<PAGE> 1
AMERICAN GENERAL SERIES PORTFOLIO COMPANY 3
SUPPLEMENT DATED APRIL 20, 1999
TO PROSPECTUS DATED SEPTEMBER 21, 1998
The section of the Prospectus entitled "Expense Summary" is replaced in its
entirety:
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' anticipated expenses for the first year of operation on an
annualized basis.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES:
(after expense reimbursements, as a percentage of net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL LARGE CAP MID CAP SMALL CAP INTERNATIONAL LARGE CAP
GROWTH FUND GROWTH FUND GROWTH FUND GROWTH FUND VALUE FUND VALUE FUND
------------- ----------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management Fee 0.90% 0.55% 0.65% 0.85% 1.00% 0.50%
Other Expenses(b) 0.71% 0.58% 0.64% 0.62% 0.70% 0.58%
----- ----- ----- ----- ----- -----
Total Fund Expenses: 1.61% 1.13% 1.29% 1.47% 1.70% 1.08%
Expense reimbursement (0.46)% (0.27)% (0.50)% (0.31)% (0.66)% (0.27)%
----- ----- ----- ----- ----- -----
Total Fund expenses after reimbursement 1.15% 0.86% 0.79% 1.16% 1.04% 0.81%
===== ===== ===== ===== ===== =====
<CAPTION>
SOCIALLY
MID CAP SMALL CAP RESPONSIBLE
VALUE FUND VALUE FUND FUND
---------- ---------- -----------
<S> <C> <C> <C>
Management Fee 0.75% 0.75% 0.25%
Other Expenses(b) 0.64% 0.63% 0.87%
----- ----- -----
Total Fund Expenses: 1.39% 1.38% 1.12%
Expense reimbursement (0.34)% (0.40)% (0.56)%
----- ----- -----
Total Fund expenses after reimbursement 1.05% 0.98% 0.56%
===== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(after expense reimbursements, as a percentage of net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MODERATE
MONEY GROWTH GROWTH
BALANCED HIGH YIELD STRATEGIC DOMESTIC CORE MARKET LIFESTYLE LIFESTYLE
FUND BOND FUND BOND FUND BOND FUND BOND FUND FUND FUND(A) FUND(A)
-------- ---------- --------- --------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee 0.80% 0.70% 0.60% 0.60% 0.50% 0.25% 0.10% 0.10%
Other Expenses(b) 0.80% 0.83% 0.90% 0.57% 0.86% 0.86% --% --%
----- ----- ----- ----- ----- ----- ----- -----
Total Fund Expenses: 1.60% 1.53% 1.50% 1.17% 1.36% 1.11% 0.10% 0.10%
Expense reimbursement (0.78)% (0.54)% (0.61)% (0.39)% (0.56)% (0.55)% --% --%
----- ----- ----- ----- ----- ----- ----- -----
Total Fund expenses after reimbursement 0.82% 0.99% 0.89% 0.78% 0.80% 0.56% 0.10% 0.10%
===== ===== ===== ===== ===== ===== ===== =====
<CAPTION>
CONSERVATIVE
GROWTH
LIFESTYLE
FUND(A)
------------
<S> <C>
Management Fee 0.10%
Other Expenses(b) --%
-----
Total Fund Expenses: 0.10%
Expense reimbursement --%
-----
Total Fund expenses after reimbursement 0.10%
=====
</TABLE>
(a) The Growth Lifestyle Fund, the Moderate Growth Lifestyle Fund and the
Conservative Growth Lifestyle Fund seek to accomplish their respective
objectives by investing primarily in a number of other Series Company Funds
("Underlying Series Company Funds"). Each Lifestyle Fund will bear
indirectly its pro rata share of the fees and expenses incurred by the
Underlying Series Company Funds in which the Lifestyle Fund is invested.
(b) Other Expenses, which include custody, accounting, reports to shareholders,
audit, legal, administrative, recordkeeping and other miscellaneous
services provided to the Funds, are based on estimated amounts for the
current fiscal year.
