<PAGE> 1
AMERICAN GENERAL SERIES PORTFOLIO COMPANY 3
SUPPLEMENT ISSUED NOVEMBER 4, 1998
TO PROSPECTUS DATED SEPTEMBER 21, 1998
American General Core Bond Fund
Effective immediately, Robert N. Kase, CFA, has assumed responsibility for the
portfolio management of the American General Core Bond Fund. Mr. Kase, Vice
President and Senior Portfolio Manager of American General Investment
Management, L.P. (the "Sub-adviser"), joined the Sub-adviser in September 1998.
From September 1992 to July 1998, Mr. Kase was Senior Portfolio Manager at CL
Capital Management, Inc.
American General Mid Cap Value Fund
In addition to Michael M. Kassen and Robert I. Gendelman, S. Basu Mullick also
is primarily responsible for the day-to-day management of American General Mid
Cap Value Fund. Mr. Mullick has been a Vice President of Neuberger&Berman
Management Inc. since October 1998. From 1993 to 1998, Mr. Mullick was a
portfolio manager for another mutual fund manager.
American General Money Market Fund
Effective immediately, the investment policies of American General Money Market
Fund (the "Money Market Fund") are amended to permit investment in taxable
municipal obligations (variable rate demand notes).
Variable rate demand notes ("VRDNs") are obligations containing a floating or
variable interest rate adjustment formula, together with an unconditional right
to demand payment of the unpaid principal balance plus accrued interest upon a
short notice period, generally not to exceed seven days. The Money Market Fund
also may invest in participation VRDNs, which provides the Fund with an
undivided interest in underlying VRDNs held by major investment banking
institutions. Any purchase of VRDNs will meet applicable diversification and
concentration requirements and conditions established by the SEC under which
such securities may be considered to have remaining maturities of 397 days or
less.
American General Small Cap Value Fund
In addition to Kathryn Maag Vorisek, Lloyd J. Spicer, CFA, and Terry B. French,
Douglas G. Madigan, CFA, also is primarily responsible for the day-to-day
management of American General Small Cap Value Fund. Mr. Madigan, Senior Vice
President and Director of Research of Fiduciary Management Associates, Inc. (the
"Sub-adviser"), joined the Sub-adviser in September 1998. Previously, Mr.
Madigan was with Harris Bank as Vice President, Equity Research, from 1994 to
September 1998 and as Mutual Fund Portfolio Manager and Partner from 1996 to
September 1998. From 1989 to 1994, Mr. Madigan was Vice President and Senior
Portfolio Manager at Continental Bank.
American General Socially Responsible Fund
Effective immediately, Maruti D. More, CFA, has assumed responsibility for the
portfolio management of the American General Socially Responsible Fund. Mr. More
has been Vice President -- Investments of American General Series Portfolio
Company 3 since July 1998. Since April 1998, Mr. More serves as Vice President
of The Variable Annuity Life Insurance Company and American General Investment
Management, L.P. From 1996 to April 1998, Mr. More was a portfolio manager with
American General Corporation. From 1993 to 1995, Mr. More was Managing Director,
Marketable Securities at Paul Revere Investment Management Corporation.
The average annual total return shown on page 33 for the 5 year period ended
March 31, 1998 is 21.54%.
VA 10832-B VER 11/98
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The section of the Prospectus entitled "Expense Summary" is replaced in its
entirety:
EXPENSE SUMMARY
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Annual fund operating expenses are the fees paid out of the assets of a Fund.
Each Fund pays a management fee to VALIC. The expenses paid by a Fund are
factored into the calculation of its share price or dividends and are not
charged directly to investors. The expenses reflected in the tables below are
based on the Funds' anticipated expenses for the first year of operation on an
annualized basis.
