AMERICAN GENERAL SERIES PORTFOLIO CO 3, 497, 1998-07-23

AMERICAN GENERAL SERIES PORTFOLIO CO 3
497, 1998-07-23

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<PAGE> 1

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THE STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 6, 1998

AMERICAN GENERAL SERIES
PORTFOLIO COMPANY 3
2929 ALLEN PARKWAY
HOUSTON TEXAS 77019
[ __________ , 1998]
PROSPECTUS

The American General Series Portfolio Company 3 (the "Series Company") is a
mutual fund made up of 18 separate Funds (the "Funds"). Each of the Funds has a
different investment objective. Each Fund is explained in more detail on its
Fact Sheet contained in this prospectus. Here is a summary of the goals of the
18 Funds:

INDEX EQUITY FUNDS:

AMERICAN GENERAL S&P 500 INDEX FUND ("S&P 500 INDEX FUND")
Total return through investments tracking the S&P 500 Index.

AMERICAN GENERAL MID CAP INDEX FUND ("MID CAP INDEX FUND")
Growth through investments tracking the S&P Mid Cap Index.

AMERICAN GENERAL SMALL CAP INDEX FUND ("SMALL CAP INDEX FUND")
Total return through investments tracking the Russell 2000 Index.

ACTIVELY MANAGED EQUITY FUNDS:

AMERICAN GENERAL INTERNATIONAL GROWTH FUND ("INTERNATIONAL GROWTH FUND")
Long-term capital appreciation through investments in companies in
developed and emerging markets.

AMERICAN GENERAL LARGE CAP GROWTH FUND ("LARGE CAP GROWTH FUND")
Long-term growth through investments in large cap U.S. issuers.

AMERICAN GENERAL MID CAP GROWTH FUND ("MID CAP GROWTH FUND")
Growth through investments in equity securities.

AMERICAN GENERAL SMALL CAP GROWTH FUND ("SMALL CAP GROWTH FUND")
Long-term growth through investments in small company growth stocks.

AMERICAN GENERAL INTERNATIONAL VALUE FUND ("INTERNATIONAL VALUE FUND")
Growth of capital and future income through investments in non-U.S.
issuers.

AMERICAN GENERAL LARGE CAP VALUE FUND ("LARGE CAP VALUE FUND")
Total returns exceeding the Russell 1000 Value Index through investments
in equity securities.

AMERICAN GENERAL MID CAP VALUE FUND ("MID CAP VALUE FUND")
Growth through investments in medium- to large-capitalization companies.

AMERICAN GENERAL SMALL CAP VALUE FUND ("SMALL CAP VALUE FUND")
Maximum long-term return through investments in small capitalization
companies.

SPECIALTY EQUITY FUND:

AMERICAN GENERAL SOCIALLY RESPONSIBLE FUND ("SOCIALLY RESPONSIBLE FUND")
Growth through investments in stocks of companies meeting social criteria
of the Fund.

BALANCED FUND:

AMERICAN GENERAL BALANCED FUND ("BALANCED FUND")
Conservation of principal and long-term growth of capital and income
through investments in fixed income and equity securities.

INCOME FUND:

AMERICAN GENERAL DOMESTIC BOND FUND ("DOMESTIC BOND FUND")
High and total return consistent with conservation of capital through
investments in debt securities.

MONEY MARKET FUND:

AMERICAN GENERAL MONEY MARKET FUND ("MONEY MARKET FUND")
Income through investments in short-term money market securities.

LIFESTYLE FUNDS:

AMERICAN GENERAL GROWTH LIFESTYLE FUND ("GROWTH LIFESTYLE FUND")
Growth through investments in Series Company Funds.

AMERICAN GENERAL MODERATE GROWTH LIFESTYLE FUND ("MODERATE GROWTH
LIFESTYLE FUND")
Growth and current income through investments in Series Company Funds.

AMERICAN GENERAL CONSERVATIVE GROWTH LIFESTYLE FUND ("CONSERVATIVE GROWTH
LIFESTYLE FUND")
Current income and a low to moderate level of growth through investments
in Series Company Funds.

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

SHARES OF THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THIS FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

These Funds are available to you only through a variable annuity contract or
variable life insurance policy you or your employer bought from The Variable
Annuity Life Insurance Company ("VALIC") or one of its affiliates, or employee
thrift plans maintained by VALIC or American General Corporation. VALIC is a
member of the American General Corporation group of companies.

Because different contracts contain different combinations of Funds, all of the
Funds in this prospectus may not be available to you. And, there may be some
Funds that are available to you that don't appear in this prospectus. See the
separate prospectus that describes your, or your employer's annuity contract for
a complete list of Funds in which you may invest. BE SURE TO READ BOTH
PROSPECTUSES IN FULL BEFORE YOU START PARTICIPATING AND KEEP THEM FOR FUTURE
REFERENCE.

VALIC has filed a Statement of Additional Information, dated [ , 1998],
with the Securities and Exchange Commission ("SEC"). This Statement contains
additional information about these Funds and is part of this prospectus. For a
free copy, write to the American General Series Portfolio Company 3 at the
address above or call 1-800-44-VALIC. The Statement of Additional Information
has been filed with the SEC and is available along with other related materials
at the SEC's internet web site (http://www.sec.gov.).

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
FUNDS. ALSO, IT HAS NOT PASSED ON WHETHER THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.

DO NOT COPY
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COVER PAGE
WELCOME....................................... 1

EXPENSE SUMMARY............................... 3

ABOUT THE FUND'S MANAGEMENT................... 4
Investment Sub-advisers.................. 4
Portfolio Manager........................ 6
How Advisers Are Paid for Their
Services............................... 6
The Sub-advisers......................... 7
About the Board of Trustees.............. 8

ABOUT THE FUNDS............................... 9
Growth, Balanced, Income and Stability
Categories............................. 9
Lifestyle Category....................... 9
About Level of Risk...................... 9
About Portfolio Turnover................. 9
About Fund Performance................... 10

THE INDEX EQUITY FUNDS........................ 11

HOW TO READ A FUND FACT SHEET................. 13

SERIES COMPANY FUND FACT SHEETS
INDEX EQUITY FUNDS
S&P 500 Index Fund.................. 14
Mid Cap Index Fund.................. 16
Small Cap Index Fund................ 18
ACTIVELY MANAGED EQUITY FUNDS
International Growth Fund........... 20
Large Cap Growth Fund............... 22
Mid Cap Growth Fund................. 24
Small Cap Growth Fund............... 26
International Value Fund............ 28
Large Cap Value Fund................ 30
Mid Cap Value Fund.................. 32
Small Cap Value Fund................ 34
SPECIALTY EQUITY FUND
Socially Responsible Fund........... 36
BALANCED FUND
Balanced Fund....................... 38
INCOME FUND
Domestic Bond Fund.................. 40
MONEY MARKET FUND
Money Market Fund................... 42
</TABLE>

LIFESTYLE FUNDS
Growth Lifestyle Fund............... 43
Moderate Growth Lifestyle Fund...... 44
Conservative Growth Lifestyle
Fund.............................. 45

TYPES OF INVESTMENTS.......................... 46
Stocks................................... 46
Bonds.................................... 46
Asset-Backed Securities............. 46
Loan Participations................. 47
Variable Amount Demand Master Notes...... 47
Structured Securities.................... 47
Real Estate Securities................... 47
Illiquid and Restricted Securities....... 47
Depository Receipts...................... 47
Investment Funds......................... 48
Foreign Currency......................... 48
When-Issued Securities................... 48
Money Market Securities.................. 48
Investment Companies..................... 48
Derivatives.............................. 48
Options............................. 49
Call Option......................... 49
Put Option.......................... 49
Swap Agreements.......................... 49
Warrants and Rights...................... 49
Repurchase Agreements.................... 50
A Word About Risk........................ 50
Investment Practices..................... 51
Limitations......................... 51
Lending Portfolio Securities........ 51

ABOUT THE SERIES COMPANY...................... 52
Series Company Shares.................... 52
Net Asset Value of the Series Company
Shares................................. 52
Dividends and Capital Gains.............. 52
Diversification.......................... 53
Taxes.................................... 53
Voting Rights............................ 53
Year 2000 Risks.......................... 54
Reports.................................. 54
</TABLE>

(i)
<PAGE> 3

WELCOME
- --------------------------------------------------------------------------------

Unless otherwise specified in this prospectus, the words we, our, and VALIC mean
The Variable Annuity Life Insurance Company and any Investment Sub-adviser that
we work with. The words you and your mean the participant.

American General Series Portfolio Company 3 (the "Series Company") was organized
as a Delaware business trust on May 6, 1998.

The Series Company is an open-end management investment company and currently
consists of 18 different Funds, each of which is described in detail in this
prospectus. We serve as each Fund's Investment Adviser and, in this role, report
directly to the Series Company's Board of Trustees. As Investment Adviser, we
oversee the Funds' day to day operations and supervise the purchase and sale of
Fund investments. However, we make investment decisions for, and are directly
responsible for the day to day management of, the Socially Responsible Fund, the
Money Market Fund and the Lifestyle Funds. For more information, see "About the
Funds' Management" in this prospectus.

Individuals can't invest in the shares of these Funds directly. Instead, they
participate through an annuity or variable life contracts or employer plan with
VALIC or one of its affiliates, or employee thrift plans maintained by VALIC or
American General Corporation. Most often employers set up these contracts so
they can offer their employees a way to save for retirement. Retirement plans
through employers may be entitled to tax benefits that individual retirement
plans may not be entitled to. These tax benefits are fully explained in your
contract prospectus.

After you invest in a Fund, you participate in Fund earnings or losses, in
proportion to the amount of money you invest. Depending on your contract, if you
withdraw your money before retirement, you may incur charges and additional tax
liabilities. However, to save for retirement, you generally should let your
investments and their earnings build. At retirement, you may withdraw all or a
portion of your money, leave it in the account until you need it, or start
receiving annuity payments. At a certain age you may be required to begin
withdrawals.

All inquiries regarding this prospectus should be directed, in writing, to VALIC
Customer Service, A3-01, 2929 Allen Parkway, Houston, Texas 77019, or by calling
1-800-633-8960.

All inquiries regarding contracts issued by American General Life Insurance
Company (AGL) should be directed to AGL's Annuity Administration Department,
2727-A Allen Parkway, Houston, Texas 77019-2191 or call 1-800-813-5065 (800)
813-5065. AGL is a member of the American General Corporation group of
companies, as is VALIC.

Open-end means shares
of the Funds can be
bought or sold by the
Series Company at any
time. Also, there is no limit
on the number of investors
who may buy shares.

1
<PAGE> 4

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2
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EXPENSE SUMMARY
- --------------------------------------------------------------------------------

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' estimated expenses for the first year of operation on an
annualized basis.

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

ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE
CAP
SMALL CAP INTERNATIONAL GROWTH
S&P 500 INDEX FUND MID CAP INDEX FUND INDEX FUND GROWTH FUND FUND
--------------------- --------------------- --------------------- --------------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee(a) -- -- -- 0.20% 0.16%
Other Expenses(a) 0.58% 0.59% 0.59% 0.96% 0.70%
--- --- --- --- ----
Total Fund Operating
Expenses(a): 0.58% 0.59% 0.59% 1.16% 0.86%
--- --- --- --- ----
--- --- --- --- ----

<CAPTION>
SMALL LARGE
CAP CAP
MID CAP GROWTH INTERNATIONAL VALUE
GROWTH FUND FUND VALUE FUND FUND
--------------------- ------ ---------------------- -----
<S> <C> <C> <C> <C> <C> <C>
Management Fee(a) 0.13% 0.53% 0.27% 0.11%
Other Expenses(a) 0.67% 0.63% 0.78% 0.70%
--- ---- --- ---
Total Fund Operating
Expenses(a): 0.80% 1.16% 1.05% 0.81%
--- ---- --- ---
--- ---- --- ---
</TABLE>

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

ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

SOCIALLY
MID CAP SMALL CAP RESPONSIBLE
VALUE FUND VALUE FUND FUND BALANCED FUND
--------------------------- -------------------------- ----------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee(a) 0.38% 0.36% -- 0.16%
Other Expenses(a) 0.67% 0.63% 0.56% 0.67%
--- --- ------ ---
Total Fund Operating
Expenses(a): 1.05% 0.99% 0.56% 0.83%
--- --- ------ ---
--- --- ------ ---

<CAPTION>
CONSERVATIVE
MONEY GROWTH MODERATE GROWTH
DOMESTIC BOND MARKET LIFESTYLE GROWTH LIFESTYLE
FUND FUND FUND(B) FUND(B) FUND(B)
-------------------------- ------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Management Fee(a) 0.10% -- 0.10% 0.10% 0.10%
Other Expenses(a) 0.74% 0.56% -- -- --
--- ---- ----- ----- -------
Total Fund Operating
Expenses(a): 0.84% 0.56% 0.10% 0.10% 0.10%
--- ---- ----- ----- -------
--- ---- ----- ----- -------
</TABLE>

(a) After expense reimbursement. In the absence of the expense reimbursement,
management fees, other expenses and total fund operating expenses,
respectively, would be: S&P 500 Index Fund, 0.27%, 0.61% and 0.88%; Mid Cap
Index Fund, 0.28%, 0.76% and 1.04%; Small Cap Index Fund, 0.28%, 0.85% and
1.13%; International Growth Fund, 0.90%, 0.96% and 1.86%; Large Cap Growth
Fund, 0.55%, 0.70% and 1.25%; Mid Cap Growth Fund, 0.65%, 0.67% and 1.32%;
Small Cap Growth Fund, 0.85%, 0.63% and 1.48%; International Value Fund,
1.00%, 0.78% and 1.78%; Large Cap Value Fund, 0.50%, 0.70% and 1.20%; Mid
Cap Value Fund, 0.75%, 0.67% and 1.42%; Small Cap Value Fund, 0.75%, 0.63%
and 1.38%; Socially Responsible Fund, 0.25%, 0.78% and 1.01%; Balanced
Fund, 0.80%, 0.67% and 1.47%; Domestic Bond Fund, 0.60%, 0.74% and 1.34%;
Money Market Fund, 0.25%, 0.75% and 1.00%.

(b) Shareholders in the Fund bear indirectly the expenses of the underlying
Series Company Funds in which the Fund invests.

The purpose of the expense table 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 does 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.

3
<PAGE> 6

ABOUT THE FUND'S MANAGEMENT
- --------------------------------------------------------------------------------

VALIC, a stock life insurance company, has been in the investment advisory
business since 1960. VALIC has been the Investment Adviser for the Funds that
comprise the Series Company since their inception.

VALIC is a member of the American General Corporation group of companies.
Members of the American General Corporation group of companies operate in each
of the 50 states and Canada and collectively provide financial services with
activities heavily weighted toward insurance.

As Investment Adviser, VALIC oversees the Funds' day to day operations. Also,
VALIC supervises the purchase and sale of Fund investments. However, we make
investment decisions for, and are directly responsible for the day to day
management of, the Socially Responsible Fund the Money Market Fund and the
Lifestyle funds. VALIC serves as Investment Adviser through an Investment
Advisory Agreement it enters into with each Fund. After the second year, this
agreement will be renewed once each year, by the Series Company Board of
Trustees.

One Investment Advisory Agreement dated [ , 1998] covers all 18
Funds.

For more information about the Advisory Agreement, see the "Investment Adviser"
section in the Statement of Additional Information.

INVESTMENT SUB-ADVISERS

For some of the Funds, VALIC works with Investment Sub-advisers, financial
service companies that specialize in certain types of investing. However, VALIC
still retains ultimate responsibility for managing the Funds. The Sub-adviser's
role is to make investment decisions for the Funds according to each Fund's
investment objectives and restrictions.

In selecting Sub-advisers, the Trustees carefully evaluated: (i) the nature and
quality of the services expected to be rendered to the Fund(s) by the
Sub-adviser, (ii) the distinct investment objective and policies of the Fund(s);
(iii) the history, reputation, qualification and background of the Sub-
advisers' 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 to each Sub-adviser.

The Sub-advisers are:

BANKERS TRUST COMPANY
("BANKER'S TRUST")

Bankers Trust is the Sub-adviser for the S&P 500 Index Fund, the Mid Cap Index
Fund, and the Small Cap Index Fund and is one of two Sub-advisers for the Small
Cap Value Fund. Bankers Trust first offered investment management services in
1938 and began managing index funds in 1977. As of March 31, 1998, Bankers Trust
managed over $300 billion in assets. Bankers Trust is entirely owned by Bankers
Trust New York Corporation, a bank holding company. Bankers Trust is the seventh
largest U.S. financial services institution as of December 31, 1997.

BROWN CAPITAL MANAGEMENT, INC. ("BROWN CAPITAL MANAGEMENT")

Brown Capital Management is the Sub-adviser for the Mid Cap Growth Fund.
Established as a Maryland corporation in 1983, Brown Capital Management served
as investment adviser to approximately $3.3 billion in assets as of December 31,
1997.

CAPITAL GUARDIAN TRUST COMPANY
("CAPITAL GUARDIAN")

Capital Guardian is the Sub-adviser for the International Value Fund, the
Balanced Fund and the Domestic Bond Fund. Capital Guardian provides investment
management services to a limited number of large institutional clients such as
employee benefit funds, foundations and endowment funds. As of December 31,
1997, Capital Guardian had more than $65 billion in assets under management.

FIDUCIARY MANAGEMENT ASSOCIATES, INC. ("FMA")

FMA is one of two Sub-advisers for the Small Cap Value Fund. FMA is a
wholly-owned subsidiary of United Asset Management Corporation, and provides
investment management services to corporations, foundations, endowments, pension
and profitsharing plans, trusts, estates and other institutions as well as
individuals. As of December 31, 1997, FMA had over $1.6 billion in assets under
management.

VALIC'S ADDRESS is 2929 Allen
Parkway, Houston, Texas 77019.

BANKERS TRUST'S PRINCIPAL OFFICES
are located at 130 Liberty Street,
New York, New York 10006.

BROWN CAPITAL MANAGEMENT'S
PRINCIPAL OFFICES are located at
809 Cathedral Street, Baltimore,
Maryland 21201.

CAPITAL GUARDIAN'S PRINCIPAL
OFFICES are located at 333 South
Hope Street, Los Angeles,
California 90071.

FMA'S PRINCIPAL OFFICES are
located at 55 West Monroe Street,
Suite #2550,
Chicago, Illinois
60603.

