be reduced or waived
o Rights of Accumulation (cumulative
purchase discount): Previous Class A
purchases may help you to qualify for a
lower sales charge. The sales charge is
calculated by adding the dollar amount of
the new purchase of shares to the higher
of the original cost or current value of
Class A Fund shares previously purchased.
o Volume Discounts (groups or grouped
accounts): Related accounts may be
aggregated for the purposes of receiving
a reduced sales charge. You must contact
Customer Service to see if you or your
group is eligible for a volume discount
purchase, and notice may be required for
each subsequent purchase. For purposes of
determining eligibility for the volume
discount, spouses and their children
under 21 years of age are treated as a
single purchaser, as is a trustee or
other fiduciary of a single trust estate
or a single fiduciary account. An
aggregate investment includes all shares
of the Funds owned plus the shares being
purchased.
o Letter of Intent: If you intend to
purchase a specific amount over the next
13 months, it may be to your benefit to
sign a Letter of Intent. This allows you
to receive a lower breakpoint for each
purchase, based on the total amount you
intend to purchase. Up to 5% of the total
amount you intend to purchase may be held
in escrow to cover additional sales
charges, just in case you do not purchase
the total amount. A Letter of Intent can
be obtained by calling Customer Service
at 1-877-999-2434.
o Purchases of Class A Shares without sales
charges: Class A Shares may be purchased
without a sales charge by:
1. Current and retired Trustees;
2. Current and retired employees of
American General Corporation and its
affiliates;
3. Directors, officers, and employees (and
when permitted, registered representatives
and their employees) of financial
intermediaries that have entered into a
selling agreement with the Distributor;
4. Immediate family members (spouse,
children under 21, grandchildren under 21,
and parents) of 1 through 3 above;
5. Financial institution trust departments
investing an aggregate of $1 million in the
Funds;
6. Accounts for which broker-dealers,
financial institutions, or financial
planners charge an account management fee
(also called a wrap fee);
7. Tax-qualified plans with more than $1
million in plan assets;
8. Tax-qualified plans purchasing shares
with loan repayments from participants; and
9. By a Fund in connection with the
acquisition of another investment company.
Class B features.
o No front-end sales charges
o Contingent deferred sales charge ("CDSC")
on redemptions
o Keeping the shares longer will reduce the
CDSC
o No CDSC is charged for shares acquired by
reinvesting dividends or capital gains
o Class B shares automatically convert to
Class A shares after 6 years
Class B CDSC Table
If you choose Class B shares, you will not
pay an initial sales charge, but you will
have to pay a CDSC if the shares are sold
within the first five years, as shown below.
Year 1 2 3 4 5 6
Charge 5% 4% 3% 2% 1% 0%
Shares not subject to a CDSC will be
redeemed first, followed by shares held the
longest during the CDSC period. The amount
of the CDSC is calculated as a percentage of
the lesser of the current market value or
the original cost of the shares being
redeemed. This means that you do not pay a
CDSC on any gain in the value of the shares
sold. The CDSC may be waived under certain
circumstances.
When the CDSC will be waived
No CDSC will be charged for:
o Exchanges of Class B Shares from one Fund
to another
o Required minimum distributions from tax-
deferred retirement plans and IRAs
o Redemptions from tax-deferred retirement
plans for termination of employment,
participant loans, or hardship
withdrawals
o The return of an excess contribution or
deferral, pursuant to sections 401(k)(8),
401(m)(6), 402(g)(2), or 408(d)(4) or (5)
of the Internal Revenue Code.
o Redemptions due to the death of an
individual investor
o Redemptions due to the deaths of all the
investors, for a joint account
o Redemptions taken due to a disability, as
determined by the Social Security
Administration
o Systematic withdrawals of at least $50,
provided that the amounts withdrawn do
not exceed 12% of the account value, on
an annual basis (you must have a minimum
balance of $5,000 to be eligible for this
program)
o Redemptions due to the failure to meet
the minimum balance requirements
Distribution and Service Plan
The Fund has adopted a Distribution and
Service Plan ("Plan") under Rule 12b-1 of
the 1940 Act. The Plan allows the Fund to
pay distribution fees for the sale and
distribution of its shares and for services
provided to shareholders. The Fund will pay
service fees of 0.25% for Class A Shares and
1% for Class B Shares during each fiscal
period.
