<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1997
REGISTRATION NOS. 33-75292/811-3240
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
---------------------
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 9 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 53 [X]
</TABLE>
---------------------
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 526-5251
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------
DAVID H. DEN BOER, ESQ.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
It is proposed that this filing will become effective:
__ immediately upon filing pursuant to paragraph (b) of
Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
__ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
__ on (date) pursuant to paragraph (a)(1) of Rule 485
PURSUANT TO RULE 24F-2(A)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE REGISTRANT
FILED RULE 24F-2 NOTICES ON FEBRUARY 24, 1997 FOR ITS MOST RECENT FISCAL YEAR
ENDING DECEMBER 31, 1996.
SEQUENTIAL NUMBER SYSTEM: PAGE __ OF __ PAGES
EXHIBIT INDEX ON SEQUENTIAL PAGE NUMBER __
================================================================================
<PAGE> 2
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTENTS
REGISTRATION STATEMENT ON FORM N-4
This Post-Effective Amendment consists of the following papers and documents:
FACING SHEET
Contents Sheet
PART A: Portfolio Director
Cross Reference Sheet
Prospectus
PART B: Portfolio Director
Statement of Additional Information
PART A: Portfolio Director 2
Cross Reference Sheet
Prospectus
PART B: Portfolio Director 2
Statement of Additional Information
PART C: Portfolio Director and Portfolio Director 2
Items twenty-four (including exhibit index) through thirty-three
Signatures
<PAGE> 3
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page....................................... Cover Page
Profile..........................................
2. Definitions...................................... About the Prospectus
3. Synopsis......................................... About Portfolio Director, About VALIC, About
VALIC Separate Account A
4. Condensed Financial Information.................. Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies.............................. About VALIC, About VALIC Separate Account A,
Variable Account Options
6. Deductions and Expenses.......................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts........................................ Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period................................... Payout Period
9. Death Benefit.................................... Death Benefits
10. Purchase and Contract Value...................... Fees and Charges, Purchase Period
11. Redemptions...................................... Surrender of Account Value
12. Taxes............................................ Federal Tax Matters
13. Legal Proceedings................................ Not Applicable
14. Table of Contents of the Statement of Additional
Information...................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page....................................... Cover Page
16. Table of Contents................................ Table of Contents
17. General Information and History.................. General Information
18. Services......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters..................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data.................. Performance Calculations
22. Payout Payments.................................. Payout Payments
23. Financial Statements............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 4
VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
(PORTFOLIO DIRECTOR)
SEPARATE ACCOUNT A. May 1, 1997
PROSPECTUS
The Portfolio Director Contract consists of group and individual variable
annuity contracts ("Portfolio Director") that are offered by The Variable
Annuity Life Insurance Company. Portfolio Director may be available to you when
you participate in a retirement program that qualifies for deferral of federal
income taxes. Non-qualified contracts are also available. Portfolio Director is
composed of the following contract forms: UIT-194, UITG-194, UITN-194,
UIT-IRA-194 and UIT-SEP-194.
Portfolio Director permits you to invest in and receive retirement benefits from
Fixed Account Options and/or Variable Account Options. Each of these investment
options is explained more fully in this prospectus. Here is a list of these
investment options:
TWO FIXED ACCOUNT OPTIONS:
Fixed Account Plus
Short-Term Fixed Account
SIXTEEN VARIABLE ACCOUNT OPTIONS
(through a variety of mutual funds):
American General Series Portfolio Company:
<TABLE>
<S> <C> <C>
Stock Index Fund Government Securities Fund Dreyfus Variable Investment Fund:
MidCap Index Fund International Government Bond Fund Dreyfus Small Cap Portfolio
Small Cap Index Fund Social Awareness Fund
International Equities Fund Science & Technology Fund Templeton Variable Products
Growth Fund Money Market Fund Series Fund:
Growth & Income Fund Timed Opportunity Fund Templeton International Fund: Class 1
Capital Conservation Fund Templeton Asset Allocation Fund: Class 1
</TABLE>
This prospectus provides you with information you should know before investing
in Portfolio Director. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1997, has been filed with
the Securities and Exchange Commission. This Statement of Additional Information
contains additional information about Portfolio Director and is part of this
prospectus. For a free copy, complete and return the form contained in the back
of this prospectus or call 1-800-44-VALIC.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO
WHOM SUCH OFFER WOULD BE UNLAWFUL THEREIN.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES. ALSO, IT HAS NOT PASSED ON WHETHER THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS......................... 1
PROFILE OF PORTFOLIO DIRECTOR CONTRACT....... 2
FEE TABLE.................................... 4
SELECTED PURCHASE UNIT DATA.................. 6
ABOUT PORTFOLIO DIRECTOR..................... 8
ABOUT VALIC.................................. 8
ABOUT VALIC SEPARATE ACCOUNT A............... 8
VARIABLE ACCOUNT OPTIONS..................... 9
Summary of Funds........................ 9
PURCHASE PERIOD.............................. 19
Purchase Payments....................... 19
Purchase Units.......................... 19
Calculation of Purchase Unit Value...... 19
Choosing Investment Options............. 20
Fixed Account Options.............. 20
Variable Account Options........... 20
Stopping Purchase Payments.............. 20
TRANSFERS BETWEEN INVESTMENT OPTIONS......... 21
During the Purchase Period.............. 21
During the Payout Period................ 21
Communicating Transfer or Reallocation
Instructions.......................... 21
Effective Date of Transfer.............. 21
FEES AND CHARGES............................. 22
Account Maintenance Fee................. 22
Surrender Charges....................... 22
Amount of Surrender Charges........ 22
10% Free Withdrawal................ 22
Exceptions to Surrender
Charges.......................... 22
Premium Tax Charge...................... 23
Separate Account Charges................ 23
Fund Annual Expense Charge.............. 23
Other Tax Charges....................... 23
Reduction or Waiver of Account
Maintenance Fee or Surrender
Charges............................... 23
PAYOUT PERIOD................................ 25
Fixed Payout............................ 25
Variable Payout......................... 25
Combination Fixed and Variable Payout... 25
Payout Date............................. 25
Payout Options.......................... 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enhancements to Payout Options.......... 26
Payout Information...................... 26
SURRENDER OF ACCOUNT VALUE................... 27
When Surrenders are Allowed............. 27
Amount That May Be Surrendered.......... 27
Surrender Restrictions.................. 27
Partial Surrenders...................... 27
Systematic Withdrawals.................. 27
Distributions Required By Federal Tax
Law................................... 28
EXCHANGE PRIVILEGE........................... 29
Restrictions on Exchange Privilege...... 29
Taxes and Conversion Costs.............. 29
Surrender Charges....................... 29
Exchange Offers......................... 29
Comparison of Contracts................. 29
Features of Portfolio Director.......... 30
Agents' and Managers' Retirement Plan
Exchange Offer........................ 30
DEATH BENEFITS............................... 31
Beneficiary Information................. 31
Special Information for Individual
Non-Tax Qualified Contracts........... 31
During the Purchase Period.............. 31
Interest Guaranteed Death
Benefit.......................... 31
Standard Death Benefit............. 32
During the Payout Period................ 32
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS................. 33
Types of Investment Performance
Information Advertised................ 33
Yield Performance Information........... 34
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............
OTHER CONTRACT FEATURES...................... 38
VOTING RIGHTS................................ 39
FEDERAL TAX MATTERS.......................... 40
Type of Plans........................... 40
Tax Consequences in General............. 40
Effect of Tax-Deferred
Accumulations......................... 41
</TABLE>
(i)
<PAGE> 6
ABOUT THE PROSPECTUS
- --------------------------------------------------------------------------------
Unless otherwise specified in this prospectus, the words we, our, Company, and
VALIC mean The Variable Annuity Life Insurance Company. The words you and your,
unless otherwise specified in this prospectus, mean the participant, contract
owner, annuitant or beneficiary.
We will use a number of other specific terms in this prospectus. We will, when
that term is used in the prospectus, provide you with a definition of that term.
The terms used in this prospectus for which we will provide you a definition
are:
Account Value
Annuitant
Assumed Investment Rate
Beneficiary
Contract Owner
Division
Fixed Account Options
Home Office
Mutual Fund or Fund
Participant
Participant Year
Payout Period
Payout Unit
Purchase Payments
Purchase Period
Purchase Unit
VALIC Separate Account A
Variable Account Options
This prospectus is being given to you to help you make decisions for selecting
various investment options and benefits to plan and save for your retirement. It
is intended to provide you with information about VALIC, Portfolio Director, and
saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in VALIC's
Separate Account A are offered. Portfolio Director will allow you to accumulate
retirement dollars in Fixed Account Options and/or Variable Account Options.
This prospectus describes only the variable aspects of Portfolio Director except
where the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
Portfolio Director. This summary is called the "Profile of Portfolio Director
Contract." It is intended to provide you with a brief overview of those sections
discussed in more detail in this prospectus.
PARTICIPANT -- the individual,
(in most cases you are the
Participant) for whom Purchase
Payments are made.
1
<PAGE> 7
PROFILE OF PORTFOLIO DIRECTOR CONTRACT
- --------------------------------------------------------------------------------
Portfolio Director is VALIC's combination fixed and variable annuity that offers
you a wide choice of investment options and flexibility. A summary of Portfolio
Director's major features is presented below. For a more detailed discussion of
the Portfolio Director Contract, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director offers you a choice from among 16 Variable Account Options
and two Fixed Account Options. You may invest in up to seven of these investment
options at any one time.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FIXED ACCOUNT
OPTIONS
- ---------------------------------------------------------------------------------------------------------------
FIXED Fixed Guaranteed high current
OPTIONS Account interest income
Plus
-----------------------------------------------------------------------------------------
Short-Term Guaranteed current
Fixed Account interest income
- ---------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY
- ---------------------------------------------------------------------------------------------------------------
INDEX Stock Index Fund Growth through investments tracking
EQUITY the S&P 500(R) Index
FUNDS -----------------------------------------------------------------------------------------
MidCap Growth through investments tracking
Index Fund the S&P MidCap 400(R) Index
-----------------------------------------------------------------------------------------
Small Cap Growth through investments tracking
Index Fund the Russell 2000(R) Index
-----------------------------------------------------------------------------------------
International growth through investments tracking
Equities Fund the EAFE Index
- ---------------------------------------------------------------------------------------------------------------
ACTIVELY Templeton Long-term capital growth through investments
MANAGED International Fund outside the U.S.
EQUITY
FUNDS -----------------------------------------------------------------------------------------
Dreyfus Small Growth through investments
Cap Portfolio in smaller companies
-----------------------------------------------------------------------------------------
Growth Fund Growth through investments
in service sector companies
-----------------------------------------------------------------------------------------
Growth & Growth and income
Income through investments in stocks or securities
Fund convertible into stocks
- ---------------------------------------------------------------------------------------------------------------
INCOME Capital Income and possible growth
FUNDS Conservation through investments in high quality debt
Fund securities
-----------------------------------------------------------------------------------------
Government Income and possible growth
Securities through investments in intermediate &
Fund long-term government debt securities
-----------------------------------------------------------------------------------------
International Income and possible growth through
Government investments in high quality foreign
Bond Fund government debt securities
- ---------------------------------------------------------------------------------------------------------------
SPECIALTY Social Growth through investments in
FUNDS Awareness stocks of companies meeting social
Fund criteria of the Fund
-----------------------------------------------------------------------------------------
Science & Growth through investments in
Technology stocks of companies which
Fund benefit from development of science
and technology
- ---------------------------------------------------------------------------------------------------------------
MONEY Money Market Income through investments in
MARKET Fund short-term money market
FUND securities
- ---------------------------------------------------------------------------------------------------------------
ASSET Timed Opportunity Maximum return through investments in
ALLOCATION Fund a mix of stocks, bonds and money market
FUNDS securities
-----------------------------------------------------------------------------------------
Templeton Flexible policy of investing in
Asset stocks and debt obligations of
Allocation companies and governments
Fund of any nation and money market investments
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------
FIXED -- --
OPTIONS
-----------------------------------------------------------------------------------------
-- --
- ---------------------------------------------------------------------------------------------------------------
ADVISER SUBADVISER
- ---------------------------------------------------------------------------------------------------------------
INDEX VALIC Bankers Trust
EQUITY
FUNDS
-----------------------------------------------------------------------------------------
VALIC Bankers Trust
-----------------------------------------------------------------------------------------
VALIC Bankers Trust
-----------------------------------------------------------------------------------------
VALIC N/A
- ---------------------------------------------------------------------------------------------------------------
ACTIVELY Templeton N/A
MANAGED Investment Counsel
EQUITY Inc.
FUNDS
-----------------------------------------------------------------------------------------
Dreyfus N/A
-----------------------------------------------------------------------------------------
VALIC T. Rowe Price
-----------------------------------------------------------------------------------------
VALIC Value Line
- ---------------------------------------------------------------------------------------------------------------
INCOME VALIC N/A
FUNDS
-----------------------------------------------------------------------------------------
VALIC N/A
-----------------------------------------------------------------------------------------
VALIC N/A
- ---------------------------------------------------------------------------------------------------------------
SPECIALTY VALIC N/A
FUNDS
-----------------------------------------------------------------------------------------
VALIC T. Rowe Price
- ---------------------------------------------------------------------------------------------------------------
MONEY VALIC N/A
MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------
ASSET VALIC N/A
ALLOCATION
FUNDS
-----------------------------------------------------------------------------------------
Templeton N/A
Investment Counsel
Inc.
</TABLE>
2
<PAGE> 8
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Fund can be found in
the section of the prospectus entitled "Variable Account Options," and also in
the current prospectus for each Fund mentioned.
INTEREST GUARANTEED DEATH BENEFIT
Portfolio Director offers a death benefit with an interest guarantee when death
occurs prior to your reaching age 70.
This contract provision is not available in some states.
LOANS
Portfolio Director offers a tax-free loan provision for tax-qualified contracts
that gives you access to your money in either of the Fixed Account Options,
subject to a minimum loan amount of $1,000. The availability of loans is subject
to government regulations, as well as your employer's plan provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans which
are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among Portfolio
Director's investment options. You may transfer your Account Values between
Variable Account Options at any time during the Purchase Period.
Your Account Value in the Short-Term Fixed Account must remain there for at
least 90 days before it can be transferred to other investment options. In Fixed
Account Plus, up to 20% of your Account Value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among Variable Account Options once each contract
year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Between Investment Options" section in the prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE:
If any of your account is invested in Variable Account Options, a quarterly
account maintenance fee of $3.75 is charged to your account. If you invest only
in Fixed Account Options during a calendar quarter no account maintenance fee is
assessed.
SURRENDER CHARGE:
Under some circumstances a surrender charge is made to your account. These
situations are discussed in detail in the section of the prospectus entitled
"Fees and Charges -- Surrender Charges." When this happens the surrender charge
is computed in two ways and you are charged whichever amount is less. The first
amount is simply 5% of whatever amount you have withdrawn. The second amount is
5% of the contributions you made to your account during the last 60 months.
Withdrawals are always subject to your plan provisions and federal tax
restrictions, which generally include a tax penalty on withdrawals made prior to
age 59 1/2.
SEPARATE ACCOUNT CHARGES:
Depending on the Variable Account Option you choose, you may incur a mortality
and expense risk fee, computed at an annualized rate of 1% or 1.25% on the
average daily net asset value of VALIC Separate Account A.
PREMIUM TAX CHARGE:
Premium taxes ranging from zero to 3% are currently imposed by certain states
and municipalities on Purchase Payments made under the contract.
FUND ANNUAL EXPENSE CHARGE:
A daily charge based on a percentage of each Fund's average daily net asset
value is payable by each Fund to its investment adviser.
Since some of these fees may not apply to your contract, consult your VALIC
Retirement Plan Specialist to see how these provisions apply to you.
PAYOUT OPTIONS
When you withdraw your money, you can select from several payout options: a
lifetime annuity (which guarantees payment for as long as you live), periodic
withdrawals and systematic withdrawals. More information on payout options can
be found in the "Payout Period" section of the prospectus.
FEDERAL TAX INFORMATION
Although deferred annuity contracts such as Portfolio Director can be purchased
with after-tax dollars, they are primarily used in connection with retirement
programs which receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
Purchase Payments may be made at any time and in any amount, subject to plan
limitations.
To learn more about the
INTEREST GUARANTEED DEATH
BENEFIT, refer to the
section in the prospectus
entitled "Death Benefits."
More information on FEES may
be found in the prospectus
under the headings "FEES AND
CHARGES" AND "FEE TABLE."
For a more detailed
discussion of these income
tax provisions, see the
"FEDERAL TAX MATTERS"
section of the prospectus
and of the Statement of
Additional Information.
For more information on
PURCHASE PAYMENTS, refer to
the "Purchase Period"
section of the prospectus.
3
<PAGE> 9
FEE TABLE
--------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Account Maintenance Fee ($3.75 per quarter, annualized) $ 15
Maximum Surrender Charge(2) 5.00%
</TABLE>
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
AGSPC Funds* Other Funds*
------------ ------------
<S> <C> <C>
Mortality and Expense Risk Fee 1.00% 1.25%
</TABLE>
* -- see list of Funds under "Fund Annual
Expenses" below.
FUND ANNUAL EXPENSES(3)
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
Management Other Total Fund
Fees Expenses Expenses
---------- -------- ----------
<S> <C> <C> <C>
AGSPC FUNDS:
Stock Index 0.28 0.07 0.35
MidCap Index 0.35 0.06 0.41
Small Cap Index 0.35 0.06 0.41
International Equities 0.35 0.07 0.42
Growth 0.80 0.03 0.83
Growth & Income 0.75 0.04 0.79
Capital Conservation 0.50 0.07 0.57
Government Securities 0.50 0.06 0.56
International Government Bond 0.50 0.06 0.56
Social Awareness 0.50 0.06 0.56
Science & Technology 0.90 0.04 0.94
Money Market 0.50 0.07 0.57
Timed Opportunity 0.50 0.07 0.57
OTHER FUNDS:
Dreyfus Small Cap 0.75 0.04 0.79
Templeton International: Class 1 0.70 0.18 0.88
Templeton Asset Allocation: Class 2 0.61 0.17 0.78
</TABLE>
EXAMPLE #1 -- Assuming Surrender at the End of the
Period Shown:
--------------------------------------------------
Total Expenses: You would pay the following expenses on a
$1,000 investment under a typical Portfolio Director
Contract invested in a single Separate Account Division as
listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Stock Index Division $61 $ 95 $128 $171
MidCap Index Division 62 97 131 177
Small Cap Index Division 62 97 131 177
International Equities Division 62 97 131 179
Templeton International Division 69 118 168 254
Dreyfus Small Cap Division 68 115 164 245
Growth Division 66 109 153 223
Growth & Income Division 65 108 151 219
Capital Conservation Division 63 102 139 195
Government Securities Division 63 101 139 194
International Government Bond
Division 63 101 139 194
Social Awareness Division 63 101 139 194
Science & Technology Division 67 112 158 234
Money Market Division 63 102 139 195
Timed Opportunity Division 63 102 139 195
Templeton Asset Allocation
Division 68 115 163 244
</TABLE>
See footnotes on Page 5.
4
<PAGE> 10
EXAMPLE #2 -- Assuming No Surrender at the End of the
Period Shown:
- ----------------------------------------------------------
Total Expenses. You would pay the following expenses on a
$1,000 investment under a typical Portfolio Director
Contract without a surrender charge imposed, invested in a
single Separate Account Division as listed below, assuming
a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Stock Index Division $14 $ 45 $ 78 $171
MidCap Index Division 15 47 81 177
Small Cap Index Division 15 47 81 177
International Equities Division 15 47 81 179
Templeton International Division 22 69 118 254
Dreyfus Small Cap Division 21 66 114 245
Growth Division 19 60 103 223
Growth & Income Division 19 59 101 219
Capital Conservation Division 17 52 89 195
Government Securities Division 17 51 89 194
International Government Bond Division 17 51 89 194
Social Awareness Division 17 51 89 194
Science & Technology Division 20 63 108 234
Money Market Division 17 52 89 195
Timed Opportunity Division 17 52 89 195
Templeton Asset Allocation Division 21 66 113 244
</TABLE>
EXAMPLE #3 -- Assuming No Account Maintenance Fee and
No Surrender at the End of the Period Shown:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a
$1,000 investment under a typical Portfolio Director
Contract without a surrender charge or account maintenance
fee imposed, invested in a single Separate Account
Division as listed below, assuming a 5% annual return on
assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Stock Index Division $14 $ 43 $ 74 $163
MidCap Index Division 14 45 77 170
Small Cap Index Division 14 45 77 170
International Equities Division 14 45 78 171
Templeton International Division 22 67 115 247
Dreyfus Small Cap Division 21 64 110 237
Growth Division 19 58 99 215
Growth & Income Division 18 56 97 211
Capital Conservation Division 16 50 86 187
Government Securities Division 16 49 85 186
International Government Bond Division 16 49 85 186
Social Awareness Division 16 49 85 186
Science & Technology Division 20 61 105 227
Money Market Division 16 50 86 187
Timed Opportunity Division 16 50 86 187
Templeton Asset Allocation Division 21 64 109 236
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged
by some states. See: "Premium Tax Charge" in this
prospectus.
(2) Reductions in the surrender charge and the account
maintenance fee are available if certain conditions
are met. See "Reduction or Waiver of Account
Maintenance Fee or Surrender Charges" and "Exceptions
to Surrender Charges" in this prospectus.
(3) MANAGEMENT FEES: The annual management fees for the
Stock Index Fund, MidCap Index Fund, Small Cap Index
Fund and International Equities Fund are based on each
Fund's average daily net asset value at the following
rates: .35% of the first $500 million and .25% on the
excess over $500 million. The annual management fees
for Growth Fund, Growth & Income Fund, Science &
Technology Fund, Social Awareness Fund, Timed
Opportunity Fund, Capital Conservation Fund,
Government Securities Fund, International Government
Bond Fund, Money Market Fund, and Dreyfus Small Cap
Portfolio are flat rates as shown regardless of the
amount of Fund assets. The annual management fees for
Templeton Asset Allocation Fund are based on the
Fund's average daily net asset value at the following
rates: .65% of the first $200 million, .585% from $200
million up to $1.3 billion, and .52% on the excess
over $1.3 billion and Templeton International Fund are
based on the Funds' average daily net asset value at
the following rates: .75% of the first $200 million,
.675% from $200 million up to $1.3 billion, and .60%
on the excess over $1.3 billion. OTHER
EXPENSES includes custody, accounting, reports to
shareholders, audit, legal and other miscellaneous
expenses.
Note: These examples should not be considered
representations of past or future expenses for VALIC
Separate Account A or for any Fund. Actual expenses may be
greater or less than those shown above. Similarly, the 5%
annual rate of return assumed in the examples is not an
estimate or guarantee of future investment performance.
The purpose of the Fee Table above is to help Contract
Owners and Participants understand the various expenses of
VALIC Separate Account A and the Funds which are, in
effect, passed on to the Contract Owners and Participants.
This Fee Table, shows all charges and expenses which may
be deducted from the assets of VALIC Separate Account A
and from the Funds in which VALIC Separate Account A
invests. For a further description of these charges and
expenses, see "Fees and Charges" in this prospectus and
"Investment Adviser" in the Series Company Prospectus and
"Management of the Fund" in the Dreyfus Small Cap
Portfolio Prospectus and "Management of the Trust" in the
Templeton Variable Products Series Fund Prospectus. Any
and all limitations on total charges and expenses are
reflected in this Fee Table.
5
<PAGE> 11
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MIDCAP SMALL CAP INTERNATIONAL TEMPLETON DREYFUS
STOCK INDEX INDEX INDEX EQUITIES INTERNATIONAL SMALL CAP
DIVISION 10(2) DIVISION 4(1) DIVISION 14 DIVISION 11 DIVISION 20 DIVISION 18
-------------- ------------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996
Purchase Units in Force 536,806,965 172,816,978 103,320,842 156,226,314 378,581,949 428,883,250
Purchase Unit Value $2.848437 $3.272588 $1.785442 $1.222906 $1.399702 $1.534694
December 31, 1995
Purchase Units in Force 455,255,243 172,613,690 98,335,995 172,564,018 219,124,926 267,735,219
Purchase Unit Value $2.343900 $2.782677 $1.544896 $1.156454 $1.142586 $1.332904
December 31, 1994
Purchase Units in Force 416,234,288 171,442,018 100,383,839 187,749,916 71,716,511 85,169,871
Purchase Unit Value $1.724134 $2.153183 $1.222329 $1.054460 $0.999282 $1.043156
July 11, 1994
Purchase Unit Value(3) -- -- -- -- $1.000000 $1.000000
April 29, 1994
Purchase Unit Value(3) -- -- -- -- -- --
December 31, 1993
Purchase Units in Force 369,550,060 134,621,879 56,159,647 117,215,227 -- --
Purchase Unit Value $1.729327 $2.259378 $1.277199 $0.986387 -- --
December 31, 1992
Purchase Units in Force 283,808,045 81,007,871 9,723,477 52,524,165
Purchase Unit Value $1.589718 $2.021271 $1.112790 $0.767135 -- --
May 1, 1992
Purchase Unit Value(3) -- -- $1.000000 -- -- --
December 31, 1991
Purchase Units in Force 90,526,907 49,106,844 -- 27,011,169 -- --
Purchase Unit Value $1.505641 $1.858030 -- $0.895250 -- --
October 1, 1991
Purchase Unit Value(3) -- -- -- -- -- --
December 31, 1990
Purchase Units in Force 46,016,297 42,958,640 -- 13,776,769 -- --
Purchase Unit Value $1.179000 $1.538017 -- $0.813423 -- --
December 31, 1989
Purchase Units in Force 22,325,990 40,618,028 -- 2,247,450
Purchase Unit Value $1.238782 $1.712671 -- $1.028405 -- --
October 2, 1989
Purchase Unit Value(3) -- -- -- $1.000000 -- --
December 31, 1988
Purchase Units in Force 9,213,178 38,747,706 -- -- -- --
Purchase Unit Value $0.968670 $1.450217 -- -- -- --
December 31, 1987
Purchase Units in Force 4,326,102 35,297,367 -- -- -- --
Purchase Unit Value $0.856238 $1.282662 -- -- -- --
April 20, 1987
Purchase Unit Value(3) $1.000000 -- -- -- -- --
December 31, 1986
Purchase Units in Force -- 28,360,188 -- -- -- --
Purchase Unit Value -- $1.351553 -- -- -- --
<CAPTION>
GROWTH
DIVISION 15
-----------
<S> <C>
December 31, 1996
Purchase Units in Force 366,272,509
Purchase Unit Value $1.733324
December 31, 1995
Purchase Units in Force 164,417,848
Purchase Unit Value $1.466652
December 31, 1994
Purchase Units in Force 32,633,370
Purchase Unit Value $1.001834
July 11, 1994
Purchase Unit Value(3) --
April 29, 1994
Purchase Unit Value(3) $1.000000
December 31, 1993
Purchase Units in Force --
Purchase Unit Value --
December 31, 1992
Purchase Units in Force
Purchase Unit Value --
May 1, 1992
Purchase Unit Value(3) --
December 31, 1991
Purchase Units in Force --
Purchase Unit Value --
October 1, 1991
Purchase Unit Value(3) --
December 31, 1990
Purchase Units in Force --
Purchase Unit Value --
December 31, 1989
Purchase Units in Force
Purchase Unit Value --
October 2, 1989
Purchase Unit Value(3) --
December 31, 1988
Purchase Units in Force --
Purchase Unit Value --
December 31, 1987
Purchase Units in Force --
Purchase Unit Value --
April 20, 1987
Purchase Unit Value(3) --
December 31, 1986
Purchase Units in Force --
Purchase Unit Value --
</TABLE>
- ------------
(1) Effective October 1, 1991, the Fund underlying this Division changed its
name from the Capital Accumulation Fund to the MidCap Index Fund and amended
its investment objective, investment program and investment restrictions
accordingly. Historical purchase unit values prior to October 1, 1991
reflect investment experience before these changes.
(2) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(3) Purchase Unit Value At Date Of Inception.
6
<PAGE> 12
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL TEMPLETON
GROWTH & CAPITAL GOVERNMENT GOVERNMENT SOCIAL SCIENCE & MONEY TIMED ASSET
INCOME CONSERVATION SECURITIES BOND AWARENESS TECHNOLOGY MARKET OPPORTUNITY ALLOCATION
DIVISION 16 DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 12 DIVISION 17 DIVISION 6 DIVISION 5 DIVISION 19
- ----------- ------------ ---------- ----------- ----------- ----------- ---------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
108,341,635 30,286,494 47,130,169 112,601,593 46,574,016 315,809,646 75,124,095 65,292,617 137,384,670
$1.583056 $1.825549 $1.815651 $1.582230 $2.252673 $2.250471 $1.607212 $2.651899 $1.414844
51,779,089 29,573,808 39,847,053 73,369,250 32,750,120 187,862,232 51,907,757 75,851,431 78,494,505
$1.296577 $1.812011 $1.799475 $1.530780 $1.835102 $1.997175 $1.545802 $2.411022 $1.205181
12,386,602 26,859,219 26,667,073 25,691,713 29,015,764 42,726,137 75,765,781 89,377,860 32,807,602
$0.993168 $1.515278 $1.547150 $1.301357 $1.333899 $1.247713 $1.479129 $1.951533 $0.995860
-- -- -- -- -- -- -- -- $1.000000
$1.000000 -- -- -- -- $1.000000 -- -- --
-- 24,628,606 26,563,166 18,155,381 26,230,566 -- 24,799,810 93,899,802 --
-- $1.630069 $1.636228 $1.258340 $1.366979 -- $1.439327 $1.997266 --
-- 14,922,749 16,609,444 6,245,713 16,956,437 -- 23,414,474 80,637,090 --
-- $1.470167 $1.491537 $1.112826 $1.279516 -- $1.415690 $1.846025 --
-- -- -- -- -- -- -- -- --
-- 11,069,044 11,694,890 953,038 8,447,711 -- 25,545,494 76,624,765 --
-- $1.366905 $1.405236 $1.090499 $1.250634 -- $1.384882 $1.878219 --
-- -- -- $1.000000 -- -- -- -- --
-- 9,321,049 8,460,327 -- 2,947,418 -- 25,246,481 72,284,139 --
-- $1.178361 $1.237104 -- $0.987666 -- $1.325393 $1.563444 --
-- 7,502,717 5,556,464 -- 212,636 -- 15,949,534 68,361,149 --
-- $1.193583 $1.179231 -- $1.010003 -- $1.240599 $1.618165 --
-- -- -- -- $1.000000 -- -- -- --
-- 3,996,455 3,408,919 -- -- -- 9,429,191 65,817,325 --
-- $1.078919 $1.062082 -- -- -- $1.149516 $1.397280 --
-- 2,343,021 2,074,588 -- -- -- 4,121,853 59,631,901 --
-- $1.018629 $1.011978 -- -- -- $1.087299 $1.286227 --
-- -- -- -- -- -- -- -- --
-- 1,153,481 1,163,907 -- -- -- 914,106 41,290,244 --
-- $1.047718 $1.046062 -- -- -- $1.040484 $1.198662 --
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
Contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
7
<PAGE> 13
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR
Portfolio Director was developed to help you save money for your retirement. It
offers you a combination of fixed and variable investment options that you can
invest in to help you reach your retirement savings goals. Your contributions to
Portfolio Director can come from different sources, like payroll deductions or
money transfers. Your retirement savings process with Portfolio Director will
involve two stages: the Purchase Period; and the Payout Period. The first is
when you make contributions into Portfolio Director called "Purchase Payments."
The second, is when you receive your retirement payouts. For more information,
see "Purchase Period" and the "Payout Period" in this prospectus.
You may choose, depending upon your retirement savings goals, your personal risk
tolerances, and your retirement plan, to invest in the Fixed Account Options
and/or the Variable Account Options described in this prospectus. When you
decide to retire, or otherwise withdraw your money, you can select from a wide
array of payout options including both fixed and variable payments. In addition,
this prospectus will describe for you all fees and charges that may apply to
your participation in Portfolio Director.
All inquiries regarding
PORTFOLIO DIRECTOR
may be directed to your
VALIC Regional Office at
the addresses shown in the
back of this prospectus.
ABOUT VALIC
We are a life insurance company organized in 1955 and located in the State of
Texas. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director. Our principal offices are located at
2929 Allen Parkway, Houston, Texas 77019. We have Regional Offices throughout
the United States. The addresses for these offices are given in the back of this
prospectus.
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, the District of Columbia, and Canada and collectively provide
financial services with activities heavily weighted toward insurance.
MUTUAL FUND OR FUND --
the investment portfolio(s)
of a registered open-end
management investment
company, which serves as
the underlying investment
vehicle for each Division
represented in VALIC
Separate Account A.
For more information about
VALIC, see the Statement of
Additional Information
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director's Variable Account Options, you will
be sending that money through VALIC's Separate Account A. You do not invest
directly in the Mutual Funds made available in Portfolio Director. VALIC's
Separate Account A invests in the Mutual Funds on behalf of your account.
VALIC Separate Account A is made up of what we call "Divisions." Sixteen
Divisions are available and represent the Variable Account Options in Portfolio
Director. Each of these Divisions invests in a different Mutual Fund made
available through Portfolio Director. For example, Division Ten represents and
invests in the Stock Index Fund. The earnings (or losses) of each Division are
credited to (or charged against) the assets of that Division, and do not affect
the performance of the other Divisions of VALIC Separate Account A.
VALIC established Separate Account A in 1979 under Texas insurance law to allow
you to be able to invest in a number of Variable Account Options available in
Portfolio Director. VALIC Separate Account A is registered with the Securities
and Exchange Commission (SEC) as a unit investment trust under the Investment
Company Act of 1940. Units of interest in VALIC Separate Account A are
registered as securities under the Securities Act of 1933.
VALIC Separate Account A is administered and accounted for as part of VALIC's
business operations. However, the income, capital gains or capital losses,
whether or not realized of each Division of VALIC Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of Portfolio Director, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director. When we discuss performance information in this prospectus, we mean
the performance of a VALIC Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of VALIC Separate Account A is represented by
units of interest issued by VALIC Separate Account A. On a daily basis, the
units of interest issued by VALIC Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable fees
and charges to VALIC Separate Account A.
8
<PAGE> 14
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director enables you to participate in Divisions that represent
sixteen Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available to you through VALIC Separate Account A.
See "About VALIC Separate Account A" in this prospectus.
Each individual Division represents and invests, through VALIC's Separate
Account A, in specific mutual funds. These mutual funds serve as the investment
vehicles for Portfolio Director and include:
- - American General Series Portfolio
Company -- offers 13 funds, for which VALIC serves as investment adviser.
- - Templeton Variable Products Series -- offers 2 funds, for which Templeton
Investment Counsel, Inc. serves as investment adviser.
- - Dreyfus Variable Investment Fund -- offers 1 fund, for which The Dreyfus
Corporation serves as investment adviser.
Each of these Funds (except for American General Series Portfolio Company's
International Government Bond Fund) is registered as a diversified open-end,
management investment company and is
regulated under the Investment Company
Act of 1940. For complete information
about each of these Funds, including
charges and expenses, you should refer
to the prospectus for that Fund.
Additional copies are available from VALIC or you may contact your VALIC
Regional Office at the addresses shown in the back of this prospectus.
Shares of the Dreyfus Small Cap Portfolio, the Templeton Asset Allocation Fund,
and the Templeton International Fund are also sold to separate accounts of other
insurance companies that may or may not be affiliated with us. This is known as
"shared funding." These funds may also be sold to separate accounts that act as
the underlying investments for both variable annuity contracts and variable life
insurance policies. This is known as "mixed funding." There are certain risks
associated with mixed and shared funding. These risks are discussed in each
Fund's prospectus.
SUMMARY OF FUNDS
A brief summary of the investment objectives of each mutual fund is shown below.
In addition to the investment objectives, the change in an Account Value of an
assumed $10,000 investment in each of the Divisions is shown in both table and
graph form. The Account Values shown are since the inception of the Division or
the last 10 fiscal years. The change in Account Values shown for the Dreyfus and
Templeton Funds have been calculated on a pro forma basis using the inception
dates of the Funds in which the corresponding Divisions invest. For more
information about how these returns were calculated including a statement of the
charges reflected, see "How to Review Investment Performance of Separate Account
Divisions" in this prospectus. Any charges under Portfolio Director excluded
from the calculation of these returns will further reduce your return.
VARIABLE ACCOUNT OPTIONS -- investment
options that correspond
to Separate Account
Divisions offered by
Portfolio Director.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
9
<PAGE> 15
STOCK INDEX FUND
(Division 10)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth through investment in common stocks that, as a
group, are expected to provide investment results closely corresponding to the
performance of the Standard & Poor's 500 Stock Index(R)*.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 20, 1987 $ Value
- ------------------------- -------
<C> <C>
04/20/87 $10,000
12/31/87 8,562
12/31/88 9,687
12/31/89 12,388
12/31/90 11,790
12/31/91 15,056
12/31/92 15,897
12/31/93 17,293
12/31/94 17,241
12/31/95 23,439
12/31/96 28,484
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 20, 1987
[CHART]
SMALL CAP INDEX FUND
(Division 14)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital through investment 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 Russell 2000(R) Index.**
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<C> <C>
05/01/92 $10,000
12/31/92 11,128
12/31/93 12,772
12/31/94 12,223
12/31/95 15,449
12/31/96 17,854
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400(R)" are
trademarks of Standard and Poor's ("S&P"). Neither the MidCap 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 investing in these
Funds.
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. Russell(TM) is a trademark of the Frank Russell Company.
10
<PAGE> 16
MIDCAP INDEX FUND
(Division 4)
- ---------------------------------------------------------------
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 Standard &
Poor's MidCap 400(R) Index*.
The performance information for the MidCap Index Division is shown in two
separate sets of tables and graphs for the ten year period beginning January 1,
1987 and for the period beginning October 1, 1991. The latter period shows the
performance of the MidCap Index Division since the change in investment
objectives, investment program and investment restrictions of the underlying
Fund. Selected Purchase Unit data for the last ten years for the MidCap Index
Division appears on page 6 of this prospectus.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<C> <C>
10/01/91 $10,000
12/31/91 11,163
12/31/92 12,143
12/31/93 13,574
12/31/94 12,936
12/31/95 16,718
12/31/96 19,661
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,490
12/31/88 10,730
12/31/89 12,672
12/31/90 11,380
12/31/91 13,747
12/31/92 14,955
12/31/93 16,717
12/31/94 15,931
12/31/95 20,589
12/31/96 24,214
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
11
<PAGE> 17
INTERNATIONAL EQUITIES FUND
(Division 11)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital through investments primarily in a
diversified portfolio of equity and equity related securities of foreign issuers
that, as a group, are expected to provide investment results closely
corresponding to the performance of the EAFE Index.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 2, 1989 $ Value
- ------------------------- -------
<C> <C>
10/02/89 $10,000
12/31/89 10,284
12/31/90 8,134
12/31/91 8,952
12/31/92 7,671
12/31/93 9,864
12/31/94 10,545
12/31/95 11,565
12/31/96 12,229
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
TEMPLETON INTERNATIONAL
FUND: CLASS 1
(Division 20)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve long-term capital growth through a flexible policy of investing
in stocks and debt obligations of companies and governments, outside the United
States. Any income realized will be incidental. Although the Fund generally
invests in common stock, it may also invest in preferred stocks and certain debt
securities such as convertible bonds which are rated in any category by S&P or
Moody's or which are unrated by any agency.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<C> <C>
05/01/92 $10,000
12/31/92 9,311
12/31/93 13,549
12/31/94 13,077
12/31/95 14,952
12/31/96 18,317
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
12
<PAGE> 18
DREYFUS SMALL CAP PORTFOLIO
(Division 18)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to maximize capital appreciation and invests principally in common stocks.
This Fund will be particularly alert to companies which The Dreyfus Corporation
considers to be emerging smaller-size companies which are believed to be
characterized by new or innovative products, services, or processes which should
enhance prospects for growth in future earnings.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1990 $ Value
- ------------------------- --------
<C> <C>
08/31/90 $ 10,000
12/31/90 10,168
12/31/91 26,105
12/31/92 44,181
12/31/93 73,477
12/31/94 78,125
12/31/95 99,825
12/31/96 114,938
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
GROWTH FUND
(Division 15)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital through investment primarily in
common stocks of U.S. growth companies engaged in service-related activities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 29,1994 $ Value
- ---------------------------- -------
<C> <C>
04/29/94 $10,000
12/31/94 10,018
12/31/95 14,667
12/31/96 17,333
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
13
<PAGE> 19
GROWTH & INCOME FUND
(Division 16)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital and, secondarily, current income
through investment in common stocks and equity-related securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 29, 1994 $ Value
- ---------------------------- -------
<C> <C>
04/29/94 $10,000
12/31/94 9,932
12/31/95 12,966
12/31/96 15,831
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
CAPITAL CONSERVATION FUND
(Division 7)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with preservation of capital
through current income and capital gains on investments in intermediate and
long-term debt instruments and other income producing securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,722
12/31/88 10,298
12/31/89 11,392
12/31/90 11,247
12/31/91 13,047
12/31/92 14,032
12/31/93 15,558
12/31/94 14,463
12/31/95 17,295
12/31/96 17,424
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
14
<PAGE> 20
GOVERNMENT SECURITIES
FUND
(Division 8)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high current income and protection of capital through investments in
intermediate and long-term U.S. Government debt securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,674
12/31/88 10,153
12/31/89 11,273
12/31/90 11,826
12/31/91 13,434
12/31/92 14,259
12/31/93 15,642
12/31/94 14,790
12/31/95 17,202
12/31/96 17,357
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
INTERNATIONAL GOVERNMENT
BOND FUND
(Division 13)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high current income through investments primarily in high quality debt
securities issued or guaranteed by foreign governments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<C> <C>
10/01/91 $10,000
12/31/91 10,905
12/31/92 11,128
12/31/93 12,583
12/31/94 13,014
12/31/95 15,308
12/31/96 15,822
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
15
<PAGE> 21
SOCIAL AWARENESS FUND
(Division 12)
- ---------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 2, 1989 $ Value
- ------------------------- -------
<C> <C>
10/02/89 $10,000
12/31/89 10,100
12/31/90 9,877
12/31/91 12,506
12/31/92 12,795
12/31/93 13,670
12/31/94 13,339
12/31/95 18,351
12/31/96 22,527
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
SCIENCE & TECHNOLOGY FUND
(Division 17)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through investment primarily in the common
stocks and equity-related securities of companies that are expected to benefit
from the development, advancement and use of science and technology.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 29, 1994 $ Value
- ------------------------- -------
<C> <C>
04/29/94 $10,000
12/31/94 12,477
12/31/95 19,972
12/31/96 22,505
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
16
<PAGE> 22
MONEY MARKET FUND
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,450
12/31/88 11,048
12/31/89 11,923
12/31/90 12,738
12/31/91 13,310
12/31/92 13,606
12/31/93 13,833
12/31/94 14,216
12/31/95 14,857
12/31/96 15,447
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
TIMED OPPORTUNITY FUND
(Division 5)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks maximum aggregate rate of return over the long-term through controlled
investment risk by adjusting its investment mix among stocks, long-term debt
securities and short-term money market securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,731
12/31/88 11,657
12/31/89 13,500
12/31/90 13,043
12/31/91 15,669
12/31/92 15,401
12/31/93 16,662
12/31/94 16,281
12/31/95 20,114
12/31/96 22,124
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
17
<PAGE> 23
TEMPLETON ASSET ALLOCATION
FUND CLASS 1
(Division 19)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of total return through a flexible policy of investing in the
following market segments: stocks of companies in any nation, debt securities of
companies and governments of any nation, and money market instruments. Changes
in the asset mix will be adjusted in an attempt to capitalize on total return
potential produced by changing economic conditions throughout the world.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 24, 1988 $ Value
- ------------------------- -------
<C> <C>
08/24/88 $10,000
12/31/88 10,237
12/31/89 11,450
12/31/90 10,405
12/31/91 13,124
12/31/92 14,009
12/31/93 17,453
12/31/94 16,714
12/31/95 20,227
12/31/96 23,746
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 24, 1988
[CHART]
18
<PAGE> 24
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director account is surrendered before the Payout Period. The
amount, number, and frequency of your Purchase Payments is determined by the
retirement plan for which Portfolio Director was purchased.
PURCHASE PAYMENTS
You may establish an account only through a VALIC representative. Initial
Purchase Payments must be received by VALIC either with, or after, a completed
application. Your employer is usually responsible for remitting Purchase
Payments to us. The employer is responsible for furnishing instructions to us (a
premium flow report) as to the amount being applied to your account. Purchase
Payments can also be made by you for IRAs and certain non-qualified contracts
("individual contracts.")
Minimum initial and subsequent Purchase Payments are as follows:
- --------------------------------------------------
<TABLE>
<CAPTION>
Initial Subsequent
Contract Type Payment Payment
------------- ------- ----------
<S> <C> <C>
Periodic Payment $ 30 $ 30
Single Payment $1,000 -0-
</TABLE>
Periodic Payment minimums apply to each Fixed Account Option or Variable Account
Option selected. The Single Payment minimum applies to each of your accounts.
Purchase Payments are received in VALIC's Home Office. When an initial Purchase
Payment accompanies an application, within 2 business days we will:
- - Accept the Application -- and issue a contract. We will also establish your
account and apply your Purchase Payment by crediting the amount to the Fixed
Account Option or Variable Account Option selected;
- - Reject the Application -- and return the Purchase Payment; or
- - Request Additional Information -- to correct or complete the application.
If we receive Purchase Payments from your employer before we receive your
completed application or enrollment form, we will not be able to open an account
for you. Under these circumstances, we will take one of the following actions:
Return Purchase Payments. If we do not have your name, address or social
security number, we will return the Purchase Payment to your employer unless
this information is immediately provided to us.
Employer-Directed Account. If we have your name, address and social security
number and we have an Employer-Directed Account Agreement from your employer,
generally we will deposit your Purchase Payment in an "Employer-Directed"
account invested in our Money Market Division Option. You may not transfer
these amounts until VALIC has received a completed application or enrollment
form.
Starter Account. If we have your name, address and social security number, but
we do not have an Employer-Directed Account Agreement from your employer, we
will deposit your Purchase Payment in a "starter" account invested in the
Money Market Division. We will send you follow-up letters requesting the
information necessary to complete the application, including your allocation
instructions. Unless a completed application or enrollment form is received by
us within 105 days of establishment of your starter account, the account
balance, including earnings, will be returned to your employer. We are not
responsible for any adverse tax consequences to you that may result from the
return of your employer's contributions.
PURCHASE UNITS
A Purchase Unit is a unit of interest owned by you in your Variable Account
Option. Purchase Units apply only to the Variable Account Options selected for
your account. Purchase Unit values are calculated at the close of regular
trading of the New York Stock Exchange (the "Exchange"), currently 4:00 p.m. New
York time (see Calculation of Purchase Unit Value below for more information.)
Purchase Units will be credited the same business day if Purchase Payments are
received by our Home Office before the close of the Exchange. If not, they will
be calculated and credited the next business day. Purchase Unit values will vary
depending on the net investment results of each of the Variable Account Options.
This means the value of your Variable Account Option will fluctuate.
Calculation of Purchase Unit Value
The Purchase Unit value for a Division is calculated as shown below:
- --------------------------------------------------
Step 1: Calculate the gross investment rate:
Gross Investment Rate
= (EQUALS)
The Division's investment income
and capital gains and losses
(whether realized or unrealized) on
that day from the assets
attributable to the Division.
/ (DIVIDED BY)
The value of the Division for
the immediately preceding day on
which the values are calculated.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the
benefits of an annuity
Contract offered by
Portfolio Director.
19
<PAGE> 25
- ------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the New York Stock Exchange is open.
- --------------------------------------------------
Step 2: Calculate net investment rate for any day as follows:
Net Investment Rate
= (EQUALS)
Gross Investment Rate
(calculated in Step 1)
- - (MINUS)
Separate Account charges and any
income tax charges.
Step 3: Determine Purchase Unit Value for that day.
Purchase Unit Value for that day.
= (EQUALS)
Purchase Unit Value for immediate
preceding day.
X (MULTIPLIED BY)
Net Investment Rate (as calculated
in Step 2) plus 1.00.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
CHOOSING INVESTMENT OPTIONS
There are 18 investment options offered in Portfolio Director. This includes 2
Fixed Account Options and 16 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 18 options. The Funds that underlie the
Variable Account Options are registered as investment companies under and are
subject to regulation of the Investment Company Act of 1940 (the Act). The Fixed
Account Options are not subject to regulation under the Act and are not required
to be registered under the Securities Act of 1933. As a result, the SEC has not
reviewed data in this prospectus that relates to the Fixed Account Options.
However, federal securities law does require such data to be accurate and
complete.
PURCHASE UNIT -- a
measuring unit used to
calculate your Account Value
during the Purchase Period.
The value of a Purchase Unit
will vary with the investment
experience of the Separate
Account Division you have
selected.
FIXED ACCOUNT OPTIONS
Each of the Fixed Account Options are part of the Company's general assets. You
may allocate all or a portion of your Purchase Payment to the Fixed Account
Options listed in "Profile of Portfolio Director Contract" appearing in this
prospectus. Purchase Payments you allocate to these Fixed Account Options are
guaranteed to earn at least a minimum rate of interest. Interest is paid on each
of the Fixed Account Options at declared rates, which may be different for each
option. We bear the entire investment risk for the Fixed Account Option. All
Purchase Payments and interest earned on such amounts in your Fixed Account
Option will be paid regardless of the investment results experienced by the
Company's general assets.
- --------------------------------------------------
Here is how you may calculate the value of your Fixed Account Option during the
Purchase Period:
Value of Your Fixed
Account Options
= (EQUALS)
All Purchase Payments made to the
Fixed Account Options
+ (PLUS)
Amounts transferred from Variable
Account Options to the Fixed
Account Options
+ (PLUS)
All interest earned
- - (MINUS)
Amounts transferred or withdrawn
from Fixed Account Options
(including applicable fees and
charges)
VARIABLE ACCOUNT OPTIONS
You may allocate all or a portion of your Purchase Payments to the Variable
Account Options listed in this prospectus. A complete discussion of each of the
Variable Account Options may be found in the "Variable Account Options" section
in this prospectus. Based upon a Variable Account Option's Purchase Unit Value
your account will be credited with the applicable number of Purchase Units. The
Purchase Unit Value of each Variable Account Option will change daily depending
upon the investment performance of the underlying fund (which may be positive or
negative) and the deduction of VALIC Separate Account A charges. See the "Fees
and Charges" section in this prospectus. Because Purchase Unit Values change
daily, the number of Purchase Units your account will be credited with for
subsequent Purchase Payments will vary. Each Variable Account Option bears its
own investment risk. Therefore, the value of your account may be worth more or
less at retirement or withdrawal.
- --------------------------------------------------
Here is how to calculate the value of each Variable Account Option in your
account during the Purchase Period:
Value of Your Variable Account Option
= (EQUALS)
Total Number of Purchase Units
X (MULTIPLIED BY)
Current Purchase Unit Value
STOPPING PURCHASE PAYMENTS
Purchase Payments may be stopped at any time. Purchase Payments may be resumed
at any time before your Portfolio Director account has been surrendered. While
no Purchase Payments are being made, the number of Purchase Units outstanding
will remain the same. (This is assuming no transfers or withdrawals are made.)
The value of the Purchase Units will continue to vary. Your Account Value will
continue to be subject to charges.
If your Account Value falls below $300, and you do not make any Purchase
Payments for two years from the date we established your account, we may close
the account and pay the Account Value (less any surrender charge) to you.
20
<PAGE> 26
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
- ---------------------------------------------------
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer was
previously made
into
Short-Term Fixed
Account.(2)
</TABLE>
- ---------------
(1) Your employer may further limit or expand the restrictions. We may charge
for those modified restrictions if specified in your employer's retirement
plan.
(2) VALIC may change this holding period at any time in the future, but it will
never be more than 180 days.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between Portfolio Director's
investment options subject to the following limitations:
- ---------------------------------------------------
<TABLE>
<CAPTION>
% OF ACCOUNT
-------------------------------- OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
-------------- ----------- ------------------- ------------
<S> <C> <C> <C>
Variable: Up to 100% Once every 365 days None
Combination
Fixed
and Variable Up to 100% Once every 365 days None
Payout: of money in
variable
option
payout
Fixed: Not -- --
permitted
</TABLE>
COMMUNICATING TRANSFER OR
REALLOCATION INSTRUCTIONS
A written instruction to transfer or reallocate all or part of your Account
Value between the various investment options in Portfolio Director, should be
sent to VALIC's Home Office.
Instructions for transfers or reallocations may be made by calling
1-800-621-7792. Telephone transfers will be allowed unless we have been notified
not to accept such telephone instructions. In this event, we must receive
written instructions, in order to permit future telephone transfers to be made.
Before a transfer will be made by telephone, you must give us the requested
identifying information concerning your account(s).
Unless we have been instructed not to accept requests for telephone transfers,
anyone may effect a telephone transfer if they furnish the requested
information. You will bear any loss resulting from such instructions, whether
the caller was specifically authorized by you or not.
No one that we employ or that represents VALIC may give telephone instructions
on your behalf without VALIC's prior written permission. (This does not apply to
a contract with the immediate family of an employee or representative of VALIC).
We will send you a confirmation of the completed transfer within 5 days from the
date of your instruction. When you receive your confirmation, it is your duty to
verify the information shown, and advise us of any errors within one business
day.
You will bear the risk of loss arising from instructions received by telephone.
We are not responsible for the authenticity of such instructions. Any telephone
instructions which we reasonably believe to be genuine will be your
responsibility. This includes losses from errors in communication. Telephone
transfer instruction may not be made during the Payout Period. We reserve the
right to stop telephone transfers at any time.
EFFECTIVE DATE OF TRANSFER
The effective date of a transfer will be:
- - The date of receipt, if received in our Home Office before the close of
regular trading of the New York Stock Exchange on a day values are calculated;
(Normally, this will be 4:00 P.M. New York time); otherwise
- - The next date values are calculated.
ACCOUNT VALUE -- the total sum
of your Fixed Account and/or
Variable Account Options that
have not yet been applied to
your Payout Payments.
PURCHASE PERIOD -- the time
between your first Purchase
Payment and your Payout Period
(or surrender).
HOME OFFICE -- Our principal
office at 2929 Allen Parkway,
Houston, Texas 77019.
PAYOUT PERIOD -- the time that
starts when you begin to
withdraw your money in a
steady stream of payments.
21
<PAGE> 27
FEES AND CHARGES
- ----------------------------------------------------------------------------
By investing in Portfolio Director, you may be subject to six basic types of
fees and charges:
- - Account Maintenance Fee
- - Surrender Charges
- - Premium Tax Charge
- - Separate Account Charges
- - Fund Annual Expense Charge
- - Other Tax Charges
These fees and charges are explained below. For additional information about
these fees and charges, see the Fee Table in this prospectus.
ACCOUNT MAINTENANCE FEE
An account maintenance fee of $3.75 will be deducted on the last day of each
calendar quarter if any of your money is invested in the Variable Account
Options. We will sell Purchase Units from your Account to pay the account
maintenance fee. If you invest only in Fixed Account Options during a calendar
quarter, this fee will not apply. If all your money in a Variable Account Option
is withdrawn, or transferred to a Fixed Account Option, the fee will be deducted
at that time. The fee will be assessed equally among the Variable Account
Options that make up your Account Value.
The account maintenance fee is to reimburse the Company for our administrative
expenses for providing Variable Account Options. This includes the expense for
establishing and maintaining the record keeping for the Variable Account
Options. We do not expect that the amount of fees we receive will be greater
than our expenses.
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
The amount of the account maintenance fee may be reduced or waived if Portfolio
Director is issued to certain types of plans which are expected to result in
lower costs to VALIC. To learn more about how we determine if account
maintenance fees may be reduced or waived, see the "Reduction or Waiver of
Account Maintenance Fee or Surrender Charges" section in this prospectus. If you
have two or more accounts established under the same group contract, we may
agree to deduct an account maintenance fee from only one account.
SURRENDER CHARGES
When you withdraw money from your account, you may be subject to a surrender
charge. For information about your right to surrender, see "Surrender of Account
Value" in this prospectus.
It is assumed that the most recent Purchase Payments are withdrawn first. No
surrender charge will be applied unless an amount is actually withdrawn. We
consider all Purchase Payments to be withdrawn before
earnings are withdrawn.
Amounts exchanged from other contracts issued by the Company may or may not be
subject to a surrender charge. After exchange, it is assumed that any new
Purchase Payments are withdrawn before the exchanged amount. For more
information, see "Exchange Privilege" in the Statement of Additional
Information.
AMOUNT OF SURRENDER CHARGES
A surrender charge may not be greater than:
- - Five percent (5%) of the amount of all Purchase Payments received during the
past 60 months; or
- - Five percent (5%) of the amount withdrawn.
10% FREE WITHDRAWAL
In any Participant Year, up to 10% of the Account Value may be withdrawn without
a surrender charge. The surrender charge will apply to any amount withdrawn that
exceeds this 10% limit. The percentage withdrawn will be determined by dividing
the amount withdrawn by the Account Value just prior to the withdrawal. If more
than one withdrawal is made during a Participant Year, each percentage will be
added to determine at what point the 10% limit has been reached.
These 10% withdrawals without charge do not reduce Purchase Payments for the
purpose of computing the surrender charge. If a surrender charge is applied to
all or part of a Purchase Payment, no surrender charge will be applied to such
Purchase Payment (or portion thereof) again.
EXCEPTIONS TO SURRENDER CHARGES
No surrender charge will be applied:
- - To money applied to provide a Payout Option;
- - To death benefits;
- - If no Purchase Payments have been received during the 60 months prior to the
date of surrender;
- - If your account has been in effect for 15 years or longer;
- - If your account has been in effect for 5 years or longer, and you have
attained age 59 1/2;
- - To "No Charge Systematic Withdrawals";
- - Under certain contracts, to withdrawals under the No Charge Minimum
Distribution provisions;
22
<PAGE> 28
- --------------------------------------------------------------------------------
- - If you have become totally and permanently disabled, defined as follows: You
are unable, due to mental or physical impairment, to perform the material and
substantial duties of any occupation for which you are suited by means of
education, training or experience; the impairment must have been in existence
for more than 180 days; the impairment must be expected to result in death or
be long-standing and indefinite and proof of disability must be evidenced by a
certified copy of a Social Security Administration determination or a doctor's
verification; and
- - If you are at least 55 years old, are no longer employed by the employer that
established the plan, and your account under the plan was established at least
5 years prior to the date of surrender.
The surrender charges may be reduced or waived if Portfolio Director is issued
to certain types of plans which are expected to result in lower costs to VALIC.
To learn more about how we determine if surrender charges may be reduced or
waived, see the "Reduction or Waiver of Account Maintenance Fee or Surrender
Charges" section in this prospectus.
PREMIUM TAX CHARGE
Taxes on Purchase Payments are imposed by some states, cities, and towns. The
rate will range from zero to 3%.
If the law of a state, city, or town requires premium taxes to be paid when
Purchase Payments are made, we will, of course, comply. Otherwise, such tax will
be deducted from the Payout Value when annuity payments are to begin.
If we deduct an amount for premium taxes, but later find the tax was not due, we
will:
- - Adjust the amount deducted in error to reflect investment experience from the
date of the deduction to the date we determined the tax was not due; and
- - Apply the excess amount, as adjusted, to increase the number of Pay-in or
Payout Units.
SEPARATE ACCOUNT CHARGES
There will be a mortality and expense risk charge applied to VALIC Separate
Account A. This is a daily charge at an annualized rate of 1% to 1.25% on the
average daily net asset value of VALIC Separate Account A. The exact rate
depends on the Variable Account Option selected. This charge is guaranteed and
cannot be increased by the Company. The mortality and expense risk charge is to
compensate the Company for assuming mortality and expense risks under Portfolio
Director. The mortality risk that the Company assumes is the obligation to
provide payments during the Payout Period for your life no matter how long that
might be. In addition, the Company assumes the obligation to pay during the
Purchase Period an interest guaranteed death benefit. For more information about
the interest guaranteed death benefit see the "Death Benefit" section of this
prospectus. The expense risk is our obligation to cover the cost of issuing and
administering Portfolio Director, no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk charge. For more
information about the mortality and expense risk charge, see the Fee Table in
this prospectus.
FUND ANNUAL EXPENSE CHARGE
Investment management charges based on a percentage of each Fund's average daily
net assets are payable by each Fund. Depending on the Variable Account Option
selected, the charges will be paid by each Fund to the Company, or to Dreyfus or
to Templeton. These charges and other Fund charges and expenses are fully
described in the prospectuses for the Funds. These charges indirectly cost you
because they lower your return.
OTHER TAX CHARGES
We reserve the right to charge for certain taxes (other than premium taxes) that
we may have to pay. This could include federal income taxes. Currently, no such
charges are being made.
REDUCTION OR WAIVER OF ACCOUNT
MAINTENANCE FEE OR SURRENDER
CHARGES
We may, as described below, determine that the account maintenance fee or the
amount of surrender charges for Portfolio Director may be reduced or waived. We
may reduce or waive these fees and charges if we determine that your retirement
program will allow us to reduce or eliminate administrative or sales expenses
that we usually incur for retirement programs. There are a number of factors we
will review in determining whether your retirement program will allow us to
reduce or eliminate these administrative or sales expenses.
23
<PAGE> 29
------------------------------------------------------------
To determine whether we can reduce or waive account maintenance fees, we review
the following factors:
- The type of retirement program
Certain types of retirement programs because of their stability can result
in lower administrative costs.
- The nature of your retirement program.
Certain types of retirement programs, due to the types of employees who
participate, experience fewer account surrenders thus reducing
administrative costs.
- The frequency of Purchase Payments for your retirement program
Purchase Payments received no more than once a year can reduce
administrative costs.
- The administrative tasks performed by your employer for your retirement
program.
The employer sponsoring your retirement program can, through their method of
remitting Purchase Payments, reduce administrative costs.
- Other factors of which we are not presently aware which could reduce
administrative costs.
To determine whether we can reduce or waive surrender charges, we review the
following factors:
- The size of your retirement program.
A retirement program which involves a larger group of employees may allow
us to reduce sales expenses.
- The total amount of Purchase Payments to be received for your retirement
program.
Larger Purchase Payments can reduce sales expenses.
- The nature of your retirement program.
Certain types of retirement programs, due to the type of employees who
participate, experience fewer account surrenders thus reducing sales
expense.
- The type of your retirement program.
Certain types of retirement programs because of their stability can result
in lower sales expenses.
- The use of mass enrollment or related administrative tasks performed by your
employer for your retirement program.
- Other factors of which we are not presently aware which could reduce sales
expenses.
We also may reduce or eliminate the amount of the mortality and expense risk
charge under Portfolio Director or credit additional amounts to the Contract
representing reductions in this charge. We will only do this if permitted by
this Contract and by VALIC guidelines in effect at the time. In no event will
the reduction or waiver of fees be permitted where the reduction or waiver
will unfairly discriminate against any person.
24
<PAGE> 30
PAYOUT PERIOD
- --------------------------------------------------------------------------------
The Payout Period (Annuity Period) begins when you decide to retire or otherwise
withdraw your money in a steady stream of payments. If your employer's plan
permits, you may apply any portion of your Account Value to one of the types of
Payout Options listed below. You may choose to have your Payout Option on either
a fixed, a variable, or a combination payout basis. When you choose to have your
Payout Option on a variable basis, you may keep the same Variable Account
Options in which your Purchase Payments were made, or transfer to different
ones.
FIXED PAYOUT
Under Fixed Payout, you will receive payments from the Company. These payments
are fixed and guaranteed by the Company. The amount of these payments will
depend on:
- Type and duration of Payout Option chosen;
- Your age or your age and the age of your survivor (1);
- Your sex or your sex and the sex of your survivor (1) (IRA's and certain
nonqualified contracts);
- The portion of your Account Value being applied; and
- The payout rate being applied and the frequency of the payments.
(1) This applies only to joint and survivor payouts.
If the benefit would be greater, the amount of your payments will be based on
the current payout rate the Company uses for immediate annuity contracts.
VARIABLE PAYOUT
With a Variable Payout, you may select up to 7 Variable Account Options. Your
payments will vary accordingly. This is due to the varying investment results
that will be experienced by each of the Variable Account Options you selected.
The Payout Unit Value is calculated just like the Purchase Unit Value for each
Variable Account Option except that the Payout Unit Value includes a factor for
the Assumed Investment Rate you select. For additional information on how Payout
Payments and Payout Unit Values are calculated, see the Statement of Additional
Information.
In determining your first Payout Payment, an Assumed Investment Rate of 3 1/2%
is used (unless you select a higher rate.) If the net investment experience of
the Variable Account Option exceeds your Assumed Investment Rate, your next
payment will be greater than your first payment. If the investment
experience of the Variable Account Option is lower than your Assumed Investment
Rate, your next payment will be less than your first payment.
COMBINATION FIXED AND VARIABLE PAYOUT
With a Combination Fixed and Variable Payout, you may choose:
- Up to 6 Variable Account Options (payments will vary); with a
- Fixed Payout (payment is fixed and guaranteed).
PAYOUT DATE
The Payout Date is the date elected by you on which your payout (annuity)
payments will start. The date elected must be the first of any month provided 30
days advance notice has been given to VALIC. Your account will be valued ten
days prior to the end of the month preceding the Payout Date. A request to start
payments must be sent to our Home Office on a form approved by VALIC. Generally,
for qualified contracts, the Payout Date may begin when you attain age 59 1/2 or
separate from service, but must begin no later than April 1 following the
calendar year you reach age 70 1/2 or the calendar year in which you retire. For
nonqualified contracts, the Payout Date may begin at any time prior to your 85th
birthday. For additional information on the minimum distribution rules that
apply to payments under 403(b), 401, 403(a) and 457 plans or simplified employee
plans ("SEPs"), see "Federal Tax Matters" in this prospectus and in the
Statement of Additional Information.
PAYOUT OPTIONS
You may specify the manner in which your Payout Payments are made. You may
select one of the following options:
- LIFE ONLY -- payments are made only to you during your lifetime. Under this
option there is no provision for a death benefit for the beneficiary. For
example, it would be possible under this option for the Annuitant to receive
only one payout payment if he died prior to the date of the second payment,
two if he died before the third payment.
- LIFE WITH GUARANTEED PERIOD -- payments are made to you during your
lifetime; but if you die before the guaranteed period has expired, your
beneficiary will receive payments for the rest of your guaranteed period.
PAYOUT UNIT -- a measuring
unit used to calculate
Payout Payments from your
Variable Account Option.
Payout Unit values will vary
with the investment
experience of the VALIC
Separate Account A Division
you have selected.
ASSUMED INVESTMENT
RATE -- the rate used to
determine your first monthly
Payout Payment per thousand
dollars of Account Value in
your Variable Account
Option(s).
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<PAGE> 31
- ------------------------------------------------------------
- LIFE WITH CASH OR UNIT REFUND -- payments are made to you during your
lifetime. Upon your death, your beneficiary will receive a lump sum payment
equal to the remaining Annuity Value.
- JOINT AND SURVIVOR LIFE -- payments are made to you during the joint
lifetime of you and your beneficiary. Upon the death of one, payments
continue during the lifetime of the survivor. This option is designed
primarily for couples who require maximum possible variable payouts during
their joint lives and are not concerned with providing for beneficiaries at
death of the last survivor. For example, it would be possible under this
option for the Joint Annuitants to receive only one payment if both
Annuitants died prior to the date of the second payment, or for the Joint
Annuitants to receive only one payment and the surviving Annuitant to
receive only one payment if one Annuitant died prior to the date of the
second payment and the surviving Annuitant dies prior to the date of the
third payment.
- PAYMENT FOR A DESIGNATED PERIOD -- payments are made to you for a select
number of years between five and thirty. Upon your death, payments will
continue to your beneficiary until the designated period is completed.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
ENHANCEMENTS TO PAYOUT OPTIONS
You may be able to select enhancements to the Payout Options described above.
These enhancements include partial annuitization, flexible payments of varying
amounts and inflation protection payments. Additionally, certain options may be
available with a one to twenty year guaranteed period. Additionally, certain
options may be available with a one to twenty year guaranteed period. The Joint
and Survivor Life Option may be available with a one to twenty year guaranteed
period option. Not all of the enhancements are available under each option.
PAYOUT INFORMATION
Once your Payout Payments have begun, the option you have chosen may not be
stopped or changed. Any one of the Variable Account Options may result in your
receiving unequal payments during your life expectancy. If payments begin before
age 59 1/2, you may suffer unfavorable tax consequences if you do not meet an
exception to federal tax law. See "Federal Tax Matters" in this prospectus.
Your Payment Option should be selected at least 30 days before your Payout Date.
If such selection is not made:
- payments will be made under the Life with Guaranteed Period Option, and
- the payments will be guaranteed for a 10 year period, and
- the payments will be based on the allocation used for your Purchase Payments
- Fixed Account Option will be used to distribute payments to you on a Fixed
Payout basis
- Variable Account Options will be used to distribute payments to you on a
Variable Payout basis.
Your first Payout Payment must total at least $25.
Most Payout Payments are made monthly. If the amount of your payment is less
than $25, we reserve the right to reduce the number of payments made each year
so each of your payments are at least $25.
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<PAGE> 32
SURRENDER OF ACCOUNT VALUE
- --------------------------------------------------------------------------------
WHEN SURRENDERS ARE ALLOWED. You may withdraw all or part of your Account Value
at any time before the Payout Period begins if:
- allowed under federal and state law; and
- allowed under your employer's plan.
For an explanation of charges that may apply if you surrender your Account
Value, see "Fees and Charges" in this prospectus.
AMOUNT THAT MAY BE SURRENDERED. The amount that may be surrendered at any time
can be determined as follows:
- --------------------------------------------------
Your
Account
Allowed Value(1)
Surrender = (EQUALS) - (MINUS)
Value Any Applicable
Surrender
Charge
1: Equals the Account Value next computed after your properly completed
request for surrender is received in our Home Office.
There is no guarantee that the Surrender Value in a Variable Account Option will
ever equal or exceed the total amount of your Purchase Payments received by us.
We will mail to you the Surrender Value within 7 calendar days after we receive
your properly completed surrender request at our Home Office. However, we may be
required to suspend or postpone payments if redemption of an underlying Fund's
shares have been suspended or postponed. See "Offering, Purchase and Redemption
of Fund Shares" in the Series Company Statement of Additional Information. See
your current Fund(s)' prospectuses for a discussion of the reasons why the
redemption of shares may be suspended or postponed.
We may receive a surrender for a Purchase Payment which has not cleared the
banking system. We may delay payment of that portion of your Surrender Value
until the check clears. The rest of the Surrender Value will be processed as
usual.
SURRENDER RESTRICTIONS
Under the TEXAS STATE OPTIONAL RETIREMENT PROGRAM, and in many Section 403(b)
contracts, no surrender or partial surrender will be allowed except for
termination of employment, retirement or death.
Under the FLORIDA STATE OPTIONAL RETIREMENT PROGRAM, no surrender or partial
surrender of Purchase Payments made by the employer will be allowed except for
termination of employment, retirement or death. Benefit payments based on
payments from the employer may not be paid in a lump sum or for a period
certain, but must be paid under a life contingency option, except for:
- death benefits; and
- certain small amounts approved by the State of Florida.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time. A partial
surrender plus any surrender charge will reduce your Account Value. Partial
surrenders will be paid from the Fixed Account Option first unless otherwise
specified by you.
The reduction in the number of Purchase Units credited to your Variable Account
Option Account Value will equal:
- --------------------------------------------------
The amount Your Purchase
surrendered Units next
from the Variable computed after
Account Option the written
+ (PLUS) / (DIVIDED BY) request for
Any Surrender surrender is
Charge received at our
Home Office.
The Surrender Value will be reduced by a full quarterly account maintenance fee
charged in the case of a full surrender during a quarter.
SYSTEMATIC WITHDRAWALS. You may elect to withdraw all or part of your Account
Value under a systematic withdrawal method described in your annuity contract
offered by Portfolio Director. There will be no surrender charge for withdrawals
using this method, which provides for:
- Payments to be made to you
- Payment over a stated period of time (but not less than five years);
- Payment of a stated yearly dollar amount or percentage (the amount or
percentage may not exceed 20% of your Account Value at the time election is
made);
We may require a minimum withdrawal amount under this method. The portion of
your account that has not been withdrawn will continue to receive the investment
return of the Variable Account Options which you selected. A systematic
withdrawal election may not be changed but can be revoked at no charge. Once
revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
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<PAGE> 33
- ------------------------------------------------------------
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW. There will be no surrender charge on
a minimum distribution required by federal tax law (known as No Charge Minimum
Distribution), if the withdrawal:
- Is made payable to you; and
- Does not exceed the amount required under federal tax law as determined by
the values in your Portfolio Director Contract and VALIC.
This contract feature will not be available in any year that an amount has been
withdrawn under the no charge systematic withdrawal method. See "Federal Tax
Matters" in this prospectus and in the Statement of Additional Information for
more information about required distributions imposed by tax law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus.
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<PAGE> 34
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director. These other contracts are listed below. We will
allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director. This exchange privilege will be available only
to other contracts for which we have not yet started making payments under a
Payout Option. If you elect to exercise one of these exchange offers, you should
contact any of our Regional Offices at the addresses shown in the back of this
prospectus.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges.
- Partial exchanges are not permitted.
- Exchanges from Portfolio Director to other contract forms are not permitted.
- This exchange privilege is only available for those other contracts listed
below.
Additionally, if you have your money in a fixed account of one of the below
listed other contracts, you must exchange directly into the Fixed Account
Options of Portfolio Director. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director. For example, you will
be subject to the rules concerning transfers among investment options as stated
in the Transfers Between Investment Options section in this prospectus. We may,
at our option, waive any transfer restrictions for a stated period of time. If
we waive these transfer restrictions, you will be allowed to exchange to any
investment option available in Portfolio Director.
WE RESERVE THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THESE EXCHANGE PRIVILEGES
AT ANY TIME.
TAXES AND CONVERSION COSTS
We will impose no fee or charge for these exchanges. Please read the "Federal
Tax Matters" section in this prospectus for information about the federal income
tax treatment of Portfolio Director.
SURRENDER CHARGES
We will generally not impose nor waive existing surrender charges as a result of
your electing to exchange from one of the other contracts.
For purposes of determining surrender charges, we often consider time in the
contract. For SPQ181 and SPQ181-1 Contracts, the contract date for determining
surrender charges under Portfolio Director will be the SPQ181 and SPQ181-1
contract date plus one year. For example, if you have an SPQ181 contract with a
contract date of January 1, 1993, upon exchange into Portfolio Director, the
contract date for surrender charges purposes becomes January 1, 1994.
For any other contract, the contract date for determining surrender charges
under Portfolio Director will be the same date as the other contract, but no
earlier than January 1, 1982. (The effect of this is to potentially shorten the
charge period for Purchase Payments subsequently made to Portfolio Director.)
If there is no surrender charge on assets within another contract, we will not
impose charges on those assets as a result of an exchange. If surrender charges
are to be based on Purchase Payments within a contract, we will consider
purchase payments in the other contract to have been transferred to Portfolio
Director for purposes of calculating the surrender charge. The effective dates
of these Purchase Payments will also be retained for surrender charge purposes.
EXCHANGE OFFERS
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
Portfolio Director will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director. A more detailed comparison of the
features, charges, and restriction between each above listed other
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<PAGE> 35
- ------------------------------------------------------------
contract and Portfolio Director is provided in the Statement of Additional
Information.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
FEATURES OF PORTFOLIO DIRECTOR
In deciding whether you want to exercise this exchange privilege, you should
consider the following features of Portfolio Director.
- Portfolio Director has more investment options to select from.
- The Portfolio Director surrender charge is calculated assuming the most
recent Purchase Payments are removed first. This policy may cause exchanged
funds to be accessible only after charges are imposed.
- Portfolio Director has an Interest Guaranteed Death Benefit.
- Portfolio Director's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Portfolio Director's guaranteed annuity rates and guaranteed interest rates
may be less favorable than the other contracts.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the Company's Agents' and Managers' Retirement Plan ("Plan"). We
grant to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts or Independence Plus Contracts
for the equivalent units of interest in Portfolio Director.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director from SA-1 or
Independence Plus Contracts may have surrender charges and account maintenance
fees imposed under Portfolio Director. All other provisions with regard to
exchange offers referenced in the section entitled "Exchange Offers" will apply
to the Agents' and Managers' Retirement Plan Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will have
three options to choose from. As to the funding vehicle for their purchase
payment plan, the participant may choose to:
- Remain in the SA-1 Contract or Independence Plus Contract.
- Leave current assets in the SA-1 Contract or Independence Plus Contract and
direct future Purchase Payments to the Portfolio Director; or
- Transfer all current assets and future Purchase Payments to the Portfolio
Director.
If the participant chooses to remain in either the SA-1 Contract or Independence
Plus Contract, future Purchase Payments and current assets will be controlled by
the provisions of the SA-1 Contract or Independence Plus Contract, respectively.
If the participant chooses to leave current assets in the SA-1 Contract or the
Independence Plus Contract and direct future Purchase Payments to Portfolio
Director, the current assets will be controlled by the provisions of the SA-1
Contract or the Independence Plus Contract, respectively. The future Purchase
Payments will be controlled by the terms of Portfolio Director subject to the
exception that surrender charges and account maintenance fees will not be
imposed under Portfolio Director. If the participant chooses to transfer all
current assets and future Purchase Payments to Portfolio Director, such current
assets and future Purchase Payments will be controlled by the provisions of
Portfolio Director subject to the exception that surrender charges and account
maintenance fees will not be imposed under Portfolio Director.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. If a participant chooses to transfer
future Purchase Payments but not current assets to Portfolio Director, the
participant will be allowed at a later date to transfer the current assets to
Portfolio Director. For a complete analysis of the differences between the SA-1
contract or the Independence Plus Contract and Portfolio Director, you should
refer to the Statement of Additional Information and the form of the contract or
certificate for its terms and conditions.
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<PAGE> 36
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director will pay death benefits during either the Purchase Period or
the Payout Period. How these death benefits will be paid are discussed below.
The death benefit provisions in Portfolio Director may vary from state to state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law.
Beneficiaries Other Than Spouses.
If the Beneficiary is not the spouse of the Annuitant, death benefits must be
paid.
- - In full within 5 years after the Annuitant's death; or
- - By payments beginning within 1 year after the Annuitant's death under:
- A life annuity;
- A life annuity with payments certain; or
- An annuity for a designated period.
If the Annuitant dies before the Annuity Date, the Beneficiary as named by you
may receive the payout.
Payments certain or payments for a designated period cannot be for a greater
period of time than the Beneficiary's life expectancy. After choosing a payment
option, a Beneficiary may exercise many of the investment options and other
rights that the Participant or Contract Owner had under Portfolio Director.
SPECIAL INFORMATION FOR INDIVIDUAL
NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Tax
Qualified Contract are not the same person. If this is the case, and the
Contract Owner dies, there will be no death benefit payable since the death
benefit is only due in the event of the Annuitant's death. However, the Contract
will be transferred to the Contingent Owner, if any, or to the Contract Owner's
estate. Such transfers will be considered a taxable event by the IRS.
DURING THE PURCHASE PERIOD
Two types of benefits are available if death occurs during the Purchase Period.
Interest Guaranteed Death Benefit and Standard Death Benefit.
INTEREST GUARANTEED DEATH BENEFIT
The interest guaranteed death benefit is payable when death occurs prior to your
reaching the age of 70. This contract provision is not available in some states.
The amount payable under the interest guaranteed death benefit will be at least
equal to the sum of your Account Value in the Fixed Account Option(s) and the
Variable Account Option(s) on the date VALIC receives proof of death.
Here is how to calculate the death benefit:
- --------------------------------------------------
Step 1: Determine your Fixed Account Option Value by taking the greater of:
Value of Fixed Account Option on date
proof of death Is received by VALIC
OR
100% of Purchase Payments placed
in Fixed Account Option
- -(MINUS)
Amount of all prior withdrawals, charges and
any portion of Account Value applied under
a Payout Option
- --------------------------------------------------
Step 2: Determine your Variable Account Option Value by taking the greater of:
Value of Variable Account Option on date
proof of death is received by VALIC
OR
100% of Purchase Payments placed in
Variable Account Options
- -(MINUS)
Prior withdrawals (out of) or transfers
(out of) the Variable Account Option
+(PLUS)
Interest at an annual rate of 3%
- --------------------------------------------------
Step 3: Add step 1 + 2 = Death Benefit
For purposes of this calculation amounts transferred into the Variable Account
Option will be treated as Purchase Payments.
BENEFICIARY -- the person
designated to receive Payout
Payments upon the death of an
Annuitant.
ANNUITANT -- the individual,
(in most cases this person is
you) to whom Payout Payments
will be paid.