4
<PAGE> 7
- --------------------------------------------------------------------------------

GOLDMAN SACHS ASSET MANAGEMENT ("GSAM")

GSAM is the Sub-adviser for the Large Cap Growth Fund. GSAM is a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"). GSAM provides a
wide range of fully discretionary investment advisory services quantitatively
driven and actively managed to U.S. and international equity portfolios, U.S.
and global fixed income portfolios, commodity and currency products and money
market accounts. As of December 31, 1997, GSAM and its affiliates served as
investment adviser or distributor for assets exceeding $135.3 billion.

J.P. MORGAN INVESTMENT MANAGEMENT INC. ("JP MORGAN")

JP Morgan is the Sub-adviser for the Small Cap Growth Fund. Known for its
commitment to proprietary research and its disciplined investment strategies, JP
Morgan provides asset management services to corporations, financial
institutions, governments and individuals. As of December 31, 1997, JP Morgan
and its affiliates employed over 300 analysts and portfolio managers around the
world and had more than $255 billion in assets under management.

JACOBS ASSET MANAGEMENT

Jacobs Asset Management is the Sub-adviser for the International Growth Fund.
Jacobs Asset Management is a Delaware limited partnership. United Asset
Management Corporation is a limited partner of, and owns a controlling interest
in, Jacobs Asset Management. Jacobs Asset Management provides investment
management and advisory services to corporations, unions, pensions and
profit-sharing plans, trusts and estates and other institutions and investors.
As of December 31, 1997, Jacobs Asset Management had more than $280 million in
assets under management.

NEUBERGER&BERMAN MANAGEMENT, INC. ("N&B MANAGEMENT")

N&B Management is the Sub-adviser for the Mid Cap Value Fund. N&B Management and
its predecessor firms have specialized in the management of no-load mutual funds
since 1950. The mutual funds managed by N&B Management and its affiliates had
aggregate net assets of approximately $20.7 billion as of December 31, 1997.

STATE STREET BANK & TRUST COMPANY ("STATE STREET BANK")/STATE STREET GLOBAL
ADVISORS ("STATE STREET GLOBAL ADVISORS")

State Street Global Advisors is the Sub-adviser for the Large Cap Value Fund.
State Street Global Advisors is an operating division of State Street Bank, a
wholly-owned subsidiary of State Street Corporation, which had more than $390
billion under management as of December 31, 1997.

GSAM'S PRINCIPAL OFFICES are
located at One New York Plaza,
New York, New York 10004.

JP MORGAN'S PRINCIPAL OFFICES
are located at 522 Fifth Avenue,
New York, NY 10036.

JACOBS ASSET MANAGEMENT'S
PRINCIPAL OFFICES are located at
200 East Broward
Boulevard, Suite 1920,
Fort Lauderdale, Florida 33301.

N&B MANAGEMENT'S PRINCIPAL
OFFICES are located 605 Third
Avenue, Second Floor, New York,
New York 10158-0180.

STATE STREET GLOBAL ADVISOR'S
PRINCIPAL OFFICES are located at
2 International Place, Boston,
Massachusetts 02110.

5
<PAGE> 8
- --------------------------------------------------------------------------------

These financial service companies act as Investment Sub-advisers through an
agreement each entered into with VALIC. For more information on these agreements
and on these Sub-advisers, see the "Investment Sub-Advisers" section in the
Statement of Additional Information.

PORTFOLIO MANAGER

A manager is a person or team of persons VALIC or one of its Sub-advisers, has
assigned to be primarily responsible for the day to day management of a Fund's
investments. A Fund's investments are called its portfolio.

HOW ADVISERS ARE PAID FOR
THEIR SERVICES

VALIC

Each Fund pays VALIC a fee based on its average daily net asset value. A Fund's
net asset value is the total value of the Fund's assets minus any money it owes
for operating expenses, such as the fee paid to its Custodian to safeguard the
Fund's investments.

Here is a list of the percentages each Fund pays VALIC.

<TABLE>
<S> <C>
S&P 500 Index Fund 0.27% on the first $500 million
0.26% on assets over $500 million
Mid Cap Index Fund 0.28% on the first $500 million
0.27% on assets over $500 million
Small Cap Index Fund 0.28% on the first $500 million
0.27% on assets over $500 million
International Growth Fund 0.90% on the first $100 million
0.80% on assets over $100 million
Large Cap Growth Fund 0.55%
Mid Cap Growth Fund 0.65% on the first $25 million
0.55% on the next $25 million
0.45% on assets over $50 million
Small Cap Growth Fund 0.85%
International Value Fund 1.00% on the first $25 million
0.85% on the next $25 million
0.675% on the next $200 million
0.625% on assets over $250 million
Large Cap Value Fund 0.50%
Mid Cap Value Fund 0.75% on the first $100 million
0.725% on the next $150 million
0.70% on the next $250 million
0.675% on the next $250 million
0.65% on the assets over $750 million
Small Cap Value Fund 0.75% on the first $50 million
0.65% on the assets over $50 million
</TABLE>

<TABLE>
<S> <C>
Socially Responsible
Fund 0.25%
Balanced Fund 0.80% on the first $25 million
0.65% on the next $25 million
0.45% on assets over $50 million
Domestic Bond Fund 0.60% on the first $50 million
0.45% on the next $50 million
0.43% on the next $200 million
0.40% on the assets over $300 million
Money Market Fund 0.25%
Conservative Growth
Lifestyle Fund 0.10%
Moderate Growth
Lifestyle Fund 0.10%
Growth Lifestyle Fund 0.10%
</TABLE>

The Investment Advisory Agreement we entered into with each Fund does not limit
how much the Funds pay in monthly expenses each year. However, we voluntarily
limit the Funds' monthly expenses as follows:

If a Fund's average monthly expenses, when annualized, are more than [.96%] of
the Fund's estimated average daily net assets, we will pay the difference. As
a result the Fund's yield or total return will increase. If VALIC decides to
stop voluntarily reducing a Fund's expenses, it may do so by giving 30 days'
notice, in writing, to the Series Company.

As shareholders of other Series Company Funds, the Lifestyle Funds incur their
proportionate share of the underlying Series Company Funds' fees and expenses,
including the fees paid to VALIC.

6
<PAGE> 9
- --------------------------------------------------------------------------------

THE SUB-ADVISERS

According to the agreements we have with the Sub-advisers, we pay them directly
out of the fee we receive from the Funds. The Funds do not pay the Sub-advisers
directly. We pay them a percentage of what is paid to us by the Funds. We and
the Sub-advisers may agree to change the amount of money we pay them. Any such
change increasing the charge paid by the Fund to VALIC would have to be approved
by the Series Company Board of Trustees and the shareholders of the Fund.

The Series Company was issued an exemptive order by the Securities and Exchange
Commission (the "SEC") on , 1998 for an exemption (the "Exemption")
from certain provisions of the Investment Company Act of 1940 ("1940 Act") which
would otherwise require VALIC to obtain formal shareholder approval prior to
engaging and entering into sub-advisory agreements with Sub-advisers. The relief
is based on the conditions set forth in the Exemption that, among other things:
(1) VALIC will select, monitor, evaluate and allocate assets to the Sub-advisers
and oversee Sub-advisers compliance with the relevant Fund's investment
objective, policies and restrictions; (2) before a Fund may rely on the
Exemption, the Exemption must be approved by the shareholders of the Funds
operating under the Exemption; (3) the Series Company will provide to
shareholders certain information about a new Sub-adviser; (4) the Series Company
will disclose in this Prospectus the existence, substance and effect of the
Exemption; and (5) the Trustees, including a majority of the "independent"
Trustees, must approve each sub-advisory agreement in the manner required under
the 1940 Act. Any changes to the Investment Advisory Agreement between the
Series Company and VALIC would still require shareholder approval. As required
by the Exemption, the shareholders of each Fund determined, at a shareholders'
meeting held on , 1998, to permit the Series Company to replace or add
Sub-advisers and to enter into sub-advisory agreements with Sub-advisers upon
approval of the Board of Trustees but without formal shareholder approval.

Under the Investment Sub-Advisory Agreement we have with Bankers Trust, we pay
Bankers Trust monthly fees based on the average daily net asset values of the
portion of the Small Cap Value Fund portfolio it manages at an annual rate of
0.03% and the S&P 500 Index Fund at an annual rate of 0.02% of the first $2
billion and 0.01% on assets over $2 billion. We pay Bankers Trust monthly fees
based on the average daily net asset values of the Mid Cap Index Fund at an
annual rate of 0.03% of the first $300 million and 0.02% on assets over $300
million and the Small Cap Index Fund at an annual rate of 0.03% of the first
$150 million and 0.02% on assets over $150 million.

Under the Investment Sub-Advisory Agreement we have with Brown Capital
Management, we pay Brown Capital Management a monthly fee based on the average
daily net asset values of the Mid Cap Growth Fund at the annual rate of 0.40% of
the first $25 million, 0.30% of the next $25 million and 0.20% on assets over
$50 million.

Under the Investment Sub-Advisory Agreement we have with Capital Guardian, we
pay Capital Guardian a monthly fee based on the average daily net asset values
of the International Value Fund at an annual rate of 0.75% of the first $25
million, 0.60% of the next $25 million, 0.425% of the next $200 million and
0.375% on assets over $250 million and the Domestic Bond Fund at an annual rate
of 0.35% of the first $50 million, 0.20% on the next $50 million, 0.18% on the
next $200 million and 0.15% of assets over $300 million. We pay Capital Guardian
monthly fees based on the average daily net asset values of the Balanced Fund at
an annual rate of 0.55% of the first $25 million, 0.40% of the next $25 million
and 0.20% on assets over $50 million. Capital Guardian aggregates fees with
respect to the International Value Fund, the Domestic Bond Fund and the Balanced
Fund and applies a 5% discount to fees between $1.25 million and $4 million, a
7.5% discount to fees from $4 million to $8 million, a 10% discount to fees
between $8 million and $12 million, and a 12.5% discount to fees exceeding $12
million.

Under the Investment Sub-Advisory Agreement we have with FMA, we pay FMA a
monthly fee based on the average daily net asset values of the portion of the
Small Cap Value Fund portfolio it manages at the annual rate of 0.50% of the
first $50 million and 0.40% on assets over $50 million.

Under the Investment Sub-Advisory Agreement we have with GSAM, we pay GSAM a
monthly fee based on the average daily net asset values of the Large Cap Growth
Fund at the annual rate of 0.30%.

Under the Investment Sub-Advisory Agreement we have with JP Morgan, we pay JP
Morgan a monthly fee based on the average daily net asset values of the Small
Cap Growth Fund at the annual rate of 0.60%.

Under the Investment Sub-Advisory Agreement we have with Jacobs Asset
Management, we pay Jacobs Asset Management a monthly fee based on the average
daily net asset values of the International Growth Fund at an annual rate of
0.65% of the first $100 million and 0.55% on assets over $100 million.

For more information on WHAT THE
SUB-ADVISERS ARE PAID, see the
"Investment Sub-Advisers" section
in the Statement of Additional
Information.

7
<PAGE> 10
- --------------------------------------------------------------------------------

Under the Investment Sub-Advisory Agreement we have with N&B Management, we pay
N&B Management a monthly fee based on the average daily net asset values of the
Mid Cap Value Fund at the annual rate of 0.50% of the first $100 million, 0.475%
of the next $150 million, 0.45% of the next $250 million, 0.425% of the next
$250 million and 0.40% on assets over $750 million.

Under the Investment Sub-Advisory Agreement we have with State Street Global
Advisers, we pay State Street Global Advisers a monthly fee based on the average
daily net asset values of the Large Cap Value Fund at the annual rate of 0.25%
but no less than $50,000 per year.

According to the agreements we have with the Sub-advisers, we will receive
investment advice for each sub-advised Fund. Under these agreements we give the
Sub-advisers the authority to buy and sell securities for these Funds. We retain
the responsibility for the overall management of these Funds. The Sub-advisers
may buy and sell securities for each Fund with broker-dealers and other
financial intermediaries that they select.

The Sub-advisers may place orders to buy and sell securities of these Funds with
a broker-dealer affiliated with the Sub-adviser as allowed by law. This could
include any affiliated futures commission merchants.

The 1940 Act permits Sub-advisers 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 can not 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-adviser's
affiliated broker are 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-advisers have entered into a written contract, as required
by the 1940 Act, to allow the Sub-adviser's affiliate to effect these type of
transactions for commissions. The 1940 Act generally prohibits a Sub-adviser or
a Sub-adviser's affiliate, acting as principal, from engaging in securities
transactions with a Fund, without an exemptive order from the SEC.

We and the Sub-advisers may enter into simultaneous purchase and sale
transactions for the Funds or affiliates of the Funds.

ABOUT THE BOARD OF TRUSTEES

The Series Company Board of Trustees currently consists of eleven members: eight
are independent Trustees and three are VALIC employees.

The Board of Trustees may change each Fund's investment objective, investment
policies and non-fundamental investment restrictions without shareholder
approval. The Board may not change any fundamental restrictions placed on the
types of investments each Fund may buy. The fundamental restrictions appear in
the Statement of Additional Information. Changes to these restrictions may be
made with shareholder approval only.

8
<PAGE> 11

ABOUT THE FUNDS
- --------------------------------------------------------------------------------

GROWTH, BALANCED, INCOME, STABILITY AND LIFESTYLE CATEGORIES

The Funds offered in this prospectus fall into five general investment
categories: growth, balanced, income, stability and lifestyle.

GROWTH CATEGORY

The goal of a Fund in the growth category is to increase the value of your
investment over the long term by investing mostly in stocks. Stocks are a type
of investment that can increase in value over a period of years. Companies sell
stock to get the money they need to grow. These companies often keep some of
their profits to reinvest in their business. As they grow, the value of their
stock may increase. This is how the value of your investment may increase.

Series Company Growth Category includes:

S&P 500 Index Fund
Mid Cap Index Fund
Small Cap Index Fund
International Growth Fund
Large Cap Growth Fund
Mid Cap Growth Fund
Small Cap Growth Fund
International Value Fund
Large Cap Value Fund
Mid Cap Value Fund
Small Cap Value Fund
Socially Responsible Fund

BALANCED CATEGORY

The goal of a Fund in the balanced category is to increase the value of your
investment over the long term and to provide income. Funds in the balanced
category seek to conserve the value of your initial investment and promote
long-term growth and income by investing in stocks and income producing
securities.

Series Balanced Category includes:

Balanced Fund

INCOME CATEGORY

Unlike Funds in the growth category, where the objective is to make the Fund's
investments increase in value, Funds in the income category try to keep the
value of their investments from falling, while providing an increase in the
value of your investment through the income earned on the Fund's investments. To
meet this objective, Funds in the income category buy investments that are
expected to pay interest to the Fund on a regular basis.

Series Company Income Category includes:

Domestic Bond Fund

STABILITY CATEGORY

Funds in the stability category provide liquidity, protection of capital and
current income through investments in high quality securities.

Series Company Stability Category includes:

Money Market Fund

LIFESTYLE CATEGORY

A Fund in the lifestyle category may invest in up to twelve Series Company
Funds. A Lifestyle Fund does not invest directly in portfolio securities but,
rather, invests in a combination of Series Funds in order to meet its investment
objective. In this manner, the Lifestyle Funds offer you the opportunity to
diversify your investment portfolio by investing in one Fund, rather than in a
variety of Series Company Funds.

Series Company Lifestyle Category includes:

Growth Lifestyle Fund
Moderate Growth Lifestyle Fund
Conservative Growth Lifestyle Fund

ABOUT LEVEL OF RISK

The risks involved in each Fund are described in each Fund's Fact Sheet. These
risks may include market risk, credit risk, interest rate risk and risk
associated with foreign securities. These risks are described in the "Types of
Investments" section in this prospectus. The money you invest in the Series
Company is not insured. And, we can't guarantee that any of the Funds will meet
their investment objectives. There's a chance you may lose money and end up with
less than you invested.

ABOUT PORTFOLIO TURNOVER

Portfolio turnover occurs when a Fund sells its investments and buys new ones.
In some Funds, high portfolio turnover occurs when these Funds sell and buy
investments as part of their investment strategy. In other Funds, like the Index
Funds discussed below, portfolio turnover is lower because the make up of the
index stays fairly constant.

High portfolio turnover may cause a fund's expenses to increase. For example, a
fund may have to pay brokerage fees and other related expenses.

9
<PAGE> 12
- --------------------------------------------------------------------------------

The anticipated portfolio turnover rates for each of the Funds except the Money
Market Fund are as follows:

<TABLE>
<CAPTION>
ANTICIPATED
PORTFOLIO
NAME OF FUND TURNOVER RATE
------------ -------------
<S> <C>
S&P 500 Index Fund 3-5%
Mid Cap Index Fund 10-15%
Small Cap Index Fund 40-50%
International Growth Fund 50%
Large Cap Growth Fund 50-75%
Mid Cap Growth Fund 30-60%
Small Cap Growth Fund 100%
International Value Fund 150%
Large Cap Value Fund 100%
Mid Cap Value Fund 100%
Small Cap Value Fund 100%
Socially Responsible Fund 120%
Balanced Fund 150%
Domestic Bond Fund 150%
Growth Lifestyle Fund 10-20%
Moderate Growth Lifestyle 10-20%
Fund
Conservative Growth Lifestyle 10-20%
Fund
</TABLE>

A portfolio turnover rate over 100% a year is higher than the rates of many
other mutual fund companies. A high rate increases a Fund's transaction costs
and expenses.

ABOUT FUND PERFORMANCE

From time to time the Series Company may advertise Fund performance information
such as Fund average total return and index total return. Information as to how
this Fund performance information is calculated appears in the Statement of
Additional Information. Additionally, information on separate account
performance appears in your contract prospectus.

10
<PAGE> 13

THE INDEX EQUITY FUNDS
- --------------------------------------------------------------------------------

Three of the 18 Funds in the Series Company are Index Equity Funds investing
mostly in stocks. Their investment strategy is to track the performance of a
specific index. This strategy is followed whether markets go up or down. As part
of this investment strategy, each Fund may also invest in futures contracts and
options. Because these Funds do not have a defensive investment strategy, when
the market goes down, you will bear the risk of such market decline.

Index Funds perform best over the long term. This means you should plan to keep
your money in an Index Fund for a period of years.

WHAT IS AN INDEX?