Payments to Broker-Dealers
The distribution and service fees are paid
to the distributor of the Funds, American
General Distributors, Inc. (the
"Distributor"), a subsidiary of American
General Corporation. The Distributor may
then pay broker-dealers a commission for
selling Fund Shares. The maximum commission
for Class A Shares is shown above, as a
percentage of the offering price. The
Distributor may pay a maximum commission of
4.00% on Class B Shares at the time of
purchase.
The Distributor may occasionally pay broker-
dealers the full amount of the Class A front-
end sales charge as a special sales
incentive. Broker-dealers may also receive
additional compensation and finder's fees,
based on assets held through the broker-
dealer firm. Finder's fees may be paid on
Class A Share purchases of $1 million or
more, excluding Money Market Funds. The
finder's fee is 0.50% on sales of $1 to $2
million, plus 0.40% on the next $1 million,
and 0.25% on the excess over $3 million.
The Distributor may also provide promotional
incentives or payments to its registered
representatives, its affiliated broker-
dealer, or to other broker-dealers in
connection with the sales of Fund Shares.
These incentives or payments may include
payments for travel and lodging expenses
incurred for meetings and seminars of a
business nature. The Distributor makes these
payments at its own expense, in accordance
with rules set forth by the National
Association of Securities Dealers, Inc.
How Shares are Valued
The price of each Class of shares for a Fund
is based on net asset value ("NAV"). NAV is
computed by adding the value of a Fund's
holdings plus other assets, subtracting
liabilities, and then dividing the result by
the number of shares outstanding. The NAV of
each Class will be different, depending on
the number of Class shares outstanding.
Portfolio securities and other assets are
valued based on market price quotations or
information provided by a market pricing
service. If price quotations are not readily
available, securities are valued by a method
that reflects fair value. These are reviewed
by the Fund's Board of Trustees. The Fund
holds some securities that may be primarily
listed on foreign exchanges. Foreign
exchanges may trade at times or on days when
the New York Stock Exchange ("NYSE") is
closed, such as on weekends or other days.
This will affect the value of the Fund's
shares; thus, the value of the Fund's shares
may change on days when you will not be able
to buy or sell your shares.
The NAV is calculated as of the close of
each business day, which coincides with the
closing of the regular session of the NYSE
(normally 4 p.m. Eastern Time). American
General Fund Group is open for business each
day the NYSE is open. Please note that there
are some federal holidays, however, such as
Columbus Day and Veterans' Day, when the
NYSE is open and the Fund Group is open but
purchases cannot be made due to the closure
of the banking system.
Opening Your Account
You may open an account through a registered
representative or by completing the enclosed
application. Please be sure to indicate the
Fund and the Class of shares you wish to
purchase.
Please take special care when completing
your application that you sign up for any
services you may desire, including telephone
privileges. If your bank is a member of the
Automated Clearing House ("ACH"), you may
sign up for the electronic transfer service.
To sign up, you MUST include a voided check
for a checking account, or a deposit slip
for a savings account. If you wish to add
services at a later date, a signature
guarantee may be required.
Send the new account application and your
purchase check to:
American General Fund Group
P.O. Box 219502
Kansas City, MO 64141-6502
If you purchase shares through a registered
representative or financial institution
You should read the program materials
together with this Prospectus. Certain
features may be modified in these programs.
Investors may be charged a fee if they
effect transactions in Fund shares through a
broker or agent.
General Purchase Information
If the Transfer Agent receives your purchase
order by 3:00 p.m. Central Time, then your
purchase will be processed at the next NAV
calculated after your order is received. Any
check purchase received without an
investment slip may cause delayed crediting.
All purchases must be made in U.S. dollars
and should be drawn only on U.S. banks. If
your check does not clear your bank, you may
be charged a fee by the Transfer Agent. All
purchases, except those made by wire, will
be on hold and unavailable for redemptions
for 15 calendar days. The Fund reserves the
right to reject any specific purchase order
and may suspend the offering of shares in
response to conditions in the securities
markets or for other reasons.
Additional Account Purchases
You may make additional purchases by
contacting your registered representative or
by:
Mail
You may use the investment remittance slip
attached to your account statement or
confirmations. Make your check payable to
the Fund in which you are investing and mail
to:
American General Fund Group
P.O. Box 219502
Kansas City, MO 64141-6502
Wire
Please call 1-877-999-2434 before you send a
wire purchase.
Your financial institution may charge you a
fee for wiring funds.
Electronic Transfers - $50 or more
If you have already signed up for our ACH
service, you may call Customer Service at 1-
877-999-2434 to transfer money from your
bank to the Fund through our electronic
transfer service. Your bank account will be
debited for the desired amount. Allow one or
two business days after you place your
request for the transfer to take place. This
ACH service allows you to purchase
additional shares quickly and conveniently
without mail delays.