CONTRACT OWNER -- either your
employer or organization in
the case of a group contract
or the Annuitant in the case
of an individual contract. If
the contract is an individual
non-qualified type, this is
generally the Annuitant but a
Contingent Contract Owner may
also be provided for.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase Payments
and Account Value may be
allocated to fixed investment
options. Currently, the Fixed
Account Options in Portfolio
Director are Fixed Account
Plus and Short-Term Fixed
Account. Each option of this
type is guaranteed to earn at
least a minimum rate of
interest.
VARIABLE ACCOUNT OPTIONS --
Investment Options that
correspond to VALIC Separate
Account A Divisions offered by
Portfolio Director. Investment
returns on Variable Account
Options will be positive or
negative depending on the
investment performance of the
underlying mutual fund.
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<PAGE> 37
- ------------------------------------------------------------
STANDARD DEATH BENEFIT
The standard death benefit is payable if death occurs on or after age 70.
The Standard Death Benefit will be the greater of:
- --------------------------------------------------
Your Account Value on the Date Proof of Death is
Received by VALIC
OR
100% of Purchase Payments (to Fixed
and/or Variable Account Options)
- -- (MINUS)
Amount of all Prior Withdrawals, Charges
and any portion of Account Value applied
under a Payout Option
DURING THE PAYOUT PERIOD
If death occurs during the Payout Period, your Beneficiary may receive a death
benefit depending on the Payout Option selected. The amount of death benefits
will also depend on the Payout Option that you selected. The Payout Options
available in Portfolio Director are described in the "Payout Period" section of
this prospectus.
- If the Life Only Option or Joint and Survivor Life Option were chosen, there
will be no death benefit.
- If the Life With Guaranteed Period Option, Joint and Survivor Life with
Guaranteed Periods Option, Life with Cash or Unit Refund Option or Payment
for a Designated Period Option were chosen, and the entire amount guaranteed
has not been paid, the Beneficiary may choose one of the following within 60
days after death benefits are payable:
- Receive the present value of any remaining payments in a lump sum; or
- Receive the remaining payments under the same terms of the guaranteed
period option chosen by the deceased Participant; or
- Receive the present value of any remaining payments applied under the
Payment for a Designated Period Option for a period equal to or shorter
than the period remaining. Spouse beneficiaries may be entitled to more
favorable treatment under federal tax law.
Under federal tax laws if the Life with Guaranteed Periods Option is chosen on a
variable basis, it may be treated in the same manner as a surrender of your
Portfolio Director account. If your account is surrendered the full amount your
Beneficiary receives will normally be treated as income for that year. This
amount generally will also be taxed at rates used for ordinary income.
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<PAGE> 38
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts before Portfolio Director
was first available to you. We may therefore, advertise investment performance
since the inception of the underlying Funds. However, in doing so, we will use
the charges and fees imposed by Portfolio Director in calculating the Division's
investment performance for earlier time frames.
TYPES OF INVESTMENT
PERFORMANCE INFORMATION
ADVERTISED
We may advertise the Division's Total Return Performance information and Yield
Performance information.
TOTAL RETURN PERFORMANCE
INFORMATION
Total Return Performance Information is based on the overall dollar or
percentage change in value of an assumed investment in a Division over a given
period of time.
There are seven ways Total Return Performance Information may be advertised:
- Standard Average Annual Total Return
- Nonstandard Average Annual Total Return
- Cumulative Total Return
- Annual Change in Purchase Unit Value
- Cumulative Change in Purchase Unit Value
- Total Return Based on Different Investment Amounts
- An Assumed Account Value of $10,000
Each of these is described below.
STANDARD AVERAGE ANNUAL TOTAL RETURN
Standard Average Annual Total Return shows the average percentage change in the
value of an investment in the Division from the beginning to the end of a given
historical period. The results shown are after all charges and fees have been
applied against the
Division. This will include account maintenance fees and surrender charges that
would have been deducted if you surrendered Portfolio Director at the end of
each period shown. Premium taxes are not deducted. This information is
calculated for each Division based on how an initial assumed payment of $1,000
performed at the end of 1, 3, 5 and 10 year periods.
The return for periods of more than one year are annualized to obtain the
average annual percentage increase (or decrease) during the period.
Annualization assumes that the application of a single rate of return each year
during the period will produce the ending value, taking into account the effect
of compounding.
NONSTANDARD AVERAGE ANNUAL TOTAL RETURN
Nonstandard Average Annual Total Return is calculated in the same manner as the
Standard Average Annual Total Return. However, Nonstandard Average Annual Total
Return shows only the historic investment results of the Division. Account
maintenance fees, surrender charges and premium taxes are not deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director will stay
in the Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. It is based on an assumed initial
investment of $10,000. The Cumulative Return will be calculated without
deduction of account maintenance fees, surrender charges or premium taxes.
ANNUAL CHANGE IN PURCHASE UNIT VALUE
Annual Change in Purchase Unit Value is a percentage change during a one year
period. This is calculated as follows:
- The Purchase Unit Value at the start of the year is subtracted from the
Purchase Unit Value at the end of the year;
- The difference is divided by the Purchase Unit Value at the start of the
year.
Account maintenance fees, surrender charges and premium taxes are not deducted.
The effect of these charges, if deducted, would reduce the Division's Annual
Change in Purchase Unit Value.
DIVISIONS -- Subaccounts of
VALIC Separate Account A
which represent the Variable
Account Options in Portfolio
Director. Each Division
invests in a different
mutual fund, each having its
own investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the
benefits of an annuity
Contract offered by
Portfolio Director.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated
and tables showing
historical performance
information, see the
Statement of Additional
Information.
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- ------------------------------------------------------------
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual changes in the Purchase Unit Value based on an initial
investment of $10,000. This will not reflect any deduction for account
maintenance fees, surrender charges and premium taxes.
YIELD PERFORMANCE INFORMATION
We may advertise Yield Performance, at a given point in time. A Division's yield
is one way of showing the rate of income the Division is earning as a percentage
of the Division's Purchase Unit Value.
MONEY MARKET DIVISION
We may advertise the Money Market Division's Current Yield and Effective Yield.
The Current Yield refers to the income produced by an investment in the Money
Market Division over a given 7-day period. The Current Yield does not take into
account surrender charges, account maintenance fees or premium taxes. The income
produced over a 7 day period is then "annualized." This means we are assuming
the amount of income produced during the 7-day period will continue to be
produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The 7-day Current Yield for the last 7 days ended
December 31, 1996 was 3.92%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield. The 7-day Effective Yield for the last 7 days ended December 31, 1996 was
3.99%.
DIVISIONS OTHER THAN THE MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate A Account
Division is printed in the four tables below.
The information presented does not reflect the advantage under Portfolio
Director of deferring federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments (see "Federal Tax Matters" in the
prospectus and in the Statement of Additional Information.) The information
presented also does not reflect the advantage under Qualified Contracts of
deferring federal income tax on Purchase Payments.
The performance results shown in the following tables are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
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<PAGE> 40
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)............. 04/20/87 11.29% -- 12.85% 16.75% 16.42%
MidCap Index Fund (Division 4)
Period from 10/13/82 to 12/31/96......... 10/13/82 8.59 9.11% 11.20 11.69 12.51
Period from 10/01/91 to 12/31/96......... 13.60 -- 11.20 11.69 12.51
Small Cap Index Fund (Division 14)......... 05/01/92 12.39 -- -- 10.33 10.47
International Equities Fund (Division
11)...................................... 10/02/89 2.72 -- 5.51 5.83 0.90
Templeton International Fund (Division
20)...................................... 05/01/92 13.03 -- -- 9.06 17.40
Dreyfus Small Cap Portfolio (Division
18)...................................... 08/31/90 46.85 -- 34.03 14.69 10.04
Growth Fund (Division 15).................. 04/29/94 21.42 -- -- -- 13.08
Growth & Income Fund (Division 16)......... 04/29/94 17.23 -- -- -- 16.99
Capital Conservation Fund (Division 7)..... 01/16/86 5.53 5.57 5.02 2.15 -3.87
Government Securities Fund (Division 8).... 01/16/86 5.48 5.53 4.30 1.83 -3.72
International Government Bond Fund
(Division 13)............................ 10/01/91 9.00 -- 6.84 6.35 -1.37
Social Awareness Fund (Division 12)........ 10/02/89 11.86 -- 11.72 16.77 17.65
Science & Technology Fund (Division 17).... 04/29/94 34.25 -- -- -- 7.59
Money Market Fund (Division 6)............. 01/16/86 4.31 4.31 1.99 2.05 -0.79
Timed Opportunity Fund (Division 5)........ 09/06/83 7.50 8.13 6.24 8.38 4.95
Templeton Asset Allocation Fund (Division
19)...................................... 08/24/88 10.79 -- 11.82 9.30 12.30
</TABLE>
The MidCap Index Division was formerly the Capital Accumulation Division.
Effective October 1, 1991, the Fund underlying this Division changed its name
from the Capital Accumulation Fund to the MidCap Index Fund and amended its
investment objective, investment program and investment restrictions
accordingly. Historical data prior to October 1, 1991 reflect investment
experience prior to these changes. Selected purchase unit data for the last ten
years for this Division appears on page 10 of the prospectus. Performance
information for the Dreyfus Small Cap Division, Templeton Asset Allocation
Division, and Templeton International Division was calculated on a pro forma
basis, using the inception dates of the underlying Funds, and applying current
contract charges.
35
<PAGE> 41
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................ 04/20/87 11.44% -- 13.60% 18.10% 21.53%
MidCap Index Fund (Division 4)
Period from 10/13/82 to 12/31/96............ 10/13/82 8.73 9.25% 11.99 13.14 17.61
Period from 10/01/91 to 12/31/96............ 13.74 -- 11.99 13.14 17.61
Small Cap Index Fund (Division 14)............ 05/01/92 13.23 -- -- 11.81 15.57
International Equities Fund (Division 11)..... 10/02/89 2.85 -- 6.44 7.43 5.75
Templeton International Fund (Division 20).... 05/01/92 13.85 -- -- 10.57 22.50
Dreyfus Small Cap Portfolio (Division 18)..... 08/31/90 47.04 -- 34.51 16.08 15.14
Growth Fund (Division 15)..................... 04/29/94 22.91 -- -- -- 18.18
Growth & Income Fund (Division 16)............ 04/29/94 18.80 -- -- -- 22.10
Capital Conservation Fund (Division 7)........ 01/16/86 5.67 5.71 5.96 3.85 0.75
Government Securities Fund (Division 8)....... 01/16/86 5.62 5.67 5.26 3.53 0.90
International Government Bond Fund (Division
13)......................................... 10/01/91 9.13 -- 7.73 7.93 3.36
Social Awareness Fund (Division 12)........... 10/02/89 12.00 -- 12.49 18.12 22.75
Science & Technology Fund (Division 17)....... 04/29/94 35.55 -- -- -- 12.68
Money Market Fund (Division 6)................ 01/16/86 4.44 4.44 3.02 3.75 3.97
Timed Opportunity Fund (Division 5)........... 09/06/83 7.64 8.26 7.14 9.91 9.99
Templeton Asset Allocation Fund (Division
19)......................................... 08/24/88 10.94 -- 12.59 10.81 17.40
</TABLE>
TABLE III
CUMULATIVE RETURN
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................ 04/20/87 184.84% -- 89.18% 64.71% 21.53%
MidCap Index Fund (Division 4)
Period from 10/13/82 through 12/31/96....... 10/13/82 227.26 142.14% 76.13 44.84 17.61
Period from 10/01/91 through 12/31/96....... 96.61 -- 76.13 44.84 17.61
Small Cap Index Fund (Division 14)............ 05/01/92 78.54 -- -- 39.79 15.57
International Equities Fund (Division 11)..... 10/02/89 22.29 -- 36.60 23.98 5.75
Templeton International Fund (Division 20).... 05/01/92 83.17 -- -- 35.19 22.50
Dreyfus Small Cap Portfolio (Division 18)..... 08/31/90 1049.38 -- 340.28 56.43 15.14
Growth Fund (Division 15)..................... 04/29/94 73.33 -- -- -- 18.18
Growth & Income Fund (Division 16)............ 04/29/94 58.31 -- -- -- 22.10
Capital Conservation Fund (Division 7)........ 01/16/86 82.55 74.24 33.55 11.99 0.75
Government Securities Fund (Division 8)....... 01/16/86 81.57 73.57 29.21 10.97 0.90
International Government Bond Fund (Division
13)......................................... 10/01/91 58.22 -- 45.09 25.74 3.36
Social Awareness Fund (Division 12)........... 10/02/89 125.27 -- 80.12 64.79 22.75
Science & Technology Fund (Division 17)....... 04/29/94 125.05 -- -- -- 12.68
Money Market Fund (Division 6)................ 01/16/86 60.72 54.47 16.05 11.66 3.97
Timed Opportunity Fund (Division 5)........... 09/06/83 165.19 121.24 41.19 32.78 9.99
Templeton Asset Allocation Fund (Division
19)......................................... 08/24/88 137.46 -- 80.94 36.05 17.40
</TABLE>
36
<PAGE> 42
TABLE IV
ANNUAL AND CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE
YEAR ENDED DECEMBER 31* 2
--------------------------------------------------------
DIVISION 1996 1995 1994 1993 1992
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)............. 21.53% 35.95% (0.30)% 8.78% 5.58%
MidCap Index Fund (Division 4)............. 17.61 29.24 (4.70) 11.78 8.79
Small Cap Index Fund (Division 14)......... 15.57 26.39 (4.30) 14.77 11.28
International Equities Fund (Division
11)....................................... 5.75 9.67 6.90 28.58 (14.31)
Templeton International Fund (Division
20)....................................... 22.50 14.34 (3.49) 45.51 (6.89)
Dreyfus Small Cap Portfolio (Division
18)....................................... 15.14 27.78 6.33 66.31 69.24
Growth Fund (Division 15).................. 18.18 46.40 0.18 -- --
Growth & Income Fund (Division 16)......... 22.10 30.55 (0.68) -- --
Capital Conservation Fund (Division 7)..... 0.75 19.58 (7.04) 10.88 7.55
Government Securities Fund (Division 8).... 0.90 16.31 (5.44) 9.70 6.14
International Government Bond Fund
(Division 13)............................. 3.36 17.63 3.42 13.08 2.05
Social Awareness Fund (Division 12)........ 22.75 37.57 (2.42) 6.84 2.31
Science & Technology Fund (Division 17).... 12.68 60.07 24.77 -- --
Money Market Fund (Division 6)............. 3.97 4.51 2.77 1.67 2.22
Timed Opportunity Fund (Division 5)........ 9.99 23.55 (2.29) 8.19 (1.71)
Templeton Asset Allocation Fund (Division
19)....................................... 17.40 21.02 (4.24) 24.59 6.74
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE
YEAR ENDED DECEMBER 31* 2
------------------------------------------------------
DIVISION 1991 1990 1989 1988 1987
- -------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)............. 27.70% (4.83)% 27.88% 13.13% (14.38)%
MidCap Index Fund (Division 4)............. 20.81 (10.20) 18.10 13.06 (5.10)
Small Cap Index Fund (Division 14)......... -- -- -- -- --
International Equities Fund (Division
11)....................................... 10.06 (20.90) 2.84 -- --
Templeton International Fund (Division
20)....................................... -- -- -- -- --
Dreyfus Small Cap Portfolio (Division
18)....................................... 156.75 1.68 -- -- --
Growth Fund (Division 15).................. -- -- -- -- --
Growth & Income Fund (Division 16)......... -- -- -- -- --
Capital Conservation Fund (Division 7)..... 16.00 (1.28) 10.63 5.92 (2.78)
Government Securities Fund (Division 8).... 13.59 4.91 11.03 4.95 (3.26)
International Government Bond Fund
(Division 13)............................. 9.05 -- -- -- --
Social Awareness Fund (Division 12)........ 26.63 (2.21) 1.00 -- --
Science & Technology Fund (Division 17).... -- -- -- -- --
Money Market Fund (Division 6)............. 4.49 6.83 7.92 5.72 4.50
Timed Opportunity Fund (Division 5)........ 20.13 (3.38) 15.81 8.63 7.31
Templeton Asset Allocation Fund (Division
19)....................................... 26.13 (9.13) 11.86 2.37 --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH
PERIOD END SINCE 12/31/86*
---------------------------------------------------------
DIVISION 1996 1995 1994 1993 1992
- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10).......... 184.84% 134.39% 72.41% 72.93% 58.97%
MidCap Index Fund (Division 4).......... 142.14 105.89 59.31 67.17 49.55
Small Cap Index Fund (Division 14)...... 78.54 54.49 22.23 27.72 11.28
International Equities Fund (Division
11).................................... 22.29 15.65 5.45 (1.36) (23.29)
Templeton International Fund (Division
20).................................... 83.17 49.52 30.77 35.49 (6.89)
Dreyfus Small Cap Portfolio (Division
18).................................... 1,049.38 898.25 681.25 634.77 341.81
Growth Fund (Division 15)............... 73.33 46.67 0.18 -- --
Growth & Income Fund (Division 16)...... 58.31 29.66 (0.68) -- --
Capital Conservation Fund (Division
7)..................................... 74.24 72.95 44.63 55.58 40.32
Government Securities Fund (Division
8)..................................... 73.57 72.02 47.90 56.42 42.59
International Government Bond Fund
(Division 13).......................... 58.22 53.08 30.14 25.83 11.28
Social Awareness Fund (Division 12)..... 125.27 83.51 33.39 36.70 27.95
Science & Technology Fund (Division
17).................................... 125.05 99.72 24.77 -- --
Money Market Fund (Division 6).......... 54.47 48.57 42.16 38.33 36.06
Timed Opportunity Fund (Division 5)..... 121.24 101.14 62.81 66.62 54.01
Templeton Asset Allocation Fund
(Division 19).......................... 137.46 102.27 67.14 74.53 40.09
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR
EACH PERIOD END SINCE 12/31/86*
------------------------------------------------------
DIVISION 1991 1990 1989 1988 1987
- -------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10).......... 50.56% 17.90% 23.88% (3.13)% (14.38)%
MidCap Index Fund (Division 4).......... 37.47 13.80 26.72 7.30 (5.10)
Small Cap Index Fund (Division 14)...... -- -- -- --
International Equities Fund (Division
11).................................... (10.48) (18.66) 2.84 -- --
Templeton International Fund (Division
20).................................... -- -- -- -- --
Dreyfus Small Cap Portfolio (Division
18).................................... 161.05 1.68 -- -- --
Growth Fund (Division 15)............... -- -- -- -- --
Growth & Income Fund (Division 16)...... -- -- -- -- --
Capital Conservation Fund (Division
7)..................................... 30.47 12.47 13.92 2.98 (2.78)
Government Securities Fund (Division
8)..................................... 34.34 18.26 12.73 1.53 (3.26)
International Government Bond Fund
(Division 13).......................... 9.05 -- -- -- --
Social Awareness Fund (Division 12)..... 25.06 (1.23) 1.00 -- --
Science & Technology Fund (Division
17).................................... -- -- -- -- --
Money Market Fund (Division 6).......... 33.10 27.38 19.23 10.48 4.50
Timed Opportunity Fund (Division 5)..... 56.69 30.43 35.00 16.57 7.31
Templeton Asset Allocation Fund
(Division 19).......................... 31.24 4.05 14.50 2.37 --
</TABLE>
- ------------
* For the year in which a Division was initiated, less than a full year's
performance has been reflected. Actual, not annualized, performance is
reflected. See footnote to Table I above for the inception date of each
Division. As noted above, effective October 1, 1991, the Fund underlying the
MidCap Index Division changed its name from the Capital Accumulation Fund to
the MidCap Index Fund and amended its investment objective, investment program
and investment restrictions accordingly. Historical data prior to October 1,
1991 reflect investment experience prior to these changes. Investment
experience for this Division subsequent to October 1, 1991 has been as
follows: for the period from October 1, 1991 through December 31, 1991, the
change in purchase unit value was 11.63%; for the period from October 1, 1991
through December 31, 1992, the cumulative change in purchase unit value was
21.43%; for the period from October 1, 1991 through December 31, 1993, the
cumulative change in purchase unit value was 35.74%; for the period from
October 1, 1991 through December 31, 1994, the cumulative change in purchase
unit value was 29.36%; for the period from October 1, 1991 through December
31, 1995 the cumulative change in purchase unit value was 67.18% and for the
period from October 1, 1991 through December 31, 1996 the cumulative change in
purchase unit value was 96.61%.
37
<PAGE> 43
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the 1940 Act, in consideration of an investment management fee or in any
other form permitted by law;
- Deregister VALIC Separate Account A under the 1940 Act, if registration is
no longer required;
- Stop accepting new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
If the Contract is being offered as a retirement plan through your employer, you
should always refer to the terms and conditions in your employer's plan when
reviewing the description of Portfolio Director in this prospectus.
Plan loans from the Fixed Account Options may be allowed by your employer's
plan. Refer to your plan for a description of charges and other information.
38
<PAGE> 44
VOTING RIGHTS
- ------------------------------------------------------------
As discussed in the "About VALIC Separate Account A" section of this prospectus,
VALIC Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Participant, you may be entitled to give voting instructions to us
as to how VALIC Separate Account A should vote its Fund shares on these matters.
Those persons entitled to give voting instructions will be determined before the
shareholders meeting is held. For more information about these shareholder
meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. This will be true even if your
employer is the Contract Owner. Contract Owners will instruct VALIC Separate
Account A in accordance with these instructions. You will receive proxy material
and a form on which voting instructions may be given before the shareholder
meeting is held.
You will not have the right to give voting instructions if Portfolio Director
was issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
DURING PURCHASE PERIOD
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
VALIC SEPARATE
ACCOUNT A -- a segregated
asset account established by
VALIC under the Texas
Insurance Code. The purpose
of VALIC Separate Account A
is to receive and invest your
Purchase Payments and
Account Value in the Variable
Account Options you have
selected.
DURING PAYOUT PERIOD OR AFTER A DEATH
BENEFIT HAS BEEN PAID
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in Portfolio Director may
have a number of shareholders including VALIC Separate Account A, VALIC and
other affiliated insurance company separate accounts and retirement plans within
the American General group of companies.
VALIC Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the
Participants invested in that Fund entitled to give instructions at that
shareholder meeting. VALIC Separate Account A will vote the shares of the Funds
it holds for which it receives no voting instruction in the same proportion as
the shares for which voting instructions have been received.
VALIC will vote the shares of the Funds it holds based on, and in the same
proportion as, the voting instructions received from participants in VALIC
Separate Account A.
In the future, we may decide how to vote the shares of VALIC or VALIC Separate
Account A in a different manner if permitted at that time under federal
securities law.
39
<PAGE> 45
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director Contracts provide tax-deferred accumulation over time, but
are subject to federal income and excise taxes, mentioned briefly below. You
should refer to the Statement of Additional Information for further details.
Section references are to the Internal Revenue Code ("Code"). We do not attempt
to describe any potential estate or gift tax, or any applicable state, local or
foreign tax law other than possible premium taxes mentioned under "Premium Tax
Charge." Remember that future legislation could modify the rules discussed
below, and always consult your personal tax adviser regarding how the current
rules apply to your specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or an IRA, or is instead a
nonqualified Contract. Portfolio Director is used under the following types of
retirement arrangements:
- Section 403(b) annuities for employees of public schools and Section
501(c)(3) tax-exempt organizations;
- Section 401(a) and 403(a) qualified plans of employers (including self-
employed individuals);
- Section 408(b) individual retirement annuities;
- Section 457 unfunded deferred compensation plans of governmental and
tax-exempt employers;
- Section 408(k) simplified deferred compensation plans of private employers.
- Unfunded, non-qualified deferred compensation plans of private employers.
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director is also available through "Non-Qualified
Contracts." Separate Account investment must be "adequately diversified" in
order for the increase in the value of Non-Qualified Contracts to receive
tax-deferred treatment. Each Fund must, as of the end of each calendar quarter
or within 30 days thereafter, have no more than 55% of its assets invested in
any one investment, 70% in any two investments, 80% in any three investments and
90% in any four investments. A Fund's failure to meet these diversification
requirements could result in tax liability to Non-Qualified Contract Owners.
Since each Fund expects to satisfy diversification, and assure tax deferred
treatment to Non-Qualified Contract holders, investment opportunities of a Fund
may consequently be limited. This would affect all Contract Owners, including
owners of Contracts other than Non-Qualified Contracts for whom diversification
is not a requirement for tax-deferred treatment.
TAX CONSEQUENCES IN GENERAL
Purchase Payments, distributions, withdrawals, transfers and surrender of a
Contract can each have a tax effect, which varies with the governing retirement
arrangement. Please refer to the detailed explanation in the Statement of
Additional Information, the documents (if any) controlling the retirement
arrangement through which the contract is offered, and your personal tax
adviser.
Purchase Payments under Portfolio Director can be made as contributions by
employers, or as pre-tax or after-tax contributions by employees, depending on
the type of retirement program. After-tax employee contributions constitute
"investment in the Contract." All Contracts receive deferral of tax on the
inside build-up of earnings on invested Purchase Payments, until a distribution
occurs. See the Statement of Additional Information for special rules, including
those applicable to taxable, non-natural owners of Non-Qualified Contracts.
Distributions are taxed differently depending on the program through which
Portfolio Director is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the amount by which
a distribution exceeds investment in the Contract is subject to income tax. For
annuity payments, investment in the contract is recovered ratably over the
expected payout period. Special recovery rules might apply in certain
situations.
Amounts subject to income tax may also incur excise tax, under the circumstances
described in the Statement of Additional Information. Generally, they would also
be subject to some form of federal income tax withholding unless rolled into
another tax-deferred vehicle. Required withholding will vary according to type
of program, type of payment and your tax status. In addition, amounts received
under all Contracts may be subject to state income tax withholding requirements.
40
<PAGE> 46
------------------------------------------------------------
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- Portfolio Director Contract issued to a tax favored retirement program
purchased with pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[CHART]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. Variable annuity
options incur mortality and expense charges (1% - 1.25%) and may also incur
administrative fees ($3.75 per quarter) and surrender charges (5% of the lesser
of all contributions received during the last 60 months or the amount
withdrawn). These fees and charges are not reflected in the above illustration
and would reduce the results shown. Income taxes are payable upon withdrawal,
and an additional 10% tax penalty may apply to withdrawals before age 59 1/2.
This information is for illustrative purposes only and is not a guarantee of
future return.
Unlike savings accounts, Premium Payments made to tax-favored retirement
programs and Non-Qualified Contracts generally provide tax deferred treatment on
earnings. In addition, Premium Payments made to tax-favored retirement programs
ordinarily are not subject to income tax until withdrawn. As shown above,
investing in a tax-favored program increases the accumulation power of savings
over time. The more taxes saved and reinvested in the program, the more the
accumulation power effectively grows over the years.
To further illustrate the advantages of tax deferred savings using a 28% Federal
tax bracket, an annual fixed yield (BEFORE THE DEDUCTION OF ANY FEES OR CHARGES)
of 8% under a tax-favored retirement program in which tax savings were
reinvested has an equivalent annual fixed yield of 5.76% under a conventional
savings program. THE 8% YIELD ON THE TAX-FAVORED PROGRAM WILL BE REDUCED BY THE
IMPACT OF INCOME TAXES UPON WITHDRAWAL. The yield will vary depending upon the
timing of withdrawals. The previous chart represents (without factoring in fees
and charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount
available for
savings before
federal taxes...... $2,500 $2,500
Current federal
income tax due on
Purchase
Payments........... 0 (700)
Net retirement plan
Purchase
Payments........... $2,500 $1,800
</TABLE>
This chart assumes a 28% Federal income tax rate. The $700 which is paid toward
current Federal income taxes on $2,500 contributed to the conventional savings
account remains in the tax-favored program, subject to being taxed upon
withdrawal. Stated otherwise, to reach an annual retirement savings goal of
$2,500, the contribution to a tax-favored retirement program results in a
current out-of-pocket expense of $1,800 while the contribution to a conventional
savings account requires the full $2,500 out-of-pocket expense. The tax-favored
retirement program represented in this chart is a plan type, such as one under
Section 403(b) of the Code, which allows participants to exclude contributions
within limits, from gross income.
41
<PAGE> 47
REVOCATION OF TELEPHONE ASSET TRANSFER AUTHORITY
Participant/Contract Owner Name:
------------------------------------------------------------------------
Social Security Number:
------------------------------------------------------------------------
Birth Date:
I am the Participant under or Contract Owner of one or more variable annuity
contracts issued by The Variable Annuity Life Insurance Company ("VALIC"). I
hereby instruct VALIC not to accept any telephone instructions to transfer
Account Values among investment options or change the allocation of future
Purchase Payments from me, anyone representing me or anyone representing himself
or herself to be me. I understand as a result of executing this form that the
transfer of Account Values or Payout Values among investment options or changes
in the allocation of future Purchase Payments may only be effected upon the
receipt by VALIC of my written instructions.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------
Participant/Contract Owner Signature Date
Mail this form to any Regional Office (see the last page of your prospectus for addresses) or to the Home
Office at the following address: VALIC, Customer Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
42
<PAGE> 48
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 49
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 6
Types of Variable Annuity Contracts................. 7
Federal Tax Matters................................. 8
Tax Consequences of Purchase Payments........... 8
Tax Consequences of Distributions............... 9
Special Tax Consequences -- Early
Distribution.................................. 10
Special Tax Consequences -- Required
Distributions................................. 10
Tax Free Rollovers, Transfers and Exchanges..... 11
Exchange Privilege.................................. 12
Exchanges From Independence Plus Contracts...... 12
Exchanges From V-Plan Contracts................. 13
Exchanges From SA-1 and SA-2 Contracts.......... 14
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 17
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total
Surrender..................................... 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
Money Market Division Yields.................... 19
Calculation of Yield for Money Market
Division Six.................................. 19
Illustration of Calculation of Yield for Money
Market Division Six........................... 19
Calculation of Effective Yield for Money Market
Division Six.................................. 19
Illustration of Calculation of Effective Yield
for Money Market Division Six................. 19
Standardized Yield for Divisions Seven, Eight and
Thirteen.......................................... 20
Calculation of Standardized Yield for Divisions
Seven, Eight and Thirteen..................... 20
Illustration of Calculation of Standardized
Yield for Divisions Seven, Eight and
Thirteen...................................... 20
Calculation of Average Annual Total Return...... 21
Performance Information............................. 21
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 21
Performance Compared to Market Indices.......... 22
Stock Index Division Ten Performance Compared to
S&P 500 Index................................. 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MidCap Index Division Four Performance Compared
to S&P 500 Index and S&P MidCap 400 Index..... 25
Small Cap Index Division Fourteen Performance
Compared to Russell 2000 Index................ 26
International Equities Division Eleven
Performance Compared to EAFE Index............ 26
Templeton International Division Twenty
Performance Compared to MSCI World Index...... 27
Dreyfus Small Cap Division Eighteen Performance
Compared to Russell 2000...................... 27
Growth Division Fifteen Performance Compared to
S&P 500 Index................................. 28
Growth & Income Division Sixteen Performance
Compared to S&P 500 Index..................... 28
Capital Conservation Division Seven Performance
Compared to Merrill Lynch Corporate Master
Index......................................... 29
Government Securities Division Eight Performance
Compared to Lehman Brothers U.S. Treasury
Composite Index............................... 30
International Government Bond Division Thirteen
Performance Compared to Salomon Brothers
Non-U.S. Dollar World Government Bond Index... 30
Social Awareness Division Twelve Performance
Compared to S&P 500 Index..................... 31
Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 31
Money Market Division Six Performance Compared
to Certificate of Deposit Primary Offering by
New York City Banks, 30 Day Index............. 32
Timed Opportunity Division Five Performance
Compared to S&P 500 Index, Merrill Lynch
Corporate and Government Master Index and
Certificate of Deposit Primary Offering by New
York City Banks, 30 Day Index................. 33
Templeton Asset Allocation Division Nineteen
Performance Compared to MSCI World Index,
Salomon Brothers Non-US Dollar World
Government Bond Index, and Certificate of
Deposit Primary Offering by New York City
Banks, 30 Day Index........................... 34
Payout Payments..................................... 34
Assumed Investment Rate......................... 34
Amount of Payout Payments....................... 34
Payout Unit Value............................... 35
Illustration of Calculation of Payout Unit
Value......................................... 36
Illustration of Payout Payments................. 36
Distribution of Variable Annuity Contracts.......... 36
Experts............................................. 37
Comments on Financial Statements.................... 38
</TABLE>
44
<PAGE> 50
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
10851 N. Black Canyon Hwy
Suite 700
Phoenix, AZ 85029
(602) 678-1700
222 South Harbor Blvd.
10th Floor
Anaheim, CA 92805
(714) 774-7844
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(415) 574-5433
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
(303) 988-3344
10006 N. Dale Mabry Hwy.
Suite 113
Tampa, FL 33618
(813) 961-1611
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1550
Chicago, IL 60606
(312) 368-1001
550 Congressional Blvd.
Suite 280
Carmel, IN 46032
(317) 574-7145
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21061
(410) 768-2330
1301 West Long Lake Road
Suite 340
Troy, MI 48098
(810) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(908) 750-5611
University Tower
3100 Tower Blvd.
Suite 1601, Box 50
Durham, NC 27707
(919) 489-6529
Two Summit Park Drive
Suite 410
Independence, OH 44131
(216) 520-2028
1800 S.W. First Avenue
Suite 505
Portland, OR 97201
(503) 223-6288
1767 Sentry Pkwy. West 19
Suite 300
Blue Bell, PA 19422
(215) 646-8030
5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
(972) 490-1515
800 Gessner
Suite 1280
Houston, TX 77024
(713) 465-2253
There are also more than thirty-seven branch offices located throughout the
country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019 1-800-44VALIC
TDD NUMBER 1-800-35VALIC
FOR UNIT VALUE INFORMATION CALL: 1-800-42VALIC & TDD 1-800-24VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-621-7792
TDD 1-800-35VALIC
EASYACCESS 1-800-42VALIC
TDD EASYACCESS 1-800-24VALIC
================================================================================
<PAGE> 51
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR
----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1997
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for Portfolio
Director* dated May 1, 1997 ("Contracts") and should be read in conjunction with
the prospectus. The terms used in this Statement of Additional Information have
the same meaning as those set forth in the prospectus. A prospectus may be
obtained by calling or writing the Company, or The Variable Annuity Marketing
Company (the "Underwriter") at 2929 Allen Parkway, Houston, Texas 77019;
1-(800)-44-VALIC. Prospectuses are also available from regional sales offices of
the Underwriter or from its registered sales representatives.
(*Portfolio Director is composed of Contract Forms UIT-194, UITG-194, UITN-194,
UIT-IRA-194, and UIT-SEP-194.)
1
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 6
Types of Variable Annuity Contracts......................... 7
Federal Tax Matters......................................... 8
Tax Consequences of Purchase Payments..................... 8
Tax Consequences of Distributions......................... 9
Special Tax Consequences -- Early Distribution............ 10
Special Tax Consequences -- Required Distributions........ 10
Tax Free Rollovers, Transfers and Exchanges............... 11
Exchange Privilege.......................................... 12
Exchanges From Independence Plus Contracts................ 12
Exchange From V-Plan Contracts............................ 13
Exchanges From SA-1 and SA-2 Contracts.................... 14
Exchange From Impact Contracts............................ 15
Exchanges From Compounder Contracts....................... 16
Information Which May Be Applicable To Any Exchange....... 17
Calculation of Surrender Charge............................. 18
Illustration of Surrender Charge on Total Surrender....... 18
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 18
Purchase Unit Value......................................... 19
Illustration of Calculation of Purchase Unit Value........ 19
Illustration of Purchase of Purchase Units................ 19
Performance Calculations.................................... 19
Money Market Division Yields.............................. 19
Calculation of Yield for Money Market Division Six........ 19
Illustration of Calculation of Yield for Money Market
Division Six........................................... 19
Calculation of Effective Yield for Money Market Division
Six.................................................... 19
Illustration of Calculation of Effective Yield for Money
Market Division Six.................................... 19
Standardized Yield for Divisions Seven, Eight and
Thirteen.................................................. 20
Calculation of Standardized Yield for Divisions Seven,
Eight and Thirteen..................................... 20
Illustration of Calculation of Standardized Yield for
Divisions Seven, Eight and Thirteen.................... 20
Calculation of Average Annual Total Return................ 21
Performance Information..................................... 21
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to
Benchmark Tables....................................... 21
Performance Compared to Market Indices.................... 22
Stock Index Division Ten Performance Compared to S&P 500
Index and S&P MidCap 400 Index......................... 25
MidCap Index Division Four Performance Compared to
Relevant Index......................................... 25
Small Cap Index Division Fourteen Performance Compared to
Russell 2000 Index..................................... 26
International Equities Division Eleven Performance
Compared to EAFE Index................................. 26
Templeton International Division Twenty Performance
Compared to MSCI World Index........................... 27
Dreyfus Small Cap Division Eighteen Performance Compared
to Russell 2000........................................ 27
Growth Division Fifteen Performance Compared to S&P 500
Index.................................................. 28
Growth & Income Division Sixteen Performance Compared to
S&P 500 Index.......................................... 28
Capital Conservation Division Seven Performance Compared
to Merrill Lynch Corporate Master Index................ 29
Government Securities Division Eight Performance Compared
to Lehman Brothers U.S. Treasury Composite Index....... 30
</TABLE>
2
<PAGE> 53
International Government Bond Division Thirteen
Performance Compared to Salomon Brothers Non-U.S.
Dollar World Government Bond Index..................... 30
Social Awareness Division Twelve Performance Compared to
S&P 500 Index.......................................... 31
Science & Technology Division Seventeen Performance
Compared to S&P 500 Index.............................. 31
Money Market Division Six Performance Compared to
Certificate of Deposit Primary Offering by New York
City Banks, 30 Day Index............................... 32
Timed Opportunity Division Five Performance Compared to
S&P 500 Index, Merrill Lynch Corporate and Government
Master Index and Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index.......... 33
Templeton Asset Allocation Division Nineteen Performance
Compared to MSCI World Index, Salomon Brothers Non-US
Dollar World Government Bond Index, and Certificate of
Deposit Primary Offering by New York City Banks, 30 Day
Index.................................................. 34
Payout Payments............................................. 34
Assumed Investment Rate................................... 34
Amount of Payout Payments................................. 34
Payout Unit Value......................................... 35
Illustration of Calculation of Payout Unit Value.......... 36
Illustration of Payout Payments........................... 36
Distribution of Variable Annuity Contracts.................. 36
Experts..................................................... 37
Comments on Financial Statements............................ 38
3
<PAGE> 54
GENERAL INFORMATION
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$2.9 billion as of December 31, 1996. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,539,015
accounts as of December 31, 1996. The number of employer groups which have
purchased Contracts has increased by 178 percent in the past ten years to more
than 22,464 as of December 31, 1996. As of December 31, 1996, the Company was
ranked in the top 1 percent of all U.S. life insurance companies with regard to
asset size. As of December 31, 1996 the Company's assets totaled nearly $30
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
As of December 31, 1996, the Company was marketing Contracts in more than
8,282 public and private, primary and secondary schools with more than 427,224
participant accounts for employees in public and private schools nationwide.
From December 31, 1986 to December 31, 1996, the cash value of investments in
these Contracts has increased by 327 percent while the number of public and
private school groups in these Contracts increased 86 percent and the number of
participant accounts in these Contracts increased by 119 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1986 to December 31, 1996, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 144 percent and for the same period the
number of participant accounts has increased 147 percent. For the same time
period cash values for participants have increased 319 percent. As of December
31, 1996, more than 43 percent of United States colleges and universities allow
the Company to market Contracts to their faculty and staff members.
The Company has utilized as the central focus in its marketing to college
and university faculty and staff members the theme that the Company is the
"Alternative of Choice."
The Company has also had growth in the healthcare segment of the
not-for-profit organization market. From December 31, 1986 to December 31, 1996
Contract cash values have increased 792 percent. During the same period the
number of healthcare groups that have purchased these Contracts increased 241
percent and the number of participants who were in the Contracts increased 748
percent.
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1986 to December 31, 1996, Contract
cash values for participants in these groups have increased 319 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 250 percent and the number of employer groups has
increased 399 percent.
Additionally, several states have enacted, as an alternative to state
administered defined benefit retirement programs, Optional Retirement Plans
(ORPs). A state that sponsors an ORP will select the carriers which will be
allowed to participate in the ORP. The Company has been selected as one of the
carriers permitted to market Contracts to state employees who elect to
participate in the ORP in 26 of the last 28 states to sponsor ORPs with multiple
carriers, as of December 31, 1996. From December 31, 1990 to December 31, 1996,
in these ORPs the number of participant accounts increased 149 percent and cash
values increased 147 percent to more than $1.8 billion dollars. In addition,
during this time period annual ORP premiums doubled.
The Company may, from time to time, refer to a general investment strategy
known as indexing.
4
<PAGE> 55
Several of the Divisions employ this investment strategy. The Company may
compare the performance of these Divisions to the S&P 500 Index, S&P MidCap 400
Index, Russell 2000 Index, Morgan Stanley Capital International Europe,
Australia, and Far East (EAFE) Index, or any other appropriate market index. The
indexes are not managed funds and have no identifiable investment objectives.
The Company may, from time to time, refer, individually or collectively, to
its package of retirement plan services. Collectively, this package of services
may be referred to as easy Retirement Plan easy Retirement Plan includes: (1)
personal, face-to-face service from highly trained VALIC Retirement Plan
Specialists; (2) informative retirement-investment education programs, seminars
and materials; (3) specialized computer-aided services for retirement planning
and developing asset allocation strategies; (4) a wide selection of innovative,
market-responsive investment options; (5) advanced and efficient administration
of retirement accounts; (6) and a financially strong and stable Company with
which to do business.
From time to time the Company may refer to the diversifying process of
asset allocation based on the Modern Portfolio Theory developed by Nobel Prize
winning economist Harry Markowitz. The basic assumptions of Modern Portfolio
Theory are that the selection of individual investments has little impact on
portfolio performance, market timing strategies seldom work, markets are
efficient and selecting the suitable mix of asset classes is more important when
creating a long-term investment portfolio. Modern Portfolio Theory allows an
investor to determine an "efficient" or "optimized" portfolio that has
historically provided a higher return with the same risk or the same return with
lower risk.
When presenting the asset allocation process the Company may outline the
process of personal and investment risk analysis including determining
individual risk tolerances and a discussion of the different types of investment
risk. The Company may classify investors into five categories based on their
personal risk tolerance and will quote various industry experts on which types
of investments are best suited to each of the five risk categories. The industry
experts quoted may include Ibbotson Associates, CDA Investment Technologies,
Lipper Analytical Services, Laffer-Cantos, Inc., VARDS Report, Wilson Associates
and any other expert which has been deemed by the Company to be appropriate. The
Company may also provide a historical overview of the performance of a variety
of investment market indexes and different asset classes, such as stocks, bonds,
cash equivalents, etc. The Company may also discuss investment volatility
(standard deviation) including the range of returns for different asset classes
over different time horizons, and the correlation between the returns of
different asset classes. The Company may also discuss the basis of portfolio
optimization including the required inputs and the construction of efficient
portfolios using sophisticated computer-based techniques. Finally, the Company
may describe various investment strategies and methods of implementation such as
the use of index funds vs. actively managed funds, the use of dollar cost
averaging techniques, the tax status of contributions, and the periodic
rebalancing of diversified portfolios.
The Company, in its marketing efforts to each of the market segments, may
from time to time design sales literature and material specifically for that
market segment, e.g., the health care segment of the not-for-profit organization
market. This sales literature and material may also be specific to a certain
group. For example, sales literature and material may be designed for a specific
hospital. The sales literature and material would address specifically the
group's contract and retirement plan.
The Company, in its marketing efforts, may also refer to the following
investment advisers referenced in the Prospectus.
Templeton Investment Counsel Inc., is the investment adviser for the
Templeton Asset Allocation Fund (underlying Division Nineteen) and the Templeton
International Fund (underlying Division Twenty). For more than 50 years, the
Templeton organization has been a leading global investment management company
with offices in the U.S., Australia, Bahamas, Canada, Germany, Hong Kong,
Luxembourg, Russia, Scotland and Singapore. A member of the $188.6 billion
Franklin Templeton Group, Templeton has more than $82 billion of assets under
management in global and non-U.S. investment companies and private accounts. The
Franklin Templeton Group provides
5
<PAGE> 56
investment management and advisory services to a worldwide client base.
Templeton Investment Counsel Inc., uses a disciplined, long-term approach to
value oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for a fund's
portfolio on the basis of fundamental company-by-company analysis.
The Company may, from time to time, refer to Value Line Inc., ("Value
Line"), investment subadviser to the Growth & Income Fund (underlying Division
16). For more than four decades, Value Line has provided investment counseling
services to mutual funds and private and institutional accounts with combined
assets in excess of $4.5 billion. Investment selection is based on the Value
Line Timeliness Ranking System, which has evolved after many years of research.
The System provides objective standards for determining whether the market is
under- or overvaluing a particular security. A Value Line subsidiary publishes
the Value Line Investment Survey, one of the best known investment advisory
services in the United States, which covers about 1700 stocks, organized into
90+ industries on a regular basis. The Expanded Edition of The Value Line
Investment Survey covers an additional 1,800 stocks.
The Company may, from time to time, refer to T. Rowe Price Associates, Inc.
(T. Rowe Price), as subadviser to the Science & Technology Fund (underlying
Division Seventeen) and the Growth Fund (underlying Division Fifteen). T. Rowe
Price, one of the nation's leading no-load mutual fund managers together with
its affiliates currently manages more than $70 billion. Its approach to managing
money is based on proprietary research and a strict investment discipline
developed over 50 years. Founded in 1937 by the late Thomas Rowe Price Jr., T.
Rowe Price is one of the pioneers of growth stock investing. Growth stock
investing focuses on well-managed companies that operate in fields where
earnings and dividends are expected to grow faster than both inflation and the
overall economy. T. Rowe Price has delivered strong performance for its clients
by investing in both large and small-growth companies which operate in the
service sector of the economy. This is based on the fundamental premise that
long-term growth in the service sector will outpace overall economic growth. T.
Rowe Price has also delivered strong performance for its clients by investing in
the common stocks of companies expected to benefit from the development,
advancement and use of science and technology. This includes industries such as
telecommunications, computers, software, medical devices, and biotechnology.
The Company may, from time to time, refer to The Dreyfus Corporation as
adviser for the Dreyfus Small Cap Portfolio (underlying Division Eighteen). The
Dreyfus Corporation has been helping Americans invest for their future with
quality mutual funds for more than four decades. As of the end of 1995, the firm
had over $82 billion in assets under management.
The Company may, from time to time, refer in advertisements or sales
materials to certain milestones which are intended to emphasize the Company's
growth and development in assets, groups and various market segments.
Additionally the Company may refer from time to time in advertisements or sales
materials to marketing strategies it utilizes to promote the Company's business
objectives. Further, the Company may refer from time to time in advertisements
or sales materials to certain value-added services it provides to its groups,
Contract Owners and Participants.
The Company may, from time to time, refer in advertisements to the
performance history of T. Rowe Price's and Value Line's publicly-available
mutual funds that are the models for the AGSPC Science & Technology Fund, Growth
Fund and Growth & Income Fund respectively (AGSPC Funds). The Company will
disclose that the information about the public funds is not the AGSPC Funds
performance and is not indicative of the AGSPC Funds past or future performance,
and should not be considered as a substitute for these Funds' performance
history.
ENDORSEMENTS AND
PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contract Owners, the
Company may refer to its endorsements. Endorsements are often in the form of a
list of organizations, individuals or other parties which recommend the Company
or the Contracts. The endorser's name will be used only with the endorser's
consent. It should be noted that the list of endorsements may change from time
to time.
6
<PAGE> 57
Also from time to time, the rating of the Company as an insurance company
by A. M. Best may be referred to in advertisements or in reports to Contract
Owners. Each year the A. M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's Ratings range from A++ to F. An A++
rating means, in the opinion of A. M. Best, that the insurer has demonstrated
the strongest ability to meet its respective policyholder and other contractual
obligations.
In addition, the claims-paying ability of the Company as measured by the
Standard and Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to D.
Further, from time to time the Company may refer to Moody's Investor's
Service's rating of the Company. Moody's Investor's Service's financial strength
ratings indicate an insurance company's ability to discharge senior policyholder
obligations and claims and are based on an analysis of the insurance company and
its relationship to its parent, subsidiaries and affiliates. Moody's Investor's
Service's ratings range from Aaa to C.
The Company may additionally refer to its Duff & Phelp's rating. A Duff &
Phelp's rating is an assessment of a Company's insurance claims paying ability.
Duff & Phelp's ratings range from AAA to CCC. An AAA rating reflects that the
Company has the highest claims paying ability.
Ratings relate to the claims paying ability of the Company's General
Account and not the investment characteristics of the Separate Account.
The Company may from time to time, refer to Lipper Analytical Services
Incorporated ("Lipper"), Morningstar, Inc. ("Morningstar") and CDA/Wiesenberger
Investment Companies (CDA/Wiesenberger) when discussing the performance of its
Divisions. Lipper, Morningstar and CDA/Wiesenberger are leading publishers of
statistical data about the investment company industry in the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. The published categories which
may be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to The Variable Annuity Research
& Data Services (VARDS) Report. The VARDS Report offers monthly analysis of the
variable annuity industry, including marketing and performance information.
The Company may, from time to time, refer to Bankers Trust Company's
Tactical Asset Allocation Model's historical performance and compare such
performance to that of the S&P 500 Index. Neither the Model nor the S&P 500
Index is a managed fund and neither have identifiable investment objectives.
Finally the Company will utilize as a comparative measure for the
performance of its Funds the Consumer Price Index ("CPI"). The CPI is a measure
of change in consumer prices, as determined in a monthly survey of the U.S.
Bureau of Labor Statistics. Housing costs, transportation, food, electricity,
changes in taxes and labor costs are among the CPI components. The CPI provides
a tool for determining the impact of inflation on an individual's purchasing
power.
TYPES OF VARIABLE ANNUITY
CONTRACTS
Three types of Contracts are offered in connection with the prospectus to
which this Statement of Additional Information relates:
(1) single payment immediate annuity Contracts;
7
<PAGE> 58
(2) single payment deferred annuity Contracts; and
(3) flexible payment deferred annuity Contracts.
Under single payment Contracts, only one Purchase Payment is made by the
Contract Owner. Under flexible payment Contracts, Purchase Payments generally
are made until retirement age is reached. However, no Purchase Payments are
required to be made after the first payment. Purchase Payments are subject to
any minimum payment requirements under the Contract.
Under deferred annuity contracts, Purchase Payments are invested and
accumulate on a fixed or variable basis until the date the Contract Owner
selects to commence annuity payments.
Under immediate annuity Contracts, the first annuity payment is made on the
first day of the second month after the Purchase Payment is received. During the
period before the Annuity Date, the Purchase Payments are invested in the same
manner, and the other terms and conditions (including the options and rights of
Contract Owners, Annuitants and Beneficiaries) are the same under immediate
annuity Contracts as under deferred annuity Contracts.
The Contracts are non-participating and will not share in any of the
profits of the Company.
FEDERAL TAX MATTERS
This Section summarizes the major tax consequences of contributions,
payments, and withdrawals under Portfolio Director, during life and at death.
TAX CONSEQUENCES OF PURCHASE PAYMENTS
403(b) Annuities. Purchase Payments made by Section 501(c)(3) tax-exempt
organizations and public educational institutions toward Contracts for their
employees are excludable from the gross income of employees, to the extent
aggregate Purchase Payments do not exceed several competing tax limitations.
This gross income exclusion applies both to employer contributions and to your
voluntary salary reduction contributions.
Your voluntary salary reduction contributions are generally limited to the
lesser of $9,500 or 20% of salary, although additional, "catch-up" contributions
are permitted under certain circumstances. Combined employer and salary
reduction contributions are generally limited to approximately 20% of salary. In
addition, after 1988 employer contributions for highly compensated employees may
be further limited by applicable nondiscrimination rules.
401(a) and 403(a) Qualified Plans. Purchase Payments made by an employer
(or a self-employed individual) under a qualified pension, profit-sharing or
annuity plan are excluded from the gross income of the employee. Purchase
Payments made by an employee generally are made on an after-tax basis, unless
eligible for pre-tax treatment by reason of Sections 401(k) or 414(h).
408(b) Individual Retirement Annuities ("IRAs"). Tax-deductible
contributions for IRA Contracts are limited to the lesser of $2,000 or 100% of
compensation, and may be made only by individuals who:
(i) are not (and whose spouses are not) active participants in another
retirement plan;
(ii) are active participants in another retirement plan, but are unmarried and
have adjusted gross income of $25,000 or less; or
(iii) are active participants (or whose spouse is) in another retirement plan,
but are married and have adjusted gross income of $40,000 or less.
Active participants in other retirement plans whose adjusted gross income
exceeds the limits in (ii) or (iii) by less than $10,000 are entitled to make
deductible IRA contributions in proportionately reduced amounts. If an IRA is
established for a nonworking spouse who has no compensation, the annual
tax-deductible Purchase Payments for both spouses' Contracts cannot exceed the
lesser of $4,000 or 100% of the working spouse's earned income, and no more than
$2,000 may be contributed to either spouse's IRA for any year.
You may be eligible to make nondeductible IRA contributions in excess of:
(i) the lesser of $2,000 ($4,000 for you and your spouse's IRA) or 100% of
compensation, over
(ii) your applicable IRA deduction limit.
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457 Plans. A unit of a state or local government may establish a deferred
compensation program for individuals who: (i) perform services for the
government unit, and (ii) belong to a select group of management or highly
compensated employees and/or independent contractors.
This type of program allows eligible individuals to defer the receipt of
compensation (and taxes thereon) otherwise presently payable to them. If the
program is an eligible deferred compensation plan (an "EDCP"), you may
contribute (and defer tax on) the lesser of $7,500 (indexed for inflation) or
33 1/3% of your "includible" compensation (compensation from the employer
currently includible in taxable income). Additional, catch-up deferrals are
permitted in your final three years before normal retirement age.
The employer uses deferred amounts to purchase the Contracts offered by
this prospectus. The Contract is generally held for the exclusive benefit of
plan participants, although certain Contracts may remain subject to the claims
of the employer's general creditors until 1999. The employee has no present
rights to vested interest in the Contract and is entitled to payment only in
accordance with the EDCP provisions.
SEP. Employer contributions under a SEP are made to a separate individual
retirement account established for each participating employee, and generally
must be made at a rate representing a uniform percent of participating
employees' compensation. Employer contributions are excludable from employees'
taxable income, and after 1993 cannot exceed the lesser of $30,000 or 15% of
your compensation.
Through 1996, employees of certain small employers (other than tax-exempt
organizations) may contribute pretax, on a salary reduction basis, to the SEP.
These salary reduction contributions may not exceed $7,000, indexed for
inflation in later years.
Unfunded Deferred Compensation Plans. Private taxable employers may
establish unfunded, non-qualified deferred compensation plans for a select group
of management or highly compensated employees and/or for independent
contractors. Certain arrangements of nonprofit employers entered into prior to
August 16, 1986, and not subsequently modified, are also subject to the rules
discussed below.
An unfunded, deferred compensation plan is a bare contractual promise on
the part of the employer to defer current wages to some future time. The
Contract is owned by the employer and remains subject to the claims of the
employer's general creditors. Private taxable employers that are not natural
persons, however, are currently taxable on any increase in the Purchase Unit
Value attributable to Purchase Payments made after February 28, 1986 to such
Contracts. Participants have no present right or vested interest in the Contract
and are only entitled to payment in accordance with plan provisions.
Non-Qualified Contracts. Purchase Payments made under Non-Qualified
Contracts are neither excludible from the gross income of the Contract Owner nor
deductible for tax purposes. However, any increase in the Purchase Unit Value of
a Non-Qualified Contract resulting from the investment performance of VALIC
Separate Account A is not taxable to the Contract Owner until received by him.
Contract Owners that are not natural persons, however, are currently taxable on
any increase in the Purchase Unit Value attributable to Purchase Payments made
after February 28, 1986 to such Contracts.
TAX CONSEQUENCES OF DISTRIBUTIONS
403(b) Annuities. Voluntary salary reduction amounts accumulated after
December 31, 1988, and earnings on voluntary contributions before and after that
date, may not be distributed before one of the following:
(1) attainment of age 59 1/2;
(2) separation from service;
(3) death;
(4) disability, or
(5) hardship (hardship distributions are limited to salary reduction
contributions only, exclusive of earnings thereon).
Distributions are taxed as ordinary income to the recipient in accordance
with Section 72.
401(a) and 403(a) Qualified Plans. Distributions from Contracts purchased
under qualified plans are taxable as ordinary income, except to the extent
allocable to an employee's after-tax contributions (investment in the Contract).
If you or your Beneficiary receive a "lump sum distribu-
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tion" (legally defined term), the taxable portion may be subject to special
5-year or 10-year income averaging treatment. Five-year forward averaging is
unavailable for distributions occurring after December 31, 1999. Ten-year income
averaging uses tax rates in effect for 1986, allows 20% capital gains treatment
for the taxable portion of a lump sum distribution attributable to years of
service before 1974, and is available if you were 50 or older on January 1,
1986.
408(b) IRAs and SEPs. Distributions are taxed as ordinary income to the
recipient.
457 Plans. Amounts received from an EDCP are includible in gross income for
the taxable year in which are paid or otherwise made available to the recipient.
Unfunded Deferred Compensation Plans. Amounts received are includible in
gross income for the taxable year in which are paid or otherwise made available
to the recipient.
Non-Qualified Contracts. Partial redemptions generally are taxed as
ordinary income to the extent of the accumulated income or gain under the
Contract if they are not received as an annuity under a Non-Qualified Contract
purchased after August 13, 1982 (or allocated to post-August 13, 1982 Purchase
Payments under a pre-existing Contract). Partial redemptions from a
Non-Qualified Contract purchased before August 14, 1982 are taxed only after the
Contract Owner has received all of his investment in the Contract. The amount
received in a complete redemption of a Non-Qualified Contract (regardless of the
date of purchase) will be taxed as ordinary income to the extent that it exceeds
the Contract Owners's investment in the Contract. Two or more Contracts
purchased from VALIC (or an affiliated company) by a Contract Owner within any
twelve-month period are treated as a single Contract for purposes of measuring
the income on a partial redemption or complete surrender.
When payments are received as an annuity, the Contract Owner's investment
in the Contract is treated as received ratably and excluded ratably from gross
income as a tax-free return of capital, over the expected payment period of the
annuity. Individuals who begin receiving annuity payments on or after January 1,
1987 can exclude from income only their unrecovered investment in the Contract.
Upon death prior to recovering tax-free their entire investment in the Contract,
such individuals generally are entitled to deduct the unrecovered amount on
their final tax return.
SPECIAL TAX CONSEQUENCES -- EARLY
DISTRIBUTION
403(b) Annuities, 401(a) and 403(a) Qualified Plans, 408(b) IRAs and
SEPs. Taxable distributions received before the recipient attains age 59 1/2
generally are subject to a 10% penalty tax in addition to regular income tax.
Distributions on account of the following generally are excepted from this
penalty tax:
(1) death;
(2) disability;
(3) separation from service after a participant reaches age 55;
(4) separation from service at any age if the distribution is in the form of
substantially equal periodic payments over the life (or life expectancy) of
the Participant (or the Participant and Beneficiary), and
(5) distributions which do not exceed the employee's tax deductible medical
expenses for the taxable year of receipt.
457 Plans. Distributions generally may be made under an EDCP prior to
separation from service only for unforeseeable emergencies, or for amounts under
$3,500 for inactive Participants, and are includible in the recipient's gross
income in the year paid.
Non-Qualified Contracts. A 10% penalty tax applies to the taxable portion
of a distribution received before age 59 1/2 under a Non-Qualified Contract,
unless the distribution is:
(1) to a Beneficiary on or after the Contract Owner's death;
(2) upon the Contract Owner's disability;
(3) part of a series of substantially equal annuity payments for the life or
life expectancy of the Contract Owner, or the lives or joint life expectancy
of the Contract Owner and Beneficiary;
(4) made under an immediate annuity contract, or
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(5) allocable to Purchase Payments made before August 14, 1982.
SPECIAL TAX CONSEQUENCES -- REQUIRED DISTRIBUTIONS
403(b) Annuities. Generally, minimum required distributions must commence
no later than April 1 of the calendar year following the later of the calendar
year in which the Participant attains age 70 1/2 or the calendar year in which
the Participant retires. Required distributions must be made over a period that
does not exceed the life or life expectancies of the Participant (or lives or
joint life expectancies of the Participant and Beneficiary). The minimum amount
payable can be determined several different ways. A penalty tax of 50% is
imposed on the amount by which the minimum required distribution in any year
exceeds the amount actually distributed in that year.
Amounts accumulated under a Contract on December 31, 1986 may be paid in a
manner that meets the above rule or, alternatively:
(i) must begin to be paid when Participant attains age 75; and
(ii) the present value of payments expected to be made over the life of the
Participant, (under the option chosen) must exceed 50% of the present value
of all payments expected to be made (the "50% rule").
The 50% rule will not apply if a Participant's spouse is the joint annuitant.
Notwithstanding these pre-January 1, 1987 rules the entire contract balance must
meet the minimum distribution incidental benefit requirement of Section
403(b)(10).
At the Participant's death before payout has begun, Contract amounts
generally either must be paid to the Beneficiary within 5 years, or must begin
within 1 year of death and be paid over the life or life expectancy of the
Beneficiary. If death occurs after commencement of (but before full) payout,
distributions generally must continue at least as rapidly as under the method
elected by the Participant and in effect at the time of death.
401(a) and 403(a) Qualified Plans. Minimum distribution requirements for
Qualified Plans, are generally the same as described for 403(b) Annuities,
except that there is no exception for pre-1987 amounts.
408(b) IRAs and SEPs. Minimum distribution requirements are generally the
same as described above for 403(b) Annuities, except that:
(1) there is no exception for pre-1987 amounts; and
(2) there is no available postponement, past April 1 of the calendar year
following the calendar year in which age 70 1/2 is attained.
457 Plans. Beginning January 1, 1989, the minimum distribution requirements
for EDCP's are generally the same as described above for 403(b) Annuities except
that there is no exception for pre-1987 amounts.
Non-Qualified Contracts. Non-Qualified Contracts do not require
commencement of distributions at any particular time and do not limit the
duration of annuity payments.
At the Participant's death before payout has begun, Contract amounts
generally either must be paid to the Beneficiary within 5 years, or must begin
within 1 year of death and be paid over the life or life expectancy of the
Beneficiary. If death occurs after commencement of (but before full) payout,
distributions generally must continue at least as rapidly as under the method
elected by the Participant at the time of death.
TAX-FREE ROLLOVERS, TRANSFERS AND
EXCHANGES
403(b) Annuities. Tax free transfers between 403(b) annuity contracts
and/or 403(b)(7) custodial accounts, and tax-free rollovers from 403(b) programs
to IRAs or other 403(b) programs, are permitted under certain circumstances.
401(a) and 403(a) Qualified Plans. The taxable portion of certain
distributions may be transferred in a tax-free rollover to an individual
retirement account or annuity, or to another such plan.
408(b) IRAs. Funds may be transferred tax-free to an IRA Contract, from a
403(b) Annuity, or 401(a) or 403(a) Qualified Plan, under certain conditions.
These amounts may subsequently be rolled over on a tax-free basis to another
such plan or 403(b) Annuity Contract
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from this "conduit" IRA. In addition, tax-free rollovers may be made from one
IRA to another provided that no more than one such rollover is made during any
twelve-month period.
SEPs. Funds may be rolled over tax free from one SEP only to another SEP or
an IRA.
457 Plans. Tax-free transfer of EDCP amounts are permitted only to another
EDCP.
Unfunded Deferred Compensation Plans. Tax-free transfers or rollovers are
not allowed from these plans.
Non-Qualified Contracts. Certain of the Non-Qualified single payment
deferred annuity Contracts permit the Contract Owner to exchange the Contract
for a new deferred annuity contract prior to the commencement of annuity
payments. The exchange of one annuity contract for another is a tax-free
transaction under Section 1035, but is reportable to the IRS.
EXCHANGE PRIVILEGE
In the prospectus we described generally how under certain conditions we
will allow you to exchange from other fixed and/or variable contracts we issue
(other contracts) to Portfolio Director. These other contracts are listed in the
prospectus. A more detailed comparison of the features, charges and restrictions
between each of these listed other contracts and Portfolio Director is provided
below.
EXCHANGES FROM INDEPENDENCE PLUS
CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within five years of the date
such Purchase Payments were made. The most recent Purchase Payments are deemed
to be withdrawn first. Up to 10% of the Account Value may be surrendered in a
Participant Year without any surrender charge being imposed. Portfolio Director
imposes a similar surrender charge upon total or partial surrenders. Both the
Portfolio Director and Independence Plus Contracts have other similar provisions
where surrender charges are not imposed. However, Portfolio Director provides at
least one additional provision, not included in Independence Plus Contracts,
under which no surrender charge will be imposed. An additional provision allows
election of a systematic withdrawal method without surrender charges. (See
"Surrender Charges" in the prospectus.) For purposes of satisfying the
fifteen-year and five-year holding requirements described in "Surrenders
Charges" in the prospectus, Portfolio Director will be deemed to have been
issued on the same date as the Independence Plus Contract or certificate
thereunder, but no earlier than January 1, 1982. Purchase Payments exchanged
into Portfolio Director and which were made within five years before the date of
exchange will be treated as Purchase Payments under Portfolio Director for
purposes of calculating surrender charges. Exchanged payments will be deemed to
have been made under Portfolio Director on the date they were made to
Independence Plus Contracts for purposes of calculating the surrender charge
under Portfolio Director.
Other Charges. Under the Independence Plus Contracts, a maintenance charge
of $20 is assessed for the first year and an annual charge of $15 is assessed
for the second and later years during the accumulation period. The charge is due
in quarterly installments. A daily fee is charged at the annual rate of 1% of
the daily net asset value allocable to the Variable Subaccounts to cover
administrative expenses (other than those covered by the annual charge) and
mortality risks assumed by the Company. For Portfolio Director, a quarterly
account maintenance charge of $3.75 is assessed for each calendar quarter during
the Purchase Period during which any Variable Account Option Account Value is
credited to a Participant's Account. The charge is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No charge is assessed for any calendar quarter if the Account Value is
credited only to the Fixed Account Options throughout the quarter. Such charge
begins immediately if an exchange is made into any Variable Account Option
offered under Portfolio Director. The charge may also be reduced or waived by
the Company for Portfolio Director if the administrative expenses are expected
to be lower for that Contract. (See "Reduction or Waiver of Account Maintenance
Fee or Surrender Charges" in the
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prospectus) To cover expenses not covered by the account maintenance charge and
to compensate the Company for assuming mortality risks under Portfolio Director,
an additional daily charge with an annualized rate of 1.00% or 1.25%, depending
upon the Variable Account Options selected, if any, on the daily net asset value
of VALIC Separate Account A is attributable to Portfolio Director. (See
"Separate Account Charges" in the prospectus)
Investment Options. Under Independence Plus Contracts ten divisions of
VALIC Separate Account A are available variable investment alternatives, each
investing in shares of a different underlying fund of the Series Company
portfolio. The ten mutual funds are managed by the Company for advisory fees at
annual rates ranging from .29% to .50% of each respective portfolio's average
daily net assets. In addition, two fixed investment options are available. Under
Portfolio Director, sixteen divisions of VALIC Separate Account A are available,
thirteen of which invest in a different investment portfolio of the Series
Company and three divisions of which invest in other mutual fund portfolios.
These mutual fund portfolios are managed either by the Company, the Dreyfus
Corporation, or Templeton Investment Counsel Inc. for advisory fees at annual
rates ranging from .28% to .90% of each portfolio's or mutual fund's average
daily net assets. Two fixed investment options are also available.
Annuity Options. Annuity options under Independence Plus Contracts provide
for payments on a fixed or variable basis, or a combination of both. The
Independence Plus Contract permits annuity payments for a designated period
between 3 and 30 years on a fixed basis only. Portfolio Director permits annuity
payments for a designated period between of 5 and 30 years on a fixed basis
only. Independence Plus Contracts and Portfolio Director both provide for
"betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM V-PLAN CONTRACTS
Sales/Surrender Charges. Under a V-Plan Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 7% of
the Purchase Payments withdrawn within five years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Up to 10% of the account value may be surrendered in a Participant Year
without any surrender charge being imposed. Portfolio Director also imposes a
surrender charge upon total or partial surrenders. However, the surrender charge
under Portfolio Director may not exceed 5% of any Purchase Payments withdrawn
within the most recent five years prior to the receipt of the surrender request
by the Company at its Home Office. V-Plan Contracts have other provisions where
surrender charges are not imposed. However, Portfolio Director provides at least
two additional provisions, not included in V-Plan Contracts, under which no
surrender charge will be imposed. Those Portfolio Director provisions include no
surrender charges on an election of the no charge systematic withdrawal method,
and where an employee-participant has maintained the account for a period of
five years and has attained the age 59 1/2. (See "Surrender Charges" in the
prospectus.) For purposes of satisfying the fifteen-year and five-year holding
requirements, Portfolio Director will be deemed to have been issued on the same
date as the V-Plan Contract or certificate thereunder, but no earlier than
January 1, 1982.
If there is a total or partial surrender, Purchase Payments exchanged into
Portfolio Director and which were made within five years before the date of
exchange will be treated as Purchase Payments under Portfolio Director for
purposes of calculating surrender charges. Exchanged payments will be deemed to
have been made under Portfolio Director on the date they were made to the V-Plan
Contract for purposes of calculating the surrender charge under Portfolio
Director.
Other Charges. There are no administrative and risk charges under V-Plan
Contracts. For Portfolio Director, a quarterly account maintenance charge of
$3.75 is assessed for each calendar quarter during the Purchase Period during
which any Variable Account Option Account Value is credited to a Participant's
Account. The charge is to reimburse the Company for some of the administrative
expenses associated with the Variable Account Options. No charge is assessed
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for any calendar quarter if the Account Value is credited only to the Fixed
Account Options throughout the quarter. Such charges begin immediately if an
exchange is made into any Variable Account Option offered under Portfolio
Director. The charge may also be reduced or waived by the Company on Portfolio
Director if the administrative expenses are expected to be lower for that
Contract. (See "Reduction or Waiver of Account Maintenance Fee or Surrender
Charges" in the prospectus.) To cover expenses not covered by the account
maintenance charge and to compensate the Company for assuming mortality risks
under Portfolio Director, an additional daily charge with an annualized rate of
1.00% or 1.25%, depending upon the Variable Account Options selected, if any, on
the daily net asset value of the VALIC Separate Account A is attributable to
Portfolio Director. (See "Separate Account Charges" in the prospectus.)
Investment Options. There are no variable investment alternatives provided
under V-Plan Contracts.
Annuity Options. Annuity options under V-Plan Contracts provide for
payments on a fixed basis only. The V-Plan Contract permits annuity payments for
a designated period of 1 to 15 years. Under a V-Plan Contract, the designated
period option may, subject to adverse tax consequences, be commuted at any time
for its remaining value. Portfolio Director permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Under
Portfolio Director, Payout Payments may be made on a fixed or variable basis, or
a combination of both. Portfolio Director does not provide for commutation.
V-Plan Contracts and Portfolio Director both provide for "betterment of rates."
Under this provision, Payout Payments for fixed annuities will be based on
mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM SA-1 AND SA-2 CONTRACTS (GUP-64, GUP-74, GTS VA CONTRACTS)
Sales/Surrender Charges. Under the SA-1 and SA-2 Contracts a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a SA-1 or SA-2 Contract is exchanged for Portfolio
Director the surrender charge under Portfolio Director will not apply to the
amount of Account Value applied to Portfolio Director ("Exchanged Amount").
Purchase Payments made to Portfolio Director, however, would be subject to
surrender charges. In the case of a partial surrender, all Purchase Payments to
Portfolio Director will be deemed to be withdrawn before any Exchanged Amount is
deemed to be withdrawn. No exchange pursuant to this offer will be allowed
within 120 days of a transfer of fixed accumulations under a SA-1 or SA-2
Contract to the variable portion of such Contract. Under Portfolio Director, no
sales charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within the most recent five
years prior to the receipt of the surrender request by the Company at its Home
Office. For purposes of this surrender charge, the most recent Purchase Payments
are deemed to be withdrawn first. (See "Surrender Charges" in the prospectus.)
Other Charges. A charge of a percentage of each Purchase Payment is made
for administrative expenses for SA-1 and SA-2 Contracts. The charge is generally
1.25% and is included in the above sales and administrative charge. An
additional daily charge (at an annual rate of 1% of total net assets
attributable to SA-1 Contracts and ranging from .21% to .85% of total net assets
attributable to SA-2 Contracts) is made for mortality and expense risks assumed
by the Company under the variable portion of the Contract. The total of these
expenses and other charges is limited to a maximum of the rate imposed on SA-1
and SA-2 Contracts on April 1, 1987. (See prospectus for SA-1 and SA-2 contracts
dated April 20, 1987.) For Portfolio Director, a quarterly account maintenance
charge of $3.75 is assessed for each calendar quarter during the Purchase Period
during which any Variable Account Option Account Value is credited to a
Participant's Account. The charge is to reimburse the Company for some of the
administrative expenses associated with the Variable Account Options. No charge
is assessed for any calendar quarter if the Account Value is credited only to
the Fixed Account Options throughout the quarter. Such charge begins immediately
if an exchange is made into any Variable Account Option
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offered under Portfolio Director. The charge may also be reduced or waived by
the Company on Portfolio Director if the administrative expenses are expected to
be lower for that Contract. (See "Reduction or Waiver of Account Maintenance Fee
or Surrender Charges" in the prospectus.) To cover expenses not covered by the
account maintenance charge and to compensate the Company for assuming mortality
risks under Portfolio Director, an additional daily charge with an annualized
rate of 1.00% or 1.25%, depending upon the Variable Account Options selected, if
any, on the average daily net asset value of the Separate Account is
attributable to Portfolio Director. (See "Separate Account Charges" in the
prospectus.)
Investment Options. Under SA-1 and SA-2 Contracts only one division of
VALIC Separate Account A is available as a variable investment alternative. This
division invests in a portfolio of the Series Company. This portfolio is managed
by the Company for advisory fees at an annual rate of .29% of the portfolio's
average daily net assets. (Under a "grandfathering" arrangement, the total
advisory fees and certain other charges imposed against these Contracts are
limited to a maximum of the rate charged on April 1, 1987. See the prospectus
for these Contracts dated April 20, 1987.) Under Portfolio Director, sixteen
divisions of VALIC Separate Account A are available, thirteen of which invest in
a different investment portfolio of the Series Company and three divisions of
which invest in other mutual fund portfolios. These mutual fund portfolios are
managed by either the Company, The Dreyfus Corporation, or Templeton Investment
Counsel Inc., for advisory fees at annual rates ranging from .29% to .90% of
each portfolio's or mutual fund's average daily net assets. Additionally, two
fixed investment options are available under Portfolio Director.
Annuity Options. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on a fixed or variable basis, or a combination of both. The SA-1
Contract annuity payments under a designated period option are limited to 15
years on a fixed basis only. Under this Contract, the designated period option
may, subject to adverse tax consequences, be commuted at any time for its
remaining value. SA-2 Contracts do not provide a designated period option nor do
they provide for commutation. Portfolio Director permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Portfolio
Director does not provide for commutation. The SA-1 and SA-2 Contracts make no
provision for transfers from a separate account to a fixed annuity during the
annuity period. This option, subject to certain conditions, is available under
Portfolio Director. The SA-1 Contracts provide an option for monthly variable
annuity payments to be made at a level payment basis during each year of the
annuity period. Portfolio Director does not provide this option. SA-1 and
Portfolio Director, but not SA-2 Contracts, both provide for "betterment of
rates." Under this provision, Payout Payments for fixed annuities will be based
on mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM IMPACT CONTRACTS
Sales/Surrender Charges. Under an Impact Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 5% of
the Purchase Payments withdrawn within three years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Portfolio Director also imposes a surrender charge upon total or partial
surrenders which may not exceed 5% of any Purchase Payments withdrawn within the
most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. Portfolio Director also has other provisions where
surrender charges are not imposed. (See "Exceptions to Surrender Charge" in the
prospectus.) For purposes of satisfying the fifteen-year and five-year holding
requirements, Portfolio Director will be deemed to have been issued on the same
date as the Impact Contract, or certificate thereunder, but no earlier than
January 1, 1982. Only Purchase Payments exchanged into a Portfolio Director
which were made within three years before the date of exchange will be treated
as Purchase Payments under Portfolio Director for purposes of calculating
surrender charges. Exchanged payments will be deemed to have been made under
Portfolio Director on the date they were made to Impact Contracts for purposes
of calculating the surrender charge under Portfolio Director.
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Other Charges. Under Impact Contracts, a $30 annual charge is assessed once
a year to cover administrative expenses. The charge may, with prior regulatory
approval if required, be increased or decreased. In addition, a daily charge is
made at an annual rate of 1% of the net asset value allocable to the Impact
Contracts to cover administrative expenses (other than those covered by the
annual charge) and mortality risks assumed by the Company. For Portfolio
Director, a quarterly account maintenance charge of $3.75 is assessed for each
calendar quarter during the Purchase Period during which any Variable Account
Option Account Value is credited to a Participant's Account. The charge is to
reimburse the Company for some of the administrative expenses associated with
the Variable Account Options. No charge is assessed for any calendar quarter if
the Account Value is credited only to the Fixed Account Options throughout the
quarter. Such charge begins immediately if an exchange is made into any Variable
Account Option offered under Portfolio Director. The charge may also be reduced
or waived by the Company on Portfolio Director if the administrative expenses
are expected to be lower for that Contract. (See "Reduction or Waiver of Account
Maintenance Fee or Surrender Charges" in the prospectus.) To cover expenses not
covered by the account maintenance charge and to compensate the Company for
assuming mortality risks under Portfolio Director, an additional daily charge
with an annualized rate of 1.00% or 1.25%, depending upon the Variable Account
Options selected, if any, on the daily net asset value of the Separate Account
is attributable to Portfolio Director. (See "Separate Account Charges" in the
prospectus.)
Investment Options. Under the Impact Contract five divisions of Separate
Account A are available as variable investment alternatives, each investing in
shares of a different underlying fund of the Series Company portfolio. The five
mutual funds are managed by the Company for advisory fees at annual rates
ranging from .29% to .50% of each respective portfolio's average daily net
assets. Under Portfolio Director, sixteen divisions of VALIC Separate Account A
are available, thirteen of which invest in a different investment portfolio of
the Series Company and three divisions of which invest in other mutual fund
portfolios. These mutual fund portfolios are managed by either the Company, The
Dreyfus Corporation, or Templeton Investment Counsel Inc., for advisory fees at
annual rates ranging from .29% to .90% of each portfolio's or mutual fund's
average daily net assets. In addition, two fixed investment options are
available under Portfolio Director.
Annuity Options. Annuity options under Impact Contracts provide for
payments on a fixed or variable basis, or a combination of both. The Impact
Contract permits annuity payments for a designated period of 1 to 15 years on a
fixed basis only. Under an Impact Contract, the designated period option may,
subject to adverse tax consequences, be commuted at any time for its remaining
value. Portfolio Director permits Payout Payments for a designated period of
between 5 and 30 years on a fixed basis only. Portfolio Director does not
provide for commutation. Impact Contracts and the Portfolio Director both
provide for "betterment of rates." Under this provision, Payout Payments for
fixed annuities will be based on mortality tables then being used by the
Company, if more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM COMPOUNDER CONTRACTS
Sales/Surrender Charges. Under a Compounder Contract a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a Compounder Contract is exchanged for Portfolio Director
the surrender charge under Portfolio Director will not apply to the amount of
Account Value applied to Portfolio Director. Purchase Payments made to Portfolio
Director, however, would be subject to the surrender charge under Portfolio
Director. In the case of a partial surrender, all Purchase Payments to Portfolio
Director will be deemed to be withdrawn before any Exchanged Amount is deemed to
be withdrawn. Under Portfolio Director, no sales charge is deducted at the time
a Purchase Payment is made, but a surrender charge may be imposed on partial or
total surrenders. The surrender charge may not exceed 5% of any Purchase
Payments withdrawn within the most recent five years prior to the receipt of the
surrender request by the Company at its Home Office. For purposes of this
surrender charge, the most recent Purchase Payments are deemed to be withdrawn
first. (See "Surrender Charges" in the prospectus.)
16
<PAGE> 67
Other Charges. A charge of a percentage of each Purchase Payment is made
for administrative expenses under a Compounder Contract. The charge is 1.25% and
is included in the above sales charge. For Portfolio Director, a quarterly
account maintenance charge of $3.75 is assessed for each calendar quarter during
the Purchase Period during which any Variable Account Option Account Value is
credited to a Participant's Account. The charge is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No charge is assessed for any calendar quarter if the Account Value is
credited only to the Fixed Account Options throughout the quarter. Such charge
begins immediately if an exchange is made into any Variable Account Option
offered under Portfolio Director. The charge may also be reduced or waived by
the Company for Portfolio Director if the administrative expenses are expected
to be lower for that Contract. (See "Reduction or Waiver of Account Maintenance
Fee or Surrender Charges" in this prospectus.) To cover expenses not covered by
the account maintenance charge and to compensate the Company for assuming
mortality risks under Portfolio Director, an additional daily charge with an
annualized rate of 1.00% or 1.25%, depending upon the Variable Account Options
selected, if any, on the daily net asset value of the Separate Account is
attributable to Portfolio Director. (See "Separate Account Charges" in the
prospectus.)