- --------------------------------------------------------------------------------
TOTAL COMBINED OPERATING EXPENSES(a)
(including indirect expenses) (after expense reimbursements, as a percentage of
net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED TOTAL COMBINED
OPERATING EXPENSES(B)
------------------------
<S> <C>
Growth Lifestyle Fund 1.09%
Moderate Growth Lifestyle Fund 1.03%
Conservative Growth Lifestyle Fund 1.00%
</TABLE>
(a) Estimated Total Combined Operating Expenses of each Lifestyle Fund is based
on the Total Fund Operating Expenses of the Underlying Series Company Funds
and the Lifestyle Funds, assuming each Lifestyle Fund's projected asset
allocation among the Underlying Series Company Funds is maintained.
(b) Reflects estimated total average weighted combined operating expenses.
The purpose of the expense tables above is to assist investors in understanding
the various costs and expenses that a shareholder of a Fund will bear directly
or indirectly. Each Fund's annual operating expenses do not reflect expenses
imposed by separate accounts of VALIC through which an investment in each Fund
is made or their related contracts. A separate account's expenses are fully
explained in your contract prospectus.
<PAGE> 2
All Funds
Effective May 1, the Fund's distributor is being changed from The Variable
Annuity Marketing Company (VAMCO) to A.G. Distributors, Inc., an affiliate of
VALIC. All references to VAMCO in this prospectus should instead refer to A.G.
Distributors, Inc.
Craig R. Rodby has resigned as a Trustee and Officer of the Funds with the size
of the Board being reset at 11. Nine of the Trustees are independent and two are
VALIC employees.
On January 19, 1999, the Board of Trustees of the Series Company approved
certain changes to the Funds' investment restrictions with respect to illiquid
and restricted securities. Specifically, the section entitled "Illiquid and
Restricted Securities" under "Types of Investments" is re-titled and replaced in
its entirety with the following:
ILLIQUID SECURITIES
An illiquid security is one that may not be frequently traded or cannot be
disposed of promptly within seven days and in the usual course of business
without taking a materially reduced price. Illiquid securities include, but
are not limited to, time deposits and repurchase agreements not maturing
within seven days and restricted securities.
A restricted security is one that has not been registered with the SEC and,
therefore, cannot be sold in the public market. Securities eligible for sale
under Rule 144A and commercial paper offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended, are not deemed by VALIC or the
Sub-adviser to be illiquid solely by reason of being restricted. Instead,
VALIC or the Sub-adviser will determine whether such securities are liquid
based on trading markets and pursuant to guidelines adopted by the Series
Company's Board of Trustees. If VALIC or the Sub-adviser concludes that a
security is not liquid, that investment will be included within the Fund's
limitation on illiquid securities.
All the Funds, except the Lifestyle Funds, may buy illiquid securities, but
are restricted as to how much money they may invest in them.
The related sidebar should only reference illiquid securities.
In the "Fact Sheets" for the Large Cap Value Fund, Mid Cap Value Fund, Socially
Responsible Fund, and Money Market Fund, please disregard all references to
restricted securities under "Investment Strategy." The stated limit should refer
to illiquid securities only.
American General Balanced Fund
R. Bryan Jacoboski is no longer a portfolio manager for the Fund. All of the
other portfolio managers for the Fund identified in this prospectus will
continue to manage the Fund.
American General Core Bond Fund
Effective November 4, 1998, Robert N. Kase, CFA, has assumed responsibility for
the portfolio management of the Fund. Mr. Kase, Vice President and Senior
Portfolio Manager of American General Investment Management, L.P. (the "Sub-
adviser"), joined the Sub-adviser in September 1998. From September 1992 to July
1998, Mr. Kase was Senior Portfolio Manager at CL Capital Management, Inc.
The "Fund Investments" guidelines included in the "Fact Sheet" should reflect
that short-term investments, such as commercial paper, bankers' acceptances,
bank certificates of deposit and other cash equivalents and cash may constitute
up to 35% of the Fund's total assets, rather than be included among investment
grade fixed-income and other securities that must constitute at least 65% of the
Fund's total assets.
American General Domestic Bond Fund
The "Fund Investments" guidelines included in the "Fact Sheet" should reflect
that short-term investments, such as commercial paper, bankers' acceptances,
bank certificates of deposit and other cash equivalents and cash may constitute
up to 35% of the Fund's total assets, rather than be included among investment
grade fixed-income and other securities that must constitute at least 65% of the
Fund's total assets.