An index reflects the average performance of a particular class of securities.
Examples of indexes include large company stocks (S&P 500 Index), mid-size
company stocks (S&P Mid Cap 400 Index), the bond market, or stocks of companies
in specific industries. Indexes are not managed funds, and cannot be bought.
Investment advisers compare the results of the funds they manage to indexes that
are close to the investment style of the fund. Information about the Series
Company's use of Standard & Poor's Indexes is in the Statement of Additional
Information.

WHICH INDEXES DO THESE FUNDS TRY TO TRACK?

While there are more than a hundred different indexes, the Index Funds in this
prospectus try to track three very prominent stock indexes:

THE S&P 500 INDEX FUND TRACKS THE STANDARD & POOR'S 500 STOCK INDEX(R)*

The Standard & Poor's 500 Stock Index(R) (S&P 500) tracks the common stock
performance of large U.S. manufacturing, utilities, transportation, and
financial companies as well as companies in other industries. These companies
are usually listed on the New York Stock Exchange. It also tracks performance of
common stocks sold by foreign and smaller U.S. companies in similar industries.
The smaller U.S. companies are usually listed on the American Stock Exchange. In
total, this index tracks 500 common stocks.

An index may periodically change some of the stocks it tracks. And, different
indexes sometimes track some of the same stocks. For example, as of May 31,
1998, this Index was tracking 18 of the same stocks tracked by the Russell 2000
Index.

THE MID CAP INDEX FUND TRACKS THE STANDARD & POOR'S MID CAP 400(R) INDEX*

The Standard & Poor's Mid Cap 400(R) Index (S&P Mid Cap 400) tracks the common
stock performance of 400 medium capitalized U.S. and foreign manufacturing,
utilities, transportation, and financial companies as well as companies in other
industries. The average market capitalization of the S&P Mid Cap 400 Index was
$3.4 billion as of December 31, 1997.

Standard & Poor's created this Index in 1991 to give investors an idea of how
the stocks of medium capitalized companies generally perform.

Standard & Poor's may periodically change some of the stocks in the index. And,
different indexes sometimes include some of the same stocks. For example, as of
May 31, 1998, this Index was tracking 130 of the same stocks tracked by the
Russell 2000 Index. This Index does not track the same stocks as the S&P 500
Index.

THE SMALL CAP INDEX FUND TRACKS
THE RUSSELL 2000(R) INDEX**

The Russell 2000(R) Index is provided by The Frank Russell Company. This Index
tracks the common stock performance of 2,000 small capitalized U.S. companies in
various industries. Small capitalized means these companies have a market value
below $1 billion.

The Frank Russell Company created this Index in 1979 to give investors an idea
of how the stocks of small capitalized companies generally perform. The average
market capitalization of the Russell 2000 Index is $820 million as of December
31, 1997.

The stocks tracked by this Index are updated annually because many small
capitalized companies eventually become medium capitalized companies and some

fail.

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

* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "S&P Mid Cap 400(R)" are
trademarks of Standard & Poor's ("S&P"). Neither the Mid Cap Index Fund nor
the Stock Index Fund is sponsored, endorsed, sold or promoted by S&P, and S&P
makes no representation regarding the advisability of investment in these
Funds.

** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. The Small Cap Index Fund is not promoted, sponsored or
endorsed by, nor in any way affiliated with Frank Russell Company. Frank
Russell Company is not responsible for and has not reviewed the Fund or any
associated literature or publications and makes no representation or
warranty, express or implied, as to their accuracy, or completeness, or
otherwise.

INDEX FUNDS have out- performed
most actively managed mutual
funds over consecutive ten year
periods. However, because they
are managed to track an index
they will rise and fall with
the market.

11
<PAGE> 14

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

HOW CLOSELY CAN INDEX FUNDS TRACK THE PERFORMANCE OF THEIR INDEX?

The factors that cause a Fund to perform differently from the Index it tries to
track are called tracking differences. There is no assurance that an Index Fund
can track its index.

The coefficient of correlation (r) is an index number which shows how closely
two variables are related. If r = 0 there is no tendency for one variable to
change with the other. A value of +1 means that one variable will vary exactly
with the other. Index funds try to keep their coefficient of correlation as
close to 1 as possible. As a practical matter, any coefficient above 0.95, when
measured against the comparison index, shows good tracking.

The index may remove one stock and substitute another requiring the sub-adviser
of the Fund to do the same. When a stock is sold and the new stock purchased,
the Fund incurs transaction costs. The index incurs no transaction costs.
Therefore, the portfolio manager cannot match exactly the performance of an
index.

Also, it may not be possible for a Fund to buy every stock in its index or in
the same proportions. Fund portfolio managers may rely on a statistical
selection technique to figure out, of the stocks tracked by their index, how
many and which ones to buy. Stocks are bought and sold when they are added to or
dropped from the Index. This keeps brokerage fees and other transaction costs
low. For more information, see the "Investment Strategy" sections on each Fund's
Fact Sheet.

12
<PAGE> 15

HOW TO READ A FUND FACT SHEET
- --------------------------------------------------------------------------------

FUND HIGHLIGHTS

Gives you a quick recap of each Fund.

FUND NAME

INVESTMENT ADVISER; INVESTMENT SUB-ADVISER

They make the investment decisions for the Fund. See "About the Fund's
Management" for more information.

PORTFOLIO MANAGER

Some Funds have a specific person or persons assigned as the portfolio manager.
This person is described here. The portfolio manager's role is explained in
"About the Fund's Management."

INVESTMENT OBJECTIVE

This is the goal of the Fund, which is set by the Series Company Board of
Trustees.

INVESTMENT RISK

Shows some of the investment risks of the Fund.

INVESTMENT STRATEGY

This section explains how the Investment Advisers go about meeting the Fund's
Investment Objective.

FUND INVESTMENTS

Shows the types of investments the Fund makes.

PERFORMANCE INFORMATION

This shows the average annual total return for a mutual fund, a managed account
or a composite of mutual funds and/or managed accounts, managed in substantially
the same manner and by the same individuals as those employed by VALIC or a
Sub-adviser to manage a Fund, for the time period indicated. [Information about
how the mutual fund, managed account or composite performed last year is
discussed.] The graph also shows the return for an index to which we compare the
mutual fund's, the managed account's or the composite's performance. For all the
Funds except the three Index Funds, the Small Cap Value Fund and the three
Lifestyle Funds we call this the Fund's "benchmark". The difference between the
Fund and index return is caused by Fund expenses and tracking differences.

13
<PAGE> 16

S&P 500 INDEX FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal TOTAL RETURN THROUGH
INVESTMENTS TRACKING THE S&P
500 INDEX
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Bankers Trust Company

PORTFOLIO MANAGER

Frank Salerno, Managing Director-Chief Investment Officer of Quantitative and
Index Equity of the Sub-adviser, has been the Fund's portfolio manager since its
inception. Mr. Salerno has been with the Sub-adviser since 1981.

INVESTMENT OBJECTIVE
Seeks to provide investment results that, before Expenses, correspond to the
total return (i.e., the combination of capital changes and income) of common
stocks publicly traded in the United States, as represented by the S&P 500 Index
(Index).
INVESTMENT RISK
The S&P 500 Index includes the stock of many large, well-established companies.
These companies usually have the financial strength to weather difficult
financial times. However, the value of any stock can rise and fall over short
and long periods of time. This Fund, which holds nearly all of the 500 stocks in
the S&P 500 Index, avoids the risk of individual stock selection and seeks to
provide the return of the large company sector of the market. In the past that
return has been positive over many years but can be negative at certain times.
There is no assurance that a positive return will occur in the future.

Because the Fund invests in many of the stocks tracked by this Index, your
investment will experience similar changes in value and share similar risks,
such as market risk and risk associated with foreign securities. For more
information about market risk and risk associated with foreign securities, see
"A Word About Risk" in this prospectus.

INVESTMENT STRATEGY

The Fund invests in a sampling of stocks in the Index that, as a group, should
reflect its performance. The stocks of the S&P 500 Index to be included in the
Fund will be selected utilizing a statistical sampling technique known as
"optimization." This process selects stocks for the Fund so that various
industry weightings, market capitalizations and fundamental characteristics
(e.g., price-to-book, price-to-earnings, debt-to-asset ratios and dividend
yields) closely approximate those of the S&P 500 Index. The stocks held by the
Fund are weighted to make the Fund's aggregate investment characteristics
similar to those of the Index as a whole. Since it may not be possible for this
Fund to buy every stock included on this Index or in the same proportions, we
rely on the aforementioned statistical technique to figure out, of the stocks
tracked by the Index, how many and which ones to buy.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund's Investments Fund's Assets*
- -------------------------------------------
<S> <C>
Stocks in the S&P 500 at least 80%
Index**
- -------------------------------------------
Futures and options no more than 33%
- -------------------------------------------
Short term debt up to 20%
securities and money
market instruments***
- -------------------------------------------
Illiquid securities up to 15%
- -------------------------------------------
</TABLE>

* At time of purchase.
** Under normal conditions, when the Fund's assets
exceed $10 million, the Fund will invest at least 80% of its assets in
common stocks of companies which comprise the S&P 500 Index.
*** The Fund's assets may be invested in short-term
instruments hedged with stock index futures or options with remaining
maturities of 397 days or less to meet redemptions, facilitate investment
in common stocks, or for day to day operating purposes. Short-term
instruments consist of (i) short-term obligations of the U.S. Government,
its agencies, instrumentalities, authorities or political subdivisions;
(ii) other short-term debt securities rated Aa or higher by Moody's
Investors Service, Inc. ("Moody's") or AA or higher by Standard & Poor's
Ratings Group("S&P") or, if unrated, of comparable quality in the opinion
of the Sub-adviser; (iii) commercial paper; (iv) bank obligations,
including negotiable certificates of deposit, time deposits and bankers'
acceptances; and (v) repurchase agreements. With respect to investments in
commercial paper, bank obligations or repurchase agreements, the issuer or
the issuer's parent must have outstanding debt rated Aa or higher by
Moody's or AA or higher by S&P or outstanding commercial paper or bank
obligations rated Prime-1 by Moody's or A-1 by S&P; or if no such ratings
are available, the instrument must be of comparable quality in our opinion.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

14
<PAGE> 17

S&P 500 INDEX FUND
- --------------------------------------------------------------------------------

The S&P 500 Index Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by the Sub-adviser for the
BT Institutional Funds Equity 500 Index Fund. The chart below shows the
historical investment performance for the BT Institutional Funds Equity 500
Index Fund. The inception date for the BT Institutional Funds Equity 500 Index
Fund was , 199 .

Fees and expenses of the S&P 500 Index Fund may differ from the fees and
expenses historically incurred by the BT Institutional Funds Equity 500 Index
Fund. The performance figures have been adjusted to reflect an additional
deduction of [ %] for the S&P 500 Index Fund. This deduction represents an
estimate of the maximum fee differential between the two funds. The fee
differential from the inception date of the BT Institutional Funds Equity 500
Index Fund to the present could have been greater or lesser in any given year.
See "Performance Information" for an explanation of the information presented
below. THE PERFORMANCE INFORMATION BELOW IS BASED ON A FUND COMPARABLE TO THE
S&P 500 INDEX FUND AND DOES NOT REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE INFORMATION -- BT INSTITUTIONAL FUNDS-
EQUITY 500 INDEX FUND]

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses. The
Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative or distribution fees or
surrender charges.

15
<PAGE> 18

MID CAP INDEX FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal GROWTH THROUGH INVESTMENTS
TRACKING THE S&P MID CAP 400
INDEX
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Bankers Trust Company

PORTFOLIO MANAGER

INVESTMENT OBJECTIVE

Seeks to provide growth of capital through investments primarily in a
diversified portfolio of common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P Mid Cap
400 Index (Index).

INVESTMENT RISK

The S&P Mid Cap 400 Index includes the stocks of many medium sized companies.
These companies usually do not have as much financial strength as very large
companies and so may not be able to do as well in difficult times. However,
because they are medium sized, they have more potential to grow, which means the
value of their stock may increase. The S&P Mid Cap 400 Index also includes
stocks of certain medium sized foreign companies. These stocks can be more risky
than large company stocks. An index fund holding nearly all of the 400 stocks in
the S&P Mid Cap 400 Index avoids the risk of individual stock selection and
seeks to provide the return of the medium-sized company sector of the market. On
average that return has been positive over many years but can be negative at
certain times. There is no assurance that a positive return will occur in the
future.

Because this Fund invests in many of the stocks tracked by this Index, your
investment will experience similar changes in value and share similar risks such
as market risk and risk associated with foreign securities. For more information
about market risk and risk associated with foreign securities, see "A Word About
Risk" in this prospectus.

INVESTMENT STRATEGY

The Fund invests in a sampling of stocks in the Index that, as a group, should
reflect its performance. The stocks of the S&P Mid Cap 400 Index to be included
in the Fund will be selected utilizing a statistical sampling technique known as
"optimization." This process selects stocks for the Fund so that various
industry weightings, market capitalizations and fundamental characteristics
(e.g. price-to-book, price-to-earnings, debt-to-asset ratios and dividend
yields) closely approximate those of the S&P Mid Cap 400 Index. The stocks held
by the Fund are weighted to make the Fund's aggregate investment characteristics
similar to those of the Index as a whole. Since it may not be possible for this
Fund to buy every stock included on this index or in the same proportions, we
rely on the aforementioned statistical technique to figure out, of the stocks
tracked by the index, how many and which ones to buy.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- -------------------------------------------
<S> <C>
Stocks in the S&P Mid Cap at least 65%
400 Index
- -------------------------------------------
Foreign stocks (listed no more than 20%
and over-the-counter)
in the S&P Mid Cap 400
Index
- -------------------------------------------
Futures and options no more than 33%
- -------------------------------------------
Investments not in the no more than 35%
S&P Mid Cap 400 Index
Common stock and
related securities
High quality money
market securities
Illiquid and restricted
securities.
- -------------------------------------------
</TABLE>

* At time of purchase.

Additional information
about THE FUND'S INVEST-
MENTS is provided in
"Types of Investments."

16
<PAGE> 19

MID CAP INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Mid Cap Index Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by VALIC for the American
General Series Portfolio Company's Mid Cap Index Fund ("AGSPC Mid Cap Index
Fund"). The chart below shows the historical investment performance for the
AGSPC Mid Cap Index Fund. The inception date for the AGSPC Mid Cap Index Fund
was October 13, 1982.

Fees and expenses of the Mid Cap Index Fund may differ from the fees and
expenses historically incurred by the AGSPC Mid Cap Index Fund. The performance
figures have been adjusted to reflect an additional deduction of [ %] for the
Mid Cap Index Fund. This deduction represents an estimate of the maximum fee
differential between the two funds. The fee differential from the inception date
of the AGSPC Mid Cap Index Fund to the present could have been greater or lesser
in any given year. See "Performance Information" for an explanation of the
information presented below. THE PERFORMANCE INFORMATION BELOW IS BASED ON A
FUND COMPARABLE TO THE MID CAP INDEX FUND AND DOES NOT REFLECT THE PERFORMANCE
OF THE FUND ITSELF.

[ADD PERFORMANCE INFORMATION FOR AGSPC
MID CAP INDEX FUND]

17
<PAGE> 20

SMALL CAP INDEX FUND

Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal TOTAL RETURN THROUGH
INVESTMENTS TRACKING THE
RUSSELL 2000 INDEX
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Bankers Trust Company

PORTFOLIO MANAGER

INVESTMENT OBJECTIVE

Seeks to replicate as closely as possible (before deduction of Expenses) the
total return of the Russell 2000 Index (Index) by investing in one or more
companies included in the Index that are deemed representative of the
diversification of the entire Russell 2000 Index.

INVESTMENT RISK

The Russell 2000 Index includes many small U.S. companies. Some of these
companies often do not have the financial strength needed to do well in
difficult times. Also, they often sell limited numbers of products, which can
make it harder for them to compete with medium and large companies. However,
because they are small, their stock prices may fluctuate more over the
short-term, but they have more potential to grow. This means their stock value
may offer greater potential for appreciation. An index fund holding a large
sampling of the 2,000 stocks in the Russell 2000 Index avoids the risks of
individual stock selection and seeks to provide the return of the smaller-sized
company sector of the market. On average that return has been positive over the
years but has been negative at certain times. There is no assurance that a
positive return will occur in the future.

Because this Fund invests in many of the stocks tracked by this Index, your
investment will experience similar changes in value and share similar risks such
as market risk. For more information about market risk, see "A Word About Risk"
in this prospectus.

INVESTMENT STRATEGY

The Fund invests in a sampling of stocks in the Index that, as a group, should
reflect its performance. The stocks of the Russell 2000 Index to be included in
the Fund will be selected utilizing a statistical sampling technique known as
"optimization." This process selects stocks for the Fund so that various
industry weightings, market capitalizations and fundamental characteristics
(e.g. price-to-book, price-to-earnings, debt-to-asset ratios and dividend
yields) closely approximate those of the Russell 2000 Index. The stocks held by
the Fund are weighted to make the Fund's aggregate investment characteristics
similar to those of the Index as a whole. Since it may not be possible for this
Fund to buy every stock included on this Index or in the same proportions, we
rely on the aforementioned statistical technique to figure out, of the stocks
tracked by the index, how many and which ones to buy.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Stocks in the Russell 2000 at least 80%
Index
- ---------------------------------------------
Illiquid securities up to 15%
- ---------------------------------------------
Futures and options up to 20%
- ---------------------------------------------
Swap agreements up to 10%
- ---------------------------------------------
Short-term securities and up to 25%
money market instruments**
- ---------------------------------------------
Warrants*** up to 5%
- ---------------------------------------------
</TABLE>

* At time of purchase.
** We may invest up to 25% of the Fund's assets in
short-term debt securities and money market instruments to meet redemption
requests or to facilitate investment in securities of the Russell 2000
Index.
*** The Fund's investment in warrants will not exceed 2%
of its assets with respect to warrants not listed on the New York or
American Stock Exchanges.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

18
<PAGE> 21

SMALL CAP INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Small Cap Index Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by the Sub-advisor [and its
affiliates] for BT Advisor Funds Small Cap Index Fund. The chart below shows the
historical investment performance for BT Advisor Funds Small Cap Index Fund. The
inception date for BT Advisor Funds Small Cap Index Fund was , 199 .