Investment Options. There are no variable investment alternatives provided
under Compounder Contracts.
Annuity Options. Payout Payments under a Compounder Contract are on a fixed
basis only and the designated period option is limited to a period of 15 years.
However, under a Compounder Contract, the designated period option may, subject
to adverse tax consequences, be commuted at any time for its remaining value.
Portfolio Director allows Payout Payments be made on a fixed or variable basis,
or both. One option under the Portfolio Director provides for a designated
period of 5 and 30 years on a fixed basis only. Portfolio Director does not
provide for commutation. Unlike Portfolio Director, the Compounder Contracts
contain no "betterment of rates" provision.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the other contracts. Therefore, the annuity rates guaranteed
in Portfolio Director are less favorable to Contract Owners and Annuitants than
those guaranteed in the other contracts. However, the current annuity rates
being charged for fixed annuities under the "betterment of rates" provisions
discussed above are more favorable than those guaranteed under Portfolio
Director or the other contracts. Of course, no assurance can be given that this
will continue to be true at the time of annuitization for a given contract.
Guaranteed annuity rate tables are set forth in your Contract or in current
endorsements thereto. Those guaranteed for Portfolio Director are set forth
therein, and copies may be obtained from one of the Company's Regional Offices
listed on the inside back cover of this prospectus.
To satisfy a Federal tax law requirement, non-spouse beneficiaries under
Portfolio Director generally must receive the entire benefit payable upon the
death of the Annuitant over their life expectancy or within five years of the
Annuitant's death. This requirement may be inapplicable to certain other
contracts or certificates issued before January 19, 1985 if not exchanged.
17
<PAGE> 68
CALCULATION OF SURRENDER CHARGE
The surrender charge is discussed in the Prospectus under "Fees and Charges
- --Surrender Charge." Examples of calculation of the Surrender Charge upon total
and partial surrender are set forth below:
ILLUSTRATION OF SURRENDER CHARGE ON TOTAL SURRENDER
Example 1.
TRANSACTION HISTORY
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/91......................... Purchase Payment $10,000
2/1/92......................... Purchase Payment 5,000
2/1/93......................... Purchase Payment 15,000
2/1/94......................... Purchase Payment 2,000
2/1/95......................... Purchase Payment 3,000
2/1/96......................... Purchase Payment 4,000
7/1/96......................... Total Purchase Payments (Assumes
Account Value is $50,000) 39,000
</TABLE>
Surrender Charge is lesser of (a) or (b):
<TABLE>
<S> <C> <C> <C>
a. Surrender Charge calculated on 60 months of Purchase Payments
1. Surrender Charge against Purchase Payment of 2/1/91......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/92 (0.05 X
$5,000)..................................................... $ 250
3. Surrender Charge against Purchase Payment of 2/1/93 (0.05 X
$15,000).................................................... $ 750
4. Surrender Charge against Purchase Payment of 2/1/94 (0.05 X
$2,000)..................................................... $ 100
5. Surrender Charge against Purchase Payment of 2/1/95 (0.05 X
$3,000)..................................................... $ 150
6. Surrender Charge against Purchase Payment of 2/1/96 (0.05 X
$4,000)..................................................... $ 200
Surrender Charge based on Purchase Payments (1 + 2 + 3 + 4 +
5 + 6)...................................................... $1,450
b. Surrender Charge calculated on the excess over 10% of the Account
Value at the time of surrender:
Account Value at time of surrender $ 50,000
Less 10% not subject to Surrender Charge -5,000
-----------
Subject to Surrender Charge 45,000
X .05
-----------
Surrender Charge based on Account
Value $ 2,250 ........................................... $2,250
c. Surrender Charge is the lesser of a or b......................... $1,450
</TABLE>
ILLUSTRATION OF SURRENDER CHARGE ON A 10% PARTIAL SURRENDER FOLLOWED BY A FULL
SURRENDER
Example 2.
TRANSACTION HISTORY (ASSUMES NO INTEREST EARNED)
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/91......................... Purchase Payment $10,000
2/1/92......................... Purchase Payment 5,000
2/1/93......................... Purchase Payment 15,000
2/1/94......................... Purchase Payment 2,000
2/1/95......................... Purchase Payment 3,000
2/1/96......................... Purchase Payment 4,000
7/1/96......................... 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
8/1/96......................... Full Surrender 35,100
</TABLE>
a. Since this is the first partial surrender in this participant year,
calculate the excess over 10% of the value of the Purchase Units
10% of $39,000 = $3,900 [no charge on this 10% withdrawal]
b. The Account Value upon which Surrender Charge on the Full Surrender may
be calculated (levied) is $39,000 - $3,900 = $35,100
c. The Surrender Charge calculated on the Account Value withdrawn $35,100 X
.05 = $1,755
d. Since only $29,000 has been paid in Purchase Payments in the 60 months
prior to the Full Surrender, the charge can only be calculated on
$29,000. The $3,900 partial withdrawal does not reduce this amount.
Thus, the charge is $29,000 X (0.05) = $1,450.
18
<PAGE> 69
PURCHASE UNIT VALUE
The calculation of Purchase Unit value is discussed in the Prospectus under
"Purchase Period." The following illustrations show a calculation of a new Unit
value and the purchase of Purchase Units (using hypothetical examples):
ILLUSTRATION OF CALCULATION OF PURCHASE UNIT VALUE
Example 3.
<TABLE>
<S> <C>
1. Purchase Unit value, beginning of period................. $ 1.800000
2. Value of Fund share, beginning of period................. $21.200000
3. Change in value of Fund share............................ $ .500000
4. Gross investment return (3)/(2).......................... .023585
5. Daily mortality and expense charge....................... .000027
6. Net investment return (4)-(5)............................ .023558
7. Net investment factor 1.000000+(6)....................... 1.023558
8. Purchase Unit value, end of period (1)X(7)............... $ 1.842404
</TABLE>
ILLUSTRATION OF PURCHASE OF PURCHASE UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 4.
<TABLE>
<S> <C>
1. First Periodic Purchase Payment.......................... $100.00
2. Purchase Unit value on effective date of purchase (see
Example 3)............................................... $ 1.800000
3. Number of Purchase Units purchased (1)/(2)............... 55.556
4. Purchase Unit value for valuation date following purchase
(see Example 3).......................................... $ 1.842404
5. Value of Purchase Units in account for valuation date
following
purchase (3)X(4)......................................... $102.36
</TABLE>
PERFORMANCE CALCULATIONS
MONEY MARKET DIVISION YIELDS
CALCULATION OF YIELD FOR MONEY MARKET DIVISION SIX
7-Day Current Yield: 3.92%
ILLUSTRATION OF CALCULATION OF YIELD FOR MONEY MARKET DIVISION SIX
Example 5.
The yield quotation above is based on the seven days ended December 31,
1996, the date of the most recent balance sheet included in the registration
statement ("base period"). It is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one Purchase Unit at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from Contract Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by 365/7.
CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION SIX
7-Day Effective Yield: 3.99%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION SIX
Example 6.
The effective yield quotation above is based on the seven days ended
December 31, 1996, the date of the most recent balance sheet included in the
registration statement ("base period"). It is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Purchase Unit at the beginning of
19
<PAGE> 70
the period, subtracting a hypothetical charge reflecting deductions from
Contract Owner accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] -1
STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND THIRTEEN
CALCULATION OF STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND THIRTEEN
<TABLE>
<CAPTION>
DIV 7 DIV 8 DIV 13
-------- -------- --------
<S> <C> <C> <C>
Standardized Yield.......................................... 5.34% 4.92% 3.49%
</TABLE>
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND
THIRTEEN
Example 7.
The yield quotation based on a 30-day period ended December 31, 1996, the
date of the most recent balance sheet of the Registrant included in the
registration statement is computed by dividing the net investment income per
Purchase Unit earned during the period by the maximum offering price per Unit
on the last day of the period, according to the following formula:
YIELD = 2 [(a - b + 1)6 - 1]
-----
cd
Where:
<TABLE>
<S> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Purchase Units outstanding
during the period
d = the maximum offering price per Purchase Unit on the last day
of the period
</TABLE>
Yield on each Division is earned from dividends declared and paid by the
Fund, which are
automatically reinvested in Fund shares.
20
<PAGE> 71
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1996, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual com-
pounded rates of over the 1, 3, 5, and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C>
P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value at the end of the 1, 3, 5 or 10 year
periods of a hypothetical $1,000 Purchase Payment made at
the beginning of the 1, 3, 5, or 10 year periods (or
fractional portion thereof)
</TABLE>
The Company may advertise standardized average annual total return which,
includes the surrender charge of up to 5% of Gross Purchase Payments received
during the most recent 60 months as well as non-standardized average annual
total returns which does not include a surrender charge or maintenance fee.
There is no sales charge for reinvested dividends. All recurring fees have
been deducted. For fees which vary with the account size, an account size equal
to that of the median account size has been assumed. Ending redeemable value has
been determined assuming a complete redemption at the end of the 1, 3, 5 or 10
year period and deduction of all nonrecurring charges at the end of each such
period.
PERFORMANCE INFORMATION
HYPOTHETICAL $10,000 ACCOUNT VALUE AND
CUMULATIVE RETURN AS COMPARED TO BENCHMARKS TABLES.
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return of each Division as compared to the benchmarks shown. Because
the Funds underlying Divisions Fifteen, Sixteen and Seventeen began operations
on April 29, 1994, performance information for those Divisions is based on
performance of comparable funds managed by the subadvisers for the Funds. The
performance information presented for all other Divisions represents actual Fund
performance.
These performance calculations for the Divisions, and the methods used for
calculating them, are explained in the prospectus. (See "How To Review
Investment Performance of Separate Account Divisions" and "Variable Account
Options" in the prospectus.)
These tables compare hypothetical investment performance and percentage
changes in Purchase Unit values with the results of several benchmarks,
representing unmanaged market indices. The performance information has been
adjusted to reflect mortality and expense risk charges. Surrender charges,
maintenance charges and premium taxes are not deducted. The effect of these
charges is to reduce total return to a Contract Owner. The comparisons should be
considered in light of the investment policies and objectives of the Funds.
Rates of return for the Divisions include reinvestment of investment income,
including capital gains, interest and dividends. The rates of return on the
market indices also have been adjusted to reflect reinvestment of interest and
dividends.
Price returns for the market indices are calculated by subtracting the
price level at the beginning of the year from the price level at the end of the
year and dividing the difference by the price level at the beginning of the
year. To calcu-
21
<PAGE> 72
late dollar values for the indices' Hypothetical $10,000 Account Value
presentation, price index values were substituted for Unit values in the
calculation described in the prospectus, and where applicable, dividend yields
were then added to determine the total returns applied in the dollar value
calculations. Similarly, to calculate Cumulative Return for the indices, the
Cumulative Return calculation described in the prospectus for Unit values of the
Divisions is used, substituting the Hypothetical $10,000 Account Value at the
end of each year for the Purchase Unit Value. No sales load, administrative
charges, or any other expenses have been deducted from the index calculations.
Additionally, the performance of a Division may from time to time be
compared with other Indexes which have been deemed by the Company relevant to
the Division.
These benchmarks do not reflect any charges for investment advisory fees,
brokerage commissions or other fees and expenses of the type charged at either
the Separate Account or Fund level. Therefore, the comparisons with these
benchmarks are of limited use.
THE PERFORMANCE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR
GUARANTEE OF FUTURE INVESTMENT PERFORMANCE, AND DO NOT REPRESENT THE ACTUAL
EXPERIENCE OF AMOUNTS INVESTED BY A PARTICULAR PARTICIPANT.
PERFORMANCE COMPARED TO MARKET INDICES
The performance of Stock Index Division Ten, Social Awareness Division
Twelve, the Growth Division Fifteen, the Growth & Income Division Sixteen, and
the Science & Technology Division Seventeen may be compared to the record of the
Standard & Poor's(R) Corporation ("S&P(R)")* Composite Stock Price Index ("S&P
500 Index"). The S&P 500(R) Index is a well known measure of the price
performance of 500 leading larger domestic stocks which represents approximately
70% of the market capitalization of the United States equity market. The index
is an unmanaged weighted index of 500 industrial, transportation, utility and
financial companies.
The performance of MidCap Index Division Four may be compared to the record
of the S&P MidCap 400 Index. The S&P MidCap 400 Index was developed in 1991 by
S&P to track the stock market performance of medium-capitalization domestic
stocks. The S&P MidCap 400 Index is market weighted and consists of 400 stocks
of domestic companies having a median market capitalization of approximately
$1.37 billion. Stocks included in the S&P MidCap 400 Index are chosen on the
basis of their market size, liquidity and industry group representation. No
stocks included in the S&P 500 Index are included in the S&P MidCap 400 Index.
The performance of Money Market Division Six may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The index is a money market index which reflects the average rate paid by New
York Banks on certificates of deposit of more than $100,000. The Index for 30
days is published daily.
The performance of Capital Conservation Division Seven may be compared to
the Merrill Lynch Corporate Master Index. The Merrill Lynch Corporate Master
Index consists of an index of approximately 3,600 corporate bond holdings of
which assets are rated BBB- to AAA. The average years to maturity of these
corporate bond holdings are approximately 12 years.
Performance of Government Securities Division Eight may be compared to the
Lehman Brothers U.S. Treasury Composite Index. The Lehman Brothers U.S. Treasury
Composite Index consists of an index of approximately 170 government securities
issues with all such issues having a maturity of greater than one year.
The performance of International Equities Division Eleven may be compared
to the Morgan Stanley Capital International Europe, Australia and Far East Index
("EAFE Index"). The EAFE Index, which commenced in 1969, is an unmanaged stock
index consisting of more than 1,000 companies from Europe, Australia and the Far
East. The index is capitalization weighted. It is a well known measure for
international stock performance. Total returns (with income reinvested)
- ---------------
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400(R)" are
trademarks of Standard and Poor's ("S&P"). Neither the MidCap 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 investing in these
Funds.
22
<PAGE> 73
for the EAFE Index are published using two methods. The first method includes
gross income (income earned without subtracting foreign income taxes which may
be withheld from foreign investors). The second method includes net income
(income earned after subtracting estimated foreign taxes). The Division
currently compares its performance with the index using the second method.
The performance of the International Government Bond Fund Division Thirteen
may be compared to the Salomon Brothers Non-US Dollar World Government Bond
Index ("Salomon Index"). Total returns with income reinvested for the Salomon
index are published using two methods. The first method includes gross income
(income earned without subtracting foreign income taxes which may be withheld
from foreign investors). The second method includes net income (income earned
after subtracting estimated foreign taxes). The Division currently compares its
performance with the index using the second method. The Salomon Index is an
unmanaged aggregate index composed of 673 issues from fifteen foreign countries.
These countries include Austria, Australia, Belgium, Canada, Denmark, Finland,
France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland and
the United Kingdom.
The performance of the Small Cap Index Division Fourteen and the Dreyfus
Small Cap Division Eighteen may be compared with the Russell 2000(R) Index
("Russell 2000").** The Russell 2000 was developed in 1984 by the Frank Russell
Company to track the stock market performance of small capitalization domestic
stocks. The Russell 2000 is market weighted and consists of approximately 2000
stocks. Stocks included in the Russell 2000 are chosen by the Frank Russell
Company on the basis of their market size.
The performance of Timed Opportunity Division Five may be compared to a
benchmark comprised of a weighted average of three market sectors corresponding
to the three market sectors in which the Division, through the Timed Opportunity
Fund, will invest as follows: 55% in equity securities, 35% in intermediate or
long-term debt securities and 10% in money market or short-term debt securities,
regardless of the Division's actual asset allocation. The performance of the
equity securities sector of the Division may be compared to the S&P 500 Index.
The performance of the intermediate or long-term debt securities sector may be
compared to the Merrill Lynch Corporate and Government Master Index. The Merrill
Lynch Corporate and Government Master Index consists of an index of
approximately 5,000 corporate and government bond holdings. The average maturity
of these corporate bond holdings is approximately 10 years. The performance of
the money market or short-term debt securities sector may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The performance of the Templeton Asset Allocation Division Nineteen may be
compared to a benchmark comprised of a weighted average of three market sectors
corresponding to the sectors in which the Division, through the Templeton Asset
Allocation Fund, will invest as follows: 55% in equity securities, 35% in
intermediate or long-term debt securities and 10% in money market or short-term
debt securities, regardless of the Division's actual asset allocation. The
performance of the equity securities sector of the Division may be compared to
the Morgan Stanley Capital International World Index ("MSCI World Index"). The
performance of the intermediate or long-term debt securities sector may be
compared to the Salomon Brothers Non-US Dollar World Government Bond Index
("Salomon World Index"). The performance of the money market or short-term debt
securities sector may be compared to the Certificate of Deposit Primary Offering
by New York City Banks, 30 Day Index. Total returns (with income reinvested) for
the MSCI World Index and the Salomon World Index are published using two
methods. The first method includes gross income (income earned without
subtracting foreign income taxes which may be withheld from foreign investors).
The second method includes net income (income earned after subtracting estimated
foreign taxes). The Division currently compares its performance with these
indexes using the second method. The MSCI World Index is an unmanaged
capitalization
- ---------------
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. Russell TM is a trademark of the Frank Russell Company.
23
<PAGE> 74
weighted index consisting of more than 1,500 issues from 22 countries as well as
certain South African gold mining issues. The countries include Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States. The Salomon
World Index is an unmanaged aggregate index composed of approximately 850 issues
from seventeen countries. The countries include Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Ireland, Germany, Italy, Japan, The
Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United
States.
The performance of the Templeton International Division Twenty may be
compared to the Morgan Stanley Capital International World Index ("MSCI World
Index"). Total returns (with income reinvested) for the MSCI World Index is
published using two methods. The first method includes gross income (income
earned without subtracting foreign income taxes which may be withheld from
foreign investors). The second method includes net income (income earned after
subtracting estimated foreign taxes). The Division currently compares its
performance with the index using the second method. The MSCI World Index is an
unmanaged capitalization weighted index consisting of more than 1,500 issues
from 22 countries as well as certain South African gold mining issues. The
countries include Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, The Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and
the United States.
24
<PAGE> 75
See "How to Review Investment Performance of Separate Account Divisions" in the
prospectus for information about how these returns were calculated.
Stock Index Division Ten Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 20, 1987
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ---------------------------------------------------------------------- -------------
<S> <C> <C>
04/20/87............................................... $ 10,000 $ 10,000
12/31/87............................................... 8,562 8,722
12/31/88............................................... 9,687 10,171
12/31/89............................................... 12,388 13,394
12/31/90............................................... 11,790 12,978
12/31/91............................................... 15,056 16,932
12/31/92............................................... 15,897 18,222
12/31/93............................................... 17,293 20,059
12/31/94............................................... 17,241 20,323
12/31/95............................................... 23,439 27,960
12/31/96............................................... 28,484 34,383
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Division
Stock Index Division Ten................. 184.84% 89.18% 64.71% 21.53%
Benchmark Comparison
S&P 500 Index............................ 243.83% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* This Division was initiated on April 20, 1987.
MidCap Index Division Four* Performance Compared to S&P 500 Index and S&P MidCap
400 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 13, 1982
<TABLE>
<CAPTION>
S&P
S&P MIDCAP
MIDCAP INDEX 500 400
DIVISION FOUR INDEX INDEX
- ------------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
10/13/82................................ $ 10,000 $ 10,000 $ 10,000
12/31/82................................ 10,096 11,352 11,564
12/31/83................................ 11,608 13,913 14,583
12/31/84................................ 11,721 14,786 14,755
12/31/85................................ 13,195 19,477 20,004
12/31/86................................ 13,516 23,113 23,247
12/31/87................................ 12,827 24,326 22,774
12/31/88................................ 14,502 28,367 27,527
12/31/89................................ 17,127 37,355 37,310
12/31/90................................ 15,380 36,195 35,401
12/31/91................................ 18,580 47,223 53,136
12/31/92................................ 20,213 50,820 59,466
12/31/93................................ 22,594 55,943 67,762
12/31/94................................ 21,532 56,681 65,332
12/31/95................................ 27,827 77,981 85,547
12/31/96................................ 32,726 95,892 102,009
</TABLE>
25
<PAGE> 76
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Division
Division Four............... 227.26% 142.14% 76.13% 44.84% 17.61%
Benchmark Comparison
S&P 500 Index............... 858.92% 314.88% 103.06% 71.41% 22.97%
S&P MidCap 400 Index........ 920.09% 338.81% 91.98% 50.54% 19.24%
</TABLE>
- ---------------
Effective October 1, 1991, the Capital Accumulation Fund changed its name to
the MidCap Index Fund and revised its investment objective, investment program
and investment restrictions accordingly, pursuant to contract owner vote.
Selected purchase unit data for the last ten years for this Division appears
in the prospectus. Figures appearing above for the S&P MidCap 400 Index for
years prior to 1991 are based on estimates provided by Standard & Poor's for
illustrative purposes.
* This Division was initiated on October 13, 1982.
Small Cap Index Division Fourteen Performance Compared to Russell 2000 Index(R)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
RUSSELL
SMALL CAP INDEX 2000
DIVISION FOURTEEN INDEX
- ---------------------------------------------------------------------- -------------
<S> <C> <C>
05/01/92............................................... $ 10,000 $ 10,000
12/31/92............................................... 11,128 11,416
12/31/93............................................... 12,772 13,571
12/31/94............................................... 12,223 13,324
12/31/95............................................... 15,449 17,114
12/31/96............................................... 17,854 19,937
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 3 YEARS 1 YEAR
---------- ------- --------
<S> <C> <C> <C>
Investment Division
Small Cap Index Division Fourteen...................... 78.54% 39.79% 15.57%
Benchmark Comparison
Russell 2000........................................... 99.37% 46.91% 16.49%
</TABLE>
- ---------------
* This Division was initiated May 1, 1992.
International Equities Division Eleven Performance Compared to EAFE Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
<TABLE>
<CAPTION>
INTERNATIONAL EQUITIES EAFE
DIVISION ELEVEN INDEX
- ---------------------------------------------------------------------- -------------
<S> <C> <C>
10/02/89............................................... $ 10,000 $ 10,000
12/31/89............................................... 10,284 10,467
12/31/90............................................... 8,134 8,013
12/31/91............................................... 8,952 8,984
12/31/92............................................... 7,671 7,891
12/31/93............................................... 9,864 10,460
12/31/94............................................... 10,545 11,274
12/31/95............................................... 11,565 12,537
12/31/96............................................... 12,229 13,295
</TABLE>
26
<PAGE> 77
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
International Equities Division Eleven... 22.29% 36.60% 23.98% 5.75%
Benchmark Comparison
EAFE Index............................... 32.95% 47.98% 27.11% 6.05%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
Templeton International Division Twenty Performance Compared to MSCI World Index
HYPOTHETICAL $10,000 ACCOUNT VALUE*
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
MSCI
TEMPLETON INTERNATIONAL WORLD
DIVISION TWENTY INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
05/01/92................................................. $10,000 $10,000
12/31/92................................................. 9,311 10,182
12/31/93................................................. 13,549 12,474
12/31/94................................................. 13,077 13,107
12/31/95................................................. 14,952 15,823
12/31/96................................................. 18,317 17,955
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 3 YEARS 1 YEAR*
---------- ------- -------
<S> <C> <C> <C>
Investment Division
Templeton International Division Twenty.............. 83.17% 35.19% 22.50%
Benchmark Comparison
MSCI World Index..................................... 79.55% 43.95% 13.48%
</TABLE>
- ---------------
* The hypothetical account illustration and cumulative returns were calculated
on a pro forma basis. Therefore, the inception date used for the Templeton
International Fund Division 20 was May 1, 1992, the inception of the
underlying fund. Current contract charges have been assessed in determining
pro forma hypothetical account values and cumulative returns.
Dreyfus Small Cap Division Eighteen Performance Compared to Russell 2000
HYPOTHETICAL $10,000 ACCOUNT VALUE*
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 31, 1990
<TABLE>
<CAPTION>
DREYFUS SMALL CAP RUSSELL
DIVISION EIGHTEEN INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
08/31/90................................................ $ 10,000 $10,000
12/31/90................................................ 10,168 9,577
12/31/91................................................ 26,105 13,996
12/31/92................................................ 44,181 16,572
12/31/93................................................ 73,477 19,701
12/31/94................................................ 78,125 19,341
12/31/95................................................ 99,825 24,844
12/31/96................................................ 114,938 28,942
</TABLE>
27
<PAGE> 78
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Dreyfus Small Cap Division Eighteen..... 1,049.38% 340.28% 56.43% 15.14%
Benchmark Comparison
Russell 2000............................ 189.42% 106.80% 46.91% 16.49%
</TABLE>
- ---------------
* The hypothetical account illustration and cumulative returns were calculated
on a pro forma basis. Therefore, the inception date used for the Dreyfus Small
Cap Fund Division 18 was August 31, 1990, the inception of the underlying
fund. Current contract charges have been assessed in determining pro forma
hypothetical account values and cumulative returns.
Growth Division Fifteen Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
GROWTH S&P 500
DIVISION FIFTEEN INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................. $10,000 $10,000
12/31/94................................................. 10,018 10,532
12/31/95................................................. 14,667 14,489
12/31/96................................................. 17,333 17,817
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Growth Division Fifteen.................. 73.33% -- -- 18.18%
Benchmark Comparison
S&P 500 Index............................ 78.17% -- -- 22.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
Growth & Income Division Sixteen Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
GROWTH & INCOME S&P 500
DIVISION SIXTEEN INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................. $10,000 $10,000
12/31/94................................................. 9,932 10,532
12/31/95................................................. 12,966 14,489
12/31/96................................................. 15,831 17,817
</TABLE>
28
<PAGE> 79
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Growth & Income Division Sixteen......... 58.31% -- -- 22.10%
Benchmark Comparison
S&P 500 Index............................ 78.17% -- -- 22.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
Capital Conservation Division Seven Performance Compared to Merrill Lynch
Corporate Master Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- ------------------------------------------------------------------- ----------------
<S> <C> <C>
01/16/86................................................. $10,000 $10,000
12/31/86................................................. 10,477 11,609
12/31/87................................................. 10,186 11,823
12/31/88................................................. 10,789 12,976
12/31/89................................................. 11,936 14,808
12/31/90................................................. 11,784 15,899
12/31/91................................................. 13,669 18,799
12/31/92................................................. 14,702 20,514
12/31/93................................................. 16,301 23,064
12/31/94................................................. 15,153 22,288
12/31/95................................................. 18,120 27,097
12/31/96................................................. 18,255 28,015
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Capital Conservation Division
Seven............................. 82.55% 74.24% 33.55% 11.99% 0.75%
Benchmark Comparison
Merrill Lynch Corporate Master
Index............................. 180.15% 141.33% 49.02% 21.47% 3.39%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
29
<PAGE> 80
Government Securities Division Eight Performance Compared to Lehman Brothers
U.S. Treasury
Composite Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- ------------------------------------------------------------------- ---------------
<S> <C> <C>
01/16/86................................................. $10,000 $10,000
12/31/86................................................. 10,461 11,630
12/31/87................................................. 10,120 11,862
12/31/88................................................. 10,621 12,694
12/31/89................................................. 11,792 14,516
12/31/90................................................. 12,371 15,765
12/31/91................................................. 14,052 18,187
12/31/92................................................. 14,915 19,502
12/31/93................................................. 16,362 21,597
12/31/94................................................. 15,472 20,857
12/31/95................................................. 17,995 24,684
12/31/96................................................. 18,157 25,369
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Government Securities Divi-
sion Eight............... 81.57% 73.57% 29.21% 10.97% 0.90%
Benchmark Comparison
U.S. Treasury Composite In-
dex...................... 153.69% 118.13% 39.49% 17.47% 2.77%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
International Government Bond Division Thirteen Performance Compared to Salomon
Brothers
Non-U.S. Dollar World Government Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
SALOMON BROS.
NON-U.S. DOLLAR
WORLD
INTERNATIONAL GOVERNMENT BOND GOVERNMENT
DIVISION THIRTEEN BOND INDEX
- ------------------------------------------------------------------- ---------------
<S> <C> <C>
10/01/91................................................. $10,000 $10,000
12/31/91................................................. 10,905 11,042
12/31/92................................................. 11,128 11,540
12/31/93................................................. 12,583 13,246
12/31/94................................................. 13,014 13,999
12/31/95................................................. 15,308 16,692
12/31/96................................................. 15,822 17,331
</TABLE>
30
<PAGE> 81
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
International Government Bond Division
Thirteen................................ 58.22% 45.09% 25.74% 3.36%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World
Government Bond Index................... 73.31% 56.96% 30.84% 3.83%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
Social Awareness Division Twelve Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- ------------------------------------------------------------------- -------
<S> <C> <C>
10/02/89................................................. $10,000 $10,000
12/31/89................................................. 10,100 10,214
12/31/90................................................. 9,877 9,897
12/31/91................................................. 12,506 12,912
12/31/92................................................. 12,795 13,896
12/31/93................................................. 13,670 15,297
12/31/94................................................. 13,339 15,499
12/31/95................................................. 18,351 21,323
12/31/96................................................. 22,527 26,220
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Social Awareness Division Twelve.......... 125.27% 80.12% 64.79% 22.75%
Benchmark Comparison
S&P 500 Index............................. 162.20% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
Science & Technology Division Seventeen Compared to S&P 500 Index.
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
SCIENCE & TECHNOLOGY S&P 500
DIVISION SEVENTEEN INDEX
- ------------------------------------------------------------------- -------
<S> <C> <C>
04/29/94................................................. $10,000 $10,000
12/31/94................................................. 12,477 10,532
12/31/95................................................. 19,972 14,489
12/31/96................................................. 22,505 17,817
</TABLE>
31
<PAGE> 82
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Science & Technology Division
Seventeen............................. 125.05% -- -- 12.68%
Benchmark Comparison
S&P 500 Index........................... 78.17% -- -- 22.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
Money Market Division Six Performance Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index (Primary CD Index)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/16/86................................................. $10,000 $10,000
12/31/86................................................. 10,405 10,591
12/31/87................................................. 10,873 11,253
12/31/88................................................. 11,495 12,083
12/31/89................................................. 12,406 13,130
12/31/90................................................. 13,254 14,181
12/31/91................................................. 13,849 14,955
12/31/92................................................. 14,157 15,427
12/31/93................................................. 14,393 15,826
12/31/94................................................. 14,791 16,390
12/31/95................................................. 15,458 17,200
12/31/96................................................. 16,072 17,980
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Money Market Division Six........... 60.72% 54.47% 16.05% 11.66% 3.97%
Benchmark Comparison
Primary CD Index.................... 79.80% 69.78% 20.23% 13.61% 4.53%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
32
<PAGE> 83
Timed Opportunity Division Five Performance Compared to S&P 500 Index, Merrill
Lynch Corporate and Government Master Index and Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 6, 1983
<TABLE>
<CAPTION>
TIMED OPPORTUNITY S&P 500 BLENDED
DIVISION FIVE INDEX INDEX*
- -------------------------------------------------------------- ------- -------
<S> <C> <C> <C>
09/06/83............................................ $10,000 $10,000 $10,000
12/31/83............................................ 9,857 10,156 10,252
12/31/84............................................ 9,853 10,793 11,269
12/31/85............................................ 11,004 14,217 14,177
12/31/86............................................ 11,987 16,871 16,536
12/31/87............................................ 12,862 17,757 17,472
12/31/88............................................ 13,973 20,706 19,669
12/31/89............................................ 16,182 27,267 24,213
12/31/90............................................ 15,634 26,420 24,748
12/31/91............................................ 18,782 34,470 30,404
12/31/92............................................ 18,460 37,095 32,608
12/31/93............................................ 19,973 40,834 35,770
12/31/94............................................ 19,515 41,373 35,769
12/31/95............................................ 24,110 56,921 45,566
12/31/96............................................ 26,519 69,995 51,871
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Timed Opportunity Division Five... 165.19% 121.24% 41.19% 32.78% 9.99%
Benchmark Comparison
S&P 500 Index..................... 599.95% 314.88% 103.06% 71.41% 22.97%
Blended Index*.................... 418.71% 213.69% 70.61% 45.01% 13.84%
</TABLE>
- ---------------
* The Blended Index reflects an allocation of investments in the following
Indexes: 55% of investments included in the S&P 500 Index, 35% of investments
included in the Merrill Lynch Corporate and Government Master Index, and 10%
of investments included in the Certificate of Deposit Primary Offering by New
York City Banks, 30 Day Index.
** This Division was initiated on September 6, 1983.
33
<PAGE> 84
Templeton Asset Allocation Division Nineteen Performance Compared to MSCI World
Index, Salomon Brothers World Government Bond Index and Certificate of Deposit
Primary Offering by New York City Banks, 30 Day Index
HYPOTHETICAL $10,000 ACCOUNT VALUE*
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 24, 1988
<TABLE>
<CAPTION>
MSCI
TEMPLETON ASSET ALLOCATION WORLD BLENDED
DIVISION NINETEEN INDEX INDEX**
- --------------------------------------------------------- -------- --------
<S> <C> <C> <C>
08/24/88....................................... $10,000 $10,000 $10,000
12/31/88....................................... 10,237 11,432 11,074
12/31/89....................................... 11,450 13,330 12,346
12/31/90....................................... 10,405 11,062 11,737
12/31/91....................................... 13,124 13,084 13,649
12/31/92....................................... 14,009 12,401 13,553
12/31/93....................................... 17,453 15,191 15,883
12/31/94....................................... 16,714 15,962 16,522
12/31/95....................................... 20,227 19,270 19,578
12/31/96....................................... 23,746 21,867 21,355
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Templeton Asset Allocation Division
Nineteen............................. 137.46% 80.94% 36.05% 17.40%
Benchmark Comparison**
MSCI World Index....................... 118.67% 67.12% 43.95% 13.48%
Blended Index.......................... 113.55% 56.46% 34.46% 9.08%
</TABLE>
- ---------------
* The hypothetical account illustration and cumulative returns were calculated
on a pro forma basis. Therefore, the inception date used for the Templeton
Asset Allocation Fund Division 19 was August 24, 1988, the inception of the
underlying fund. Current contract charges have been assessed in determining
pro forma hypothetical account values and cumulative returns.
** The Blended Index reflects an allocation of investments in the following
Indexes: 55% of investments included in the MSCI World Index, 35% of
investments included in the Salomon Brothers World Government Bond Index and
10% of investments included in the Certificate of Deposit Primary Offering by
New York City Bank, 30 Day index.
PAYOUT PAYMENTS
ASSUMED INVESTMENT RATE
The discussion concerning the amount of payout payments which follows this
section is based on an Assumed Investment Rate of 3 1/2% per annum. However, the
Company will permit each Annuitant choosing a variable payout option to select
an Assumed Investment Rate permitted by state law or regulations other than the
3 1/2% rate described in this prospectus as follows: 3%, 4 1/2%, 5% or 6% per
annum. (Note: an Assumed Investment Rate higher than 5% may not be selected
under individual Contracts.) The foregoing Assumed Investment Rates are used
merely in order to determine the first monthly payment per thousand dollars of
value. It should not be inferred that such rates will bear any relationship to
the actual net investment experience of VALIC Separate Account A.
AMOUNT OF PAYOUT PAYMENTS
The amount of the first variable annuity payment to the Annuitant will
depend on the amount
34
<PAGE> 85
of the Account Value applied to effect the variable annuity as of the tenth day
immediately preceding the date payout payments commence, the amount of any
premium tax owed, the annuity option selected, and the age of the Annuitant.
The Contracts contain tables indicating the dollar amount of the first
payout payment under each payout option for each $1,000 of Account Value (after
the deduction for any premium tax) at various ages. These tables are based upon
the 1983 Table A (promulgated by the Society of Actuaries) and an Assumed
Investment Rate of 3%, 3 1/2%, 4% and 5% per annum (3 1/2% in the group
Contract).
The portion of the first monthly variable payout payment derived from a
Division of VALIC Separate Account A is divided by the Payout Unit value for
that Division (calculated ten days prior to the date of the first monthly
payment) to determine the number of Payout Units in each Division represented by
the payment. The number of such units will remain fixed during the Payout
Period, assuming the Annuitant makes no transfers of Payout Units to provide
Payout Units under another Division or to provide a fixed annuity.
In any subsequent month, the dollar amount of the variable payout payment
derived from each Division is determined by multiplying the number of Payout
Units in that Division by the value of such Payout Unit on the tenth day
preceding the due date of such payment. The Payout Unit value will increase or
decrease in proportion to the net investment return of the Division or Divisions
underlying the variable payout since the date of the previous payout payment,
less an adjustment to neutralize the 3 1/2% or other Assumed Investment Rate
referred to above.
Therefore, the dollar amount of variable payout payments after the first
will vary with the amount by which the net investment return is greater or less
than 3 1/2% per annum. For example, if a Division has a cumulative net
investment return of 5% over a one year period, the first payout payment in the
next year will be approximately 1 1/2 percentage points greater than the payment
on the same date in the preceding year, and subsequent payments will continue to
vary with the investment experience of the Division. If such net investment
return is 1% over a one year period, the first payout payment in the next year
will be approximately 2 1/2 percentage points less than the payment on the same
date in the preceding year, and subsequent payments will continue to vary with
the investment experience of the applicable Division.
Each deferred Contract provides that, when fixed payout payments are to be
made under one of the first four payout options, the monthly payment to the
Annuitant will not be less than the monthly payment produced by the then current
settlement option rates, which will not be less than the rates used for a
currently issued single payment immediate annuity contract. The purpose of this
provision is to assure the Annuitant that, at retirement, if the fixed payout
purchase rates then required by the Company for new single payment immediate
annuity contracts are significantly more favorable than the annuity rates
guaranteed by a Contract, the Annuitant will be given the benefit of the new
annuity rates.
PAYOUT UNIT VALUE
The value of a Payout Unit is calculated at the same time that the value of
an Purchase Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Purchase Period" in the prospectus.) The
calculation of Payout Unit value is discussed in the prospectus under "Payout
Period."
The following illustrations show, by use of hypothetical examples, the
method of determining the Payout Unit value and the amount of variable annuity
payments.
35
<PAGE> 86
ILLUSTRATION OF CALCULATION OF PAYOUT UNIT VALUE
Example 8.
<TABLE>
<S> <C>
1. Payout Unit value, beginning of period.................. $ .980000
2. Net investment factor for Period (see Example 3)........ 1.023558
3. Daily adjustment for 3 1/2% Assumed Investment Rate..... .999906
4. (2)X(3)................................................. 1.023462
5. Payout Unit value, end of period (1)X(4)................ $1.002993
</TABLE>
ILLUSTRATION OF PAYOUT PAYMENTS
Example 9. Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <C>
1. Number of Purchase Units at Payout Date................. 10,000.00
2. Purchase Unit value (see Example 3)..................... $ 1.800000
3. Account Value of Contract (1)X(2)....................... $18,000.00
4. First monthly Payout Payment per $1,000 of Account
Value..................................................... $ 5.63
5. First monthly Payout Payment (3)X(4)/1,000.............. $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5)/(6).......................... 103.408
8. Assume Payout Unit value for second month equal to...... $ .997000
9. Second monthly Payout Payment (7)X(8)................... $ 103.10
10. Assume Payout Unit value for third month equal to....... $ .953000
11. Third monthly Payout Payment (7)X(10)................... $ 98.55
</TABLE>
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for VALIC Separate Account A is the Underwriter as defined above, a
wholly-owned subsidiary of the Company. The Underwriter's address is 2929 Allen
Parkway, Houston, Texas 77019. The Underwriter is a Texas corporation organized
in 1970 and is a member of the NASD.
The licensed agents who sell the Contracts will be compensated for such
sales by commissions ranging up to 5% of each Purchase Payment. Managers who
supervise the agents will receive overriding commissions ranging up to 1% of
Purchase Payments. (These various commissions are paid by the Company and do not
result in any charge to Contract Owners or to VALIC Separate Account A in
addition to the charges described under "Fees and Charges" in the prospectus.)
Pursuant to its underwriting agreement with the Underwriter and VALIC
Separate Account A, the Company reimburses the Underwriter for reasonable sales
expenses, including overhead expenses. Sales commissions for year 1996 were
$52,963,000.
36
<PAGE> 87
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
and the financial statements of the Company's Separate Account A at December 31,
1996 and for each of the two years in the period then ended, appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein. The financial statements audited by Ernst & Young LLP have been included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
37
<PAGE> 88
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of The Variable Annuity Life Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
Divisions Four, Five, Six, Seven, Eight, Ten, Eleven, Twelve, Thirteen,
Fourteen, Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, and Twenty are the
only Divisions available under the Contracts described in the Prospectus. The
Separate Account financial statements contained herein reflect the composition
of the Separate Account as of December 31, 1996, and for the fiscal year then
ended.
38
<PAGE> 89
[PICTURE]
[VALIC LOGO]
<PAGE> 90
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
The Variable Annuity Life Insurance Company
We have audited the accompanying consolidated balance sheets of The
Variable Annuity Life Insurance Company and Subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Variable
Annuity Life Insurance Company and Subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG
Houston, Texas
February 14, 1997
<PAGE> 91
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In Thousands
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments - Notes 2, 6, 7, 8:
Fixed maturity securities
(amortized cost: $19,667,491 in 1996 and $18,590,102 in 1995) $20,189,473 $19,745,726
Equity securities (cost: $8,624 in 1996 and $56,825 in 1995) 8,589 71,770
Mortgage loans on real estate 1,349,855 1,443,817
Real estate, net of accumulated depreciation
of $69 in 1996 and $99 in 1995 37,130 23,365
Policy loans 639,200 557,637
Other long-term invested assets 35,945 16,929
Short-term investments 53,000 39,277
----------- -----------
Total investments 22,313,192 21,898,521
----------- -----------
Investment income receivable 315,118 292,967
Cash on deposit and on hand 24,360 27,794
Receivable for securities sold 18,654 51,947
Deferred policy acquisition costs - Note 3 557,748 182,546
Due from reinsurer, net 15,700 16,873
Other assets 45,798 37,912
Assets held in Separate Accounts 7,134,412 4,540,889
----------- -----------
Total assets $30,424,982 $27,049,449
----------- -----------
LIABILITIES
Policy reserves for fixed annuity investment contracts $21,067,429 $20,146,697
Payable for securities purchased 575 26,885
Remittances not allocated 66,473 52,913
Commissions, general expenses, and taxes (other than income taxes) 41,642 44,380
Other liabilities 75,636 51,768
Income tax liabilities - Note 4 265,160 387,076
Liabilities related to Separate Accounts 7,134,412 4,540,889
----------- -----------
Total liabilities 28,651,327 25,250,608
----------- -----------
STOCKHOLDER'S EQUITY
Common stock (voting) par value $1 per share, 5,000 shares authorized
and 3,575 issued and outstanding in 1996 and 1995 - Note 5 3,575 3,575
Additional paid-in capital 459,281 384,126
Retained earnings 1,143,947 1,014,520
Net unrealized investment gains - Note 2 166,852 396,620
----------- -----------
Total stockholder's equity 1,773,655 1,798,841
----------- -----------
Total liabilities and stockholder's equity $30,424,982 $27,049,449
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 92
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Surrender charges $ 12,348 $ 9,967 $ 9,964
Mortality charges 59,955 34,965 21,136
Expense charges 5,654 5,122 5,528
Net investment income - Note 2 1,654,496 1,597,681 1,493,942
Net reinsurance income 1,528 1,573 1,908
Realized investment gains (losses) - Note 2 21,551 (7,149) (71,950)
Other income 10,920 6,878 6,517
----------- ----------- -----------
Total revenues 1,766,452 1,649,037 1,467,045
----------- ----------- -----------
COSTS AND EXPENSES
Policy costs:
Increase in policy reserves for fixed annuity contracts 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Total costs 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Expenses:
Commissions 97,630 84,670 73,198
Salaries 54,016 48,227 42,742
Data processing 12,088 13,200 10,908
Postage and telephone 11,308 10,710 8,137
Sales promotion 10,394 9,361 8,024
Printing and supplies 5,290 4,721 4,372
Guaranty association assessments - Note 9 2,678 18,961 6,300
Other expenses 49,875 44,055 43,029
Amortization of deferred policy acquisition costs - Note 3 31,201 16,841 13,263
Policy acquisition costs deferred - Note 3 (116,818) (104,702) (88,046)
----------- ----------- -----------
Total expenses 157,662 146,044 121,927
----------- ----------- -----------
Total costs and expenses 1,401,655 1,350,030 1,255,474
----------- ----------- -----------
EARNINGS
Income before income tax expense 364,797 299,007 211,571
Income tax expense - Note 4 124,370 99,720 70,183
----------- ----------- -----------
Net income $ 240,427 $ 199,287 $ 141,388
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 93
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning and end of year $ 3,575 $ 3,575 $ 3,575
----------- ----------- -----------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year 384,126 382,733 382,727
Capital contribution from stockholder 75,155 1,393 6
----------- ----------- -----------
Balance at end of year 459,281 384,126 382,733
----------- ----------- -----------
RETAINED EARNINGS
Balance at beginning of year 1,014,520 910,233 821,845
Net income 240,427 199,287 141,388
Dividends paid to stockholder (111,000) (95,000) (53,000)
----------- ----------- -----------
Balance at end of year 1,143,947 1,014,520 910,233
----------- ----------- -----------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at beginning of year 396,620 (563,481) 348,470
Change during year (229,768) 960,101 (911,951)
----------- ----------- -----------
Balance at end of year 166,852 396,620 (563,481)
----------- ----------- -----------
STOCKHOLDER'S EQUITY
Balance at end of year $ 1,773,655 $ 1,798,841 $ 733,060
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 94
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 240,427 $ 199,287 $ 141,388
Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,243,993 1,203,986 1,133,547
Deferred policy acquisition costs (85,617) (87,861) (74,783)
Other, net (50,233) 28,179 (41,944)
------------ ------------ ------------
Net cash provided by operating activities 1,348,570 1,343,591 1,158,208
------------ ------------ ------------
INVESTING ACTIVITIES
Investment purchases (14,883,271) (9,671,304) (7,827,877)
Investment calls, maturities, and sales 13,897,479 8,025,420 6,456,637
Net (increase) decrease in short-term investments (13,722) 120,745 (160,022)
------------ ------------ ------------
Net cash used for investing activities (999,514) (1,525,139) (1,531,262)
------------ ------------ ------------
FINANCING ACTIVITIES
Policyholder account deposits 2,896,090 2,553,928 2,227,803
Policyholder account withdrawals (1,276,008) (996,324) (1,004,953)
Transfers to Separate Accounts (1,936,727) (1,273,778) (723,994)
Capital contribution from stockholder 75,155 1,607 6
Net decrease in short-term debt -- -- (59,000)
Dividends paid (111,000) (95,000) (53,000)
------------ ------------ ------------
Net cash used for or provided by financing activities (352,490) 190,433 386,862
------------ ------------ ------------
NET CHANGE IN CASH
Net increase (decrease) in cash (3,434) 8,885 13,808
Cash at beginning of year 27,794 18,909 5,101
------------ ------------ ------------
Cash at end of year $ 24,360 $ 27,794 $ 18,909
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 95
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
All dollar amounts in thousands, except per share data
- --------------------------------------------------------------------------------
1
================================================================================
SIGNIFICANT ACCOUNTING POLICIES
================================================================================
1.1 INTRODUCTION
The Variable Annuity Life Insurance Company (VALIC), an indirect, wholly
owned subsidiary of American General Corporation (AGC), provides tax-deferred
retirement annuities and employer-sponsored retirement plans to employees of
educational, health care, public sector, and not-for-profit organizations.
VALIC markets products nationwide through exclusive sales representatives.
VALIC is 100% owned by American General Life Insurance Company (AGL), a
wholly owned subsidiary of AGC Life Insurance Company (AGC Life). AGC Life is a
wholly owned subsidiary of AGC. A summary of the accounting policies followed
in the preparation of the consolidated financial statements is set forth below.
1.2 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) and include the accounts
of VALIC and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated in consolidation. Certain items in the prior
years' financial statements have been reclassified to conform with the 1996
presentation.
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and disclosures of contingent assets and liabilities. Ultimate
results could differ from these estimates.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. All fixed maturity and equity
securities are classified as available-for-sale and recorded at fair value.
After adjusting related balance sheet accounts as if the unrealized gains
(losses) had been realized, the net adjustment is recorded in net unrealized
gains (losses) on securities within stockholder's equity. If the fair value of
a security classified as available-for-sale declines below its cost and this
decline is considered to be other than temporary, the security is reduced to
its fair value, and the reduction is recorded as a realized loss.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance for losses covers all non-performing loans
and loans for which management has a concern based on its assessment of risk
factors, such as potential non-payment or non-monetary default. The allowance
is based on a loan-specific review and a formula that reflects past results and
current trends.
Impaired loans, those for which VALIC determines that it is probable that
all amounts due under the contractual terms will not be collected, are reported
at the lower of amortized cost or fair value of the underlying collateral, less
estimated costs to sell.
POLICY LOANS. Policy loans are reported at unpaid principal balance.
INVESTMENT INCOME. Interest on fixed maturity securities and performing
mortgage loans is recorded as income when earned and is adjusted for any
amortization of premium or discount. Interest on delinquent mortgage loans is
recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES). Realized investment gains (losses) are
recognized using the specific identification method.
1.4 DERIVATIVES RELATED TO INVESTMENTS
VALIC's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements. The difference between amounts paid
and received on swap agreements is recorded on an accrual basis as an
adjustment to investment income over the periods covered by the agreements. The
related amount payable to or receivable from counterparties is included in
other liabilities or assets.
The fair values of swap agreements are recognized in the consolidated
balance sheet if they hedge investments carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains (losses) on
securities included in stockholder's equity, consistent with the treatment of
the related investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into
income over the remaining term of the related investment. If the underlying
investment is extinguished or sold, any related gain or loss on swap agreements
is recognized in income.
6
<PAGE> 96
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
1.5 DEFERRED POLICY ACQUISITION COSTS
(DPAC)
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC. DPAC
is charged to expense in relation to the estimated gross profits of the
insurance contracts, including realized gains (losses).
DPAC is adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in net unrealized gains
(losses) on securities within stockholder's equity.
VALIC reviews the carrying value of DPAC on at least an annual basis.
Management considers estimated future gross profit margins as well as expected
mortality, interest earned and credited rates, persistency, and expenses in
determining whether the carrying amount is recoverable.
1.6 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain
contracts, principally annuities for which the investment risk lies solely with
the holder of the contract rather than the company. Consequently, the insurer's
liability for these accounts equals the value of the account assets. Investment
income, realized investment gains (losses), and policyholder account deposits
and withdrawals related to Separate Accounts are excluded from the consolidated
statements of income and cash flows. Assets held in the Separate Accounts are
primarily shares in mutual funds, which are carried at fair value, based on the
quoted net asset value per share.
1.7 POLICY RESERVES
Net deposits made by fixed annuity policyholders are accumulated at
interest rates guaranteed by VALIC plus excess interest paid at the sole
discretion of the Board of Directors until benefits are payable. Reserves for
deferred annuities (accumulation phase) are equivalent to the policyholders'
account values. Reserves for annuities on which benefits are currently payable
(annuity payout phase) are provided based upon estimated mortality and other
assumptions, including provisions for the risk of adverse deviation from
assumptions, which were appropriate at the time the contracts were issued. The
1971 Individual or Group Annuity Mortality Tables, and the 1983a Table have
been used to provide for future annuity benefits in the annuity payout phase.
Interest rates used in determining reserves for policy benefits during both the
accumulation and annuity payout phases range from 3.5% to 13.5%.
1.8 RECOGNITION OF REVENUES AND COSTS
Premium receipts for annuity contracts are classified as deposits instead
of revenues. Revenues for these contracts consist of the mortality, expense,
and surrender charges. Gains (losses) from mortality guarantees under variable
annuity contracts are recognized as they occur.
1.9 INCOME TAXES
Deferred tax assets and liabilities are established for temporary
differences between the financial reporting basis and the tax basis of assets
and liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income
tax expense.
A valuation allowance for deferred tax assets is provided if all or some
portion of the deferred tax asset may not be realized. An increase or decrease
in a valuation allowance that results from a change in circumstances that
causes a change in judgment about the realizability of the related deferred tax
asset is included in income. A change related to fluctuations in fair value of
available-for-sale fixed maturity securities is included in net unrealized
gains (losses) in stockholder's equity.
1.10 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity (capital and surplus) that differ
from GAAP. Net income and stockholder's equity as determined by statutory
accounting practices at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $ 213,686 $ 157,622 $ 171,486
---------- ---------- ----------
Stockholder's equity $1,077,366 $ 926,654 $ 869,026
---------- ---------- ----------
</TABLE>
7
<PAGE> 97
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2
===============================================================================
INVESTMENTS
===============================================================================
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,471,879 $1,414,644 $1,300,028
Affiliated fixed
maturity securities 2,851 3,181 3,342
Equity securities 782 4,281 2,529
Mortgage loans on
real estate 140,492 149,974 163,263
Other 51,040 36,473 36,226
---------- ---------- ----------
Gross investment income 1,667,044 1,608,553 1,505,388
Investment expenses 12,548 10,872 11,446
---------- ---------- ----------
Net investment income $1,654,496 $1,597,681 $1,493,942
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income
during 1996 totaled $6,455 or 0.03% of total invested assets. The ultimate
disposition of these assets is not expected to have a material effect on
VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1996.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 1,417 $ 832 $(83,950)
Equity securities 15,795 7,706 2,143
Mortgage loans on real estate 4,635 (24,465) (11,640)
Real estate 389 3,767 1,608
Other (685) 5,011 19,889
-------- -------- --------
Realized gains (losses)
before taxes 21,551 (7,149) (71,950)
Income tax expense (benefit) 7,543 (1,414) (25,183)
-------- -------- --------
Net realized investment
gains (losses) $ 14,008 $ (5,735) $(46,767)
-------- -------- --------
</TABLE>
Proceeds from sales of fixed maturity securities were $3,052,550,
$1,432,183, and $1,128,925 during 1996, 1995, and 1994, respectively. Gross
gains of $28,173, $15,722, and $7,610 and gross losses of $36,802, $30,518, and
$89,917, were realized on those sales during 1996, 1995, and 1994,
respectively.
During fourth quarter 1994, AGC initiated a program to realize capital
losses for tax purposes to offset prior period capital gains. During 1995, AGC
received a tax refund of $45,944 generated by $126,285 in net capital losses
realized in fourth quarter 1994 primarily through the sale of fixed maturity
securities. In conjunction with this program, VALIC realized net capital losses
for tax purposes of $110,019 in fourth quarter 1994, primarily through the sale
of $1,186,197 of fixed maturity securities. Due to declining interest rates
during 1995, which resulted in increasing values of VALIC's fixed maturity
securities, no additional capital losses were realized under this program.
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 219,426 $ 173,879 $ 20,025 $ 33,063
Obligations of states and
political subdivisions 32,308 32,349 840 1,467
Debt securities issued by
foreign governments 241,908 238,592 10,958 19,639
Corporate securities 13,211,735 11,338,933 457,461 792,302
Mortgage-backed securities 5,932,878 6,771,473 150,021 333,436
Affiliated fixed maturity securities 29,236 32,275 -- --
Redeemable preferred stock -- 2,601 -- --
----------- ----------- ----------- -----------
Total fixed maturity securities $19,667,491 $18,590,102 $ 639,305 $ 1,179,907
----------- ----------- ----------- -----------
Equity securities $ 8,624 $ 56,825 $ 61 $ 14,966
=========== =========== =========== ===========
<CAPTION>
Gross Unrealized Losses Fair Value
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (465) $ (25) $ 238,986 $ 206,917
Obligations of states and
political subdivisions (197) (15) 32,951 33,801
Debt securities issued by
foreign governments (122) -- 252,744 258,231
Corporate securities (76,389) (20,225) 13,592,807 12,111,010
Mortgage-backed securities (40,150) (3,924) 6,042,749 7,100,985
Affiliated fixed maturity securities -- -- 29,236 32,275
Redeemable preferred stock -- (94) -- 2,507
----------- ----------- ----------- -----------
Total fixed maturity securities $ (117,323) $ (24,283) $20,189,473 $19,745,726
----------- ----------- ----------- -----------
Equity securities $ (96) $ (21) $ 8,589 $ 71,770
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 98
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES-
(CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities, due
In one year or less $ 125,977 $ 127,799
In years two through five 2,601,072 2,705,686
In years six through ten 7,872,259 8,097,598
After ten years 3,135,304 3,215,641
Mortgage-backed securities 5,932,879 6,042,749
----------- -----------
Total fixed maturity securities $19,667,491 $20,189,473
----------- -----------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON
SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in stockholder's equity at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 639,366 $ 1,194,873
Gross unrealized losses (117,419) (24,304)
DPAC adjustments (261,363) (551,624)
Deferred federal income taxes (93,732) (222,325)
----------- -----------
Net unrealized gains
on securities $ 166,852 $ 396,620
----------- -----------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656,073 $ 677,739
Pacific and Mountain 406,948 455,009
Central 331,411 365,282
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
Property type:
Office $ 456,818 $ 478,493
Retail 451,668 461,272
Industrial 221,532 223,374
Apartments 190,583 242,469
Residential and other 73,831 92,422
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
</TABLE>
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 54,213 $ 55,665 $ 48,612
Net additions (a) (3,845) 12,619 9,926
Deductions (b) (5,791) (14,071) (2,873)
--------- --------- ---------
Balance at December 31 $ 44,577 $ 54,213 $ 55,665
--------- --------- ---------
</TABLE>
(a) Charged to realized investment losses.
(b) Resulting from foreclosures.
IMPAIRED LOANS. Impaired mortgage loans on real estate and related
interest income were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Impaired loans:
With allowance* $ 46,346 $ 63,167
Without allowance 236 2,577
--------- ---------
Total impaired loans $ 46,582 $ 65,744
--------- ---------
Average investment $ 56,163 $ 83,049
Interest income earned 4,816 7,012
Interest income - cash basis 4,617 6,539
--------- ---------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$6,848 and $17,701, respectively.
9
<PAGE> 99
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
3
================================================================================
DEFERRED POLICY ACQUISITION COSTS (DPAC)
================================================================================
DPAC at December 31, and the components of the change for the years then
ended, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 182,546 $ 910,479 $ 113,116
Deferrals:
Commissions 62,760 52,959 44,899
Other acquisition costs 54,058 51,743 43,147
Amortization:
Accretion of interest 59,810 54,086 47,170
Operating earnings (91,011) (70,927) (60,433)
Offset to realized
(gains) losses (676) 4,991 19,812
Effect of net unrealized
(gains) losses on securities 290,261 (820,785) 702,768
--------- --------- ---------
Balance at December 31 $ 557,748 $ 182,546 $ 910,479
--------- --------- ---------
</TABLE>
4
================================================================================
INCOME TAXES
================================================================================
4.1 TAX-SHARING AGREEMENT
VALIC, combined with its Separate Accounts, is taxed as a life insurance
company. VALIC and the Separate Accounts are included in the consolidated life
insurance company tax return of AGC. VALIC participates in a tax-sharing
agreement with the other companies included in the consolidated return. Under
this agreement, tax payments are made to AGC as if the companies filed separate
tax returns and companies incurring operating losses and/or capital losses are
reimbursed for the use of these losses by the consolidated return group.
4.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (4,551) $ 10,740
Deferred tax liabilities, applicable to:
Basis differential of investments 201,122 428,863
DPAC 192,815 61,915
Other 8,025 2,480
--------- ---------
Total deferred tax liabilities 401,962 493,258
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (118,595) (100,014)
Basis differential of investments (6,219) (7,527)
Other (7,437) (9,381)
--------- ---------
Total deferred tax assets (132,251) (116,922)
--------- ---------
Net deferred tax liabilities 269,711 376,336
--------- ---------
Total income tax liabilities $ 265,160 $ 387,076
--------- ---------
</TABLE>
4.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 99,560 $ 99,273 $ 52,973
State 2,842 3,224 2,368
--------- --------- ---------
Total current income
tax expense 102,402 102,497 55,341
--------- --------- ---------
Deferred, applicable to:
DPAC 29,308 32,174 32,800
Policy reserves (18,581) (28,780) (31,085)
Basis differential of
investments 2,754 (786) 7,189
Other, net 8,487 (5,385) 5,938
--------- --------- ---------
Total deferred income
tax expense (benefit) 21,968 (2,777) 14,842
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 127,679 $ 104,652 $ 74,050
Dividends received
deduction (4,935) (3,883) (3,392)
Tax-exempt interest (ESOP) (3,865) (4,426) (4,670)
State income taxes 3,311 2,918 7,051
Other items 2,180 459 (2,856)
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1996, 1995, and 1994 were $114,478, $52,790,
and $122,608, respectively. State income taxes paid in 1996, 1995 and 1994 were
$3,060, $2,653, and $3,390 respectively.
10
<PAGE> 100
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
5
================================================================================
CAPITAL STOCK
================================================================================
VALIC has two classes of capital stock: preferred stock ($1.00 par value
with 2 million shares authorized) that may be issued with such dividend,
liquidation, redemption, conversion, voting, and other rights as the board of
directors may determine, and common stock ($1.00 par value, 5 million shares
authorized).
VALIC is restricted by state insurance laws as to the amount it may pay as
dividends without prior approval from the Texas Department of Insurance. The
maximum dividend payout which may be made without prior approval in 1997 is
$205,992.
6
================================================================================
DERIVATIVE FINANCIAL INSTRUMENTS
================================================================================
Derivative financial instruments related to investment securities at
December 31, 1996 were as follows:
<TABLE>
<S> <C>
Interest rate swap agreements to pay fixed rate
Notional amount $27,000
Average receive rate 6.88%
Average pay rate 5.61
Currency swap agreements (receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $89,535
Average exchange rate 1.56
</TABLE>
7
================================================================================
FAIR VALUE OF FINANCIAL INSTRUMENTS
================================================================================
Carrying amounts and fair values for certain of VALIC's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all VALIC's assets and liabilities, and
(2) the reporting of investments at fair value without a corresponding
revaluation of related policyholder liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1996 1995
------------------------------ -----------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $20,198,062* $20,198,062* $19,817,496* $19,817,496*
Mortgage loans on real estate 1,352,994 1,349,855 1,473,598 1,443,817
Policy loans 637,870 639,200 567,199 557,637
Liabilities
Insurance investment contracts 19,753,088 21,067,429 19,883,419 20,146,697
----------- ----------- ----------- -----------
</TABLE>
* Includes derivative financial instruments with negative fair value of $7,872
in 1996 and negative fair value of $1,121 in 1995.
The following methods and assumptions were used to estimate the fair
values of financial instruments.
FIXED MATURITY AND EQUITY SECURITIES. Fair values of fixed maturity and
equity securities were based on quoted market prices, where available. For
investments not actively traded, fair values were estimated using values
obtained from independent pricing services or, in the case of some private
placements, by discounting expected future cash flows using a current market
rate applicable to yield, credit quality, and average life of the investments.
MORTGAGE LOANS ON REAL ESTATE. Fair value of mortgage loans was estimated
primarily using discounted cash flows, based on contractual maturities and
risk-adjusted discount rates.
POLICY LOANS. Fair value of policy loans was estimated using discounted
cash flows and actuarially-determined assumptions, incorporating market rates.
INSURANCE INVESTMENT CONTRACTS. Fair value of insurance investment
contracts was estimated using cash flows discounted at market interest rates.
11
<PAGE> 101
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
8
================================================================================
TRANSACTIONS WITH AFFILIATED COMPANIES
================================================================================
In the ordinary course of business, VALIC is occasionally involved in
transactions with affiliated companies. Transactions involving the purchase or
disposal of securities are consummated at the market value of the security on
the date of the transaction. Transactions with affiliated companies during each
of the three years in the period ended December 31, 1996 were as follows:
Operating expenses include $17,533 in 1996, $21,173 in 1995, and $23,138
in 1994 for amounts paid to AGC or its subsidiaries primarily for rent, data
processing services, use of facilities, and investment expenses. Interest paid
on borrowings from AGC totaled $455 in 1996, $1,662 in 1995, and $525 in 1994.
On November 4, 1982, VALIC invested $11,853 in 13 1/2% Restricted
Subordinated Notes due November 4, 2002 issued by AGC. The principal amount of
the note is due November 4, 2002. Principal payments of $592 were received on
November 4, 1996, 1995, and 1994. VALIC recognized $1,372 in interest income
during 1996, $1,452 for 1995, and $1,532 for 1994.
On December 31, 1984, VALIC entered into a $48,929 note purchase agreement
with AGC. Under the agreement AGC issued an adjustable rate promissory note in
exchange for VALIC's holdings of AGC preferred stock, common stock, and
warrants. The principal amount of the note is due in 20 equal installment
payments commencing December 29, 1985 and concluding December 29, 2004.
Principal payments of $2,446 were received on December 29, 1996, December 29,
1995, and December 31, 1994. VALIC recognized $1,479, $1,729, and $1,810 of
interest income on the note during 1996, 1995, and 1994, respectively.
On February 14, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $11,268.
On February 15, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $9,900.
On September 30, 1995, VALIC received a capital contribution from AGL of
electronic data processing equipment with a book value of $1,575 and a related
tax liability of $214.
VALIC paid common stock dividends of $111,000, $31.05 per share; $95,000,
$26.57 per share, and $53,000, $14.83 per share, in 1996, 1995, and 1994,
respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds
from the sale totaled $13,033 with a profit of $33 recognized on the
transaction.
On December 30, 1996, VALIC received a capital contribution of $75,000
from AGL.
9
================================================================================
COMMITMENTS AND CONTINGENCIES
================================================================================
VALIC is a defendant in various lawsuits arising in the normal course of
business. VALIC believes it has valid defenses in these lawsuits and is
defending the cases vigorously. VALIC also believes that the total amounts that
would ultimately have to be paid arising from these lawsuits would have no
material effect on its consolidated financial position.
All 50 states have laws requiring solvent life insurance companies to pay
assessments to state guaranty associations to protect the interests of
policyholders of insolvent life insurance companies. State guaranty fund
expense included in operating costs and expenses was $2,678, $18,961, and
$6,300, for the years ended December 31, 1996, 1995, and 1994, respectively.
The accrued liability for anticipated assessments was $13,661, $20,249, and
$10,214, at December 31, 1996, 1995, and 1994, respectively. The 1996 liability
was estimated by VALIC using the latest information available from the National
Organization of Life and Health Insurance Guaranty Associations. Although the
amount accrued represents VALIC's best estimate of its liability, this estimate
may change in the future. Additionally, changes in state laws could decrease
the amount recoverable against future premium taxes.
10
================================================================================
EMPLOYEE BENEFIT PLANS
================================================================================
10.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
12
<PAGE> 102
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
10.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 917 $ 601 $ 759
Interest cost on projected
benefit obligation 843 635 551
Actual (return) loss on
plan assets (2,785) (1,249) 414
Amortization of unrecognized
net asset existing at date of
initial application (23) (72) (58)
Amortization of unrecognized
prior service cost 44 44 35
Deferral of net asset gain (loss) 2,210 749 (920)
------- ------- -------
Total pension expense $ 1,206 $ 708 $ 781
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.50% 7.25% 8.50%
Rate of increase in
compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of
return on plan assets 10.00% 10.00% 10.00%
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1996 and 1995 for VALIC's
defined benefit pension plan:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 8,265 $ 6,983
Nonvested 1,251 1,127
-------- --------
Accumulated benefit obligation 9,516 8,110
Effect of increase in compensation levels 2,474 2,219
-------- --------
Projected benefit obligation 11,990 10,329
Plan assets at fair value 9,120 6,406
-------- --------
Plan assets in excess of projected
benefit obligation (2,870) (3,923)
Unrecognized net loss 1,266 2,037
Unrecognized prior service cost 62 105
Unrecognized net obligation at
January 1, net of amortization -- (23)
-------- --------
Net pension liability $ (1,542) $ (1,804)
-------- --------
</TABLE>
Equity and fixed maturity securities were 60% and 35%, respectively, of
the plan's assets at the plan's most recent balance sheet dates. The remaining
plan assets consisted primarily of cash equivalents and investment-related
receivables.
10.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through American General Corporation, has life, medical,
supplemental major medical, and dental plans for certain retired employees and
agents. Most plans are contributory, with retiree contributions adjusted
annually to limit employer contributions to predetermined amounts. VALIC has
reserved the right to change or eliminate these benefits at any time.
The life plans are fully insured; the retiree and medical and dental plans
are unfunded and self-insured. Postretirement benefit expense in 1996, 1995,
and 1994 was $282, $228, and $281, respectively.
The plans' combined funded status and the accrued postretirement benefit
cost included in other liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 21 $ 115
Fully eligible active plan participants 103 26
Other active plan participants 1,479 1,509
--------- ---------
Accumulated postretirement
benefit obligations 1,603 1,650
Unrecognized net loss (66) (393)
Net funding (17) --
--------- ---------
Accrued benefit cost $ 1,520 $ 1,257
--------- ---------
Discount rate on postretirement
benefit obligations 7.50% 7.25%
--------- ---------
</TABLE>
13
<PAGE> 103
[PICTURE]
[VALIC LOGO]
<PAGE> 104
ANNUAL REPORT
TO CONTRACT OWNERS
DECEMBER 31, 1996
SEPARATE
ACCOUNT A
[VALIC LOGO]
<PAGE> 105
================================================================================
CHAIRMAN'S LETTER SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1996 Annual Report to Contract
Owners for Separate Account A of the Variable Annuity Life Insurance Company. A
summary of the change in unit value for each fund and each product series
(Portfolio Director 1, Portfolio Director 2, Independence Plus, Group Unit
Purchase and Impact) appears on page two.
Economic conditions in 1996 continued the recent pattern of modest growth and
low inflation. Gross Domestic Product has been increasing at a 2.5% annual
rate, slightly above the level in 1995 and in line with expectations for 1997.
Inflation, as measured by the Consumer Price Index, has been reported at 3.3%
and is expected to remain at that level through 1997.
The equity markets provided a second year of exceptional returns. The S&P
500(R) recorded a total return of 22.97%. Smaller capitalization stocks returns
were lower but still very satisfactory. The Standard & Poor's MidCap 400 Index
returned 19.24% and the Russell 2000(R) Index produced 16.49%.
The bond market followed an elliptical pattern declining in the first seven
months and rising in the last four months. Yields on the long-term Treasury
bond rose from 6.0% at the beginning of the year to 7.2% in July and declined
to 6.6% at year end. Bond market returns were less than 3.5%, with coupon
returns offsetting a decline in market value.
VALIC's domestic indexed funds provided returns ranging from 15.57% to 21.53%.
Managed domestic equity funds' returns varied widely from 3.53% to 22.75%. A
large part of the variance was caused by the spread in returns as large
capitalization stocks, on balance, outperformed smaller capitalization issues.
In the Morningstar rankings, twelve of VALIC's equity funds were in the top
half of their categories. Of those, eight were in the top quartile.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ STEPHEN D. BICKEL
Stephen D. Bickel, Chairman and CEO
The Variable Annuity Life Insurance Company
January 24, 1997
This report is not authorized for distribution as advertising or sales
literature. This report is published exclusively for the information of the
variable annuity contract owners of the Company in accordance with section 30
(d) of the Investment Company Act of 1940.
"S&P 500(R)" and "Standard & Poor's MidCap 400 Index" are trademarks of
Standard & Poor's Corporation (S&P). The Stock Index Fund and MidCap Index Fund
are not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the funds. The
Russell 2000(R) Index is a trademark / service mark of the Frank Russell
Company. Russell(TM) is a trademark of the Frank Russell Company.
1
<PAGE> 106
================================================================================
CHAIRMAN'S LETTER - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Morningstar, Inc.(1) One Year
- ------------------------ Total Returns
Ranking Portfolio Portfolio Indepen- Group For Year Ending
- ---------------- Director Director dence Unit December 31,
Percen- Average 2 1 Plus Impact Purchase -------------------
Position tile Return Division Division Division Division Division 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56/356 84 18.52 AGSPC Stock Index Fund .................... 10C 10C 10C 10D 10A, 10B 21.53% 35.95%
279/587 52 16.79 AGSPC MidCap Index Fund ................... - 4 4 4 - 17.61 29.24
128/249 49 14.57 AGSPC Small Cap Index Fund ................ - 14 14 - - 15.57 26.39
347/369 6 13.83 AGSPC International Equities Fund ......... - 11 11 - - 5.75 9.67
262/587 55 16.79 AGSPC Growth Fund ......................... 15 15 - - - 18.18 46.40
46/356 87 18.52 AGSPC Growth & Income Fund ................ - 16 - - - 22.10 30.55
69/127 46 18.52 AGSPC Science & Technology Fund ........... 17 17 - - - 12.68 60.07
26/356 93 18.52 AGSPC Social Awareness Fund ............... 12 12 12 - - 22.75 37.57
331/416 20 12.33 AGSPC Timed Opportunity Fund .............. - 5 5 5 - 9.99 23.55
139/249 44 14.57 Dreyfus Small Cap Portfolio ............... - 18 - - - 15.14 27.78
360/587 39 16.79 Founders Growth Fund ...................... 30 - - - - 15.35 44.15
262/356 26 18.52 Neuberger&Berman Guardian Trust ........... 29 - - - - 16.54 30.70
116/369 69 13.83 Putnam Global Growth Fund ................. 28 - - - - 15.37 13.68
168/249 33 14.57 Putnam New Opportunities Fund ............. 26 - - - - 9.70 44.87
207/249 17 14.57 Putnam OTC & Emerging Growth Fund ......... 27 - - - - 3.53 54.45
132/356 63 18.52 Scudder Growth and Income Fund ............ 21 - - - - 20.63 29.58
31/416 93 12.33 Templeton Asset Allocation Fund ........... - 19 - - - 17.40 21.02
92/369 75 13.83 Templeton Foreign Fund .................... 32 - - - - 16.74 10.07
39/369 89 13.83 Templeton International Fund .............. - 20 - - - 22.50 14.34
155/249 38 14.57 Twentieth Century Ultra Fund .............. 31 - - - - 12.43 36.23
74/416 82 12.33 Vanguard/Wellington Fund .................. 25 - - - - 14.69 31.30
35/356 90 18.52 Vanguard/Windsor II ....................... 24 - - - - 22.56 37.14
255/295 14 2.86 AGSPC Capital Conservation Fund ........... - 7 7 1 - 0.75 19.58
103/143 28 1.50 AGSPC Government Securities Fund .......... - 8 8 - - 0.90 16.31
54/77 30 7.55 AGSPC Intl Government Bond Fund ........... 13 13 13 - - 3.36 17.63
77/262 71 3.79 AGSPC Money Market Fund ................... 6 6 6 2 - 3.97 4.51
280/295 5 2.86 Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio .......... 22 - - - - (0.72) 24.86
138/143 3 1.50 Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio ..... 23 - - - - (3.08) 28.51
</TABLE>
(1) SOURCE: Morningstar Variable Annuity/Life Performance Report, January 1997
The Portfolio Director 1 and 2 rankings shown in this publication indicate the
total return rankings of Separate Account A's divisions compared to
Morningstar categories for the twelve month period ending 12/31/96. The total
returns and rankings displayed show value after all management, administration
fees and fund expenses and do not include potential sales charges or
maintenance fees, if applicable. For total return information over a longer
period, see the Portfolio Director 1 and 2 prospectuses. The performance shown
represents past performance. The principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Past performance does not guarantee future
returns.