<PAGE> 3
American General Mid Cap Value Fund
In addition to Michael M. Kassen and Robert I. Gendelman, S. Basu Mullick is
also primarily responsible for the day-to-day management of the Fund. Mr.
Mullick has been a Vice President of Neuberger Berman Management Inc., since
October 1998. From 1993 to 1998, Mr. Mullick was a portfolio manager for another
mutual fund manager.
American General Money Market Fund
The first paragraph of the "Investment Strategy" section of the Fund's "Fact
Sheet" is replaced in its entirety with the following:
The Fund invests in short-term money market securities to provide you with
liquidity, protection of your investment and current income. Such securities
must mature, after giving effect to any demand features, 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 Fund's "Fact Sheet" should reflect that the Fund may buy taxable municipal
obligations (variable rate demand notes).
Variable rate demand notes ("VRDNs") are obligations containing a floating or
variable interest rate adjustment formula, together with an unconditional right
to demand payment of the unpaid principal balance plus accrued interest upon a
short notice period, generally not to exceed seven days. The Fund may invest in
participation VRDNs, which provides the Fund with an undivided interest in
underlying VRDNs held by major investment banking institutions. Any purchase of
VRDNs will meet applicable diversification and concentration requirements and
conditions established by the SEC under which such securities may be considered
to have remaining maturities of 397 days or less.
American General Small Cap Value Fund
Bankers Trust Company, sub-adviser to the Fund, is a wholly owned subsidiary of
Bankers Trust Corporation. On November 30, 1998, Bankers Trust Corporation
entered into an Agreement and Plan of Merger with Deutsche Bank AG under which
Bankers Trust Corporation would merge with and into a subsidiary of Deutsche
Bank AG. Deutsche Bank AG is a major global banking institution that is engaged
in a wide range of financial services, including investment management, mutual
funds, retail and commercial banking, investment banking and insurance. The
transaction is contingent upon various regulatory approvals. If the transaction
is approved and completed, Deutsche Bank AG, as Bankers Trust's new parent
company, will control the operations of Bankers Trust. Bankers Trust has
informed the Funds that, under this new arrangement, the services provided to
the Funds will be maintained at their current level. As a result of the
foregoing transactions, on April 20, 1999, the AGSPC3 Board approved a new
investment sub-advisory agreement with Bankers Trust. The new sub-advisory
agreement is identical to the current agreement with Bankers Trust except for
the effective date.
In addition to Kathryn A. Vorisek, Lloyd J. Spicer, CFA, and Terry B. French,
Douglas G. Madigan, CFA, and David C. Faircloth, CFA, also are primarily
responsible for the day-to-day management of the Fund. Mr. Madigan, Senior Vice
President and Director of Research of Fiduciary Management Associates, Inc. (the
"Sub-adviser"), joined the Sub-adviser in September 1998. Previously, Mr.
Madigan was with Harris Bank as Vice President, Equity Research, from 1994 to
September 1998 and as Mutual Fund Portfolio Manager and Partner from 1996 to
September 1998. From 1989 to 1994, Mr. Madigan was Vice President and Senior
Portfolio Manager at Continental Bank. Mr. Faircloth, Vice President and
Portfolio Manager, joined the Sub-adviser in November 1998. Previously, Mr.
Faircloth was Vice President and Portfolio Manager at the Northern Trust Company
from 1990 until November 1998.
American General Socially Responsible Fund
The Fund has made certain changes to its social criteria. The following replaces
the second sentence of the section entitled "Investment Objective" in the Fund's
"Fact Sheet."
The Fund does not invest in companies that are significantly engaged in:
- the production of nuclear energy;
- the manufacture of military weapons or delivery systems;
- the manufacture of alcoholic beverages or tobacco products;
- the operation of gambling casinos; or
- business practices or the production of products that significantly
pollute the environment.
<PAGE> 4
Paul W. Green, CFA has assumed portfolio management responsibility for the Fund.
Mr. Green has been Vice President and Investment Officer of VALIC since February
1999. Previously, Mr. Green was with BARRA, Inc., a financial consulting firm,
since July 1993.