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ANNUAL FUND OPERATING EXPENSES:
(after expense reimbursements, as a percentage of net assets)
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<TABLE>
<CAPTION>
INTERNATIONAL LARGE CAP MID CAP SMALL CAP INTERNATIONAL LARGE CAP
GROWTH FUND GROWTH FUND GROWTH FUND GROWTH FUND VALUE FUND VALUE FUND
------------- ----------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management Fee 0.90% 0.55% 0.65% 0.85% 1.00% 0.50%
Other Expenses(b) 0.71% 0.58% 0.64% 0.62% 0.70% 0.58%
----- ----- ----- ----- ----- -----
Total Fund Expenses: 1.61% 1.13% 1.29% 1.47% 1.70% 1.08%
Expense reimbursement (0.46)% (0.27)% (0.50)% (0.31)% (0.66)% (0.27)%
Total fund expenses after reimbursement 1.15% 0.86% 0.79% 1.16% 1.04% 0.81%
===== ===== ===== ===== ===== =====
<CAPTION>
SOCIALLY
MID CAP SMALL CAP RESPONSIBLE
VALUE FUND VALUE FUND FUND
---------- ---------- -----------
<S> <C> <C> <C>
Management Fee 0.75% 0.75% 0.25%
Other Expenses(b) 0.64% 0.63% 0.87%
----- ----- -----
Total Fund Expenses: 1.39% 1.38% 1.12%
Expense reimbursement (0.34)% (0.40)% (0.56)%
Total fund expenses after reimbursement 1.05% 0.98% 0.56%
===== ===== =====
</TABLE>
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ANNUAL FUND OPERATING EXPENSES
(after expense reimbursements, as a percentage of net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MODERATE
MONEY GROWTH GROWTH
BALANCED HIGH YIELD STRATEGIC DOMESTIC CORE MARKET LIFESTYLE LIFESTYLE
FUND BOND FUND BOND FUND BOND FUND BOND FUND FUND FUND(a) FUND(a)
-------- ---------- --------- --------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee 0.80% 0.70% 0.60% 0.60% 0.50% 0.25% 0.10% 0.10%
Other Expenses(b) 0.80% 0.83% 0.90% 0.57% 0.86% 0.86% --% --%
----- ----- ----- ----- ----- ----- ----- -----
Total Fund Expenses: 1.60% 1.53% 1.50% 1.17% 1.36% 1.11% 0.10% 0.10%
Expense reimbursement (0.78)% (0.54)% (0.61)% (0.39)% (0.56)% (0.55)% --% --%
Total fund expenses after reimbursement 0.82% 0.99% 0.89% 0.78% 0.80% 0.56% 0.10% 0.10%
===== ===== ===== ===== ===== ===== ===== =====
<CAPTION>
CONSERVATIVE
GROWTH
LIFESTYLE
FUND(a)
------------
<S> <C>
Management Fee 0.10%
Other Expenses(b) --%
-----
Total Fund Expenses: 0.10%
Expense reimbursement --%
Total fund expenses after reimbursement 0.10%
=====
</TABLE>
(a) The Growth Lifestyle Fund, the Moderate Growth Lifestyle Fund and the
Conservative Growth Lifestyle Fund seek to accomplish their respective
objectives by investing primarily in a number of other Series Company Funds
("Underlying Series Company Funds"). Each Lifestyle Fund will bear
indirectly its pro rata share of the fees and expenses incurred by the
Underlying Series Company Funds in which the Lifestyle Fund is invested.
(b) Other Expenses, which include custody, accounting, reports to shareholders,
audit, legal, administrative, recordkeeping and other miscellaneous
services provided to the Funds, are based on estimated amounts for the
current fiscal year.
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TOTAL COMBINED OPERATING EXPENSES(a)
(including indirect expenses) (after expense reimbursements, as a percentage of
net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED TOTAL COMBINED
OPERATING EXPENSES(b)
------------------------
<S> <C>
Growth Lifestyle Fund 1.09%
Moderate Growth Lifestyle Fund 1.03%
Conservative Growth Lifestyle Fund 1.00%
</TABLE>
(a) Estimated Total Combined Operating Expenses of each Lifestyle Fund is based
on the Total Fund Operating Expenses of the Underlying Series Company Funds
and the Lifestyle Funds, assuming each Lifestyle Fund's projected asset
allocation among the Underlying Series Company Funds is maintained.
(b) Reflects estimated total average weighted combined operating expenses.
The purpose of the expense tables above is to assist investors in understanding
the various costs and expenses that a shareholder of a Fund will bear directly
or indirectly. Each Fund's annual operating expenses do not reflect expenses
imposed by separate accounts of VALIC through which an investment in each Fund
is made or their related contracts. A separate account's expenses are fully
explained in your contract prospectus.