2
<PAGE> 107
================================================================================
FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
ASSETS: ALL DIVISIONS
--------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $5,613,414,313) ................... $6,848,720,710
Balance due from VALIC general account ........................................................ 7,839,650
--------------
NET ASSETS .................................................................................... $6,856,560,360
--------------
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of reinvestment) .. $6,840,617,496
Reserves for annuity contracts on benefit ..................................................... 15,942,864
--------------
TOTAL CONTRACT OWNER RESERVES ................................................................. $6,856,560,360
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME: ALL DIVISIONS
-------------
<S> <C>
Dividends from mutual funds ................................................................... $ 88,556,732
-------------
EXPENSES:
Mortality and expense risk charge ............................................................. 57,564,107
Reimbursement of expenses (Note C) ............................................................ (167,038)
-------------
Total expenses ....................................................................... 57,397,069
-------------
NET INVESTMENT INCOME ......................................................................... 31,159,663
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 96,618,063
Capital gains distributions from mutual funds ................................................. 175,625,286
Net unrealized appreciation of investments during the year .................................... 539,282,575
-------------
Net realized and unrealized gain on investments ............................................. 811,525,924
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 842,685,587
=============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................................................... $ 31,159,663 $ 34,191,940
Net realized gain on investments .......................................................... 96,618,063 54,777,042
Capital gains distributions from mutual funds ............................................. 175,625,286 110,007,833
Net unrealized appreciation of investments during the year ................................ 539,282,575 640,017,922
--------------- ---------------
Increase in net assets resulting from operations ........................................ 842,685,587 838,994,737
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ......................................................................... 1,307,543,093 820,355,349
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ....... (210,060,345) (114,759,722)
Annuity benefit payments .................................................................. (1,897,648) (1,588,610)
Amounts transferred from VALIC general account ............................................ 647,659,402 220,818,448
--------------- ---------------
Increase in net assets resulting from principal transactions ............................ 1,743,244,502 924,825,465
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .............................................................. 2,585,930,089 1,763,820,202
NET ASSETS:
Beginning of year ......................................................................... 4,270,630,271 2,506,810,069
--------------- ---------------
End of year ............................................................................... $ 6,856,560,360 $ 4,270,630,271
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 108
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $ 378,856,928 $ 30,721,138 $1,529,744,413 $ 42,481,642
Balance due (to) from VALIC general account ....... (207,899) 4,786 601,957 (10,515)
-------------- -------------- -------------- --------------
NET ASSETS ........................................ $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $ 367,264,137 $ 29,086,370 $1,529,060,822 $ 42,319,960
Reserves for annuity contracts on benefit ......... 11,384,892 1,639,554 1,285,548 151,167
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES ..................... $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC NEUBERGER&
TIMED DREYFUS FOUNDERS BERMAN
OPPORTUNITY SMALL CAP GROWTH GUARDIAN
FUND PORTFOLIO FUND TRUST
DIVISION 5 DIVISION 18 DIVISION 30 DIVISION 29
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $173,145,150 $657,404,003 $ 31,872,619 $ 9,144,621
Balance due (to) from VALIC general account ....... 84,325 982,056 245,857 58,685
------------ ------------ ------------ ------------
NET ASSETS ........................................ $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $173,149,425 $658,204,551 $ 32,118,476 $ 9,203,306
Reserves for annuity contracts on benefit ......... 80,050 181,508 -- --
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES ..................... $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC
TWENTIETH VANGUARD/ CAPITAL
CENTURY ULTRA WELLINGTON VANGUARD/ CONSERVATION
FUND FUND WINDSOR II FUND
DIVISION 31 DIVISION 25 DIVISION 24 DIVISION 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $17,259,437 $25,025,702 $41,436,294 $ 6,488,667
Balance due (to) from VALIC general account ....... 58,221 163,816 363,484 13,203
----------- ----------- ----------- -----------
NET ASSETS ........................................ $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,497,192
Reserves for annuity contracts on benefit ......... -- -- -- 4,678
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 109
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH & SCIENCE & SOCIAL
INDEX INDEX EQUITIES GROWTH INCOME TECHNOLOGY AWARENESS
FUND FUND FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16 DIVISION 17 DIVISION 12
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 565,680,826 $ 184,521,204 $ 191,110,175 $ 633,819,402 $ 171,283,956 $ 709,577,919 $ 104,772,608
30,567 (42,882) 116,353 1,296,205 244,249 1,386,245 143,421
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
$ 565,558,770 $ 184,473,371 $ 191,050,097 $ 634,868,931 $ 171,510,875 $ 710,720,450 $ 104,916,029
152,623 4,951 176,431 246,676 17,330 243,714 -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND TEMPLETON TEMPLETON TEMPLETON
GROWTH OPPORTUNITIES GROWTH INCOME ASSET ALLOCATION FOREIGN INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 19 DIVISION 32 DIVISION 20
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 17,494,577 $ 49,812,851 $ 43,542,866 $ 18,325,255 $ 194,271,899 $ 39,066,749 $ 529,645,484
114,481 410,128 224,089 98,230 328,988 388,324 378,327
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,377,876 $ 39,455,073 $ 529,901,911
- - - - 223,011 - 121,900
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC AGSPC AGSPC FIXED INCOME FIXED INCOME
CAPITAL GOVERNMENT INTERNATIONAL SECURITIES FUND - SECURITIES FUND -
CONSERVATION SECURITIES GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
FUND FUND BOND FUND -------------------------------- PORTFOLIO PORTFOLIO
DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22 DIVISION 23
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 55,255,834 $ 85,570,274 $ 178,021,807 $ 4,870,208 $ 120,378,551 $ 3,528,351 $ 4,589,300
33,645 1,665 150,364 9,293 380,075 2,506 (212,599)
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
$ 55,289,479 $ 85,571,939 $ 178,161,619 $ 4,879,501 $ 120,740,347 $ 3,530,857 $ 4,376,701
- - 10,552 - 18,279 - -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
</TABLE>
5
<PAGE> 110
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ...................... $ 6,791,052 $ 559,035 $ 24,619,582 $ 775,055
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ................ 3,604,468 170,656 12,878,174 411,146
Reimbursement of expenses (Note C) ............... -- (73,695) -- --
-------------- -------------- -------------- --------------
Total expenses ................................ 3,604,468 96,961 12,878,174 411,146
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) ..................... 3,186,584 462,074 11,741,408 363,909
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ................. 12,767,086 2,085,848 10,129,542 2,391,364
Capital gains distributions from mutual funds .... 2,739,498 222,372 11,061,404 307,213
Net unrealized appreciation (depreciation)
of investments during the year ................ 51,675,655 3,182,195 222,475,966 4,964,983
-------------- -------------- -------------- --------------
Net realized and unrealized gain on investments .. 67,182,239 5,490,415 243,666,912 7,663,560
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $ 70,368,823 $ 5,952,489 $ 255,408,320 $ 8,027,469
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
SCIENCE & SOCIAL TIMED DREYFUS
STATEMENTS OF OPERATIONS TECHNOLOGY AWARENESS OPPORTUNITY SMALL CAP
For the year ended December 31, 1996 FUND FUND FUND PORTFOLIO
DIVISION 17 DIVISION 12 DIVISION 5 DIVISION 18
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ........................... $ -- $ 1,339,307 $ 5,922,604 $ 1,224,730
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ..................... 5,521,307 792,838 1,788,197 6,549,419
Reimbursement of expenses (Note C) .................... -- -- -- --
-------------- -------------- -------------- --------------
Total expenses ..................................... 5,521,307 792,838 1,788,197 6,549,419
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) .......................... (5,521,307) 546,469 4,134,407 (5,324,689)
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 20,659,560 778,115 7,668,485 1,994,033
Capital gains distributions from mutual funds ......... 32,117,202 10,715,745 18,741,770 19,221,026
Net unrealized appreciation (depreciation)
of investments during the year ..................... 15,569,750 4,483,540 (13,565,417) 56,124,110
-------------- -------------- -------------- --------------
Net realized and unrealized gain (loss) on investments 68,346,512 15,977,400 12,844,838 77,339,169
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 62,825,205 $ 16,523,869 $ 16,979,245 $ 72,014,480
============== ============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 111
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH &
INDEX INDEX EQUITIES GROWTH INCOME
FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 6,776,195 $ 2,324,957 $ 3,599,021 $ 2,128,889 $ 799,107
- -------------- -------------- -------------- -------------- --------------
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
-- -- -- -- --
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
- -------------- -------------- -------------- -------------- --------------
1,513,296 637,395 1,591,421 (2,278,501) (402,222)
- -------------- -------------- -------------- -------------- --------------
17,436,698 4,544,601 10,405,298 130,878 483,596
33,690,174 11,216,991 6,021,502 11,891,551 3,131,642
33,029,566 7,711,563 (6,663,813) 58,161,783 19,205,904
- -------------- -------------- -------------- -------------- --------------
84,156,438 23,473,155 9,762,987 70,184,212 22,821,142
- -------------- -------------- -------------- -------------- --------------
$ 85,669,734 $ 24,110,550 $ 11,354,408 $ 67,905,711 $ 22,418,920
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& PUTNAM PUTNAM PUTNAM OTC &
FOUNDERS BERMAN GLOBAL NEW EMERGING
GROWTH GUARDIAN GROWTH OPPORTUNITIES GROWTH
FUND TRUST FUND FUND FUND
DIVISION 30* DIVISION 29* DIVISION 28* DIVISION 26* DIVISION 27*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 31,678 $ 33,512 $ 386,503 $ -- $ --
- -------------- -------------- -------------- -------------- --------------
74,336 22,319 39,664 113,933 108,371
(14,593) (4,401) (7,712) (22,122) (21,011)
- -------------- -------------- -------------- -------------- --------------
59,743 17,918 31,952 91,811 87,360
- -------------- -------------- -------------- -------------- --------------
(28,065) 15,594 354,551 (91,811) (87,360)
- -------------- -------------- -------------- -------------- --------------
-- 10,864 1,237 9,737 9,014
2,106,129 128,127 765,977 333,297 2,846,114
(1,697,540) 348,451 (504,554) (1,619,779) (4,620,592)
- -------------- -------------- -------------- -------------- --------------
408,589 487,442 262,660 (1,276,745) (1,765,464)
- -------------- -------------- -------------- -------------- --------------
$ 380,524 $ 503,036 $ 617,211 $ (1,368,556) $ (1,852,824)
============== ============== ============== ============== ==============
</TABLE>
7
<PAGE> 112
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SCUDDER
GROWTH AND TEMPLETON TEMPLETON
INCOME ASSET ALLOCATION FOREIGN
FUND FUND FUND
DIVISION 21* DIVISION 19 DIVISION 32*
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME: .................................... $ 158,744 $ 3,271,039 $ 550,688
Dividends from mutual funds ........................... --
EXPENSES:
Mortality and expense risk charge ..................... 38,490 1,812,817 84,678
Reimbursement of expenses (Note C) .................... -- -- (16,623)
Total expenses ..................................... 38,490 1,812,817 68,055
NET INVESTMENT INCOME (LOSS) .......................... 120,254 1,458,222 482,633
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 22,419 430,651 125
Capital gains distributions from mutual funds ......... 607,596 2,566,073 285,587
Net unrealized appreciation (depreciation)
of investments during the year ..................... 84,718 19,843,521 1,121,790
Net realized and unrealized gain on investments ....... 714,733 22,840,245 1,407,502
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 834,987 $ 24,298,467 $ 1,890,135
================ ================ ================
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT
AGSPC CAPITAL CONSERVATION FUND SECURITIES
-------------------------------- FUND
DIVISION 1 DIVISION 7 DIVISION 8
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 454,827 $ 3,599,885 $ 4,872,690
-------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge .......................... 69,783 545,929 795,753
Reimbursement of expenses (Note C) ......................... -- -- --
Total expenses .......................................... 69,783 545,929 795,753
-------------- -------------- --------------
NET INVESTMENT INCOME ...................................... 385,044 3,053,956 4,076,937
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 60,355 (425,696) (378,294)
Capital gains distributions from mutual funds .............. -- -- --
Net unrealized appreciation (depreciation)
of investments during the year .......................... (428,426) (2,170,354) (2,658,037)
-------------- -------------- --------------
Net realized and unrealized gain (loss) on investments ..... (368,071) (2,596,050) (3,036,331)
-------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 16,973 $ 457,906 $ 1,040,606
============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 113
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON TWENTIETH VANGUARD/
INTERNATIONAL CENTURY ULTRA WELLINGTON VANGUARD/
FUND FUND FUND WINDSOR II
DIVISION 20 DIVISION 31* DIVISION 25* DIVISION 24*
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 4,540,296 $ -- $ 379,677 $ 576,345
- -------------- -------------- -------------- --------------
4,934,897 43,940 53,077 88,288
-- (6,881) -- --
- -------------- -------------- -------------- --------------
4,934,897 37,059 53,077 88,288
- -------------- -------------- -------------- --------------
(394,601) (37,059) 326,600 488,057
- -------------- -------------- -------------- --------------
3,551,468 18,993 -- 11,774
1,324,253 884,238 818,129 1,554,790
- -------------- -------------- -------------- --------------
78,888,709 (659,907) (444,072) (217,368)
- -------------- -------------- -------------- --------------
83,764,430 243,324 374,057 1,349,196
- -------------- -------------- -------------- --------------
$ 83,369,829 $ 206,265 $ 700,657 $ 1,837,253
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
INTERNATIONAL SECURITIES FUND- SECURITIES FUND-
GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
BOND FUND ------------------------------- PORTFOLIO PORTFOLIO
DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22* DIVISION 23*
- -------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 8,037,534 $ 272,228 $ 4,429,817 $ 44,221 $ 57,514
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
-- -- -- -- --
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
- -------------- -------------- -------------- ---------------- ----------------
6,561,676 216,537 3,525,805 36,167 46,282
- -------------- -------------- -------------- ---------------- ----------------
1,815,703 -- -- 2,260 2,349
295,588 -- -- 31,298 --
(2,362,017) -- -- (11,407) 33,654
- -------------- -------------- -------------- ---------------- ----------------
(250,726) -- -- 22,151 36,003
- -------------- -------------- -------------- ---------------- ----------------
$ 6,310,950 $ 216,537 $ 3,525,805 $ 58,318 $ 82,285
============== ============== ============== ================ ================
</TABLE>
9
<PAGE> 114
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------------------------------------
DIVISION 10A DIVISION 10B
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .......................................... $ 3,186,584 $ 3,760,733 $ 462,074 $ 493,423
Net realized gain on investments ............................... 12,767,086 5,349,737 2,085,848 631,222
Capital gains distributions from mutual funds .................. 2,739,498 6,875,040 222,372 570,166
Net unrealized appreciation
of investments during the year .............................. 51,675,655 78,996,842 3,182,195 6,528,773
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 70,368,823 94,982,352 5,952,489 8,223,584
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 4,265,439 5,033,111 501,306 574,384
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (22,309,652) (16,541,542) (2,364,484) (1,698,590)
Annuity benefit payments ....................................... (1,401,028) (1,296,973) (250,350) (218,489)
Amounts transferred (to) from VALIC general account ............ (13,443,730) (23,599,151) (1,406,730) (2,885,564)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (32,888,971) (36,404,555) (3,520,258) (4,228,259)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ................................... 37,479,852 58,577,797 2,432,231 3,995,325
NET ASSETS:
Beginning of year .............................................. 341,169,177 282,591,380 28,293,693 24,298,368
------------- ------------- ------------- -------------
End of year .................................................... $ 378,649,029 $ 341,169,177 $ 30,725,924 $ 28,293,693
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 29,995,363 33,814,520 1,560,525 1,836,094
Purchase payments .............................................. 323,038 497,922 26,729 39,513
Surrenders ..................................................... (1,822,126) (1,718,657) (123,291) (110,735)
Transfers - interdivision and (to) from VALIC general account .. (1,116,886) (2,598,422) (83,562) (204,347)
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 27,379,389 29,995,363 1,380,401 1,560,525
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 13.413891 $ 11.036946 $ 21.070956 $ 17.221812
============= ============ ============= ============
Annuity unit value assuming a 3.5% discount factor............. $ 3.873132 $ 3.298369 $ 5.173716 $ 4.376632
============= ============ ============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 115
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
- ------------------------------------------------------------------------
DIVISION 10C DIVISION 10D
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 11,741,408 $ 10,698,331 $ 363,909 $ 472,763
10,129,542 10,775,457 2,391,364 1,335,894
11,061,404 21,483,819 307,213 831,333
222,475,966 221,238,425 4,964,983 9,456,579
- --------------- --------------- --------------- ---------------
255,408,320 264,196,032 8,027,469 12,096,569
- --------------- --------------- --------------- ---------------
210,185,191 155,833,642 1,004,698 1,280,197
(49,624,470) (30,060,583) (2,219,367) (2,417,823)
(61,625) (29,665) (10,433) (5,520)
47,055,243 (42,300,802) (5,536,446) (7,115,532)
- --------------- --------------- --------------- ---------------
207,554,339 83,442,592 (6,761,548) (8,258,678)
- --------------- --------------- --------------- ---------------
462,962,659 347,638,624 1,265,921 3,837,891
1,067,383,711 719,745,087 41,205,206 37,367,315
- --------------- --------------- --------------- ---------------
$ 1,530,346,370 $ 1,067,383,711 $ 42,471,127 $ 41,205,206
=============== =============== =============== ===============
455,255,243 416,234,288 9,885,873 12,207,684
80,768,570 76,950,994 231,458 341,405
(18,096,464) (14,254,441) (486,940) (663,263)
18,879,616 (23,675,598) (1,248,687) (1,999,953)
- --------------- --------------- --------------- ---------------
536,806,965 455,255,243 8,381,704 9,885,873
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 2.848437 $ 2.343900 $ 5.049088 $ 4.155057
=============== =============== =============== ===============
$ 2.085358 $ 1.776053 $ 3.032347 $ 2.582770
=============== =============== =============== ===============
<CAPTION>
AGSPC
AGSPC SMALL CAP
MIDCAP INDEX FUND INDEX FUND
- ---------------------------------- ----------------------------------
DIVISION 4 DIVISION 14
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 1,513,296 $ 2,391,702 $ 637,395 $ 563,294
17,436,698 10,603,188 4,544,601 2,963,270
33,690,174 17,377,938 11,216,991 2,945,819
33,029,566 76,322,743 7,711,563 24,766,420
- --------------- --------------- --------------- ---------------
85,669,734 106,695,571 24,110,550 31,238,803
- --------------- --------------- --------------- ---------------
76,583,041 87,946,264 31,004,229 40,608,391
(21,727,656) (15,264,152) (7,478,000) (4,632,557)
(19,036) (16,844) (563) (3,022)
(55,201,966) (69,269,652) (15,148,966) (38,506,364)
- --------------- --------------- --------------- ---------------
(365,617) 3,395,616 8,376,700 (2,533,552)
- --------------- --------------- --------------- ---------------
85,304,117 110,091,187 32,487,250 28,705,251
480,407,276 370,316,089 151,991,072 123,285,821
- --------------- --------------- --------------- ---------------
$ 565,711,393 $ 480,407,276 $ 184,478,322 $ 151,991,072
=============== =============== =============== ===============
172,613,690 171,442,018 98,335,995 100,383,839
25,301,831 35,874,094 18,844,484 30,141,511
(7,030,990) (5,995,776) (4,305,572) (3,356,851)
(18,067,553) (28,706,646) (9,554,065) (28,832,504)
- --------------- --------------- --------------- ---------------
172,816,978 172,613,690 103,320,842 98,335,995
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 3.272588 $ 2.782677 $ 1.785442 $ 1.544896
=============== =============== =============== ===============
$ 2.044683 $ 1.799452 $ 1.520786 $ 1.361960
=============== =============== =============== ===============
</TABLE>
11
<PAGE> 116
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC
FUND GROWTH FUND
DIVISION 11 DIVISION 15
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ 1,591,421 $ 1,304,847 $ (2,278,501) $ (869,578)
Net realized gain on investments ............................... 10,405,298 13,215,875 130,878 8,587
Capital gains distributions from mutual funds .................. 6,021,502 4,363,325 11,891,551 3,650,399
Net unrealized appreciation (depreciation)
of investments during the year .............................. (6,663,813) (725,229) 58,161,783 39,103,633
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 11,354,408 18,158,818 67,905,711 41,893,041
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 34,022,917 52,726,233 164,255,730 58,223,803
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (8,616,063) (6,722,321) (10,378,550) (1,776,523)
Annuity benefit payments ....................................... (13,432) (5,870) (38,688) --
Amounts transferred (to) from VALIC general account ............ (45,208,742) (63,364,477) 172,227,639 109,893,422
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (19,815,320) (17,366,435) 326,066,131 166,340,702
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ (8,460,912) 792,383 393,971,842 208,233,743
NET ASSETS:
Beginning of year .............................................. 199,687,440 198,895,057 241,143,765 32,910,022
------------- ------------- ------------- -------------
End of year .................................................... $ 191,226,528 $ 199,687,440 $ 635,115,607 $ 241,143,765
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 172,564,018 187,749,916 164,417,848 32,633,370
Purchase payments .............................................. 28,526,458 49,402,081 101,043,809 45,984,606
Surrenders ..................................................... (7,207,422) (6,214,230) (5,693,969) (1,266,891)
Transfers - interdivision and (to) from VALIC general account .. (37,656,740) (58,373,749) 106,504,821 87,066,763
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 156,226,314 172,564,018 366,272,509 164,417,848
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ -----------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ........................................ $ 1.222906 $ 1.156454 $ 1.733324 $ 1.466652
============= ============= ============ ============
Annuity unit value assuming a 3.5% discount factor ............. $ 0.953246 $ 0.933003 $ 1.580931 $ 1.384532
============= ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 117
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
AGSPC AGSPC AGSPC TIMED OPPORTUNITY
GROWTH & INCOME FUND SCIENCE & TECHNOLOGY FUND SOCIAL AWARENESS FUND FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 16 DIVISION 17 DIVISION 12 DIVISION 5
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (402,222) $ (75,425) $ (5,521,307) $ (1,432,122) $ 546,469 $ 599,922 $ 4,134,407 $ 5,452,120
483,596 19,953 20,659,560 6,545,968 778,115 371,169 7,668,485 2,006,917
3,131,642 472,785 32,117,202 37,380,606 10,715,745 3,609,468 18,741,770 3,186,462
19,205,904 8,794,032 15,569,750 41,310,631 4,483,540 10,227,915 (13,565,417) 26,710,438
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
22,418,920 9,211,345 62,825,205 83,805,083 16,523,869 14,808,474 16,979,245 37,355,937
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,180,652 17,507,504 181,422,903 93,027,877 18,543,307 10,849,944 15,126,160 20,940,181
(2,962,157) (641,935) (14,164,178) (3,055,711) (3,798,307) (1,516,923) (11,037,733) (7,824,702)
(1,598) -- (40,073) (824) -- -- (7,329) (6,591)
43,756,812 28,680,150 105,706,951 147,758,969 13,547,350 (2,864,774) (30,784,573) (42,300,580)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
81,973,709 45,545,719 272,925,603 237,730,311 28,292,350 6,468,247 (26,703,475) (29,191,692)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
104,392,629 54,757,064 335,750,808 321,535,394 44,816,219 21,276,721 (9,724,230) 8,164,245
67,135,576 12,378,512 375,213,356 53,677,962 60,099,810 38,823,089 182,953,705 174,789,460
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 171,528,205 $ 67,135,576 $ 710,964,164 $ 375,213,356 $ 104,916,029 $ 60,099,810 $ 173,229,475 $ 182,953,705
============= ============= ============= ============= ============= ============= ============= =============
51,779,089 12,386,602 187,862,232 42,726,137 32,750,120 29,015,764 75,851,431 89,377,860
28,095,895 14,980,745 84,389,312 54,428,033 9,143,695 6,860,477 6,003,535 9,806,864
(1,842,881) (455,265) (6,049,987) (1,584,330) (1,827,332) (929,671) (4,376,494) (3,569,040)
30,309,532 24,867,007 49,608,089 92,292,392 6,507,533 (2,196,450) (12,185,855) (19,764,253)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
108,341,635 51,779,089 315,809,646 187,862,232 46,574,016 32,750,120 65,292,617 75,851,431
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.583056 $ 1.296577 $ 2.250471 $ 1.997175 $ 2.252673 $ 1.835102 $ 2.651899 $ 2.411022
============= ============= ============= ============= ============= ============= ============= =============
$ 1.443874 $ 1.223980 $ 2.052612 $ 1.885352 $ 1.755941 $ 1.480522 $ 1.680570 $ 1.581407
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
13
<PAGE> 118
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
FOUNDERS
GROWTH
DREYFUS SMALL CAP PORTFOLIO FUND
------------------------------ -------------
DIVISION 18 DIVISION 30
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ (5,324,689) $ (1,441,343) $ (28,065)
Net realized gain on investments ................................. 1,994,033 26,776 --
Capital gains distributions from mutual funds .................... 19,221,026 6,796,184 2,106,129
Net unrealized appreciation (depreciation)
of investments during the year ................................ 56,124,110 47,179,100 (1,697,540)
------------- ------------- -------------
Increase (decrease) in net assets resulting from operations . 72,014,480 52,560,717 380,524
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 168,538,535 96,201,687 8,595,522
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,795,343) (3,867,838) (36,494)
Annuity benefit payments ......................................... (8,413) (915) --
Amounts transferred (to) from VALIC general account .............. 74,732,906 122,606,635 23,178,924
------------- ------------- -------------
Increase in net assets
resulting from principal transactions ..................... 229,467,685 214,939,569 31,737,952
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ..................................... 301,482,165 267,500,286 32,118,476
NET ASSETS:
Beginning of year ................................................ 356,903,894 89,403,608 --
------------- -------------
End of year ...................................................... $ 658,386,059 $ 356,903,894 $ 32,118,476
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................. 267,735,219 85,169,871 --
Purchase payments ................................................ 117,376,109 80,950,706 9,274,157
Surrenders ....................................................... (8,756,141) (2,954,777) (32,596)
Transfers - interdivision and (to) from VALIC general account .... 52,528,063 104,569,419 21,955,903
------------- ------------- -------------
Accumulation units end of year ................................... 428,883,250 267,735,219 31,197,464
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
--------------------------- ------------
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Accumulation unit value ............................... $ 1.534694 $ 1.332904 $ 1.029522
============ ============ ============
Annuity unit value assuming a 3.5% discount factor .... $ 1.409551 $ 1.267071 $ 1.011867
============ ============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 119
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND
NEUBERGER&BERMAN GROWTH OPPORTUNITIES GROWTH INCOME
GUARDIAN TRUST FUND FUND FUND FUND
DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21
- -------------- -------------- -------------- -------------- --------------
1996* 1996* 1996* 1996* 1996*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 15,594 $ 354,551 $ (91,811) $ (87,360) $ 120,254
10,864 1,237 9,737 9,014 22,419
128,127 765,977 333,297 2,846,114 607,596
348,451 (504,554) (1,619,779) (4,620,592) 84,718
- -------------- -------------- -------------- -------------- --------------
503,036 617,211 (1,368,556) (1,852,824) 834,987
- -------------- -------------- -------------- -------------- --------------
2,108,685 3,174,282 11,510,093 11,571,920 4,643,308
(21,439) (15,952) (87,148) (77,988) (23,004)
-- -- -- -- --
6,613,024 13,833,517 40,168,590 34,125,847 12,968,194
- -------------- -------------- -------------- -------------- --------------
8,700,270 16,991,847 51,591,535 45,619,779 17,588,498
- -------------- -------------- -------------- -------------- --------------
9,203,306 17,609,058 50,222,979 43,766,955 18,423,485
-- -- -- -- --
- -------------- -------------- -------------- -------------- --------------
$ 9,203,306 $ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485
============== ============== ============== ============== ==============
-- -- -- -- --
2,109,025 3,377,941 13,342,250 13,681,504 4,726,075
(19,267) (16,466) (87,502) (82,877) (21,254)
6,121,834 13,287,125 39,746,951 35,304,201 11,819,225
- -------------- -------------- -------------- -------------- --------------
8,211,592 16,648,600 53,001,699 48,902,828 16,524,046
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1996 1996 1996 1996 1996
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 1.120770 $ 1.057690 $ 0.947573 $ 0.894978 $ 1.114950
============== ============== ============== ============== ==============
$ 1.101550 $ 1.039552 $ 0.931324 $ 0.879630 $ 1.095830
============== ============== ============== ============== ==============
</TABLE>
15
<PAGE> 120
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
TEMPLETON
TEMPLETON ASSET FOREIGN
ALLOCATION FUND FUND
------------------------------ -------------
DIVISION 19 DIVISION 32
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 1,458,222 $ 360,608 $ 482,633
Net realized gain on investments ................................ 430,651 87,754 125
Capital gains distributions from mutual funds ................... 2,566,073 -- 285,587
Net unrealized appreciation (depreciation)
of investments during the year ............................... 19,843,521 11,935,576 1,121,790
------------- ------------- -------------
Increase in net assets resulting from operations ........... 24,298,467 12,383,938 1,890,135
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 46,026,342 26,412,918 9,386,263
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,839,217) (1,156,891) (122,577)
Annuity benefit payments ........................................ (39,584) (1,361) --
Amounts transferred (to) from VALIC general account ............. 33,529,527 24,133,475 28,301,252
------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 75,677,068 49,388,141 37,564,938
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 99,975,535 61,772,079 39,455,073
NET ASSETS:
Beginning of year ............................................... 94,625,352 32,853,273 --
------------- ------------- -------------
End of year ..................................................... $ 194,600,887 $ 94,625,352 $ 39,455,073
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 78,494,505 32,807,602 --
Purchase payments ............................................... 35,369,271 24,212,805 10,156,940
Surrenders ...................................................... (2,676,756) (964,768) (116,295)
Transfers - interdivision and (to) from VALIC general account ... 26,197,650 22,438,866 26,631,183
============= ============= =============
Accumulation units end of year .................................. 137,384,670 78,494,505 36,671,828
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
----------------------------- -------------
1996 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Accumulation unit value ........................................... $ 1.414844 $ 1.205181 $ 1.075896
============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.299474 $ 1.145656 $ 1.057446
============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 121
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTIETH
CENTURY VANGUARD/
ULTRA WELLINGTON VANGUARD/
TEMPLETON INTERNATIONAL FUND FUND FUND WINDSOR II
- ------------------------------ ------------- ------------- -------------
DIVISION 20 DIVISION 31 DIVISION 25 DIVISION 24
- ------------------------------ ------------- ------------- -------------
1996 1995 1996* 1996* 1996*
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ (394,601) $ (1,169,628) $ (37,059) $ 326,600 $ 488,057
3,551,468 25,628 18,993 -- 11,774
1,324,253 350,470 884,238 818,129 1,554,790
78,888,709 23,406,038 (659,907) (444,072) (217,368)
- ------------- ------------- ------------- ------------- -------------
83,369,829 22,612,508 206,265 700,657 1,837,253
- ------------- ------------- ------------- ------------- -------------
121,376,573 69,120,243 4,513,492 7,042,246 10,178,409
(9,699,818) (2,577,387) (29,941) (12,075) (103,527)
(3,367) (463) -- -- --
84,599,243 89,125,401 12,627,842 17,458,690 29,887,643
- ------------- ------------- ------------- ------------- -------------
196,272,631 155,667,794 17,111,393 24,488,861 39,962,525
- ------------- ------------- ------------- ------------- -------------
279,642,460 178,280,302 17,317,658 25,189,518 41,799,778
250,381,351 72,101,049 -- -- --
- ------------- ------------- ------------- ------------- -------------
$ 530,023,811 $ 250,381,351 $ 17,317,658 $ 25,189,518 $ 41,799,778
============= ============= ============= ============= =============
219,124,926 71,716,511 -- -- --
97,229,761 65,697,216 4,747,541 7,335,077 10,359,662
(7,187,616) (2,198,909) (27,374) (12,748) (91,924)
69,414,878 83,910,108 11,933,909 15,544,305 27,025,023
- ------------- ------------- ------------- ------------- -------------
378,581,949 219,124,926 16,654,076 22,866,634 37,292,761
============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31:
- ------------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1996 1996
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 1.399702 $ 1.142586 $ 1.039845 $ 1.101584 $ 1.120855
============= ============= ============= ============= =============
$ 1.285567 $ 1.086152 $ 1.022013 $ 1.082693 $ 1.101634
============= ============= ============= ============= =============
</TABLE>
17
<PAGE> 122
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC AGSPC
CAPITAL CONSERVATION CAPITAL CONSERVATION
FUND FUND
---------------------------- ----------------------------
DIVISION 1 DIVISION 7
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ......................................... $ 385,044 $ 449,111 $ 3,053,956 $ 2,607,547
Net realized gain (loss) on investments ....................... 60,355 65,122 (425,696) (138,616)
Capital gains distributions from mutual funds ................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the year ............................. (428,426) 906,759 (2,170,354) 5,643,853
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ......... 16,973 1,420,992 457,906 8,112,784
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 280,092 286,600 10,990,401 10,464,260
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .......................... (624,478) (623,792) (2,515,394) (1,972,220)
Annuity benefit payments ...................................... (512) (499) -- --
Amounts transferred (to) from VALIC general account ........... (953,654) (1,306,120) (7,231,500) (3,821,311)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................. (1,298,552) (1,643,811) 1,243,507 4,670,729
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,281,579) (222,819) 1,701,413 12,783,513
NET ASSETS:
Beginning of year ............................................. 7,783,449 8,006,268 53,588,066 40,804,553
------------ ------------ ------------ ------------
End of year ................................................... $ 6,501,870 $ 7,783,449 $ 55,289,479 $ 53,588,066
============ ============ ============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .......................... 2,402,085 2,953,861 29,573,808 26,859,219
Purchase payments ............................................. 87,169 96,297 6,098,740 6,253,935
Surrenders .................................................... (196,821) (207,008) (1,343,357) (1,058,493)
Transfers - interdivision and (to) from VALIC
general account . ........................................... (300,897) (441,065) (4,042,697) (2,480,853)
------------ ------------ ------------ ------------
Accumulation units end of year ................................ 1,991,536 2,402,085 30,286,494 29,573,808
============ ============ ============ ============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ....................................... $ 3.262402 $ 3.238370 $ 1.825549 $ 1.812011
============ ============ ============ ============
Annuity unit value assuming a 3.5% discount factor ............ $ 1.794552 $ 1.843690 $ 1.255251 $ 1.289558
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 123
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC
GOVERNMENT SECURITIES INTERNATIONAL GOVERNMENT AGSPC
FUND BOND FUND MONEY MARKET FUND
- ----------------------------- ------------------------------ ----------------------------------------------------------------
DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 4,076,937 $ 2,982,495 $ 6,561,676 $ 3,459,290 $ 216,537 $ 306,524 $ 3,525,805 $ 3,277,326
(378,294) (28,711) 1,815,703 911,852 -- -- -- --
-- -- 295,588 114,019 -- -- -- --
(2,658,037) 5,103,399 (2,362,017) 3,111,995 -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,040,606 8,057,183 6,310,950 7,597,156 216,537 306,524 3,525,805 3,277,326
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,451,360 15,047,915 48,300,297 31,073,737 163,293 355,756 40,448,483 26,840,702
(3,354,710) (1,987,445) (4,925,561) (1,946,252) (465,203) (681,366) (13,617,200) (7,793,169)
-- -- (33) -- -- -- (1,584) (1,574)
(2,269,092) 9,219,172 16,174,338 42,026,449 (1,426,148) (806,250) 10,145,727 (54,484,648)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
12,827,558 22,279,642 59,549,041 71,153,934 (1,728,058) (1,131,860) 36,975,426 (35,438,689)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
13,868,164 30,336,825 65,859,991 78,751,090 (1,511,521) (825,336) 40,501,231 (32,161,363)
71,703,775 41,366,950 112,312,180 33,561,090 6,391,022 7,216,358 80,257,395 112,418,758
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 85,571,939 $ 71,703,775 $ 178,172,171 $ 112,312,180 $ 4,879,501 $ 6,391,022 $ 120,758,626 $ 80,257,395
============= ============= ============= ============= ============= ============= ============= =============
39,847,053 26,667,073 73,369,250 25,691,713 2,917,361 3,442,237 51,907,757 75,765,781
10,391,393 9,058,310 31,815,367 21,413,110 73,255 165,743 25,572,924 18,072,687
(1,871,516) (1,149,951) (3,112,236) (1,286,336) (208,252) (316,475) (8,565,366) (5,090,822)
(1,236,761) 5,271,621 10,529,212 27,550,763 (639,830) (374,144) 6,208,780 (36,839,889)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
47,130,169 39,847,053 112,601,593 73,369,250 2,142,534 2,917,361 75,124,095 51,907,757
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
December 31: December 31: December 31: December 31:
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.815651 $ 1.799475 $ 1.582230 $ 1.530780 $ 2.277444 $ 2.190686 $ 1.607212 $ 1.545802
============= ============= ============= ============= ============= ============= ============= =============
$ 1.248443 $ 1.280634 $ 1.321708 $ 1.323493 $ 1.399179 $ 1.392992 $ 1.093041 $ 1.088077
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
19
<PAGE> 124
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
VANGUARD VANGUARD
FIXED FIXED
INCOME INCOME
SECURITIES SECURITIES
FUND - FUND - L/T
L/T CORPORATE U.S. TREASURY
PORTFOLIO PORTFOLIO
------------ ------------
DIVISION 22 DIVISION 23
------------ ------------
1996* 1996*
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 36,167 $ 46,282
Net realized gain on investments ................................ 2,260 2,349
Capital gains distributions from mutual funds ................... 31,298 --
Net unrealized appreciation (depreciation)
of investments during the year ............................... (11,407) 33,654
------------ ------------
Increase in net assets resulting from operations ........... 58,318 82,285
------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,030,635 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,212) (9,447)
Annuity benefit payments ........................................ -- --
Amounts transferred (to) from VALIC general account ............. 2,445,116 3,186,574
------------ ------------
Increase in net assets
resulting from principal transactions .................... 3,472,539 4,294,416
------------ ------------
TOTAL INCREASE IN NET ASSETS .................................... 3,530,857 4,376,701
NET ASSETS:
Beginning of year ............................................... -- --
------------ ------------
End of year ..................................................... $ 3,530,857 $ 4,376,701
============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- --
Purchase payments ............................................... 1,099,573 1,138,211
Surrenders ...................................................... (3,347) (9,203)
Transfers - interdivision and (to) from VALIC general account ... 2,274,215 3,045,361
------------ ------------
Accumulation units end of year .................................. 3,370,441 4,174,369
============ ============
<CAPTION>
December 31, December 31,
1996 1996
------------ ------------
<S> <C> <C>
Accumulation unit value ......................................... $ 1.047595 $ 1.048470
============ ============
Annuity unit value assuming a 3.5% discount factor .............. $ 1.029630 $ 1.030490
============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 125
================================================================================
NOTES TO FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ("VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of thirty-three subaccounts or "divisions." Each division,
which represents a variable investment vehicle available only through a VALIC
annuity contract, invests in one of the following mutual funds:
American General Series Portfolio Company ("AGSPC"):
AGSPC Stock Index Fund (Divisions 10A, B, C, and D)
AGSPC MidCap Index Fund (Division 4)
AGSPC Small Cap Index Fund (Division 14)
AGSPC International Equities Fund (Division 11)
AGSPC Growth Fund (Division 15)
AGSPC Growth & Income Fund (Division 16)
AGSPC Science & Technology Fund (Division 17)
AGSPC Social Awareness Fund (Division 12)
AGSPC Timed Opportunity Fund (Division 5)
AGSPC Capital Conservation Fund (Divisions 1 and 7)
AGSPC Government Securities Fund (Division 8)
AGSPC International Government Bond Fund (Division 13)
AGSPC Money Market Fund (Divisions 2 and 6)
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)
Founders Growth Fund (Division 30)
Neuberger&Berman Guardian Trust (Division 29)
Putnam Global Growth Fund (Division 28)
Putnam New Opportunities Fund (Division 26)
Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
Templeton Foreign Fund (Division 32)
Templeton Variable Products Series Fund:
Templeton Asset Allocation Fund (Division 19)
Templeton International Fund (Division 20)
Twentieth Century Ultra Fund (Division 31)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio (Division 22)
Long-Term U.S. Treasury Portfolio (Division 23)
Vanguard/Wellington Fund (Division 25)
Vanguard/Windsor II (Division 24)
Divisions 21 through 32 commenced operations on July 1, 1996.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
INVESTMENT VALUATION. Investments in mutual funds (the "Funds") are valued
at the net asset (market) value per share at the close of each business day as
reported by the Fund.
INVESTMENT TRANSACTIONS. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
basis of identified cost. Capital gain distributions from mutual funds are
recorded on the ex-dividend date and reinvested upon receipt.
INVESTMENT INCOME. Dividend income from mutual funds is recorded on the
ex-dividend date and reinvested upon receipt.
ANNUITY RESERVES. Net payments made by variable annuity contract owners
are accumulated based on the performance of the investments of the Separate
Account until the date the contract owners select to commence annuity payments.
Reserves for annuities on which benefits are currently payable are provided for
based upon estimated mortality and other assumptions, including provisions for
the risk of adverse deviation from assumptions, which were appropriate at the
time the contracts were issued. The 1983(a) Individual Mortality Table has been
used in the computation of annuity reserves for currently payable contracts.
Participants are able to elect investment rates between 3.0% and 6.0%, as
regulated by the applicable state laws.
21
<PAGE> 126
================================================================================
NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC acts as investment adviser and transfer agent to AGSPC.
The Separate Account is charged for mortality and expense risks assumed by
VALIC. The charge, based on the daily net assets of each division, is assessed
daily based on the following annual rates: for Division 10B, 0.85% on the first
$10,000,000, 0.425% on the next $90,000,000, and 0.21% on the excess over
$100,000,000; for Divisions 1, 2, 4, 5, 6, 7, 8, 10A, 10C, 10D, 11, 12, 13, 14,
15, 16, and 17, 1.00%; and for Divisions 18 through 32, 1.25%. Certain
unaffiliated mutual funds reimburse to VALIC a portion of the distribution or
administrative costs associated with offering their funds through a VALIC
annuity contract. VALIC, in turn reduces the separate account charge to that
division by the amount of the reimbursement. The expense reduction is credited
daily based on the following annual rates: for Divisions 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20%.
Pursuant to the reorganization agreement entered into on April 17, 1987,
which transferred VALIC Separate Accounts One and Two into Separate Account A
Divisions 10A and 10B, respectively, expenses of each division (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets: Division 10A, 1.4157% on the first
$359,065,787, 1.36% on the next $40,934,213, and 1.32% on the excess over
$400,000,000; Division 10B, 0.6966% on the first $25,434,267, 0.5% on the next
$74,565,733, and 0.25% on the excess over $100,000,000. Accordingly, during the
years ended December 31, 1996 and 1995, VALIC reduced expenses of Division 10B
by $73,695 and $69,586, respectively.
A portion of the annual contract maintenance charge is assessed each
contract (except those relating to Divisions 10A and 10B) by VALIC on the last
day of the calendar quarter in which VALIC receives the first purchase payment,
and in quarterly installments thereafter during the accumulation period.
Maintenance charges assessed totaled $3,625,368 and $2,494,903 for the years
ended December 31, 1996, and December 31, 1995, respectively.
VALIC received surrender charges of $1,998,356 and $1,299,069 for the years
ended December 31, 1996, and December 31, 1995, respectively. In addition,
VALIC received $76,330 and $11,846 for the year ended December 31, 1996, in
sales load on variable annuity purchase payments for Divisions 10A and 10B,
respectively. VALIC received $100,290 and $18,404 for the year ended December
31, 1995, in sales load on variable annuity purchase payments for Divisions 10A
and 10B, respectively.
NOTE D -- INVESTMENTS
The cost of fund shares is the same for financial reporting and federal
income tax purposes. The following is a summary of fund shares owned as of
December 31, 1996:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Stock Index Fund ............... 10A,B,C,D 87,073,994 $22.76 $1,981,804,121 $1,327,746,117 $ 654,058,004
AGSPC MidCap Index Fund .............. 4 29,632,311 19.09 565,680,826 449,572,385 116,108,441
AGSPC Small Cap Index Fund ........... 14 11,997,478 15.38 184,521,204 153,924,818 30,596,386
AGSPC International Equities Fund .... 11 17,597,622 10.86 191,110,175 186,523,328 4,586,847
AGSPC Growth Fund .................... 15 37,305,439 16.99 633,819,402 536,223,583 97,595,819
AGSPC Growth & Income Fund ........... 16 11,029,231 15.53 171,283,956 143,198,387 28,085,569
AGSPC Science & Technology Fund ...... 17 36,314,121 19.54 709,577,919 650,004,665 59,573,254
AGSPC Social Awareness Fund .......... 12 6,746,465 15.53 104,772,608 92,520,041 12,252,567
AGSPC Timed Opportunity Fund ......... 5 14,900,615 11.62 173,145,150 164,668,872 8,476,278
Dreyfus Small Cap Portfolio .......... 18 12,622,965 52.08 657,404,003 554,202,812 103,201,191
Founders Growth Fund ................. 30 2,008,357 15.87 31,872,619 33,570,159 (1,697,540)
Neuberger&Berman Guardian Trust ...... 29 576,221 15.87 9,144,621 8,796,170 348,451
Putnam Global Growth Fund ............ 28 1,616,874 10.82 17,494,577 17,999,131 (504,554)
Putnam New Opportunities Fund ........ 26 1,226,012 40.63 49,812,851 51,432,630 (1,619,779)
Putnam OTC & Emerging Growth Fund .... 27 2,978,308 14.62 43,542,866 48,163,458 (4,620,592)
Scudder Growth and Income Fund ....... 21 788,862 23.23 18,325,255 18,240,537 84,718
Templeton Asset Allocation Fund ...... 19 9,215,934 21.08 194,271,899 163,221,896 31,050,003
Templeton Foreign Fund ............... 32 3,770,922 10.36 39,066,749 37,944,959 1,121,790
Templeton International Fund ......... 20 28,785,081 18.40 529,645,484 429,586,719 100,058,765
Twentieth Century Ultra Fund ......... 31 614,433 28.09 17,259,437 17,919,344 (659,907)
Vanguard/Wellington Fund ............. 25 957,006 26.15 25,025,702 25,469,774 (444,072)
Vanguard/Windsor II .................. 24 1,738,829 23.83 41,436,294 41,653,662 (217,368)
AGSPC Capital Conservation Fund ...... 1 & 7 6,540,731 9.44 61,744,501 62,635,525 (891,024)
AGSPC Government Securities Fund ..... 8 8,740,580 9.79 85,570,274 87,080,789 (1,510,515)
AGSPC Intl Government Bond Fund ...... 13 14,664,070 12.14 178,021,807 177,770,389 251,418
AGSPC Money Market Fund .............. 2 & 6 125,248,759 1.00 125,248,759 125,248,759 --
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio ..... 22 401,405 8.79 3,528,351 3,539,758 (11,407)
Long-Term Treasury Portfolio ...... 23 460,773 9.96 4,589,300 4,555,646 33,654
-------------- -------------- --------------
$6,848,720,710 $5,613,414,313 $1,235,306,397
============== ============== ==============
</TABLE>
22
<PAGE> 127
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE E -- FEDERAL INCOME TAXES
VALIC is taxed as a life insurance company under the Internal Revenue Code
and includes the operations of the Separate Account in determining its federal
income tax liability. Under current federal income tax law the investment
income and capital gains from sale of investments realized by the Separate
Account are not taxable. Therefore, no federal income tax provision has been
made.
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPCStock Index Fund:
Division 10A ....................................... $ 17,021,738 $ 43,812,850
Division 10B ....................................... 2,580,971 5,429,098
Division 10C ....................................... 256,325,254 25,747,213
Division 10D ....................................... 2,027,471 8,102,453
AGSPCMidCap Index Fund Division 4 ..................... 82,810,931 47,686,904
AGSPCSmall Cap Index Fund Division 14 ................. 39,025,150 19,167,355
AGSPCInternational Equities Fund Division 11 .......... 86,696,926 98,467,340
AGSPCGrowth Fund Division 15 .......................... 335,262,129 301,789
AGSPCGrowth & Income Fund Division 16 ................. 86,012,396 1,299,897
AGSPCScience & Technology Fund Division 17 ............ 352,574,477 53,374,853
AGSPCSocial Awareness Fund Division 12 ................ 42,813,000 3,268,198
AGSPCTimed Opportunity Fund Division 5 ................ 28,638,442 32,465,770
Dreyfus Small Cap Portfolio Division 18 ............... 249,716,319 6,505,702
Founders Growth Fund Division 30 ...................... 33,570,159 --
Neuberger&Berman Guardian Trust Division 29 ........... 8,898,099 112,793
Putnam Global Growth Fund Division 28 ................. 18,021,308 23,414
Putnam New Opportunities Fund Division 26 ............. 51,544,430 121,537
Putnam OTC & Emerging Growth Fund Division 27 ......... 48,276,161 121,717
Scudder Growth and Income Fund Division 21 ............ 18,402,759 184,641
Templeton Asset Allocation Fund Division 19 ........... 82,157,269 2,508,019
Templeton Foreign Fund Division 32 .................... 37,950,945 6,111
Templeton International Fund Division 20 .............. 218,306,492 20,995,568
Twentieth Century Ultra Fund Division 31 .............. 18,018,419 118,068
Vanguard/Wellington Fund Division 25 .................. 25,469,774 --
Vanguard/Windsor II Division 24 ....................... 41,722,849 80,961
AGSPCCapital Conservation Fund:
Division 1 ......................................... 693,471 1,607,591
Division 7 ......................................... 14,085,173 9,602,267
AGSPCGovernment Securities Fund Division 8 ............ 25,289,634 8,298,547
AGSPCInternational Government Bond Fund Division 13 ... 90,682,754 24,293,817
AGSPCMoney Market Fund:
Division 2 ......................................... 1,864,996 3,374,351
Division 6 ......................................... 234,317,827 194,495,674
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 .......... 3,689,310 151,812
Long-Term U.S. Treasury Portfolio Division 23 ...... 4,877,356 324,059
-------------- --------------
Total ........................................... $2,559,344,389 $ 612,050,369
============== ==============
</TABLE>
23
<PAGE> 128
================================================================================
REPORT OF INDEPENDENT AUDITORS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO THE BOARD OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AND CONTRACT OWNERS
OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
We have audited the accompanying statements of net assets of The Variable
Annuity Life Insurance Company Separate Account A ("Separate Account A") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, and 11 through
32, inclusive) comprising Separate Account A as of December 31, 1996. We have
also audited the related statements of operations for the year then ended and
the statements of changes in net assets for each of the two years in the period
then ended of Separate Account A and each of its divisions except for divisions
21 through 32, inclusive, for which we audited the statements of operations and
the statements of changes in net assets for the period from July 1, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of Separate Account A's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Separate Account A and each of
the divisions comprising Separate Account A at December 31, 1996, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
January 24, 1997
24
<PAGE> 129
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY --------------
SEPARATE ACCOUNT A Bulk Rate
U.S. Postal
P.O. Box 3206 PAID
Houston, Texas 77253-3206 Permit No. 6__
Houston, Texas
--------------
<PAGE> 130
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR 2
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page....................................... Cover Page
Profile..........................................
2. Definitions...................................... About the Prospectus
3. Synopsis......................................... About Portfolio Director 2, About VALIC, About
VALIC Separate Account A
4. Condensed Financial Information.................. Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies.............................. About VALIC, About VALIC Separate Account A,
Variable Account Options
6. Deductions and Expenses.......................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts........................................ Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period................................... Payout Period
9. Death Benefit.................................... Death Benefits
10. Purchase and Contract Value...................... Fees and Charges, Purchase Period
11. Redemptions...................................... Surrender of Account Value
12. Taxes............................................ Federal Tax Matters
13. Legal Proceedings................................ Not Applicable
14. Table of Contents of the Statement of Additional
Information...................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page....................................... Cover Page
16. Table of Contents................................ Table of Contents
17. General Information and History.................. General Information
18. Services......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters..................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data.................. Performance Calculations
22. Payout Payments.................................. Payout Payments
23. Financial Statements............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 131
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A.
FOR SERIES 2.1 - 2.11 May 1, 1997
PROSPECTUS
Portfolio Director 2 consists of group and individual variable annuity contracts
that are offered by The Variable Annuity Life Insurance Company. Portfolio
Director 2 may be available to you when you participate in a retirement program
that qualifies for deferral of federal income taxes. Non-qualified contracts are
also available for certain employer plans only. Portfolio Director 2 is composed
of the following contract forms: UIT-194, UITG-194, UITN-194, UIT-IRA-194 and
UIT-SEP-194.
Portfolio Director 2 permits you to invest in and receive retirement benefits
from Fixed Account Options and/or Variable Account Options. Each of these
investment options is explained more fully in this prospectus. Here is a list of
these investment options:
TWO FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
EIGHTEEN VARIABLE ACCOUNT OPTIONS*
<TABLE>
<S> <C> <C>
American General Series Portfolio Neuberger&Berman Management Inc. American Century Investment
Company (AGSPC): Neuberger&Berman Guardian Trust Management, Inc.
Growth Fund Twentieth Century Ultra Fund
International Government Bond Fund Putnam Investments The Vanguard Group, Inc.
Money Market Fund Putnam Global Growth Fund Vanguard Fixed Income
Science & Technology Fund Putnam New Opportunities Fund Securities Fund --
Social Awareness Fund Putnam OTC & Emerging Growth Long-Term Corporate
Stock Index Fund Fund Portfolio
Vanguard Fixed Income
Founders Funds, Inc. Scudder, Stevens & Clark, Inc. Securities Fund --
Founders Growth Fund Scudder Growth and Income Fund Long-Term U.S.
Treasury Portfolio
Templeton Funds, Inc. Vanguard/Wellington Fund
Templeton Foreign Fund Vanguard/Windsor II
</TABLE>
* Each of these mutual funds is publicly available except for the six AGSPC
Funds.
- --------------------------------------------------------------------------------
This prospectus provides you with information you should know before investing
in Portfolio Director 2. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1997, has been filed with
the Securities and Exchange Commission. This Statement of Additional Information
contains additional information about Portfolio Director 2 and is part of this
prospectus. For a free copy, complete and return the form contained in the back
of this prospectus or call 1-800-44-VALIC.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO
WHOM SUCH OFFER WOULD BE UNLAWFUL THEREIN.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES. ALSO, IT HAS NOT PASSED ON WHETHER THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
<PAGE> 132
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS......................... 1
PROFILE OF PORTFOLIO DIRECTOR 2.............. 2
FEE TABLE.................................... 4
SELECTED PURCHASE UNIT DATA.................. 7
ABOUT PORTFOLIO DIRECTOR 2................... 9
ABOUT VALIC.................................. 9
ABOUT VALIC SEPARATE ACCOUNT A............... 9
VARIABLE ACCOUNT OPTIONS..................... 10
Summary of Funds........................ 10
PURCHASE PERIOD.............................. 20
Purchase Payments....................... 20
Purchase Units.......................... 20
Calculation of Purchase Unit Value...... 20
Choosing Investment Options............. 21
Fixed Account Options.............. 21
Variable Account Options........... 21
Stopping Purchase Payments.............. 21
TRANSFERS BETWEEN INVESTMENT OPTIONS......... 22
During the Purchase Period.............. 22
During the Payout Period................ 22
Communicating Transfer or Reallocation
Instructions.......................... 22
Effective Date of Transfer.............. 22
FEES AND CHARGES............................. 23
Account Maintenance Fee................. 23
Surrender Charges....................... 23
Amount of Surrender Charges........ 23
10% Free Withdrawal................ 23
Exceptions to Surrender
Charges.......................... 23
Premium Tax Charge...................... 24
Separate Account Charges................ 24
Fund Annual Expense Charge.............. 24
Other Tax Charges....................... 24
Reduction or Waiver of Account
Maintenance Fee or Surrender
Charges............................... 24
Separate Account Expense
Reimbursement......................... 25
PAYOUT PERIOD................................ 26
Fixed Payout............................ 26
Variable Payout......................... 26
Combination Fixed and Variable Payout... 26
Payout Date............................. 26
Payout Options.......................... 26
Enhancements to Payout Options.......... 27
Payout Information...................... 27
SURRENDER OF ACCOUNT VALUE................... 28
When Surrenders are Allowed............. 28
Amount That May Be Surrendered.......... 28
Surrender Restrictions.................. 28
Partial Surrenders...................... 28
Systematic Withdrawals.................. 28
Distributions Required By Federal Tax
Law................................... 29
EXCHANGE PRIVILEGE........................... 30
Restrictions on Exchange Privilege...... 30
Taxes and Conversion Costs.............. 30
Surrender Charges....................... 30
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director.................... 30
Exchange Offer for Portfolio Director
and Portfolio Director 2.............. 30
Comparison of Contracts................. 31
Features of Portfolio Director 2........ 31
Agents' and Managers' Retirement Plan
Exchange Offer........................ 31
DEATH BENEFITS............................... 33
Beneficiary Information................. 33
Special Information for Individual
Non-Tax Qualified Contracts........... 33
During the Purchase Period.............. 33
Interest Guaranteed Death
Benefit.......................... 33
Standard Death Benefit............. 34
During the Payout Period................ 34
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS................. 35
Types of Investment Performance
Information Advertised................ 35
Total Return Performance Information.... 35
Standard Average Annual Total Return.... 35
Nonstandard Average Annual Total
Return................................ 35
Cumulative Total Return................. 35
Annual Change in Purchase Unit Value.... 35
Cumulative Change in Purchase Unit
Value................................. 36
Total Return Based on Different
Investment Amounts.................... 36
An Assumed Account Value of $10,000..... 36
Yield Performance Information........... 36
Money Market Division................... 36
Divisions Other Than The Money Market
Division.............................. 36
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............ 36
OTHER CONTRACT FEATURES...................... 40
Changes That May Not Be Made............ 40
Change of Beneficiary................... 40
Contingent Owner........................ 40
Cancellation -- The 20 Day "Free
Look"................................. 40
We Reserve Certain Rights............... 40
Relationship to Employer's Plan......... 40
VOTING RIGHTS................................ 41
Who May Give Voting Instructions........ 41
Determination of Fund Shares
Attributable to Your Account.......... 41
During Purchase Period................ 41
During Payout Period or after a Death
Benefit Has Been Paid.............. 41
How Fund Shares Are Voted............... 41
FEDERAL TAX MATTERS.......................... 42
Type of Plans........................... 42
Tax Consequences in General............. 42
Effect of Tax-Deferred
Accumulations......................... 43
</TABLE>
(i)
<PAGE> 133
ABOUT THE PROSPECTUS
- --------------------------------------------------------------------------------
Unless otherwise specified in this prospectus, the words we, our, Company, and
VALIC mean The Variable Annuity Life Insurance Company. The words you and your,
unless otherwise specified in this prospectus, mean the participant, contract
owner, annuitant or beneficiary.
We will use a number of other specific terms in this prospectus. We will, when
that term is used in the prospectus, provide you with a definition of that term.
The terms used in this prospectus for which we will provide you a definition
are:
Account Value
Annuitant
Assumed Investment Rate
Beneficiary
Contract Owner
Division
Fixed Account Options
Home Office
Mutual Fund or Fund
Participant
Participant Year
Payout Period
Payout Unit
Purchase Payments
Purchase Period
Purchase Unit
VALIC Separate Account A
Variable Account Options
This prospectus is being given to you to help you make decisions for selecting
various investment options and benefits to plan and save for your retirement. It
is intended to provide you with information about VALIC, Portfolio Director 2,
and saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in VALIC's
Separate Account A are offered. Portfolio Director 2 will allow you to
accumulate retirement dollars in Fixed Account Options and/or Variable Account
Options. This prospectus describes only the variable aspects of Portfolio
Director 2 except where the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
Portfolio Director 2. This summary is called the "Profile of Portfolio Director
2." It is intended to provide you with a brief overview of those sections
discussed in more detail in this prospectus.
PARTICIPANT -- the individual, (in most cases you are the Participant) for whom
Purchase Payments are made.
1
<PAGE> 134
PROFILE OF PORTFOLIO DIRECTOR 2
- --------------------------------------------------------------------------------
Portfolio Director 2 is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director 2's major features is presented below. For a more detailed
discussion of Portfolio Director 2, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director 2 offers you a choice from among 18 Variable Account Options
and two Fixed Account Options. You may invest in up to seven of these investment
options at any one time.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FIXED ACCOUNT
OPTIONS
- -------------------------------------------------------------------------------------------------------------------------------
FIXED Fixed Guaranteed high current --
OPTIONS Account Plus interest income
-----------------------------------------------------------------------------------------------------------
Short-Term Guaranteed current --
Fixed Account interest income
- -------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER
- -------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Index Fund Growth through investments VALIC
EQUITY tracking the S&P 500(R)
FUNDS Index
- -------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Fund Growth through investments VALIC
MANAGED in service sector companies
-----------------------------------------------------------------------------------------------------------
EQUITY Founders Growth of capital through Founders
FUNDS Growth investment in common stock of
Fund well established, high quality companies
-----------------------------------------------------------------------------------------------------------
Neuberger&Berman Capital appreciation through Neuberger&Berman
Guardian Trust investment in common stocks of Management Inc.
long established, high quality companies
-----------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a globally Putnam
Growth Fund diversified portfolio of common stocks
-----------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam
Opportunities Fund through investment in common stock
-----------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam
Emerging Growth investments in common stocks of
Fund small-to-medium companies
-----------------------------------------------------------------------------------------------------------
Scudder Growth Long-term growth of capital, current Scudder
and Income Fund income and growth of income
-----------------------------------------------------------------------------------------------------------
Templeton Growth through investments Templeton
Foreign in companies and governments
Fund outside the U.S.
-----------------------------------------------------------------------------------------------------------
Twentieth Century Capital growth through American Century
Ultra investments in common
Fund stock
-----------------------------------------------------------------------------------------------------------
Vanguard/ Growth and income through Vanguard
Windsor II investment in common stock
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard/ Income and growth through 30 to 40% Vanguard
FUNDS Wellington investment in high quality corporate bonds
Fund and 60 to 70% investment in common stocks
- -------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Income and possible growth through VALIC
FUNDS Government investments in high quality foreign
Bond Fund government debt securities
-----------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment Vanguard
Securities in long-term quality corporate bonds
Fund-Long-Term
Corporate Portfolio
-----------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment in Vanguard
Securities long-term U.S. Treasury bonds
Fund-Long-Term
U.S. Treasury Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Growth through investments in stocks VALIC
FUNDS Technology of companies which benefit from
Fund development of science and technology
-----------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC
Awareness stocks of companies meeting social
Fund criteria of the Fund
- -------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Market Income through investments in VALIC
MARKET Fund short-term money market
FUNDS securities
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
- ------------------------------------------------------------
FIXED --
OPTIONS
------------------------------------------------------------
--
- ----------------------------------------------------------------------------------------------------
SUBADVISER
- ------------------------------------------------------------------------------------------------------------------------
INDEX Bankers Trust
EQUITY
FUNDS
- -------------------------------------------------------------------------------------------------------------------------------
ACTIVELY T. Rowe Price
MANAGED
-----------------------------------------------------------------------------------------------------------
EQUITY N/A
FUNDS
-----------------------------------------------------------------------------------------------------------
Neuberger &
Berman, LLC
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED N/A
FUNDS
- -------------------------------------------------------------------------------------------------------------------------------
INCOME N/A
FUNDS
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY T. Rowe Price
FUNDS
-----------------------------------------------------------------------------------------------------------
N/A
- -------------------------------------------------------------------------------------------------------------------------------
MONEY N/A
MARKET
FUNDS
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 135
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Fund can be found in
the section of the prospectus entitled "Variable Account Options," and also in
the current prospectus for each Fund mentioned.
INTEREST GUARANTEED DEATH
BENEFIT
Portfolio Director 2 offers a death benefit with an interest guarantee when
death occurs prior to your reaching age 70.
This contract provision is not available in some states.
LOANS
Portfolio Director 2 offers a tax-free loan provision for tax-qualified
contracts that gives you access to your money in either of the Fixed Account
Options, subject to a minimum loan amount of $1,000. The availability of loans
is subject to government regulations, as well as your employer's plan
provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans which
are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among Portfolio
Director 2's investment options. You may transfer your Account Values between
Variable Account Options at any time during the Purchase Period.
Your Account Value in the Short-Term Fixed Account must remain there for at
least 90 days before it can be transferred to other investment options. In Fixed
Account Plus, up to 20% of your Account Value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among Variable Account Options once each contract
year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Between Investment Options" section in the prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE:
If any of your account is invested in Variable Account Options, a quarterly
account maintenance fee of $3.75 is charged to your account. If you invest only
in Fixed Account Options during a calendar quarter no account maintenance fee is
assessed.
SURRENDER CHARGE:
Under some circumstances a surrender charge is made to your account. These
situations are discussed in detail in the section
of the prospectus entitled "Fees and Charges -- Surrender Charges." When this
happens the surrender charge is computed in two ways and you are charged
whichever amount is less. The first amount is simply 5% of whatever amount you
have withdrawn. The second amount is 5% of the contributions you made to your
account during the last 60 months.
Withdrawals are always subject to your plan provisions and federal tax
restrictions, which generally include a tax penalty on withdrawals made prior to
age 59 1/2.
SEPARATE ACCOUNT CHARGES:
Depending on the Variable Account Option you choose you may incur a mortality
and expense risk fee computed at an annualized rate of 1% or 1.25% on the
average daily net asset value of VALIC Separate Account A.
PREMIUM TAX CHARGE:
Premium taxes ranging from zero to 3% are currently imposed by certain states
and municipalities on Purchase Payments made under the contract.
FUND ANNUAL EXPENSE CHARGE:
A daily charge based on a percentage of each Fund's average daily net asset
value is payable by each Fund to its investment adviser.
Since some of these fees may not apply to your contract, consult your VALIC
Retirement Plan Specialist to see how these provisions apply to you.
SEPARATE ACCOUNT
EXPENSE REIMBURSEMENT
The Company will reimburse to certain Divisions any fees it receives from the
Fund or its affiliate for providing the Fund administrative and shareholder
services. For more information as to which Variable Account Options have a
Separate Account Expense Reimbursement see the Fee Table.
PAYOUT OPTIONS
When you withdraw your money, you can select from several payout options: a
lifetime annuity (which guarantees payment for as long as you live), periodic
withdrawals and systematic withdrawals. More information on payout options can
be found in the "Payout Period" section of the prospectus.
FEDERAL TAX INFORMATION
Although deferred annuity contracts such as Portfolio Director 2 can be
purchased with after-tax dollars, they are primarily used in connection with
retirement programs which receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
Purchase Payments may be made at any time and in any amount, subject to plan
limitations.
<TABLE>
<S> <C>
To learn more about the
INTEREST GUARANTEED DEATH
BENEFIT, refer to the
section in the prospectus
entitled "Death Benefits."
More information on FEES may
be found in the prospectus
under the headings "FEES AND
CHARGES" AND "FEE TABLE."
For a more detailed
discussion of these income
tax provisions, see the
"FEDERAL TAX MATTERS"
section of the prospectus
and of the Statement of
Additional Information.
For more information on
PURCHASE PAYMENTS, refer to
the "Purchase Period"
section of the prospectus.
</TABLE>
3
<PAGE> 136
FEE TABLE
------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Account Maintenance Fee ($3.75 per quarter, annualized) $ 15
Maximum Surrender Charge(2) 5.00%
</TABLE>
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
SEPARATE
MORTALITY ACCOUNT TOTAL
AND EXPENSE EXPENSE SEPARATE
FUND RISK CHARGE REIMBURSEMENT ACCOUNT FEE
---- ----------- ------------- -----------
<S> <C> <C> <C>
AGSPC Growth 1.00% -- 1.00%
AGSPC International Government
Bond 1.00% -- 1.00%
AGSPC Money Market 1.00% -- 1.00%
AGSPC Science & Technology 1.00% -- 1.00%
AGSPC Social Awareness 1.00% -- 1.00%
AGSPC Stock Index 1.00% -- 1.00%
Founders Growth(3) 1.25% (.25%) 1.00%
Neuberger&Berman Guardian Trust(3) 1.25% (.25%) 1.00%
Putnam Global Growth(3) 1.25% (.25%) 1.00%
Putnam New Opportunities(3) 1.25% (.25%) 1.00%
Putnam OTC & Emerging Growth(3) 1.25% (.25%) 1.00%
Scudder Growth and Income 1.25% -- 1.25%
Templeton Foreign(3) 1.25% (.25%) 1.00%
Twentieth Century Ultra(3) 1.25% (.20%) 1.05%
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio 1.25% -- 1.25%
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio 1.25% -- 1.25%
Vanguard/Wellington 1.25% -- 1.25%
Vanguard/Windsor II 1.25% -- 1.25%
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
Management Other Total Fund
Fund Fees Expenses(4) Expenses
---- ---------- ----------- ----------
<S> <C> <C> <C>
AGSPC Growth 0.80% 0.03% 0.83%
AGSPC International Government Bond 0.50 0.06 0.56
AGSPC Money Market 0.50 0.07 0.57
AGSPC Science & Technology 0.90 0.04 0.94
AGSPC Social Awareness 0.50 0.06 0.56
AGSPC Stock Index 0.28 0.07 0.35
Founders Growth 0.71 0.48 1.19
Neuberger&Berman Guardian Trust(5) 0.84 0.08 0.92
Putnam Global Growth 0.65 0.62 1.27
Putnam New Opportunities 0.54 0.57 1.11
Putnam OTC & Emerging Growth 0.60 0.51 1.11
Scudder Growth and Income 0.49 0.29 0.78
Templeton Foreign 0.61 0.51 1.12
Twentieth Century Ultra 1.00 0.00 1.00
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio 0.03 0.25 0.28
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio 0.01 0.24 0.25
Vanguard/Wellington 0.04 0.27 0.31
Vanguard/Windsor II 0.13 0.26 0.39
</TABLE>
See footnotes on page 6.
4
<PAGE> 137
EXAMPLE #1 -- Assuming No Account Maintenance Fee and
No Surrender at the End of the Period Shown:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a
$1,000 investment under a typical Portfolio Director 2
Contract without a surrender charge or account maintenance
fee imposed, invested in a single Separate Account Division
as listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $19 $ 58 $ 99 $215
AGSPC International Government Bond Division
13 16 49 85 186
AGSPC Money Market Division 6 16 50 86 187
AGSPC Science & Technology Division 17 20 61 105 227
AGSPC Social Awareness Division 12 16 49 85 186
AGSPC Stock Index Division 10 14 43 74 163
Founders Growth Division 30 22 69 118 253
Neuberger&Berman Guardian Trust
Division 29 20 60 104 225
Putnam Global Growth Division 28 23 71 122 261
Putnam New Opportunities Division 26 21 66 113 245
Putnam OTC & Emerging Growth Division 27 21 66 113 245
Scudder Growth and Income Division 21 21 64 109 236
Templeton Foreign Division 32 22 66 114 246
Twentieth Century Ultra Division 31 21 64 110 238
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio Division 22 16 48 84 183
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio Division
23 15 47 82 180
Vanguard/Wellington Division 25 16 49 85 186
Vanguard/Windsor II Division 24 17 52 89 195
</TABLE>
EXAMPLE #2 -- Assuming No Surrender at the End of the
Period Shown:
- ------------------------------------------------------------
Total Expenses. You would pay the following expenses on a
$1,000 investment under a typical Portfolio Director 2
Contract without a surrender charge imposed, invested in a
single Separate Account Division as listed below, assuming a
5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $19 $ 60 $103 $223
AGSPC International Government Bond Division
13 17 51 89 194
AGSPC Money Market Division 6 17 52 89 195
AGSPC Science & Technology Division 17 20 63 108 234
AGSPC Social Awareness Division 12 17 51 89 194
AGSPC Stock Index Division 10 14 45 78 171
Founders Growth Division 30 23 71 121 260
Neuberger&Berman Guardian Trust
Division 29 20 63 107 232
Putnam Global Growth Division 28 24 73 125 268
Putnam New Opportunities Division 26 22 68 117 252
Putnam OTC & Emerging Growth Division 27 22 68 117 252
Scudder Growth and Income Division 21 21 66 113 244
Templeton Foreign Division 32 22 69 118 253
Twentieth Century Ultra Division 31 22 66 114 246
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio Division 22 16 51 87 191
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio Division
23 16 50 86 187
Vanguard/Wellington Division 25 17 51 89 194
Vanguard/Windsor II Division 24 17 54 93 203
</TABLE>
5
<PAGE> 138
EXAMPLE #3 -- Assuming Surrender at the End of the Period
Shown:
------------------------------------------------------------
Total Expenses: You would pay the following expenses on a
$1,000 investment under a typical Portfolio Director 2
Contract invested in a single Separate Account Division as
listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $66 $109 $153 $223
AGSPC International Government Bond Division
13 63 101 139 194
AGSPC Money Market Division 6 63 102 139 195
AGSPC Science & Technology Division 17 67 112 158 234
AGSPC Social Awareness Division 12 63 101 139 194
AGSPC Stock Index Division 10 61 95 128 171
Founders Growth Division 30 69 120 171 260
Neuberger&Berman Guardian Trust
Division 29 67 112 157 232
Putnam Global Growth Division 28 70 122 175 268
Putnam New Opportunities Division 26 68 117 167 252
Putnam OTC & Emerging Growth Division 27 68 117 167 252
Scudder Growth and Income Division 21 68 115 163 244
Templeton Foreign Division 32 68 118 168 253
Twentieth Century Ultra Division 31 68 115 164 246
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio Division 22 63 100 137 191
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio Division
23 63 99 136 187
Vanguard/Wellington Division 25 63 101 139 194
Vanguard/Windsor II Division 24 64 104 143 203
</TABLE>
--------------------------------
(1) Premium taxes are not shown here, but may be charged by
some states. See: "Premium Tax Charge" in this
prospectus.
(2) Reductions in the surrender charge and the account
maintenance fee are available if certain conditions are
met. See "Reduction or Waiver of Account Maintenance Fee
or Surrender Charges" and "Exceptions to Surrender
Charges" in this prospectus.
(3) For these Funds the Total Separate Account Fee equals
the VALIC Separate Account A mortality and expense risk
charge reduced by the Separate Account Expense
Reimbursement. Pursuant to the Separate Account Expense
Reimbursement the Company's charges to these Divisions
are reduced by an amount equal to payments from the
underlying Fund or its affiliate for administrative and
shareholder services provided by the Company. See "Fees
and Charges -- Separate Account Expense Reimbursement"
in this prospectus for more information.
The following Funds or their affiliates pay
administrative, shareholder service or distribution fees
to the Company: Founders (0.25%), Neuberger & Berman
(0.25%), Putnam (0.25%), Templeton (0.25%) and Twentieth
Century (0.20%).
(4) OTHER EXPENSES includes custody, accounting, reports to
shareholders, audit, legal and other miscellaneous
expenses. Additionally for the Founders, Putnam and
Templeton Funds, this includes distribution fees at the
rate of .25%. See each Fund's prospectus for a detailed
explanation of these fees.
(5) The Trust started operating on August 3, 1993. It has
identical investment objectives and policies to, and as
part of a "master/feeder structure" invests in, the same
portfolio as Neuberger&Berman Guardian Fund ("Fund"),
which is also managed by Neuberger&Berman Management
Incorporated ("N&B"). N&B voluntarily bears certain
expenses of Neuberger&Berman Guardian Trust ("Trust") so
that the Trust's expense ratio per annum will not exceed
the expense ratio per annum of the Fund by more than
0.10% of the Trust's average daily net assets. This
arrangement can be terminated on sixty days' notice. The
reimbursement reflected in this Fee Table is based upon
N&B's estimate. Absent the reimbursement, Other Expenses
are estimated to be 0.10% and Total Fund Expenses to be
0.96% of average daily net assets.
Note: These examples should not be considered
representations of past or future expenses for VALIC
Separate Account A or for any Fund. Actual expenses may be
greater or less than those shown above. Similarly, the 5%
annual rate of return assumed in the examples is not an
estimate or guarantee of future investment performance. The
purpose of the Fee Table above is to help Contract Owners
and Participants understand the various expenses of VALIC
Separate Account A and the Funds which are, in effect,
passed on to the Contract Owners and Participants.
This Fee Table shows all charges and expenses which may be
deducted from the assets of VALIC Separate Account A and
from the Funds in which VALIC Separate Account A invests.
For a further description of these charges and expenses, see
"Fees and Charges" in this prospectus and the descriptions
of fees and charges in each of the Fund's prospectuses. Any
and all limitations on total charges and expenses are
reflected in this Fee Table.
6
<PAGE> 139
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL AGSPC AGSPC AGSPC
AGSPC GOVERNMENT MONEY SCIENCE & SOCIAL AGSPC FOUNDERS
GROWTH BOND MARKET TECHNOLOGY AWARENESS STOCK INDEX GROWTH
DIVISION 15 DIVISION 13 DIVISION 6 DIVISION 17 DIVISION 12 DIVISION 10(1) DIVISION 30
----------- ----------- ---------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996
Purchase Units in Force 366,272,509 112,601,593 75,124,095 315,809,646 46,574,016 536,806,965 31,197,464
Purchase Unit Value $ 1.733324 $ 1.582230 $ 1.607212 $ 2.250471 $2.252673 $2.848437 $1.029522
July 1, 1996
Initial Offering Value $1.000000
December 31, 1995
Purchase Units in Force 164,417,848 73,369,250 51,907,757 187,862,232 32,750,120 455,255,243
Purchase Unit Value $1.466652 $1.530780 $1.545802 $1.997175 $1.835102 $2.343900
December 31, 1994
Purchase Units in Force 32,633,370 25,691,713 75,765,781 42,726,137 29,015,764 416,234,288
Purchase Unit Value $1.001834 $1.301357 $1.479129 $1.247713 $1.333899 $1.724134
July 11, 1994
Purchase Unit Value(2) -- -- -- -- -- --
April 29, 1994
Purchase Unit Value(2) $1.000000 -- -- $1.000000 -- --
December 31, 1993
Purchase Units in Force -- 18,155,381 24,799,810 -- 26,230,566 369,550,060
Purchase Unit Value -- $1.258340 $1.439327 -- $1.366979 $1.729327
December 31, 1992
Purchase Units in Force -- 6,245,713 23,414,474 -- 16,956,437 283,808,045
Purchase Unit Value -- $1.112826 $1.415690 -- $1.279516 $1.589718
May 1, 1992
Purchase Unit Value(2) -- -- -- -- -- --
December 31, 1991
Purchase Units in Force -- 953,038 25,545,494 -- 8,447,711 90,526,907
Purchase Unit Value -- $1.090499 $1.384882 -- $1.250634 $1.505641
October 1, 1991
Purchase Unit Value(2) -- $1.000000 -- -- -- --
December 31, 1990
Purchase Units in Force -- -- 25,246,481 -- 2,947,418 46,016,297
Purchase Unit Value -- -- $1.325393 -- $0.987666 $1.179000
December 31, 1989
Purchase Units in Force -- -- 15,949,534 -- 212,636 22,325,990
Purchase Unit Value -- -- $1.240599 -- $1.010003 $1.238782
October 2, 1989
Purchase Unit Value(2) -- -- -- -- $1.000000 --
December 31, 1988
Purchase Units in Force -- -- 9,429,191 -- -- 9,213,178
Purchase Unit Value -- -- $1.149516 -- -- $0.968670
December 31, 1987
Purchase Units in Force -- -- 4,121,853 -- -- 4,326,102
Purchase Unit Value -- -- $1.087299 -- -- $0.856238
April 20, 1987
Purchase Unit Value(2) -- -- -- -- -- $1.000000
December 31, 1986
Purchase Units in Force -- -- 914,106 -- -- --
Purchase Unit Value -- -- $1.040484 -- -- --
<CAPTION>
NEUBERGER&
BERMAN
GUARDIAN TRUST
DIVISION 29
--------------
<S> <C>
December 31, 1996
Purchase Units in Force 8,211,592
Purchase Unit Value $1.120770
July 1, 1996
Initial Offering Value $1.000000
December 31, 1995
Purchase Units in Force
Purchase Unit Value
December 31, 1994
Purchase Units in Force
Purchase Unit Value
July 11, 1994
Purchase Unit Value(2)
April 29, 1994
Purchase Unit Value(2)
December 31, 1993
Purchase Units in Force
Purchase Unit Value
December 31, 1992
Purchase Units in Force
Purchase Unit Value
May 1, 1992
Purchase Unit Value(2)
December 31, 1991
Purchase Units in Force
Purchase Unit Value
October 1, 1991
Purchase Unit Value(2)
December 31, 1990
Purchase Units in Force
Purchase Unit Value
December 31, 1989
Purchase Units in Force
Purchase Unit Value
October 2, 1989
Purchase Unit Value(2)
December 31, 1988
Purchase Units in Force
Purchase Unit Value
December 31, 1987
Purchase Units in Force
Purchase Unit Value
April 20, 1987
Purchase Unit Value(2)
December 31, 1986
Purchase Units in Force
Purchase Unit Value
</TABLE>
- ------------
(1) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(2) Purchase Unit Value At Date Of Inception.
7
<PAGE> 140
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VANGUARD VANGUARD
FIXED INCOME FIXED INCOME
SECURITIES FUND- SECURITIES FUND-
PUTNAM OTC SCUDDER LONG-TERM LONG-TERM
PUTNAM GLOBAL PUTNAM NEW & EMERGING GROWTH AND TEMPLETON TWENTIETH CORPORATE U.S. TREASURY
GROWTH OPPORTUNITIES GROWTH INCOME FOREIGN CENTURY ULTRA PORTFOLIO PORTFOLIO
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 32 DIVISION 31 DIVISION 22 DIVISION 23
- ------------- ------------- ----------- ----------- ----------- ------------- ---------------- ----------------
<C> <C> <C> <C> <C> <C> <C> <C>
16,648,600 53,001,699 48,902,828 16,524,046 36,671,828 16,654,076 3,370,441 4,174,369
$ 1.057690 $ 0.947573 $ 0.894978 $ 1.114950 $ 1.075896 $ 1.039845 $ 1.047595 $ 1.048470
$ 1.000000 $ 1.000000 $ 1.000000 $ 1.000000 $ 1.000000 $ 1.000000 $ 1.000000 $ 1.000000
<CAPTION>
PUTNAM GLOBAL VANGUARD/ VANGUARD/
GROWTH WELLINGTON WINDSOR II
DIVISION 28 DIVISION 25 DIVISION 24
- ------------- ----------- -----------
<C> <C> <C>
16,648,600 22,866,634 37,292,761
$ 1.057690 $ 1.101584 $ 1.120855
$ 1.000000 $ 1.000000 $ 1.000000
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
Contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
8
<PAGE> 141
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR 2
Portfolio Director 2 was developed to help you save money for your retirement.
It offers you a combination of fixed and variable investment options that you
can invest in to help you reach your retirement savings goals. Your
contributions to Portfolio Director 2 can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director 2 will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
2 called "Purchase Payments." The second, is when you receive your retirement
payouts. For more information, see "Purchase Period" and the "Payout Period" in
this prospectus.
You may choose, depending upon your retirement savings goals, your personal risk
tolerances, and your retirement plan, to invest in the Fixed Account Options
and/or the Variable Account Options described in this prospectus. When you
decide to retire, or otherwise withdraw your money, you can select from a wide
array of payout options including both fixed and variable payments. In addition,
this prospectus will describe for you all fees and charges that may apply to
your participation in Portfolio Director 2.
ABOUT VALIC
We are a life insurance company organized in 1955 and located in the State of
Texas. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director 2. Our principal offices are located
at 2929 Allen Parkway, Houston, Texas 77019. We have Regional Offices throughout
the United States. The addresses for these offices are given in the back of this
prospectus.
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, the District of Columbia, and Canada and collectively provide
financial services with activities heavily weighted toward insurance.
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director 2's Variable Account Options, you
will be sending that money through VALIC's Separate Account A. You do not invest
directly in the Mutual Funds made available in Portfolio Director 2. VALIC's
Separate Account A invests in the Mutual Funds on behalf of your account.
VALIC Separate Account A is made up of what we call "Divisions." Eighteen
Divisions are available and represent the Variable Account Options in Portfolio
Director 2. Each of these Divisions invests in a different Mutual Fund made
available through Portfolio Director 2. For example, Division Ten represents and
invests in the Stock Index Fund. The earnings (or losses) of each Division are
credited to (or charged against) the assets of that Division, and do not affect
the performance of the other Divisions of VALIC Separate Account A.
VALIC established Separate Account A in 1979 under Texas insurance law to allow
you to be able to invest in a number of Variable Account Options available in
Portfolio Director 2. VALIC Separate Account A is registered with the Securities
and Exchange Commission (SEC) as a unit investment trust under the Investment
Company Act of 1940. Units of interest in VALIC Separate Account A are
registered as securities under the Securities Act of 1933.
VALIC Separate Account A is administered and accounted for as part of VALIC's
business operations. However, the income, capital gains or capital losses,
whether or not realized of each Division of VALIC Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of Portfolio Director 2, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director 2, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director 2 be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director 2. When we discuss performance information in this prospectus, we mean
the performance of a VALIC Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of VALIC Separate Account A is represented by
units of interest issued by VALIC Separate Account A. On a daily basis, the
units of interest issued by VALIC Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable fees
and charges to VALIC Separate Account A.
<TABLE>
<S> <C>
All inquiries regarding
PORTFOLIO DIRECTOR 2
may be directed to your
VALIC Regional Office at
the addresses shown in the
back of this prospectus.
MUTUAL FUND OR FUND --
the investment portfolio(s)
of a registered open-end
management investment
company, which serves as
the underlying investment
vehicle for each Division
represented in VALIC
Separate Account A.
For more information about
VALIC, see the Statement of
Additional Information
</TABLE>
9
<PAGE> 142
VARIABLE ACCOUNT OPTIONS
------------------------------------------------------------
Portfolio Director 2 enables you to participate in Divisions that represent
eighteen Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available to you through VALIC Separate Account A.
See "About VALIC Separate Account A" in this prospectus.
Each individual Division represents and invests, through VALIC's Separate
Account A, in specific mutual funds. Twelve of the Mutual Funds are also
available to the general public. These mutual funds serve as the investment
vehicles for Portfolio Director 2 and include:
- - American General Series Portfolio
Company (AGSPC) -- offers 6 funds, for which VALIC serves as investment
adviser.