Automatic Investment Programs
Please call 1-877-999-2434 to set up an
automatic investment program. You may change
amounts or Funds or discontinue a program at
any time.
Automatic Investing
You may request an automatic ACH transfer of
$50 or more from your bank to the Fund. You
may choose when you want this to occur,
whether monthly, bimonthly, quarterly, or
some other time.
Payroll Deductions
You may make regular investments of $50 or
more through automatic payroll deduction you
initiate through your employer. Your
employer may have special forms and other
rules for this program.
Systematic Exchanges
If you have a Fund balance of at least
$5,000, you may request an automatic
exchange of $25 or more from that Fund
account to another Fund account. The
automatic exchange will occur once per
month.
Exchanges of Shares from one Fund to another
Please call Customer Service at 1-877-999-
2434 to make an exchange. You must have
telephone privileges for this service.
An exchange of shares occurs when you sell
shares in one Fund and buy shares in another
Fund. Each exchange may produce a taxable
gain or loss.
Exchanges between accounts will only be
accepted if the accounts are registered
identically.
Exchanges may be requested by mail or by
telephone. Please refer to "Selling Your
Shares" for more details on requests by
mail.
If you exchange Class A Shares of the Money
Market Fund or the Municipal Money Market
Fund for Class A Shares of any other Fund
with a sales charge, you will pay a sales
charge at the time of the exchange.
Shares may only be exchanged for shares of
the same class of another Fund.
No CDSC is imposed on exchanges of Class B
Shares subject to a CDSC at the time of the
exchange because the shares are still within
the American General Fund Group. The CDSC
will be charged for all other sales.
Because excessive trading can increase Fund
expenses and hurt performance for other
shareholders, we may refuse any exchange
that we believe is due to market timing or
which may otherwise significantly affect a
Fund.
We may modify these exchange policies upon
60 days' prior notice to shareholders.
Selling Your Shares
When you request a redemption by 3:00 p.m.
Central Time, the proceeds of the sale will
normally be mailed, wired, or sent by
electronic transfer (ACH) the next business
day, provided all necessary documents have
been received by the Transfer Agent, and the
funds are available for redemption. If your
recent purchase is on hold and not available
for redemption, you may exchange it into
another Fund. The Funds have the right to
redeem shares in assets other than cash for
redemption amounts exceeding, in any 90-day
period, $250,000 or 1% of the net asset
value of the affected Fund, whichever is
less.
When the NYSE is closed (or when trading is
restricted) for any reason other than its
customary weekend or holiday closings, or
under any emergency circumstances as
determined by the SEC, redemptions may be
suspended or payment dates postponed. Please
note that there are some federal holidays,
however, such as Columbus Day and Veterans'
Day, when the NYSE is open and the Fund
Group is open but redemptions cannot be made
due to the closure of the banking system.
You may sell shares by contacting your
registered representative or by:
Telephone: Check redemptions, ACH, or bank
wires
You may redeem up to $25,000 daily by
calling Customer Service at 1-877-999-2434
before 3:00 p.m. Central Time. The proceeds
of the sale may be sent only to pre-
authorized destinations, such as your
address of record or your bank account by
wire or by ACH.
Bank wires must be for at least $500. You
may be charged up to $25 for a wire to your
bank, and your bank may charge to receive
the wire. International wires are more
expensive; therefore, the charge to you may
be higher.
ACH transfers must be for at least $50.
There is no charge for an ACH transfer.
Allow one or two business days after you
place your request for the transfer to take
place.
Mail
Your written request should include the
following information:
1. Your name, address, and daytime
telephone number;
2. Your account number;
3. The name or number of the Fund from
which you wish to sell shares;
4. The Class of Shares to be sold, if
applicable;
5. The dollar or share amount of the sale;
and
6. Your signature, guaranteed (see below).
Send the written request to:
American General Fund Group
P.O. Box 219502
Kansas City, MO 64141-6502
Special Requirements
A signature guarantee is required for any:
1. Redemption when the account address has
been listed less than 30 days; or
2. Redemption to an address other than
that on the account.
You may obtain a signature guarantee from:
1. A bank which is a member of the FDIC;
2. A trust company;
3. A member firm of a national securities
exchange; or
4. Another eligible guarantor institution.
Guarantees must be signed by an authorized
signatory of the guarantor institution and
be accompanied by the words "Signature
Guaranteed."
A notary public cannot provide a signature
guarantee.