Fees and expenses of the Small Cap Index Fund may differ from the fees and
expenses historically incurred by the BT Advisor Funds Small Cap Index Fund. The
performance figures have been adjusted to reflect an additional deduction of
[ %] for the Small Cap Index Fund. This deduction represents an estimate of
the maximum fee differential between the two funds. The fee differential from
the inception date of the BT Advisor Funds Small Cap Index Fund to the present
could have been greater or lesser in any given year. See "Performance
Information" for an explanation of the information presented below. THE
PERFORMANCE INFORMATION BELOW IS BASED ON A FUND COMPARABLE TO THE SMALL CAP
INDEX FUND AND DOES NOT REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE INFORMATION FOR BT ADVISORS FUND-
SMALL CAP INDEX FUND]

19
<PAGE> 22

INTERNATIONAL GROWTH
FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal LONG-TERM CAPITAL
APPRECIATION THROUGH
INVESTMENTS IN COMPANIES IN
DEVELOPED AND EMERGING
MARKETS
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER
Jacobs Asset Management

PORTFOLIO MANAGER

This Fund is managed by an investment committee comprised of the following
individuals: Daniel L. Jacobs, Wai W. Chin and Robert J. Jurgens. Mr. Jacobs has
been President of the Sub-adviser since July 1, 1995. From 1984 to 1995, Mr.
Jacobs was Executive Vice President and Director of Templeton Investment
Counsel. Mr. Jacobs was portfolio manager of Templeton's Smaller Companies
Growth Fund. Ms. Chin has been Managing Director of Asian Research and Portfolio
Management of the Sub-adviser since July 1995. Prior to this, Ms. Chin was Vice
President of the Global Equity Group of Scudder, Stevens & Clark. Mr. Jurgens
has been Managing Director of European Research and Portfolio Management of the
Sub-adviser since August 1995. From 1993 to 1995, Mr. Jurgens was Vice President
and head of AIG Global Investors' International Equity Division.

INVESTMENT OBJECTIVE

Seeks to provide long-term capital appreciation by investing in equity
securities of companies in developed and emerging markets. The Fund may invest
across the capitalization spectrum, although it intends to emphasize smaller
capitalization stocks.

INVESTMENT RISK

As described in the Investment Strategy section below, this Fund invests almost
all its assets in foreign securities, which have risks that U.S. investments do
not have. For a further explanation of the risks associated with foreign
securities, see "A Word About Risk" in this prospectus.

INVESTMENT STRATEGY

The Fund will invest in equity securities in the markets of at least three
countries outside the United States. The Fund will focus its investments on
developed and emerging market countries. Emerging market country investments
will be made only where we believe the economies are developing and the markets
are becoming more sophisticated.

We will use a flexible, value-oriented approach to selecting this Fund's
investments, focusing on companies rather than on countries or markets. Our goal
is to identify stocks selling at the greatest discount to their intrinsic future
value. Value is ascertained through an analysis of price/cash flow, enterprise
value/cash flow, and price/future earnings. This Fund invests in a wide range of
stocks including smaller capitalization companies.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Foreign securities** at least 85%
Common, stock, preferred
stock, convertible
preferred stock, rights and
warrants, American
Depository Receipts,
European Depository
Receipts and Global
Depository Receipts
- ---------------------------------------------
Equity securities of issuers up to 40%
in emerging countries***
- ---------------------------------------------
Equity securities of small generally 50%
capitalization
companies****
- ---------------------------------------------
Securities of open-end or up to 10%
closed-end investment
companies
- ---------------------------------------------
Forward currency exchange up to 100%
contracts
- ---------------------------------------------
Illiquid securities up to 15%
- ---------------------------------------------
Short term investments***** up to 10%
- ---------------------------------------------
</TABLE>

* At time of purchase.
** We intend to invest at least 85% of this Fund's total
assets in the equity securities of at least three countries outside the
United States.
*** An "emerging country" security is issued by a
Company that in our opinion has one or more of the following
characteristics: (i) its principal securities trading market is in an
emerging country; (ii) alone or on a consolidated basis, it derives 50% or
more of its annual revenue from either goods produced, sales made or
services performed in emerging countries, or (iii) it is organized under
the laws of, and has a principal office in, an emerging country.
**** Small capitalization companies are companies with
market capitalizations of less than $1 billion at the time of purchase.
***** For temporary defensive reasons, we may invest up
to 100% of the Fund's assets in short-term (less than twelve months to
maturity) securities or cash, including domestic and foreign money market
instruments, certificates of deposit, bankers' acceptances, time deposits,
U.S. Government obligations, U.S. Government agency securities, short-term
corporate debt securities, and commercial paper rated A-1 or A-2 by S&P or
Prime 1 or Prime 2 by Moody's or if unrated, in our opinion of comparable
quality. We may do this when we think economic, political or market
conditions make it too risky for us to follow our general guidelines.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

20
<PAGE> 23

INTERNATIONAL GROWTH FUND
Fact Sheet
- --------------------------------------------------------------------------------

The International Growth Fund has not commenced operations and has no investment
performance record. The performance information shown below for the
International Growth Fund is based on a composite of the UAM Funds Jacobs
International Octagon Portfolio and the Templeton Small Companies Growth Fund
("Composite"). The International Growth Fund is modeled after the Composite and
will be managed in substantially the same manner and by the same individuals.
The chart below shows the historical investment performance for the Composite.
The inception date for the Composite was , 199 .

Fees and expenses of the International Growth Fund may differ from the fees and
expenses historically incurred by the Composite. The performance figures have
been adjusted to reflect an additional deduction of [ %] for the
International Growth Fund. This deduction represents an estimate of the maximum
fee differential between the International Growth Fund and the Composite. The
fee differential from the inception date of the Composite to the present could
have been greater or lesser in any given year. See "Performance Information" for
an explanation of the information presented below. THE PERFORMANCE INFORMATION
BELOW IS BASED ON A COMPOSITE COMPARABLE TO THE INTERNATIONAL GROWTH FUND AND
DOES NOT REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[ADD COMBINED PERFORMANCE INFORMATION FOR THE COMPOSITE]

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Composite returns reflect investment management fees and other expenses. The
Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative or distribution fees or
surrender charges.

21
<PAGE> 24

LARGE CAP GROWTH FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal LONG-TERM GROWTH THROUGH
INVESTMENTS IN LARGE CAP
U.S. ISSUERS
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Goldman Sachs Asset Management

PORTFOLIO MANAGER

This Fund is managed by the following individuals: Kent Clark; Robert L. Jones;
and Victor H. Pinter. Mr. Jones, Managing Director, joined the Sub-adviser in
1989. Mr. Clark has been Vice President of the Sub-adviser since 1992. Mr.
Pinter has been Vice President of the Sub-adviser since 1990.

INVESTMENT OBJECTIVE

Seeks long-term growth of capital through a broadly diversified portfolio of
equity securities of large cap U.S. issuers that are expected to have better
prospects for earnings growth than the growth rate of the general domestic
economy. Dividend income is a secondary consideration.

INVESTMENT RISK

This Fund invests almost entirely in stocks. Stock values can rise and fall over
both short and long periods of time. The Fund's investments are selected to
maintain a risk profile similar to the Russell 1000 Growth Index, and your
investment may experience similar changes in value and share similar risks such
as market risk, credit risk, interest rate risk and risk associated with foreign
securities. For more information about market risk, credit risk, interest rate
risk and risk associated with foreign securities, see "A Word About Risk" in
this prospectus.
INVESTMENT STRATEGY
The Fund will be managed utilizing Goldman Sachs' Quantitative Equity Strategy.
The acronym "CORE" (Computer-Optimized and Research Enhanced) reflects the three
step investment process the team uses to select securities. First, we estimate
the returns of 3000 U.S. stocks using a combination of research from the Goldman
Sachs Global Investment Research Department, other industry sources and
objective quantitative analysis. Next, the Fund's investment portfolio is
constructed by balancing expected returns against portfolio risk, trading fees
and investment objectives. The Fund is intended to be constructed with minimum
deviations from the sector, risk statistics and macroeconomic sensitivity of the
benchmark. A proprietary multi-factor model is used in seeking to ensure risks
taken are both intended and are warranted due to expected return. Lastly, the
Fund is traded regularly and rebalanced in seeking to ensure all positions are
in line with current market outlooks and benchmark weights.

We follow the guidelines listed below for making the primary investments for
this Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Equity Securities of U.S. and at least 90%
foreign issuers,**
including convertible
securities, American
Depository Receipts and
Global Depository Receipts
- ---------------------------------------------
Fixed income securities U.S. up to 100%
Government securities,
repurchase agreements
collateralized by U.S.
Government securities,
commercial paper rated at
least A-2 by S&P or P-2 by
Moody's, certificates of
deposit, bankers'
acceptances, repurchase
agreements, non-
convertible preferred
stocks, non-convertible
corporate bonds with a
remaining maturity of less
than one year
- ---------------------------------------------
Futures and options*** up to 5%
- ---------------------------------------------
Illiquid securities up to 15%
- ---------------------------------------------
Warrants and stock purchase up to 5%
rights
- ---------------------------------------------
Investment companies up to 5%
- ---------------------------------------------
Unseasoned companies up to 5%
- ---------------------------------------------
</TABLE>

* At time of purchase
** This Fund may invest in the securities of a foreign
issuer only if the securities are traded in the U.S. and the issuer
complies with U.S. accounting standards.
*** The Fund may purchase or sell futures contracts only
with respect to a representative index. At no time will the aggregate
margin deposit required on all futures or options held, exceed 5% of the
Fund's total assets.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

22
<PAGE> 25

LARGE CAP GROWTH FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Large Cap Growth Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by the Sub-adviser for the
Goldman Sachs CORE Large Cap Growth Fund. The chart below shows the historical
investment performance for the Goldman Sachs CORE Large Cap Growth Fund for the
period from May 1, 1997 to present. Performance information prior to May 1, 1997
(commencement date for Goldman Sachs CORE Large Cap Growth Fund) is that of a
predecessor separate account adjusted to reflect the higher fees and expenses
applicable to Goldman Sachs CORE Large Cap Growth Fund. The performance
information below for the Large Cap Growth Fund is a composite of the Goldman
Sachs CORE Large Cap Growth Fund and a predecessor separate account
("Composite"). Although the predecessor separate account was managed by GSAM in
substantially the same manner and by the same individuals as the Goldman Sachs
CORE Large Cap Growth Fund, the separate account was not registered under the
1940 Act and was not subject to certain investment restrictions imposed by the
1940 Act. If it had been registered under the 1940 Act, performance might have
been adversely affected.

Fees and expenses of the Large Cap Growth Fund may differ from the fees and
expenses historically incurred by the Composite. The performance figures have
been adjusted to reflect an additional deduction of [ %] for the Large Cap
Growth Fund. This deduction represents an estimate of the maximum fee
differential between the two funds. The fee differential from the inception date
of the Composite to the present could have been greater or lesser in any given
year. See "Performance Information" for an explanation of the information
presented below. THE PERFORMANCE INFORMATION BELOW IS BASED ON A FUND COMPARABLE
TO THE LARGE CAP GROWTH FUND AND DOES NOT REFLECT THE PERFORMANCE OF THE FUND
ITSELF.

[ADD PERFORMANCE INFORMATION FOR GOLDMAN SACHS CORE LARGE CAP GROWTH FUND]

23
<PAGE> 26

MID CAP GROWTH FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal CAPITAL APPRECIATION THROUGH
INVESTMENTS IN EQUITY
SECURITIES
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Brown Capital Management, Inc.

PORTFOLIO MANAGER
The Fund is managed by a team led by Eddie C. Brown. Mr. Brown is Founder,
President and controlling shareholder of the Sub-adviser. Mr. Brown has been
with the Sub-adviser since its inception in 1983.

INVESTMENT OBJECTIVE

Seeks capital appreciation principally through investments in equity securities,
such as common and preferred stocks and securities convertible into common
stocks. Current income is of secondary importance.

INVESTMENT RISK

This Fund invests mostly in stocks of medium sized companies that we believe are
undervalued in the marketplace. The value of any stock may rise or fall over
long or short periods of time. Although these stocks present an opportunity for
capital appreciation, they may not be broadly traded and involve market risk and
risk associated with foreign securities. For a discussion of market risk and
risk associated with foreign securities, see "A Word About Risk" in this
prospectus.

INVESTMENT STRATEGY

This Fund will invest principally in the equity securities of medium
capitalization companies. We will seek to achieve capital appreciation through
an opportunistic stock investment strategy with a growth bias. This Fund will
purchase equity securities of those companies that we feel are undervalued
relative to their growth potential in the securities markets, because the
companies are presently out of favor, not well known or possess value that is
not currently recognized by the investment community. We use a "bottom up"
approach to select specific securities, employing analysis that contains
elements of traditional dividend discount and earnings yield models, establishes
predicted relative valuation for equity and fixed income markets, and determines
the attractiveness of individual securities through evaluation of growth and
risk characteristics of the underlying company relative to the overall equity
market. Although the Fund's portfolio securities generally will be acquired for
the long term, they may be sold under some of the following circumstances when
the Sub-adviser believes that: a) the anticipated price appreciation has been
achieved or is no longer probable; b) alternative investments offer superior
total return prospects; or c) fundamentals change adversely.

We follow the guidelines listed below for making the primary investments for
this Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Equity securities at least 90%
Common stocks, convertible
preferred stocks,
participating preferred
stocks, preferred equity
redemption cumulative
stocks, preferred stocks
and convertible bonds
traded and domestic
exchanges or an over-
the-counter markets
- ---------------------------------------------
Foreign securities, American up to 10%
Depository Receipts
("ADRs")**
- ---------------------------------------------
Money market instruments*** up to 10%
and fixed income
securities, U.S. Government
securities, corporate debt
securities (including those
subject to repurchase
agreements), bankers
acceptances and
certificates of deposit of
domestic branches of U.S.
banks, commercial paper
(including variable amount
demand master notes) rated
in one of the two highest
rating of organizations or,
if not rated, of equivalent
quality and cash and cash
equivalents
- ---------------------------------------------
Illiquid securities up to 10%
- ---------------------------------------------
Real estate securities**** up to 10%
- ---------------------------------------------
</TABLE>

* At time of purchase
** Foreign securities held by this Fund will be held in the
form of ADRs.
*** For temporary defensive reasons, we may invest up to
100% of the Fund's assets in money market instruments and cash and cash
equivalents. We may do this when we think economic and market conditions
make it too risky to follow its general guidelines.
**** This Fund will not invest directly in real estate, but
rather, in readily marketable securities issued by or interests in
companies that invest in real estate, including real estate investment
trusts (REITs).

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

24
<PAGE> 27

MID CAP GROWTH FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Mid Cap Growth Fund has not commenced operations and has no investment
performance record. However, the Fund's investment objective and policies and
the Fund's strategies will be substantially similar to those employed by the
Sub-adviser with respect to certain discretionary investment management accounts
under their management ("Combined Accounts"). The chart below shows the
historical investment performance for a composite of these Combined Accounts)
("Combined Accounts Composite"). The Combined Accounts Composite includes all
discretionary accounts managed by the Sub-adviser invested principally in equity
securities of medium capitalization companies using the same investment strategy
that the Sub-adviser will employ on behalf of the Fund. The inception date for
the Combined Accounts Composite was August 31, 1992.

The discretionary accounts in the Combined Accounts Composite are not subject to
the investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the 1940 Act and the Internal Revenue
Code. If the accounts included in the Combined Accounts Composite had been
subject to the requirements imposed on mutual funds, their performance might
have been lower.

Fees and expenses of the Mid Cap Growth Fund may differ from the fees and
expenses historically incurred by the Sub-adviser's Combined Accounts Composite.
The performance figures have been adjusted to reflect an additional deduction of
[ %] for the Mid Cap Growth Fund. This deduction represents an estimate of
the maximum fee differential between the Mid Cap Growth Fund and the Combined
Accounts Composite. See "Performance Information" for an explanation of the
information presented below. THE PERFORMANCE INFORMATION BELOW IS BASED ON A
COMPOSITE COMPARABLE TO THE MID CAP GROWTH FUND AND DOES NOT REFLECT THE
PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE OF COMPOSITE]

25
<PAGE> 28

SMALL CAP GROWTH FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal LONG-TERM GROWTH THROUGH
INVESTMENTS IN SMALL COMPANY
GROWTH STOCKS
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

J.P. Morgan Investment Management Inc.

PORTFOLIO MANAGER

Candice Eggerss and Saira Malik are the members of the Sub-adviser's team who
will be primarily responsible for the day-to-day management of the Fund. Ms.
Eggerss, who has been with the Sub-adviser since 1996, is Vice President and
specializes in portfolio investments in small capitalization technology
companies. Prior to this, Ms. Eggerss was employed at Weiss, Peck and Greer from
April 1993 to April 1996 and at Equitable Capital Management prior to 1993. Ms.
Malik joined the Sub-adviser in 1995 after completing her graduate studies at
the University of Wisconsin.
INVESTMENT OBJECTIVE

Seeks to provide long-term growth from a portfolio of small company growth
stocks.
INVESTMENT RISK

This Fund invests primarily in U.S. small company growth stocks. These companies
may not have the financial strength to do well in difficult times. Because they
are small, the stock prices of these companies may fluctuate more over the short
term but they have more potential to grow. This means their stock value may
offer greater potential for appreciation. The securities that the Fund invests
in involve certain risks such as market risks and risk associated with foreign
securities. For a discussion of these risks, see "A Word About Risk" in this
prospectus.

INVESTMENT STRATEGY

This Fund invests in U.S. companies whose market capitalizations are greater
than $150 million and less than $1.25 billion. On an industry by industry basis,
the Fund's weightings are similar to those of the Russell 2000 Growth Index.
Within each industry, the Fund invests in the stocks that our research and
valuation process indicate are the most undervalued. The greater a company's
estimated worth compared to the current market price of its stock, the more
undervalued the company.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Small company growth stocks at least 65%
U.S. and foreign common
stocks, convertible
securities, preferred
stocks, trust or
partnership interests,
warrants, rights and
investment company
securities
- ---------------------------------------------
Foreign investments up to 5%
- ---------------------------------------------
Futures up to 25%
- ---------------------------------------------
Illiquid securities up to 15%
- ---------------------------------------------
Investment grade short term up to 10%
securities**
- ---------------------------------------------
Swaps up to 5%
- ---------------------------------------------
</TABLE>

* At time of purchase.
** During severe market downturns or to maintain
adequate liquidity to meet redemptions, we may invest up to 100% of the
Fund's assets in investment grade short term securities, including
repurchase agreements and, for temporary or extraordinary purposes, may
borrow from banks up to 10% of its assets.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

26
<PAGE> 29

SMALL CAP GROWTH FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Small Cap Growth Fund has not commenced operations and has no investment
performance record. However, the Fund's investment objective and policies and
the Fund's strategies will be substantially similar to those employed by the
Sub-adviser and its affiliates with respect to certain discretionary investment
management accounts under their management ("Combined Accounts"). The chart
below shows the historical investment performance for a composite of these
Combined Accounts ("Combined Accounts Composite"). The Combined Accounts
Composite includes all non-mutual fund discretionary accounts managed by the
Sub-adviser and its affiliates invested solely in the equity securities of small
capitalization companies using the same investment strategy that the Sub-adviser
will employ on behalf of the Fund. The inception date for the Combined Accounts
Composite was August 31, 1994.