The average annual total return shown on page 33 for the 5 year period ended
March 31, 1998 is 21.54%
VA 10832-D
<PAGE> 5
AMERICAN GENERAL SERIES PORTFOLIO COMPANY 3
SUPPLEMENT DATED APRIL 20, 1999
TO STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 21, 1998
For ALL FUNDS
Effective May 1, 1999, the Funds' distributor will change from The Variable
Annuity Marketing Company (VAMCO) to A.G. Distributors, Inc., an affiliate of
VALIC. All references to VAMCO in this Statement of Additional Information
should instead refer to A.G. Distributors, Inc.
Craig R. Rodby has resigned as a Trustee and officer of the Funds.
For the INTERNATIONAL GROWTH FUND, THE LARGE CAP GROWTH FUND, THE SMALL CAP
GROWTH FUND, THE INTERNATIONAL VALUE FUND, THE LARGE CAP VALUE FUND, THE MID CAP
VALUE FUND, THE SMALL CAP VALUE FUND, THE BALANCED FUND, THE HIGH YIELD BOND
FUND, THE STRATEGIC BOND FUND, THE CORE BOND FUND, AND THE DOMESTIC BOND FUND
the non-fundamental investment restriction regarding illiquid securities is
replaced in its entirety with the following:
The Fund may not invest more than 15% of the Fund's net assets (taken at the
greater of cost or market value) in securities that are illiquid or not
readily marketable including time deposits and repurchase agreements not
maturing within seven days or restricted securities, but excluding (a) Rule
144A securities that have been determined to be liquid by VALIC or the
Sub-adviser, in accordance with guidelines adopted by the Series Company's
Board of Trustees, and (b) commercial paper that is sold under Section 4(2)
of the 1933 Act which: (i) is not traded flat or in default as to interest
or principal; (ii) is rated in one of the two highest categories by at least
two nationally recognized statistical rating organizations and VALIC or the
Sub-adviser, in accordance with guidelines adopted by the Series Company's
Board of Trustees, has determined the commercial paper to be liquid; or
(iii) is rated in one of the two highest categories by one nationally
recognized statistical rating agency and VALIC or the Sub-adviser, in
accordance with guidelines adopted by the Series Company's Board of
Trustees, has determined that the commercial paper is of equivalent quality
and is liquid.
For the MID CAP GROWTH FUND, SOCIALLY RESPONSIBLE FUND, AND MONEY MARKET FUND
the non-fundamental investment restriction regarding illiquid securities is
replaced in its entirety with the following:
The Fund may not invest more than 10% of the Fund's net assets (taken at the
greater of cost or market value) in securities that are illiquid or not
readily marketable including time deposits and repurchase agreements not
maturing within seven days or restricted securities, but excluding (a) Rule
144A securities that have been determined to be liquid by VALIC or the
Sub-adviser, in accordance with guidelines adopted by the Series Company's
Board of Trustees, and (b) commercial paper that is sold under Section 4(2)
of the 1933 Act which: (i) is not traded flat or in default as to interest
or principal; (ii) is rated in one of the two highest categories by at least
two nationally recognized statistical rating organizations and VALIC or the
Sub-adviser, in accordance with guidelines adopted by the Series Company's
Board of Trustees, has determined the commercial paper to be liquid; or
(iii) is rated in one of the two highest categories by one nationally
recognized statistical rating agency and VALIC or the Sub-adviser, in
accordance with guidelines adopted by the Series Company's Board of
Trustees, has determined that the commercial paper is of equivalent quality
and is liquid.
For MID CAP VALUE FUND
Neuberger&Berman Management Inc., the Fund's sub-adviser, has changed its name
to Neuberger Berman Management Inc.
For the SMALL CAP VALUE FUND
On March 11, 1999, Bankers Trust announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related recordkeeping problems that occurred between 1994 and early 1996.
Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
$60 million fine to federal authorities. Separately, Bankers Trust agreed to pay
a $3.5 million fine to the State of New York. The events leading up to the
guilty pleas did not arise out of the investment advisory or mutual fund
management activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Fund. The SEC
has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
VA 10832-1B