Automatic Redemptions
o You may request an automatic monthly or
quarterly ACH transfer of $50 or more
from the Fund to your bank, provided your
account balance is $5,000 or more.
o You may request a monthly or quarterly
automatic check redemption of $50 or
more, provided your account balance is
$5,000 or more.
Reinstatement Privilege
If you redeem some or all of your Fund
shares, you have up to 30 days to reinvest
all or part of your redemption proceeds in
Class A Shares of the Fund without paying a
sales charge. This privilege applies only to
redemptions of Class A Shares on which an
initial sales change or CDSC was paid or to
redemptions of Class A shares of the Fund
that you purchased by reinvesting dividends
or distributions. You must ask the Transfer
Agent to apply this privilege when you send
your payment.
Minimum Account Balances
If the balance in your account falls below
the required minimum initial investment, you
will be notified that you should bring the
balance up to the required minimum amount
within 60 days. If your account remains
below the minimum required, it may be closed
and the proceeds mailed to the address of
record.
Dividends, Capital Gains and Taxes
The Fund pays quarterly dividends from its
net investment income. Net investment income
consists of interest income, net short-term
capital gains, if any, and dividends
declared and paid on investments, less
expenses. Distributions of net short-term
capital gains (treated as dividends for tax
purposes) and net long-term capital gains,
if any, are normally paid once a year;
however, the Fund does not anticipate making
any such distributions unless available
capital loss carryovers have been used or
have expired. Dividend and distribution
payments will vary between classes; dividend
payments are anticipated to be generally
higher for Class A shares.
Dividend Payment Options
Dividends and any distributions are
automatically reinvested in the same Fund
without a sales charge, unless you elect to
have dividends paid in cash or in shares of
the Money Market Fund or the Municipal Money
Market Fund. You may make this election on
the account application.
Buying a Dividend
At the time of purchase, the share price of
each class may reflect undistributed income,
capital gains or unrealized appreciation of
securities. Any income or capital gains from
these amounts which are later distributed to
you are fully taxable. On the record date
for a distribution, share value is reduced
by the amount of the distribution. If you
buy shares just before the record date
("buying a dividend") you will pay the full
price for the shares and then receive a
portion of the price back as a taxable
distribution.
Federal Taxes
In January, the Fund will mail you Form 1099-
DIV indicating the federal tax status of
dividends and any capital gain distributions
paid to you during the past year. Generally,
dividends and distributions are taxable in
the year they are paid. However, any
dividends and distributions paid in January
but declared during the prior three months
are taxable in the year declared. Dividends
and distributions are taxable to you
regardless of whether they are taken in cash
or reinvested. Dividends, including short-
term capital gains, are taxable as ordinary
income. Distributions from long-term capital
gains are taxable as long-term capital
gains, regardless of how long you have owned
shares.
Capital Gains or Losses
You may realize a capital gain or loss when
you sell or exchange shares. This capital
gain or loss will be short- or long-term,
depending on how long you have owned the
shares which were sold. In January, the Fund
will mail you Form 1099-B indicating the
total amount of all sales, including
exchanges. You should keep your account
statements to help determine the cost basis
of the shares to report on your tax returns.
Taxpayer Identification Number
If we do not have your correct Social
Security or Taxpayer Identification Number
("TIN") and a signed certified application
or Form W-9, Federal law requires us to
withhold 31% of your reportable dividends,
and possibly 31% of certain redemptions. In
addition, you may be subject to a fine by
the Internal Revenue Service. We reserve the
right to reject any new account or any
purchase order for failure to supply a
certified TIN.
<PAGE>
For investors who want more information
about the Funds, the following documents are
available free upon request:
Annual/Semi-Annual Reports: Additional
information about each Fund's investments is
available in the Fund's Annual and Semi-
Annual reports to shareholders.
Statement of Additional Information ("SAI"):
The SAI provides more detailed information
about the Funds and is incorporated into
this prospectus by reference.
You can get free copies of reports and SAIs,
request other information and discuss your
questions about the Funds by contacting your
broker, or the Funds at:
Telephone: 1-877-999-2434
American General Web-Site Address:
http://www.agfundgroup.com
You can review the Funds' reports and SAI at
the public Reference Room of the SEC.
You can get text only copies:
o For a fee, by writing to or calling
the Public Reference Room of the
Commission, Washington, D.C. 20549-
6009, Telephone: 1-800-SEC-0330.
o Free from the Commission's Internet
website at http://www.sec.gov.
Investment Company Act File No. 811-08875
(AGSPC 2)