Fees and expenses of the Small Cap Growth Fund may differ from the fees and
expenses historically incurred by the accounts in the Combined Accounts
Composite. The performance figures below reflect the deduction of a 1.20% fee
which is the highest fee charged by the Sub-adviser for the strategy it will
employ in its management of the Small Cap Growth Fund. The fee differential from
the inception date of Combined Accounts Composite to the present could have been
greater or lesser in any given year. See "Performance Information" for an
explanation of the information presented below. THE PERFORMANCE INFORMATION
BELOW IS BASED ON A COMPOSITE COMPARABLE TO THE SMALL CAP GROWTH FUND AND DOES
NOT REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[INSERT PERFORMANCE FOR COMBINED ACCOUNTS COMPOSITE]

27
<PAGE> 30

INTERNATIONAL VALUE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal GROWTH OF CAPITAL AND FUTURE
INCOME THROUGH INVESTMENTS
IN NON-U.S. ISSUERS
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Capital Guardian Trust Company

PORTFOLIO MANAGER

This Fund is managed using a system of multiple portfolio managers. Under this
system, the Fund is divided into segments, which are assigned to individual
managers.
INVESTMENT OBJECTIVE

Seeks to provide growth of capital and future income through investments
primarily in securities of non-U.S. issuers and securities whose principal
markets are outside of the United States.

INVESTMENT RISK

As described in the Investment Strategy section below, this Fund invests almost
all of its assets in foreign securities, which have risks that U.S. investments
do not have. For a further explanation of the risks associated with foreign
securities and market risk, see "A Word About Risk" in this prospectus.

INVESTMENT STRATEGY

The Fund invests in a portfolio consisting primarily of common stocks (or
securities convertible into common stocks) and bonds of non-U.S. issuers.

While the assets of the Fund can be invested with geographical flexibility, the
emphasis will be on securities of companies located in Europe, Canada,
Australia, and the Far East, giving due consideration to economic, social, and
political developments, currency risks and the liquidity of various national
markets.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Foreign securities** common at least 80%
stocks, convertible stocks
and bonds
- ---------------------------------------------
Futures and options Put and up to 90%
call options on foreign
currencies and forward
currency contracts
- ---------------------------------------------
Cash, cash equivalents, up to 100%
government securities,
nonconvertible preferred
stocks, or straight debt
securities***
- ---------------------------------------------
</TABLE>

* At the time of purchase.
** We may invest up to 10% of the Fund's assets in the
securities of foreign small capitalization companies. The Fund also may
invest in securities of issuers located in emerging markets countries.
*** We may invest up to 100% of the Fund's assets in
these instruments in varying proportions, when we think economic, political
and market conditions in foreign countries make it too risky to follow our
general guidelines.

For additional
information about THE
FUND'S INVESTMENTS see
"Types of Investments."

28
<PAGE> 31

INTERNATIONAL VALUE FUND
Fact Sheet
- --------------------------------------------------------------------------------

The International Value Fund has not commenced operations and has no investment
performance record. However, the Fund's investment objectives, policies and
strategies will be substantially similar to those employed by the Sub-adviser
with respect to certain discretionary investment accounts managed by the
Sub-adviser. The chart below shows the historical investment performance (with
the adjustments noted below) for a composite of the Sub-adviser's similar
accounts which use the same investment strategy that the Sub-adviser will employ
on behalf of the Fund ("Sub-adviser Composite"). The Sub-adviser Composite
represents the total return, gross of management fees, of all relevant accounts
managed on a discretionary basis by the institutional investment management
division of the Sub-adviser. The inception date of the Sub-Adviser Composite was
.

The discretionary accounts in the Sub-adviser Composite are not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the 1940 Act and the Internal Revenue
Code. If the accounts included in the Sub-Adviser Composite had been subject to
the requirements imposed on mutual funds, their performance might have been
lower.

Fees and expenses of the International Value Fund may differ from the fees and
expenses historically incurred by the accounts within the Sub-Adviser Composite.
The actual Sub-adviser Composite results have been adjusted downward by VALIC to
reflect an additional deduction of [ %] for the International Value Fund.
This deduction represents an estimate of the maximum fee differential between
the International Value Fund and the Sub-adviser Composite. The fee differential
from the inception date of the Sub-adviser Composite to the present could have
been greater or lesser in any given year. See "Performance Information" for an
explanation of the information presented below. THE PERFORMANCE INFORMATION
BELOW IS BASED ON A COMPOSITE COMPARABLE TO THE INTERNATIONAL VALUE FUND AND
DOES NOT REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE INFORMATION FOR SUB-ADVISER COMPOSITE]

29
<PAGE> 32

LARGE CAP VALUE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal TOTAL RETURNS EXCEEDING THE
RUSSELL 1000 VALUE INDEX
THROUGH INVESTMENTS IN
EQUITY SECURITIES
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

State Street Bank & Trust Company/
State Street Global Advisors

PORTFOLIO MANAGER

This Fund is managed using a system of multiple portfolio managers.
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the Russell 1000 Value
Index (Index) through investment in equity securities.

INVESTMENT RISK

This Fund invests primarily in the stocks of large, well-established companies
that generally possess the strength to withstand difficult financial periods.
Nevertheless, the value of any stock can rise or fall over short and long
periods of time. As described below, in order to avoid unintended exposures to
economic factors, including the direction of the economy, interest rates, energy
prices and inflation, we maintain the proportion of stocks from different
economic sectors in this Fund's portfolio at a level similar to that of the
Russell 1000 Value Index. There is no assurance that the Fund will be unaffected
by such economic factors.

Because the Fund maintains sector weights at a similar level to that of the
Index, your investment may experience similar changes in value and share similar
risks such as market risk and risk associated with foreign securities. For more
information about market risk and risk associated with foreign securities, see
"A Word About Risk" in this prospectus.

INVESTMENT STRATEGY

The Fund will invest primarily in equity securities. Equity securities will be
selected by the Fund and ranked according to two separate and uncorrelated
measures: value and the momentum of Wall Street sentiment. The value measure
compares a company's assets, projected earnings growth and cash flow growth with
its stock price within the context of its historical valuation. The measure of
Wall Street sentiment examines changes in Wall Street analysts' earnings
estimates and ranks stocks by the strength and consistency of those changes.
These two measures will be combined to create a single composite score of each
stock's attractiveness. These scores are used to determine their relative
attractiveness. Sector weights are maintained at a similar level to that of the
Russell 1000 Value Index to avoid unintended exposure to factors such as the
direction of the economy, interest rates, energy prices and inflation.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets
- ---------------------------------------------
<S> <C>
Equity securities at least 65%
- ---------------------------------------------
Foreign debt securities** up to 5%
- ---------------------------------------------
American Depository Receipts up to 5%
- ---------------------------------------------
Corporate bonds up to 5%
- ---------------------------------------------
Debentures up to 5%
- ---------------------------------------------
Notes up to 5%
- ---------------------------------------------
Warrants up to 5%
- ---------------------------------------------
Illiquid and restricted up to 15%
securities
- ---------------------------------------------
Securities lending up to 33 1/3%
- ---------------------------------------------
When-issued securities up to 25%
- ---------------------------------------------
Put and call options up to 25%
Covered put and call
options on securities
Put and call options on
securities indices
- ---------------------------------------------
Futures and options up to 5%
Initial margin deposits on
futures and premiums for
options and futures
- ---------------------------------------------
High quality short-term fixed up to 100%
income securities***
- ---------------------------------------------
</TABLE>

* At time of purchase.
** The Fund may invest up to 5% of its total assets in the
obligations of foreign issuers that are denominated in U.S. dollars.
*** For temporary defensive purposes, to invest
uncommitted cash balances or to meet shareholder redemptions, we may invest
up to 100% of the Fund's assets in high quality short-term fixed income
securities such as U.S. Government securities, repurchase agreements
collateralized by these obligations, variable amount master demand notes,
commercial paper, bank certificates of deposit, bankers' acceptances and
time deposits.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

30
<PAGE> 33

LARGE CAP VALUE FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Large Cap Value Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by the Sub-adviser for a
discretionary account (the "Discretionary Account") managed by the Sub-adviser
with similar investment objectives. The Discretionary Account is not subject to
the investment limitations, diversification and other restrictions imposed on
registered mutual funds by the 1940 Act and the Internal Revenue Code. The chart
below shows the historical investment performance for the SSgA Large Cap Value
Fund. The inception date for the Discretionary Account was August, 1992.

Fees and expenses of the Large Cap Value Fund will be substantially greater than
the fees and expenses historically incurred by the Discretionary Account. The
performance figures have been adjusted to reflect an additional deduction of
[ %] for the Large Cap Value Fund. This deduction represents an estimate of
the maximum fee differential between the Large Cap Value Fund and the
Discretionary Account. The fee differential from the inception date of the
Discretionary Account to the present could have been greater or lesser in any
given year. See "Performance Information" for an explanation of the information
presented below. THE PERFORMANCE INFORMATION BELOW IS BASED ON A DISCRETIONARY
ACCOUNT COMPARABLE TO THE LARGE CAP VALUE FUND AND DOES NOT REFLECT THE
PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE INFORMATION FOR SSGA LARGE CAP VALUE FUND]

31
<PAGE> 34

MID CAP VALUE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal GROWTH THROUGH INVESTMENTS
IN MEDIUM- TO LARGE
CAPITALIZATION COMPANIES
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC
INVESTMENT SUB-ADVISER

Neuberger & Berman Management, Inc.

PORTFOLIO MANAGER
Michael M. Kassen and Robert I. Gendelman serve as co-managers of the Fund. Mr.
Kassen and Mr. Gendelman are Vice Presidents of the Sub-adviser and principals
of Neuberger & Berman, LLC. Messrs. Kassen and Gendelman have been associated
with the Sub-adviser since 1990 and 1994, respectively.

INVESTMENT OBJECTIVE

Seeks capital growth, through investment in common stocks of medium- to
large-capitalization established companies using a value-oriented investment
approach.

INVESTMENT RISK

As described in the Investment Strategy section below, this Fund invests almost
all its assets in stocks of companies that are undervalued in the marketplace.
The value of any stock may rise or fall over long or short periods of time.
Although these stocks present an opportunity for capital appreciation, they may
not be broadly traded and involve market risk and risk associated with foreign
securities. For a discussion of these risks, see "A Word About Risk" in this
prospectus.

INVESTMENT STRATEGY

This Fund invests principally in common stocks of medium- to
large-capitalization established companies, using a value-oriented investment
approach intended to increase capital with reasonable risk. We choose securities
we believe are undervalued based on strong fundamentals, including a low
price-to-earnings ratio, consistent cash flow, and the company's track record
through all parts of the market cycle. When selecting securities for this Fund,
we also consider other factors as including ownership by a company's management
of the company's stock and the dominance a company in its particular field.

We follow the guidelines listed below for making the investments for this Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Equity Securities at least 65%
Common stock, preferred
stock, convertible
securities
- ---------------------------------------------
Covered call options up to 35%
- ---------------------------------------------
Foreign currency transactions up to 5%
- ---------------------------------------------
Options on foreign currencies up to 5%
- ---------------------------------------------
Foreign securities up to 10%
- ---------------------------------------------
Illiquid and restricted up to 15%
securities**
- ---------------------------------------------
Corporate debt securities up to 15%
rated below investment
grade and comparable
unrated securities***
- ---------------------------------------------
Investment grade debt less than 5%
securities Corporate bonds
and debentures, U.S.
Government securities,
money market instruments,
zero coupon securities
- ---------------------------------------------
Cash and cash equivalents**** up to 100%
- ---------------------------------------------
</TABLE>

* At time of purchase
** We may invest up to 15% of the Funds' assets in
illiquid securities. Restricted securities are explained under "Types of
Investments."
*** This Fund may invest up to 15% of its assets in below
investment grade debt securities only when we believe that the anticipated
return to the Fund warrants exposure to the additional risk involved in
these instruments.
**** For temporary defensive reasons, we may invest up to
100% of the Fund's assets in cash and cash equivalents, U.S. Government
securities, commercial paper and certain other money market instruments,
including repurchase agreements collateralized by the foregoing. We may do
this when we think economic and market conditions make it too risky to
follow its general investment guidelines.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

32
<PAGE> 35

MID CAP VALUE FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Mid Cap Value Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by the Sub-adviser for the
Neuberger&Berman Partners Fund. The chart below shows the historical investment
performance for the Neuberger&Berman Partners Fund. The inception date for the
Neuberger&Berman Partners Fund was , 199 .

Fees and expenses of the Mid Cap Value Fund may differ from the fees and
expenses historically incurred by the Neuberger&Berman Partners Fund. The
performance figures have been adjusted to reflect an additional deduction of
[ %] for the Mid Cap Value Fund. This deduction represents an estimate of the
maximum fee differential between the two funds. The fee differential from the
inception date of the Neuberger&Berman Partners Fund to the present could have
been greater or lesser in any given year. See "Performance Information" for an
explanation of the information presented below. THE PERFORMANCE INFORMATION
BELOW IS BASED ON A FUND COMPARABLE TO THE MID CAP VALUE FUND AND DOES NOT
REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE INFORMATION FOR

NEUBERGER&BERMAN PARTNERS FUND]

33
<PAGE> 36

SMALL CAP VALUE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal MAXIMUM LONG-TERM RETURN
THROUGH INVESTMENTS IN
SECURITIES OF SMALL
CAPITALIZATION COMPANIES
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISERS

Fiduciary Management Associates, Inc.
Bankers Trust Company

PORTFOLIO MANAGER

Patricia A. Falkowski, President and Chief Investment Officer of FMA has been
Portfolio Manager for the actively-managed portion of the Fund's portfolio since
the Fund's inception. Ms. Falkowski has been with FMA since 1991.

Frank Salerno, Managing Director-Chief Investment Officer of Quantitative and
Equity Index of Bankers Trust, has been the portfolio manager for the
passively-managed portion of this Fund's portfolio since the Fund's inception.
Mr. Salerno has been with Bankers Trust since 1981.

INVESTMENT OBJECTIVE

Seeks maximum long-term return, consistent with reasonable risk to principal, by
investing primarily in common stocks of smaller companies in terms of revenues
and/or market capitalization.

INVESTMENT RISK

As described below, this Fund invests in smaller capitalization companies. Some
of these companies do not have the financial strength to do well in difficult
times.

A portion of this Fund's portfolio is invested in a statistically-selected
sampling of the 2000 stocks in the Russell 2000 Index. This part of the Fund's
investment portfolio avoids the risks of individual stock selection and seeks to
achieve and exceed the return of the smaller-sized company sector of the market.
On the average, that return has been positive, but has been negative at certain
times. There is no assurance that a positive return will occur in the future.

Because this Fund invests in smaller capitalization stocks, your investment may
exhibit greater market value volatility than investments in common stocks of
larger companies. Your investment also will experience similar changes in value
and share similar risks as stocks included in the Russell 2000 Index, such as
market risk and risk associated with investment in foreign securities. For more
information about these risks, see "A Word About Risk" in this prospectus.

INVESTMENT STRATEGIES

This Fund invests primarily in common stocks of small capitalization companies.
One portion of the Fund's investment portfolio will be actively managed and the
other portion will be passively managed. In analyzing and selecting investments
for the actively-managed portion of the Fund's investment portfolio, we look for
market themes and changes that signal opportunity. We seek companies with lower
price-to-earnings ratios, strong cash flow, good credit lines and clean or
improving balance sheets. At any given time, this portion of the Fund's
investment portfolio will be invested in a diversified group of small
capitalization stocks in several industries. The Fund will invest primarily in
U.S. companies with seasoned management or a track record as part of a larger
company.

The passively-managed portion of the Fund's investment portfolio is comprised of
a sampling of stocks in the Russell 2000 Index that, as a group, should reflect
its performance. The stocks of the Russell 2000 Value Index to be included in
the Fund will be selected utilizing a statistical sampling technique known as
"optimization." This process selects stocks for the Fund so that various
industry weightings, market capitalizations and fundamental characteristics
(e.g. price-to-book, price-to-earnings, debt-to-asset ratios and dividend
yields) closely approximate those of the Russell 2000 Value Index. The stocks
held by the Fund are weighted to make the Fund's aggregate investment
characteristics similar to those of the Index as a whole. Since it may not be
possible for this Fund to buy every stock included on this index or in the same
proportions, we rely on the aforementioned statistical technique to figure out,
of the stocks tracked by the index, how many and which ones to buy.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

34
<PAGE> 37

SMALL CAP VALUE FUND
Fact Sheet
- --------------------------------------------------------------------------------

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Small company stocks** at least 65%
- ---------------------------------------------
Short-term investments up to 35%
Foreign and domestic money
market instruments,
certificates of deposit
bankers' acceptances, time
deposits, U.S. Government
obligations, U.S.
Government agency
securities, short-term
corporate debt securities,
commercial paper rated A-1
or A-2 by S&P or Prime-1 or
Prime-2 by Moody's or, if
unrated, of comparable
quality, repurchase
agreements
- ---------------------------------------------
Illiquid securities up to 15%
- ---------------------------------------------
Futures and Options up to 20%
- ---------------------------------------------
Swap Agreements up to 10%
- ---------------------------------------------
Warrants*** up to 5%
- ---------------------------------------------
Time deposits**** up to 10%
- ---------------------------------------------
Foreign securities up to 10%
- ---------------------------------------------
Investment companies up to 10%
- ---------------------------------------------
</TABLE>

* At time of purchase.
** This Fund will invest at least 65% of its assets in the
stocks of companies whose stock market capitalizations range from $50
million to $1 billion, including stocks in the Russell 2000 Index.
*** The Fund's investment in warrants will not exceed 2%
of its assets with respect to warrants not listed on the New York or
American Stock Exchanges.
**** This Fund will invest only in time deposits maturing
in two to seven calendar days. The Fund will not purchase time deposits
maturing in more than seven days.