- - Founders Funds, Inc. -- offers 1 fund for which Founders Asset Management,
Inc. serves as investment adviser.
- - Neuberger&Berman Management Inc. -- offers 1 fund for which Neuberger & Berman
Management Inc. serves as investment manager and Neuberger & Berman LLC.,
serves as sub-adviser.
- - Putnam Investments -- offers 3 funds for which Putnam Investment Management
Inc., serves as investment adviser.
- - Scudder, Stevens & Clark, Inc. -- offers 1 fund for which Scudder, Stevens &
Clark Inc. serves as investment adviser.
- - Templeton Funds Inc. -- offers 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - American Century Investments -- offers 1 fund for which American Century
Investment Management, Inc. serves as investment adviser.
- - The Vanguard Group Inc. -- offers 4 funds for which Barrow, Hanley, Mewhinney
& Strauss Inc., Equinox Capital Management Inc., Tukmann Capital Management
Inc., Vanguard Group Inc., Wellington Management Company and Vanguard Group
Inc., Fixed Income Management Division serve as investment advisers
Each of these Funds (except for AGSPC's International Government Bond Fund which
is a non-diversified Fund) is registered as a diversified open-end, management
investment company and is regulated under the Investment Company Act of 1940.
For complete information about each of these Funds, including charges and
expenses, you should refer to the prospectus for that Fund. Additional copies
are available from VALIC or you may contact your VALIC Regional Office at the
addresses shown in the back of this prospectus.
SUMMARY OF FUNDS
A brief summary of the investment objectives of each Mutual Fund is shown below.
In addition to the investment objectives, the change in an Account Value of an
assumed $10,000 investment in each of the Divisions is shown in both table and
graph form. This will reflect a deduction for separate account fees (mortality
and expense risk charges minus any applicable reimbursements) and underlying
fund charges. This will not reflect any deduction for account maintenance fees,
surrender charges and premium taxes. These charges would further reduce your
return. The Account Values shown are since the inception of the Division or the
last 10 fiscal years (except for the Putnam New Opportunities Division which
shows the Account Value since the inception date of the underlying Fund). For
more information about how these returns were calculated including a statement
of the charges reflected and tables showing historical performance information
see "How to Review Investment Performance of Separate Account Divisions" in this
prospectus.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond
to Separate Account
Divisions offered by
Portfolio Director 2.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
10
<PAGE> 143
AGSPC
GROWTH FUND
(Division 15)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital through investment primarily in
common stocks of U.S. growth companies engaged in service-related activities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 29,1994 $ Value
- ---------------------------- -------
<C> <C>
04/29/94 $10,000
12/31/94 10,018
12/31/95 14,667
12/31/96 17,333
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[Chart]
AGSPC
INTERNATIONAL GOVERNMENT
BOND FUND
(Division 13)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high current income through investments primarily in high quality debt
securities issued or guaranteed by foreign governments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<C> <C>
10/01/91 $10,000
12/31/91 10,905
12/31/92 11,128
12/31/93 12,583
12/31/94 13,014
12/31/95 15,308
12/31/96 15,822
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
11
<PAGE> 144
AGSPC
MONEY MARKET FUND
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,450
12/31/88 11,048
12/31/89 11,923
12/31/90 12,738
12/31/91 13,310
12/31/92 13,606
12/31/93 13,833
12/31/94 14,216
12/31/95 14,857
12/31/96 15,447
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
AGSPC
SCIENCE & TECHNOLOGY FUND
(Division 17)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through investment primarily in the common
stocks and equity-related securities of companies that are expected to benefit
from the development, advancement and use of science and technology.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 29, 1994 $ Value
- ------------------------- -------
<C> <C>
04/29/94 $10,000
12/31/94 12,477
12/31/95 19,972
12/31/96 22,505
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
12
<PAGE> 145
AGSPC
SOCIAL AWARENESS FUND
(Division 12)
- ---------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 2, 1989 $ Value
- ------------------------- -------
<C> <C>
10/02/89 $10,000
12/31/89 10,100
12/31/90 9,877
12/31/91 12,506
12/31/92 12,795
12/31/93 13,670
12/31/94 13,339
12/31/95 18,351
12/31/96 22,527
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
AGSPC
STOCK INDEX FUND
(Division 10)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth through investment in common stocks that, as a
group, are expected to provide investment results closely corresponding to the
performance of the Standard & Poor's 500 Stock Index(R)*.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 20, 1987 $ Value
- ------------------------- -------
<C> <C>
04/20/87 $10,000
12/31/87 8,562
12/31/88 9,687
12/31/89 12,388
12/31/90 11,790
12/31/91 15,056
12/31/92 15,897
12/31/93 17,293
12/31/94 17,241
12/31/95 23,439
12/31/96 28,484
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 20, 1987
[Chart]
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in this Fund.
13
<PAGE> 146
FOUNDERS GROWTH FUND
(Division 30)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital. Fund invests primarily in common stocks of
well established, high-quality growth companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,906
12/31/88 11,318
12/31/89 15,884
12/31/90 14,061
12/31/91 20,522
12/31/92 21,181
12/31/93 26,329
12/31/94 25,199
12/31/95 36,329
12/31/96 41,906
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
NEUBERGER&BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in a large number of common stocks of long-established, high quality
companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,802
12/31/88 12,428
12/31/89 14,953
12/31/90 14,108
12/31/91 18,767
12/31/92 22,113
12/31/93 24,857
12/31/94 24,987
12/31/95 32,656
12/31/96 38,057
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
* The Trust started operating on August 3, 1993. It has identical investment
objectives and policies to, and as part of a "master/feeder structure"
invests, in the same portfolio as Neuberger&Berman Guardian Fund ("Fund"),
which is also managed by Neuberger& Berman Management Incorporated ("N&B
Management"). N&B Management voluntarily bears certain expenses of the Trust
so that the Trust's expense ratio per annum will not exceed the expense ratio
per annum of the Fund by more than 0.10% of the Trust's average daily net
assets. This arrangement can be terminated on sixty days' notice. The
performance information for the Trust before August 3, 1993 is for the Fund
and its predecessor, which had an inception date of June 1, 1950. For more
information about the Trust's "master/feeder structure" see the Trust's
prospectus.
14
<PAGE> 147
PUTNAM GLOBAL GROWTH
FUND
Class A Shares
(Division 28)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation. Current income is only an incidental consideration
in selecting investments for the Fund. The Fund is designed for investors
seeking above-average capital growth potential through a globally diversified
portfolio of common stocks. Dividend and interest income is only an incidental
consideration.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,620
12/31/88 11,466
12/31/89 14,141
12/31/90 12,714
12/31/91 14,852
12/31/92 14,740
12/31/93 19,243
12/31/94 18,892
12/31/95 21,477
12/31/96 24,777
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
PUTNAM NEW OPPORTUNITIES
FUND
Class A Shares
(Division 26)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital appreciation. Current income is only an incidental
consideration. The Fund invests principally in common stocks of companies in
sectors of the economy which the Fund's investment adviser believes possess
above-average long-term growth potential.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1990 $ Value
- ------------------------- -------
<C> <C>
08/31/90 $10,000
12/31/90 11,041
12/31/91 18,317
12/31/92 22,780
12/31/93 29,932
12/31/94 30,620
12/31/95 44,354
12/31/96 48,656
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
15
<PAGE> 148
PUTNAM OTC & EMERGING
GROWTH FUND
Class A Shares
(Division 27)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation. The Fund invests primarily in common stocks traded
in the over-the-counter ("OTC") market and common stocks, of "emerging growth"
companies listed on securities exchanges. The Fund is designed for investors
willing to assume above-average risk in return for above average capital growth
potential. The Fund may trade securities for short-term profits.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,371
12/31/88 11,932
12/31/89 15,237
12/31/90 13,604
12/31/91 18,971
12/31/92 21,167
12/31/93 27,678
12/31/94 28,020
12/31/95 43,269
12/31/96 44,794
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
SCUDDER GROWTH AND
INCOME FUND
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,222
12/31/88 11,309
12/31/89 14,114
12/31/90 13,616
12/31/91 17,236
12/31/92 18,649
12/31/93 21,292
12/31/94 21,576
12/31/95 27,955
12/31/96 33,721
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
16
<PAGE> 149
TEMPLETON FOREIGN FUND
Class I Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth through a flexible policy of investing in stocks
and debt obligations of companies and governments outside the United States. Any
income realized will be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 12,350
12/31/88 14,922
12/31/89 19,286
12/31/90 18,523
12/31/91 21,692
12/31/92 21,498
12/31/93 29,123
12/31/94 28,939
12/31/95 31,853
12/31/96 37,186
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[Chart]
TWENTIETH CENTURY ULTRA
FUND
(Division 31)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth. The Fund invests primarily in common stocks that are
considered to have better-than-average prospects for appreciation.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,557
12/31/88 11,836
12/31/89 16,038
12/31/90 17,356
12/31/91 32,019
12/31/92 32,084
12/31/93 38,674
12/31/94 36,885
12/31/95 50,249
12/31/96 56,496
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
17
<PAGE> 150
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
CORPORATE PORTFOLIO
(Division 22)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high level of current income consistent with the maintenance of principal
and liquidity. The Portfolio invests in a diversified portfolio of investment
grade corporate and government bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,896
12/31/88 10,722
12/31/89 12,197
12/31/90 12,795
12/31/91 15,279
12/31/92 16,566
12/31/93 18,734
12/31/94 17,523
12/31/95 21,877
12/31/96 21,718
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
U.S. TREASURY PORTFOLIO
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high level of current income consistent with the maintenance of principal
and liquidity. The Portfolio invests at least 85% of its assets in long-term
securities backed by the full faith and credit of the U.S. Government. Also, at
least 65% of the Fund assets will be invested in U.S. Treasury bills, notes and
bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,588
12/31/88 10,336
12/31/89 12,040
12/31/90 12,579
12/31/91 14,590
12/31/92 15,478
12/31/93 17,853
12/31/94 16,392
12/31/95 21,065
12/31/96 20,417
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
18
<PAGE> 151
VANGUARD/WELLINGTON FUND
(Division 25)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks conservation of principal, a reasonable income return, and profits without
undue risk.
This Fund seeks relative capital stability, a reasonable level of income, and
the potential for capital appreciation. By balancing its investments among
common stocks and bonds, the Fund is expected to provide lower investment risk
and share price volatility (and a lower return in the long run) than a mutual
fund which invests exclusively in common stocks.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 10,101
12/31/88 11,583
12/31/89 13,913
12/31/90 13,356
12/31/91 16,311
12/31/92 17,385
12/31/93 19,493
12/31/94 19,159
12/31/95 25,154
12/31/96 28,849
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
VANGUARD/WINDSOR II
(Division 24)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital and income by investing primarily
in common stocks. The Fund's secondary objective is to provide current income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1987 $ Value
- ------------------------- -------
<C> <C>
01/01/87 $10,000
12/31/87 9,665
12/31/88 11,906
12/31/89 15,032
12/31/90 13,364
12/31/91 16,988
12/31/92 18,790
12/31/93 21,083
12/31/94 20,580
12/31/95 28,221
12/31/96 34,589
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1987
[CHART]
19
<PAGE> 152
PURCHASE PERIOD
------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director 2 account is surrendered before the Payout Period. The
amount, number, and frequency of your Purchase Payments is determined by the
retirement plan for which Portfolio Director 2 was purchased.
PURCHASE PAYMENTS
You may establish an account only through a VALIC representative. Initial
Purchase Payments must be received by VALIC either with, or after, a completed
application. Your employer is usually responsible for remitting Purchase
Payments to us. The employer is responsible for furnishing instructions to us (a
premium flow report) as to the amount being applied to your account.
Minimum initial and subsequent Purchase Payments are as follows:
- --------------------------------------------------
<TABLE>
<CAPTION>
Initial Subsequent
Contract Type Payment Payment
------------- ------- ----------
<S> <C> <C>
Periodic Payment $ 30 $ 30
Single Payment $1,000 -0-
</TABLE>
Periodic Payment minimums apply to each Fixed Account Option or Variable Account
Option selected. The Single Payment minimum applies to each of your accounts.
Purchase Payments are received in VALIC's Home Office. When an initial Purchase
Payment accompanies an application, within 2 business days we will:
- - Accept the Application -- and issue a contract. We will also establish your
account and apply your Purchase Payment by crediting the amount to the Fixed
Account Option or Variable Account Option selected;
- - Reject the Application -- and return the Purchase Payment; or
- - Request Additional Information -- to correct or complete the application.
If we receive Purchase Payments from your employer before we receive your
completed application or enrollment form, we will not be able to open an account
for you. Under these circumstances, we will take one of the following actions:
Return Purchase Payments. If we do not have your name, address or social
security number, we will return the Purchase Payment to your employer unless
this information is immediately provided to us.
Employer-Directed Account. If we have your name, address and social security
number and we have an Employer-Directed Account Agreement from your employer,
generally we will deposit your Purchase Payment
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director 2.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
in an "Employer-Directed" account invested in our Money Market Division
Option. You may not transfer these amounts until VALIC has received a
completed application or enrollment form.
Starter Account. If we have your name, address and social security number, but
we do not have an Employer-Directed Account Agreement from your employer, we
will deposit your Purchase Payment in a "starter" account invested in the
Money Market Division. We will send you follow-up letters requesting the
information necessary to complete the application, including your allocation
instructions. Unless a completed application or enrollment form is received by
us within 105 days of establishment of your starter account, the account
balance, including earnings, will be returned to your employer. We are not
responsible for any adverse tax consequences to you that may result from the
return of your employer's contributions.
PURCHASE UNITS
A Purchase Unit is a unit of interest owned by you in your Variable Account
Option. Purchase Units apply only to the Variable Account Options selected for
your account. Purchase Unit values are calculated at the close of regular
trading of the New York Stock Exchange (the "Exchange"), currently 4:00 p.m. New
York time (see Calculation of Purchase Unit Value below for more information.)
Purchase Units will be credited the same business day if Purchase Payments are
received by our Home Office before the close of the Exchange. If not, they will
be calculated and credited the next business day. Purchase Unit values will vary
depending on the net investment results of each of the Variable Account Options.
This means the value of your Variable Account Option will fluctuate.
CALCULATION OF PURCHASE UNIT VALUE
The Purchase Unit value for a Division is calculated as shown below:
- --------------------------------------------------
Step 1: Calculate the gross investment rate:
Gross Investment Rate
= (EQUALS)
The Division's investment income
and capital gains and losses
(whether realized or unrealized) on
that day from the assets
attributable to the Division.
/ (DIVIDED BY)
The value of the Division for
the immediately preceding day on
which the values are calculated.
20
<PAGE> 153
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the New York Stock Exchange is open.
- --------------------------------------------------
Step 2: Calculate net investment rate for any day as follows:
Net Investment Rate
= (EQUALS)
Gross Investment Rate
(calculated in Step 1)
- - (MINUS)
Separate Account charges and any
income tax charges.
Step 3: Determine Purchase Unit Value for that day.
Purchase Unit Value for that day.
= (EQUALS)
Purchase Unit Value for immediate
preceding day.
X (MULTIPLIED BY)
Net Investment Rate (as calculated
in Step 2) plus 1.00.
CHOOSING INVESTMENT OPTIONS
There are 20 investment options offered in Portfolio Director 2. This includes 2
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 20 options. The Funds that underlie the
Variable Account Options are registered as investment companies under and are
subject to regulation of the Investment Company Act of 1940 (the Act). The Fixed
Account Options are not subject to regulation under the Act and are not required
to be registered under the Securities Act of 1933. As a result, the SEC has not
reviewed data in this prospectus that relates to the Fixed Account Options.
However, federal securities law does require such data to be accurate and
complete.
FIXED ACCOUNT OPTIONS
Each of the Fixed Account Options are part of the Company's general assets. You
may allocate all or a portion of your Purchase Payment to the Fixed Account
Options listed in "Profile of Portfolio Director 2 Contract" appearing in this
prospectus. Purchase Payments you allocate to these Fixed Account Options are
guaranteed to earn at least a minimum rate of interest. Interest is paid on each
of the Fixed Account Options at declared rates, which may be different for each
option. We bear the entire investment risk for the Fixed Account Option. All
Purchase Payments and interest earned on such amounts in your Fixed Account
Option will be paid regardless of the investment results experienced by the
Company's general assets.
- --------------------------------------------------
Here is how you may calculate the value of your Fixed Account Option during the
Purchase Period:
Value of Your Fixed
Account Options
= (EQUALS)
All Purchase Payments made to the
Fixed Account Options
+ (PLUS)
Amounts transferred from Variable
Account Options to the Fixed
Account Options
+ (PLUS)
All interest earned
- - (MINUS)
Amounts transferred or withdrawn
from Fixed Account Options
(including applicable fees and charges)
VARIABLE ACCOUNT OPTIONS
You may allocate all or a portion of your Purchase Payments to the Variable
Account Options listed in this prospectus. A complete discussion of each of the
Variable Account Options may be found in the "Variable Account Options" section
in this prospectus. Based upon a Variable Account Option's Purchase Unit Value
your account will be credited with the applicable number of Purchase Units. The
Purchase Unit Value of each Variable Account Option will change daily depending
upon the investment performance of the underlying fund (which may be positive or
negative) and the deduction of VALIC Separate Account A charges. See the "Fees
and Charges" section in this prospectus. Because Purchase Unit Values change
daily, the number of Purchase Units your account will be credited with for
subsequent Purchase Payments will vary. Each Variable Account Option bears its
own investment risk. Therefore, the value of your account may be worth more or
less at retirement or withdrawal.
- --------------------------------------------------
Here is how to calculate the value of each Variable Account Option in your
account during the Purchase Period:
Value of Your Variable Account Option
= (EQUALS)
Total Number of Purchase Units
X (MULTIPLIED BY)
Current Purchase Unit Value
STOPPING PURCHASE PAYMENTS
Purchase Payments may be stopped at any time. Purchase Payments may be resumed
at any time before your Portfolio Director 2 account has been surrendered. While
no Purchase Payments are being made, the number of Purchase Units outstanding
will remain the same. (This is assuming no transfers or withdrawals are made.)
The value of the Purchase Units will continue to vary. Your Account Value will
continue to be subject to charges.
If your Account Value falls below $300, and you do not make any Purchase
Payments for two years from the date we established your account, we may close
the account and pay the Account Value (less any surrender charge) to you.
<TABLE>
<S> <C>
PURCHASE UNIT -- a
measuring unit used to
calculate your Account Value
during the Purchase Period.
The value of a Purchase Unit
will vary with the
investment
experience of the Separate
Account Division you have
selected.
</TABLE>
21
<PAGE> 154
TRANSFERS BETWEEN INVESTMENT OPTIONS
------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director 2 without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director 2's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
- ---------------------------------------------------
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer was
previously made
into
Short-Term Fixed
Account.(2)
</TABLE>
- ---------------
(1) Your employer may further limit or expand the restrictions. We may charge
for those modified restrictions if specified in your employer's retirement
plan.
(2) VALIC may change this holding period at any time in the future, but it will
never be more than 180 days.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between Portfolio Director 2's
investment options subject to the following limitations:
- ---------------------------------------------------
<TABLE>
<CAPTION>
% OF ACCOUNT
-------------------------------- OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
-------------- ----------- ------------------- ------------
<S> <C> <C> <C>
Variable: Up to 100% Once every 365 days None
Combination
Fixed
and Variable Up to 100% Once every 365 days None
Payout: of money in
variable
option
payout
Fixed: Not -- --
permitted
</TABLE>
ACCOUNT VALUE -- the total
sum of your Fixed Account
and/or Variable Account
Options that have not yet
been applied to your Payout
Payments.
PURCHASE PERIOD -- the time
between your first Purchase
Payment and your Payout
Period (or surrender).
HOME OFFICE -- Our
principal office at 2929 Allen
Parkway, Houston, Texas
77019.
PAYOUT PERIOD -- the time
that starts when you begin to
withdraw your money in a
steady stream of payments.
COMMUNICATING TRANSFER OR
REALLOCATION INSTRUCTIONS
A written instruction to transfer or reallocate all or part of your Account
Value between the various investment options in Portfolio Director, should be
sent to VALIC's Home Office.
Instructions for transfers or reallocations may be made by calling
1-800-621-7792. Telephone transfers will be allowed unless we have been notified
not to accept such telephone instructions. In this event, we must receive
written instructions, in order to permit future telephone transfers to be made.
Before a transfer will be made by telephone, you must give us the requested
identifying information concerning your account(s).
Unless we have been instructed not to accept requests for telephone transfers,
anyone may effect a telephone transfer if they furnish the requested
information. You will bear any loss resulting from such instructions, whether
the caller was specifically authorized by you or not.
No one that we employ or that represents VALIC may give telephone instructions
on your behalf without VALIC's prior written permission. (This does not apply to
a contract with the immediate family of an employee or representative of VALIC).
We will send you a confirmation of the completed transfer within 5 days from the
date of your instruction. When you receive your confirmation, it is your duty to
verify the information shown, and advise us of any errors within one business
day.
You will bear the risk of loss arising from instructions received by telephone.
We are not responsible for the authenticity of such instructions. Any telephone
instructions which we reasonably believe to be genuine will be your
responsibility. This includes losses from errors in communication. Telephone
transfer instruction may not be made during the Payout Period. We reserve the
right to stop telephone transfers at any time.
EFFECTIVE DATE OF TRANSFER
The effective date of a transfer will be:
- - The date of receipt, if received in our Home Office before the close of
regular trading of the New York Stock Exchange on a day values are calculated;
(Normally, this will be 4:00 P.M. New York time); otherwise
- - The next date values are calculated.
22
<PAGE> 155
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director 2, you may be subject to six basic types of
fees and charges:
- - Account Maintenance Fee
- - Surrender Charges
- - Premium Tax Charge
- - Separate Account Charges
- - Fund Annual Expense Charge
- - Other Tax Charges
These fees and charges are explained below. For additional information about
these fees and charges, see the Fee Table in this prospectus.
ACCOUNT MAINTENANCE FEE
An account maintenance fee of $3.75 will be deducted on the last day of each
calendar quarter if any of your money is invested in the Variable Account
Options. We will sell Purchase Units from your Account to pay the account
maintenance fee. If you invest only in Fixed Account Options during a calendar
quarter, this fee will not apply. If all your money in a Variable Account Option
is withdrawn, or transferred to a Fixed Account Option, the fee will be deducted
at that time. The fee will be assessed equally among the Variable Account
Options that make up your Account Value.
The account maintenance fee is to reimburse the Company for our administrative
expenses for providing Variable Account Options. This includes the expense for
establishing and maintaining the record keeping for the Variable Account
Options. We do not expect that the amount of fees we receive will be greater
than our expenses.
The amount of the account maintenance fee may be reduced or waived if Portfolio
Director 2 is issued to certain types of plans which are expected to result in
lower costs to VALIC. To learn more about how we determine if account
maintenance fees may be reduced or waived, see the "Reduction or Waiver of
Account Maintenance Fee or Surrender Charges" section in this prospectus. If you
have two or more accounts established under the same group contract, we may
agree to deduct an account maintenance fee from only one account.
SURRENDER CHARGES
When you withdraw money from your account, you may be subject to a surrender
charge. For information about your right to surrender, see "Surrender of Account
Value" in this prospectus.
It is assumed that the most recent Purchase Payments are withdrawn first. No
surrender charge will be applied unless an amount is
actually withdrawn. We consider all Purchase Payments to be withdrawn before
earnings are withdrawn.
Amounts exchanged from other contracts issued by the Company may or may not be
subject to a surrender charge. After exchange, it is assumed that any new
Purchase Payments are withdrawn before the exchanged amount. For more
information, see "Exchange Privilege" in the Statement of Additional
Information.
AMOUNT OF SURRENDER CHARGES
A surrender charge may not be greater than:
- - Five percent (5%) of the amount of all Purchase Payments received during the
past 60 months; or
- - Five percent (5%) of the amount withdrawn.
10% FREE WITHDRAWAL
In any Participant Year, up to 10% of the Account Value may be withdrawn without
a surrender charge. The surrender charge will apply to any amount withdrawn that
exceeds this 10% limit. The percentage withdrawn will be determined by dividing
the amount withdrawn by the Account Value just prior to the withdrawal. If more
than one withdrawal is made during a Participant Year, each percentage will be
added to determine at what point the 10% limit has been reached.
These 10% withdrawals without charge do not reduce Purchase Payments for the
purpose of computing the surrender charge. If a surrender charge is applied to
all or part of a Purchase Payment, no surrender charge will be applied to such
Purchase Payment (or portion thereof) again.
EXCEPTIONS TO SURRENDER CHARGES
No surrender charge will be applied:
- - To money applied to provide a Payout Option;
- - To death benefits;
- - If no Purchase Payments have been received during the 60 months prior to the
date of surrender;
- - If your account has been in effect for 15 years or longer;
- - If your account has been in effect for 5 years or longer, and you have
attained age 59 1/2;
- - To "No Charge Systematic Withdrawals";
- - Under certain contracts, to withdrawals under the No Charge Minimum
Distribution provisions;
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
23
<PAGE> 156
- --------------------------------------------------------------------------------
- - If you have become totally and permanently disabled, defined as follows: You
are unable, due to mental or physical impairment, to perform the material and
substantial duties of any occupation for which you are suited by means of
education, training or experience; the impairment must have been in existence
for more than 180 days; the impairment must be expected to result in death or
be long-standing and indefinite and proof of disability must be evidenced by a
certified copy of a Social Security Administration determination or a doctor's
verification; and
- - If you are at least 55 years old, are no longer employed by the employer that
established the plan, and your account under the plan was established at least
5 years prior to the date of surrender.
The surrender charges may be reduced or waived if Portfolio Director 2 is issued
to certain types of plans which are expected to result in lower costs to VALIC.
To learn more about how we determine if surrender charges may be reduced or
waived, see the "Reduction or Waiver of Account Maintenance Fee or Surrender
Charges" section in this prospectus.
PREMIUM TAX CHARGE
Taxes on Purchase Payments are imposed by some states, cities, and towns. The
rate will range from zero to 3%.
If the law of a state, city, or town requires premium taxes to be paid when
Purchase Payments are made, we will, of course, comply. Otherwise, such tax will
be deducted from the Payout Value when annuity payments are to begin.
If we deduct an amount for premium taxes, but later find the tax was not due, we
will:
- - Adjust the amount deducted in error to reflect investment experience from the
date of the deduction to the date we determined the tax was not due; and
- - Apply the excess amount, as adjusted, to increase the number of Pay-in or
Payout Units.
SEPARATE ACCOUNT CHARGES
There will be a mortality and expense risk charge applied to VALIC Separate
Account A. This is a daily charge at an annualized rate of 1% to 1.25% on the
average daily net asset value of VALIC Separate Account A. The exact rate
depends on the Variable Account Option selected. This charge is guaranteed and
cannot be increased by the Company. The mortality and expense risk charge is to
compensate the Company for assuming mortality and expense risks under Portfolio
Director. The mortality risk that the Company assumes is the obligation to
provide payments during the Payout Period for your life no matter how long that
might be. In addition, the Company assumes the obligation to pay during the
Purchase Period an interest guaranteed death benefit. For more information about
the interest guaranteed death benefit see the "Death Benefit" section of this
prospectus. The expense risk is our obligation to cover the cost of issuing and
administering Portfolio Director 2, no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk charge. For more
information about the mortality and expense risk charge, see the Fee Table in
this prospectus.
FUND ANNUAL EXPENSE CHARGE
Investment management charges based on a percentage of each Fund's average daily
net assets are payable by each Fund. Depending on the Variable Account Option
selected, the charges will be paid by each Fund to its investment adviser. These
charges and other Fund charges and expenses are fully described in the
prospectuses for the Funds. These charges indirectly cost you because they lower
your return.
OTHER TAX CHARGES
We reserve the right to charge for certain taxes (other than premium taxes) that
we may have to pay. This could include federal income taxes. Currently, no such
charges are being made.
REDUCTION OR WAIVER OF ACCOUNT
MAINTENANCE FEE OR SURRENDER
CHARGES
We may, as described below, determine that the account maintenance fee or the
amount of surrender charges for Portfolio Director 2 may be reduced or waived.
We may reduce or waive these fees and charges if we determine that your
retirement program will allow us to reduce or eliminate administrative or sales
expenses that we usually incur for retirement programs. There are a number of
factors we will review in determining whether your retirement program will allow
us to reduce or eliminate these administrative or sales expenses.
24
<PAGE> 157
- --------------------------------------------------------------------------------
To determine whether we can reduce or waive account maintenance fees, we review
the following factors:
- The type of retirement program.
Certain types of retirement programs because of their stability can result
in lower administrative costs.
- The nature of your retirement program.
Certain types of retirement programs, due to the types of employees who
participate, experience fewer account surrenders thus reducing
administrative costs.
- The frequency of Purchase Payments for your retirement program
Purchase Payments received no more than once a year can reduce
administrative costs.
- The administrative tasks performed by your employer for your retirement
program.
The employer sponsoring your retirement program can, through their method
of remitting Purchase Payments, reduce administrative costs.
- Other factors of which we are not presently aware which could reduce
administrative costs.
To determine whether we can reduce or waive surrender charges, we review the
following factors:
- The size of your retirement program.
A retirement program which involves a larger group of employees may allow
us to reduce sales expenses.
- The total amount of Purchase Payments to be received for your retirement
program.
Larger Purchase Payments can reduce sales expenses.
- The nature of your retirement program.
Certain types of retirement programs, due to the type of employees who
participate, experience fewer account surrenders thus reducing sales
expense.
- The type of your retirement program.
Certain types of retirement programs because of their stability can result
in lower sales expenses.
- The use of mass enrollment or related administrative tasks performed by your
employer for your retirement program.
- Other factors of which we are not presently aware which could reduce sales
expenses.
We also may reduce or eliminate the amount of the mortality and expense risk
charge under Portfolio Director 2 or credit additional amounts to the Contract
representing reductions in this charge. We will only do this if permitted by
this Contract and by VALIC guidelines in effect at the time. In no event will
the reduction or waiver of fees and charges be permitted where the reduction
or waiver will unfairly discriminate against any person.
SEPARATE ACCOUNT EXPENSE
REIMBURSEMENT
Some of the Mutual Funds or their affiliates may have an agreement with the
Company to pay the Company for certain administrative and shareholder services
it provides to the underlying Fund. The Company will reduce its charges to the
Division investing in that Fund by the full amount of any of these payments it
receives. See the Fee Table in this prospectus for an identification of those
Funds for which a reimbursement applies.
25
<PAGE> 158
PAYOUT PERIOD
------------------------------------------------------------
The Payout Period (Annuity Period) begins when you decide to retire or otherwise
withdraw your money in a steady stream of payments. If your employer's plan
permits, you may apply any portion of your Account Value to one of the types of
Payout Options listed below. You may choose to have your Payout Option on either
a fixed, a variable, or a combination payout basis. When you choose to have your
Payout Option on a variable basis, you may keep the same Variable Account
Options in which your Purchase Payments were made, or transfer to different
ones.
FIXED PAYOUT
Under Fixed Payout, you will receive payments from the Company. These payments
are fixed and guaranteed by the Company. The amount of these payments will
depend on:
- Type and duration of Payout Option chosen;
- Your age or your age and the age of your survivor (1);
- Your sex or your sex and the sex of your survivor (1) (IRA's and certain
nonqualified contracts);
- The portion of your Account Value being applied; and
- The payout rate being applied and the frequency of the payments.
(1) This applies only to joint and survivor payouts.
If the benefit would be greater, the amount of your payments will be based on
the current payout rate the Company uses for immediate annuity contracts.
VARIABLE PAYOUT
With a Variable Payout, you may select up to 7 Variable Account Options. Your
payments will vary accordingly. This is due to the varying investment results
that will be experienced by each of the Variable Account Options you selected.
The Payout Unit Value is calculated just like the Purchase Unit Value for each
Variable Account Option except that the Payout Unit Value includes a factor for
the Assumed Investment Rate you select. For additional information on how Payout
Payments and Payout Unit Values are calculated, see the Statement of Additional
Information.
In determining your first Payout Payment, an Assumed Investment Rate of 3 1/2%
is used (unless you select a higher rate.) If the net investment experience of
the Variable Account Option exceeds your Assumed Investment Rate, your next
payment will be greater than your first payment. If the investment
experience of the Variable Account Option is lower than your Assumed Investment
Rate, your next payment will be less than your first payment.
COMBINATION FIXED AND VARIABLE
PAYOUT
With a Combination Fixed and Variable Payout, you may choose:
- Up to 6 Variable Account Options (payments will vary); with a
- Fixed Payout (payment is fixed and guaranteed).
PAYOUT DATE
The Payout Date is the date elected by you on which your payout (annuity)
payments will start. The date elected must be the first of any month provided 30
days advance notice has been given to VALIC. Your account will be valued ten
days prior to the end of the month preceding the Payout Date. A request to start
payments must be sent to our Home Office on a form approved by VALIC. Generally,
for qualified contracts, the Payout Date may begin when you attain age 59 1/2 or
separate from service, but must begin no later than April 1 following the
calendar year you reach age 70 1/2 or the calendar year in which you retire. For
nonqualified contracts, the Payout Date may begin at any time prior to your 85th
birthday. For additional information on the minimum distribution rules that
apply to payments under 403(b), 401, 403(a) and 457 plans or simplified employee
plans ("SEPs"), see "Federal Tax Matters" in this prospectus and in the
Statement of Additional Information.
PAYOUT OPTIONS
You may specify the manner in which your Payout Payments are made. You may
select one of the following options:
- LIFE ONLY -- payments are made only to you during your lifetime. Under this
option there is no provision for a death benefit for the beneficiary. For
example, it would be possible under this option for the Annuitant to receive
only one payout payment if he died prior to the date of the second payment,
two if he died before the third payment.
- LIFE WITH GUARANTEED PERIOD -- payments are made to you during your
lifetime; but if you die before the guaranteed period has expired, your
beneficiary will receive payments for the rest of your guaranteed period.
<TABLE>
<S> <C>
PAYOUT UNIT -- a measuring
unit used to calculate
Payout
Payments from your Variable
Account Option. Payout Unit
values will vary with the
investment experience of the
VALIC Separate Account A
Division you have selected.
ASSUMED INVESTMENT
RATE -- the rate used to
determine your first monthly
Payout Payment per
thousand dollars of Account
Value in your Variable
Account Option(s).
</TABLE>
26
<PAGE> 159
- --------------------------------------------------------------------------------
- LIFE WITH CASH OR UNIT REFUND -- payments are made to you during your
lifetime. Upon your death, your beneficiary will receive a lump sum payment
equal to the remaining Annuity Value.
- JOINT AND SURVIVOR LIFE -- payments are made to you during the joint
lifetime of you and your beneficiary. Upon the death of one, payments
continue during the lifetime of the survivor. This option is designed
primarily for couples who require maximum possible variable payouts during
their joint lives and are not concerned with providing for beneficiaries at
death of the last survivor. For example, it would be possible under this
option for the Joint Annuitants to receive only one payment if both
Annuitants died prior to the date of the second payment, or for the Joint
Annuitants to receive only one payment and the surviving Annuitant to
receive only one payment if one Annuitant died prior to the date of the
second payment and the surviving Annuitant dies prior to the date of the
third payment.
- PAYMENT FOR A DESIGNATED PERIOD -- payments are made to you for a select
number of years between five and thirty. Upon your death, payments will
continue to your beneficiary until the designated period is completed.
ENHANCEMENTS TO PAYOUT OPTIONS
You may be able to select enhancements to the Payout Options described above.
These enhancements include partial annuitization, flexible payments of varying
amounts and inflation protection payments. Additionally, certain options may be
available with a one to twenty year guaranteed period. Additionally, certain
options may be available with a one to twenty year guaranteed period. The Joint
and Survivor Life Option may be available with a
one to twenty year guaranteed period option. Not all of the enhancements are
available under each option.
PAYOUT INFORMATION
Once your Payout Payments have begun, the option you have chosen may not be
stopped or changed. Any one of the Variable Account Options may result in your
receiving unequal payments during your life expectancy. If payments begin before
age 59 1/2, you may suffer unfavorable tax consequences if you do not meet an
exception to federal tax law. See "Federal Tax Matters" in this prospectus.
Your Payment Option should be selected at least 30 days before your Payout Date.
If such selection is not made:
- payments will be made under the Life with Guaranteed Period Option, and
- the payments will be guaranteed for a 10 year period, and
- the payments will be based on the allocation used for your Purchase Payments
- Fixed Account Option will be used to distribute payments to you on a Fixed
Payout basis
- Variable Account Options will be used to distribute payments to you on a
Variable Payout basis.
Your first Payout Payment must total at least $25.
Most Payout Payments are made monthly. If the amount of your payment is less
than $25, we reserve the right to reduce the number of payments made each year
so each of your payments are at least $25.
<TABLE>
<S> <C>
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the
Contract,
see the "Statement of
Additional Information".
</TABLE>
27
<PAGE> 160
SURRENDER OF ACCOUNT VALUE
------------------------------------------------------------
WHEN SURRENDERS ARE ALLOWED. You may withdraw all or part of your Account Value
at any time before the Payout Period begins if:
- allowed under federal and state law; and
- allowed under your employer's plan.
For an explanation of charges that may apply if you surrender your Account
Value, see "Fees and Charges" in this prospectus.
AMOUNT THAT MAY BE SURRENDERED. The amount that may be surrendered at any time
can be determined as follows:
- --------------------------------------------------
<TABLE>
<C> <C> <C>
Your
Account
Allowed Value(1)
Surrender = (EQUALS) - (MINUS)
Value Any Applicable
Surrender
Charge
</TABLE>
1: Equals the Account Value next computed after your properly completed
request for surrender is received in our Home Office.
There is no guarantee that the Surrender Value in a Variable Account Option will
ever equal or exceed the total amount of your Purchase Payments received by us.
We will mail to you the Surrender Value within 7 calendar days after we receive
your properly completed surrender request at our Home Office. However, we may be
required to suspend or postpone payments if redemption of an underlying Fund's
shares have been suspended or postponed. See "Offering, Purchase and Redemption
of Fund Shares" in the Series Company Statement of Additional Information. See
your current Fund(s)' prospectuses for a discussion of the reasons why the
redemption of shares may be suspended or postponed.
We may receive a surrender for a Purchase Payment which has not cleared the
banking system. We may delay payment of that portion of your Surrender Value
until the check clears. The rest of the Surrender Value will be processed as
usual.
SURRENDER RESTRICTIONS
Under the TEXAS STATE OPTIONAL RETIREMENT PROGRAM, and in many Section 403(b)
contracts, no surrender or partial surrender will be allowed except for
termination of employment, retirement or death.
Under the FLORIDA STATE OPTIONAL RETIREMENT PROGRAM, no surrender or partial
surrender of Purchase Payments made by the employer will be allowed except for
termination of employment, retirement or death. Benefit payments based on
payments from the employer may not be paid in a lump sum or for a period
certain, but must be paid under a life contingency option, except for:
- death benefits; and
- certain small amounts approved by the State of Florida.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time. A partial
surrender plus any surrender charge will reduce your Account Value. Partial
surrenders will be paid from the Fixed Account Options first unless otherwise
specified by you.
The reduction in the number of Purchase Units credited to your Variable Account
Option Account Value will equal:
- --------------------------------------------------
<TABLE>
<C> <C> <C>
The amount Your Purchase
surrendered Units next
from the Variable computed after
Account Option the written
+ (PLUS) / (DIVIDED BY) request for
Any Surrender surrender is
Charge received at our
Home Office.
</TABLE>
The Surrender Value will be reduced by a full quarterly account maintenance fee
charged in the case of a full surrender during a quarter.
SYSTEMATIC WITHDRAWALS. You may elect to withdraw all or part of your Account
Value under a systematic withdrawal method described in your annuity contract
offered by Portfolio Director 2. There will be no surrender charge for
withdrawals using this method, which provides for:
- Payments to be made to you
- Payment over a stated period of time (but not less than five years);
- Payment of a stated yearly dollar amount or percentage (the amount or
percentage may not exceed 20% of your Account Value at the time election is
made);
We may require a minimum withdrawal amount under this method. The portion of
your account that has not been withdrawn will continue to receive the investment
return of the Variable Account Options which you selected. A systematic
withdrawal election may not be changed but can be revoked at no charge. Once
revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
28
<PAGE> 161
- --------------------------------------------------------------------------------
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW. There will be no surrender charge on
a minimum distribution required by federal tax law (known as No Charge Minimum
Distribution), if the withdrawal:
- Is made payable to you; and
- Does not exceed the amount required under federal tax law as determined by
the values in your Portfolio Director 2 Contract and VALIC.
This contract feature will not be available in any year that an amount has been
withdrawn under the no charge systematic withdrawal method. See "Federal Tax
Matters" in this prospectus and in the Statement of Additional Information for
more information about required distributions imposed by tax law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus.
29
<PAGE> 162
EXCHANGE PRIVILEGE
------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director 2. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director 2. This exchange privilege will be available
only to other contracts for which we have not yet started making payments under
a Payout Option. If you elect to exercise one of these exchange offers, you
should contact any of our Regional Offices at the addresses shown in the back of
this prospectus.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges.
- Partial exchanges are not permitted.
- Exchanges from Portfolio Director 2 to other contract forms are not
permitted (Exchanges between Portfolio Director and Portfolio Director 2 are
permitted).
- This exchange privilege is only available for those other contracts listed
below.
Additionally, if you have your money in a fixed account of one of the below
listed other contracts, you must exchange directly into the Fixed Account
Options of Portfolio Director 2. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director 2. For example, you
will be subject to the rules concerning transfers among investment options as
stated in the Transfers Between Investment Options section in this prospectus.
We may, at our option, waive any transfer restrictions for a stated period of
time. If we waive these transfer restrictions, you will be allowed to exchange
to any investment option available in Portfolio Director 2.
WE RESERVE THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THESE EXCHANGE PRIVILEGES
AT ANY TIME.
TAXES AND CONVERSION COSTS
We will impose no fee or charge for these exchanges. Please read the "Federal
Tax Matters" section in this prospectus for information about the federal income
tax treatment of Portfolio Director 2.
SURRENDER CHARGES
We will generally not impose nor waive existing surrender charges as a result of
your electing to exchange from one of the other contracts.
For purposes of determining surrender charges, we often consider time in the
contract. For SPQ181 and SPQ181-1 Contracts, the contract date for determining
surrender charges under Portfolio Director 2 will be the SPQ181 and SPQ181-1
contract date plus one year. For example, if you have an SPQ181 contract with a
contract date of January 1, 1993, upon exchange into Portfolio Director 2, the
contract date for surrender charges purposes becomes January 1, 1994.
For any other contract, the contract date for determining surrender charges
under Portfolio Director 2 will be the same date as the other contract, but no
earlier than January 1, 1982. (The effect of this is to potentially shorten the
charge period for Purchase Payments subsequently made to Portfolio Director 2.)
If there is no surrender charge on assets within another contract, we will not
impose charges on those assets as a result of an exchange. If surrender charges
are to be based on Purchase Payments within a contract, we will consider
purchase payments in the other contract to have been transferred to Portfolio
Director 2 for purposes of calculating the surrender charge. The effective dates
of these Purchase Payments will also be retained for surrender charge purposes.
The Portfolio Director 2 surrender charge is calculated assuming the most recent
Purchase Payments are removed first. This policy may cause exchanged funds to be
accessible only after charges are imposed.
EXCHANGE OFFERS FOR CONTRACTS OTHER THAN
PORTFOLIO DIRECTOR
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
Portfolio Director 2 will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
30
<PAGE> 163
- ------------------------------------------------------------
EXCHANGE OFFER FOR PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
Subject to the restrictions stated below and the general restrictions on
exchange privileges stated above you may exchange from Portfolio
Director to Portfolio Director 2. Additionally you may exchange from Portfolio
Director 2 to Portfolio Director. Once you have exchanged from Portfolio
Director to Portfolio Director 2 or from Portfolio Director 2 to Portfolio
Director you must wait 120 days before making another exchange between Portfolio
Director and Portfolio Director 2.
Both Portfolio Director and Portfolio Director 2 are available to qualified
contracts and certain non-qualified contracts. Portfolio Director 2 is not
available to non-qualified contracts issued to individuals. Please read the
"Federal Tax Matters" in this prospectus for information about the federal
income tax treatment of Portfolio Director 2.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director 2. A more detailed comparison of the
features, charges, and restriction between each above listed other contract and
Portfolio Director 2 is provided in the Statement of Additional Information.
Portfolio Director and Portfolio Director 2 contain the same provisions except
as to available Variable Account Options and certain Separate Account Expense
Reimbursements. See "Fees and Changes" in this prospectus.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
FEATURES OF PORTFOLIO DIRECTOR 2
In deciding whether you want to exercise these exchange privileges, you should
consider the following features of Portfolio Director 2.
- Portfolio Director 2 has more investment options to select from.
- Portfolio Director 2 has 12 publicly available mutual funds as investment
options.
- The Portfolio Director 2 surrender charge is calculated assuming the most
recent Purchase Payments are removed first. This policy may cause exchanged
funds to be accessible only after charges are imposed.
- Portfolio Director 2 has an Interest Guaranteed Death Benefit.
- Portfolio Director 2's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Portfolio Director 2's guaranteed annuity rates and guaranteed interest
rates may be less favorable than the other contracts.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the Company's Agents' and Managers' Retirement Plan ("Plan"). We
grant to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts, Independence Plus Contracts
and Portfolio Director for the equivalent units of interest in Portfolio
Director 2.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director 2 any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director 2 from SA-1,
Independence Plus or Portfolio Director Contracts may have surrender charges and
account maintenance fees imposed under Portfolio Director 2. All other
provisions with regard to exchange offers referenced in the section entitled
"Exchange Offers" will apply to the Agents' and Managers' Retirement Plan
Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will have
three options to choose from. As to the funding vehicle for their purchase
payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract or Portfolio
Director.
- Leave current assets in the SA-1 Contract, Independence Plus or Portfolio
Director and direct future Purchase Payments to Portfolio Director 2; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director 2.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus
31
<PAGE> 164
- --------------------------------------------------------------------------------
Contract or Portfolio Director, future Purchase Payments and current assets will
be controlled by the provisions of the SA-1 Contract, Independence Plus Contract
or Portfolio Director, respectively. If the participant chooses to leave current
assets in the SA-1 Contract, the Independence Plus Contract or Portfolio
Director and direct future Purchase Payments to Portfolio Director 2, the
current assets will be controlled by the provisions of the SA-1 Contract, the
Independence Plus Contract or Portfolio Director, respectively. The future
Purchase Payments will be controlled by the terms of Portfolio Director 2
subject to the exception that surrender charges and account maintenance fees
will not be imposed under Portfolio Director 2. If the participant chooses to
transfer all current assets and future Purchase Payments to Portfolio Director
2, such current assets and future Purchase Payments will be controlled by the
provisions of Portfolio Director 2 subject to the exception that surrender
charges and account maintenance fees will not be imposed under Portfolio
Director 2.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director 2 the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. Exchanges to Portfolio Director will be
permitted. See "Exchange Offer for Portfolio Director and Portfolio Director 2"
in this prospectus. If a participant chooses to transfer future Purchase
Payments but not current assets to Portfolio Director 2, the participant will be
allowed at a later date to transfer the current assets to Portfolio Director 2.
For a complete analysis of the differences between the SA-1 contract, the
Independence Plus Contract or Portfolio Director and Portfolio Director 2, you
should refer to the Statement of Additional Information and the form of the
contract or certificate for its terms and conditions.
32
<PAGE> 165
DEATH BENEFITS
- --------------------------------------------------------------------------------
DEATH BENEFITS
Portfolio Director 2 will pay death benefits during either the Purchase Period
or the Payout Period. How these death benefits will be paid are discussed below.
The death benefit provisions in Portfolio Director 2 may vary from state to
state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law.
Beneficiaries Other Than Spouses.
If the Beneficiary is not the spouse of the Annuitant, death benefits must be
paid.
- - In full within 5 years after the Annuitant's death; or
- - By payments beginning within 1 year after the Annuitant's death under:
- A life annuity;
- A life annuity with payments certain; or
- An annuity for a designated period.
If the Annuitant dies before the Annuity Date, the Beneficiary as named by you
may receive the payout.
Payments certain or payments for a designated period cannot be for a greater
period of time than the Beneficiary's life expectancy. After choosing a payment
option, a Beneficiary may exercise many of the investment options and other
rights that the Participant or Contract Owner had under Portfolio Director 2.
SPECIAL INFORMATION FOR INDIVIDUAL
NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Tax
Qualified Contract are not the same person. If this is the case, and the
Contract Owner dies, there will be no death benefit payable since the death
benefit is only due in the event of the Annuitant's death. However, the Contract
will be transferred to the Contingent Owner, if any, or to the Contract Owner's
estate. Such transfers will be considered a taxable event by the IRS.
DURING THE PURCHASE PERIOD
Two types of benefits are available if death occurs during the Purchase Period.
Interest Guaranteed Death Benefit and Standard Death Benefit.
INTEREST GUARANTEED DEATH BENEFIT
The interest guaranteed death benefit is payable when death occurs prior to your
reaching the age of 70. This contract provision is not available in some states.
The amount payable under the interest guaranteed death benefit will be at least
equal to the sum of your Account Value in the Fixed Account Option(s) and the
Variable Account Option(s) on the date VALIC receives proof of death.
Here is how to calculate the death benefit:
- --------------------------------------------------
Step 1: Determine your Fixed Account Option Value by taking the greater of:
<TABLE>
<S> <C> <C>
Value of Fixed Account Option on date
proof of death Is received by VALIC
OR
100% of Purchase Payments placed
in Fixed Account Option
- - (MINUS)
Amount of all prior withdrawals, charges and
any portion of Account Value applied under
a Payout Option
</TABLE>
- --------------------------------------------------
Step 2: Determine your Variable Account Option Value by taking the greater of:
<TABLE>
<S> <C> <C>
Value of Variable Account Option on date
proof of death is received by VALIC
OR
100% of Purchase Payments placed in
Variable Account Options
- - (MINUS)
Prior withdrawals (out of) or transfers
(out of) the Variable Account Option
+ (PLUS)
Interest at an annual rate of 3%
</TABLE>
- --------------------------------------------------
Step 3: Add step 1 + 2 = Death Benefit
For purposes of this calculation amounts transferred into the Variable Account
Option will be treated as Purchase Payments.
<TABLE>
<S> <C>
BENEFICIARY -- the person
designated to receive Payout
Payments upon the death of
an Annuitant.
ANNUITANT -- the individual,
(in most cases this person
is you) to whom Payout
Payments will be paid.
CONTRACT OWNER -- either
your employer or
organization in the case of
a group contract or the
Annuitant in the case of an
individual contract. If the
contract is an individual
non-qualified type, this is
generally the Annuitant but
a Contingent Contract Owner
may also be provided for.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase Payments
and Account Value may be
allocated to fixed
investment options.
Currently, the Fixed Account
Options in Portfolio
Director 2 are Fixed Account
Plus and Short-Term Fixed
Account. Each option of this
type is guaranteed to earn
at least a minimum rate of
interest.
VARIABLE ACCOUNT
OPTIONS -- Investment
Options that correspond to
VALIC Separate Account A
Divisions offered by
Portfolio Director 2.
Investment returns on
Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
</TABLE>
33
<PAGE> 166
------------------------------------------------------------
STANDARD DEATH BENEFIT
The standard death benefit is payable if death occurs on or after age 70.
The Standard Death Benefit will be the greater of:
- --------------------------------------------------
<TABLE>
<S> <C> <C>
Your Account Value on the Date Proof of Death is
Received by VALIC
OR
100% of Purchase Payments (to Fixed
and/or Variable Account Options)
- -- (MINUS)
Amount of all Prior Withdrawals, Charges
and any portion of Account Value applied
under a Payout Option
</TABLE>
DURING THE PAYOUT PERIOD
If death occurs during the Payout Period, your Beneficiary may receive a death
benefit depending on the Payout Option selected. The amount of death benefits
will also depend on the Payout Option that you selected. The Payout Options
available in Portfolio Director 2 are described in the "Payout Period" section
of this prospectus.
- If the Life Only Option or Joint and Survivor Life Option were chosen, there
will be no death benefit.
- If the Life With Guaranteed Period Option, Joint and Survivor Life with
Guaranteed Periods Option, Life with Cash or Unit Refund Option or Payment
for a Designated Period Option were chosen, and the entire amount guaranteed
has not been paid, the Beneficiary may choose one of the following within 60
days after death benefits are payable:
- Receive the present value of any remaining payments in a lump sum; or
- Receive the remaining payments under the same terms of the guaranteed
period option chosen by the deceased Participant; or
- Receive the present value of any remaining payments applied under the
Payment for a Designated Period Option for a period equal to or shorter
than the period remaining. Spouse beneficiaries may be entitled to more
favorable treatment under federal tax law.
Under federal tax laws if the Life with Guaranteed Periods Option is chosen on a
variable basis, it may be treated in the same manner as a surrender of your
Portfolio Director 2 account. If your account is surrendered the full amount
your Beneficiary receives will normally be treated as income for that year. This
amount generally will also be taxed at rates used for ordinary income.
34
<PAGE> 167
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts or to the general public
before Portfolio Director 2 was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds.
However, in doing so, we will use the charges and fees imposed by Portfolio
Director 2 in calculating the Division's investment performance for earlier time
frames.
TYPES OF INVESTMENT PERFORMANCE
INFORMATION ADVERTISED
We may advertise the Division's Total Return Performance information and Yield
Performance information.
TOTAL RETURN PERFORMANCE
INFORMATION
Total Return Performance Information is based on the overall dollar or
percentage change in value of an assumed investment in a Division over a given
period of time.
There are seven ways Total Return Performance Information may be advertised:
- Standard Average Annual Total Return
- Nonstandard Average Annual Total Return
- Cumulative Total Return
- Annual Change in Purchase Unit Value
- Cumulative Change in Purchase Unit Value
- Total Return Based on Different Investment Amounts
- An Assumed Account Value of $10,000
Each of these is described below.
STANDARD AVERAGE ANNUAL TOTAL RETURN
Standard Average Annual Total Return shows the average percentage change in the
value of an investment in the Division from the beginning to the end of a given
historical period. The results shown are after all charges and fees have been
applied against the
Division. This will include account maintenance fees and surrender charges that
would have been deducted if you surrendered Portfolio Director 2 at the end of
each period shown. Premium taxes are not deducted. This information is
calculated for each Division based on how an initial assumed payment of $1,000
performed at the end of 1, 3, 5 and 10 year periods.
The return for periods of more than one year are annualized to obtain the
average annual percentage increase (or decrease) during the period.
Annualization assumes that the application of a single rate of return each year
during the period will produce the ending value, taking into account the effect
of compounding.
NONSTANDARD AVERAGE ANNUAL TOTAL
RETURN
Nonstandard Average Annual Total Return is calculated in the same manner as the
Standard Average Annual Total Return. However, Nonstandard Average Annual Total
Return shows only the historic investment results of the Division. Account
maintenance fees, surrender charges and premium taxes are not deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director 2 will stay
in the Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. It is based on an assumed initial
investment of $10,000. The Cumulative Return will be calculated without
deduction of account maintenance fees, surrender charges or premium taxes.
ANNUAL CHANGE IN PURCHASE UNIT VALUE
Annual Change in Purchase Unit Value is a percentage change during a one year
period. This is calculated as follows:
- The Purchase Unit Value at the start of the year is subtracted from the
Purchase Unit Value at the end of the year;
- The difference is divided by the Purchase Unit Value at the start of the
year.
Account maintenance fees, surrender charges and premium taxes are not deducted.
The effect of these charges, if deducted, would reduce the Division's Annual
Change in Purchase Unit Value.
<TABLE>
<S> <C>
DIVISIONS -- Subaccounts of
VALIC Separate Account A
which represent the Variable
Account Options in Portfolio
Director 2. Each Division
invests in a different
mutual fund, each having its
own investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the
benefits of an annuity
Contract offered by
Portfolio Director 2.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
</TABLE>
35
<PAGE> 168
------------------------------------------------------------
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director 2 charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual changes in the Purchase Unit Value based on an initial
investment of $10,000. This will not reflect any deduction for account
maintenance fees, surrender charges and premium taxes.
YIELD PERFORMANCE INFORMATION
We may advertise Yield Performance, at a given point in time. A Division's yield
is one way of showing the rate of income the Division is earning as a percentage
of the Division's Purchase Unit Value.
MONEY MARKET DIVISION
We may advertise the Money Market Division's Current Yield and Effective Yield.
The Current Yield refers to the income produced by an investment in the Money
Market Division over a given 7-day period. The Current Yield does not take into
account surrender charges, account maintenance fees or premium taxes. The income
produced over a 7 day period is then "annualized." This means we are assuming
the amount of income produced during the 7-day period will continue to be
produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The 7-day Current Yield for the last 7 days ended
December 31, 1996 was 3.92%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield. The 7-day Effective Yield for the last 7 days ended December 31, 1996 was
3.99%.
DIVISIONS OTHER THAN THE MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION:
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate Account A
Division is printed in the four tables below.
The information presented does not reflect the advantage under Portfolio
Director 2 of deferring federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments (see "Federal Tax Matters" in the
prospectus and in the Statement of Additional Information.) The information
presented also does not reflect the advantage under Qualified Contracts of
deferring federal income tax on Purchase Payments.
The performance results shown in the following tables are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
36
<PAGE> 169
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
DIVISION DATE INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- --------- ---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)................... 04/29/94 21.42% -- -- -- 13.08%
AGSPC International Government Bond (Division
13)........................................ 01/01/91 9.00 -- 6.84% 6.35% -1.37
AGSPC Money Market (Division 6).............. 01/16/86 -- 4.31% 1.99 2.05 -0.79
AGSPC Science & Technology (Division 17)..... 04/29/94 34.25 -- -- -- 7.59
AGSPC Social Awareness (Division 12)......... 10/02/89 11.86 -- 11.72 16.77 17.65
AGSPC Stock Index (Division 10).............. 04/20/87 11.29 -- 12.85 16.75 16.42
Founders Growth (Division 30)................ 01/05/62 -- 15.31 14.68 15.42 10.26
Neuberger & Berman Guardian Trust (Division
29)(1)..................................... 06/01/50 -- 14.20 14.52 13.89 11.44
Putnam Global Growth (Division 28)........... 09/01/67 -- 9.41 10.01 7.27 10.27
Putnam New Opportunities (Division 26)....... 08/31/90 28.27 -- 21.01 16.26 4.68
Putnam OTC & Emerging Growth (Division 27)... 11/01/82 -- 16.08 18.14 16.09 -1.22
Scudder Growth and Income (Division 21)(2)... 11/13/84 -- 12.83 13.68 15.22 15.53
Templeton Foreign (Division 32).............. 10/05/82 -- 13.94 10.63 6.96 11.64
Twentieth Century Ultra (Division 31)........ 11/02/81 -- 18.81 11.29 12.06 7.34
Vanguard Fixed Income Securities Fund-Long-
Term Corporate Portfolio (Division 22)..... 07/09/73 -- 7.98 6.43 3.43 -5.27
Vanguard Fixed Income Securities Fund-Long-
Term U.S. Treasury Portfolio (Division
23)........................................ 05/19/86 -- 7.31 6.08 2.94 -7.52
Vanguard/Wellington (Division 25)............ 07/01/29 -- 11.08 11.34 12.56 9.59
Vanguard/Windsor II (Division 24)............ 06/24/85 -- 13.12 14.61 16.63 17.46
</TABLE>
- ---------------
* The returns shown are since inception for the Divisions that have been in
existence for less than ten years:
(1) The Trust started operating on August 3, 1993. It has identical investment
objectives and policies to, and as part of a "master/feeder structure"
invests in, the same portfolio as Neuberger&Berman Guardian Fund ("Fund"),
which is also managed by Neuberger&Berman Management Incorporated ("N&B").
N&B voluntarily bears certain expenses of Neuberger&Berman Guardian Trust
("Trust") so that the Trust's expense ratio per annum will not exceed the
expense ratio per annum of the Fund by more than 0.10% of the Trust's
average daily net assets. This arrangement can be terminated on sixty days'
notice. The reimbursement reflected in this Fee Table is based upon N&B's
estimate. Absent the reimbursement, Other Expenses are estimated to be 0.10%
and Total Fund Expenses to be 0.96% of average daily net assets.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
37
<PAGE> 170
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE*
DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)..................... 04/29/94 22.91% -- -- -- 18.18%
AGSPC International Government Bond
(Division 13)................................ 10/01/01 9.13 -- 7.73% 7.93% 3.36
AGSPC Money Market (Division 6)................ 01/16/86 -- 4.44% 3.02 3.75 3.97
AGSPC Science & Technology (Division 17)....... 04/29/94 35.55 -- -- -- 12.68
AGSPC Social Awareness (Division 12)........... 10/02/89 12.00 -- 12.49 18.12 22.75
AGSPC Stock Index (Division 10)................ 04/20/87 11.44 -- 13.60 18.10 21.53
Founders Growth (Division 30).................. 01/05/62 -- 15.41 15.35 16.76 15.35
Neuberger&Berman Guardian Trust (Division
29)(1)....................................... 06/01/50 -- 14.30 15.19 15.26 16.54
Putnam Global Growth (Division 28)............. 09/01/67 -- 9.50 10.78 8.79 15.37
Putnam New Opportunities (Division 26)......... 08/31/90 28.38 -- 21.58 17.58 9.70
Putnam OTC & Emerging Growth (Division 27)..... 11/01/82 -- 16.18 18.75 17.41 3.53
Scudder Growth and Income (Division 21)........ 11/13/84 -- 12.92 14.37 16.56 20.63
Templeton Foreign (Division 32)................ 10/05/82 -- 14.04 11.38 8.49 16.74
Twentieth Century Ultra (Division 31).......... 11/02/81 -- 18.91 12.03 13.47 12.43
Vanguard Fixed Income Securities Fund Long-Term
Corporate Portfolio (Division 22)............ 07/09/73 -- 8.06 7.29 5.05 -0.72
Vanguard Fixed Income Securities Fund Long-Term
U.S. Treasury Portfolio (Division 23)........ 05/19/86 -- 7.40 6.95 4.57 -3.08
Vanguard/Wellington (Division 25).............. 07/01/29 -- 11.18 12.08 13.96 14.69
Vanguard/Windsor II (Division 24).............. 06/24/85 -- 13.21 15.28 17.94 22.56
</TABLE>
TABLE III
CUMULATIVE RETURN
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE*
DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)..................... 04/29/94 73.33% -- -- -- 18.18%
AGSPC International Government Bond (Division
13).......................................... 10/01/91 58.22 -- 45.09% 25.74% 3.36
AGSPC Money Market (Division 6)................ 01/16/86 -- 54.47% 16.05 11.66 3.97
AGSPC Science & Technology (Division 17)....... 04/29/94 125.05 -- -- -- 12.68
AGSPC Social Awareness (Division 12)........... 10/02/89 125.27 -- 80.12 64.79 22.75
AGSPC Stock Index (Division 10)................ 04/20/87 184.84 -- 89.18 64.71 21.53
Founders Growth (Division 30).................. 01/05/62 -- 319.06 104.21 59.16 15.35
Neuberger&Berman Guardian Trust (Division
29)(1)....................................... 06/01/50 -- 280.57 102.79 53.11 16.54
Putnam Global Growth (Division 28)............. 09/01/67 -- 147.77 66.83 28.76 15.37
Putnam New Opportunities (Division 26)......... 08/31/90 386.56 -- 165.64 62.56 9.70
Putnam OTC & Emerging Growth (Division 27)..... 11/01/82 347.94 136.12 61.84 3.53
Scudder Growth and Income (Division 21)........ 11/13/84 237.21 95.64 58.37 20.63
Templeton Foreign (Division 32)................ 10/05/82 271.86 71.43 27.69 16.74
Twentieth Century Ultra (Division 31).......... 11/02/81 -- 464.96 76.44 46.08 12.43
Vanguard Fixed Income Securities Fund Long-Term
Corporate Portfolio (Division 22)............ 07/09/73 -- 117.18 42.14 15.93 -0.72
Vanguard Fixed Income Securities Fund Long-Term
U.S. Treasury Portfolio (Division 23)........ 05/19/86 -- 104.17 39.93 14.36 -3.08
Vanguard/Wellington (Division 25).............. 07/01/29 -- 188.49 76.87 48.00 14.69
Vanguard/Windsor II (Division 24).............. 06/24/85 245.89 103.61 64.06 22.56
</TABLE>
- ---------------
* The returns shown are since inception for the Divisions that have been in
existence for less than ten years:
38
<PAGE> 171
TABLE IV
ANNUAL AND CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE YEAR ENDED
--------------------------------------------------------
DIVISION 1996 1995 1994 1993 1992
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)................ 18.18% 46.40% 0.18% -- --
AGSPC International Government Bond
(Division 13)............................ 3.36 17.63 3.42 13.08% 2.05%
AGSPC Money Market (Division 6)........... 3.97 4.51 2.77 1.67 2.22
AGSPC Science & Technology (Division
17)...................................... 12.68 60.07 24.77 -- --
AGSPC Social Awareness (Division 12)...... 22.75 37.57 (2.42) 6.84 2.31
AGSPC Stock Index (Division 10)........... 21.53 35.95 (0.30) 8.78 5.58
Founders Growth (Division 30)............. 15.35 44.15 (4.29) 24.30 3.21
Neuberger&Berman Guardian Trust (Division
29)(1)................................... 16.54 30.70 0.51 12.43 17.87
Putnam Global Growth (Division 28)........ 15.37 13.68 (1.84) 30.56 (0.76)
Putnam New Opportunities (Division 26).... 9.70 44.87 2.29 31.40 24.37
Putnam OTC & Emerging Growth (Division
27)...................................... 3.53 54.45 1.22 30.77 11.58
Scudder Growth and Income (Division 21)... 20.63 29.58 1.33 14.17 8.22
Templeton Foreign (Division 32)........... 16.74 10.07 (0.62) 35.48 (0.89)
Twentieth Century Ultra (Division 31)..... 12.43 36.23 (4.62) 20.54 0.20
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division
22)...................................... (0.72) 24.86 (6.47) 13.08 8.41
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio
(Division 23)............................ (3.08) 28.51 (8.17) 15.36 6.09
Vanguard/Wellington (Division 25)......... 14.69 31.30 (1.71) 12.12 6.58
Vanguard/Windsor II (Division 24)......... 22.56 37.14 (2.38) 12.21 10.59
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE YEAR ENDED DECEMBER 31*
------------------------------------------------------
DIVISION 1991 1990 1989 1988 1987
- -------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)................ -- -- -- -- --
AGSPC International Government Bond
(Division 13)............................ 9.05% -- -- -- --
AGSPC Money Market (Division 6)........... 4.49 6.83% 7.92% 5.72% 4.50%
AGSPC Science & Technology (Division
17)...................................... -- -- -- -- --
AGSPC Social Awareness (Division 12)...... 26.63 (2.21) 1.00 -- --
AGSPC Stock Index (Division 10)........... 27.70 (4.83) 27.88 13.13 (14.38)
Founders Growth (Division 30)............. 45.94 (11.48) 40.37 3.77 9.05
Neuberger&Berman Guardian Trust (Division
29)(1)................................... 32.86 (5.63) 20.27 26.84 (1.97)
Putnam Global Growth (Division 28)........ 16.81 (10.11) 23.23 7.95 6.26
Putnam New Opportunities (Division 26).... 65.93 10.41 -- -- --
Putnam OTC & Emerging Growth (Division
27)...................................... 39.47 (10.75) 27.70 15.04 3.70
Scudder Growth and Income (Division 21)... 26.60 (3.55) 24.82 10.63 2.21
Templeton Foreign (Division 32)........... 17.10 (3.95) 29.25 20.82 23.51
Twentieth Century Ultra (Division 31)..... 84.49 8.21 35.50 12.12 5.58
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division
22)...................................... 19.42 4.90 13.76 8.35 (1.04)
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio
(Division 23)............................ 15.98 4.48 16.48 7.81 (4.13)
Vanguard/Wellington (Division 25)......... 22.13 (4.01) 20.11 14.67 1.01
Vanguard/Windsor II (Division 24)......... 27.11 (11.10) 26.25 23.19 (3.35)
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD
--------------------------------------------------------
DIVISION 1996 1995 1994 1993 1992
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)................ 73.33% 46.67% 0.18% -- --
AGSPC International Government Bond
(Division 13)............................ 58.22 53.08 30.14 25.83% 11.28%
AGSPC Money Market (Division 6)........... 54.47 48.57 42.16 38.33 36.06
AGSPC Science & Technology (Division
17)...................................... 125.05 99.72 24.77 -- --
AGSPC Social Awareness (Division 12)...... 125.27 83.51 33.39 36.70 27.95
AGSPC Stock Index (Division 10)........... 184.84 134.39 72.41 72.93 58.97
Founders Growth (Division 30)............. 319.06 163.29 151.99 163.29 111.81
Neuberger&Berman Guardian Trust (Division
29)(1)................................... 280.57 226.56 149.87 148.57 121.13
Putnam Global Growth (Division 28)........ 147.77 114.77 88.92 92.43 47.40
Putnam New Opportunities (Division 26).... 386.56 343.65 206.25 199.40 127.85
Putnam OTC & Emerging Growth (Division
27)...................................... 347.94 332.69 180.20 176.78 111.67
Scudder Growth and Income (Division 21)... 237.21 179.55 115.76 112.92 86.49
Templeton Foreign (Division 32)........... 271.86 218.53 189.39 191.23 114.98
Twentieth Century Ultra (Division 31)..... 464.96 402.50 268.85 286.74 220.85
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division
22)...................................... 117.18 118.77 75.23 87.34 65.66
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio
(Division 23)............................ 104.17 110.65 63.92 78.53 54.77
Vanguard/Wellington (Division 25)......... 188.49 151.54 91.59 94.93 73.85
Vanguard/Windsor II (Division 24)......... 245.89 182.21 105.80 110.83 87.90
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE 12/31/86*
------------------------------------------------------
DIVISION 1991 1990 1989 1988 1987
- -------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)................ -- -- -- -- --
AGSPC International Government Bond
(Division 13)............................ 9.05% -- -- -- --
AGSPC Money Market (Division 6)........... 33.10 27.38% 19.23% 10.48% 4.50%
AGSPC Science & Technology (Division
17)...................................... -- -- -- -- --
AGSPC Social Awareness (Division 12)...... 25.06 (1.23) 1.00 -- --
AGSPC Stock Index (Division 10)........... 50.56 17.90 23.88 (3.13) (14.38)
Founders Growth (Division 30)............. 105.22 40.61 58.84 13.18 9.05
Neuberger&Berman Guardian Trust (Division
29)(1)................................... 87.67 41.08 49.53 24.28 (1.97)
Putnam Global Growth (Division 28)........ 48.52 27.14 41.41 14.66 6.26
Putnam New Opportunities (Division 26).... 83.20 10.41 -- -- --
Putnam OTC & Emerging Growth (Division
27)...................................... 89.71 36.04 52.37 19.32 3.70
Scudder Growth and Income (Division 21)... 72.36 36.16 41.14 13.09 2.21
Templeton Foreign (Division 32)........... 116.92 85.23 92.86 49.22 23.51
Twentieth Century Ultra (Division 31)..... 220.20 73.56 60.38 18.36 5.58
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division
22)...................................... 52.79 27.95 21.97 7.22 (1.04)
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio
(Division 23)............................ 45.90 25.79 20.40 3.36 (4.13)
Vanguard/Wellington (Division 25)......... 63.11 33.56 39.13 15.83 1.01
Vanguard/Windsor II (Division 24)......... 69.88 33.64 50.32 19.06 (3.35)
</TABLE>
- ------------
* For the year in which a Division was initiated, less than a full year's
performance has been reflected. Actual, not annualized, performance is
reflected.
39
<PAGE> 172
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director 2 may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the 1940 Act, in consideration of an investment management fee or in any
other form permitted by law;
- Deregister VALIC Separate Account A under the 1940 Act, if registration is
no longer required;
- Stop accepting new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
If the Contract is being offered as a retirement plan through your employer, you
should always refer to the terms and conditions in your employer's plan when
reviewing the description of Portfolio Director 2 in this prospectus.
Plan loans from the Fixed Account Options may be allowed by your employer's
plan. Refer to your plan for a description of charges and other information.
40
<PAGE> 173
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About VALIC Separate Account A" section of this prospectus,
VALIC Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Participant, you may be entitled to give voting instructions to us
as to how VALIC Separate Account A should vote its Fund shares on these matters.
Those persons entitled to give voting instructions will be determined before the
shareholders meeting is held. For more information about these shareholder
meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. This will be true even if your
employer is the Contract Owner. Contract Owners will instruct VALIC Separate
Account A in accordance with these instructions. You will receive proxy material
and a form on which voting instructions may be given before the shareholder
meeting is held.
You will not have the right to give voting instructions if Portfolio Director 2
was issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
DURING PURCHASE PERIOD
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
DURING PAYOUT PERIOD OR AFTER A DEATH
BENEFIT HAS BEEN PAID
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in Portfolio Director 2
may have a number of shareholders including VALIC Separate Account A, VALIC
other affiliated insurance company separate accounts and retirement plans within
the American General group of companies and public shareholders.
VALIC Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the
Participants invested in that Fund entitled to give instructions at that
shareholder meeting. VALIC Separate Account A will vote the shares of the Funds
it holds for which it receives no voting instruction in the same proportion as
the shares for which voting instructions have been received.
VALIC will vote the shares of the Funds it holds based on, and in the same
proportion as, the voting instructions received from participants in VALIC
Separate Account A.
In the future, we may decide how to vote the shares of VALIC or VALIC Separate
Account A in a different manner if permitted at that time under federal
securities law.
<TABLE>
<S> <C>
VALIC SEPARATE
ACCOUNT A -- a segregated
asset account established by
VALIC under the Texas
Insurance Code. The purpose
of VALIC Separate Account A
is to receive and invest
your
Purchase Payments and
Account Value in the
Variable
Account Options you have
selected.
</TABLE>
41
<PAGE> 174
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director 2 provides tax-deferred accumulation over time, but is
subject to federal income and excise taxes, mentioned briefly below. You should
refer to the Statement of Additional Information for further details. Section
references are to the Internal Revenue Code ("Code"). We do not attempt to
describe any potential estate or gift tax, or any applicable state, local or
foreign tax law other than possible premium taxes mentioned under "Premium Tax
Charge." Remember that future legislation could modify the rules discussed
below, and always consult your personal tax adviser regarding how the current
rules apply to your specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or an IRA, or is instead a
nonqualified Contract. Portfolio Director 2 is used under the following types of
retirement arrangements:
- Section 403(b) annuities for employees of public schools and Section
501(c)(3) tax-exempt organizations;
- Section 401(a) and 403(a) qualified plans of for-profit employers and other
employers (including self-employed individuals);
- Section 408(b) individual retirement annuities;
- Section 457 unfunded deferred compensation plans of governmental and
tax-exempt employers;
- Section 408(k) simplified deferred compensation plans of private employers.
The foregoing Contracts are "Qualified Contracts."
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director 2 is also available through "Non-Qualified
Contracts" to the extent acquired by "Non-Natural Persons." Such Non-Qualified
Contracts generally include unfunded, nonqualified deferred compensation plans
of corporate employers. TAX CONSEQUENCES IN GENERAL
Purchase Payments, distributions, withdrawals, transfers and surrender of a
Contract can each have a tax effect, which varies with the governing retirement
arrangement. Please refer to the detailed explanation in the Statement of
Additional Information, the documents (if any) controlling the retirement
arrangement through which the contract is offered, and your personal tax
adviser.
Purchase Payments under Portfolio Director 2 can be made as contributions by
employers, or as pre-tax or after-tax contributions by employees, depending on
the type of retirement program. After-tax employee contributions constitute
"investment in the Contract." All Qualified Contracts receive deferral of tax on
the inside build-up of earnings on invested Purchase Payments, until a
distribution occurs. See the Statement of Additional Information for special
rules, including those applicable to taxable, non-natural owners of
Non-Qualified Contracts.
Distributions are taxed differently depending on the program through which
Portfolio Director 2 is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the amount by which
a distribution exceeds investment in the Contract is subject to income tax. For
annuity payments, investment in the contract is recovered ratably over the
expected payout period. Special recovery rules might apply in certain
situations.
Amounts subject to income tax may also incur excise tax, under the circumstances
described in the Statement of Additional Information. Generally, they would also
be subject to some form of federal income tax withholding unless rolled into
another tax-deferred vehicle. Required withholding will vary according to type
of program, type of payment and your tax status. In addition, amounts received
under all Contracts may be subject to state income tax withholding requirements.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory
42
<PAGE> 175
- --------------------------------------------------------------------------------
of the 1981 ruling to these Qualified Contracts under current law. In any event,
were the IRS to challenge the deferred tax treatment of these Qualified
Contracts under the theory of the 1981 ruling, VALIC and its tax counsel believe
that Contract owners would prevail.
It is also the opinion of VALIC and its tax counsel that for each other type of
Qualified Contract an independent exemption provides tax deferral regardless of
ownership of the Mutual Fund shares.
Generally, investment earnings on contributions to Non-Qualified Contracts will
be taxed currently to the owner and such contracts will not be treated as
annuities for federal income tax purposes.
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- Portfolio Director 2 Contract issued to a tax favored retirement program
purchased with pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- Conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[BAR GRAPH]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. The deduction of
fees and charges for both tax-deferred plans is reflected in the chart. Variable
options incur mortality and expense charges (1% - 1.25%) and may also incur
administrative fees ($3.75 per quarter) and surrender charges (5% of the lesser
of all contributions received during the last 60 months or the amount
withdrawn). The dotted lines represent the amounts remaining after withdrawal
and payment of taxes and any surrender charge. An additional 10% tax penalty may
apply to withdrawals before age 59 1/2. This information is for illustrative
purposes only and is not a guarantee of future return.
Unlike savings accounts, Premium Payments made to tax-favored retirement
programs and Non-Qualified Contracts generally provide tax deferred treatment on
earnings. In addition, Premium Payments made to tax-favored retirement programs
ordinarily are not subject to income tax until withdrawn. As shown above,
investing in a tax-favored program increases the accumulation power of savings
over time. The more taxes saved and reinvested in the program, the more the
accumulation power effectively grows over the years.
To further illustrate the advantages of tax deferred savings using a 28% Federal
tax bracket, an annual fixed yield (BEFORE THE DEDUCTION OF ANY FEES OR CHARGES)
of 8% under a tax-favored retirement program in which tax savings were
reinvested has an equivalent annual fixed yield of 5.76% under a conventional
savings program. THE 8% YIELD ON THE TAX-FAVORED PROGRAM WILL BE REDUCED BY THE
IMPACT OF INCOME TAXES UPON WITHDRAWAL. The yield will vary depending upon the
timing of withdrawals. The previous chart represents (without factoring in fees
and charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax
43
<PAGE> 176
contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount
available for
savings before
federal taxes...... $2,500 $2,500
Current federal
income tax due on
Purchase
Payments........... 0 (700)
Net retirement plan
Purchase
Payments........... $2,500 $1,800
</TABLE>
This chart assumes a 28% federal income tax rate. The $700 which is paid toward
current federal income taxes on $2,500 contributed to the conventional savings
account remains in the tax-qualified program, subject to being taxed upon
withdrawal. Stated otherwise, to reach an annual retirement savings goal of
$2,500, the contribution to a tax-qualified retirement program results in a
current out-of-pocket expense of $1,800 while the contribution to a conventional
savings account requires the full $2,500 out-of-pocket expense. The
tax-qualified retirement program represented in this chart is a plan type, such
as one under Section 403(b) of the Code, which allows participants to exclude
contributions within limits, from gross income.
44
<PAGE> 177
REVOCATION OF TELEPHONE ASSET TRANSFER AUTHORITY
Participant/Contract Owner Name:
------------------------------------------------------------------------
Social Security Number:
------------------------------------------------------------------------
Birth Date:
I am the Participant under or Contract Owner of one or more variable annuity
contracts issued by The Variable Annuity Life Insurance Company ("VALIC"). I
hereby instruct VALIC not to accept any telephone instructions to transfer
Account Values among investment options or change the allocation of future
Purchase Payments from me, anyone representing me or anyone representing himself
or herself to be me. I understand as a result of executing this form that the
transfer of Account Values or Payout Values among investment options or changes
in the allocation of future Purchase Payments may only be effected upon the
receipt by VALIC of my written instructions.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------
Participant/Contract Owner Signature Date
Mail this form to any Regional Office (see the last page of your prospectus for addresses) or to the Home
Office at the following address: VALIC, Customer Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
45
<PAGE> 178
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director
2).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 179
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 7
Types of Variable Annuity Contracts................. 8
Federal Tax Matters................................. 8
Tax Consequences of Purchase Payments........... 8
Tax Consequences of Distributions............... 9
Special Tax Consequences -- Early
Distribution.................................. 10
Special Tax Consequences -- Required
Distributions................................. 10
Tax Free Rollovers, Transfers and Exchanges..... 11
Exchange Privilege.................................. 11
Exchanges From Portfolio Director, Exchanges
From Portfolio Director 2..................... 11
Exchanges From Independence Plus Contracts...... 12
Exchanges From V-Plan Contracts................. 13
Exchanges From SA-1 and SA-2 Contracts.......... 14
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 17
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total Surrender.. 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
Money Market Division Yields.................... 19
Calculation of Yield for Money Market
Division Six.................................. 19
Illustration of Calculation of Yield for Money
Market Division Six........................... 19
Calculation of Effective Yield for Money Market
Division Six.................................. 19
Illustration of Calculation of Effective Yield
for Money Market Division Six................. 19
Standardized Yield for Bond Fund Divisions.......... 20
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 20
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 20
Calculation of Average Annual Total Return...... 21
Performance Information............................. 22
Hypothetical $10,000 Account Value and
Cumulative Return as Compared
to Benchmark Tables........................... 22
Performance Compared to Market Indices.......... 22
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 25
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 26
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 26
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 27
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 27
Founders Growth Division Thirty Compared to S&P
500 Index..................................... 28
Neuberger&Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 28
Putnam Global Growth Division Twenty-eight
Compared to MCSI World Index and S&P 500
Index......................................... 29
Putnam New Opportunities Division Twenty-six
Compared to S&P 500 Index..................... 29
Putnam OTC & Emerging Growth Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 30
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 30
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 31
Twentieth Century Ultra Division
Thirty-one Compared to S&P 500 Index and
NASDAQ Composite Index........................ 31
Vanguard Fixed Income Securities Fund -- Long-
Term Corporate Portfolio Division Twenty-two
Compared to Merrill Lynch Corporate Master
Index......................................... 32
Vanguard Fixed Income Securities Fund -- Long-
Term U.S. Treasury Portfolio Division Twenty-
three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 32
Vanguard/Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 33
Vanguard/Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 33
Payout Payments..................................... 34
Assumed Investment Rate......................... 34
Amount of Payout Payments....................... 34
Payout Unit Value............................... 34
Illustration of Calculation of Payout Unit
Value......................................... 35
Illustration of Payout Payments................. 35
Distribution of Variable Annuity Contracts.......... 36
Experts............................................. 36
Comments on Financial Statements.................... 37
</TABLE>
47
<PAGE> 180
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
10851 N. Black Canyon Hwy
Suite 700
Phoenix, AZ 85029
(602) 678-1700
222 South Harbor Blvd.
10th Floor
Anaheim, CA 92805
(714) 774-7844
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(415) 574-5433
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
(303) 988-3344
10006 N. Dale Mabry Hwy.
Suite 113
Tampa, FL 33618
(813) 961-1611
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1550
Chicago, IL 60606
(312) 368-1001
550 Congressional Blvd.
Suite 280
Carmel, IN 46032
(317) 574-7145
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21061
(410) 768-2330
1301 West Long Lake Road
Suite 340
Troy, MI 48098
(810) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(908) 750-5611
University Tower
3100 Tower Blvd.
Suite 1601, Box 50
Durham, NC 27707
(919) 489-6529
Two Summit Park Drive
Suite 410
Independence, OH 44131
(216) 520-2028
1800 S.W. First Avenue
Suite 505
Portland, OR 97201
(503) 223-6288
1767 Sentry Pkwy. West 19
Suite 300
Blue Bell, PA 19422
(215) 646-8030
5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
(972) 490-1515
800 Gessner
Suite 1280
Houston, TX 77024
(713) 465-2253
There are also more than thirty-seven branch offices located throughout the
country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019 1-800-44VALIC
TDD NUMBER 1-800-35VALIC
FOR UNIT VALUE INFORMATION CALL: 1-800-42VALIC & TDD 1-800-24VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-621-7792
TDD 1-800-35VALIC
EASYACCESS 1-800-42VALIC
TDD EASYACCESS 1-800-24VALIC
================================================================================
<PAGE> 181
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
FOR SERIES 2.1 - 2.11
----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1997
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for Portfolio
Director 2 dated May 1, 1997 ("Contracts") and should be read in conjunction
with the prospectus. The terms used in this Statement of Additional Information
have the same meaning as those set forth in the prospectus. A prospectus may be
obtained by calling or writing the Company, or The Variable Annuity Marketing
Company (the "Underwriter") at 2929 Allen Parkway, Houston, Texas 77019;
1-800-44-VALIC. Prospectuses are also available from regional sales offices of
the Underwriter or from its registered sales representatives.
(*Portfolio Director 2 is composed of Contract Forms UIT-194, UITG-194,
UITN-194, UIT-IRA-194, and UIT-SEP-194.)
1
<PAGE> 182
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 6
Types of Variable Annuity Contracts......................... 8
Federal Tax Matters......................................... 8
Tax Consequences of Purchase Payments..................... 8
Tax Consequences of Distributions......................... 9
Special Tax Consequences -- Early Distribution............ 10
Special Tax Consequences -- Required Distributions........ 10
Tax Free Rollovers, Transfers and Exchanges............... 11
Exchange Privilege.......................................... 11
Exchanges from Portfolio Director, Exchanges from
Portfolio Director 2................................... 11
Exchanges From Independence Plus Contracts................ 12
Exchanges From V-Plan Contracts........................... 13
Exchanges From SA-1 and SA-2 Contracts.................... 14
Exchanges From Impact Contracts........................... 15
Exchanges From Compounder Contracts....................... 16
Information Which May Be Applicable To Any Exchange....... 17
Calculation of Surrender Charge............................. 18
Illustration of Surrender Charge on Total Surrender....... 18
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 18
Purchase Unit Value......................................... 19
Illustration of Calculation of Purchase Unit Value........ 19
Illustration of Purchase of Purchase Units................ 19
Performance Calculations.................................... 19
Money Market Division Yields.............................. 19
Calculation of Yield for Money Market Division Six........ 19
Illustration of Calculation of Yield for Money Market
Division Six........................................... 19
Calculation of Effective Yield for Money Market Division
Six.................................................... 19
Illustration of Calculation of Effective Yield for Money
Market Division Six.................................... 19
Standardized Yield for Bond Fund Divisions.................. 20
Calculation of Standardized Yield for Bond Fund
Divisions.............................................. 20
Illustration of Calculation of Standardized Yield for Bond
Fund Divisions......................................... 20
Calculation of Average Annual Total Return................ 21
Performance Information..................................... 22
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to
Benchmark Tables....................................... 22
Performance Compared to Market Indices.................... 22
AGSPC Growth Division Fifteen Performance Compared to S&P
500 Index.............................................. 25
AGSPC International Government Bond Division Thirteen
Performance Compared to Salomon Brothers Non-U.S.
Dollar World Government Bond Index..................... 25
AGSPC Money Market Division Six Performance Compared to
Certificate of Deposit Primary Offering by New York
City Banks, 30 Day Index (Primary CD Index)............ 26
AGSPC Science & Technology Division Seventeen Performance
Compared to S&P 500 Index.............................. 26
AGSPC Social Awareness Division Twelve Performance
Compared to S&P 500 Index.............................. 27
AGSPC Stock Index Division Ten Performance Compared to S&P
500 Index.............................................. 27
Founders Growth Division Thirty Compared to S&P 500
Index.................................................. 28
Neuberger&Berman Guardian Trust Division Twenty-nine
Compared to S&P 500 Index.............................. 28
Putnam Global Growth Division Twenty-eight Compared to
MCSI World Index and S&P 500 Index..................... 29
Putnam New Opportunities Division Twenty-six Compared to
S&P 500 Index.......................................... 29
</TABLE>
2
<PAGE> 183
Putnam OTC & Emerging Growth Division Twenty-seven
Compared to Russell 2000 Index and S&P 500 Index....... 30
Scudder Growth and Income Division Twenty-one Compared to
S&P 500 Index.......................................... 30
Templeton Foreign Division Thirty-two Compared to EAFE
Index.................................................. 31
Twentieth Century Ultra Division Thirty-one Compared to
S&P 500 Index and NASDAQ Composite Index............... 31
Vanguard Fixed Income Securities Fund -- Long-Term
Corporate Portfolio Division Twenty-two Compared to
Merrill Lynch Corporate Master Index................... 32
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division Twenty-three Compared to
Lehman Brothers U.S. Treasury Long-Term Index.......... 32
Vanguard/Wellington Division Twenty-five Compared to S&P
500 Index and Merrill Lynch Corporate Master Index..... 33
Vanguard/Windsor II Division Twenty-four Compared to S&P
500 Index.............................................. 33
Payout Payments............................................. 34
Assumed Investment Rate................................... 34
Amount of Payout Payments................................. 34
Payout Unit Value......................................... 34
Illustration of Calculation of Payout Unit Value.......... 35
Illustration of Payout Payments........................... 35
Distribution of Variable Annuity Contracts.................. 36
Experts..................................................... 36
Comments on Financial Statements............................ 37
3
<PAGE> 184
GENERAL INFORMATION
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$2.9 billion as of December 31, 1996. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,539,015
accounts as of December 31, 1996. The number of employer groups which have
purchased Contracts has increased by 178 percent in the past ten years to more
than 22,464 as of December 31, 1996. As of December 31, 1996, the Company was
ranked in the top 1 percent of all U.S. life insurance companies with regard to
asset size. As of December 31, 1996 the Company's assets totaled nearly $30
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
As of December 31, 1996, the Company was marketing Contracts in more than
8,282 public and private, primary and secondary schools with more than 427,224
participant accounts for employees in public and private schools nationwide.
From December 31, 1986 to December 31, 1996, the cash value of investments in
these Contracts has increased by 327 percent while the number of public and
private school groups in these Contracts increased 86 percent and the number of
participant accounts in these Contracts increased by 119 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1986 to December 31, 1996, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 144 percent and for the same period the
number of participant accounts has increased 147 percent. For the same time
period cash values for participants have increased 319 percent. As of December
31, 1996, more than 43 percent of United States colleges and universities allow
the Company to market Contracts to their faculty and staff members.
The Company has utilized as the central focus in its marketing to college
and university faculty and staff members the theme that the Company is the
"Alternative of Choice."
The Company has also had growth in the health care segment of the
not-for-profit organization market. From December 31, 1986 to December 31, 1996
Contract cash values have increased 792 percent. During the same period the
number of health care groups that have purchased these Contracts increased 241
percent and the number of participants who were in the Contracts increased 748
percent.
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1986 to December 31, 1996, Contract
cash values for participants in these groups have increased 319 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 250 percent and the number of employer groups has
increased 399 percent.
Additionally, several states have enacted, as an alternative to state
administered defined benefit retirement programs, Optional Retirement Plans
(ORPs). A state that sponsors an ORP will select the carriers which will be
allowed to participate in the ORP. The Company has been selected as one of the
carriers permitted to market Contracts to state employees who elect to
participate in the ORP in 26 of the last 28 states to sponsor ORPs with multiple
carriers, as of December 31, 1996. From December 31, 1990 to December 31, 1996,
in these ORPs the number of participant accounts increased 149 percent and cash
values increased 147 percent to more than $1.8 billion dollars. In addition,
during this time period annual ORP premiums doubled.
The Company may, from time to time, refer to a general investment strategy
known as indexing.
4
<PAGE> 185
Several of the Divisions employ this investment strategy. The Company may
compare the performance of these Divisions to the S&P 500 Index, S&P MidCap 400
Index, Russell 2000 Index, Morgan Stanley Capital International Europe,
Australia, and Far East (EAFE) Index, or any other appropriate market index. The
indexes are not managed funds and have no identifiable investment objectives.
The Company may, from time to time, refer, individually or collectively, to
its package of retirement plan services. Collectively, this package of services
may be referred to as easy Retirement Plan easy Retirement Plan includes: (1)
personal, face-to-face service from highly trained VALIC Retirement Plan
Specialists; (2) informative retirement-investment education programs, seminars
and materials; (3) specialized computer-aided services for retirement planning
and developing asset allocation strategies; (4) a wide selection of innovative,
market-responsive investment options; (5) advanced and efficient administration
of retirement accounts; (6) and a financially strong and stable Company with
which to do business.
From time to time the Company may refer to the diversifying process of
asset allocation based on the Modern Portfolio Theory developed by Nobel Prize
winning economist Harry Markowitz. The basic assumptions of Modern Portfolio
Theory are that the selection of individual investments has little impact on
portfolio performance, market timing strategies seldom work, markets are
efficient and selecting the suitable mix of asset classes is more important when
creating a long-term investment portfolio. Modern Portfolio Theory allows an
investor to determine an "efficient" or "optimized" portfolio that has
historically provided a higher return with the same risk or the same return with
lower risk.
When presenting the asset allocation process the Company may outline the
process of personal and investment risk analysis including determining
individual risk tolerances and a discussion of the different types of investment
risk. The Company may classify investors into five categories based on their
personal risk tolerance and will quote various industry experts on which types
of investments are best suited to each of the five risk categories. The industry
experts quoted may include Ibbotson Associates, CDA Investment Technologies,
Lipper Analytical Services, Laffer-Cantos, Inc., VARDS Report, Wilson Associates
and any other expert which has been deemed by the Company to be appropriate. The
Company may also provide a historical overview of the performance of a variety
of investment market indexes and different asset classes, such as stocks, bonds,
cash equivalents, etc. The Company may also discuss investment volatility
(standard deviation) including the range of returns for different asset classes
over different time horizons, and the correlation between the returns of
different asset classes. The Company may also discuss the basis of portfolio
optimization including the required inputs and the construction of efficient
portfolios using sophisticated computer-based techniques. Finally, the Company
may describe various investment strategies and methods of implementation such as
the use of index funds vs. actively managed funds, the use of dollar cost
averaging techniques, the tax status of contributions, and the periodic
rebalancing of diversified portfolios.
The Company, in its marketing efforts to each of the market segments, may
from time to time design sales literature and material specifically for that
market segment, e.g., the health care segment of the not-for-profit organization
market. This sales literature and material may also be specific to a certain
group. For example, sales literature and material may be designed for a specific
hospital. The sales literature and material would address specifically the
group's contract and retirement plan.
The Company, in its marketing efforts, may also refer to the following
investment advisers referenced in the Prospectus.
The Company may, from time-to-time refer to Founders Asset Management, Inc.
(FAM) as investment adviser to Founders Growth Fund (underlying Division
Thirty). FAM is a registered investment adviser first established as an asset
manager in 1938.
The Company may, from time to time, refer to Neuberger & Berman Management
Inc. (N&B Management) as investment manager to the Portfolio in which Guardian
Trust (underlying Division Twenty-nine) invests. N&B Management is the
administrator and distributor of shares of the Guardian Trust. N&B Management
and its predecessor firms have specialized in the management
5
<PAGE> 186
of no-load mutual funds since 1950. N&B Management had aggregate net assets
under management of approximately $11.4 billion as of December 31, 1996.
The Company may, from time to time, refer to Putnam Investment Management
Inc. (PIM) as investment adviser to the Putnam New Opportunities Fund
(underlying Division Twenty-six), Putnam OTC Emerging Growth Fund (underlying
Division Twenty-seven) and Putnam Global Growth Fund (underlying Division
Twenty-eight). PIM has been managing mutual funds since 1937. As of March 31,
1996 PIM and its affiliates managed approximately $135 billion in assets.
The Company may, from time to time refer to Scudder, Stevens & Clark, Inc.
("Scudder") as investment adviser to the Scudder Growth and Income Fund. Scudder
was established in 1919.
The Company may, from time to time, refer to Templeton Global Advisors
(TGA) Limited as investment adviser to the Templeton Foreign Fund (underlying
Division Thirty-two). TGA is an indirect wholly owned subsidiary of Franklin
Resources Inc. The Templeton organization has been investing globally over the
past 52 years and, with its affiliates, provides investment management and
advisory services to a worldwide client base, including over 4.3 million mutual
fund shareholders, foundations, endowments, employee benefit plans and
individuals.
The Company may, from time to time, refer to the Wellington Management
Company (WMC) as investment adviser to the Vanguard/Wellington Fund (underlying
Division Twenty-five) and the Vanguard Fixed Income Securities Fund -- Long-Term
Corporate Portfolio (underlying Division Twenty-two). WMC is a professional
investment counseling firm which globally provides investment services to
investment companies, institutions and individuals. As of December 31, 1995, WMC
held discretionary management authority to more than $108 billion of assets.
The Company may, from time to time, refer to Vanguard Group Inc., Fixed
Income Management Division (VFIM) as investment adviser to the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (underlying Division
Twenty-three). VFIM provides investment advisory services to more than 39
Vanguard money market and bond portfolios. Total assets under management by VFIM
were $70 billion as of December 31, 1995.
The Company may, from time to time, refer to Barrow, Hanley, Mewhinney &
Strauss Inc, Equinox Capital Management, Tukmann Capital Management, Inc. and
Vanguard Group Inc. Each is an investment adviser to Vanguard/Windsor II
(underlying Division Twenty-four). Barrow, Hanley, Mewhinney & Strauss Inc. is a
Texas corporation which manages a portion of the equity allocation of the
Vanguard/Windsor II. As of December 31, 1996 this portion was approximately 72%
of Vanguard/Windsor II's total assets.
Equinox Capital Management, a Delaware corporation, Tukmann Capital
Management, a Maryland corporation, and Vanguard Group Inc. manage the
investment and reinvestment of a portion of the equity allocation of Vanguard/
Windsor II. As of December 31, 1996, these investment advisers each managed
approximately 10% of Vanguard/Windsor II's total assets.
The Company may, from time-to-time, refer to American Century Investment
Management, Inc. (ACIM) as investment adviser to the Twentieth Century Ultra
Fund (underlying Division Thirty-one). ACIM, or its predecessor has been
providing investment advisory services to American Century since its founding in
1958.
The Company may, from time to time, refer in advertisements or sales
materials to certain milestones which are intended to emphasize the Company's
growth and development in assets, groups and various market segments. The
Company may also refer to other versions of Portfolio Director in advertisements
or sales material. The Company may refer to certain innovative aspects of its
products such as having a variety of publicly available mutual funds as Variable
Account Options. Additionally the Company may refer from time to time in
advertisements or sales materials to marketing strategies it utilizes to promote
the Company's business objectives. Further, the Company may refer from time to
time in advertisements or sales materials to certain value-added services it
provides to its groups, Contract Owners and Participants.
The Company may from time to time compare the performance of the mutual
funds that serve as the investment vehicles for Portfolio Director 2 to the
performance of certain market
6
<PAGE> 187
indices. These market indices are described in the "Performance Information"
Section of this Statement of Additional Information.
ENDORSEMENTS AND
PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contract Owners, the
Company may refer to its endorsements. Endorsements are often in the form of a
list of organizations, individuals or other parties which recommend the Company
or the Contracts. The endorser's name will be used only with the endorser's
consent. It should be noted that the list of endorsements may change from time
to time.
Also from time to time, the rating of the Company as an insurance company
by A. M. Best may be referred to in advertisements or in reports to Contract
Owners. Each year the A. M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's Ratings range from A++ to F. An A++
rating means, in the opinion of A. M. Best, that the insurer has demonstrated
the strongest ability to meet its respective policyholder and other contractual
obligations.
In addition, the claims-paying ability of the Company as measured by the
Standard and Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to D.
Further, from time to time the Company may refer to Moody's Investor's
Service's rating of the Company. Moody's Investor's Service's financial strength
ratings indicate an insurance company's ability to discharge senior policyholder
obligations and claims and are based on an analysis of the insurance company and
its relationship to its parent, subsidiaries and affiliates. Moody's Investor's
Service's ratings range from Aaa to C.
The Company may additionally refer to its Duff & Phelp's rating. A Duff &
Phelp's rating is an assessment of a Company's insurance claims paying ability.
Duff & Phelp's ratings range from AAA to CCC. An AAA rating reflects that the
Company has the highest claims paying ability.
Ratings relate to the claims paying ability of the Company's General
Account and not the investment characteristics of the Separate Account.
The Company may from time to time, refer to Lipper Analytical Services
Incorporated ("Lipper"), Morningstar, Inc. ("Morningstar") and CDA/Wiesenberger
Investment Companies (CDA/Wiesenberger) when discussing the performance of its
Divisions. Lipper, Morningstar and CDA/Wiesenberger are leading publishers of
statistical data about the investment company industry in the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. Morningstar has not, however,
ranked the Neuberger & Berman Guardian Trust. The published categories which may
be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to The Variable Annuity Research
& Data Services (VARDS) Report. The VARDS Report offers monthly analysis of the
variable annuity industry, including marketing and performance information.
Finally the Company will utilize as a comparative measure for the
performance of its Funds the Consumer Price Index ("CPI"). The CPI is a measure
of change in consumer prices, as determined in a monthly survey of the U.S.
Bureau of Labor Statistics. Housing costs, transportation, food, electricity,
changes in taxes and labor costs
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are among the CPI components. The CPI provides a tool for determining the impact
of inflation on an individual's purchasing power.
TYPES OF VARIABLE ANNUITY
CONTRACTS
Three types of Contracts are offered in connection with the prospectus to
which this Statement of Additional Information relates:
(1) single payment immediate annuity Contracts;
(2) single payment deferred annuity Contracts; and
(3) flexible payment deferred annuity Contracts.
Under single payment Contracts, only one Purchase Payment is made by the
Contract Owner. Under flexible payment Contracts, Purchase Payments generally
are made until retirement age is reached. However, no Purchase Payments are
required to be made after the first payment. Purchase Payments are subject to
any minimum payment requirements under the Contract.
Under deferred annuity contracts, Purchase Payments are invested and
accumulate on a fixed or variable basis until the date the Contract Owner
selects to commence annuity payments.
Under immediate annuity Contracts, the first annuity payment is made on the
first day of the second month after the Purchase Payment is received. During the
period before the Annuity Date, the Purchase Payments are invested in the same
manner, and the other terms and conditions (including the options and rights of
Contract Owners, Annuitants and Beneficiaries) are the same under immediate
annuity Contracts as under deferred annuity Contracts.
The Contracts are non-participating and will not share in any of the
profits of the Company.
FEDERAL TAX MATTERS
This Section summarizes the major tax consequences of contributions,
payments, and withdrawals under Portfolio Director 2, during life and at death.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if Purchase Payments under the contract are invested in
publicly available mutual funds. If investment in publicly available mutual
funds were to cause the tax deferral provisions described below for these
specific types of contracts not to apply, you would be currently taxed on
transfers, redemptions, purchase payments and dividend and capital gains
distributions.
In addition, it is also the opinion of VALIC and its tax counsel that, for
each other type of Qualified Contract, an independent exemption provides tax
deferral regardless of ownership of the Mutual Fund shares.
Investment earnings on contributions to Non-Qualified Contracts generally
will be taxed currently to the owner, and the contracts will not be treated as
annuities for federal income tax purposes. For this reason, Non-Qualified
Contracts will be offered and sold only to non-natural persons pursuant to the
meaning of Section 72 of the Code.
TAX CONSEQUENCES OF PURCHASE PAYMENTS
403(b) Annuities. Purchase Payments made by Section 501(c)(3) tax-exempt
organizations and public educational institutions toward Contracts for their
employees are excludable from the gross income of employees, to the extent
aggregate Purchase Payments do not exceed several competing tax limitations.
This gross income exclusion applies both to employer contributions and to your
voluntary salary reduction contributions.
Your voluntary salary reduction contributions are generally limited to the
lesser of $9,500 or 20% of salary, although additional, "catch-up" contributions
are permitted under certain circumstances. Combined employer and salary
reduction contributions are generally limited to approximately 20% of salary. In
addition, after 1988 employer contributions for highly compensated employees may
be further limited by applicable nondiscrimination rules.
401(a) and 403(a) Qualified Plans. Purchase Payments made by an employer
(or a self-employed individual) under a qualified pension, profit-sharing or
annuity plan are excluded from the gross income of the employee. Purchase
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Payments made by an employee generally are made on an after-tax basis, unless
eligible for pre-tax treatment by reason of Sections 401(k) or 414(h).
408(b) Individual Retirement Annuities ("IRAs"). Tax-deductible
contributions for IRA Contracts are limited to the lesser of $2,000 or 100% of
compensation, and may be made only by individuals who:
(i) are not (and whose spouses are not) active participants in another
retirement plan;
(ii) are active participants in another retirement plan, but are unmarried and
have adjusted gross income of $25,000 or less; or
(iii) are active participants (or whose spouse is) in another retirement plan,
but are married and have adjusted gross income of $40,000 or less.
Active participants in other retirement plans whose adjusted gross income
exceeds the limits in (ii) or (iii) by less than $10,000 are entitled to make
deductible IRA contributions in proportionately reduced amounts. If an IRA is
established for a nonworking spouse who has no compensation, the annual
tax-deductible Purchase Payments for both spouses' Contracts cannot exceed the
lesser of $4,000 or 100% of the working spouse's earned income, and no more than
$2,000 may be contributed to either spouse's IRA for any year.
You may be eligible to make nondeductible IRA contributions in excess of:
(i) the lesser of $2,000 ($4,000 for you and your spouse's IRA) or 100% of
compensation, over
(ii) your applicable IRA deduction limit.
You may also make unlimited contributions of eligible rollover amounts from
other qualified plans. See Tax-Free Rollovers, Transfers and Exchanges.
457 Plans. A unit of a state or local government may establish a deferred
compensation program for individuals who perform services for the government
unit. In addition, a non-governmental tax-exempt employer may establish an
eligible deferred compensation program for individuals who: (i) perform services
for the employer, and (ii) belong to a select group of management or highly
compensated employees and/or independent contractors.
This type of program allows eligible individuals to defer the receipt of
compensation (and taxes thereon) otherwise presently payable to them. If the
program is an eligible deferred compensation plan (an "EDCP"), you may
contribute (and defer tax on) the lesser of $7,500 (indexed for inflation) or
33 1/3% of your "includible" compensation (compensation from the employer
currently includible in taxable income). Additional, catch-up deferrals are
permitted in your final three years before normal retirement age.
The employer uses deferred amounts to purchase the Contracts offered by
this prospectus. The Contract is generally held for the exclusive benefit of
plan participants, although certain Contracts may remain subject to the claims
of the employer's general creditors until 1999. The employee has no present
rights to vested interest in the Contract and is entitled to payment only in
accordance with the EDCP provisions.
SEP. Employer contributions under a SEP are made to a separate individual
retirement account established for each participating employee, and generally
must be made at a rate representing a uniform percent of participating
employees' compensation. Employer contributions are excludable from employees'
taxable income, and after 1993 cannot exceed the lesser of $30,000 or 15% of
your compensation.
Through 1996, employees of certain small employers (other than tax-exempt
organizations) may contribute pretax, on a salary reduction basis, to the SEP.
These salary reduction contributions may not exceed $7,000, indexed for
inflation in later years.
Non-Qualified Contracts. Non-natural persons may purchase a Non-Qualified
Contract. However, any increase in the Purchase Unit Value of a Non-Qualified
Contract resulting from the investment performance of VALIC Separate Account A
is taxable to the Contract Owner when credited to it.
TAX CONSEQUENCES OF DISTRIBUTIONS
403(b) Annuities. Voluntary salary reduction amounts accumulated after
December 31, 1988, and earnings on voluntary contributions
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before and after that date, may not be distributed before one of the following:
(1) attainment of age 59 1/2;
(2) separation from service;
(3) death;
(4) disability, or
(5) hardship (hardship distributions are limited to salary reduction
contributions only, exclusive of earnings thereon).
Distributions are taxed as ordinary income to the recipient in accordance
with Section 72.
401(a) and 403(a) Qualified Plans. Distributions from Contracts purchased
under qualified plans are taxable as ordinary income, except to the extent
allocable to an employee's after-tax contributions (investment in the Contract).
If you or your Beneficiary receive a "lump sum distribution" (legally defined
term), the taxable portion may be subject to special 5-year or 10-year income
averaging treatment. Five-year forward averaging is unavailable for
distributions occurring after December 31, 1999. Ten-year income averaging uses
tax rates in effect for 1986, allows 20% capital gains treatment for the taxable
portion of a lump sum distribution attributable to years of service before 1974,
and is available if you were 50 or older on January 1, 1986.
408(b) IRAs and SEPs. Distributions are taxed as ordinary income to the
recipient.
457 Plans. Amounts received from an EDCP are includible in gross income for
the taxable year in which are paid or otherwise made available to the recipient.
Non-Qualified Contracts. The investment performance of the VALIC Separate
Account A is taxable when credited to the contract owner whether or not
distributed.
SPECIAL TAX CONSEQUENCES -- EARLY
DISTRIBUTION
403(b) Annuities, 401(a) and 403(a) Qualified Plans, 408(b) IRAs and
SEPs. Taxable distributions received before the recipient attains age 59 1/2
generally are subject to a 10% penalty tax in addition to regular income tax.
Distributions on account of the following generally are excepted from this
penalty tax:
(1) death;
(2) disability;
(3) separation from service after a participant reaches age 55;
(4) separation from service at any age if the distribution is in the form of
substantially equal periodic payments over the life (or life expectancy) of
the Participant (or the Participant and Beneficiary), and
(5) distributions which do not exceed the employee's tax deductible medical
expenses for the taxable year of receipt.
457 Plans. Distributions generally may be made under an EDCP prior to
separation from service only for unforeseeable emergencies, or for amounts under
$3,500 for inactive Participants, and are includible in the recipient's gross
income in the year paid.
Non-Qualified Contracts. No penalties apply for early distributions under
Non-Qualified Contracts sold to non-natural persons.
SPECIAL TAX CONSEQUENCES -- REQUIRED DISTRIBUTIONS
403(b) Annuities. Generally, minimum required distributions must commence
no later than April 1 of the calendar year following the later of the calendar
year in which the Participant attains age 70 1/2 or the calendar year in which
the Participant retires. Required distributions must be made over a period that
does not exceed the life or life expectancies of the Participant (or lives or
joint life expectancies of the Participant and Beneficiary). The minimum amount
payable can be determined several different ways. A penalty tax of 50% is
imposed on the amount by which the minimum required distribution in any year
exceeds the amount actually distributed in that year.
Amounts accumulated under a Contract on December 31, 1986 may be paid in a
manner that meets the above rule or, alternatively:
(i) must begin to be paid when Participant attains age 75; and
(ii) the present value of payments expected to be made over the life of the
Participant, (under the option chosen) must exceed 50% of the present value
of all payments expected to be made (the "50% rule").
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The 50% rule will not apply if a Participant's spouse is the joint annuitant.
Notwithstanding these pre-January 1, 1987 rules the entire contract balance must
meet the minimum distribution incidental benefit requirement of Section
403(b)(10).
At the Participant's death before payout has begun, Contract amounts
generally either must be paid to the Beneficiary within 5 years, or must begin
within 1 year of death and be paid over the life or life expectancy of the
Beneficiary. If death occurs after commencement of (but before full) payout,
distributions generally must continue at least as rapidly as under the method
elected by the Participant and in effect at the time of death.
401(a) and 403(a) Qualified Plans. Minimum distribution requirements for
Qualified Plans, are generally the same as described for 403(b) Annuities,
except that there is no exception for pre-1987 amounts.
408(b) IRAs and SEPs. Minimum distribution requirements are generally the
same as described above for 403(b) Annuities, except that:
(1) there is no exception for pre-1987 amounts; and
(2) there is no available postponement, past April 1 of the calendar year
following the calendar year in which age 70 1/2 is attained.
457 Plans. Beginning January 1, 1989, the minimum distribution requirements
for EDCP's are generally the same as described above for 403(b) Annuities except
that there is no exception for pre-1987 amounts.
Non-Qualified Contracts. Non-Qualified Contracts do not require
commencement of distributions at any particular time and do not limit the
duration of annuity payments.
TAX-FREE ROLLOVERS, TRANSFERS AND
EXCHANGES
403(b) Annuities. Tax free transfers between 403(b) annuity contracts
and/or 403(b)(7) custodial accounts, and tax-free rollovers from 403(b) programs
to IRAs or other 403(b) programs, are permitted under certain circumstances.
401(a) and 403(a) Qualified Plans. The taxable portion of certain
distributions may be transferred in a tax-free rollover to an individual
retirement account or annuity, or to another such plan.
408(b) IRAs. Funds may be transferred tax-free to an IRA Contract, from a
403(b) Annuity, or 401(a) or 403(a) Qualified Plan, under certain conditions.
These amounts may subsequently be rolled over on a tax-free basis to another
such plan or 403(b) Annuity Contract from this "conduit" IRA. In addition,
tax-free rollovers may be made from one IRA to another provided that no more
than one such rollover is made during any twelve-month period.
SEPs. Funds may be rolled over tax free from one SEP only to another SEP or
an IRA.
457 Plans. Tax-free transfer of EDCP amounts are permitted only to another
EDCP.
EXCHANGE PRIVILEGE
In the prospectus we described generally how under certain conditions we
will allow you to exchange from other fixed and/or variable contracts we issue
(other contracts) to Portfolio Director 2. These other contracts are listed in
the prospectus. A more detailed comparison of the features, charges and
restrictions between each of these listed other contracts and Portfolio Director
2 provided below.
In the prospectus we also describe exchanges between Portfolio Director and
Portfolio Director 2 and the restrictions imposed on those exchanges.
Specifically once you have exchanged between Portfolio Director and Portfolio 2
you must wait 120 days before making another exchange between Portfolio Director
and Portfolio Director 2.
EXCHANGES FROM PORTFOLIO DIRECTOR,
EXCHANGES FROM PORTFOLIO DIRECTOR 2
Sales/Surrender Charges.
Portfolio Director and Portfolio Director 2 have the same provisions for
imposing surrender charges upon total or partial surrenders. Both Portfolio
Director and Portfolio Director 2 have the same provisions where surrender
charges are not imposed. For purposes of satisfying the fifteen-year and
five-year holding requirements described in "Surrender Charges" in the
prospectus, Portfolio Director 2 will be deemed to have been issued on the same
date as Portfolio Director. Purchase Payments exchanged into Portfolio Director
2 will be treated as Purchase Payments
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under Portfolio Director 2 for purposes of calculating surrender charges.
Exchanged payments will be deemed to have been made under Portfolio Director 2
on the date they were made to Portfolio Director for purposes of calculating the
surrender charge under Portfolio Director 2.
Other Charges
Portfolio Director and Portfolio Director 2 have the same provisions for
imposing the quarterly account maintenance fee.
Both Portfolio Director and Portfolio Director 2 impose an additional daily
charge with an annualized rate of 1.00% to 1.25% depending upon the Variable
Account Option selected, if any, on the daily net asset value of VALIC Separate
Account A. This charge is to cover expenses not covered by the account
maintenance charge and to compensate the Company for assuming mortality risks.
Under Portfolio Director 2 the Company will reimburse to certain Divisions any
fees it receives from a Mutual Fund for providing the Mutual Fund administrative
and shareholder services.
Investment Options
Under Portfolio Director, sixteen divisions of VALIC Separate Account A are
available, thirteen of which invest in different investment portfolios of AGSPC
and three divisions of which invest in other mutual fund portfolios. These
mutual fund portfolios are managed either by the Company, the Dreyfus
Corporation or Templeton Investment Counsel Inc. for advisory fees at annual
rates ranging from .29% to .90% of each portfolio's or mutual fund's average
daily net assets. Two fixed investment options are also available.
Under Portfolio Director 2, eighteen divisions of VALIC Separate Account A
are available, 6 of which invest in a different portfolio of AGSPC and 12
divisions of which invest in other publicly available mutual fund portfolios.
These mutual fund portfolios are managed either by the Company or other
investment managers for advisory fees ranging from 0.01% to 1.00% of each
portfolio's or mutual fund's average daily net assets. Two fixed investment
options are also available.
Annuity Options
Both Portfolio Director and Portfolio Director 2 provide the same annuity
options.
EXCHANGES FROM INDEPENDENCE PLUS
CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within five years of the date
such Purchase Payments were made. The most recent Purchase Payments are deemed
to be withdrawn first. Up to 10% of the Account Value may be surrendered in a
Participant Year without any surrender charge being imposed. Portfolio Director
2 imposes a similar surrender charge upon total or partial surrenders. Both the
Portfolio Director 2 and Independence Plus Contracts have other similar
provisions where surrender charges are not imposed. However, Portfolio Director
2 provides at least one additional provision, not included in Independence Plus
Contracts, under which no surrender charge will be imposed. An additional
provision allows election of a systematic withdrawal method without surrender
charges. (See "Surrender Charges" in the prospectus.) For purposes of satisfying
the fifteen-year and five-year holding requirements described in "Surrenders
Charges" in the prospectus, Portfolio Director 2 will be deemed to have been
issued on the same date as the Independence Plus Contract or certificate
thereunder, but no earlier than January 1, 1982. Purchase Payments exchanged
into Portfolio Director 2 and which were made within five years before the date
of exchange will be treated as Purchase Payments under Portfolio Director 2 for
purposes of calculating surrender charges. Exchanged payments will be deemed to
have been made under Portfolio Director 2 on the date they were made to
Independence Plus Contracts for purposes of calculating the surrender charge
under Portfolio Director 2.
Other Charges. Under the Independence Plus Contracts, a maintenance charge
of $20 is assessed for the first year and an annual charge of $15 is assessed
for the second and later years during the accumulation period. The charge is due
in quarterly installments. A daily fee is charged at the annual rate of 1% of
the daily net asset value allocable to the Variable Subaccounts to cover
administrative expenses (other than those covered by the annual charge) and
mortality risks assumed by the Company. For Portfolio
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Director 2, a quarterly account maintenance charge of $3.75 is assessed for each
calendar quarter during the Purchase Period during which any Variable Account
Option Account Value is credited to a Participant's Account. The charge is to
reimburse the Company for some of the administrative expenses associated with
the Variable Account Options. No charge is assessed for any calendar quarter if
the Account Value is credited only to the Fixed Account Options throughout the
quarter. Such charge begins immediately if an exchange is made into any Variable
Account Option offered under Portfolio Director 2. The charge may also be
reduced or waived by the Company for Portfolio Director 2 if the administrative
expenses are expected to be lower for that Contract. (See "Reduction or Waiver
of Account Maintenance Fee or Surrender Charges" in the prospectus) To cover
expenses not covered by the account maintenance charge and to compensate the
Company for assuming mortality risks under Portfolio Director 2, an additional
daily charge with an annualized rate of 1.00% or 1.25%, depending upon the
Variable Account Options selected, if any, on the daily net asset value of VALIC
Separate Account A is attributable to Portfolio Director 2. (See "Separate
Account Charges" and "Separate Account Expense Reimbursement" in the prospectus)
Investment Options. Under Independence Plus Contracts ten divisions of
VALIC Separate Account A are available variable investment alternatives, each
investing in shares of a different underlying fund of AGSPC portfolio. The ten
mutual funds are managed by the Company for advisory fees at annual rates
ranging from .29% to .50% of each respective portfolio's average daily net
assets. In addition, two fixed investment options are available. Under Portfolio
Director 2, eighteen divisions of VALIC Separate Account A are available, six of
which invest in a different investment portfolio of AGSPC and twelve divisions
of which invest in other publicly available mutual fund portfolios. These mutual
fund portfolios are managed either by the Company, or other investment advisers
for advisory fees at annual rates ranging from .01% to 1.00% of each portfolio's
or mutual fund's average daily net assets. Two fixed investment options are also
available.
Annuity Options. Annuity options under Independence Plus Contracts provide
for payments on a fixed or variable basis, or a combination of both. The
Independence Plus Contract permits annuity payments for a designated period
between 3 and 30 years on a fixed basis only. Portfolio Director 2 permits
annuity payments for a designated period between of 5 and 30 years on a fixed
basis only. Independence Plus Contracts and Portfolio Director 2 both provide
for "betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM V-PLAN CONTRACTS
Sales/Surrender Charges. Under a V-Plan Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 7% of
the Purchase Payments withdrawn within five years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Up to 10% of the account value may be surrendered in a Participant Year
without any surrender charge being imposed. Portfolio Director 2 also imposes a
surrender charge upon total or partial surrenders. However, the surrender charge
under Portfolio Director 2 may not exceed 5% of any Purchase Payments withdrawn
within the most recent five years prior to the receipt of the surrender request
by the Company at its Home Office. V-Plan Contracts have other provisions where
surrender charges are not imposed. However, Portfolio Director 2 provides at
least two additional provisions, not included in V-Plan Contracts, under which
no surrender charge will be imposed. Those Portfolio Director 2 provisions
include no surrender charges on an election of the no charge systematic
withdrawal method, and where an employee-participant has maintained the account
for a period of five years and has attained the age 59 1/2. (See "Surrender
Charges" in the prospectus.) For purposes of satisfying the fifteen-year and
five-year holding requirements, Portfolio Director 2 will be deemed to have been
issued on the same date as the V-Plan Contract or certificate thereunder, but no
earlier than January 1, 1982.
If there is a total or partial surrender, Purchase Payments exchanged into
Portfolio Directors 2 and which were made within five years before the date of
exchange will be treated as
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Purchase Payments under Portfolio Director 2 for purposes of calculating
surrender charges. Exchanged payments will be deemed to have been made under
Portfolio Director 2 on the date they were made to the V-Plan Contract for
purposes of calculating the surrender charge under Portfolio Director 2.
Other Charges. There are no administrative and risk charges under V-Plan
Contracts. For Portfolio Director 2, a quarterly account maintenance charge of
$3.75 is assessed for each calendar quarter during the Purchase Period during
which any Variable Account Option Account Value is credited to a Participant's
Account. The charge is to reimburse the Company for some of the administrative
expenses associated with the Variable Account Options. No charge is assessed for
any calendar quarter if the Account Value is credited only to the Fixed Account
Options throughout the quarter. Such charges begin immediately if an exchange is
made into any Variable Account Option offered under Portfolio Director 2. The
charge may also be reduced or waived by the Company on Portfolio Director 2 if
the administrative expenses are expected to be lower for that Contract. (See
"Reduction or Waiver of Account Maintenance Fee or Surrender Charges" in the
prospectus.) To cover expenses not covered by the account maintenance charge and
to compensate the Company for assuming mortality risks under Portfolio Director
2, an additional daily charge with an annualized rate of 1.00% or 1.25%,
depending upon the Variable Account Options selected, if any, on the daily net
asset value of the VALIC Separate Account A is attributable to Portfolio
Director 2. (See "Separate Account Charges" and "Separate Account Expense
Reimbursement" in the prospectus.)
Investment Options. There are no variable investment alternatives provided
under V-Plan Contracts.
Annuity Options. Annuity options under V-Plan Contracts provide for
payments on a fixed basis only. The V-Plan Contract permits annuity payments for
a designated period of 1 to 15 years. Under a V-Plan Contract, the designated
period option may, subject to adverse tax consequences, be commuted at any time
for its remaining value. Portfolio Director 2 permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Under
Portfolio Director 2, Payout Payments may be made on a fixed or variable basis,
or a combination of both. Portfolio Director 2 does not provide for commutation.
V-Plan Contracts and Portfolio Directors 2 both provide for "betterment of
rates." Under this provision, Payout Payments for fixed annuities will be based
on mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM SA-1 AND SA-2 CONTRACTS (GUP-64, GUP-74, GTS VA CONTRACTS)
Sales/Surrender Charges. Under the SA-1 and SA-2 Contracts a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a SA-1 or SA-2 Contract is exchanged for Portfolio
Director 2 the surrender charge under Portfolio Director 2 will not apply to the
amount of Account Value applied to Portfolio Director 2 ("Exchanged Amount").
Purchase Payments made to Portfolio Director 2, however, would be subject to
surrender charges. In the case of a partial surrender, all Purchase Payments to
Portfolio Director 2 will be deemed to be withdrawn before any Exchanged Amount
is deemed to be withdrawn. No exchange pursuant to this offer will be allowed
within 120 days of a transfer of fixed accumulations under a SA-1 or SA-2
Contract to the variable portion of such Contract. Under Portfolio Director 2,
no sales charge is deducted at the time a Purchase Payment is made, but a
surrender charge may be imposed on partial or total surrenders. The surrender
charge may not exceed 5% of any Purchase Payments withdrawn within the most
recent five years prior to the receipt of the surrender request by the Company
at its Home Office. For purposes of this surrender charge, the most recent
Purchase Payments are deemed to be withdrawn first. (See "Surrender Charges" in
the prospectus.)
Other Charges. A charge of a percentage of each Purchase Payment is made
for administrative expenses for SA-1 and SA-2 Contracts. The charge is generally
1.25% and is included in the above sales and administrative charge. An
additional daily charge (at an annual rate of 1% of total net assets
attributable to SA-1 Contracts and ranging from .21% to .85% of total net assets
attributable to SA-2 Contracts) is made for mor-
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tality and expense risks assumed by the Company under the variable portion of
the Contract. The total of these expenses and other charges is limited to a
maximum of the rate imposed on SA-1 and SA-2 Contracts on April 1, 1987. (See
prospectus for SA-1 and SA-2 contracts dated April 20, 1987.) For Portfolio
Director 2, a quarterly account maintenance charge of $3.75 is assessed for each
calendar quarter during the Purchase Period during which any Variable Account
Option Account Value is credited to a Participant's Account. The charge is to
reimburse the Company for some of the administrative expenses associated with
the Variable Account Options. No charge is assessed for any calendar quarter if
the Account Value is credited only to the Fixed Account Options throughout the
quarter. Such charge begins immediately if an exchange is made into any Variable
Account Option offered under Portfolio Director 2. The charge may also be
reduced or waived by the Company on Portfolio Director 2 if the administrative
expenses are expected to be lower for that Contract. (See "Reduction or Waiver
of Account Maintenance Fee or Surrender Charges" in the prospectus.) To cover
expenses not covered by the account maintenance charge and to compensate the
Company for assuming mortality risks under Portfolio Director 2, an additional
daily charge with an annualized rate of 1.00% or 1.25%, depending upon the
Variable Account Options selected, if any, on the average daily net asset value
of the Separate Account is attributable to Portfolio Director 2. (See "Separate
Account Charges" and "Separate Account Expense Reimbursement" in the
prospectus.)
Investment Options. Under SA-1 and SA-2 Contracts only one division of
VALIC Separate Account A is available as a variable investment alternative. This
division invests in a portfolio of AGSPC. This portfolio is managed by the
Company for advisory fees at an annual rate of .29% of the portfolio's average
daily net assets. (Under a "grandfathering" arrangement, the total advisory fees
and certain other charges imposed against these Contracts are limited to a
maximum of the rate charged on April 1, 1987. See the prospectus for these
Contracts dated April 20, 1987.) Under Portfolio Director 2, eighteen divisions
of VALIC Separate Account A are available, six of which invest in a different
investment portfolio of AGSPC and twelve divisions of which invest in other
publicly available mutual fund portfolios. These mutual fund portfolios are
managed by either the Company or other investment managers, for advisory fees at
annual rates ranging from .01% to 1.00% of each portfolio's or mutual fund's
average daily net assets. Additionally, two fixed investment options are
available under Portfolio Director 2.
Annuity Options. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on a fixed or variable basis, or a combination of both. The SA-1
Contract annuity payments under a designated period option are limited to 15
years on a fixed basis only. Under this Contract, the designated period option
may, subject to adverse tax consequences, be commuted at any time for its
remaining value. SA-2 Contracts do not provide a designated period option nor do
they provide for commutation. Portfolio Director 2 permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Portfolio
Director 2 does not provide for commutation. The SA-1 and SA-2 Contracts make no
provision for transfers from a separate account to a fixed annuity during the
annuity period. This option, subject to certain conditions, is available under
Portfolio Director 2. The SA-1 Contracts provide an option for monthly variable
annuity payments to be made at a level payment basis during each year of the
annuity period. Portfolio Director 2 does not provide this option. SA-1 and
Portfolio Director 2, but not SA-2 Contracts, both provide for "betterment of
rates." Under this provision, Payout Payments for fixed annuities will be based
on mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM IMPACT CONTRACTS
Sales/Surrender Charges. Under an Impact Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 5% of
the Purchase Payments withdrawn within three years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Portfolio Director 2 also imposes a surrender charge upon total or
partial surrenders which may not exceed 5% of any Purchase Payments withdrawn
within the most recent five years prior to the receipt of the surren-
15
<PAGE> 196
der request by the Company at its Home Office. Portfolio Director 2 also has
other provisions where surrender charges are not imposed. (See "Exceptions to
Surrender Charge" in the prospectus.) For purposes of satisfying the fifteen-
year and five-year holding requirements, Portfolio Director 2 will be deemed to
have been issued on the same date as the Impact Contract, or certificate
thereunder, but no earlier than January 1, 1982. Only Purchase Payments
exchanged into a Portfolio Director 2 which were made within three years before
the date of exchange will be treated as Purchase Payments under Portfolio
Director 2 for purposes of calculating surrender charges. Exchanged payments
will be deemed to have been made under Portfolio Director 2 on the date they
were made to Impact Contracts for purposes of calculating the surrender charge
under Portfolio Director 2.
Other Charges. Under Impact Contracts, a $30 annual charge is assessed once
a year to cover administrative expenses. The charge may, with prior regulatory
approval if required, be increased or decreased. In addition, a daily charge is
made at an annual rate of 1% of the net asset value allocable to the Impact
Contracts to cover administrative expenses (other than those covered by the
annual charge) and mortality risks assumed by the Company. For Portfolio
Director 2, a quarterly account maintenance charge of $3.75 is assessed for each
calendar quarter during the Purchase Period during which any Variable Account
Option Account Value is credited to a Participant's Account. The charge is to
reimburse the Company for some of the administrative expenses associated with
the Variable Account Options. No charge is assessed for any calendar quarter if
the Account Value is credited only to the Fixed Account Options throughout the
quarter. Such charge begins immediately if an exchange is made into any Variable
Account Option offered under Portfolio Director 2. The charge may also be
reduced or waived by the Company on Portfolio Director 2 if the administrative
expenses are expected to be lower for that Contract. (See "Reduction or Waiver
of Account Maintenance Fee or Surrender Charges" in the prospectus.) To cover
expenses not covered by the account maintenance charge and to compensate the
Company for assuming mortality risks under Portfolio Director 2, an additional
daily charge with an annualized rate of 1.00% or 1.25%, depending upon the
Variable Account Options selected, if any, on the daily net asset value of the
Separate Account is attributable to Portfolio Director 2. (See "Separate Account
Charges" and "Separate Account Expense Reimbursement" in the prospectus.)
Investment Options. Under the Impact Contract five divisions of Separate
Account A are available as variable investment alternatives, each investing in
shares of a different underlying fund of AGSPC. The five mutual funds are
managed by the Company for advisory fees at annual rates ranging from .29% to
.50% of each respective portfolio's average daily net assets. Under Portfolio
Director 2, eighteen divisions of VALIC Separate Account A are available, six of
which invest in a different investment portfolio of AGSPC and twelve divisions
of which invest in other publicly available mutual fund portfolios. These mutual
fund portfolios are managed by either the Company, or other investment managers,
for advisory fees at annual rates ranging from .01% to 1.00% of each portfolio's
or mutual fund's average daily net assets. In addition, two fixed investment
options are available under Portfolio Director 2.
Annuity Options. Annuity options under Impact Contracts provide for
payments on a fixed or variable basis, or a combination of both. The Impact
Contract permits annuity payments for a designated period of 1 to 15 years on a
fixed basis only. Under an Impact Contract, the designated period option may,
subject to adverse tax consequences, be commuted at any time for its remaining
value. Portfolio Director 2 permits Payout Payments for a designated period of
between 5 and 30 years on a fixed basis only. Portfolio Director 2 does not
provide for commutation. Impact Contracts and the Portfolio Director 2 both
provide for "betterment of rates." Under this provision, Payout Payments for
fixed annuities will be based on mortality tables then being used by the
Company, if more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM COMPOUNDER CONTRACTS
Sales/Surrender Charges. Under a Compounder Contract a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a Compounder Contract
16
<PAGE> 197
is exchanged for Portfolio Director 2 the surrender charge under Portfolio
Director 2 will not apply to the amount of Account Value applied to Portfolio
Director 2. Purchase Payments made to Portfolio Director 2, however, would be
subject to the surrender charge under Portfolio Director 2. In the case of a
partial surrender, all Purchase Payments to Portfolio Director 2 will be deemed
to be withdrawn before any Exchanged Amount is deemed to be withdrawn. Under
Portfolio Director 2, no sales charge is deducted at the time a Purchase Payment
is made, but a surrender charge may be imposed on partial or total surrenders.
The surrender charge may not exceed 5% of any Purchase Payments withdrawn within
the most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. For purposes of this surrender charge, the most
recent Purchase Payments are deemed to be withdrawn first. (See "Surrender
Charges" in the prospectus.)
Other Charges. A charge of a percentage of each Purchase Payment is made
for administrative expenses under a Compounder Contract. The charge is 1.25% and
is included in the above sales charge. For Portfolio Director 2, a quarterly
account maintenance charge of $3.75 is assessed for each calendar quarter during
the Purchase Period during which any Variable Account Option Account Value is
credited to a Participant's Account. The charge is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No charge is assessed for any calendar quarter if the Account Value is
credited only to the Fixed Account Options throughout the quarter. Such charge
begins immediately if an exchange is made into any Variable Account Option
offered under Portfolio Director 2. The charge may also be reduced or waived by
the Company for Portfolio Director 2 if the administrative expenses are expected
to be lower for that Contract. (See "Reduction or Waiver of Account Maintenance
Fee or Surrender Charges" in this prospectus.) To cover expenses not covered by
the account maintenance charge and to compensate the Company for assuming
mortality risks under Portfolio Director 2, an additional daily charge with an
annualized rate of 1.00% or 1.25%, depending upon the Variable Account Options
selected, if any, on the daily net asset value of the Separate Account is
attributable to Portfolio Director 2. (See "Separate Account Charges" and
"Separate Account Expense Reimbursement" in the prospectus.)
Investment Options. There are no variable investment alternatives provided
under Compounder Contracts.
Annuity Options. Payout Payments under a Compounder Contract are on a fixed
basis only and the designated period option is limited to a period of 15 years.
However, under a Compounder Contract, the designated period option may, subject
to adverse tax consequences, be commuted at any time for its remaining value.
Portfolio Director 2 allows Payout Payments be made on a fixed or variable
basis, or both. One option under the Portfolio Director 2 provides for a
designated period of 5 and 30 years on a fixed basis only. Portfolio Director 2
does not provide for commutation. Unlike Portfolio Director 2, the Compounder
Contracts contain no "betterment of rates" provision.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the other contracts. Therefore, the annuity rates guaranteed
in Portfolio Director 2 are less favorable to Contract Owners and Annuitants
than those guaranteed in the other contracts. However, the current annuity rates
being charged for fixed annuities under the "betterment of rates" provisions
discussed above are more favorable than those guaranteed under Portfolio
Director 2 or the other contracts. Of course, no assurance can be given that
this will continue to be true at the time of annuitization for a given contract.
Guaranteed annuity rate tables are set forth in your Contract or in current
endorsements thereto. Those guaranteed for Portfolio Director 2 are set forth
therein, and copies may be obtained from one of the Company's Regional Offices
listed on the inside back cover of this prospectus.
To satisfy a federal tax law requirement, non-spouse beneficiaries under
Portfolio Director 2 generally must receive the entire benefit payable upon the
death of the Annuitant over their life expectancy or within five years of the
Annuitant's death. This requirement may be inapplicable to certain other
contracts or certificates issued before January 19, 1985 if not exchanged.
17
<PAGE> 198
CALCULATION OF SURRENDER CHARGE
The surrender charge is discussed in the Prospectus under "Fees and Charges
- --Surrender Charge." Examples of calculation of the Surrender Charge upon total
and partial surrender are set forth below:
ILLUSTRATION OF SURRENDER CHARGE ON TOTAL SURRENDER
Example 1.
TRANSACTION HISTORY
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/91......................... Purchase Payment $10,000
2/1/92......................... Purchase Payment 5,000
2/1/93......................... Purchase Payment 15,000
2/1/94......................... Purchase Payment 2,000
2/1/95......................... Purchase Payment 3,000
2/1/96......................... Purchase Payment 4,000
7/1/96......................... Total Purchase Payments (Assumes
Account Value is $50,000) 39,000
</TABLE>
Surrender Charge is lesser of (a) or (b):
<TABLE>
<S> <C> <C> <C>
a. Surrender Charge calculated on 60 months of Purchase Payments
1. Surrender Charge against Purchase Payment of 2/1/91......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/92......... $ 250
3. Surrender Charge against Purchase Payment of 2/1/93......... $ 750
4. Surrender Charge against Purchase Payment of 2/1/94......... $ 100
5. Surrender Charge against Purchase Payment of 2/1/95......... $ 150
6. Surrender Charge against Purchase Payment of 2/1/96......... $ 200
Surrender Charge based on Purchase Payments (1 + 2 + 3 + 4 +
5 + 6)...................................................... $1,450
b. Surrender Charge calculated on the excess over 10% of the Account
Value at the time of surrender:
Account Value at time of surrender $ 50,000
Less 10% not subject to Surrender Charge -5,000
-----------
Subject to Surrender Charge 45,000
X .05
-----------
Surrender Charge based on Account
Value $ 2,250 ........................................... $2,250
c. Surrender Charge is the lesser of a or b......................... $1,450
</TABLE>
ILLUSTRATION OF SURRENDER CHARGE ON A 10% PARTIAL SURRENDER FOLLOWED BY A FULL
SURRENDER
Example 2.
TRANSACTION HISTORY (ASSUMES NO INTEREST EARNED)
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/91......................... Purchase Payment $10,000
2/1/92......................... Purchase Payment 5,000
2/1/93......................... Purchase Payment 15,000
2/1/94......................... Purchase Payment 2,000
2/1/95......................... Purchase Payment 3,000
2/1/96......................... Purchase Payment 4,000
7/1/96......................... 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
8/1/96......................... Full Surrender 35,100
</TABLE>
a. Since this is the first partial surrender in this participant year,
calculate the excess over 10% of the value of the Purchase Units
10% of $39,000 = $3,900 [no charge on this 10% withdrawal]
b. The Account Value upon which Surrender Charge on the Full Surrender may
be calculated (levied) is $39,000 - $3,900 = $35,100
c. The Surrender Charge calculated on the Account Value withdrawn $35,100 X
.05 = $1,755
d. Since only $29,000 has been paid in Purchase Payments in the 60 months
prior to the Full Surrender, the charge can only be calculated on
$29,000. The $3,900 partial withdrawal does not reduce this amount.
Thus, the charge is $29,000 X (0.05) = $1,450.
18
<PAGE> 199
PURCHASE UNIT VALUE
The calculation of Purchase Unit value is discussed in the Prospectus under
"Purchase Period." The following illustrations show a calculation of a new Unit
value and the purchase of Purchase Units (using hypothetical examples):
ILLUSTRATION OF CALCULATION OF PURCHASE UNIT VALUE
Example 3.
<TABLE>
<S> <C>
1. Purchase Unit value, beginning of
period................................ $ 1.800000
2. Value of Fund share, beginning of
period................................ $21.200000
3. Change in value of Fund share........ $ .500000
4. Gross investment return (3)/(2)...... .023585
5. Daily mortality and expense charge... .000027
6. Net investment return (4)-(5)........ .023558
7. Net investment factor 1.000000+(6)... 1.023558
8. Purchase Unit value, end of period
(1)X(7)............................... $ 1.842404
</TABLE>
ILLUSTRATION OF PURCHASE OF PURCHASE UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 4.
<TABLE>
<S> <C>
1. First Periodic Purchase Payment.......................... $ 100.00
2. Purchase Unit value on effective date of purchase (see
Example 3)............................................... $ 1.800000
3. Number of Purchase Units purchased (1)/(2)............... 55.556
4. Purchase Unit value for valuation date following purchase
(see Example 3).......................................... $ 1.842404
5. Value of Purchase Units in account for valuation date
following purchase (3)X(4)............................... $ 102.36
</TABLE>
PERFORMANCE CALCULATIONS
MONEY MARKET DIVISION YIELDS
CALCULATION OF YIELD FOR MONEY MARKET DIVISION SIX
7-Day Current Yield: 3.92%
ILLUSTRATION OF CALCULATION OF YIELD FOR MONEY MARKET DIVISION SIX
Example 5.
The yield quotation above is based on the seven days ended December 31,
1996, the date of the most recent balance sheet included in the registration
statement ("base period"). It is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one Purchase Unit at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from Contract Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by 365/7.
CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION SIX
7-Day Effective Yield: 3.99%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION SIX
Example 6.
The effective yield quotation above is based on the seven days ended
December 31, 1996, the date of the most recent balance sheet included in the
registration statement ("base period"). It is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Purchase Unit at the beginning of
19
<PAGE> 200
the period, subtracting a hypothetical charge reflecting deductions from
Contract Owner accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] -1
STANDARDIZED YIELD FOR BOND FUND DIVISIONS
CALCULATION OF STANDARDIZED YIELD FOR BOND FUND DIVISIONS
<TABLE>
<CAPTION>
DIV. 13 DIV. 22 DIV. 23
-------- -------- --------
<S> <C> <C> <C>
Standardized Yield.......................................... 3.49% 5.88% 5.33%
</TABLE>
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR BOND FUND DIVISIONS
Example 7.
The yield quotation based on a 30-day period ended December 31, 1996, the
date of the most recent balance sheet of the Registrant included in the
registration statement is computed by dividing the net investment income per
Purchase Unit earned during the period by the maximum offering price per Unit
on the last day of the period, according to the following formula:
YIELD = 2 [( a - b + 1)6 - 1]
cd
Where:
<TABLE>
<S> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Purchase Units outstanding
during the period
d = the maximum offering price per Purchase Unit on the last day
of the period
</TABLE>
Yield on each Division is earned from dividends declared and paid by the
Fund, which are automatically reinvested in Fund shares.
20
<PAGE> 201
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1996, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual com-
pounded rates of over the 1, 3, 5, and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C>
P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value at the end of the 1, 3, 5 or 10 year
periods of a hypothetical $1,000 Purchase Payment made at
the beginning of the 1, 3, 5, or 10 year periods (or
fractional portion thereof)
</TABLE>
The Company may advertise standardized average annual total return which,
includes the surrender charge of up to 5% of Gross Purchase Payments received
during the most recent 60 months as well as non-standardized average annual
total returns which does not include a surrender charge or maintenance fee.
There is no sales charge for reinvested dividends. All recurring fees have
been deducted. For fees which vary with the account size, an account size equal
to that of the median account size has been assumed. Ending redeemable value has
been determined assuming a complete redemption at the end of the 1, 3, 5 or 10
year period and deduction of all nonrecurring charges at the end of each such
period.
21
<PAGE> 202
PERFORMANCE INFORMATION
HYPOTHETICAL $10,000 ACCOUNT VALUE AND
CUMULATIVE RETURN AS COMPARED TO BENCHMARKS TABLES.
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return of each Division as compared to the benchmarks shown. Because
the Funds underlying Divisions Fifteen, Sixteen and Seventeen began operations
on April 29, 1994, performance information for those Divisions is based on
performance of comparable funds managed by the subadvisers for the Funds. The
performance information presented for all other Divisions represents actual Fund
performance.
These performance calculations for the Divisions, and the methods used for
calculating them, are explained in the prospectus. (See "How To Review
Investment Performance of Separate Account Divisions" and "Variable Account
Options" in the prospectus.)
These tables compare hypothetical investment performance and percentage
changes in Purchase Unit values with the results of several benchmarks,
representing unmanaged market indices. The performance information has been
adjusted to reflect mortality and expense risk charges. Surrender charges,
maintenance charges and premium taxes are not deducted. The effect of these
charges is to reduce total return to a Contract Owner. The comparisons should be
considered in light of the investment policies and objectives of the Funds.
Rates of return for the Divisions include reinvestment of investment income,
including capital gains, interest and dividends. The rates of return on the
market indices also have been adjusted to reflect reinvestment of interest and
dividends.
Price returns for the market indices are calculated by subtracting the
price level at the beginning of the year from the price level at the end of the
year and dividing the difference by the price level at the beginning of the
year. To calculate dollar values for the indices' Hypothetical $10,000 Account
Value presentation, price index values were substituted for Unit values in the
calculation described in the prospectus, and where applicable, dividend yields
were then added to determine the total returns applied in the dollar value
calculations. Similarly, to calculate Cumulative Return for the indices, the
Cumulative Return calculation described in the prospectus for Unit values of the
Divisions is used, substituting the Hypothetical $10,000 Account Value at the
end of each year for the Purchase Unit Value. No sales load, administrative
charges, or any other expenses have been deducted from the index calculations.
Additionally, the performance of a Division may from time to time be
compared with other Indexes which have been deemed by the Company relevant to
the Division.
These benchmarks do not reflect any charges for investment advisory fees,
brokerage commissions or other fees and expenses of the type charged at either
the Separate Account or Fund level. Therefore, the comparisons with these
benchmarks are of limited use.
THE PERFORMANCE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR
GUARANTEE OF FUTURE INVESTMENT PERFORMANCE, AND DO NOT REPRESENT THE ACTUAL
EXPERIENCE OF AMOUNTS INVESTED BY A PARTICULAR PARTICIPANT.
PERFORMANCE COMPARED TO MARKET INDICES
The performance of AGSPC Growth Division Fifteen, AGSPC Science &
Technology Division Seventeen, AGSPC Social Awareness Division Twelve, AGSPC
Stock Index Division Ten, Founders Growth Division Thirty, Neuberger & Berman
Guardian Trust Division Twenty-nine, Putnam New Opportunities Division
Twenty-six, Scudder Growth and Income Division Twenty-one, and Vanguard/Windsor
II Division Twenty-four may be compared to the record of the Standard &
Poor's(R) Corporation ("S&P(R)")* Composite Stock Price Index ("S&P 500 Index").
The S&P 500(R) Index is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries. The
Index represents approximately 70% of the aggregate United States equity markets
capitalization.
- ---------------
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in this Fund.
22
<PAGE> 203
The performance of the AGSPC International Government Bond Division
Thirteen may be compared to the Salomon Brothers Non-US Dollar World Government
Bond Index ("Salomon Index"). Total returns with income reinvested for the
Salomon index are published using two methods. The first method includes gross
income (income earned without subtracting foreign income taxes which may be
withheld from foreign investors). The second method includes net income (income
earned after subtracting estimated foreign taxes). The Division currently
compares its performance with the index using the second method. The Salomon
Index is an unmanaged aggregate index composed of 673 issues from fifteen
foreign countries. These countries include Austria, Australia, Belgium, Canada,
Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden,
Switzerland and the United Kingdom.
The performance of AGSPC Money Market Division Six may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The index is a money market index which reflects the average rate paid by New
York Banks on certificates of deposit of more than $100,000. The Index for 30
days is published daily.
The Putnam Global Growth Division Twenty-eight may be compared to the
Morgan Stanley Capital International World Index ("MSCI World Index"). Total
returns (with income reinvested) for the MSCI World Index is published using two
methods. The first method includes gross income (income earned without
subtracting foreign income taxes which may be withheld from foreign investors).
The second method includes net income (income earned after subtracting estimated
foreign taxes. The Division currently compares its performance with the index
using the second method. The MSCI World Index is an unmanaged capitalization
weighed index consisting of more than 1,500 issues from 22 countries as well as
certain South African gold mining issues. The countries include Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States.
The performance of the Putnam OTC & Emerging Growth Division Twenty-seven
may be compared to the Russell 2000(R) Index ("Russell 2000").** The Russell
2000 was developed in 1984 by the Frank Russell Trust Company to track the stock
market performance of small capitalization domestic stocks. The Russell 2000 is
market weighted and consists of approximately 2000 stocks. Stocks included in
the Russell 2000 are chosen by the Frank Russell Trust Company on the basis of
their market size.
The Templeton Foreign Division Thirty-two may be compared to the Morgan
Stanley Capital International Europe, Australia, and Far East Index ("EAFE
Index"). The EAFE Index, which commenced in 1969, is an unmanaged stock index
consisting of more than 1,000 companies from Europe, Australia and the Far East.
The index is capitalization weighted. It is a well known measure for
international stock performance. Total returns (with income reinvested) for the
EAFE Index are published using two methods. The first method includes gross
income (income earned without subtracting foreign income taxes which may be
withheld from foreign investors). The second method includes net income (income
earned after subtracting estimated foreign taxes). The Division currently
compares it performance with the index using the second method.
The Vanguard Fixed Income Securities Fund -- Long-Term Corporate Division
Twenty-two may be compared to the Merrill Lynch Corporate Master Index. The
Merrill Lynch Corporate Master Index consists of an index of approximately 3,600
corporate bond holdings of which assets are rated BBB- to AAA. The average years
to maturity of these corporate bond holdings are approximately 12 years.
The performance of the Vanguard Fixed Income Securities Fund -- Long-Term
U.S. Treasury Portfolio Division Twenty-three may be compared to the Lehman
Brothers U.S. Treasury Long-Term Index. This index measures a Fund's sensitivity
to interest rate changes. This index
- ---------------
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. RussellTM is a trademark of the Frank Russell Trust Company.
23
<PAGE> 204
was initiated in 1976 and is composed of all bonds covered by the Shearson
Lehman Hutton Treasury Bond Index with maturities of ten years or greater.
The performance of the Vanguard/Welling-
ton Division Twenty-five may be compared to a Blended Index, a measure of the
investment performance of a balanced portfolio of stocks and bonds, comprised of
the S&P 500 Index (65%) and the Merrill Lynch Corporate Master Index (35%). The
S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries. The
S&P 500 Index represents approximately 70% of the aggregate market
capitalization of the United States equity markets. The Merrill Lynch Corporate
Master Index consists of an index of approximately 3,600 corporate bond holdings
of which assets are rated BBB- to AAA. The average years to maturity of the
corporate bond holdings are approximately 12 years.
The performance of the Twentieth Century Ultra Division Thirty-one may be
compared to both the S&P 500 Index and the National Association of Securities
Dealers Automated Quotations (NASDAQ) Composite Price Index. The S&P 500 Index
is an unmanaged capitalization-weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. The S&P 500 Index
represents approximately 70% of the aggregate market capitalization of the
United States equity market. The NASDAQ Composite Price Index was developed by
the National Association of Securities Dealers (NASD) on May 17, 1971 with
figures available from February 5, 1971, at which time the index value was 100.
Through NASDAQ, the NASD provides daily, weekly, and monthly sets of stock price
indicators for Over-the-Counter (OTC) securities in different industry
categories. As of the end of 1996, over 5,800 issues were contained in the
NASDAQ Composite Price Index.
24
<PAGE> 205
See "How to Review Investment Performance of Separate Account Divisions" in the
prospectus for information about how these returns were calculated.
AGSPC Growth Division Fifteen Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
GROWTH S&P 500
DIVISION FIFTEEN INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................. $10,000 $10,000
12/31/94................................................. 10,018 10,532
12/31/95................................................. 14,667 14,489
12/31/96................................................. 17,333 17,817
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Growth Division Fifteen.................. 73.33% -- -- 18.18%
Benchmark Comparison
S&P 500 Index............................ 78.17% -- -- 22.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
AGSPC International Government Bond Division Thirteen Performance Compared to
Salomon Brothers Non-U.S. Dollar World Government Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
SALOMON BROS.
NON-U.S. DOLLAR
WORLD
INTERNATIONAL GOVERNMENT BOND GOVERNMENT
DIVISION THIRTEEN BOND INDEX
- ------------------------------------------------------------------- ---------------
<S> <C> <C>
10/01/91................................................. $10,000 $10,000
12/31/91................................................. 10,905 11,042
12/31/92................................................. 11,128 11,540
12/31/93................................................. 12,583 13,246
12/31/94................................................. 13,014 13,999
12/31/95................................................. 15,308 16,692
12/31/96................................................. 15,822 17,331
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
International Government Bond Division
Thirteen............................... 58.22% 45.09% 25.74% 3.36%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World
Government Bond Index.................. 73.31% 56.96% 30.84% 3.83%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
25
<PAGE> 206
AGSPC Money Market Division Six Performance Compared to Certificate of Deposit
Primary Offering by
New York City Banks, 30 Day Index (Primary CD Index)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- -------------------------------------------------- --------
<S> <C> <C>
01/01/87................................ $10,000 $10,000
12/31/87................................ 10,450 10,626
12/31/88................................ 11,048 11,409
12/31/89................................ 11,923 12,398
12/31/90................................ 12,738 13,390
12/31/91................................ 13,310 14,162
12/31/92................................ 13,606 14,567
12/31/93................................ 13,833 14,943
12/31/94................................ 14,216 15,476
12/31/95................................ 14,857 16,241
12/31/96................................ 15,447 16,978
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Money Market Division Six................... 54.47% 16.05% 11.66% 3.97%
Benchmark Comparison
Primary CD Index............................ 69.78% 20.23% 13.61% 4.53%
</TABLE>
AGSPC Science & Technology Division Seventeen Compared to S&P 500 Index.
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
SCIENCE & TECHNOLOGY S&P 500
DIVISION SEVENTEEN INDEX
- ------------------------------------------------------------------- -------
<S> <C> <C>
04/29/94................................................. $10,000 $10,000
12/31/94................................................. 12,477 10,532
12/31/95................................................. 19,972 14,489
12/31/96................................................. 22,505 17,817
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Science & Technology Division
Seventeen............................. 125.05% -- -- 12.68%
Benchmark Comparison
S&P 500 Index........................... 78.17% -- -- 22.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
26
<PAGE> 207
AGSPC Social Awareness Division Twelve Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- ------------------------------------------------------------------- -------
<S> <C> <C>
10/02/89................................................. $10,000 $10,000
12/31/89................................................. 10,100 10,214
12/31/90................................................. 9,877 9,897
12/31/91................................................. 12,506 12,912
12/31/92................................................. 12,795 13,896
12/31/93................................................. 13,670 15,297
12/31/94................................................. 13,339 15,499
12/31/95................................................. 18,351 21,323
12/31/96................................................. 22,527 26,220
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Social Awareness Division Twelve....... 125.27% 80.12% 64.79% 22.75%
Benchmark Comparison
S&P 500 Index.......................... 162.20% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
AGSPC Stock Index Division Ten Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 20, 1987
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ---------------------------------------------------------------------- -------------
<S> <C> <C>
04/20/87............................................... $ 10,000 $ 10,000
12/31/87............................................... 8,562 8,722
12/31/88............................................... 9,687 10,171
12/31/89............................................... 12,388 13,394
12/31/90............................................... 11,790 12,978
12/31/91............................................... 15,056 16,932
12/31/92............................................... 15,897 18,222
12/31/93............................................... 17,293 20,059
12/31/94............................................... 17,241 20,323
12/31/95............................................... 23,439 27,960
12/31/96............................................... 28,484 34,383
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Division
Stock Index Division Ten................. 184.84% 89.18% 64.71% 21.53%
Benchmark Comparison
S&P 500 Index............................ 243.83% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* This Division was initiated on April 20, 1987.
27
<PAGE> 208
Founders Growth Division Thirty Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
FOUNDERS GROWTH S&P 500
DIVISION THIRTY INDEX
- ----------------------------------------------------------------- --------
<S> <C> <C>
01/01/87............................................... $10,000 $10,000
12/31/87............................................... 10,906 10,525
12/31/88............................................... 11,318 12,273
12/31/89............................................... 15,884 16,162
12/31/90............................................... 14,061 15,660
12/31/91............................................... 20,522 20,431
12/31/92............................................... 21,181 21,988
12/31/93............................................... 26,329 24,204
12/31/94............................................... 25,199 24,524
12/31/95............................................... 36,329 33,739
12/31/96............................................... 41,906 41,488
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Founders Growth Division Thirty..... 319.06% 104.21% 59.16% 15.35%
Benchmark Comparison
S&P 500 Index....................... 314.88% 103.06% 71.41% 22.97%
</TABLE>
Neuberger&Berman Guardian Trust Division Twenty-Nine Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
GUARDIAN TRUST S&P 500
DIVISION TWENTY-NINE* INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/01/87................................................. $10,000 $10,000
12/31/87................................................. 9,802 10,525
12/31/88................................................. 12,428 12,273
12/31/89................................................. 14,953 16,162
12/31/90................................................. 14,108 15,660
12/31/91................................................. 18,767 20,431
12/31/92................................................. 22,113 21,988
12/31/93................................................. 24,857 24,204
12/31/94................................................. 24,987 24,524
12/31/95................................................. 32,656 33,739
12/31/96................................................. 38,057 41,488
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Neuberger&Berman Guardian Trust
Division Twenty-Nine................. 280.57% 102.79% 53.11% 16.54%
Benchmark Comparison
S&P 500 Index.......................... 314.88% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* The Trust started operating on August 3, 1993. It has identical investment
objectives and policies to, and as part of a "master/feeder structure" invests
in, the same portfolio as Neuberger&Berman Guardian Fund ("Fund"), which is
also managed by Neuberger&Berman Management Incorporated ("N&B"). N&B
voluntarily bears certain expenses of Neuberger&Berman Guardian Trust
("Trust") so that the Trust's expense ratio per annum will not exceed the
expense ratio per annum of the Fund by more than 0.10% of the Trust's average
daily net assets. This arrangement can be terminated on sixty days' notice.
The reimbursement reflected in this Fee Table is based upon N&B's estimate.
Absent the reimbursement, Other Expenses are estimated to be 0.10% and Total
Fund Expenses to be 0.96% of average daily net assets.
28
<PAGE> 209
Putnam Global Growth Division Twenty-Eight Compared to MSCI World Index and S&P
500 Index.
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
MSCI
GLOBAL GROWTH WORLD S&P 500
DIVISION TWENTY-EIGHT INDEX INDEX
- -------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/87................................ $10,000 $10,000 $10.000
12/31/87................................ 10,620 11,616 10,525
12/31/88................................ 11,466 14,322 12,273
12/31/89................................ 14,141 16,700 16,162
12/31/90................................ 12,714 13,858 15,660
12/31/91................................ 14,852 16,392 20,431
12/31/92................................ 14,740 15,535 21,988
12/31/93................................ 19,243 19,031 24,204
12/31/94................................ 19,892 19,997 24,524
12/31/95................................ 21,477 24,141 33,739
12/31/96................................ 24,777 27,394 41,488
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Putnam Global Growth
Division Twenty-Eight................ 147.77% 66.83% 28.76% 15.37%
Benchmark Comparison
MSCI World Index....................... 173.94% 67.12% 43.95% 13.48%
S&P 500 Index.......................... 314.88% 103.06% 71.41% 22.97%
</TABLE>
Putnam New Opportunities Division Twenty-Six Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 31, 1990
<TABLE>
<CAPTION>
NEW OPPORTUNITIES S&P 500
DIVISION TWENTY-SIX INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
08/31/90................................................. $10,000 $10,000
12/31/90................................................. 11,041 10,366
12/31/91................................................. 18,317 13,524
12/31/92................................................. 22,780 14,555
12/31/93................................................. 29,932 16,022
12/31/94................................................. 30,620 16,233
12/31/95................................................. 44,354 22,333
12/31/96................................................. 48,656 27,463
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Putnam New Opportunities
Division Twenty-Six............... 386.56% 165.64% 62.56% 9.70%
Benchmark Comparison
S&P 500 Index....................... 174.63% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on August 31, 1990.