35
<PAGE> 38

SOCIALLY RESPONSIBLE
FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal GROWTH THROUGH INVESTMENTS
IN STOCKS OF COMPANIES
MEETING SOCIAL CRITERIA OF
THE FUND
- -------------------------------------------------
Investment Category GROWTH
</TABLE>

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

INVESTMENT ADVISER

VALIC

PORTFOLIO MANAGER

John W. Mossbarger has been this Fund's portfolio manager and Vice President and
Investment Officer of the Series Company since its inception. Since 1992, Mr.
Mossbarger has served as Vice President and Investment Officer of American
General Series Portfolio Company, a registered, open-end investment company.

INVESTMENT OBJECTIVE

Seeks to obtain growth of capital through investment, primarily in common
stocks, in companies which meet the social criteria established for the Fund.
The Fund invests only in companies which meet its social criteria. The Fund does
not invest in companies that:

- produce nuclear energy;

- make military weapons or delivery systems; or

- engage continuously in practices or produce products that significantly
pollute the environment (such products include tobacco products).

INVESTMENT RISK
Most of the companies this Fund invests in are included in the S&P 500 Index.
This Fund's degree of market risk is slightly greater than the S&P 500 Index
Fund's degree of risk. This is because its investments are more limited by its
investment objective. This Fund may also experience market risk, and risks
associated with foreign securities. For a discussion of these risks see the S&P
500 Index Fund's Fact Sheet and "A Word About Risk" in this prospectus.
If a company stops meeting the Fund's social criteria after the Fund invested in
it, the Fund will sell these investments even if this means the Fund loses
money. Also, if the Fund changes its social criteria and the companies the Fund
has already invested in no longer qualify, the Fund will sell these investments
even if this means the Fund loses money. Social criteria screening will limit
the availability of investment opportunities for the Fund more than for funds
having no such criteria.

To find out which companies meet the Fund's social criteria, we rely on industry
classifications, research services such as the Investor Responsibility Research
Center (IRRC), and special magazines and papers that publish this type of
information.

Since our definition of social criteria is not "fundamental," the Series
Company's Board of Trustees may change it without shareholder approval. When
deciding to make changes to the criteria, the Board will consider, among other
things, new or revised state laws that govern or affect the investments of
public funds. At least once a year, we survey state laws on this issue to look
for any new developments. If our survey shows that at least 20 states have
adopted laws that restrict public funds from being invested in a clearly
definable category of investments, this category is automatically added to our
social criteria list.

INVESTMENT STRATEGY

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund's Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Common stocks of companies at least 80%
meeting Fund's social
criteria
- ---------------------------------------------
Other types of securities of up to 20%
companies meeting social
criteria including:
Foreign securities
Preferred stock
Convertible securities
High quality money market
securities and warrants
- ---------------------------------------------
Futures and options up to 33%
- ---------------------------------------------
Illiquid and restricted up to 10%
securities
- ---------------------------------------------
</TABLE>

* At time of purchase.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

36
<PAGE> 39

SOCIALLY RESPONSIBLE FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Socially Responsible Fund has not commenced operations and has no investment
performance record. However, the Fund will be managed in substantially the same
manner and by the same individuals as those employed by VALIC for the American
General Series Portfolio Company Social Awareness Fund ("AGSPC Social Awareness
Fund"). The chart below shows the historical investment performance for the
AGSPC Social Awareness Fund. The inception date for the AGSPC Social Awareness
Fund was October 2, 1989.

Fees and expenses of the Socially Responsible Fund may differ from the fees and
expenses historically incurred by the AGSPC Social Awareness Fund. The
performance figures have been adjusted to reflect an additional deduction of
[ %] for the Socially Responsible Fund. This deduction represents an estimate
of the maximum fee differential between the two funds. The fee differential from
the inception date of the AGSPC Social Awareness Fund to the present could have
been greater or lesser in any given year. See "Performance Information" for an
explanation of the information presented below. THE PERFORMANCE INFORMATION
BELOW IS BASED ON A FUND COMPARABLE TO THE SOCIALLY RESPONSIBLE FUND AND DOES
NOT REFLECT THE PERFORMANCE OF THE FUND ITSELF.

[ADD PERFORMANCE DISCLOSURE FOR AGSPC SOCIAL AWARENESS FUND]

37
<PAGE> 40

BALANCED FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal CONSERVATION OF PRINCIPAL
AND LONG-TERM GROWTH OF
CAPITAL AND INCOME THROUGH
INVESTMENTS IN FIXED INCOME
AND EQUITY SECURITIES
- -------------------------------------------------
Investment Category BALANCED
</TABLE>

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

INVESTMENT ADVISER

VALIC
INVESTMENT SUB-ADVISER

Capital Guardian Trust Company

PORTFOLIO MANAGER

This Fund is managed using a system of multiple portfolio managers. Under this
system, the Fund is divided into segments, which are assigned to individual
managers.

INVESTMENT OBJECTIVE

Seeks balanced accomplishment of
(i) conservation of principal and (ii) long-term growth of capital and income
through investment in fixed income and equity securities.

INVESTMENT RISK

This Fund invests principally in debt securities and stocks. Stock values can
rise and fall over long and short periods of time and involve market risks. Like
equity securities, debt securities involve certain risks, including interest
rate risk, credit risk, market risk and risk associated with foreign securities.
This may cause the debt securities that the Fund owns to be worth less than the
Fund paid. For a discussion of these risk, see "A Word About Risk" in this
prospectus.

INVESTMENT STRATEGY

The Fund invests in a combination of debt securities and stock in order to
maintain the value of your principal investment and provide you with capital
growth and income over the long-term. We select securities for the Fund's
portfolio by identifying the stock and debt that represent fundamental values at
reasonable prices. We implement this philosophy using a system of portfolio
managers, under which a different portfolio manager makes investment decisions
for the debt and equity portions of the Fund.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- -------------------------------------------
<S> <C>
Fixed income securities not less than 20%
Securities rated "A" not more than 80%
or better by Moody's
or S&P or of
comparable investment
quality; U.S.
Government securities,
mortgage-related
securities of
governmental issuers,
GNMA certificates of
private issuers,
collateralized
mortgage obligations,
mortgage-backed bonds,
cash or cash
equivalents, including
commercial bank
obligations and
commercial paper**
- -------------------------------------------
Equity securities*** not less than 20%
- -------------------------------------------
High yield debt not more than 20%
securities
- -------------------------------------------
</TABLE>

* At time of purchase.
** These investments will constitute at least 75% of the
fixed-income securities held by the Fund.
*** Equity securities held by the Fund will be listed on
national securities exchanges or in the national over-the-counter market
(NASDAQ) and may include American Depository Receipts. We may invest up to
10% of the Fund's assets in the securities of U.S. small-capitalization
companies.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

38
<PAGE> 41

BALANCED FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Balanced Fund has not commenced operations and has no investment performance
record. However, the Fund's investment objectives, policies and strategies will
be substantially similar to those employed by the Sub-adviser with respect to
certain discretionary investment accounts managed by the Sub-adviser. The chart
below shows the historical investment performance (with the adjustments noted
below) for a composite of the Sub-adviser's similar accounts which use the same
investment strategy that the Sub-adviser will employ on behalf of the Fund
("Sub-adviser Composite"). The Sub-adviser Composite represents the total
return, gross of management fees, of all relevant accounts managed on a
discretionary basis by the institutional investment management division of the
Sub-adviser. The inception date of the Sub-adviser Composite was .

The discretionary accounts in the Sub-adviser Composite are not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the 1940 Act and the Internal Revenue
Code. If the accounts included in the Sub-adviser Composite had been subject to
the requirements imposed on mutual funds, their performance might have been
lower.

Fees and expenses of the Balanced Fund may differ from the fees and expenses
historically incurred by the accounts within the Sub-adviser Composite. The
actual Sub-adviser Composite results have been adjusted downward by VALIC to
reflect an additional deduction of [ %] for the Balanced Fund. This deduction
represents an estimate of the maximum fee differential between the Balanced Fund
and the Sub-adviser Composite. The fee differential from the inception date of
the Sub-adviser Composite to the present could have been greater or lesser in
any given year. See "Performance Information" for an explanation of the
information presented below. THE PERFORMANCE INFORMATION BELOW IS BASED ON A
COMPOSITE COMPARABLE TO THE FUND AND DOES NOT REFLECT THE PERFORMANCE OF THE
FUND ITSELF.

[INSERT PERFORMANCE FOR SUB-ADVISER COMPOSITE]

39
<PAGE> 42

DOMESTIC BOND FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal HIGH TOTAL RETURN CONSISTENT
WITH CONSERVATION OF CAPITAL
THROUGH INVESTMENTS IN DEBT
SECURITIES
- -------------------------------------------------
Investment Category INCOME
</TABLE>

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

INVESTMENT ADVISER

VALIC

INVESTMENT SUB-ADVISER

Capital Guardian Trust Company

PORTFOLIO MANAGER

James S. Baker and James R. Mulally serve as the Fund's portfolio managers. Mr.
Baker, Vice President and fixed-income portfolio manager of an affiliate of the
Sub-adviser, has focused on the application of quantitative valuations to
investment grade bonds and portfolios for the Sub-adviser since 1987. Mr.
Mulally, Senior Vice President, Director and Chairman of the Sub-adviser's Fixed
Income Subcommittee, joined the Sub-adviser in 1980.

INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in debt instruments and other income producing securities.

INVESTMENT RISK

The securities the Fund invests in involve certain risks, such as interest rate
risk, credit risk, market risk and risk associated with foreign securities. This
may cause the debt instruments that the Fund owns to be worth less than what the
Fund paid. For a discussion of these risks see "A Word About Risk" in this
prospectus.

INVESTMENT STRATEGY

The Fund invests in high quality bonds to provide you with the highest possible
total return from current income and capital gains while preserving your
investment. To increase the Fund's earning potential, we may use a small part of
the Fund's assets to make some higher risk investments.

We follow the guidelines listed below for making the primary investments for the
Fund.

<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------
<S> <C>
Investment grade intermediate at least 75%
and long-term corporate
bonds rated at least A by
Moody's or S&P** or of
comparable quality,
Eurodollar fixed income
securities***, securities
issued or guaranteed by the
U.S. Government****, or the
Canadian Government,
interest bearing short-term
investments, such as
commercial paper, bankers'
acceptances, bank
certificates of deposit and
other cash equivalents and
cash
- ---------------------------------------------
Other debt obligations up to 25%
Corporate bonds rated less
than A by Moody's or S&P,
mortgage-related
securities, high yield
bonds
- ---------------------------------------------
U.S. Government up to 100%
securities****
- ---------------------------------------------
</TABLE>

* At time of purchase.
** For more information concerning ratings see
"Description of Corporate Bond Ratings" and "Description of Commercial
Paper Ratings" in the Statement of Additional Information.
*** The Fund currently intends to limit these investments
to no more than 20% of its total assets.
**** U.S. Government securities are securities issued or
guaranteed by the U.S. Government which are supported by (i) the full faith
and credit of the U.S. Government, (ii) the right of the issuer to borrow
from the U.S. Treasury, (iii) the credit of the issuing government agency
or (iv) the discretionary authority of the U.S. Government or GNMA to
purchase certain obligations of the agency.

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

40
<PAGE> 43

DOMESTIC BOND FUND
Fact Sheet
- --------------------------------------------------------------------------------

The Domestic Bond Fund has not commenced operations and has no investment
performance record. However, the Fund's investment objectives, policies and
strategies will be substantially similar to those employed by the Sub-adviser
with respect to certain discretionary investment accounts managed by the
Sub-adviser. The chart below shows the historical investment performance (with
the adjustments noted below) for a composite of the Sub-adviser's similar
accounts which use the same investment strategy that the Sub-adviser will employ
on behalf of the Fund ("Sub-adviser Composite"). The Sub-adviser Composite
represents the total return, gross of management fees, of all relevant accounts
managed on a discretionary basis by the institutional investment management
division of the Sub-adviser. The inception date of the Sub-adviser Composite was
.

The discretionary accounts in the Sub-adviser Composite are not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the 1940 Act and the Internal Revenue
Code. If the accounts included in the Sub-adviser Composite had been subject to
the requirements imposed on mutual funds, their performance might have been
lower.

Fees and expenses of the Domestic Bond Fund may differ from the fees and
expenses historically incurred by the accounts within the Sub-adviser Composite.
The actual Sub-adviser Composite results have been adjusted downward by VALIC to
reflect an additional deduction of [ %] for the Domestic Bond Fund. This
deduction represents an estimate of the maximum fee differential between the
Domestic Bond Fund and the Sub-adviser Composite. The fee differential from the
inception date of the Sub-adviser Composite to the present could have been
greater or lesser in any given year. See "Performance Information" for an
explanation of the information presented below. THE PERFORMANCE INFORMATION
BELOW IS BASED ON A COMPOSITE COMPARABLE TO THE FUND AND DOES NOT REFLECT THE
PERFORMANCE OF THE FUND ITSELF.

[INSERT PERFORMANCE FOR SUB-ADVISER COMPOSITE]

41
<PAGE> 44

MONEY MARKET FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal INCOME THROUGH INVESTMENT IN
SHORT-TERM MONEY MARKET
SECURITIES
- -------------------------------------------------
Investment Category STABILITY
</TABLE>

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

INVESTMENT ADVISER

VALIC

PORTFOLIO MANAGER

Teresa Moro has been this Fund's portfolio manager and Vice President and
Investment Officer of the Series Company since its inception. Since 1991, Ms.
Moro has served as Vice President and Investment Officer of American General
Series Portfolio Company, a registered investment company.

INVESTMENT OBJECTIVE

Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.

INVESTMENT RISK

The short-term money market securities that this Fund invests in are high
quality investments, posing low credit and interest rate risk. The current yield
of the Fund will generally go up or down with changes in the level of interest
rates. The Fund uses the amortized cost method to value its portfolio securities
and tries to keep its net asset value at $1.00 per share. There can be no
assurance that the net asset value will be $1.00 per share at all times.

Because the risk to the money you invest is low, the potential for profit is
also low. The Fund may experience risks including interest rate risk, market
risk, credit risk and risk associated with foreign securities. For a discussion
of these risks, see "A Word About Risk" in this prospectus.

INVESTMENT STRATEGY

The Fund invests in short-term money market securities to provide you with
liquidity, protection of your investment and current income. We use 95% of the
Fund's assets to buy short-term securities that are rated within the highest
rating category for short term debt obligations by at least two nationally
recognized rating services or unrated securities of comparable investment
quality. These eligible securities must mature in 13 months or less and the Fund
must have a dollar-weighted average portfolio maturity of 90 days or less. These
practices are designed to minimize any fluctuation in the value of the Fund's
portfolio.

The investments this Fund may buy include:

- Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities

- Certificates of deposit and other obligations of domestic banks that have
total assets in excess of $1 billion

- Commercial paper sold by corporations and finance companies

- Corporate debt obligations with remaining maturities of 13 months or less

- Repurchase agreements

- Money market instruments of foreign issuers payable in U.S. dollars (limited
to no more than 20% of the Fund's net assets)

- Asset-backed securities

- Loan participations

- Adjustable rate securities

- Illiquid and restricted securities (including Rule 144A Securities)*
- ---------------

*limited to 10% of the Fund's net assets

Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments."

42
<PAGE> 45

GROWTH LIFESTYLE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal GROWTH THROUGH INVESTMENTS
IN SERIES COMPANY FUNDS
- -------------------------------------------------
Investment Category LIFESTYLE
</TABLE>

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

INVESTMENT ADVISER

VALIC

PORTFOLIO MANAGER

The Fund is managed by a team led by William Trimbur, Jr. Mr. Trimbur has been
this Fund's portfolio manager and Vice President and Investment Officer of the
Series Company since its inception. Since 1987, Mr. Trimbur has served as Vice
President and Investment Officer of American General Series Portfolio Company, a
registered investment company.

INVESTMENT OBJECTIVE

Seeks growth through investments in Series Company Funds. This Fund is suitable
for investors seeking the potential for capital growth that a fund investing
predominately in common stocks may offer.

INVESTMENT RISK

The Fund allocates its assets among twelve of the Series Company Funds. The
allocation among the different Series Company Funds is designed to achieve the
Fund's investment objective and reduce risk.

The Fund's performance is directly related to the performance of the Series
Company Funds in which it invests. Changes in the net asset values of the
underlying Series Company Funds affect this Fund's net asset value. Also, the
Fund's ability to meet its investment objective depends upon the ability of the
underlying Series Company Funds to meet their investment objective.

Investment in the Series Company Funds involves manager risk. The securities
that Series Company Funds invest in involve market risk, credit risk, interest
rate risk and risk associated with foreign investments. For a discussion of
these risks, see "A Word About Risk" in this prospectus.

INVESTMENT STRATEGY

This Fund is managed so that it can serve as a complete investment program for
you or as a core part of your larger portfolio. We intend to allocate the Fund's
assets among the Series Company Funds as follows:

<TABLE>
<S> <C>
American General International 15%
Value Fund
American General International 15%
Growth Fund
American General Small Cap 2%
Index Fund
American General Small Cap 9%
Value Fund
American General Small Cap 9%
Growth Fund
American General Mid Cap 3%
Index Fund
American General Mid Cap 6%
Value Fund
American General Mid Cap 6%
Growth Fund
American General S&P 500 5%
Index Fund
American General Large Cap 10%
Growth Fund
American General Large Cap 10%
Value Fund
American General Domestic 10%
Bond Fund
</TABLE>

43
<PAGE> 46

MODERATE GROWTH
LIFESTYLE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal GROWTH AND CURRENT INCOME
THROUGH INVESTMENTS IN
SERIES COMPANY FUNDS
- -------------------------------------------------
Investment Category LIFESTYLE
</TABLE>

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

INVESTMENT ADVISER

VALIC

PORTFOLIO MANAGER

INVESTMENT OBJECTIVE

Seeks growth and current income through investments in Series Company Funds.
This Fund is suitable for investors who wish to invest in stocks, but who are
not willing to assume the substantial market risks of the Lifestyle Growth Fund.

INVESTMENT RISK

The Fund allocates its assets among twelve of the Series Company Funds. The
allocation among the different Series Company Funds is designed to achieve the
Fund's investment objective and reduce risk.

INVESTMENT STRATEGY

<TABLE>
<S> <C>
American General International 8%
Value Fund
American General International 7%
Growth Fund
American General Small Cap 3%
Index Fund
American General Small Cap 6%
Value Fund
American General Small Cap 6%
Growth Fund
American General Mid Cap 3%
Index Fund
American General Mid Cap 6%
Value Fund
American General Mid Cap 6%
Growth Fund
American General S&P 500 6%
Index Fund
American General Large Cap 12%
Growth Fund
American General Large Cap 12%
Value Fund
American General Domestic 25%
Bond Fund
</TABLE>

44
<PAGE> 47

CONSERVATIVE GROWTH
LIFESTYLE FUND
Fact Sheet

<TABLE>
<S> <C>
- -------------------------------------------------
Investment Goal CURRENT INCOME AND LOW TO
MODERATE GROWTH THROUGH
INVESTMENTS IN SERIES
COMPANY FUNDS
- -------------------------------------------------
Investment Category LIFESTYLE
</TABLE>

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

INVESTMENT ADVISER

VALIC

PORTFOLIO MANAGER

INVESTMENT OBJECTIVE

Seeks current income and low to moderate growth of capital through investments
in Series Company Funds.

INVESTMENT RISK

The fund allocates its assets among twelve of the Series Company Funds. The
allocation among the different Series Company Funds is designed to achieve the
Fund's investment objective and reduce risk.

INVESTMENT STRATEGY

<TABLE>
<S> <C>
American General International 5%
Value Fund
American General International 5%
Growth Fund
American General Small Cap 2%
Index Fund
American General Small Cap 4%
Value Fund
American General Small Cap 4%
Growth Fund
American General Mid Cap 2%
Index Fund
American General Mid Cap 4%
Value Fund
American General Mid Cap 4%
Growth Fund
American General S&P 500 6%
Index Fund
American General Large Cap 12%
Growth Fund
American General Large Cap 12%
Value Fund
American General Domestic 40%
Bond Fund
</TABLE>

45
<PAGE> 48

TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------

STOCKS -- also called equity securities

If you own a share of stock, you own a part of the company that issued it.
Companies sell stock to get the money they need to grow.

Generally, there are three types of stocks:

Common stock -- Each share of common stock represents a part of the ownership of
the company. The holder of common stock participates in the growth of the
company through increasing stock price and receipt of dividends. If the company
runs into difficulty, the stock price can decline and dividends may not be paid.

Preferred stock -- Each share of preferred stock allows the holder to get a set
dividend before the common stock shareholders receive any dividends on their
shares.

Convertible preferred stock -- A stock with a set dividend which the holder may
exchange for a certain amount of common stock.

All of the Funds except the Lifestyle Funds, the Money Market Fund and the
Domestic Bond Fund, may invest in common, preferred, and convertible preferred
stock in accordance with their investment strategies.

Stocks are not the only type of equity securities. More information about other
types of equity securities in which certain Funds may invest is contained in the
Statement of Additional Information.

BONDS -- also called debt securities

Bonds are sold by governments on the local, state, and federal levels, and by
companies. There are many different kinds of bonds. For example, each bond issue
has specific terms. U.S. Government bonds are guaranteed to pay interest and
principal by the federal government. Revenue bonds are usually only paid from
the revenue of the issuer. An example of that would be an airport revenue bond.
Debentures are a very common type of corporate bond (a bond sold by a company).
Payment of interest and return of principal is subject to the company's ability
to pay. Convertible bonds are corporate bonds that can be exchanged for stock.
The types of bonds that most Funds may invest in include, but are not limited
to: U.S. Government bonds and investment grade corporate bonds (the Mid Cap
Value Fund, the Balanced Fund and the Domestic Bond Fund may also invest in
below investment grade bonds). For a description of investment grade bonds see
"A Word about Risk -- Market Risk" in this prospectus.

Investing in a bond is like making a loan for a fixed period of time at a fixed
interest rate. During the fixed period, the bond pays interest on a regular
basis. At the end of the fixed period, the bond matures and the investor usually
gets back the principal amount of the bond. Fixed periods to maturity are
categorized as short term (generally less than 12 months), intermediate (one to
10 years), and long term (10 years or more). Commercial paper is a specific type
of corporate or short term note. In fact, it's very short term, being paid in
less than 270 days. Most commercial paper matures in 50 days or less.

Bonds rated Ba or B by Moody's and S&P (generally known as lower-medium and
lower-quality bonds) are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and principal in accordance
with the terms of the obligation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by uncertainties or risk
exposures to adverse conditions. Lower-medium and lower-quality bonds may be
more susceptible to real or perceived adverse economic and individual corporate
developments than would investment grade bonds.

For example, a projected economic downturn or the possibility of an increase in
interest risk bond prices because such an event might lessen the ability of
highly leveraged high yield issuers to meet their principal and interest payment
obligations, meet projected business goals, or obtain additional financing. In
addition, the secondary trading market for lower-medium and lower-quality bonds
may be less liquid than the market for investment grade bonds. This potential
lack of liquidity may make it more difficult to accurately value certain of
these lower-grade portfolio securities.

ASSET-BACKED SECURITIES

Asset-backed securities are bonds or notes that are normally supported by a
specific property. If the issuer fails to pay the interest or return the
principal when the bond matures, then the issuer must give the property to the
bondholders or noteholders. All of the Funds in this prospectus, except the
Lifestyle Funds and the Mid Cap Value Fund, may invest in asset-backed
securities. Examples of assets supporting asset-backed securities include credit
card receivables, retail installment loans, home equity loans, auto loans, and
manufactured housing loans.

ISSUED means the
Company (ISSUER) sold it
originally to the public.

For more information
about BONDS AND RATINGS
OF BONDS, see the
Statement of Additional
Information.

For more information about
ASSET-BACKED SECURITIES
see the Statement of
Additional Information.

46
<PAGE> 49
- --------------------------------------------------------------------------------

LOAN PARTICIPATIONS

A loan participation is an investment in a loan made to a U.S. company that is
secured by the company's assets. The assets must be, at all times, worth enough
money to cover the balance due on the loan. Major national and regional banks
make loans to companies and then sell the loans to investors. These banks don't
guarantee the companies will pay the principal and interest due on the loans.

All the Funds in this prospectus, other than the Lifestyle Funds and the Mid Cap
Value Fund, may invest in loan participations.

VARIABLE AMOUNT DEMAND MASTER NOTES

The Large Cap Value Fund, the Mid Cap Value Fund, the Balanced Fund and the
Domestic Bond Fund may invest in variable amount demand master notes. Variable
amount master demand notes are unsecured obligations that are redeemable upon
demand and are typically unrated. These instruments are issued pursuant to
written agreements between their issuers and holders. The agreements permit the
holders to increase (subject to an agreed maximum) and the holders and issuers
to decrease the principal amount of the notes, and specify that the rate of
interest payable on the principal fluctuates according to an agreed formula.

STRUCTURED SECURITIES

The value of the principal of and/or interest on such securities is determined
by reference to changes in the value of specific currencies, interest rates,
commodities, indices or other financial indicators (the "Reference") or the
relative change in two or more References. The interest rate or the principal
amount payable upon maturity or redemption may be increased or decreased
depending upon changes in the applicable Reference. The terms of the structured
securities may provide that in certain circumstances no principal is due at
maturity and, therefore, result in the loss of a Fund's investment.

The Balanced Fund and the Domestic Bond Fund may invest in structured
securities.

REAL ESTATE SECURITIES

All of the Funds in this prospectus, except the Lifestyle Funds and the Domestic
Bond Fund, may invest in real estate securities. Real estate securities are
securities issued by companies that invest in real estate or interests therein.
Certain Funds also may invest in real estate investment trusts ("REITs"). REITs
are generally publicly traded on the national stock exchanges and in the
over-the-counter market and have varying degrees of liquidity. More information
about REITs and real estate securities generally is contained in the Statement
of Additional Information.

ILLIQUID AND RESTRICTED SECURITIES

An illiquid security is one that may not be frequently traded. If it must be
sold quickly, it may have to be sold at a loss. For example, if a fund owns a
stock that is not sold very often and the fund needs to sell this stock quickly,
it may have to offer the investment at a low price for someone to buy it.

A restricted security is one that has not been registered with the SEC and
therefore can't be sold in the public market. Restricted securities do include
securities eligible for resale under Rule 144A of the Securities Act of 1933.
Some Rule 144A securities may be liquid as determined by VALIC or a Sub-adviser.
For more information about Rule 144A securities see the Statement of Additional
Information. These investments can be very risky because the Fund's ability to
sell a restricted stock is very limited.

All the Funds, except the Lifestyle Funds, may buy illiquid and restricted
securities, but are restricted as to how much money they may invest in them. See
"Limitations" below.

DEPOSITORY RECEIPTS

All of the Funds in this prospectus, except the Lifestyle Funds, may invest in
ADRs. ADRs are certificates issued by a United States bank or trust company and
represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a United States bank.

EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank. We
consider ADRs, EDRs and GDRs to be foreign securities. The International Growth
Fund, the Small Cap Growth Fund, the International Value Fund and the MidCap
Value Fund may invest in EDRs and/or GDRs. The Large Cap Growth Fund may invest
in GDRs but may not invest in EDRs.

For more information
about LOAN PARTICIPANTS
see the Statement
of Additional Information.

For more information
about ILLIQUID AND RESTRICTED
SECURITIES see the
Statement of Additional
Information.

For more information
about REAL ESTATE
SECURITIES, see the Statement
of Additional Information.

47
<PAGE> 50
- --------------------------------------------------------------------------------

INVESTMENT FUNDS

Some countries have laws and regulations that currently preclude direct foreign
investment in the securities of their companies. However, indirect foreign
investment in the securities of companies listed and traded on the stock
exchanges in these countries is permitted through investment funds which have
been specifically authorized. The International Growth Fund, the Large Cap
Growth Fund, the Small Cap Growth Fund, the International Value Fund and the Mid
Cap Value Fund may invest in investment funds.

FOREIGN CURRENCY

All of the Funds, except the Lifestyle Funds, the S&P 500 Index Fund, the Mid
Cap Index Fund, the Small Cap Index Fund, the Large Cap Value Fund, the Small
Cap Value Fund, the Large Cap Growth Fund, the Mid Cap Growth Fund, the Small
Cap Growth Fund, the Balanced Fund, the Domestic Bond Fund and the Money Market
Fund, may buy and sell foreign currencies the same way they buy and sell other
investments. Funds buy foreign currencies when they believe the value of the
currency will increase. If it does increase, they sell the currency for a
profit. If it decreases they will experience a loss. Generally, the
International Growth Fund and the International Value Fund may also buy and sell
foreign currencies to settle transactions for foreign securities bought or sold
in the Fund.

The Funds, except the Lifestyle Funds, the S&P 500 Index Fund, the Mid Cap Index
Fund, the Small Cap Index Fund, the Large Cap Value Fund, the Small Cap Value
Fund, the Large Cap Growth Fund, the Mid Cap Growth Fund, the Small Cap Growth
Fund, the Balanced Fund, the Domestic Bond Fund the Money Market Fund, may
purchase forward foreign currency exchange contracts to protect against a
decline in the value of the U.S. dollar, to effect cross-hedges involving two
non-U.S. currencies, or for, settlement purposes.

WHEN-ISSUED SECURITIES

When-issued securities are those investments that have been announced by the
issuer and will be on the market soon. The Funds negotiate the price with a
broker before it goes on the market. If the security ends up selling on the
market at a lower price than negotiated, the Funds may have a loss. If it sells
at a higher price, the Funds may have a profit.

All of the Funds, other than the Lifestyle Funds, the Small Cap Growth Fund, the
Money Market Fund and the Mid Cap Value Fund, may buy when-issued securities in
accordance with their investment strategy.

MONEY MARKET SECURITIES

All of the Funds may invest part of their assets in high quality money market
securities payable in U.S. dollars. A listing of the types of money market
securities in which the Money Market Fund may invest in is in that Fund's Fact
Sheet. 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-adviser.

These high quality money market securities may include:

- Cash and cash equivalents

- Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities

- Certificates of deposit and other obligations of domestic banks having total
assets in excess of $1 billion

- Commercial paper sold by corporations and finance companies

- Corporate debt obligations with remaining maturities of 13 months or less

- Repurchase agreements, money market securities of foreign issuers if payable
in U.S. dollars, asset-backed securities, loan participations, and
adjustable rate securities

INVESTMENT COMPANIES

Certain of the Funds may invest in the securities of other open-end or
closed-end investment companies. Under the 1940 Act, a Fund may invest no more
than 5% of its total assets in the securities of any one investment company nor
may it acquire more than 3% of the voting securities of any other investment
company. A Fund will indirectly bear its proportionate share of any management
fees paid by an investment company in which it invests.

The International Growth Fund, the Large Cap Growth Fund, the Large Cap Value
Fund, the Mid Cap Value Fund, the Small Cap Growth Fund, and the Small Cap Value
Fund each may invest in investment company securities in accordance with its
investment objectives.

DERIVATIVES

Unlike stocks and bonds that represent actual ownership of that stock or bond,
derivatives are investments which "derive" their value from securities issued by
a company, government, or government agency. In certain cases, derivatives may
be purchased for non-speculative investment purposes or to protect ("hedge")
against a change in the price of the underlying security. There are some
investors who take higher risk

For more information on put
and call options AND FINANCIAL
FUTURES CONTRACTS AND OPTIONS, see
the Statement of Additional
information.

For more information
about WHEN-ISSUED SECURITIES,
see the Statement
of Additional Information.

For more information about
MONEY MARKET SECURITIES OF
FOREIGN ISSUERS the Funds
may purchase, see the
Statement of Additional
Information.

For more information
about FOREIGN CURRENCY
EXCHANGE TRANSACTIONS, see
the Statement of
Additional Information.

48
<PAGE> 51
- --------------------------------------------------------------------------------

("speculate") and buy derivatives to profit from a change in price of the
underlying security. We may purchase derivatives to hedge the investment
portfolios and to earn additional income in order to help achieve the Funds'
objectives. Generally, we do not buy derivatives to speculate.

The Funds, other than the Lifestyle Funds, the Money Market Fund, the Domestic
Bond Fund, the Balanced Fund, the Mid Cap Growth Fund and the International
Growth Fund may buy and sell derivatives, such as futures and/or options.

Options

An option is the right to buy or sell any type of investment for a preset price
over a specific period of time.

Call Option

For example, you can buy an option from Mr. Smith that gives you the right to
buy 10 shares of stock X at $25.00 per share anytime between now and six weeks
from now. You believe stock X will be selling for more than $25.00 per share
between now and then. Mr. Smith believes it won't be. If you exercise this
option before it expires, Mr. Smith must sell you 10 shares of stock X at $25.00
per share.

On the other hand, you can sell an option to Mr. Smith that gives him the right
to buy 10 shares of stock X at $25.00 per share anytime between now and six
weeks from now. You believe stock X will be selling for less than $25.00 per
share between now and then. Mr. Smith believes it won't be. If he exercises this
option before per share anytime between now and six weeks from now. In this
example, you believe stock X will be selling for less than $25.00 per share
between now and then. Mr. Smith thinks it will be selling for more.

Put Option

Or, you can buy an option from Mr. Smith that gives you the right to sell him 10
shares of X stock at $25.00 per share anytime between now and six weeks from
now. In this example, you believe stock X will be selling for less than $25.00
per share between now and then. Mr. Smith thinks it will be selling for more.

Or, you can sell an option to Mr. Smith that gives him the right to sell to you
10 shares of X stock at $25.00 per share anytime between now and six weeks from
now. In this example, he believes stock X will be selling for less than $25.00
per share between now and then.

The Funds use stock and bond futures to invest cash and cash equivalents. When
certain levels are reached the Fund will sell the futures and buy stocks or
bonds.

All of the Funds except the Lifestyle Funds, the Money Market Fund, the Domestic
Bond Fund, the Balanced Fund and the International Growth Fund may invest in one
or more of the following types of futures and options:

- Write exchange traded covered put and call options on securities and stock
indices.

- Purchase exchange traded put and call options on securities and stock
indices.

- Purchase and sell exchange traded financial futures contracts.

- Write covered call options and purchase exchange traded put and call options
on financial futures contracts.

- Write covered call options and purchase non-exchange traded call and put
options on financial futures contracts.

The International Value Fund, the Large Cap Value Fund and the Small Cap Growth
Fund may write and purchase put and call options on securities and stock indices
that are not traded on an exchange.

SWAP AGREEMENTS

Swap agreements are contracts between parties in which one party agrees to make
payments to the other party based on the change in market value of a specified
index or asset. In return, the other party agrees to make payments to the first
party based on the return of a different specified index or asset. Additional
information about swap agreements is contained in the Statement of Additional
Information.

The Small Cap Value Fund, the Small Cap Growth Fund and the Small Cap Index Fund
may enter into swap agreements.

WARRANTS AND RIGHTS

Warrants and rights are instruments which entitle the holder to buy underlying
equity securities at a specific price for a specific period of time. A warrant
tends to be more volatile than its underlying securities and ceases to have
value if it is not exercised prior to its expiration date. Changes in the value
of a warrant do not necessarily correspond to changes in the value of its
underlying securities.

The International Growth Fund, the Large Cap Value Fund, the Large Cap Growth
Fund, the Small Cap Value Fund, the International Value Fund, the Balanced Fund,
the Domestic Bond Fund, the Small Cap Growth Fund and the Small Cap Index Fund
are authorized to use warrants or rights.

For more information about
SWAP AGREEMENTS, see the
Statement of Additional
Information.

49
<PAGE> 52
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENTS

A repurchase agreement requires the seller of the security to buy it back at a
set price at a certain time. If a Fund enters into a repurchase agreement, it is
really making a short term loan (usually for one day to one week). The Funds may
enter into repurchase agreements only with well-established securities dealers
or banks that are members of the Federal Reserve System. All the Funds in this
prospectus may invest in repurchase agreements.

The risk in a repurchase agreement is the failure of the seller to be able to
buy the security back. If the value of the security declines, the Fund may have
to sell at a loss.

A repurchase agreement of more than 7 days duration is illiquid. A discussion of
repurchase agreements, illiquid securities and Fund limitations is contained in
the Statement of Additional Information.