29
<PAGE> 210
Putnam OTC & Emerging Growth Division Twenty-Seven Compared to Russell 2000
Index and S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
OTC & EMERGING GROWTH RUSSELL S&P 500
DIVISION TWENTY-SEVEN 2000 INDEX
- -------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/87................................ $10,000 $10,000 $10,000
12/31/87................................ 10,371 9,120 10,525
12/31/88................................ 11,932 11,402 12,273
12/31/89................................ 15,237 13,256 16,162
12/31/90................................ 13,604 10,668 15,660
12/31/91................................ 18,971 15,589 20,431
12/31/92................................ 21,167 18,458 21,988
12/31/93................................ 27,678 21,943 24,204
12/31/94................................ 28,020 21,543 24,524
12/31/95................................ 43,269 27,672 33,739
12/31/96................................ 44,794 32,236 41,488
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Putnam OTC & Emerging Growth
Division Twenty-Seven................ 347.94% 136.12% 61.84% 3.53%
Benchmark Comparison
Russell 2000 Index..................... 222.36% 106.80% 46.91% 16.49%
S&P 500 Index.......................... 314.88% 103.06% 71.41% 22.97%
</TABLE>
Scudder Growth and Income Division Twenty-One Performance Compared to S&P 500
Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
SCUDDER GROWTH AND INCOME S&P 500
DIVISION TWENTY-ONE INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/01/87................................................. $10,000 $10,000
12/31/87................................................. 10,222 10,525
12/31/88................................................. 11,309 12,273
12/31/89................................................. 14,114 16,162
12/31/90................................................. 13,616 15,660
12/31/91................................................. 17,236 20,431
12/31/92................................................. 18,649 21,988
12/31/93................................................. 21,292 24,204
12/31/94................................................. 21,576 24,524
12/31/95................................................. 27,955 33,739
12/31/96................................................. 33,721 41,488
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Scudder Growth and Income
Division Twenty-One.................. 237.21% 95.64% 58.37% 20.63%
Benchmark Comparison
S&P 500 Index.......................... 314.88% 103.06% 71.41% 22.97%
</TABLE>
30
<PAGE> 211
Templeton Foreign Division Thirty-Two Compared to EAFE Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
EAFE
FOREIGN DIVISION THIRTY-TWO INDEX
- ---------------------------------------------------------------------- -------------
<S> <C> <C>
01/01/87............................................... $ 10,000 $ 10,000
12/31/87............................................... 12,350 12,463
12/31/88............................................... 14,922 15,986
12/31/89............................................... 19,286 17,671
12/31/90............................................... 18,523 13,528
12/31/91............................................... 21,692 15,168
12/31/92............................................... 21,498 13,322
12/31/93............................................... 29,123 17,659
12/31/94............................................... 28,939 19,033
12/31/95............................................... 31,853 21,166
12/31/96............................................... 37,186 22,446
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Templeton Foreign Division Thirty-Two... 271.86% 71.43% 27.69% 16.74%
Benchmark Comparison
EAFE Index.............................. 124.46% 47.98% 27.11% 6.05%
</TABLE>
Twentieth-Century Ultra Division Thirty-One Compared to S&P 500 Index and NASDAQ
Composite Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
NASDAQ
ULTRA S&P 500 COMPOSITE
DIVISION THIRTY-ONE INDEX INDEX*
- ------------------------------------------------------- ------------- ---------
<S> <C> <C> <C>
01/01/87................................ $ 10,000 $ 10,000 $10,000
12/31/87................................ 10,557 10,525 9,474
12/31/88................................ 11,836 12,273 10,933
12/31/89................................ 16,038 16,162 13,058
12/31/90................................ 17,356 15,660 10,717
12/31/91................................ 32,019 20,431 16,809
12/31/92................................ 32,084 21,988 19,406
12/31/93................................ 38,674 24,204 22,269
12/31/94................................ 36,885 24,524 21,557
12/31/95................................ 50,249 33,739 30,162
12/31/96................................ 56,496 41,488 37,010
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Twentieth Century Ultra Division
Thirty-One........................... 464.96% 76.44% 46.08% 12.43%
Benchmark Comparison
S&P 500 Index.......................... 314.88% 103.06% 71.41% 22.97%
NASDAQ Composite Index*................ 270.10% 120.18% 66.20% 22.71%
</TABLE>
- ---------------
* Does not include dividends reinvested.
31
<PAGE> 212
Vanguard Fixed Income Securities Fund -- Long-Term Corporate Portfolio Division
Twenty-Two Compared to Merrill Lynch Corporate Master Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
MERRILL LYNCH
LONG-TERM CORPORATE CORPORATE MASTER
DIVISION TWENTY-TWO INDEX
- --------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/87............................................. $10,000 $10,000
12/31/87............................................. 9,896 10,184
12/31/88............................................. 10,722 11,178
12/31/89............................................. 12,197 12,756
12/31/90............................................. 12,795 13,696
12/31/91............................................. 15,279 16,194
12/31/92............................................. 16,566 17,671
12/31/93............................................. 18,734 19,867
12/31/94............................................. 17,523 19,199
12/31/95............................................. 21,877 23,341
12/31/96............................................. 21,718 24,133
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Vanguard Fixed Income Securities Fund-
Long-Term Corporate Portfolio......... 117.18% 42.14% 15.93% -0.72%
Benchmark Comparison
Merrill Lynch Corporate Master Index.... 141.33% 49.02% 21.47% 3.39%
</TABLE>
Vanguard Fixed Income Securities Fund -- Long-Term U.S. Treasury Portfolio
Division Twenty-Three Compared to Lehman Brothers U.S. Treasury Long-Term Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
LEHMAN BROS.
U.S. TREASURY
LONG-TERM U.S. TREASURY LONG-TERM
DIVISION TWENTY-THREE INDEX
- --------------------------------------------------------------- -------------
<S> <C> <C>
01/01/87............................................. $10,000 $10,000
12/31/87............................................. 9,588 9,732
12/31/88............................................. 10,336 10,628
12/31/89............................................. 12,040 12,638
12/31/90............................................. 12,579 13,436
12/31/91............................................. 14,590 15,923
12/31/92............................................. 15,478 17,191
12/31/93............................................. 17,853 20,157
12/31/94............................................. 16,392 18,616
12/31/95............................................. 21,065 24,329
12/31/96............................................. 20,417 24,118
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Vanguard Fixed Income Securities Fund
Long-Term U.S. Treasury Portfolio.... 104.17% 39.93% 14.36% -3.08%
Benchmark Comparison
Lehman Brothers U.S. Treasury
Long-Term Index...................... 141.18% 51.47% 19.65% -0.87%
</TABLE>
32
<PAGE> 213
Vanguard/Wellington Division Twenty-Five Compared to S&P 500 Index and Merrill
Lynch Corporate Master Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
VANGUARD WELLINGTON BLENDED
DIVISION TWENTY-FIVE INDEX*
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/01/87................................................. $10,000 $10,000
12/31/87................................................. 10,101 10,536
12/31/88................................................. 11,583 12,035
12/31/89................................................. 13,913 15,098
12/31/90................................................. 13,356 15,199
12/31/91................................................. 16,311 19,198
12/31/92................................................. 17,385 20,772
12/31/93................................................. 19,493 23,044
12/31/94................................................. 19,159 22,980
12/31/95................................................. 25,154 30,291
12/31/96................................................. 28,849 35,096
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Vanguard/Wellington Division
Twenty-Five.......................... 188.49% 76.87% 48.00% 14.69%
Benchmark Comparison
Blended Index*......................... 250.96% 82.81% 52.30% 15.86%
</TABLE>
- ---------------
* The Blended Index reflects an allocation of investments in the following
indexes: 65% of investments included in the S&P 500 Index and 35% of
investments included in the Merrill Lynch Corporate Master Index.
Vanguard/Windsor II Division Twenty-Four Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1987
<TABLE>
<CAPTION>
VANGUARD WINDSOR II S&P 500
DIVISION TWENTY-FOUR INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/01/87................................................. $10,000 $10,000
12/31/87................................................. 9,665 10,525
12/31/88................................................. 11,906 12,273
12/31/89................................................. 15,032 16,162
12/31/90................................................. 13,364 15,660
12/31/91................................................. 16,988 20,431
12/31/92................................................. 18,790 21,988
12/31/93................................................. 21,083 24,204
12/31/94................................................. 20,580 24,524
12/31/95................................................. 28,221 33,739
12/31/96................................................. 34,589 41,488
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Vanguard/Windsor II Division
Twenty-Four.......................... 245.89% 103.61% 64.06% 22.56%
Benchmark Comparison
S&P 500 Index.......................... 314.88% 103.06% 71.41% 22.97%
</TABLE>
33
<PAGE> 214
PAYOUT PAYMENTS
ASSUMED INVESTMENT RATE
The discussion concerning the amount of payout payments which follows this
section is based on an Assumed Investment Rate of 3 1/2% per annum. However, the
Company will permit each Annuitant choosing a variable payout option to select
an Assumed Investment Rate permitted by state law or regulations other than the
3 1/2% rate described in this prospectus as follows: 3%, 4 1/2%, 5% or 6% per
annum. (Note: an Assumed Investment Rate higher than 5% may not be selected
under individual Contracts.) The foregoing Assumed Investment Rates are used
merely in order to determine the first monthly payment per thousand dollars of
value. It should not be inferred that such rates will bear any relationship to
the actual net investment experience of VALIC Separate Account A.
AMOUNT OF PAYOUT PAYMENTS
The amount of the first variable annuity payment to the Annuitant will
depend on the amount of the Account Value applied to effect the variable annuity
as of the tenth day immediately preceding the date payout payments commence, the
amount of any premium tax owed, the annuity option selected, and the age of the
Annuitant.
The Contracts contain tables indicating the dollar amount of the first
payout payment under each payout option for each $1,000 of Account Value (after
the deduction for any premium tax) at various ages. These tables are based upon
the 1983 Table A (promulgated by the Society of Actuaries) and an Assumed
Investment Rate of 3%, 3 1/2%, 4% and 5% per annum (3 1/2% in the group
Contract).
The portion of the first monthly variable payout payment derived from a
Division of VALIC Separate Account A is divided by the Payout Unit value for
that Division (calculated ten days prior to the date of the first monthly
payment) to determine the number of Payout Units in each Division represented by
the payment. The number of such units will remain fixed during the Payout
Period, assuming the Annuitant makes no transfers of Payout Units to provide
Payout Units under another Division or to provide a fixed annuity.
In any subsequent month, the dollar amount of the variable payout payment
derived from each Division is determined by multiplying the number of Payout
Units in that Division by the value of such Payout Unit on the tenth day
preceding the due date of such payment. The Payout Unit value will increase or
decrease in proportion to the net investment return of the Division or Divisions
underlying the variable payout since the date of the previous payout payment,
less an adjustment to neutralize the 3 1/2% or other Assumed Investment Rate
referred to above.
Therefore, the dollar amount of variable payout payments after the first
will vary with the amount by which the net investment return is greater or less
than 3 1/2% per annum. For example, if a Division has a cumulative net
investment return of 5% over a one year period, the first payout payment in the
next year will be approximately 1 1/2 percentage points greater than the payment
on the same date in the preceding year, and subsequent payments will continue to
vary with the investment experience of the Division. If such net investment
return is 1% over a one year period, the first payout payment in the next year
will be approximately 2 1/2 percentage points less than the payment on the same
date in the preceding year, and subsequent payments will continue to vary with
the investment experience of the applicable Division.
Each deferred Contract provides that, when fixed payout payments are to be
made under one of the first four payout options, the monthly payment to the
Annuitant will not be less than the monthly payment produced by the then current
settlement option rates, which will not be less than the rates used for a
currently issued single payment immediate annuity contract. The purpose of this
provision is to assure the Annuitant that, at retirement, if the fixed payout
purchase rates then required by the Company for new single payment immediate
annuity contracts are significantly more favorable than the annuity rates
guaranteed by a Contract, the Annuitant will be given the benefit of the new
annuity rates.
PAYOUT UNIT VALUE
The value of a Payout Unit is calculated at the same time that the value of
an Purchase Unit
34
<PAGE> 215
is calculated and is based on the same values for Fund shares and other assets
and liabilities. (See "Purchase Period" in the prospectus.) The calculation of
Payout Unit value is discussed in the prospectus under "Payout Period."
The following illustrations show, by use of hypothetical examples, the
method of determining the Payout Unit value and the amount of variable annuity
payments.
ILLUSTRATION OF CALCULATION OF PAYOUT UNIT VALUE
Example 8.
<TABLE>
<S> <C>
1. Payout Unit value, beginning of period.................. $ .980000
2. Net investment factor for Period (see Example 3)........ 1.023558
3. Daily adjustment for 3 1/2% Assumed Investment Rate..... .999906
4. (2)X(3)................................................. 1.023462
5. Payout Unit value, end of period (1)X(4)................ $1.002993
</TABLE>
ILLUSTRATION OF PAYOUT PAYMENTS
Example 9. Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <C>
1. Number of Purchase Units at Payout Date................. 10,000.00
2. Purchase Unit value (see Example 3)..................... $ 1.800000
3. Account Value of Contract (1)X(2)....................... $18,000.00
4. First monthly Payout Payment per $1,000 of Account
Value..................................................... $ 5.63
5. First monthly Payout Payment (3)X(4)/1,000.............. $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5)/(6).......................... 103.408
8. Assume Payout Unit value for second month equal to...... $ .997000
9. Second monthly Payout Payment (7)X(8)................... $ 103.10
10. Assume Payout Unit value for third month equal to....... $ .953000
11. Third monthly Payout Payment (7)X(10)................... $ 98.55
</TABLE>
35
<PAGE> 216
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for VALIC Separate Account A is the Underwriter as defined above, a
wholly-owned subsidiary of the Company. The Underwriter's address is 2929 Allen
Parkway, Houston, Texas 77019. The Underwriter is a Texas corporation organized
in 1970 and is a member of the NASD.
The licensed agents who sell the Contracts will be compensated for such
sales by commissions ranging up to 5% of each Purchase Payment. Managers who
supervise the agents will receive overriding commissions ranging up to 1% of
Purchase Payments. (These various commissions are paid by the Company and do not
result in any charge to Contract Owners or to VALIC Separate Account A in
addition to the charges described under "Fees and Charges" in the prospectus.)
Pursuant to its underwriting agreement with the Underwriter and VALIC
Separate Account A, the Company reimburses the Underwriter for reasonable sales
expenses, including overhead expenses. Sales commissions for year 1996 were
$11,530,000.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996,
and the financial statements of the Company's Separate Account A at December 31,
1996 and for each of the two years in the period then ended, appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein. The financial statements audited by Ernst & Young LLP have been included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
36
<PAGE> 217
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of The Variable Annuity Life Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
Divisions Six, Ten, Twelve, Thirteen, Fifteen, Seventeen, Twenty-one,
Twenty-two, Twenty-three, Twenty-four, Twenty-five, Twenty-six, Twenty-seven,
Twenty-eight, Twenty-nine, Thirty, Thirty-one and Thirty-two are the only
Divisions available under the Contracts described in the Prospectus. The
Separate Account financial statements contained herein reflect the composition
of the Separate Account as of December 31, 1996, and for the fiscal year then
ended.
37
<PAGE> 218
[PICTURE]
[VALIC LOGO]
<PAGE> 219
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
The Variable Annuity Life Insurance Company
We have audited the accompanying consolidated balance sheets of The
Variable Annuity Life Insurance Company and Subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Variable
Annuity Life Insurance Company and Subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG
Houston, Texas
February 14, 1997
<PAGE> 220
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In Thousands
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments - Notes 2, 6, 7, 8:
Fixed maturity securities
(amortized cost: $19,667,491 in 1996 and $18,590,102 in 1995) $20,189,473 $19,745,726
Equity securities (cost: $8,624 in 1996 and $56,825 in 1995) 8,589 71,770
Mortgage loans on real estate 1,349,855 1,443,817
Real estate, net of accumulated depreciation
of $69 in 1996 and $99 in 1995 37,130 23,365
Policy loans 639,200 557,637
Other long-term invested assets 35,945 16,929
Short-term investments 53,000 39,277
----------- -----------
Total investments 22,313,192 21,898,521
----------- -----------
Investment income receivable 315,118 292,967
Cash on deposit and on hand 24,360 27,794
Receivable for securities sold 18,654 51,947
Deferred policy acquisition costs - Note 3 557,748 182,546
Due from reinsurer, net 15,700 16,873
Other assets 45,798 37,912
Assets held in Separate Accounts 7,134,412 4,540,889
----------- -----------
Total assets $30,424,982 $27,049,449
----------- -----------
LIABILITIES
Policy reserves for fixed annuity investment contracts $21,067,429 $20,146,697
Payable for securities purchased 575 26,885
Remittances not allocated 66,473 52,913
Commissions, general expenses, and taxes (other than income taxes) 41,642 44,380
Other liabilities 75,636 51,768
Income tax liabilities - Note 4 265,160 387,076
Liabilities related to Separate Accounts 7,134,412 4,540,889
----------- -----------
Total liabilities 28,651,327 25,250,608
----------- -----------
STOCKHOLDER'S EQUITY
Common stock (voting) par value $1 per share, 5,000 shares authorized
and 3,575 issued and outstanding in 1996 and 1995 - Note 5 3,575 3,575
Additional paid-in capital 459,281 384,126
Retained earnings 1,143,947 1,014,520
Net unrealized investment gains - Note 2 166,852 396,620
----------- -----------
Total stockholder's equity 1,773,655 1,798,841
----------- -----------
Total liabilities and stockholder's equity $30,424,982 $27,049,449
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 221
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Surrender charges $ 12,348 $ 9,967 $ 9,964
Mortality charges 59,955 34,965 21,136
Expense charges 5,654 5,122 5,528
Net investment income - Note 2 1,654,496 1,597,681 1,493,942
Net reinsurance income 1,528 1,573 1,908
Realized investment gains (losses) - Note 2 21,551 (7,149) (71,950)
Other income 10,920 6,878 6,517
----------- ----------- -----------
Total revenues 1,766,452 1,649,037 1,467,045
----------- ----------- -----------
COSTS AND EXPENSES
Policy costs:
Increase in policy reserves for fixed annuity contracts 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Total costs 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Expenses:
Commissions 97,630 84,670 73,198
Salaries 54,016 48,227 42,742
Data processing 12,088 13,200 10,908
Postage and telephone 11,308 10,710 8,137
Sales promotion 10,394 9,361 8,024
Printing and supplies 5,290 4,721 4,372
Guaranty association assessments - Note 9 2,678 18,961 6,300
Other expenses 49,875 44,055 43,029
Amortization of deferred policy acquisition costs - Note 3 31,201 16,841 13,263
Policy acquisition costs deferred - Note 3 (116,818) (104,702) (88,046)
----------- ----------- -----------
Total expenses 157,662 146,044 121,927
----------- ----------- -----------
Total costs and expenses 1,401,655 1,350,030 1,255,474
----------- ----------- -----------
EARNINGS
Income before income tax expense 364,797 299,007 211,571
Income tax expense - Note 4 124,370 99,720 70,183
----------- ----------- -----------
Net income $ 240,427 $ 199,287 $ 141,388
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 222
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning and end of year $ 3,575 $ 3,575 $ 3,575
----------- ----------- -----------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year 384,126 382,733 382,727
Capital contribution from stockholder 75,155 1,393 6
----------- ----------- -----------
Balance at end of year 459,281 384,126 382,733
----------- ----------- -----------
RETAINED EARNINGS
Balance at beginning of year 1,014,520 910,233 821,845
Net income 240,427 199,287 141,388
Dividends paid to stockholder (111,000) (95,000) (53,000)
----------- ----------- -----------
Balance at end of year 1,143,947 1,014,520 910,233
----------- ----------- -----------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at beginning of year 396,620 (563,481) 348,470
Change during year (229,768) 960,101 (911,951)
----------- ----------- -----------
Balance at end of year 166,852 396,620 (563,481)
----------- ----------- -----------
STOCKHOLDER'S EQUITY
Balance at end of year $ 1,773,655 $ 1,798,841 $ 733,060
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 223
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 240,427 $ 199,287 $ 141,388
Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,243,993 1,203,986 1,133,547
Deferred policy acquisition costs (85,617) (87,861) (74,783)
Other, net (50,233) 28,179 (41,944)
------------ ------------ ------------
Net cash provided by operating activities 1,348,570 1,343,591 1,158,208
------------ ------------ ------------
INVESTING ACTIVITIES
Investment purchases (14,883,271) (9,671,304) (7,827,877)
Investment calls, maturities, and sales 13,897,479 8,025,420 6,456,637
Net (increase) decrease in short-term investments (13,722) 120,745 (160,022)
------------ ------------ ------------
Net cash used for investing activities (999,514) (1,525,139) (1,531,262)
------------ ------------ ------------
FINANCING ACTIVITIES
Policyholder account deposits 2,896,090 2,553,928 2,227,803
Policyholder account withdrawals (1,276,008) (996,324) (1,004,953)
Transfers to Separate Accounts (1,936,727) (1,273,778) (723,994)
Capital contribution from stockholder 75,155 1,607 6
Net decrease in short-term debt -- -- (59,000)
Dividends paid (111,000) (95,000) (53,000)
------------ ------------ ------------
Net cash used for or provided by financing activities (352,490) 190,433 386,862
------------ ------------ ------------
NET CHANGE IN CASH
Net increase (decrease) in cash (3,434) 8,885 13,808
Cash at beginning of year 27,794 18,909 5,101
------------ ------------ ------------
Cash at end of year $ 24,360 $ 27,794 $ 18,909
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 224
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
All dollar amounts in thousands, except per share data
- --------------------------------------------------------------------------------
1
================================================================================
SIGNIFICANT ACCOUNTING POLICIES
================================================================================
1.1 INTRODUCTION
The Variable Annuity Life Insurance Company (VALIC), an indirect, wholly
owned subsidiary of American General Corporation (AGC), provides tax-deferred
retirement annuities and employer-sponsored retirement plans to employees of
educational, health care, public sector, and not-for-profit organizations.
VALIC markets products nationwide through exclusive sales representatives.
VALIC is 100% owned by American General Life Insurance Company (AGL), a
wholly owned subsidiary of AGC Life Insurance Company (AGC Life). AGC Life is a
wholly owned subsidiary of AGC. A summary of the accounting policies followed
in the preparation of the consolidated financial statements is set forth below.
1.2 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) and include the accounts
of VALIC and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated in consolidation. Certain items in the prior
years' financial statements have been reclassified to conform with the 1996
presentation.
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and disclosures of contingent assets and liabilities. Ultimate
results could differ from these estimates.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. All fixed maturity and equity
securities are classified as available-for-sale and recorded at fair value.
After adjusting related balance sheet accounts as if the unrealized gains
(losses) had been realized, the net adjustment is recorded in net unrealized
gains (losses) on securities within stockholder's equity. If the fair value of
a security classified as available-for-sale declines below its cost and this
decline is considered to be other than temporary, the security is reduced to
its fair value, and the reduction is recorded as a realized loss.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance for losses covers all non-performing loans
and loans for which management has a concern based on its assessment of risk
factors, such as potential non-payment or non-monetary default. The allowance
is based on a loan-specific review and a formula that reflects past results and
current trends.
Impaired loans, those for which VALIC determines that it is probable that
all amounts due under the contractual terms will not be collected, are reported
at the lower of amortized cost or fair value of the underlying collateral, less
estimated costs to sell.
POLICY LOANS. Policy loans are reported at unpaid principal balance.
INVESTMENT INCOME. Interest on fixed maturity securities and performing
mortgage loans is recorded as income when earned and is adjusted for any
amortization of premium or discount. Interest on delinquent mortgage loans is
recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES). Realized investment gains (losses) are
recognized using the specific identification method.
1.4 DERIVATIVES RELATED TO INVESTMENTS
VALIC's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements. The difference between amounts paid
and received on swap agreements is recorded on an accrual basis as an
adjustment to investment income over the periods covered by the agreements. The
related amount payable to or receivable from counterparties is included in
other liabilities or assets.
The fair values of swap agreements are recognized in the consolidated
balance sheet if they hedge investments carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains (losses) on
securities included in stockholder's equity, consistent with the treatment of
the related investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into
income over the remaining term of the related investment. If the underlying
investment is extinguished or sold, any related gain or loss on swap agreements
is recognized in income.
6
<PAGE> 225
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
1.5 DEFERRED POLICY ACQUISITION COSTS
(DPAC)
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC. DPAC
is charged to expense in relation to the estimated gross profits of the
insurance contracts, including realized gains (losses).
DPAC is adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in net unrealized gains
(losses) on securities within stockholder's equity.
VALIC reviews the carrying value of DPAC on at least an annual basis.
Management considers estimated future gross profit margins as well as expected
mortality, interest earned and credited rates, persistency, and expenses in
determining whether the carrying amount is recoverable.
1.6 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain
contracts, principally annuities for which the investment risk lies solely with
the holder of the contract rather than the company. Consequently, the insurer's
liability for these accounts equals the value of the account assets. Investment
income, realized investment gains (losses), and policyholder account deposits
and withdrawals related to Separate Accounts are excluded from the consolidated
statements of income and cash flows. Assets held in the Separate Accounts are
primarily shares in mutual funds, which are carried at fair value, based on the
quoted net asset value per share.
1.7 POLICY RESERVES
Net deposits made by fixed annuity policyholders are accumulated at
interest rates guaranteed by VALIC plus excess interest paid at the sole
discretion of the Board of Directors until benefits are payable. Reserves for
deferred annuities (accumulation phase) are equivalent to the policyholders'
account values. Reserves for annuities on which benefits are currently payable
(annuity payout phase) are provided based upon estimated mortality and other
assumptions, including provisions for the risk of adverse deviation from
assumptions, which were appropriate at the time the contracts were issued. The
1971 Individual or Group Annuity Mortality Tables, and the 1983a Table have
been used to provide for future annuity benefits in the annuity payout phase.
Interest rates used in determining reserves for policy benefits during both the
accumulation and annuity payout phases range from 3.5% to 13.5%.
1.8 RECOGNITION OF REVENUES AND COSTS
Premium receipts for annuity contracts are classified as deposits instead
of revenues. Revenues for these contracts consist of the mortality, expense,
and surrender charges. Gains (losses) from mortality guarantees under variable
annuity contracts are recognized as they occur.
1.9 INCOME TAXES
Deferred tax assets and liabilities are established for temporary
differences between the financial reporting basis and the tax basis of assets
and liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income
tax expense.
A valuation allowance for deferred tax assets is provided if all or some
portion of the deferred tax asset may not be realized. An increase or decrease
in a valuation allowance that results from a change in circumstances that
causes a change in judgment about the realizability of the related deferred tax
asset is included in income. A change related to fluctuations in fair value of
available-for-sale fixed maturity securities is included in net unrealized
gains (losses) in stockholder's equity.
1.10 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity (capital and surplus) that differ
from GAAP. Net income and stockholder's equity as determined by statutory
accounting practices at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $ 213,686 $ 157,622 $ 171,486
---------- ---------- ----------
Stockholder's equity $1,077,366 $ 926,654 $ 869,026
---------- ---------- ----------
</TABLE>
7
<PAGE> 226
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2
===============================================================================
INVESTMENTS
===============================================================================
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,471,879 $1,414,644 $1,300,028
Affiliated fixed
maturity securities 2,851 3,181 3,342
Equity securities 782 4,281 2,529
Mortgage loans on
real estate 140,492 149,974 163,263
Other 51,040 36,473 36,226
---------- ---------- ----------
Gross investment income 1,667,044 1,608,553 1,505,388
Investment expenses 12,548 10,872 11,446
---------- ---------- ----------
Net investment income $1,654,496 $1,597,681 $1,493,942
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income
during 1996 totaled $6,455 or 0.03% of total invested assets. The ultimate
disposition of these assets is not expected to have a material effect on
VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1996.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 1,417 $ 832 $(83,950)
Equity securities 15,795 7,706 2,143
Mortgage loans on real estate 4,635 (24,465) (11,640)
Real estate 389 3,767 1,608
Other (685) 5,011 19,889
-------- -------- --------
Realized gains (losses)
before taxes 21,551 (7,149) (71,950)
Income tax expense (benefit) 7,543 (1,414) (25,183)
-------- -------- --------
Net realized investment
gains (losses) $ 14,008 $ (5,735) $(46,767)
-------- -------- --------
</TABLE>
Proceeds from sales of fixed maturity securities were $3,052,550,
$1,432,183, and $1,128,925 during 1996, 1995, and 1994, respectively. Gross
gains of $28,173, $15,722, and $7,610 and gross losses of $36,802, $30,518, and
$89,917, were realized on those sales during 1996, 1995, and 1994,
respectively.
During fourth quarter 1994, AGC initiated a program to realize capital
losses for tax purposes to offset prior period capital gains. During 1995, AGC
received a tax refund of $45,944 generated by $126,285 in net capital losses
realized in fourth quarter 1994 primarily through the sale of fixed maturity
securities. In conjunction with this program, VALIC realized net capital losses
for tax purposes of $110,019 in fourth quarter 1994, primarily through the sale
of $1,186,197 of fixed maturity securities. Due to declining interest rates
during 1995, which resulted in increasing values of VALIC's fixed maturity
securities, no additional capital losses were realized under this program.
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 219,426 $ 173,879 $ 20,025 $ 33,063
Obligations of states and
political subdivisions 32,308 32,349 840 1,467
Debt securities issued by
foreign governments 241,908 238,592 10,958 19,639
Corporate securities 13,211,735 11,338,933 457,461 792,302
Mortgage-backed securities 5,932,878 6,771,473 150,021 333,436
Affiliated fixed maturity securities 29,236 32,275 -- --
Redeemable preferred stock -- 2,601 -- --
----------- ----------- ----------- -----------
Total fixed maturity securities $19,667,491 $18,590,102 $ 639,305 $ 1,179,907
----------- ----------- ----------- -----------
Equity securities $ 8,624 $ 56,825 $ 61 $ 14,966
=========== =========== =========== ===========
<CAPTION>
Gross Unrealized Losses Fair Value
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (465) $ (25) $ 238,986 $ 206,917
Obligations of states and
political subdivisions (197) (15) 32,951 33,801
Debt securities issued by
foreign governments (122) -- 252,744 258,231
Corporate securities (76,389) (20,225) 13,592,807 12,111,010
Mortgage-backed securities (40,150) (3,924) 6,042,749 7,100,985
Affiliated fixed maturity securities -- -- 29,236 32,275
Redeemable preferred stock -- (94) -- 2,507
----------- ----------- ----------- -----------
Total fixed maturity securities $ (117,323) $ (24,283) $20,189,473 $19,745,726
----------- ----------- ----------- -----------
Equity securities $ (96) $ (21) $ 8,589 $ 71,770
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 227
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES-
(CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities, due
In one year or less $ 125,977 $ 127,799
In years two through five 2,601,072 2,705,686
In years six through ten 7,872,259 8,097,598
After ten years 3,135,304 3,215,641
Mortgage-backed securities 5,932,879 6,042,749
----------- -----------
Total fixed maturity securities $19,667,491 $20,189,473
----------- -----------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON
SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in stockholder's equity at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 639,366 $ 1,194,873
Gross unrealized losses (117,419) (24,304)
DPAC adjustments (261,363) (551,624)
Deferred federal income taxes (93,732) (222,325)
----------- -----------
Net unrealized gains
on securities $ 166,852 $ 396,620
----------- -----------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656,073 $ 677,739
Pacific and Mountain 406,948 455,009
Central 331,411 365,282
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
Property type:
Office $ 456,818 $ 478,493
Retail 451,668 461,272
Industrial 221,532 223,374
Apartments 190,583 242,469
Residential and other 73,831 92,422
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
</TABLE>
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 54,213 $ 55,665 $ 48,612
Net additions (a) (3,845) 12,619 9,926
Deductions (b) (5,791) (14,071) (2,873)
--------- --------- ---------
Balance at December 31 $ 44,577 $ 54,213 $ 55,665
--------- --------- ---------
</TABLE>
(a) Charged to realized investment losses.
(b) Resulting from foreclosures.
IMPAIRED LOANS. Impaired mortgage loans on real estate and related
interest income were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Impaired loans:
With allowance* $ 46,346 $ 63,167
Without allowance 236 2,577
--------- ---------
Total impaired loans $ 46,582 $ 65,744
--------- ---------
Average investment $ 56,163 $ 83,049
Interest income earned 4,816 7,012
Interest income - cash basis 4,617 6,539
--------- ---------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$6,848 and $17,701, respectively.
9
<PAGE> 228
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
3
================================================================================
DEFERRED POLICY ACQUISITION COSTS (DPAC)
================================================================================
DPAC at December 31, and the components of the change for the years then
ended, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 182,546 $ 910,479 $ 113,116
Deferrals:
Commissions 62,760 52,959 44,899
Other acquisition costs 54,058 51,743 43,147
Amortization:
Accretion of interest 59,810 54,086 47,170
Operating earnings (91,011) (70,927) (60,433)
Offset to realized
(gains) losses (676) 4,991 19,812
Effect of net unrealized
(gains) losses on securities 290,261 (820,785) 702,768
--------- --------- ---------
Balance at December 31 $ 557,748 $ 182,546 $ 910,479
--------- --------- ---------
</TABLE>
4
================================================================================
INCOME TAXES
================================================================================
4.1 TAX-SHARING AGREEMENT
VALIC, combined with its Separate Accounts, is taxed as a life insurance
company. VALIC and the Separate Accounts are included in the consolidated life
insurance company tax return of AGC. VALIC participates in a tax-sharing
agreement with the other companies included in the consolidated return. Under
this agreement, tax payments are made to AGC as if the companies filed separate
tax returns and companies incurring operating losses and/or capital losses are
reimbursed for the use of these losses by the consolidated return group.
4.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (4,551) $ 10,740
Deferred tax liabilities, applicable to:
Basis differential of investments 201,122 428,863
DPAC 192,815 61,915
Other 8,025 2,480
--------- ---------
Total deferred tax liabilities 401,962 493,258
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (118,595) (100,014)
Basis differential of investments (6,219) (7,527)
Other (7,437) (9,381)
--------- ---------
Total deferred tax assets (132,251) (116,922)
--------- ---------
Net deferred tax liabilities 269,711 376,336
--------- ---------
Total income tax liabilities $ 265,160 $ 387,076
--------- ---------
</TABLE>
4.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 99,560 $ 99,273 $ 52,973
State 2,842 3,224 2,368
--------- --------- ---------
Total current income
tax expense 102,402 102,497 55,341
--------- --------- ---------
Deferred, applicable to:
DPAC 29,308 32,174 32,800
Policy reserves (18,581) (28,780) (31,085)
Basis differential of
investments 2,754 (786) 7,189
Other, net 8,487 (5,385) 5,938
--------- --------- ---------
Total deferred income
tax expense (benefit) 21,968 (2,777) 14,842
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 127,679 $ 104,652 $ 74,050
Dividends received
deduction (4,935) (3,883) (3,392)
Tax-exempt interest (ESOP) (3,865) (4,426) (4,670)
State income taxes 3,311 2,918 7,051
Other items 2,180 459 (2,856)
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1996, 1995, and 1994 were $114,478, $52,790,
and $122,608, respectively. State income taxes paid in 1996, 1995 and 1994 were
$3,060, $2,653, and $3,390 respectively.
10
<PAGE> 229
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
5
================================================================================
CAPITAL STOCK
================================================================================
VALIC has two classes of capital stock: preferred stock ($1.00 par value
with 2 million shares authorized) that may be issued with such dividend,
liquidation, redemption, conversion, voting, and other rights as the board of
directors may determine, and common stock ($1.00 par value, 5 million shares
authorized).
VALIC is restricted by state insurance laws as to the amount it may pay as
dividends without prior approval from the Texas Department of Insurance. The
maximum dividend payout which may be made without prior approval in 1997 is
$205,992.
6
================================================================================
DERIVATIVE FINANCIAL INSTRUMENTS
================================================================================
Derivative financial instruments related to investment securities at
December 31, 1996 were as follows:
<TABLE>
<S> <C>
Interest rate swap agreements to pay fixed rate
Notional amount $27,000
Average receive rate 6.88%
Average pay rate 5.61
Currency swap agreements (receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $89,535
Average exchange rate 1.56
</TABLE>
7
================================================================================
FAIR VALUE OF FINANCIAL INSTRUMENTS
================================================================================
Carrying amounts and fair values for certain of VALIC's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all VALIC's assets and liabilities, and
(2) the reporting of investments at fair value without a corresponding
revaluation of related policyholder liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1996 1995
------------------------------ -----------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $20,198,062* $20,198,062* $19,817,496* $19,817,496*
Mortgage loans on real estate 1,352,994 1,349,855 1,473,598 1,443,817
Policy loans 637,870 639,200 567,199 557,637
Liabilities
Insurance investment contracts 19,753,088 21,067,429 19,883,419 20,146,697
----------- ----------- ----------- -----------
</TABLE>
* Includes derivative financial instruments with negative fair value of $7,872
in 1996 and negative fair value of $1,121 in 1995.
The following methods and assumptions were used to estimate the fair
values of financial instruments.
FIXED MATURITY AND EQUITY SECURITIES. Fair values of fixed maturity and
equity securities were based on quoted market prices, where available. For
investments not actively traded, fair values were estimated using values
obtained from independent pricing services or, in the case of some private
placements, by discounting expected future cash flows using a current market
rate applicable to yield, credit quality, and average life of the investments.
MORTGAGE LOANS ON REAL ESTATE. Fair value of mortgage loans was estimated
primarily using discounted cash flows, based on contractual maturities and
risk-adjusted discount rates.
POLICY LOANS. Fair value of policy loans was estimated using discounted
cash flows and actuarially-determined assumptions, incorporating market rates.
INSURANCE INVESTMENT CONTRACTS. Fair value of insurance investment
contracts was estimated using cash flows discounted at market interest rates.
11
<PAGE> 230
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
8
================================================================================
TRANSACTIONS WITH AFFILIATED COMPANIES
================================================================================
In the ordinary course of business, VALIC is occasionally involved in
transactions with affiliated companies. Transactions involving the purchase or
disposal of securities are consummated at the market value of the security on
the date of the transaction. Transactions with affiliated companies during each
of the three years in the period ended December 31, 1996 were as follows:
Operating expenses include $17,533 in 1996, $21,173 in 1995, and $23,138
in 1994 for amounts paid to AGC or its subsidiaries primarily for rent, data
processing services, use of facilities, and investment expenses. Interest paid
on borrowings from AGC totaled $455 in 1996, $1,662 in 1995, and $525 in 1994.
On November 4, 1982, VALIC invested $11,853 in 13 1/2% Restricted
Subordinated Notes due November 4, 2002 issued by AGC. The principal amount of
the note is due November 4, 2002. Principal payments of $592 were received on
November 4, 1996, 1995, and 1994. VALIC recognized $1,372 in interest income
during 1996, $1,452 for 1995, and $1,532 for 1994.
On December 31, 1984, VALIC entered into a $48,929 note purchase agreement
with AGC. Under the agreement AGC issued an adjustable rate promissory note in
exchange for VALIC's holdings of AGC preferred stock, common stock, and
warrants. The principal amount of the note is due in 20 equal installment
payments commencing December 29, 1985 and concluding December 29, 2004.
Principal payments of $2,446 were received on December 29, 1996, December 29,
1995, and December 31, 1994. VALIC recognized $1,479, $1,729, and $1,810 of
interest income on the note during 1996, 1995, and 1994, respectively.
On February 14, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $11,268.
On February 15, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $9,900.
On September 30, 1995, VALIC received a capital contribution from AGL of
electronic data processing equipment with a book value of $1,575 and a related
tax liability of $214.
VALIC paid common stock dividends of $111,000, $31.05 per share; $95,000,
$26.57 per share, and $53,000, $14.83 per share, in 1996, 1995, and 1994,
respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds
from the sale totaled $13,033 with a profit of $33 recognized on the
transaction.
On December 30, 1996, VALIC received a capital contribution of $75,000
from AGL.
9
================================================================================
COMMITMENTS AND CONTINGENCIES
================================================================================
VALIC is a defendant in various lawsuits arising in the normal course of
business. VALIC believes it has valid defenses in these lawsuits and is
defending the cases vigorously. VALIC also believes that the total amounts that
would ultimately have to be paid arising from these lawsuits would have no
material effect on its consolidated financial position.
All 50 states have laws requiring solvent life insurance companies to pay
assessments to state guaranty associations to protect the interests of
policyholders of insolvent life insurance companies. State guaranty fund
expense included in operating costs and expenses was $2,678, $18,961, and
$6,300, for the years ended December 31, 1996, 1995, and 1994, respectively.
The accrued liability for anticipated assessments was $13,661, $20,249, and
$10,214, at December 31, 1996, 1995, and 1994, respectively. The 1996 liability
was estimated by VALIC using the latest information available from the National
Organization of Life and Health Insurance Guaranty Associations. Although the
amount accrued represents VALIC's best estimate of its liability, this estimate
may change in the future. Additionally, changes in state laws could decrease
the amount recoverable against future premium taxes.
10
================================================================================
EMPLOYEE BENEFIT PLANS
================================================================================
10.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
12
<PAGE> 231
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
10.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 917 $ 601 $ 759
Interest cost on projected
benefit obligation 843 635 551
Actual (return) loss on
plan assets (2,785) (1,249) 414
Amortization of unrecognized
net asset existing at date of
initial application (23) (72) (58)
Amortization of unrecognized
prior service cost 44 44 35
Deferral of net asset gain (loss) 2,210 749 (920)
------- ------- -------
Total pension expense $ 1,206 $ 708 $ 781
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.50% 7.25% 8.50%
Rate of increase in
compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of
return on plan assets 10.00% 10.00% 10.00%
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1996 and 1995 for VALIC's
defined benefit pension plan:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 8,265 $ 6,983
Nonvested 1,251 1,127
-------- --------
Accumulated benefit obligation 9,516 8,110
Effect of increase in compensation levels 2,474 2,219
-------- --------
Projected benefit obligation 11,990 10,329
Plan assets at fair value 9,120 6,406
-------- --------
Plan assets in excess of projected
benefit obligation (2,870) (3,923)
Unrecognized net loss 1,266 2,037
Unrecognized prior service cost 62 105
Unrecognized net obligation at
January 1, net of amortization -- (23)
-------- --------
Net pension liability $ (1,542) $ (1,804)
-------- --------
</TABLE>
Equity and fixed maturity securities were 60% and 35%, respectively, of
the plan's assets at the plan's most recent balance sheet dates. The remaining
plan assets consisted primarily of cash equivalents and investment-related
receivables.
10.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through American General Corporation, has life, medical,
supplemental major medical, and dental plans for certain retired employees and
agents. Most plans are contributory, with retiree contributions adjusted
annually to limit employer contributions to predetermined amounts. VALIC has
reserved the right to change or eliminate these benefits at any time.
The life plans are fully insured; the retiree and medical and dental plans
are unfunded and self-insured. Postretirement benefit expense in 1996, 1995,
and 1994 was $282, $228, and $281, respectively.
The plans' combined funded status and the accrued postretirement benefit
cost included in other liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 21 $ 115
Fully eligible active plan participants 103 26
Other active plan participants 1,479 1,509
--------- ---------
Accumulated postretirement
benefit obligations 1,603 1,650
Unrecognized net loss (66) (393)
Net funding (17) --
--------- ---------
Accrued benefit cost $ 1,520 $ 1,257
--------- ---------
Discount rate on postretirement
benefit obligations 7.50% 7.25%
--------- ---------
</TABLE>
13
<PAGE> 232
[PICTURE]
[VALIC LOGO]
<PAGE> 233
ANNUAL REPORT
TO CONTRACT OWNERS
DECEMBER 31, 1996
SEPARATE
ACCOUNT A
[VALIC LOGO]
<PAGE> 234
================================================================================
CHAIRMAN'S LETTER SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1996 Annual Report to Contract
Owners for Separate Account A of the Variable Annuity Life Insurance Company. A
summary of the change in unit value for each fund and each product series
(Portfolio Director 1, Portfolio Director 2, Independence Plus, Group Unit
Purchase and Impact) appears on page two.
Economic conditions in 1996 continued the recent pattern of modest growth and
low inflation. Gross Domestic Product has been increasing at a 2.5% annual
rate, slightly above the level in 1995 and in line with expectations for 1997.
Inflation, as measured by the Consumer Price Index, has been reported at 3.3%
and is expected to remain at that level through 1997.
The equity markets provided a second year of exceptional returns. The S&P
500(R) recorded a total return of 22.97%. Smaller capitalization stocks returns
were lower but still very satisfactory. The Standard & Poor's MidCap 400 Index
returned 19.24% and the Russell 2000(R) Index produced 16.49%.
The bond market followed an elliptical pattern declining in the first seven
months and rising in the last four months. Yields on the long-term Treasury
bond rose from 6.0% at the beginning of the year to 7.2% in July and declined
to 6.6% at year end. Bond market returns were less than 3.5%, with coupon
returns offsetting a decline in market value.
VALIC's domestic indexed funds provided returns ranging from 15.57% to 21.53%.
Managed domestic equity funds' returns varied widely from 3.53% to 22.75%. A
large part of the variance was caused by the spread in returns as large
capitalization stocks, on balance, outperformed smaller capitalization issues.
In the Morningstar rankings, twelve of VALIC's equity funds were in the top
half of their categories. Of those, eight were in the top quartile.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ STEPHEN D. BICKEL
Stephen D. Bickel, Chairman and CEO
The Variable Annuity Life Insurance Company
January 24, 1997
This report is not authorized for distribution as advertising or sales
literature. This report is published exclusively for the information of the
variable annuity contract owners of the Company in accordance with section 30
(d) of the Investment Company Act of 1940.
"S&P 500(R)" and "Standard & Poor's MidCap 400 Index" are trademarks of
Standard & Poor's Corporation (S&P). The Stock Index Fund and MidCap Index Fund
are not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the funds. The
Russell 2000(R) Index is a trademark / service mark of the Frank Russell
Company. Russell(TM) is a trademark of the Frank Russell Company.
1
<PAGE> 235
================================================================================
CHAIRMAN'S LETTER - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Morningstar, Inc.(1) One Year
- ------------------------ Total Returns
Ranking Portfolio Portfolio Indepen- Group For Year Ending
- ---------------- Director Director dence Unit December 31,
Percen- Average 2 1 Plus Impact Purchase ------------------
Position tile Return Division Division Division Division Division 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56/356 84 18.52 AGSPC Stock Index Fund .................... 10C 10C 10C 10D 10A, 10B 21.53% 35.95%
279/587 52 16.79 AGSPC MidCap Index Fund ................... - 4 4 4 - 17.61 29.24
128/249 49 14.57 AGSPC Small Cap Index Fund ................ - 14 14 - - 15.57 26.39
347/369 6 13.83 AGSPC International Equities Fund ......... - 11 11 - - 5.75 9.67
262/587 55 16.79 AGSPC Growth Fund ......................... 15 15 - - - 18.18 46.40
46/356 87 18.52 AGSPC Growth & Income Fund ................ - 16 - - - 22.10 30.55
69/127 46 18.52 AGSPC Science & Technology Fund ........... 17 17 - - - 12.68 60.07
26/356 93 18.52 AGSPC Social Awareness Fund ............... 12 12 12 - - 22.75 37.57
331/416 20 12.33 AGSPC Timed Opportunity Fund .............. - 5 5 5 - 9.99 23.55
139/249 44 14.57 Dreyfus Small Cap Portfolio ............... - 18 - - - 15.14 27.78
360/587 39 16.79 Founders Growth Fund ...................... 30 - - - - 15.35 44.15
262/356 26 18.52 Neuberger&Berman Guardian Trust ........... 29 - - - - 16.54 30.70
116/369 69 13.83 Putnam Global Growth Fund ................. 28 - - - - 15.37 13.68
168/249 33 14.57 Putnam New Opportunities Fund ............. 26 - - - - 9.70 44.87
207/249 17 14.57 Putnam OTC & Emerging Growth Fund ......... 27 - - - - 3.53 54.45
132/356 63 18.52 Scudder Growth and Income Fund ............ 21 - - - - 20.63 29.58
31/416 93 12.33 Templeton Asset Allocation Fund ........... - 19 - - - 17.40 21.02
92/369 75 13.83 Templeton Foreign Fund .................... 32 - - - - 16.74 10.07
39/369 89 13.83 Templeton International Fund .............. - 20 - - - 22.50 14.34
155/249 38 14.57 Twentieth Century Ultra Fund .............. 31 - - - - 12.43 36.23
74/416 82 12.33 Vanguard/Wellington Fund .................. 25 - - - - 14.69 31.30
35/356 90 18.52 Vanguard/Windsor II ....................... 24 - - - - 22.56 37.14
255/295 14 2.86 AGSPC Capital Conservation Fund ........... - 7 7 1 - 0.75 19.58
103/143 28 1.50 AGSPC Government Securities Fund .......... - 8 8 - - 0.90 16.31
54/77 30 7.55 AGSPC Intl Government Bond Fund ........... 13 13 13 - - 3.36 17.63
77/262 71 3.79 AGSPC Money Market Fund ................... 6 6 6 2 - 3.97 4.51
280/295 5 2.86 Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio .......... 22 - - - - (0.72) 24.86
138/143 3 1.50 Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio ..... 23 - - - - (3.08) 28.51
</TABLE>
(1) SOURCE: Morningstar Variable Annuity/Life Performance Report, January 1997
The Portfolio Director 1 and 2 rankings shown in this publication indicate the
total return rankings of Separate Account A's divisions compared to
Morningstar categories for the twelve month period ending 12/31/96. The total
returns and rankings displayed show value after all management, administration
fees and fund expenses and do not include potential sales charges or
maintenance fees, if applicable. For total return information over a longer
period, see the Portfolio Director 1 and 2 prospectuses. The performance shown
represents past performance. The principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Past performance does not guarantee future
returns.
2
<PAGE> 236
================================================================================
FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
ASSETS: ALL DIVISIONS
--------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $5,613,414,313) ................... $6,848,720,710
Balance due from VALIC general account ........................................................ 7,839,650
--------------
NET ASSETS .................................................................................... $6,856,560,360
--------------
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of reinvestment) .. $6,840,617,496
Reserves for annuity contracts on benefit ..................................................... 15,942,864
--------------
TOTAL CONTRACT OWNER RESERVES ................................................................. $6,856,560,360
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME: ALL DIVISIONS
-------------
<S> <C>
Dividends from mutual funds ................................................................... $ 88,556,732
-------------
EXPENSES:
Mortality and expense risk charge ............................................................. 57,564,107
Reimbursement of expenses (Note C) ............................................................ (167,038)
-------------
Total expenses ....................................................................... 57,397,069
-------------
NET INVESTMENT INCOME ......................................................................... 31,159,663
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 96,618,063
Capital gains distributions from mutual funds ................................................. 175,625,286
Net unrealized appreciation of investments during the year .................................... 539,282,575
-------------
Net realized and unrealized gain on investments ............................................. 811,525,924
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 842,685,587
=============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................................................... $ 31,159,663 $ 34,191,940
Net realized gain on investments .......................................................... 96,618,063 54,777,042
Capital gains distributions from mutual funds ............................................. 175,625,286 110,007,833
Net unrealized appreciation of investments during the year ................................ 539,282,575 640,017,922
--------------- ---------------
Increase in net assets resulting from operations ........................................ 842,685,587 838,994,737
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ......................................................................... 1,307,543,093 820,355,349
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ....... (210,060,345) (114,759,722)
Annuity benefit payments .................................................................. (1,897,648) (1,588,610)
Amounts transferred from VALIC general account ............................................ 647,659,402 220,818,448
--------------- ---------------
Increase in net assets resulting from principal transactions ............................ 1,743,244,502 924,825,465
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .............................................................. 2,585,930,089 1,763,820,202
NET ASSETS:
Beginning of year ......................................................................... 4,270,630,271 2,506,810,069
--------------- ---------------
End of year ............................................................................... $ 6,856,560,360 $ 4,270,630,271
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 237
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $ 378,856,928 $ 30,721,138 $1,529,744,413 $ 42,481,642
Balance due (to) from VALIC general account ....... (207,899) 4,786 601,957 (10,515)
-------------- -------------- -------------- --------------
NET ASSETS ........................................ $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $ 367,264,137 $ 29,086,370 $1,529,060,822 $ 42,319,960
Reserves for annuity contracts on benefit ......... 11,384,892 1,639,554 1,285,548 151,167
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES ..................... $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC NEUBERGER&
TIMED DREYFUS FOUNDERS BERMAN
OPPORTUNITY SMALL CAP GROWTH GUARDIAN
FUND PORTFOLIO FUND TRUST
DIVISION 5 DIVISION 18 DIVISION 30 DIVISION 29
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $173,145,150 $657,404,003 $ 31,872,619 $ 9,144,621
Balance due (to) from VALIC general account ....... 84,325 982,056 245,857 58,685
------------ ------------ ------------ ------------
NET ASSETS ........................................ $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $173,149,425 $658,204,551 $ 32,118,476 $ 9,203,306
Reserves for annuity contracts on benefit ......... 80,050 181,508 -- --
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES ..................... $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC
TWENTIETH VANGUARD/ CAPITAL
CENTURY ULTRA WELLINGTON VANGUARD/ CONSERVATION
FUND FUND WINDSOR II FUND
DIVISION 31 DIVISION 25 DIVISION 24 DIVISION 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $17,259,437 $25,025,702 $41,436,294 $ 6,488,667
Balance due (to) from VALIC general account ....... 58,221 163,816 363,484 13,203
----------- ----------- ----------- -----------
NET ASSETS ........................................ $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,497,192
Reserves for annuity contracts on benefit ......... -- -- -- 4,678
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 238
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH & SCIENCE & SOCIAL
INDEX INDEX EQUITIES GROWTH INCOME TECHNOLOGY AWARENESS
FUND FUND FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16 DIVISION 17 DIVISION 12
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 565,680,826 $ 184,521,204 $ 191,110,175 $ 633,819,402 $ 171,283,956 $ 709,577,919 $ 104,772,608
30,567 (42,882) 116,353 1,296,205 244,249 1,386,245 143,421
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
$ 565,558,770 $ 184,473,371 $ 191,050,097 $ 634,868,931 $ 171,510,875 $ 710,720,450 $ 104,916,029
152,623 4,951 176,431 246,676 17,330 243,714 -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND TEMPLETON TEMPLETON TEMPLETON
GROWTH OPPORTUNITIES GROWTH INCOME ASSET ALLOCATION FOREIGN INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 19 DIVISION 32 DIVISION 20
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 17,494,577 $ 49,812,851 $ 43,542,866 $ 18,325,255 $ 194,271,899 $ 39,066,749 $ 529,645,484
114,481 410,128 224,089 98,230 328,988 388,324 378,327
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,377,876 $ 39,455,073 $ 529,901,911
- - - - 223,011 - 121,900
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC AGSPC AGSPC FIXED INCOME FIXED INCOME
CAPITAL GOVERNMENT INTERNATIONAL SECURITIES FUND - SECURITIES FUND -
CONSERVATION SECURITIES GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
FUND FUND BOND FUND -------------------------------- PORTFOLIO PORTFOLIO
DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22 DIVISION 23
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 55,255,834 $ 85,570,274 $ 178,021,807 $ 4,870,208 $ 120,378,551 $ 3,528,351 $ 4,589,300
33,645 1,665 150,364 9,293 380,075 2,506 (212,599)
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
$ 55,289,479 $ 85,571,939 $ 178,161,619 $ 4,879,501 $ 120,740,347 $ 3,530,857 $ 4,376,701
- - 10,552 - 18,279 - -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
</TABLE>
5
<PAGE> 239
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ...................... $ 6,791,052 $ 559,035 $ 24,619,582 $ 775,055
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ................ 3,604,468 170,656 12,878,174 411,146
Reimbursement of expenses (Note C) ............... -- (73,695) -- --
-------------- -------------- -------------- --------------
Total expenses ................................ 3,604,468 96,961 12,878,174 411,146
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) ..................... 3,186,584 462,074 11,741,408 363,909
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ................. 12,767,086 2,085,848 10,129,542 2,391,364
Capital gains distributions from mutual funds .... 2,739,498 222,372 11,061,404 307,213
Net unrealized appreciation (depreciation)
of investments during the year ................ 51,675,655 3,182,195 222,475,966 4,964,983
-------------- -------------- -------------- --------------
Net realized and unrealized gain on investments .. 67,182,239 5,490,415 243,666,912 7,663,560
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $ 70,368,823 $ 5,952,489 $ 255,408,320 $ 8,027,469
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
SCIENCE & SOCIAL TIMED DREYFUS
STATEMENTS OF OPERATIONS TECHNOLOGY AWARENESS OPPORTUNITY SMALL CAP
For the year ended December 31, 1996 FUND FUND FUND PORTFOLIO
DIVISION 17 DIVISION 12 DIVISION 5 DIVISION 18
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ........................... $ -- $ 1,339,307 $ 5,922,604 $ 1,224,730
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ..................... 5,521,307 792,838 1,788,197 6,549,419
Reimbursement of expenses (Note C) .................... -- -- -- --
-------------- -------------- -------------- --------------
Total expenses ..................................... 5,521,307 792,838 1,788,197 6,549,419
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) .......................... (5,521,307) 546,469 4,134,407 (5,324,689)
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 20,659,560 778,115 7,668,485 1,994,033
Capital gains distributions from mutual funds ......... 32,117,202 10,715,745 18,741,770 19,221,026
Net unrealized appreciation (depreciation)
of investments during the year ..................... 15,569,750 4,483,540 (13,565,417) 56,124,110
-------------- -------------- -------------- --------------
Net realized and unrealized gain (loss) on investments 68,346,512 15,977,400 12,844,838 77,339,169
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 62,825,205 $ 16,523,869 $ 16,979,245 $ 72,014,480
============== ============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 240
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH &
INDEX INDEX EQUITIES GROWTH INCOME
FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 6,776,195 $ 2,324,957 $ 3,599,021 $ 2,128,889 $ 799,107
- -------------- -------------- -------------- -------------- --------------
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
-- -- -- -- --
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
- -------------- -------------- -------------- -------------- --------------
1,513,296 637,395 1,591,421 (2,278,501) (402,222)
- -------------- -------------- -------------- -------------- --------------
17,436,698 4,544,601 10,405,298 130,878 483,596
33,690,174 11,216,991 6,021,502 11,891,551 3,131,642
33,029,566 7,711,563 (6,663,813) 58,161,783 19,205,904
- -------------- -------------- -------------- -------------- --------------
84,156,438 23,473,155 9,762,987 70,184,212 22,821,142
- -------------- -------------- -------------- -------------- --------------
$ 85,669,734 $ 24,110,550 $ 11,354,408 $ 67,905,711 $ 22,418,920
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& PUTNAM PUTNAM PUTNAM OTC &
FOUNDERS BERMAN GLOBAL NEW EMERGING
GROWTH GUARDIAN GROWTH OPPORTUNITIES GROWTH
FUND TRUST FUND FUND FUND
DIVISION 30* DIVISION 29* DIVISION 28* DIVISION 26* DIVISION 27*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 31,678 $ 33,512 $ 386,503 $ -- $ --
- -------------- -------------- -------------- -------------- --------------
74,336 22,319 39,664 113,933 108,371
(14,593) (4,401) (7,712) (22,122) (21,011)
- -------------- -------------- -------------- -------------- --------------
59,743 17,918 31,952 91,811 87,360
- -------------- -------------- -------------- -------------- --------------
(28,065) 15,594 354,551 (91,811) (87,360)
- -------------- -------------- -------------- -------------- --------------
-- 10,864 1,237 9,737 9,014
2,106,129 128,127 765,977 333,297 2,846,114
(1,697,540) 348,451 (504,554) (1,619,779) (4,620,592)
- -------------- -------------- -------------- -------------- --------------
408,589 487,442 262,660 (1,276,745) (1,765,464)
- -------------- -------------- -------------- -------------- --------------
$ 380,524 $ 503,036 $ 617,211 $ (1,368,556) $ (1,852,824)
============== ============== ============== ============== ==============
</TABLE>
7
<PAGE> 241
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SCUDDER
GROWTH AND TEMPLETON TEMPLETON
INCOME ASSET ALLOCATION FOREIGN
FUND FUND FUND
DIVISION 21* DIVISION 19 DIVISION 32*
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME: .................................... $ 158,744 $ 3,271,039 $ 550,688
Dividends from mutual funds ........................... --
EXPENSES:
Mortality and expense risk charge ..................... 38,490 1,812,817 84,678
Reimbursement of expenses (Note C) .................... -- -- (16,623)
Total expenses ..................................... 38,490 1,812,817 68,055
NET INVESTMENT INCOME (LOSS) .......................... 120,254 1,458,222 482,633
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 22,419 430,651 125
Capital gains distributions from mutual funds ......... 607,596 2,566,073 285,587
Net unrealized appreciation (depreciation)
of investments during the year ..................... 84,718 19,843,521 1,121,790
Net realized and unrealized gain on investments ....... 714,733 22,840,245 1,407,502
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 834,987 $ 24,298,467 $ 1,890,135
================ ================ ================
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT
AGSPC CAPITAL CONSERVATION FUND SECURITIES
-------------------------------- FUND
DIVISION 1 DIVISION 7 DIVISION 8
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 454,827 $ 3,599,885 $ 4,872,690
-------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge .......................... 69,783 545,929 795,753
Reimbursement of expenses (Note C) ......................... -- -- --
Total expenses .......................................... 69,783 545,929 795,753
-------------- -------------- --------------
NET INVESTMENT INCOME ...................................... 385,044 3,053,956 4,076,937
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 60,355 (425,696) (378,294)
Capital gains distributions from mutual funds .............. -- -- --
Net unrealized appreciation (depreciation)
of investments during the year .......................... (428,426) (2,170,354) (2,658,037)
-------------- -------------- --------------
Net realized and unrealized gain (loss) on investments ..... (368,071) (2,596,050) (3,036,331)
-------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 16,973 $ 457,906 $ 1,040,606
============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 242
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON TWENTIETH VANGUARD/
INTERNATIONAL CENTURY ULTRA WELLINGTON VANGUARD/
FUND FUND FUND WINDSOR II
DIVISION 20 DIVISION 31* DIVISION 25* DIVISION 24*
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 4,540,296 $ -- $ 379,677 $ 576,345
- -------------- -------------- -------------- --------------
4,934,897 43,940 53,077 88,288
-- (6,881) -- --
- -------------- -------------- -------------- --------------
4,934,897 37,059 53,077 88,288
- -------------- -------------- -------------- --------------
(394,601) (37,059) 326,600 488,057
- -------------- -------------- -------------- --------------
3,551,468 18,993 -- 11,774
1,324,253 884,238 818,129 1,554,790
- -------------- -------------- -------------- --------------
78,888,709 (659,907) (444,072) (217,368)
- -------------- -------------- -------------- --------------
83,764,430 243,324 374,057 1,349,196
- -------------- -------------- -------------- --------------
$ 83,369,829 $ 206,265 $ 700,657 $ 1,837,253
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
INTERNATIONAL SECURITIES FUND- SECURITIES FUND-
GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
BOND FUND ------------------------------- PORTFOLIO PORTFOLIO
DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22* DIVISION 23*
- -------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 8,037,534 $ 272,228 $ 4,429,817 $ 44,221 $ 57,514
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
-- -- -- -- --
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
- -------------- -------------- -------------- ---------------- ----------------
6,561,676 216,537 3,525,805 36,167 46,282
- -------------- -------------- -------------- ---------------- ----------------
1,815,703 -- -- 2,260 2,349
295,588 -- -- 31,298 --
(2,362,017) -- -- (11,407) 33,654
- -------------- -------------- -------------- ---------------- ----------------
(250,726) -- -- 22,151 36,003
- -------------- -------------- -------------- ---------------- ----------------
$ 6,310,950 $ 216,537 $ 3,525,805 $ 58,318 $ 82,285
============== ============== ============== ================ ================
</TABLE>
9
<PAGE> 243
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------------------------------------
DIVISION 10A DIVISION 10B
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .......................................... $ 3,186,584 $ 3,760,733 $ 462,074 $ 493,423
Net realized gain on investments ............................... 12,767,086 5,349,737 2,085,848 631,222
Capital gains distributions from mutual funds .................. 2,739,498 6,875,040 222,372 570,166
Net unrealized appreciation
of investments during the year .............................. 51,675,655 78,996,842 3,182,195 6,528,773
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 70,368,823 94,982,352 5,952,489 8,223,584
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 4,265,439 5,033,111 501,306 574,384
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (22,309,652) (16,541,542) (2,364,484) (1,698,590)
Annuity benefit payments ....................................... (1,401,028) (1,296,973) (250,350) (218,489)
Amounts transferred (to) from VALIC general account ............ (13,443,730) (23,599,151) (1,406,730) (2,885,564)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (32,888,971) (36,404,555) (3,520,258) (4,228,259)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ................................... 37,479,852 58,577,797 2,432,231 3,995,325
NET ASSETS:
Beginning of year .............................................. 341,169,177 282,591,380 28,293,693 24,298,368
------------- ------------- ------------- -------------
End of year .................................................... $ 378,649,029 $ 341,169,177 $ 30,725,924 $ 28,293,693
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 29,995,363 33,814,520 1,560,525 1,836,094
Purchase payments .............................................. 323,038 497,922 26,729 39,513
Surrenders ..................................................... (1,822,126) (1,718,657) (123,291) (110,735)
Transfers - interdivision and (to) from VALIC general account .. (1,116,886) (2,598,422) (83,562) (204,347)
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 27,379,389 29,995,363 1,380,401 1,560,525
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 13.413891 $ 11.036946 $ 21.070956 $ 17.221812
============= ============ ============= ============
Annuity unit value assuming a 3.5% discount factor............. $ 3.873132 $ 3.298369 $ 5.173716 $ 4.376632
============= ============ ============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 244
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
- ------------------------------------------------------------------------
DIVISION 10C DIVISION 10D
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 11,741,408 $ 10,698,331 $ 363,909 $ 472,763
10,129,542 10,775,457 2,391,364 1,335,894
11,061,404 21,483,819 307,213 831,333
222,475,966 221,238,425 4,964,983 9,456,579
- --------------- --------------- --------------- ---------------
255,408,320 264,196,032 8,027,469 12,096,569
- --------------- --------------- --------------- ---------------
210,185,191 155,833,642 1,004,698 1,280,197
(49,624,470) (30,060,583) (2,219,367) (2,417,823)
(61,625) (29,665) (10,433) (5,520)
47,055,243 (42,300,802) (5,536,446) (7,115,532)
- --------------- --------------- --------------- ---------------
207,554,339 83,442,592 (6,761,548) (8,258,678)
- --------------- --------------- --------------- ---------------
462,962,659 347,638,624 1,265,921 3,837,891
1,067,383,711 719,745,087 41,205,206 37,367,315
- --------------- --------------- --------------- ---------------
$ 1,530,346,370 $ 1,067,383,711 $ 42,471,127 $ 41,205,206
=============== =============== =============== ===============
455,255,243 416,234,288 9,885,873 12,207,684
80,768,570 76,950,994 231,458 341,405
(18,096,464) (14,254,441) (486,940) (663,263)
18,879,616 (23,675,598) (1,248,687) (1,999,953)
- --------------- --------------- --------------- ---------------
536,806,965 455,255,243 8,381,704 9,885,873
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 2.848437 $ 2.343900 $ 5.049088 $ 4.155057
=============== =============== =============== ===============
$ 2.085358 $ 1.776053 $ 3.032347 $ 2.582770
=============== =============== =============== ===============
<CAPTION>
AGSPC
AGSPC SMALL CAP
MIDCAP INDEX FUND INDEX FUND
- ---------------------------------- ----------------------------------
DIVISION 4 DIVISION 14
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 1,513,296 $ 2,391,702 $ 637,395 $ 563,294
17,436,698 10,603,188 4,544,601 2,963,270
33,690,174 17,377,938 11,216,991 2,945,819
33,029,566 76,322,743 7,711,563 24,766,420
- --------------- --------------- --------------- ---------------
85,669,734 106,695,571 24,110,550 31,238,803
- --------------- --------------- --------------- ---------------
76,583,041 87,946,264 31,004,229 40,608,391
(21,727,656) (15,264,152) (7,478,000) (4,632,557)
(19,036) (16,844) (563) (3,022)
(55,201,966) (69,269,652) (15,148,966) (38,506,364)
- --------------- --------------- --------------- ---------------
(365,617) 3,395,616 8,376,700 (2,533,552)
- --------------- --------------- --------------- ---------------
85,304,117 110,091,187 32,487,250 28,705,251
480,407,276 370,316,089 151,991,072 123,285,821
- --------------- --------------- --------------- ---------------
$ 565,711,393 $ 480,407,276 $ 184,478,322 $ 151,991,072
=============== =============== =============== ===============
172,613,690 171,442,018 98,335,995 100,383,839
25,301,831 35,874,094 18,844,484 30,141,511
(7,030,990) (5,995,776) (4,305,572) (3,356,851)
(18,067,553) (28,706,646) (9,554,065) (28,832,504)
- --------------- --------------- --------------- ---------------
172,816,978 172,613,690 103,320,842 98,335,995
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 3.272588 $ 2.782677 $ 1.785442 $ 1.544896
=============== =============== =============== ===============
$ 2.044683 $ 1.799452 $ 1.520786 $ 1.361960
=============== =============== =============== ===============
</TABLE>
11
<PAGE> 245
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC
FUND GROWTH FUND
DIVISION 11 DIVISION 15
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ 1,591,421 $ 1,304,847 $ (2,278,501) $ (869,578)
Net realized gain on investments ............................... 10,405,298 13,215,875 130,878 8,587
Capital gains distributions from mutual funds .................. 6,021,502 4,363,325 11,891,551 3,650,399
Net unrealized appreciation (depreciation)
of investments during the year .............................. (6,663,813) (725,229) 58,161,783 39,103,633
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 11,354,408 18,158,818 67,905,711 41,893,041
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 34,022,917 52,726,233 164,255,730 58,223,803
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (8,616,063) (6,722,321) (10,378,550) (1,776,523)
Annuity benefit payments ....................................... (13,432) (5,870) (38,688) --
Amounts transferred (to) from VALIC general account ............ (45,208,742) (63,364,477) 172,227,639 109,893,422
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (19,815,320) (17,366,435) 326,066,131 166,340,702
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ (8,460,912) 792,383 393,971,842 208,233,743
NET ASSETS:
Beginning of year .............................................. 199,687,440 198,895,057 241,143,765 32,910,022
------------- ------------- ------------- -------------
End of year .................................................... $ 191,226,528 $ 199,687,440 $ 635,115,607 $ 241,143,765
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 172,564,018 187,749,916 164,417,848 32,633,370
Purchase payments .............................................. 28,526,458 49,402,081 101,043,809 45,984,606
Surrenders ..................................................... (7,207,422) (6,214,230) (5,693,969) (1,266,891)
Transfers - interdivision and (to) from VALIC general account .. (37,656,740) (58,373,749) 106,504,821 87,066,763
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 156,226,314 172,564,018 366,272,509 164,417,848
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ -----------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ........................................ $ 1.222906 $ 1.156454 $ 1.733324 $ 1.466652
============= ============= ============ ============
Annuity unit value assuming a 3.5% discount factor ............. $ 0.953246 $ 0.933003 $ 1.580931 $ 1.384532
============= ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 246
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
AGSPC AGSPC AGSPC TIMED OPPORTUNITY
GROWTH & INCOME FUND SCIENCE & TECHNOLOGY FUND SOCIAL AWARENESS FUND FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 16 DIVISION 17 DIVISION 12 DIVISION 5
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (402,222) $ (75,425) $ (5,521,307) $ (1,432,122) $ 546,469 $ 599,922 $ 4,134,407 $ 5,452,120
483,596 19,953 20,659,560 6,545,968 778,115 371,169 7,668,485 2,006,917
3,131,642 472,785 32,117,202 37,380,606 10,715,745 3,609,468 18,741,770 3,186,462
19,205,904 8,794,032 15,569,750 41,310,631 4,483,540 10,227,915 (13,565,417) 26,710,438
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
22,418,920 9,211,345 62,825,205 83,805,083 16,523,869 14,808,474 16,979,245 37,355,937
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,180,652 17,507,504 181,422,903 93,027,877 18,543,307 10,849,944 15,126,160 20,940,181
(2,962,157) (641,935) (14,164,178) (3,055,711) (3,798,307) (1,516,923) (11,037,733) (7,824,702)
(1,598) -- (40,073) (824) -- -- (7,329) (6,591)
43,756,812 28,680,150 105,706,951 147,758,969 13,547,350 (2,864,774) (30,784,573) (42,300,580)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
81,973,709 45,545,719 272,925,603 237,730,311 28,292,350 6,468,247 (26,703,475) (29,191,692)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
104,392,629 54,757,064 335,750,808 321,535,394 44,816,219 21,276,721 (9,724,230) 8,164,245
67,135,576 12,378,512 375,213,356 53,677,962 60,099,810 38,823,089 182,953,705 174,789,460
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 171,528,205 $ 67,135,576 $ 710,964,164 $ 375,213,356 $ 104,916,029 $ 60,099,810 $ 173,229,475 $ 182,953,705
============= ============= ============= ============= ============= ============= ============= =============
51,779,089 12,386,602 187,862,232 42,726,137 32,750,120 29,015,764 75,851,431 89,377,860
28,095,895 14,980,745 84,389,312 54,428,033 9,143,695 6,860,477 6,003,535 9,806,864
(1,842,881) (455,265) (6,049,987) (1,584,330) (1,827,332) (929,671) (4,376,494) (3,569,040)
30,309,532 24,867,007 49,608,089 92,292,392 6,507,533 (2,196,450) (12,185,855) (19,764,253)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
108,341,635 51,779,089 315,809,646 187,862,232 46,574,016 32,750,120 65,292,617 75,851,431
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.583056 $ 1.296577 $ 2.250471 $ 1.997175 $ 2.252673 $ 1.835102 $ 2.651899 $ 2.411022
============= ============= ============= ============= ============= ============= ============= =============
$ 1.443874 $ 1.223980 $ 2.052612 $ 1.885352 $ 1.755941 $ 1.480522 $ 1.680570 $ 1.581407
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
13
<PAGE> 247
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
FOUNDERS
GROWTH
DREYFUS SMALL CAP PORTFOLIO FUND
------------------------------ -------------
DIVISION 18 DIVISION 30
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ (5,324,689) $ (1,441,343) $ (28,065)
Net realized gain on investments ................................. 1,994,033 26,776 --
Capital gains distributions from mutual funds .................... 19,221,026 6,796,184 2,106,129
Net unrealized appreciation (depreciation)
of investments during the year ................................ 56,124,110 47,179,100 (1,697,540)
------------- ------------- -------------
Increase (decrease) in net assets resulting from operations . 72,014,480 52,560,717 380,524
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 168,538,535 96,201,687 8,595,522
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,795,343) (3,867,838) (36,494)
Annuity benefit payments ......................................... (8,413) (915) --
Amounts transferred (to) from VALIC general account .............. 74,732,906 122,606,635 23,178,924
------------- ------------- -------------
Increase in net assets
resulting from principal transactions ..................... 229,467,685 214,939,569 31,737,952
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ..................................... 301,482,165 267,500,286 32,118,476
NET ASSETS:
Beginning of year ................................................ 356,903,894 89,403,608 --
------------- -------------
End of year ...................................................... $ 658,386,059 $ 356,903,894 $ 32,118,476
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................. 267,735,219 85,169,871 --
Purchase payments ................................................ 117,376,109 80,950,706 9,274,157
Surrenders ....................................................... (8,756,141) (2,954,777) (32,596)
Transfers - interdivision and (to) from VALIC general account .... 52,528,063 104,569,419 21,955,903
------------- ------------- -------------
Accumulation units end of year ................................... 428,883,250 267,735,219 31,197,464
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
--------------------------- ------------
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Accumulation unit value ............................... $ 1.534694 $ 1.332904 $ 1.029522
============ ============ ============
Annuity unit value assuming a 3.5% discount factor .... $ 1.409551 $ 1.267071 $ 1.011867
============ ============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 248
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND
NEUBERGER&BERMAN GROWTH OPPORTUNITIES GROWTH INCOME
GUARDIAN TRUST FUND FUND FUND FUND
DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21
- -------------- -------------- -------------- -------------- --------------
1996* 1996* 1996* 1996* 1996*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 15,594 $ 354,551 $ (91,811) $ (87,360) $ 120,254
10,864 1,237 9,737 9,014 22,419
128,127 765,977 333,297 2,846,114 607,596
348,451 (504,554) (1,619,779) (4,620,592) 84,718
- -------------- -------------- -------------- -------------- --------------
503,036 617,211 (1,368,556) (1,852,824) 834,987
- -------------- -------------- -------------- -------------- --------------
2,108,685 3,174,282 11,510,093 11,571,920 4,643,308
(21,439) (15,952) (87,148) (77,988) (23,004)
-- -- -- -- --
6,613,024 13,833,517 40,168,590 34,125,847 12,968,194
- -------------- -------------- -------------- -------------- --------------
8,700,270 16,991,847 51,591,535 45,619,779 17,588,498
- -------------- -------------- -------------- -------------- --------------
9,203,306 17,609,058 50,222,979 43,766,955 18,423,485
-- -- -- -- --
- -------------- -------------- -------------- -------------- --------------
$ 9,203,306 $ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485
============== ============== ============== ============== ==============
-- -- -- -- --
2,109,025 3,377,941 13,342,250 13,681,504 4,726,075
(19,267) (16,466) (87,502) (82,877) (21,254)
6,121,834 13,287,125 39,746,951 35,304,201 11,819,225
- -------------- -------------- -------------- -------------- --------------
8,211,592 16,648,600 53,001,699 48,902,828 16,524,046
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1996 1996 1996 1996 1996
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 1.120770 $ 1.057690 $ 0.947573 $ 0.894978 $ 1.114950
============== ============== ============== ============== ==============
$ 1.101550 $ 1.039552 $ 0.931324 $ 0.879630 $ 1.095830
============== ============== ============== ============== ==============
</TABLE>
15
<PAGE> 249
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
TEMPLETON
TEMPLETON ASSET FOREIGN
ALLOCATION FUND FUND
------------------------------ -------------
DIVISION 19 DIVISION 32
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 1,458,222 $ 360,608 $ 482,633
Net realized gain on investments ................................ 430,651 87,754 125
Capital gains distributions from mutual funds ................... 2,566,073 -- 285,587
Net unrealized appreciation (depreciation)
of investments during the year ............................... 19,843,521 11,935,576 1,121,790
------------- ------------- -------------
Increase in net assets resulting from operations ........... 24,298,467 12,383,938 1,890,135
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 46,026,342 26,412,918 9,386,263
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,839,217) (1,156,891) (122,577)
Annuity benefit payments ........................................ (39,584) (1,361) --
Amounts transferred (to) from VALIC general account ............. 33,529,527 24,133,475 28,301,252
------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 75,677,068 49,388,141 37,564,938
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 99,975,535 61,772,079 39,455,073
NET ASSETS:
Beginning of year ............................................... 94,625,352 32,853,273 --
------------- ------------- -------------
End of year ..................................................... $ 194,600,887 $ 94,625,352 $ 39,455,073
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 78,494,505 32,807,602 --
Purchase payments ............................................... 35,369,271 24,212,805 10,156,940
Surrenders ...................................................... (2,676,756) (964,768) (116,295)
Transfers - interdivision and (to) from VALIC general account ... 26,197,650 22,438,866 26,631,183
============= ============= =============
Accumulation units end of year .................................. 137,384,670 78,494,505 36,671,828
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
----------------------------- -------------
1996 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Accumulation unit value ........................................... $ 1.414844 $ 1.205181 $ 1.075896
============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.299474 $ 1.145656 $ 1.057446
============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 250
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTIETH
CENTURY VANGUARD/
ULTRA WELLINGTON VANGUARD/
TEMPLETON INTERNATIONAL FUND FUND FUND WINDSOR II
- ------------------------------ ------------- ------------- -------------
DIVISION 20 DIVISION 31 DIVISION 25 DIVISION 24
- ------------------------------ ------------- ------------- -------------
1996 1995 1996* 1996* 1996*
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ (394,601) $ (1,169,628) $ (37,059) $ 326,600 $ 488,057
3,551,468 25,628 18,993 -- 11,774
1,324,253 350,470 884,238 818,129 1,554,790
78,888,709 23,406,038 (659,907) (444,072) (217,368)
- ------------- ------------- ------------- ------------- -------------
83,369,829 22,612,508 206,265 700,657 1,837,253
- ------------- ------------- ------------- ------------- -------------
121,376,573 69,120,243 4,513,492 7,042,246 10,178,409
(9,699,818) (2,577,387) (29,941) (12,075) (103,527)
(3,367) (463) -- -- --
84,599,243 89,125,401 12,627,842 17,458,690 29,887,643
- ------------- ------------- ------------- ------------- -------------
196,272,631 155,667,794 17,111,393 24,488,861 39,962,525
- ------------- ------------- ------------- ------------- -------------
279,642,460 178,280,302 17,317,658 25,189,518 41,799,778
250,381,351 72,101,049 -- -- --
- ------------- ------------- ------------- ------------- -------------
$ 530,023,811 $ 250,381,351 $ 17,317,658 $ 25,189,518 $ 41,799,778
============= ============= ============= ============= =============
219,124,926 71,716,511 -- -- --
97,229,761 65,697,216 4,747,541 7,335,077 10,359,662
(7,187,616) (2,198,909) (27,374) (12,748) (91,924)
69,414,878 83,910,108 11,933,909 15,544,305 27,025,023
- ------------- ------------- ------------- ------------- -------------
378,581,949 219,124,926 16,654,076 22,866,634 37,292,761
============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31:
- ------------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1996 1996
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 1.399702 $ 1.142586 $ 1.039845 $ 1.101584 $ 1.120855
============= ============= ============= ============= =============
$ 1.285567 $ 1.086152 $ 1.022013 $ 1.082693 $ 1.101634
============= ============= ============= ============= =============
</TABLE>
17
<PAGE> 251
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC AGSPC
CAPITAL CONSERVATION CAPITAL CONSERVATION
FUND FUND
---------------------------- ----------------------------
DIVISION 1 DIVISION 7
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ......................................... $ 385,044 $ 449,111 $ 3,053,956 $ 2,607,547
Net realized gain (loss) on investments ....................... 60,355 65,122 (425,696) (138,616)
Capital gains distributions from mutual funds ................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the year ............................. (428,426) 906,759 (2,170,354) 5,643,853
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ......... 16,973 1,420,992 457,906 8,112,784
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 280,092 286,600 10,990,401 10,464,260
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .......................... (624,478) (623,792) (2,515,394) (1,972,220)
Annuity benefit payments ...................................... (512) (499) -- --
Amounts transferred (to) from VALIC general account ........... (953,654) (1,306,120) (7,231,500) (3,821,311)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................. (1,298,552) (1,643,811) 1,243,507 4,670,729
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,281,579) (222,819) 1,701,413 12,783,513
NET ASSETS:
Beginning of year ............................................. 7,783,449 8,006,268 53,588,066 40,804,553
------------ ------------ ------------ ------------
End of year ................................................... $ 6,501,870 $ 7,783,449 $ 55,289,479 $ 53,588,066
============ ============ ============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .......................... 2,402,085 2,953,861 29,573,808 26,859,219
Purchase payments ............................................. 87,169 96,297 6,098,740 6,253,935
Surrenders .................................................... (196,821) (207,008) (1,343,357) (1,058,493)
Transfers - interdivision and (to) from VALIC
general account . ........................................... (300,897) (441,065) (4,042,697) (2,480,853)
------------ ------------ ------------ ------------
Accumulation units end of year ................................ 1,991,536 2,402,085 30,286,494 29,573,808
============ ============ ============ ============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ....................................... $ 3.262402 $ 3.238370 $ 1.825549 $ 1.812011
============ ============ ============ ============
Annuity unit value assuming a 3.5% discount factor ............ $ 1.794552 $ 1.843690 $ 1.255251 $ 1.289558
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 252
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC
GOVERNMENT SECURITIES INTERNATIONAL GOVERNMENT AGSPC
FUND BOND FUND MONEY MARKET FUND
- ----------------------------- ------------------------------ ----------------------------------------------------------------
DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 4,076,937 $ 2,982,495 $ 6,561,676 $ 3,459,290 $ 216,537 $ 306,524 $ 3,525,805 $ 3,277,326
(378,294) (28,711) 1,815,703 911,852 -- -- -- --
-- -- 295,588 114,019 -- -- -- --
(2,658,037) 5,103,399 (2,362,017) 3,111,995 -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,040,606 8,057,183 6,310,950 7,597,156 216,537 306,524 3,525,805 3,277,326
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,451,360 15,047,915 48,300,297 31,073,737 163,293 355,756 40,448,483 26,840,702
(3,354,710) (1,987,445) (4,925,561) (1,946,252) (465,203) (681,366) (13,617,200) (7,793,169)
-- -- (33) -- -- -- (1,584) (1,574)
(2,269,092) 9,219,172 16,174,338 42,026,449 (1,426,148) (806,250) 10,145,727 (54,484,648)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
12,827,558 22,279,642 59,549,041 71,153,934 (1,728,058) (1,131,860) 36,975,426 (35,438,689)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
13,868,164 30,336,825 65,859,991 78,751,090 (1,511,521) (825,336) 40,501,231 (32,161,363)
71,703,775 41,366,950 112,312,180 33,561,090 6,391,022 7,216,358 80,257,395 112,418,758
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 85,571,939 $ 71,703,775 $ 178,172,171 $ 112,312,180 $ 4,879,501 $ 6,391,022 $ 120,758,626 $ 80,257,395
============= ============= ============= ============= ============= ============= ============= =============
39,847,053 26,667,073 73,369,250 25,691,713 2,917,361 3,442,237 51,907,757 75,765,781
10,391,393 9,058,310 31,815,367 21,413,110 73,255 165,743 25,572,924 18,072,687
(1,871,516) (1,149,951) (3,112,236) (1,286,336) (208,252) (316,475) (8,565,366) (5,090,822)
(1,236,761) 5,271,621 10,529,212 27,550,763 (639,830) (374,144) 6,208,780 (36,839,889)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
47,130,169 39,847,053 112,601,593 73,369,250 2,142,534 2,917,361 75,124,095 51,907,757
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
December 31: December 31: December 31: December 31:
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.815651 $ 1.799475 $ 1.582230 $ 1.530780 $ 2.277444 $ 2.190686 $ 1.607212 $ 1.545802
============= ============= ============= ============= ============= ============= ============= =============
$ 1.248443 $ 1.280634 $ 1.321708 $ 1.323493 $ 1.399179 $ 1.392992 $ 1.093041 $ 1.088077
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
19
<PAGE> 253
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
VANGUARD VANGUARD
FIXED FIXED
INCOME INCOME
SECURITIES SECURITIES
FUND - FUND - L/T
L/T CORPORATE U.S. TREASURY
PORTFOLIO PORTFOLIO
------------ ------------
DIVISION 22 DIVISION 23
------------ ------------
1996* 1996*
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 36,167 $ 46,282
Net realized gain on investments ................................ 2,260 2,349
Capital gains distributions from mutual funds ................... 31,298 --
Net unrealized appreciation (depreciation)
of investments during the year ............................... (11,407) 33,654
------------ ------------
Increase in net assets resulting from operations ........... 58,318 82,285
------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,030,635 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,212) (9,447)
Annuity benefit payments ........................................ -- --
Amounts transferred (to) from VALIC general account ............. 2,445,116 3,186,574
------------ ------------
Increase in net assets
resulting from principal transactions .................... 3,472,539 4,294,416
------------ ------------
TOTAL INCREASE IN NET ASSETS .................................... 3,530,857 4,376,701
NET ASSETS:
Beginning of year ............................................... -- --
------------ ------------
End of year ..................................................... $ 3,530,857 $ 4,376,701
============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- --
Purchase payments ............................................... 1,099,573 1,138,211
Surrenders ...................................................... (3,347) (9,203)
Transfers - interdivision and (to) from VALIC general account ... 2,274,215 3,045,361
------------ ------------
Accumulation units end of year .................................. 3,370,441 4,174,369
============ ============
<CAPTION>
December 31, December 31,
1996 1996
------------ ------------
<S> <C> <C>
Accumulation unit value ......................................... $ 1.047595 $ 1.048470
============ ============
Annuity unit value assuming a 3.5% discount factor .............. $ 1.029630 $ 1.030490
============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 254
================================================================================
NOTES TO FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ("VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of thirty-three subaccounts or "divisions." Each division,
which represents a variable investment vehicle available only through a VALIC
annuity contract, invests in one of the following mutual funds:
American General Series Portfolio Company ("AGSPC"):
AGSPC Stock Index Fund (Divisions 10A, B, C, and D)
AGSPC MidCap Index Fund (Division 4)
AGSPC Small Cap Index Fund (Division 14)
AGSPC International Equities Fund (Division 11)
AGSPC Growth Fund (Division 15)
AGSPC Growth & Income Fund (Division 16)
AGSPC Science & Technology Fund (Division 17)
AGSPC Social Awareness Fund (Division 12)
AGSPC Timed Opportunity Fund (Division 5)
AGSPC Capital Conservation Fund (Divisions 1 and 7)
AGSPC Government Securities Fund (Division 8)
AGSPC International Government Bond Fund (Division 13)
AGSPC Money Market Fund (Divisions 2 and 6)
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)
Founders Growth Fund (Division 30)
Neuberger&Berman Guardian Trust (Division 29)
Putnam Global Growth Fund (Division 28)
Putnam New Opportunities Fund (Division 26)
Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
Templeton Foreign Fund (Division 32)
Templeton Variable Products Series Fund:
Templeton Asset Allocation Fund (Division 19)
Templeton International Fund (Division 20)
Twentieth Century Ultra Fund (Division 31)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio (Division 22)
Long-Term U.S. Treasury Portfolio (Division 23)
Vanguard/Wellington Fund (Division 25)
Vanguard/Windsor II (Division 24)
Divisions 21 through 32 commenced operations on July 1, 1996.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
INVESTMENT VALUATION. Investments in mutual funds (the "Funds") are valued
at the net asset (market) value per share at the close of each business day as
reported by the Fund.