A WORD ABOUT RISK

There are five basic types of investment risk you may be subject to:

- Market Risk

- Credit (Financial) Risk

- Interest Rate Risk

- Risk Associated with Foreign Securities

- Manager Risk (Lifestyle Funds only)

Generally stocks are considered to be subject to market risk, while debt
securities, such as U.S. government bonds and money market securities are
subject to interest rate risk. Other debt securities, such as corporate bonds,
involve both interest rate and credit (financial) risk. Lastly, risks associated
with foreign securities can involve political, currency and limited information
risks. Each of these types of investment risks is discussed below.

Market Risk

Market risk refers to the 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 to fall in price.
When this happens, even though a company is experiencing growth in profits, the
price of its stock could fall.

Credit (Financial) Risk

Credit risk refers to the risk that the issuer of a bond may default or be
unable to pay interest or principal due on a bond.

To help the Funds' Investment Adviser or Sub-advisers decide which U.S.
corporate and foreign bonds to buy, they rely on Moody's and S&P (two nationally
recognized bond rating services), and on VALIC's and/or a Sub-adviser's own
research. This research lowers the risk of buying a bond of a company that may
not pay the interest and principal on the bond.

Certain of the Funds in this prospectus may buy bonds that are rated as
investment grade. There are four different levels of investment grade, from AAA
to BBB; see Description of Corporate Bond Ratings in the Statement of Additional
Information. All bonds with these ratings are considered to have adequate
ability to pay interest and principal.

All of the Funds in this prospectus may buy bonds issued by the U.S. Government.
The U.S. Government guarantees it will always pay principal and interest.

Interest Rate Risk

Interest rate risk refers to the risk that fluctuations in interest rates may
affect the value of interest paying securities in a Fund. If a fund sells a bond
before it matures, it may lose money, even if the bond is guaranteed by the U.S.
Government. Say, for example, a fund bought an intermediate government bond last
year that was paying interest at a fixed rate of 6%. Now, intermediate
government bonds are paying interest at a rate of 7%. If the fund wants to sell
the bond paying 6%, it will have to sell it at a discount (and realize a loss)
to attract buyers because they can buy new bonds paying 7% interest.

Manager Risk

The Lifestyle Funds, which do not hold securities directly, are subject to
manager risk, which is the possibility that the portfolio managers of the
underlying Funds may fail to execute the underlying Funds' investment strategies
effectively. As a result, the Lifestyle Funds may fail to meet their stated
objectives.

Risk Associated with Foreign Securities

Certain Funds may, subject to limits stated in the Fund's Fact Sheet, invest in
foreign securities including ADRs and securities of companies domiciled in
emerging market countries. A foreign security is a security issued by an entity
domiciled or incorporated outside of the U.S.

Among the principal risks of owning foreign securities:

Political risk -- the chance of a change in government and the assets of the
company being taken away.

Currency risk -- a change in the value of the foreign currency compared to the
dollar. If the foreign currency declines in value, your investment valued in
U.S. dollars will decline even if the value of the foreign stock or bond is
unchanged.

For more information about
REPURCHASE AGREEMENTS, see the
Statement of Additional
Information.

For more information about
FOREIGN SECURITIES AND EMERGING
MARKETS, see the Statement
of Additional Information.

50
<PAGE> 53
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Limited information -- foreign companies generally are not regulated to the
degree U.S. companies are and may not report all of the information we are used
to getting. To minimize taxes they may not report some income or they may report
higher expenses.

INVESTMENT PRACTICES

Limitations

Each Fund has limitations on the percentage of its assets that it may allocate
to certain investments.

These limits are determined by the Fund's investment objectives and risk level.

For example, the S&P 500 Fund's investment goal is growth through investments
tracking the S&P 500 Index, an index that includes stocks of domestic and
foreign companies. As a result, this Fund may invest no more than 20% of its
assets in stocks that are not part of the S&P 500 Index.

Some Funds are restricted from buying certain types of investments altogether.
For example, the Money Market Fund may not invest in futures and options.

Each Fund's limitations are shown in the Investment Strategy section of its Fact
Sheet.

Lending Portfolio Securities

Each Fund, except the Lifestyle Funds, may lend its investment securities to
broker-dealers and other financial institutions to earn more money for the Fund.
Assets are placed in a special account by the borrower to cover the market value
of the securities on loan. The assets serving as collateral for the loan are
valued daily.

A risk of lending portfolio investments is that there may be a delay in the Fund
getting its investments back when a loaned security is sold.

The Funds will only make loans to broker-dealers and other financial
institutions approved by its Custodian, as monitored by VALIC and authorized by
the Board of Trustees.

For more information about
LENDING PORTFOLIO SECURITIES, see
the Statement of Additional Information.

For more information about
INVESTMENT LIMITATIONS, see the
Statement of Additional
Information.

51
<PAGE> 54

ABOUT THE SERIES COMPANY
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SERIES COMPANY SHARES

The Series Company is an open-end mutual fund and may offer shares of the Funds
for sale at any time. However, the Series Company offers shares of the Funds
only to registered and unregistered separate accounts of VALIC, and its
affiliates, or employee thrift plans maintained by VALIC or American General
Corporation.

The Series Company was organized on May 6, 1998, under the laws of the state of
Delaware as a business trust, and presently is authorized to sell 18 series.
Each of these series is authorized to issue an unlimited number of shares of
beneficial interest, par value $0.01 per share.

The Series Company does not contemplate holding regular meetings of shareholders
to elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Series Company will assist such
holders in communicating with other shareholders of the Series Company to the
extent required by the 1940 Act. More detailed information concerning the Series
Company is set forth in the Statement of Additional Information.

The Series Company's Declaration of Trust provides that no Trustee, officer or
shareholder of the Series Company shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or liability of the Series Company but the assets of the Fund only
shall be liable.

As a participant, you do not directly buy shares of the Funds that make up the
Series Company. Instead, you buy units in either a registered or unregistered
separate account of VALIC or of its affiliates. When you buy these units, you
specify which Funds you want the separate account to invest your money in. The
separate account, in turn, buys the shares of the Funds according to your
instructions. See your contract prospectus for more information on the separate
account associated with your contract.

When the separate accounts buy, sell, or transfer shares of the Funds, they do
not pay any charges related to these transactions.

As distributor, VAMCO sells shares of the Funds to the separate accounts. VAMCO
is a wholly owned subsidiary of VALIC and acts as a distributor under an
agreement it has with the Series Company. VAMCO does not charge the Series
Company or the separate accounts for its services. Also, VAMCO is not required
to sell a minimum number of shares to the separate accounts.

VAMCO sends orders to buy, sell or transfer shares to the Series Company's
transfer agent daily. The price of any share affected by the request is the next
net asset value calculated after order is received.

For more information on how to participate, see your contract prospectus.

NET ASSET VALUE OF THE SERIES COMPANY SHARES

How Net Asset Value is Calculated

Here is how the Series Company calculates the net asset value of each Fund's
shares:

<TABLE>
<S> <C> <C> <C>
Step 1:
Total value of the Fund's
assets* (including money The Fund's
owed to the fund but not yet Total Net Asset
collected) = Value
- - The Fund's liabilities
(including money owed by the
Fund but not yet paid)

Step 2:
The Fund's total net asset
value (from Step 1)
/ The total number of the
Fund's shares that are NET ASSET VALUE
outstanding. = PER SHARE
</TABLE>

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

* The Series Company uses the fair market value of Fund's
investments to calculate the Fund's total value. However, it uses the
amortized cost method to determine the values of all the Money Market Fund's
investments and of any other Fund's short-term securities maturing within 60
days. The amortized cost method approximates fair market value.

If a Fund's portfolio includes investments that are not sold often or are not
sold on any exchanges, the Series Company's Board of Trustees or its delegate
will, in good faith, estimate fair market value of these investments.

When Net Asset Value is Calculated

The Series Company calculates the net asset value of each Fund's shares at
approximately 4pm EST each day the New York Stock Exchange is open. (The New
York Stock Exchange is open Monday through Friday but is closed on certain
federal and other holidays.)

Through VAMCO, the separate accounts send orders to the Series Company to buy,
sell, or transfer shares based on requests received from participants.

DIVIDENDS AND CAPITAL GAINS

Dividends from Net Investment Income

Net investment income generally includes stock dividends received and bond
interest earned less expenses paid by the Fund. Each Fund pays dividends from
net investment income occasionally. Dividends from net investment income are
automatically reinvested for you into additional shares of the Fund. Each Fund,
except the Money Market Fund pays dividends

THE VARIABLE ANNUITY
MARKETING COMPANY
(VAMCO) acts as the
Series Company's
distributor.

52
<PAGE> 55
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quarterly. The Money Market Fund pays dividends daily.

Distributions from Capital Gains

When a Fund sells a security for more than it paid for that security, a capital
gain results. Once a year, each Fund pays distributions from capital gains, as
long as total capital gains exceed total capital losses. Distributions from
capital gains are automatically reinvested for you into additional shares of the
Fund.

DIVERSIFICATION

Each Fund's diversification policy limits the amount that the Fund may invest in
certain securities. Each Fund's diversification policy is also designed to
comply with the diversification requirements of the Internal Revenue Code (the
"Code") as well as the 1940 Act.

All of the Funds, except the Lifestyle Funds, may, with respect to 75% of their
total assets, invest up to 5% of their total assets in a single issuer. An
issuer, or "company" does not include the U.S. Government or agencies of the
U.S. Government according to the Code and the 1940 Act. For diversification
purposes, repurchase agreements are considered to be issued by the U.S.
Government if backed by U.S. Government securities. Also, these Funds may not
own more than 10% of the voting securities of a company.

The Lifestyle Funds are "non-diversified" under the 1940 Act. This means that
each Fund can invest more of its assets in fewer issuers and for this reason may
be riskier than the other Funds. These Funds may invest up to 25% of their total
assets in a single issuer as long as those investments representing over 5% of
total assets in one issuer do not exceed 50% of total assets of a
Fund. The remaining 50% of total assets may not include more than 5% of total
assets in one issuer.

Also, the Money Market Fund may not invest more than 5% of its total assets in
any company rated as "second tier" by a national rating service (as described in
Types of Investments).

TAXES

By paying out all earnings as described in the Dividends and Capital Gains
section above and by complying with the diversification requirements under the
Code, each Fund expects to qualify as a Registered Investment Company (RIC)
under Subchapter M of the Code. By qualifying as a RIC the Fund will not have to
pay federal income taxes.

VOTING RIGHTS

One Vote Per Share

Each outstanding share has one vote on all matters that shareholders vote on. As
a participant, you vote on these matters indirectly by voting your units. The
way you vote your units as a participant depends on your contract. See your
contract prospectus for specific details.

When a matter comes up for vote, the separate account will vote its shares in
the same proportion as the unit votes it actually receives. If VALIC determines
that it may, under the current interpretation of the 1940 Act, vote shares
directly instead of voting through its units, it may decide to vote that way.

Shareholder Meetings

Delaware law does not require the Series Company to hold regular, annual
shareholder meetings. But, the Series Company must hold shareholder meetings on
the following matters:

- to approve certain agreements as required by the 1940 Act;

- to change fundamental investment objectives in the Diversification section
and to change fundamental investment restrictions, above;

- to fill vacancies on the Series Company's Board of Trustees if the
shareholders have elected less than a majority of the Trustees.

Shareholder Communications

The Series Company will assist in shareholder communications.

See the Statement of
Additional information and
your contract prospectus for
further tax discussions. You
should also consult your tax
advisor before investing.

53
<PAGE> 56
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YEAR 2000 RISKS

Like insurance companies, financial and business organizations around the world,
the Series Company Funds could be adversely affected if the computer systems
used by the Series Company, other service providers and entities with computer
systems that are linked to the Series Company's records do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly known as the "Year 2000 Issue." The Series Company is taking
steps that it believes are reasonably designed to address the Year 2000 Issue
with respect to the computer systems that it uses and to obtain satisfactory
assurances that comparable steps are being taken by each of the Series Company's
major service providers. The Series Company expects to be substantially complete
with its computer systems projects to address the Year 2000 Issue by the end of
1998. However, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Series Company Funds.

REPORTS

The Series Company sends Annual Reports containing audited financial statements,
Semi-Annual Reports containing unaudited financial statements, and proxy
materials to contract owners or participants. Also, the Series Company includes
an Annual Report with each Statement of Additional Information it sends out.

If you have any questions about the Annual or Semi-Annual Reports, call or write
to the Series Company at the phone number / address found on the cover page of
this prospectus.

54
<PAGE> 57

Please tear off, complete and return the form below to Suite A3-01,
Communications Unit, The Variable Annuity Life Insurance Company, 2929 Allen
Parkway, Houston, Texas 77019 to order a Statement of Additional Information for
the Company. A Statement of Additional Information may also be ordered by
calling 1-800-44-VALIC.

................................................................................

<TABLE>
<S> <C>
___________________________________________________________________________________________________________________________

Please send me a free copy of the Statement of Additional Information for American General Series Portfolio Company 3.

Name: GA #:
------------------------------------------- --------------------------------------------------

Address: Policy #:
--------------------------------------- ---------------------------------------------

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

Social Security Number:
---------------------------
___________________________________________________________________________________________________________________________
</TABLE>
<PAGE> 58

(This page intentionally left blank)
<PAGE> 59

TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information and History..................... 4
Performance and Yield Information................... 4
Average Annual Total Return..................... 4
Portfolio Total Return.......................... 4
Index Total Return.............................. 5
Seven Day Yields................................ 5
30 Day Current Yield............................ 5
Performance Returns............................. 6
Fundamental Investment Restrictions................. 7
American General S&P 500 Index Fund............. 7
American General Mid Cap Index Fund............. 9
American General Small Cap Index Fund........... 10
American General International Growth Fund...... 13
American General Large Cap Growth Fund.......... 14
American General Mid Cap Growth Fund............ 15
American General Small Cap Growth Fund.......... 16
American General International Value Fund....... 16
American General Large Cap Value Fund........... 17
American General Mid Cap Value Fund............. 18
American General Small Cap Value Fund........... 19
American General Socially Responsible Fund...... 22
American General Balanced Fund.................. 23
American General Domestic Bond Fund............. 23
American General Money Market Fund.............. 24
American General Growth Lifestyle Fund.......... 25
American General Moderate Growth Lifestyle
Fund.......................................... 26
American General Conservative Growth Lifestyle
Fund.......................................... 27
Investment Practices................................ 28
Repurchase Agreements........................... 28
Lending Portfolio Securities.................... 28
Reverse Repurchase Agreements................... 29
Convertible Securities.......................... 29
Foreign Securities.............................. 29
Emerging Markets................................ 30
Foreign Currency Exchange Transactions.......... 31
Standard and Poor's Depository Receipts......... 31
When-Issued Securities.......................... 31
Debt Securities................................. 31
Zero Coupon Bonds............................... 32
Real Estate Securities and Real Estate
Investment Trusts............................. 32
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Warrants........................................ 32
Swap Agreements................................. 33
Eurodollar Obligations.......................... 33
Asset-Backed Securities......................... 33
Mortgage-Backed Securities...................... 34
Loan Participations............................. 34
Adjustable Rate Securities...................... 35
Illiquid Securities............................. 35
Rule 144A Securities............................ 35
Options on Securities and Securities Indices.... 36
Writing Covered Call and Put Options and
Purchasing Call and Put Options............... 37
Financial Futures Contracts..................... 38
Options on Financial Futures Contracts.......... 40
Certain Additional Risks of Options and
Financial Futures Contracts................... 40
Limitations..................................... 42
Short Sales and Short Sales Against the Box..... 42
Money Market Securities of Foreign Issuers...... 42
Investment Adviser.................................. 43
Investment Sub-Advisers............................. 44
Portfolio Transactions and Brokerage................ 46
Offering, Purchase, and Redemption of Fund Shares... 48
Determination of Net Asset Value.................... 49
Calculation of Yield for the Money Market Fund...... 50
Taxation............................................ 51
General......................................... 51
Section 817(h) of the Code...................... 54
Other Information................................... 55
Shareholder Reports............................. 55
Voting and Other Rights......................... 55
Custody of Assets............................... 55
Index Funds..................................... 56
Description of Corporate Bond Ratings........... 57
Description of Commercial Paper Ratings......... 58
Independent Auditors............................ 58
Trustees and Officers............................... 59
Financial Statements................................ 62
</TABLE>
<PAGE> 60

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INVESTMENT ADVISER:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019

INVESTMENT SUB-ADVISERS:
Bankers Trust Company
130 Liberty St.
New York, New York 10006

Brown Capital Management, Inc.
809 Cathedral Street
Baltimore, Maryland 21201

Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071

Fiduciary Management Associates, Inc.
55 West Monroe Street
Suite 2550
Chicago, Illinois 60603

Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004

J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Jacobs Asset Management
200 East Broward Boulevard
Suite 1920
Fort Lauderdale, Florida 33301

Neuberger&Berman Management, Inc.

605 Third Avenue
Second Floor
New York, New York 10158-0180
State Street Global Advisors
2 International Place
Boston, Massachusetts 02110
DISTRIBUTOR:
The Variable Annuity Marketing Company
2929 Allen Parkway
Houston, TX 77019
CUSTODIAN:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INDEPENDENT AUDITORS:
Ernst & Young LLP
1221 McKinney Street
Houston, Texas 77010
TRANSFER AND SHAREHOLDER SERVICE AGENT:
Boston Financial Data Services
2 Heritage Drive
Quincy, Massachusetts 02071

TRUSTEES AND OFFICERS

<TABLE>
<CAPTION>
TRUSTEES OFFICERS
-------- --------
<S> <C> <C>
Thomas L. West, Jr. Thomas L. West, Jr. Chairman
Craig R. Rodby John A. Graf President
John A. Graf Craig R. Rodby Vice Chairman
Norman Hackerman Michael G. Atnip Executive Vice President
John William Lancaster Joe C. Osborne Executive Vice President
F. Robert Paulsen Norman Jaskol Vice President and Chief Investment Officer
R. Miller Upton Teresa S. Moro Vice President and Investment Officer
Ben H. Love John W. Mossbarger Vice President and Investment Officer
William Trimbur, Vice President and Investment Officer
Jr. Vice President
Brent C. Nelson Vice President and Secretary
Cynthia A. Toles Vice President and Assistant Secretary
Nori L. Gabert Treasurer
Gregory R. Seward Controller
Kathryn A. Pearce Assistant Treasurer
Earl E. Allen, Jr.
</TABLE>

Printed Matter

Printed in U.S.A.

VA 10832 VER. 7/98 Recycled Paper LOGO

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