INVESTMENT TRANSACTIONS. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
basis of identified cost. Capital gain distributions from mutual funds are
recorded on the ex-dividend date and reinvested upon receipt.
INVESTMENT INCOME. Dividend income from mutual funds is recorded on the
ex-dividend date and reinvested upon receipt.
ANNUITY RESERVES. Net payments made by variable annuity contract owners
are accumulated based on the performance of the investments of the Separate
Account until the date the contract owners select to commence annuity payments.
Reserves for annuities on which benefits are currently payable are provided for
based upon estimated mortality and other assumptions, including provisions for
the risk of adverse deviation from assumptions, which were appropriate at the
time the contracts were issued. The 1983(a) Individual Mortality Table has been
used in the computation of annuity reserves for currently payable contracts.
Participants are able to elect investment rates between 3.0% and 6.0%, as
regulated by the applicable state laws.
21
<PAGE> 255
================================================================================
NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC acts as investment adviser and transfer agent to AGSPC.
The Separate Account is charged for mortality and expense risks assumed by
VALIC. The charge, based on the daily net assets of each division, is assessed
daily based on the following annual rates: for Division 10B, 0.85% on the first
$10,000,000, 0.425% on the next $90,000,000, and 0.21% on the excess over
$100,000,000; for Divisions 1, 2, 4, 5, 6, 7, 8, 10A, 10C, 10D, 11, 12, 13, 14,
15, 16, and 17, 1.00%; and for Divisions 18 through 32, 1.25%. Certain
unaffiliated mutual funds reimburse to VALIC a portion of the distribution or
administrative costs associated with offering their funds through a VALIC
annuity contract. VALIC, in turn reduces the separate account charge to that
division by the amount of the reimbursement. The expense reduction is credited
daily based on the following annual rates: for Divisions 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20%.
Pursuant to the reorganization agreement entered into on April 17, 1987,
which transferred VALIC Separate Accounts One and Two into Separate Account A
Divisions 10A and 10B, respectively, expenses of each division (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets: Division 10A, 1.4157% on the first
$359,065,787, 1.36% on the next $40,934,213, and 1.32% on the excess over
$400,000,000; Division 10B, 0.6966% on the first $25,434,267, 0.5% on the next
$74,565,733, and 0.25% on the excess over $100,000,000. Accordingly, during the
years ended December 31, 1996 and 1995, VALIC reduced expenses of Division 10B
by $73,695 and $69,586, respectively.
A portion of the annual contract maintenance charge is assessed each
contract (except those relating to Divisions 10A and 10B) by VALIC on the last
day of the calendar quarter in which VALIC receives the first purchase payment,
and in quarterly installments thereafter during the accumulation period.
Maintenance charges assessed totaled $3,625,368 and $2,494,903 for the years
ended December 31, 1996, and December 31, 1995, respectively.
VALIC received surrender charges of $1,998,356 and $1,299,069 for the years
ended December 31, 1996, and December 31, 1995, respectively. In addition,
VALIC received $76,330 and $11,846 for the year ended December 31, 1996, in
sales load on variable annuity purchase payments for Divisions 10A and 10B,
respectively. VALIC received $100,290 and $18,404 for the year ended December
31, 1995, in sales load on variable annuity purchase payments for Divisions 10A
and 10B, respectively.
NOTE D -- INVESTMENTS
The cost of fund shares is the same for financial reporting and federal
income tax purposes. The following is a summary of fund shares owned as of
December 31, 1996:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Stock Index Fund ............... 10A,B,C,D 87,073,994 $22.76 $1,981,804,121 $1,327,746,117 $ 654,058,004
AGSPC MidCap Index Fund .............. 4 29,632,311 19.09 565,680,826 449,572,385 116,108,441
AGSPC Small Cap Index Fund ........... 14 11,997,478 15.38 184,521,204 153,924,818 30,596,386
AGSPC International Equities Fund .... 11 17,597,622 10.86 191,110,175 186,523,328 4,586,847
AGSPC Growth Fund .................... 15 37,305,439 16.99 633,819,402 536,223,583 97,595,819
AGSPC Growth & Income Fund ........... 16 11,029,231 15.53 171,283,956 143,198,387 28,085,569
AGSPC Science & Technology Fund ...... 17 36,314,121 19.54 709,577,919 650,004,665 59,573,254
AGSPC Social Awareness Fund .......... 12 6,746,465 15.53 104,772,608 92,520,041 12,252,567
AGSPC Timed Opportunity Fund ......... 5 14,900,615 11.62 173,145,150 164,668,872 8,476,278
Dreyfus Small Cap Portfolio .......... 18 12,622,965 52.08 657,404,003 554,202,812 103,201,191
Founders Growth Fund ................. 30 2,008,357 15.87 31,872,619 33,570,159 (1,697,540)
Neuberger&Berman Guardian Trust ...... 29 576,221 15.87 9,144,621 8,796,170 348,451
Putnam Global Growth Fund ............ 28 1,616,874 10.82 17,494,577 17,999,131 (504,554)
Putnam New Opportunities Fund ........ 26 1,226,012 40.63 49,812,851 51,432,630 (1,619,779)
Putnam OTC & Emerging Growth Fund .... 27 2,978,308 14.62 43,542,866 48,163,458 (4,620,592)
Scudder Growth and Income Fund ....... 21 788,862 23.23 18,325,255 18,240,537 84,718
Templeton Asset Allocation Fund ...... 19 9,215,934 21.08 194,271,899 163,221,896 31,050,003
Templeton Foreign Fund ............... 32 3,770,922 10.36 39,066,749 37,944,959 1,121,790
Templeton International Fund ......... 20 28,785,081 18.40 529,645,484 429,586,719 100,058,765
Twentieth Century Ultra Fund ......... 31 614,433 28.09 17,259,437 17,919,344 (659,907)
Vanguard/Wellington Fund ............. 25 957,006 26.15 25,025,702 25,469,774 (444,072)
Vanguard/Windsor II .................. 24 1,738,829 23.83 41,436,294 41,653,662 (217,368)
AGSPC Capital Conservation Fund ...... 1 & 7 6,540,731 9.44 61,744,501 62,635,525 (891,024)
AGSPC Government Securities Fund ..... 8 8,740,580 9.79 85,570,274 87,080,789 (1,510,515)
AGSPC Intl Government Bond Fund ...... 13 14,664,070 12.14 178,021,807 177,770,389 251,418
AGSPC Money Market Fund .............. 2 & 6 125,248,759 1.00 125,248,759 125,248,759 --
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio ..... 22 401,405 8.79 3,528,351 3,539,758 (11,407)
Long-Term Treasury Portfolio ...... 23 460,773 9.96 4,589,300 4,555,646 33,654
-------------- -------------- --------------
$6,848,720,710 $5,613,414,313 $1,235,306,397
============== ============== ==============
</TABLE>
22
<PAGE> 256
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE E -- FEDERAL INCOME TAXES
VALIC is taxed as a life insurance company under the Internal Revenue Code
and includes the operations of the Separate Account in determining its federal
income tax liability. Under current federal income tax law the investment
income and capital gains from sale of investments realized by the Separate
Account are not taxable. Therefore, no federal income tax provision has been
made.
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPCStock Index Fund:
Division 10A ....................................... $ 17,021,738 $ 43,812,850
Division 10B ....................................... 2,580,971 5,429,098
Division 10C ....................................... 256,325,254 25,747,213
Division 10D ....................................... 2,027,471 8,102,453
AGSPCMidCap Index Fund Division 4 ..................... 82,810,931 47,686,904
AGSPCSmall Cap Index Fund Division 14 ................. 39,025,150 19,167,355
AGSPCInternational Equities Fund Division 11 .......... 86,696,926 98,467,340
AGSPCGrowth Fund Division 15 .......................... 335,262,129 301,789
AGSPCGrowth & Income Fund Division 16 ................. 86,012,396 1,299,897
AGSPCScience & Technology Fund Division 17 ............ 352,574,477 53,374,853
AGSPCSocial Awareness Fund Division 12 ................ 42,813,000 3,268,198
AGSPCTimed Opportunity Fund Division 5 ................ 28,638,442 32,465,770
Dreyfus Small Cap Portfolio Division 18 ............... 249,716,319 6,505,702
Founders Growth Fund Division 30 ...................... 33,570,159 --
Neuberger&Berman Guardian Trust Division 29 ........... 8,898,099 112,793
Putnam Global Growth Fund Division 28 ................. 18,021,308 23,414
Putnam New Opportunities Fund Division 26 ............. 51,544,430 121,537
Putnam OTC & Emerging Growth Fund Division 27 ......... 48,276,161 121,717
Scudder Growth and Income Fund Division 21 ............ 18,402,759 184,641
Templeton Asset Allocation Fund Division 19 ........... 82,157,269 2,508,019
Templeton Foreign Fund Division 32 .................... 37,950,945 6,111
Templeton International Fund Division 20 .............. 218,306,492 20,995,568
Twentieth Century Ultra Fund Division 31 .............. 18,018,419 118,068
Vanguard/Wellington Fund Division 25 .................. 25,469,774 --
Vanguard/Windsor II Division 24 ....................... 41,722,849 80,961
AGSPCCapital Conservation Fund:
Division 1 ......................................... 693,471 1,607,591
Division 7 ......................................... 14,085,173 9,602,267
AGSPCGovernment Securities Fund Division 8 ............ 25,289,634 8,298,547
AGSPCInternational Government Bond Fund Division 13 ... 90,682,754 24,293,817
AGSPCMoney Market Fund:
Division 2 ......................................... 1,864,996 3,374,351
Division 6 ......................................... 234,317,827 194,495,674
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 .......... 3,689,310 151,812
Long-Term U.S. Treasury Portfolio Division 23 ...... 4,877,356 324,059
-------------- --------------
Total ........................................... $2,559,344,389 $ 612,050,369
============== ==============
</TABLE>
23
<PAGE> 257
================================================================================
REPORT OF INDEPENDENT AUDITORS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO THE BOARD OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AND CONTRACT OWNERS
OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
We have audited the accompanying statements of net assets of The Variable
Annuity Life Insurance Company Separate Account A ("Separate Account A") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, and 11 through
32, inclusive) comprising Separate Account A as of December 31, 1996. We have
also audited the related statements of operations for the year then ended and
the statements of changes in net assets for each of the two years in the period
then ended of Separate Account A and each of its divisions except for divisions
21 through 32, inclusive, for which we audited the statements of operations and
the statements of changes in net assets for the period from July 1, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of Separate Account A's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Separate Account A and each of
the divisions comprising Separate Account A at December 31, 1996, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
January 24, 1997
24
<PAGE> 258
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY --------------
SEPARATE ACCOUNT A Bulk Rate
U.S. Postal
P.O. Box 3206 PAID
Houston, Texas 77253-3206 Permit No. 6__
Houston, Texas
--------------
<PAGE> 259
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTRACT FORM
PORTFOLIO DIRECTOR
AND
PORTFOLIO DIRECTOR 2
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Filed with Part A:
Selected Purchase Unit Data for each Fund for the last ten years or
since inception
Filed with Part B:
(i) Audited Financial Statements
The Variable Annuity Life Insurance Company
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholder Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(ii) Audited Financial Statements
The Variable Annuity Life Insurance Company Separate Account A --
Report of Independent Auditors
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Division Financial Statements
Notes to Financial Statements
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the related
information is included in the financial statements and therefore such
schedules have been omitted.
C-1
<PAGE> 260
(b) Exhibits
<TABLE>
<C> <S>
1. -- Resolutions adopted by The Variable Annuity Life
Insurance Company Board of Directors at its Annual
Meeting of April 18, 1979 establishing The Variable
Annuity Life Insurance Company Separate Account A,
incorporated herein by reference to Post-Effective
Statement No. 5 filed with the Securities and Exchange
Commission ("SEC") on March 1, 1996 (File No. 33-
75292/811-3240)
2. -- Not Applicable.
3. -- Underwriting Agreement between The Variable Annuity Life
Insurance Company, The Variable Annuity Life Insurance
Company Separate Account A and The Variable Annuity
Marketing Company, incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(a). -- Specimen Individual Annuity Contract. (Form UIT-194),
incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3240).
4(b)(i). -- Specimen Group Annuity Contract. (Form UITG-194),
incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3240).
4(b)(ii). -- Specimen Individual Non-Qualified Annuity Contract. (Form
UITN-194), incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(b)(iii). -- Specimen Certificate of Participation under Group Annuity
Contract. (Form UITG-194P), incorporated herein by
reference to Post-Effective Amendment No. 5 filed with
the SEC on March 1, 1996 (File No. 33-75292/811-3240).
4(b)(iv). -- Specimen Individual Retirement Account Annuity Contract.
(Form UIT-IRA-194), incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(b)(v). -- Specimen Simplified Employee Pension Contract (Form
UIT-SEP-194), incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
5(a). -- Specimen Application for Annuity Contract, incorporated
herein by reference to Post-Effective Amendment No. 5
filed with the SEC on March 1, 1996 (File No.
33-75292/811-3240).
5(b). -- Specimen Group Master Application, incorporated herein by
reference to Post-Effective Amendment No. 5 filed with
the SEC on March 1, 1996 (File No. 33-75292/811-3240).
6(a). -- Copy of Amended and Restated Articles of Incorporation of
The Variable Annuity Life Insurance Company, incorporated
herein by reference to Post-Effective Amendment No. 5
filed with the SEC on March 1, 1996 (File No.
33-75292/811-3240).
6(b). -- Copy of Amendment Number One to Amended and Restated
Articles of Incorporation of The Variable Annuity Life
Insurance Company (as amended through April 28, 1989)
effective March 28, 1990, incorporated herein by
reference to Post-Effective Amendment No. 5 filed with
the SEC on March 1, 1996 (File No. 33-75922/811-3240).
7. -- Not Applicable.
</TABLE>
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<PAGE> 261
<TABLE>
<S> <C>
8(a). -- Participation Agreement between The Variable Annuity Life
Insurance Company and Templeton Variable Products Series
Fund, incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3240).
8(b). -- Participation Agreement between The Variable Annuity Life
Insurance Company and Dreyfus Variable Investment Fund,
incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1994 (File
No. 33-75292/811-3420).
8(c). -- Order Transmission Agreement between The Variable Annuity
Life Insurance Company and Scudder Service Corporation,
incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996.
(File No. 33-75292/811-3240)
8(d). -- Fund Participation Agreement between The Variable Annuity
Life Insurance Company and Putnam Mutual Funds Corp.,
incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996.
(File No. 33-75292/811-3240)
8(e). -- Fund Participation Agreement between The Variable Annuity
Life Insurance Company and Twentieth Century Investors
Inc., incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996.
(File No. 33-75292/811-3240)
8(f). -- Participation Agreement between The Variable Annuity Life
Insurance Company and Founders Growth Fund Inc.,
incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996.
(File No. 33-75292/811-3240)
8(g). -- Master Shareholder Services Agreement between The
Variable Annuity Life Insurance Company and Franklin
Templeton Group of Funds, incorporated herein by
reference to Post-Effective Amendment No. 8 filed with
the SEC on June 28, 1996. (File No. 33-75292/811-3240)
8(h). -- Participation Agreement between The Variable Annuity Life
Insurance Company and Vanguard Group, Inc., incorporated
herein by reference to Post-Effective Amendment No. 8
filed with the SEC on June 28, 1996. (File No.
33-75292/811-3240)
8(i) -- Agreement between The Variable Annuity Life Insurance
Company and
Neuberger & Berman Management Inc., incorporated herein
by reference to Post-Effective Amendment No. 8 filed with
the SEC on June 28, 1996. (File No. 33-75292/811-3240)
9. -- Written Consent and Opinion of Cynthia A. Toles, Senior
Associate General Counsel and Secretary, incorporated
herein by reference to Post-Effective Amendment No. 5
filed with the SEC on March 1, 1995 (File No.
33-75292/811-3240).
10. -- Consent of Independent Auditors.
11. -- Not Applicable.
12. -- Not Applicable.
13. -- Calculation of standard and nonstandard performance
information.
14. -- Financial Data Schedule. (Exhibit 27 for purposes of
electronic filing).
</TABLE>
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<PAGE> 262
<TABLE>
<S> <C>
15. -- Confidential Personal Data Form which discloses Section
403(b)(11) withdrawal restrictions as set forth in a
no-action letter issued by the SEC on November 28, 1988,
and which requires the signed acknowledgement of
participants who purchase Section 403(b) annuities with
regard to these withdrawal restrictions, incorporated
herein by reference to Post-Effective Amendment No. 5
filed with the SEC on March 1, 1996 (File No.
33-75292/811-3240).
16(a). -- Copies of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Robert
M. Devlin, Peter V. Tuters, Stephen D. Bickel, Joe C.
Osborne, and Sam Magee, incorporated herein by reference
to Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
16(b). -- Copy of manually signed power of attorney for The
Variable Annuity Life Insurance Company Director Harold
S. Hook, incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
16(c). -- Copy of manually signed power of attorney for The
Variable Annuity Life Insurance Company Director Austin
P. Young, incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
16(d). -- Copy of manually signed power of attorney for The
Variable Annuity Life Insurance Company Director Jon P.
Newton incorporated herein by reference to Post-Effective
Amendment No. 6 filed with the SEC on April 19, 1996
(File No. 33-75292/811-3240).
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and principal officers of the Company are set forth below,
together with their current principal occupations including any position with
American General Corporation ("AGC"), the indirect parent of The Variable
Annuity Life Insurance Company ("VALIC"), the depositor of the Registrant, and
The Variable Annuity Marketing Company ("VAMCO"), the principal underwriter of
the Contracts issued through the Registrant. The business address of each
officer and director is 2929 Allen Parkway, Houston, Texas 77019.
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Harold S. Hook......................... Senior Chairman of the Board of Directors, VALIC.
Chairman of the Board, American General Corporation.
Robert M. Devlin....................... Senior Chairman of the Board of Directors, VALIC.
President, American General Corporation.
Jon P. Newton.......................... Vice Chairman of the Board of Directors, VALIC.
Vice Chairman of the Board of Directors and General
Counsel, American General Corporation
Peter V. Tuters........................ Director; Vice President and Chief Investment Officer,
VALIC.
Senior Vice President and Chief Investment Officer,
American General Corporation.
Stephen D. Bickel...................... Chairman and Chief Executive Officer, VALIC.
Chairman of the Board of Directors, VAMCO.
Craig R. Rodby......................... Vice Chairman of the Board of Directors, VALIC.
Thomas L. West, Jr..................... Director, President, VALIC.
Director, VAMCO
</TABLE>
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<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Sam E. Magee........................... Director; Senior Vice President -- Operations, VALIC.
Joe C. Osborne......................... Director; Senior Vice President -- Marketing, VALIC.
Director and President, VAMCO.
Brent C. Nelson........................ Director, Senior Vice President and Controller, Finance,
VALIC.
Donald L. Sharps....................... Senior Vice President -- Systems VALIC
J. David Crank......................... Vice President -- Group Plan Administration, VALIC.
Stephen H. Field....................... Vice President -- Real Estate VALIC
Norman Jaskol.......................... Vice President and Managing Director -- Investments,
VALIC.
Elizabeth B. Johnson................... Vice President -- Organizational Services VALIC
Stephen G. Kellison.................... Vice President and Chief Actuary VALIC
Ronald E. Kopke........................ Vice President -- Sales Operations, VALIC.
Senior Vice President -- VAMCO.
Charles D. Robinson.................... Vice President -- National Markets VALIC
Jack L. Rochelle....................... Vice President -- Information Technology Services VALIC
Phillip W. Schraub..................... Vice President -- Customer Service VALIC
Conway R. Shaw......................... Vice President -- Group Marketing VALIC
William A. Wilson...................... Vice President and General Counsel, VALIC.
Bobby Ray Worrell...................... Vice President -- Systems Development Service VALIC
Cynthia A. Toles....................... Secretary, VALIC.
Director, Secretary and Assistant Treasurer, VAMCO.
James D. Bonsall....................... Treasurer, VALIC.
Jane E. Bates.......................... Chief Compliance Officer, VALIC.
Treasurer, VAMCO.
D. Lynne Walters....................... Tax Officer, VALIC.
Tax Officer, VAMCO.
Vice President -- Taxes, American General Corporation.
</TABLE>
ITEM 26. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
No person is controlled by the Registrant. The Registrant is a segregated
asset account of the Company ("Depositor") established in accordance with the
Texas Insurance Code. The Registrant supports benefits payable under Variable
Annuity Contracts investing in American General Series Portfolio Company (the
"Series Company"), the Templeton Asset Allocation Fund and Templeton
International Fund (each a separate series of Templeton Variable Products Series
Fund), and Small Cap Portfolio of the Dreyfus Variable Investment Fund. The
Registrant votes Series Company shares and shares held in Templeton Variable
Products Series Fund and Dreyfus Variable Investment Fund only as directed by
the contract owner. (See "Voting Rights" in the Prospectus for these Contracts.)
The Depositor is indirectly wholly-owned by AGC (formerly American General
Insurance Company.) Therefore, the Depositor and various companies affiliated
with the Depositor may be deemed to be under common control with the Registrant.
These companies, together with their state of incorporation and the identity of
the owners of their common stock, are set forth in Exhibit 21, "Subsidiaries of
American General Corporation," of the Form 10-K of AGC filed for the year ended
December 31, 1996 (File No. 1-7981), which is incorporated herein by reference.
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<PAGE> 264
ITEM 27. NUMBER OF CONTRACT OWNERS
As of a date within 90 days prior to the date of filing, there were 264,754
individual Contract Owners, 5,892 group Contract Owners of the qualified
Contracts, offered by the Portfolio Director prospectus of the Registrant, and
11,839 individual Contract Owners and 5 group Contract Owners of the
non-qualified Contracts offered by the Portfolio Director prospectus. The
Registrant issues different contracts through other Registration Statements.
ITEM 28. INDEMNIFICATION
Set forth below is a summary of the general effect of applicable provisions
of the Depositor's Bylaws regarding indemnification of, and advancement of legal
expenses to, the Depositor's officers, directors and employees (collectively,
"Indemnitees").
The Depositor shall indemnify any Indemnitee who was or is a named
defendant or respondent or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative (including any action by or in the
right of the Depositor), or any appeal of such action, suit or proceeding and
any inquiry or investigation that could lead to such an action, suit or
proceeding, by reason of the fact that the Indemnitee is or was a director, or
officer or employee of the Depositor, or is or was serving at the request of the
Depositor as a director, officer, partner, venturer, proprietor, trustee,
employee, or similar functionary of another foreign or domestic corporation or
nonprofit corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, against judgments, penalties
(including excise and similar taxes), fines, amounts paid in settlement, and
reasonable expenses (including court costs and attorneys' fees) actually
incurred by him in connection with such action, suit or proceeding, if
Indemnitee acted in good faith and in a manner he reasonably believed, (i) in
the case of conduct in his official capacity as a director of the Depositor, to
be in the best interests of the Depositor and (ii) in all other cases, to be not
opposed to the best interests of the Depositor; and, with respect to any
criminal action or proceeding, if Indemnitee had no reasonable cause to believe
his conduct was unlawful; provided, however that in the case of any threatened,
pending or completed action, suit or proceeding by or in the right of the
Depositor, the indemnity shall be limited to reasonable expenses (including
court costs and attorneys' fees) actually incurred in connection with such
action, suit or proceeding; and no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Depositor or liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity as a director or officer. The
termination of any action, suit or proceeding by judgment, order, settlement, or
conviction, or on a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the Indemnitee did not act in good faith and
in a manner which Indemnitee reasonably believed to be in the best interests of
the Depositor; and, with respect to any criminal action or proceeding, shall not
create a presumption that the person had reasonable cause to believe that his
conduct was unlawful.
Where an Indemnitee of the Depositor or other person entitled to indemnity
hereunder has been wholly successful, on the merits or otherwise, in defense of
any such action, suit or proceeding, Indemnitee shall be indemnified against
reasonable expenses (including court costs and attorneys' fees) actually
incurred by him in connection therewith.
Any indemnification (unless otherwise ordered by a court of competent
jurisdiction) shall be made by the Depositor only as authorized in a specific
case upon a determination that the applicable standard of conduct has been met.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who at the time of the vote have not
been named as defendants or respondents in such action, suit or proceeding, or
(ii) if such a quorum cannot be obtained, by a majority vote of a committee of
the Board of Directors, designated to act in the matter by a majority vote of
all directors, consisting solely of two or more directors who at the time of the
vote are not named defendants or respondents in such action, suit or proceeding,
or (iii) by special legal counsel selected by the Board of Directors (or a
committee thereof) by vote in the manner set forth in subparagraphs (i) and
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<PAGE> 265
(ii) immediately above or if such a quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all directors, or (iv) by
the shareholders in a vote that excludes the shares held by any Indemnitee who
is named as a defendant or respondent in such action, suit or proceeding.
Reasonable expenses incurred by an Indemnitee of the Depositor or other
person entitled to indemnity hereunder, who was, is or is threatened to be made
a named defendant or respondent in any such action, suit or proceeding described
above may be paid by the Depositor in advance of the final disposition thereof
upon (i) receipt of a written affirmation by the Indemnitee of his good faith
belief that he has met the standard of conduct necessary for indemnification
under this article and a written undertaking by or on behalf of the Indemnitee
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Depositor as authorized under this article and
(ii) a determination that the facts then known to those making the determination
would not preclude indemnification under this article.
Notwithstanding any other provision of this article, the Depositor may pay
or reimburse expenses incurred by any Indemnitee of the Depositor or any other
person entitled to indemnity hereunder in connection with his appearance as a
witness or other participation in any action, suit or a proceeding described
above at a time when he is not named defendant or respondent in such action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant, as provided above or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification by the Depositor is against public policy, as expressed in the
Act, and therefore may be unenforceable. In the event (a) that a claim for such
indemnification (except insofar as it provides for the payment by the Depositor
of expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against the
Depositor by such director, officer or controlling person; and (b) the
Securities and Exchange Commission is still of the same opinion that the
Depositor or Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit such cause to a court of
appropriate jurisdiction, the question of whether such indemnification by the
Depositor is against public policy as expressed in the Act will be governed by
the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) VAMCO acts as exclusive distributor and principal underwriter of the
Registrant and as principal underwriter for the Series Company, a registered
investment company.
(b) The following information is furnished with respect to each officer and
director of VAMCO:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH VAMCO
---------------- ----------
<S> <C>
Stephen D. Bickel(1)..................... Chairman of the Board of Directors
Thomas L. West, Jr....................... Director
Joe C. Osborne(1)........................ Director and President
Cynthia A. Toles(1)...................... Director, Secretary and Assistant
Treasurer
Ronald E. Kopke(1)....................... Senior Vice President
Jane E. Bates(1)......................... Treasurer
D. Lynne Walters(1)...................... Tax Officer
Todd M. Adams............................ Vice President
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
</TABLE>
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<PAGE> 266
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH VAMCO
---------------- ----------
<S> <C>
F. William Scott......................... Vice President
Two Summit Park Drive
Suite 410
Independence, OH 44131
Edward K. Boero.......................... Vice President
222 South Harbor Blvd.
10th Floor
Anaheim, CA 92805
Steven P. Boero.......................... Vice President
1900 O'Farrell Street
Suite 390
San Mateo, CA 94403-1311
Joe H. Connell........................... Vice President
10851 N. Black Canyon Hwy.
Suite 700
Phoenix, AZ 85029
James J. Costello........................ Vice President
1767 Sentry Parkway West 19
Suite 300
Blue Bell, PA 19422
Paige T. Davis........................... Vice President
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21060
George E. Downing........................ Vice President
100 Ashford Center North
Suite 100
Atlanta, GA 30338
Robert G. Fillmore....................... Vice President
90 Woodbridge Center Dr.
Suite 300
Woodbridge, NJ 07095
James K. Graham.......................... Vice President
1301 West Long Lake Road
Suite 340
Troy, MI 48098
Richard R. Gumpert....................... Vice President
5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
Thomas N. Lange.......................... Vice President
10006 N. Dale Mabry Hwy.
Suite 113
Tampa, FL 33618
Alden D. Lewis........................... Vice President
1800 S.W. First Avenue
Suite 505
Portland, OR 97201
</TABLE>
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<PAGE> 267
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH VAMCO
---------------- ----------
<S> <C>
David R. Lyle............................ Vice President
University Tower
3100 Tower Road
Suite 1601, Box 50
Durham, NC 27707
Sharon J. Novickas....................... Vice President
230 West Monroe
Suite 1550
Chicago, IL 60606
Robert A. Obester........................ Vice President
800 Gessner
Suite 1280
Houston, TX 77024
Evan Cole................................ Vice President
410 Amherst Street
Suite 250
Nashua, NH 03063
William G. Tubbs......................... Vice President
550 Congressional Blvd.
Suite 280
Carmel, IN 46032
Donald R. Van Putten..................... Vice President
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
</TABLE>
- ---------------
(1) 2929 Allen Parkway, Houston, Texas 77019
(c) VAMCO is the principal underwriter for the Registrant. The licensed
agents who sell the forms of Contract covered by this registration statement are
compensated for such sales by commissions paid by Depositor. These commissions
do not result in any change to the Registrant or to Contract Owners,
Participants, Annuitants or Beneficiaries in addition to the charges described
in the prospectuses for the Contract.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated thereunder will be
in the physical possession of:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
ITEM 31. MANAGEMENT SERVICES
There have been no management-related services provided to the Separate
Account for the last three fiscal years.
ITEM 32. UNDERTAKINGS
a. VALIC hereby commits itself, on behalf of the Contract Owners, to the
following undertakings:
1. To file a post-effective amendment to this registration statement
as frequently as necessary to ensure that the audited financial statements
in the registration statement are never more than 16 months old for so long
as payments under he variable annuity contracts may be accepted;
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<PAGE> 268
2. To include either (1) as part of any application to purchase a
contract offer by the prospectus, a space that an applicant can check to
request a Statement of Additional Information; or (2) a post card or
similar written communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of Additional Information:
3. To deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly
upon written or oral request.
b. The Company hereby represents that the fees and charges deducted under
the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by the
Company.
ITEM 33. WITHDRAWAL RESTRICTIONS FOR 403(B) PLANS
The Tax Reform Act of 1986 added to the Internal Revenue Code a new Section
403(b)(11) which applies to tax years beginning after December 31, 1988. This
paragraph provides that withdrawal restrictions apply to contributions made and
interest earned subsequent to December 31, 1988. Such restrictions require that
distributions not begin before age 59 1/2, separation from service, death,
disability, or hardship (only employee contributions without accrued interest
may be withdrawn in case of hardship). These withdrawal restrictions appear in
Section 403(b) Annuities for Employees of Certain Tax-Exempt Organizations or
Public Educational Institutions in the Prospectus for Contracts of this
Registration Statement.
The Company relies on a no-action letter issued by the Securities and
Exchange Commission on November 28, 1988 stating that no enforcement action
would be taken under sections 22(e), 27(c)(1), or 27(d) of the Investment
Company Act of 1940 if, in effect, the Company permits restrictions on cash
distributions from elective contributions to the extent necessary to comply with
Section 403(b)(11) of the Internal Revenue Code in accordance with the following
conditions:
(1) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
Contract;
(2) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the Contract;
(3) Instruct sales representatives who solicit participants to
purchase the Contract specifically to being the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants;
(4) Obtain from each plan participant who purchases a Section 403(b)
annuity Contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his contract
value.
The Company has complied, and is complying, with the provisions of
paragraphs (1)-(4) above.
The Company relies on Rule 6c-7 of the Investment Company Act of 1940 (the
"Act") which states that a registered separate account, and any depositor of or
underwriter for such account, shall be exempt from the provisions of sections
22(e), 27(c)(1) and 27(d) of the Act with respect to this Contract participating
in this account to the extent necessary to permit compliance with the Texas
Optional Retirement Program (Program) in accordance with the following
conditions:
(a) include appropriate disclosure regarding the restrictions on
redemption imposed by the Program in each registration statement, including
the prospectus, used in connection with the Program;
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<PAGE> 269
(b) include appropriate disclosure regarding the restrictions on
redemption imposed by the Program in any sales literature used in
connection with the offer of this Contract to Program participants;
(c) instruct salespeople who solicit Program participants to purchase
this Contract specifically to bring the restrictions on redemption imposed
by the Program to the attention of potential Program participants.
(d) obtain from each Program participant who purchases this Contract
in connection with the Program, prior to or at the time of such purchase, a
signed statement acknowledging the restrictions on redemption imposed by
the Program.
The Company has complied, and is complying, with the provisions of
paragraphs (a)-(d) above.
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<PAGE> 270
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, The Variable Annuity Life Insurance Company
Separate Account A, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement, and has duly
caused this amendment to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
City of Houston, State of Texas, on the 18th day of April, 1997.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE
ACCOUNT A
The Variable Annuity Life
Insurance Company
Attest: /s/ CYNTHIA A. TOLES By: /s/ STEPHEN D. BICKEL
--------------------------- ----------------------------------
Cynthia A. Toles Stephen D. Bickel
Secretary Chairman and Chief Executive
Officer
<PAGE> 271
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Depositor, The Variable Annuity Life Insurance Company,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Registration Statement, and has duly caused this
amendment to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the
City of Houston, State of Texas, on the 18th day of April, 1997.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
Attest: /s/ CYNTHIA A. TOLES By: /s/ STEPHEN D. BICKEL
--------------------------- ----------------------------------
Cynthia A. Toles Stephen D. Bickel
Secretary Chairman and Chief Executive
Officer
<PAGE> 272
Pursuant to the requirements of the Securities Act of 1933, this
amendment has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ STEPHEN D. BICKEL Chairman and Chief Executive April 18th, 1997
- ---------------------------- Officer
Stephen D. Bickel
/s/ THOMAS L. WEST, JR. President and Director April 18th, 1997
- ----------------------------
Thomas L. West, Jr.
/s/ BRENT C. NELSON Senior Vice President, April 18th, 1997
- ---------------------------- Controller and Director
Brent C. Nelson
/s/ BRENT C. NELSON Principal Accounting Officer April 18th, 1997
- ----------------------------
Brent C. Nelson
** Senior Chairman of the Board April , 1997
- ---------------------------- of Directors --
Harold S. Hook
* Senior Chairman of the Board April , 1997
- ---------------------------- of Directors --
Robert M. Devlin
* Vice Chairman of the Board April , 1997
- ---------------------------- of Directors --
Jon P. Newton
</TABLE>
<PAGE> 273
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ CRAIG R. RODBY Vice Chairman of the Board April 18th, 1997
- ---------------------------- of Directors
Craig R. Rodby
* Senior Vice President - April , 1997
- ---------------------------- Operations and Director ----
Sam E. Magee
* Senior Vice President - April , 1997
- ---------------------------- Marketing and Director ----
Joe C. Osborne
* Vice President, Chief April , 1997
- ---------------------------- Investment Officer and Director ----
Peter V. Tuters
*By: /s/ CYNTHIA A. TOLES April 18th, 1997
- ----------------------------
Cynthia A. Toles
Attorney-in-Fact
**By: /s/ STEPHEN D. BICKEL April 18th, 1997
- ----------------------------
Stephen D. Bickel
Attorney-in-Fact
</TABLE>
<PAGE> 274
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S> <C>
10. -- Consent of Independent Auditors
13. -- Calculation of standard and nonstandard performance
information.
14. -- Financial Data Schedule (Exhibit 27 for purposes of
electronic filing).
</TABLE>
- ---------------
* Page numbers inserted in manually signed copy only
<PAGE> 1
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 14, 1997 as to The Variable Annuity Life
Insurance Company and January 24, 1997 as to The Variable Annuity Life
Insurance Company Separate Account A in Post-Effective Amendment No. 9 to the
Registration Statement (Form N-4, No. 33-75292) of The Variable Annuity Life
Insurance Company Separate Account A.
/s/ ERNST & YOUNG LLP
--------------------------------------
ERNST & YOUNG LLP
Houston, Texas
April 16, 1997
<PAGE> 1
CALCULATIONS FOR PERFORMANCE INFORMATION
IN PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
Illustration of Calculation of
Average Annual Total Return
SEPARATE ACCOUNT A - WITH SURRENDER CHARGES AND MAINTENANCE FEES
<TABLE>
<CAPTION>
DIVISION 10 (PERIOD ENDING 12/31/96) 1 year 3 years 5 years Since
Inception Date: April 20, 1987 Inception
<S> <C> <C> <C> <C>
Ending value before surrender charges: 1,214.23 1,641.38 1,880.23 0.00
(90 % limit) x 90% x 90% x 90% x 90%
-------- -------- -------- ---------
1,092.81 1,477.24 1,692.21 0.00
5 % surrender charge: x 5% x 5% x 5% x 5%
-------- -------- -------- ---------
Surrender charge: 54.64 73.86 84.61 0.00
======== ======== ======== =========
Ending value before surrender charge: 1,214.23 1,641.38 1,880.23 0.00
Less surrender charge: $50.00 LIMIT 50.00 50.00 50.00 0.00
-------- -------- -------- ---------
Ending value after surrender charge: 1,164.23 1,591.38 1,830.23 0.00
-------- -------- -------- ---------
Average Annual Total Return Data
Present Value - Initial Purchase (P): 1,000.00 1,000.00 1,000.00 1,000.00
Future Value - End. Value after surr. chg (ERV): 1,164.23 1,591.38 1,830.23 2,813.13
Number of years (n): 1.00 3.00 5.00 9.706849
Average Annual Total Return (T): 16.42% 16.75% 12.85% 11.29%
</TABLE>
<PAGE> 2
Data for Division 10C STOCK INDEX
Maintenance fee charged quarterly
Monthly Contribution (14) = 0
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
[(2b-2a)/2a] [(3b+1)* [(3b+1)* [(3b+1)* [(3b+1)*
(5a+(14))- (7a+(14))- (9a+(14))- (11a+(14))-
(4)] (6)] (8)] (10)]
Date Unit Value % Change Maint $1,000 Maint $1,000 Maint $1,000 Maint $1,000
In Unit Fee Investment Fee Investment Fee Investment Fee Investment
Values Since Inception 5 years 3 years 1 year
DIV 10C |-----------------maximum maintenance fee $3.75 per quarter--------------|
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* Inception date 4/20/87
20-Apr-87 * 1.000000 1,000.00
Apr-87 0.983733 -0.016267 0.00 983.73
May-87 0.991339 0.007732 0.00 991.34
Jun-87 1 1.039922 0.049007 0.35 1,039.58
Jul-87 1.088863 0.047062 0.00 1,088.50
Aug-87 1.131177 0.038861 0.00 1,130.80
Sep-87 1 1.103117 -0.024806 0.37 1,102.38
Oct-87 0.862597 -0.218037 0.00 862.02
Nov-87 0.792474 -0.081293 0.00 791.95
Dec-87 1 0.856238 0.080462 0.28 855.38
Jan-88 0.886990 0.035915 0.00 886.11
Feb-88 0.925334 0.043229 0.00 924.41
Mar-88 1 0.895865 -0.031847 0.30 894.67
Apr-88 0.903639 0.008678 0.00 902.44
May-88 0.907917 0.004734 0.00 906.71
Jun-88 1 0.945578 0.041481 0.31 944.01
Jul-88 0.941187 -0.004644 0.00 939.62
Aug-88 0.906777 -0.036560 0.00 905.27
Sep-88 1 0.945692 0.042916 0.31 943.81
Oct-88 0.967037 0.022571 0.00 965.11
Nov-88 0.951402 -0.016168 0.00 949.51
Dec-88 1 0.968670 0.018150 0.32 966.42
</TABLE>
<PAGE> 3
Data for Division 10C STOCK INDEX
Maintenance fee charged quarterly
Monthly Contribution (14) = 0
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
[(2b-2a)/2a] [(3b+1)* [(3b+1)* [(3b+1)* [(3b+1)*
(5a+(14))- (7a+(14))- (9a+(14))- (11a+(14))-
(4)] (6)] (8)] (10)]
Date Unit Value % Change Maint $1,000 Maint $1,000 Maint $1,000 Maint $1,000
In Unit Fee Investment Fee Investment Fee Investment Fee Investment
Values Since Inception 5 years 3 years 1 year
DIV 10C |-----------------maximum maintenance fee $3.75 per quarter--------------|
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-89 1.035019 0.068495 0.00 1,032.61
Feb-89 1.007656 -0.026437 0.00 1,005.31
Mar-89 1 1.026340 0.018542 0.34 1,023.62
Apr-89 1.076142 0.048524 0.00 1,073.28
May-89 1.118266 0.039144 0.00 1,115.30
Jun-89 1 1.106383 -0.010626 0.37 1,103.08
Jul-89 1.201150 0.085655 0.00 1,197.56
Aug-89 1.222849 0.018065 0.00 1,219.20
Sep-89 1 1.217594 -0.004297 0.40 1,213.55
Oct-89 1.189220 -0.023303 0.00 1,185.27
Nov-89 1.212673 0.019721 0.00 1,208.65
Dec-89 1 1.238782 0.021530 0.41 1,234.26
Jan-90 1.155647 -0.067110 0.00 1,151.43
Feb-90 1.168074 0.010753 0.00 1,163.81
Mar-90 1 1.199697 0.027073 0.40 1,194.92
Apr-90 1.166850 -0.027379 0.00 1,162.21
May-90 1.280713 0.097582 0.00 1,275.62
Jun-90 1 1.273909 -0.005313 0.42 1,268.42
Jul-90 1.263565 -0.008120 0.00 1,258.12
Aug-90 1.143767 -0.094810 0.00 1,138.84
Sep-90 1 1.087894 -0.048850 0.36 1,082.84
Oct-90 1.078024 -0.009073 0.00 1,073.02
Nov-90 1.146774 0.063774 0.00 1,141.45
Dec-90 1 1.179000 0.028101 0.39 1,173.14
</TABLE>
<PAGE> 4
Data for Division 10C STOCK INDEX
Maintenance fee charged quarterly
Monthly Contribution (14) = 0
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
[(2b-2a)/2a] [(3b+1)* [(3b+1)* [(3b+1)* [(3b+1)*
(5a+(14))- (7a+(14))- (9a+(14))- (11a+(14))-
(4)] (6)] (8)] (10)]
Date Unit Value % Change Maint $1,000 Maint $1,000 Maint $1,000 Maint $1,000
In Unit Fee Investment Fee Investment Fee Investment Fee Investment
Values Since Inception 5 years 3 years 1 year
DIV 10C |-----------------maximum maintenance fee $3.75 per quarter--------------|
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-91 1.227038 0.040745 0.00 1,220.94
Feb-91 1.311679 0.068980 0.00 1,305.16
Mar-91 1 1.340327 0.021841 0.44 1,333.22
Apr-91 1.339568 -0.000566 0.00 1,332.46
May-91 1.395707 0.041908 0.00 1,388.31
Jun-91 1 1.329416 -0.047496 0.44 1,321.93
Jul-91 1.388704 0.044597 0.00 1,380.88
Aug-91 1.417723 0.020896 0.00 1,409.74
Sep-91 1 1.391744 -0.018324 0.46 1,383.44
Oct-91 1.410132 0.013212 0.00 1,401.72
Nov-91 1.357625 -0.037236 0.00 1,349.53
Dec-91 1 1.505641 0.109026 0.50 1,496.16 1,000.00
Jan-92 1.473359 -0.021441 0.00 1,464.09 0.00 978.56
Feb-92 1.489841 0.011187 0.00 1,480.46 0.00 989.51
Mar-92 1 1.457573 -0.021659 0.48 1,447.92 0.32 967.75
Apr-92 1.494237 0.025154 0.00 1,484.34 0.00 992.10
May-92 1.500005 0.003860 0.00 1,490.07 0.00 995.93
Jun-92 1 1.477379 -0.015084 0.49 1,467.11 0.33 980.58
Jul-92 1.535260 0.039178 0.00 1,524.58 0.00 1,018.99
Aug-92 1.501168 -0.022206 0.00 1,490.73 0.00 996.37
Sep-92 1 1.519376 0.012129 0.50 1,508.31 0.34 1,008.12
Oct-92 1.523170 0.002497 0.00 1,512.08 0.00 1,010.63
Nov-92 1.572738 0.032543 0.00 1,561.28 0.00 1,043.52
Dec-92 1 1.589718 0.010796 0.52 1,577.61 0.35 1,054.44
</TABLE>
<PAGE> 5
Data for Division 10C STOCK INDEX
Maintenance fee charged quarterly
Monthly Contribution (14) = 0
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
[(2b-2a)/2a] [(3b+1)* [(3b+1)* [(3b+1)* [(3b+1)*
(5a+(14))- (7a+(14))- (9a+(14))- (11a+(14))-
(4)] (6)] (8)] (10)]
Date Unit Value % Change Maint $1,000 Maint $1,000 Maint $1,000 Maint $1,000
In Unit Fee Investment Fee Investment Fee Investment Fee Investment
Values Since Inception 5 years 3 years 1 year
DIV 10C |-----------------maximum maintenance fee $3.75 per quarter--------------|
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-93 1.603974 0.008968 0.00 1,591.76 0.00 1,063.89
Feb-93 1.626466 0.014023 0.00 1,614.08 0.00 1,078.81
Mar-93 1 1.660648 0.021016 0.55 1,647.46 0.37 1,101.12
Apr-93 1.618904 -0.025137 0.00 1,606.04 0.00 1,073.44
May-93 1.659405 0.025018 0.00 1,646.22 0.00 1,100.30
Jun-93 1 1.661750 0.001413 0.55 1,648.00 0.37 1,101.48
Jul-93 1.652984 -0.005275 0.00 1,639.31 0.00 1,095.67
Aug-93 1.712719 0.036138 0.00 1,698.55 0.00 1,135.27
Sep-93 1 1.697885 -0.008661 0.56 1,683.28 0.37 1,125.06
Oct-93 1.730769 0.019368 0.00 1,715.88 0.00 1,146.85
Nov-93 1.712002 -0.010843 0.00 1,697.27 0.00 1,134.42
Dec-93 1 1.729327 0.010120 0.57 1,713.88 0.38 1,145.52 1,000.00
Jan-94 1.784271 0.031772 0.00 1,768.33 0.00 1,181.91 0.00 1,031.77
Feb-94 1.733667 -0.028361 0.00 1,718.18 0.00 1,148.39 0.00 1,002.51
Mar-94 1 1.655974 -0.044814 0.55 1,640.64 0.36 1,096.56 0.32 957.26
Apr-94 1.672968 0.010262 0.00 1,657.47 0.00 1,107.82 0.00 967.09
May-94 1.697012 0.014372 0.00 1,681.30 0.00 1,123.74 0.00 980.99
Jun-94 1 1.654395 -0.025113 0.54 1,638.53 0.36 1,095.15 0.32 956.03
Jul-94 1.705734 0.031032 0.00 1,689.38 0.00 1,129.14 0.00 985.70
Aug-94 1.774123 0.040094 0.00 1,757.11 0.00 1,174.41 0.00 1,025.22
Sep-94 1 1.728930 -0.025473 0.57 1,711.78 0.38 1,144.11 0.33 998.77
Oct-94 1.766283 0.021605 0.00 1,748.76 0.00 1,168.83 0.00 1,020.35
Nov-94 1.701336 -0.036770 0.00 1,684.46 0.00 1,125.85 0.00 982.83
Dec-94 1 1.724134 0.013400 0.57 1,706.46 0.38 1,140.56 0.33 995.67
</TABLE>
<PAGE> 6
Data for Division 10C STOCK INDEX
Maintenance fee charged quarterly
Monthly Contribution (14) = 0
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
[(2b-2a)/2a] [(3b+1)* [(3b+1)* [(3b+1)* [(3b+1)*
(5a+(14))- (7a+(14))- (9a+(14))- (11a+(14))-
(4)] (6)] (8)] (10)]
Date Unit Value % Change Maint $1,000 Maint $1,000 Maint $1,000 Maint $1,000
In Unit Fee Investment Fee Investment Fee Investment Fee Investment
Values Since Inception 5 years 3 years 1 year
DIV 10C |-----------------maximum maintenance fee $3.75 per quarter--------------|
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-95 1.768410 0.025680 0.00 1,750.29 0.00 1,169.85 0.00 1,021.24
Feb-95 1.835155 0.037743 0.00 1,816.35 0.00 1,214.00 0.00 1,059.79
Mar-95 1 1.886135 0.027780 0.62 1,866.18 0.41 1,247.31 0.36 1,088.87
Apr-95 1.940792 0.028978 0.00 1,920.26 0.00 1,283.46 0.00 1,120.42
May-95 2.015864 0.038681 0.00 1,994.54 0.00 1,333.10 0.00 1,163.76
Jun-95 1 2.060376 0.022081 0.68 2,037.91 0.45 1,362.09 0.40 1,189.06
Jul-95 2.124836 0.031286 0.00 2,101.66 0.00 1,404.70 0.00 1,226.26
Aug-95 2.127761 0.001377 0.00 2,104.56 0.00 1,406.63 0.00 1,227.95
Sep-95 1 2.215905 0.041426 0.73 2,191.01 0.49 1,464.42 0.42 1,278.39
Oct-95 2.206753 -0.004130 0.00 2,181.96 0.00 1,458.37 0.00 1,273.11
Nov-95 2.302320 0.043307 0.00 2,276.45 0.00 1,521.53 0.00 1,328.25
Dec-95 1 2.343900 0.018060 0.77 2,316.80 0.51 1,548.49 0.45 1,351.78 1,000.00
Jan-96 2.421756 0.033216 0.00 2,393.75 0.00 1,599.93 0.00 1,396.69 0.00 1,033.22
Feb-96 2.441682 0.008228 0.00 2,413.45 0.00 1,613.09 0.00 1,408.18 0.00 1,041.72
Mar-96 2 2.462501 0.008526 0.51 2,433.51 0.34 1,626.50 0.30 1,419.89 0.22 1,050.38
Apr-96 2.496138 0.013660 0.00 2,466.75 0.00 1,648.72 0.00 1,439.28 0.00 1,064.73
May-96 2.558104 0.024825 0.00 2,527.99 0.00 1,689.65 0.00 1,475.01 0.00 1,091.16
Jun-96 2 2.564931 0.002669 0.53 2,534.20 0.36 1,693.80 0.31 1,478.64 0.23 1,093.84
Jul-96 2.449282 -0.045089 0.00 2,419.94 0.00 1,617.43 0.00 1,411.97 0.00 1,044.52
Aug-96 2.496999 0.019482 0.00 2,467.09 0.00 1,648.94 0.00 1,439.47 0.00 1,064.87
Sep-96 2 2.634827 0.055197 0.55 2,602.71 0.37 1,739.59 0.32 1,518.61 0.24 1,123.41
Oct-96 2.705589 0.026856 0.00 2,672.61 0.00 1,786.31 0.00 1,559.39 0.00 1,153.58
Nov-96 2.901517 0.072416 0.00 2,866.15 0.00 1,915.67 0.00 1,672.32 0.00 1,237.12
Dec-96 2 2.848437 -0.018294 0.59 2,813.13 0.40 1,880.23 0.35 1,641.38 0.26 1,214.23
</TABLE>
n= 9.706849 yrs
as of 12/31/96
Note: a denotes previous month
b denotes current month
1 - Maintenance fee applied at quarter end has been converted
to 0.1329% / 4 quarters
2- Maintenance fee applied at quarter end has been converted
to 0.0842% / 4 quarters
<PAGE> 7
NON-STANDARD AVERAGE ANNUAL TOTAL RETURNS
(Without surrender charges or maintenance fees)
As of December 31, 1996
Division 10
P(1+T)*n = ERV
1 Year 3 Years
P = $1,000.00 P = $1,000.00
n = 1 n = 3
ERV = $1,215.26 ERV = $1,647.14
T = 21.53% T = 18.10%
5 Years Since Inception
P = $1,000.00 P = $1,000.00
n = 5 n = 9.706849
ERV = $1,891.84 ERV = $2,848.44
T = 13.60% T = 11.44%
<PAGE> 8
Illustration of
Calculation of Cumulative Return
Division 10
1 Year
-----------------
Value at 12-31-96 $12,153
Less Value at 12-31-95 $10,000
-----------
$ 2,153
Divided by Value at 12-31-95 $10,000
-----------
Cumulative Return 21.53%
===========
3 Years
-----------------
Value at 12-31-96 $16,471
Less Value at 12-31-93 $10,000
-----------
$ 6,471
Divided by Value at 12-31-93 $10,000
------------
Cumulative Return 64.71%
============
5 Years
-----------------
Value at 12-31-96 $18,918
Less Value at 12-31-91 $10,000
-----------
$ 8,918
Divided by Value at 12-31-91 $10,000
-----------
Cumulative Return 89.18%
===========
Since Inception
-----------------
Value at 12-31-96 $28,484
Less Value at 04-20-87 $10,000
-----------
$18,484
Divided by Value at 04-20-87 $10,000
-----------
Cumulative Return 184.84%
===========
<PAGE> 9
CALCULATIONS FOR PERFORMANCE INFORMATION
IN PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
Illustration of
Calculation of Annual and Cumulative Change in Accumulation Unit Value
DIVISION 10
(1) (2) (3) [(1)-(2)]/(2) [(1)-(3)]/(3)
Cumulative
AUV AUV AUV Annual Change Year
In Yr N In Yr N-1 In Yr 1 Change Since 4/20/87 N
- ------------ ------------ ------------ ------------- -------------- -------
2.848437 2.343900 1.000000 21.53% 184.84% 1996
2.343900 1.724134 1.000000 35.95% 134.39% 1995
1.724134 1.729327 1.000000 -0.30% 72.41% 1994
1.729327 1.589718 1.000000 8.78% 72.93% 1993
1.589718 1.505641 1.000000 5.58% 58.97% 1992
1.505641 1.179000 1.000000 27.70% 50.56% 1991
1.179000 1.238782 1.000000 -4.83% 17.90% 1990
1.238782 0.968670 1.000000 27.88% 23.88% 1989
0.968670 0.856238 1.000000 13.13% -3.13% 1988
0.856238 1.000000 1.000000 -14.38% -14.38% 1987
<PAGE> 10
Illustration of 30-Day
Standardized Yield for Division Thirteen
AGSPC
30-DAY STANDARDIZED YIELD
FOR NON-MONEY MARKET DIVISIONS
OF SEPARATE ACCOUNT A
FOR THE MONTH ENDED
DECEMBER 31, 1996
Division 13
Yield = 2[(((a-b)/(cd)+1)*6)-1] = 3.49%
a = $768,656.46
b = $260,469.04
c = 111,332,354.32
d = 1.582230
<PAGE> 11
Illustration of 7 - Day
Current and Effective Yields for Division 6
Money Market Division Six
As of December 31, 1996
(1) Seven Day Current Yield:
1.607212-1.606008 366
----------------------- X ----------- = 0.039198 = 3.92%
1.606008 7 =======
(2) Seven Day Effective Yield:
1.607212-1.606008 366/7
[ ----------------------- + 1] - 1
1.606008
366/7
[ 1.00074968493 ] - 1 0.03994 = 3.99%
=======
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> VALIC Separate Account A - Division 4
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 449,572,385
<INVESTMENTS-AT-VALUE> 565,680,826
<RECEIVABLES> 30,567
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 565,711,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 565,711,393
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 565,711,393
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 172,816,978
<SHARES-COMMON-PRIOR> 172,613,690
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 565,711,393
<DIVIDEND-INCOME> 6,776,195
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,262,899
<NET-INVESTMENT-INCOME> 1,513,296
<REALIZED-GAINS-CURRENT> 51,126,872
<APPREC-INCREASE-CURRENT> 33,029,566
<NET-CHANGE-FROM-OPS> 85,669,734
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,301,831
<NUMBER-OF-SHARES-REDEEMED> 25,098,543
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 203,288
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> VALIC Separate Account A - Division 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 164,668,872
<INVESTMENTS-AT-VALUE> 173,145,150
<RECEIVABLES> 84,325
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173,229,475
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 173,229,475
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 173,229,475
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 65,292,617
<SHARES-COMMON-PRIOR> 75,851,431
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 173,229,475
<DIVIDEND-INCOME> 5,922,604
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,788,197
<NET-INVESTMENT-INCOME> 4,134,407
<REALIZED-GAINS-CURRENT> 26,410,255
<APPREC-INCREASE-CURRENT> (13,565,417)
<NET-CHANGE-FROM-OPS> 16,979,245
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,003,535
<NUMBER-OF-SHARES-REDEEMED> 16,562,349
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (10,558,814)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> VALIC Separate Account A - Division 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 120,378,551
<INVESTMENTS-AT-VALUE> 120,378,551
<RECEIVABLES> 380,075
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,758,626
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 120,758,626
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 120,758,626
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 75,124,095
<SHARES-COMMON-PRIOR> 51,907,757
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 120,758,626
<DIVIDEND-INCOME> 4,429,817
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 904,012
<NET-INVESTMENT-INCOME> 3,525,805
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,525,805
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,781,704
<NUMBER-OF-SHARES-REDEEMED> 8,565,366
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,216,338
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> VALIC Separate Account A - Division 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 56,085,328
<INVESTMENTS-AT-VALUE> 55,255,834
<RECEIVABLES> 33,645
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,289,479
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 55,289,479
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 55,289,479
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 30,286,494
<SHARES-COMMON-PRIOR> 29,573,808
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 55,289,479
<DIVIDEND-INCOME> 3,599,885
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 545,929
<NET-INVESTMENT-INCOME> 3,053,956
<REALIZED-GAINS-CURRENT> (425,696)
<APPREC-INCREASE-CURRENT> (2,170,354)
<NET-CHANGE-FROM-OPS> 457,906
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,098,740
<NUMBER-OF-SHARES-REDEEMED> 5,386,054
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 712,686
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> VALIC Separate Account A - Division 8
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 87,080,789
<INVESTMENTS-AT-VALUE> 85,570,274
<RECEIVABLES> 1,665
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,571,939
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 85,571,939
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 85,571,939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 47,130,169
<SHARES-COMMON-PRIOR> 39,847,053
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 85,571,939
<DIVIDEND-INCOME> 4,872,690
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 795,753
<NET-INVESTMENT-INCOME> 4,076,937
<REALIZED-GAINS-CURRENT> (378,294)
<APPREC-INCREASE-CURRENT> (2,658,037)
<NET-CHANGE-FROM-OPS> 1,040,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,391,393
<NUMBER-OF-SHARES-REDEEMED> 3,108,277
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,283,116
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 103
<NAME> VALIC Separate Account A - Division 10C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,043,894,442
<INVESTMENTS-AT-VALUE> 1,529,744,413
<RECEIVABLES> 601,957
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,530,346,370
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 1,530,346,370
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,530,346,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 536,806,965
<SHARES-COMMON-PRIOR> 455,255,243
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,530,346,370
<DIVIDEND-INCOME> 24,619,582
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 12,878,174
<NET-INVESTMENT-INCOME> 11,741,408
<REALIZED-GAINS-CURRENT> 21,190,946
<APPREC-INCREASE-CURRENT> 222,475,966
<NET-CHANGE-FROM-OPS> 255,408,320
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99,648,186
<NUMBER-OF-SHARES-REDEEMED> 18,096,464
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 81,551,722
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> VALIC Separate Account A - Division 11
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 186,523,328
<INVESTMENTS-AT-VALUE> 191,110,175
<RECEIVABLES> 116,353
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,226,528
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 191,226,528
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 191,226,528
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 156,226,314
<SHARES-COMMON-PRIOR> 172,564,018
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 191,226,528
<DIVIDEND-INCOME> 3,599,021
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,007,600
<NET-INVESTMENT-INCOME> 1,591,421
<REALIZED-GAINS-CURRENT> 16,426,800
<APPREC-INCREASE-CURRENT> (6,663,813)
<NET-CHANGE-FROM-OPS> 11,354,408
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,526,458
<NUMBER-OF-SHARES-REDEEMED> 44,864,162
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (16,337,704)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> VALIC Separate Account A - Division 12
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 92,520,041
<INVESTMENTS-AT-VALUE> 104,772,608
<RECEIVABLES> 143,421
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 104,916,029
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 104,916,029
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 104,916,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 46,574,016
<SHARES-COMMON-PRIOR> 32,750,120
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 104,916,029
<DIVIDEND-INCOME> 1,339,307
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 792,838
<NET-INVESTMENT-INCOME> 546,469
<REALIZED-GAINS-CURRENT> 11,493,860
<APPREC-INCREASE-CURRENT> 4,483,540
<NET-CHANGE-FROM-OPS> 16,523,869
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,651,228
<NUMBER-OF-SHARES-REDEEMED> 1,827,332
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,823,896
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> VALIC Separate Account A - Division 13
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 177,770,389
<INVESTMENTS-AT-VALUE> 178,021,807
<RECEIVABLES> 150,364
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,172,171
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 178,172,171
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 178,172,171
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 112,601,593
<SHARES-COMMON-PRIOR> 73,369,250
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 178,172,171
<DIVIDEND-INCOME> 8,037,534
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,475,858
<NET-INVESTMENT-INCOME> 6,561,676
<REALIZED-GAINS-CURRENT> 2,111,291
<APPREC-INCREASE-CURRENT> (2,362,017)
<NET-CHANGE-FROM-OPS> 6,310,950
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,344,579
<NUMBER-OF-SHARES-REDEEMED> 3,112,236
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 39,232,343
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> VALIC Separate Account A - Division 14
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 153,924,818
<INVESTMENTS-AT-VALUE> 184,521,204
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184,521,204
<PAYABLE-FOR-SECURITIES> 42,882
<SENIOR-LONG-TERM-DEBT> 184,478,322
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 184,521,204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 103,320,842
<SHARES-COMMON-PRIOR> 98,335,995
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 184,478,322
<DIVIDEND-INCOME> 2,324,957
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,687,562
<NET-INVESTMENT-INCOME> 637,395
<REALIZED-GAINS-CURRENT> 15,761,592
<APPREC-INCREASE-CURRENT> 7,711,563
<NET-CHANGE-FROM-OPS> 24,110,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,844,484
<NUMBER-OF-SHARES-REDEEMED> 13,859,637
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,984,847
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> VALIC Separate Account A - Division 15
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 536,223,583
<INVESTMENTS-AT-VALUE> 633,819,402
<RECEIVABLES> 1,296,205
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 635,115,607
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 635,115,607
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 635,115,607
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 366,272,509
<SHARES-COMMON-PRIOR> 164,417,848
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 635,115,607
<DIVIDEND-INCOME> 2,128,889
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,407,390
<NET-INVESTMENT-INCOME> (2,278,501)
<REALIZED-GAINS-CURRENT> 12,022,429
<APPREC-INCREASE-CURRENT> 58,161,783
<NET-CHANGE-FROM-OPS> 67,905,711
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 207,548,630
<NUMBER-OF-SHARES-REDEEMED> 5,693,969
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 201,854,661
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> VALIC Separate Account A - Division 16
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 143,198,387
<INVESTMENTS-AT-VALUE> 171,283,956
<RECEIVABLES> 244,249
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 171,528,205
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 171,528,205
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 171,528,205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 108,341,635
<SHARES-COMMON-PRIOR> 51,779,089
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 171,528,205
<DIVIDEND-INCOME> 799,107
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,201,329
<NET-INVESTMENT-INCOME> (402,222)
<REALIZED-GAINS-CURRENT> 3,615,238
<APPREC-INCREASE-CURRENT> 19,205,904
<NET-CHANGE-FROM-OPS> 22,418,920
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 58,405,427
<NUMBER-OF-SHARES-REDEEMED> 1,842,881
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 56,562,546
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> VALIC Separate Account A - Division 17
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 650,004,665
<INVESTMENTS-AT-VALUE> 709,577,919
<RECEIVABLES> 1,386,245
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 710,964,164
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 710,964,164
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 710,964,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 315,809,646
<SHARES-COMMON-PRIOR> 187,862,232
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 710,964,164
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,521,307
<NET-INVESTMENT-INCOME> (5,521,307)
<REALIZED-GAINS-CURRENT> 52,776,762
<APPREC-INCREASE-CURRENT> 15,569,750
<NET-CHANGE-FROM-OPS> 62,825,205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 133,997,401
<NUMBER-OF-SHARES-REDEEMED> 6,049,987
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 127,947,414
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> VALIC Separate Account A - Division 18
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 554,202,812
<INVESTMENTS-AT-VALUE> 657,404,003
<RECEIVABLES> 982,056
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 658,386,059
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 658,386,059
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 658,386,059
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 428,883,250
<SHARES-COMMON-PRIOR> 267,735,219
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 658,386,059
<DIVIDEND-INCOME> 1,224,730
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 6,549,419
<NET-INVESTMENT-INCOME> (5,324,689)
<REALIZED-GAINS-CURRENT> 21,215,059
<APPREC-INCREASE-CURRENT> 56,124,110
<NET-CHANGE-FROM-OPS> 72,014,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 169,904,172
<NUMBER-OF-SHARES-REDEEMED> 8,756,141
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 161,148,031
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 19
<NAME> VALIC Separate Account A - Division 19
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 163,221,896
<INVESTMENTS-AT-VALUE> 194,271,899
<RECEIVABLES> 328,988
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 194,600,887
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 194,600,887
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 194,600,887
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 137,384,670
<SHARES-COMMON-PRIOR> 78,494,505
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 194,600,887
<DIVIDEND-INCOME> 3,271,039
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,812,817
<NET-INVESTMENT-INCOME> 1,458,222
<REALIZED-GAINS-CURRENT> 2,996,724
<APPREC-INCREASE-CURRENT> 19,843,521
<NET-CHANGE-FROM-OPS> 24,298,467
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 61,566,921
<NUMBER-OF-SHARES-REDEEMED> 2,676,756
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 58,890,165
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 20
<NAME> VALIC Separate Account A - Division 20
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 429,586,719
<INVESTMENTS-AT-VALUE> 529,645,484
<RECEIVABLES> 378,327
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 530,023,811
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 530,023,811
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 530,023,811
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 378,581,949
<SHARES-COMMON-PRIOR> 219,124,926
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 530,023,811
<DIVIDEND-INCOME> 4,540,296
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,934,897
<NET-INVESTMENT-INCOME> (394,601)
<REALIZED-GAINS-CURRENT> 4,875,721
<APPREC-INCREASE-CURRENT> 78,888,709
<NET-CHANGE-FROM-OPS> 83,369,829
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 166,644,639
<NUMBER-OF-SHARES-REDEEMED> 7,187,616
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 159,457,023
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> VALIC Separate Account A - Division 21
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 18,240,537
<INVESTMENTS-AT-VALUE> 18,325,255
<RECEIVABLES> 98,230
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,423,485
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 18,423,485
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 18,423,485
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 16,524,046
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 18,423,485
<DIVIDEND-INCOME> 158,744
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 38,490
<NET-INVESTMENT-INCOME> 120,254
<REALIZED-GAINS-CURRENT> 630,015
<APPREC-INCREASE-CURRENT> 84,718
<NET-CHANGE-FROM-OPS> 834,987
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,545,300
<NUMBER-OF-SHARES-REDEEMED> 21,254
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,524,046
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> VALIC Separate Account A - Division 22
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,539,758
<INVESTMENTS-AT-VALUE> 3,528,351
<RECEIVABLES> 2,506
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,530,857
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 3,530,857
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 3,530,857
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,370,441
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,530,857
<DIVIDEND-INCOME> 44,221
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 8,054
<NET-INVESTMENT-INCOME> 36,167
<REALIZED-GAINS-CURRENT> 33,558
<APPREC-INCREASE-CURRENT> (11,407)
<NET-CHANGE-FROM-OPS> 58,318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,373,788
<NUMBER-OF-SHARES-REDEEMED> 3,347
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,370,441
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> VALIC Separate Account A - Division 23
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,555,646
<INVESTMENTS-AT-VALUE> 4,589,300
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,589,300
<PAYABLE-FOR-SECURITIES> 212,599
<SENIOR-LONG-TERM-DEBT> 4,376,701
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 4,589,300
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 4,174,369
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,376,701
<DIVIDEND-INCOME> 57,514
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 11,232
<NET-INVESTMENT-INCOME> 46,282
<REALIZED-GAINS-CURRENT> 2,349
<APPREC-INCREASE-CURRENT> 33,654
<NET-CHANGE-FROM-OPS> 82,285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,183,572
<NUMBER-OF-SHARES-REDEEMED> 9,203
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,174,369
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 24
<NAME> VALIC Separate Account A - Division 24
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 41,653,662
<INVESTMENTS-AT-VALUE> 41,436,294
<RECEIVABLES> 363,484
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41,799,778
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 41,779,778
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 41,779,778
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 37,292,761
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 41,799,778
<DIVIDEND-INCOME> 576,345
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 88,288
<NET-INVESTMENT-INCOME> 488,057
<REALIZED-GAINS-CURRENT> 1,566,564
<APPREC-INCREASE-CURRENT> (217,368)
<NET-CHANGE-FROM-OPS> 1,837,253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,384,685
<NUMBER-OF-SHARES-REDEEMED> 91,924
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 37,292,761
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 25
<NAME> VALIC Separate Account A - Division 25
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 25,469,774
<INVESTMENTS-AT-VALUE> 25,025,702
<RECEIVABLES> 163,816
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,189,518
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 25,189,518
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 25,189,518
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 22,866,634
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25,189,518
<DIVIDEND-INCOME> 379,677
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 53,077
<NET-INVESTMENT-INCOME> 326,600
<REALIZED-GAINS-CURRENT> 818,129
<APPREC-INCREASE-CURRENT> (444,072)
<NET-CHANGE-FROM-OPS> 700,657
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,879,382
<NUMBER-OF-SHARES-REDEEMED> 12,748
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22,866,634
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 26
<NAME> VALIC Separate Account A - Division 26
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 51,432,630
<INVESTMENTS-AT-VALUE> 49,812,851
<RECEIVABLES> 410,128
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,222,979
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 50,222,979
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 50,222,979
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 53,001,699
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 50,222,979
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 91,811
<NET-INVESTMENT-INCOME> (91,811)
<REALIZED-GAINS-CURRENT> 343,034
<APPREC-INCREASE-CURRENT> (1,619,779)
<NET-CHANGE-FROM-OPS> (1,368,556)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,089,201
<NUMBER-OF-SHARES-REDEEMED> 87,502
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 53,001,699
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 27
<NAME> VALIC Separate Account A - Division 27
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 48,163,458
<INVESTMENTS-AT-VALUE> 43,542,866
<RECEIVABLES> 224,089
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,766,955
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 43,766,955
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 43,766,955
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 48,902,828
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 43,766,955
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 87,360
<NET-INVESTMENT-INCOME> (87,360)
<REALIZED-GAINS-CURRENT> 2,855,128
<APPREC-INCREASE-CURRENT> (4,620,592)
<NET-CHANGE-FROM-OPS> (1,852,824)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 48,985,705
<NUMBER-OF-SHARES-REDEEMED> 82,877
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 48,902,828
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 28
<NAME> VALIC Separate Account A - Division 28
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 17,999,131
<INVESTMENTS-AT-VALUE> 17,494,577
<RECEIVABLES> 114,481
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,609,058
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 17,609,058
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 17,609,058
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 16,648,600
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17,609,058
<DIVIDEND-INCOME> 386,503
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 31,952
<NET-INVESTMENT-INCOME> 354,551
<REALIZED-GAINS-CURRENT> 767,214
<APPREC-INCREASE-CURRENT> (504,554)
<NET-CHANGE-FROM-OPS> 617,211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,665,066
<NUMBER-OF-SHARES-REDEEMED> 16,466
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,648,600
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 29
<NAME> VALIC Separate Account A - Division 29
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 8,796,170
<INVESTMENTS-AT-VALUE> 9,144,621
<RECEIVABLES> 58,685
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,203,306
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 9,203,306
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 9,203,306
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8,211,592
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 9,203,306
<DIVIDEND-INCOME> 33,512
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 17,918
<NET-INVESTMENT-INCOME> 15,594
<REALIZED-GAINS-CURRENT> 138,991
<APPREC-INCREASE-CURRENT> 348,451
<NET-CHANGE-FROM-OPS> 503,036
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,230,859
<NUMBER-OF-SHARES-REDEEMED> 19,267
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,211,592
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 30
<NAME> VALIC Separate Account A - Division 30
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 33,570,159
<INVESTMENTS-AT-VALUE> 31,872,619
<RECEIVABLES> 245,857
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,118,476
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 32,118,476
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 32,118,476
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 31,197,464
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 32,118,476
<DIVIDEND-INCOME> 31,678
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 59,743
<NET-INVESTMENT-INCOME> (28,065)
<REALIZED-GAINS-CURRENT> 2,106,129
<APPREC-INCREASE-CURRENT> (1,697,540)
<NET-CHANGE-FROM-OPS> 380,524
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,230,060
<NUMBER-OF-SHARES-REDEEMED> 32,596
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 31,197,464
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 31
<NAME> VALIC Separate Account A - Division 31
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 17,919,344
<INVESTMENTS-AT-VALUE> 17,259,437
<RECEIVABLES> 58,221
<ASSETS-OTHER> 17,317,658
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,317,658
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 17,317,658
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 17,317,658
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 16,654,076
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17,317,658
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 37,059
<NET-INVESTMENT-INCOME> (37,059)
<REALIZED-GAINS-CURRENT> 903,231
<APPREC-INCREASE-CURRENT> (659,907)
<NET-CHANGE-FROM-OPS> 206,265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,681,450
<NUMBER-OF-SHARES-REDEEMED> 27,374
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,654,076
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 32
<NAME> VALIC Separate Account A - Division 32
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 37,944,959
<INVESTMENTS-AT-VALUE> 39,066,749
<RECEIVABLES> 388,324
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,455,073
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 39,455,073
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 39,455,073
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 36,671,828
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 39,455,073
<DIVIDEND-INCOME> 550,688
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 68,055
<NET-INVESTMENT-INCOME> 482,633
<REALIZED-GAINS-CURRENT> 285,712
<APPREC-INCREASE-CURRENT> 1,121,790
<NET-CHANGE-FROM-OPS> 1,890,135
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,788,123
<NUMBER-OF-SHARES-REDEEMED> 116,295
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 36,671,828
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
