<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THE STATEMENT OF
ADDITIONAL INFORMATION DOES NOT CONSTITUTE A PROSPECTUS.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 2, 1998
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR PLUS
SEPARATE ACCOUNT A
FOR SERIES 1 TO 12 , 1998
PROSPECTUS
Certain Series Portfolio Director Plus consists of group and individual variable
annuity contracts that are offered by The Variable Annuity Life Insurance
Company ("VALIC") to Participants in certain employer sponsored retirement
plans. Portfolio Director Plus 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 Plus is composed of the following contract forms: UIT-194,
UITG-194, UITN-194, UIT-IRA-194 and UIT-SEP-194.
Portfolio Director Plus permits you to invest in and receive retirement benefits
in up to 2 Fixed Account Options and/or an array of up to 30 of the 50 Variable
Account Options described in this prospectus. If your contract is part of your
employer's retirement program, that program will describe which Variable Account
Options are available to you. If your contract is a tax-deferred nonqualified
annuity that is not part of your employer's retirement plan, those Variable
Account Options that are invested in Mutual Funds available to the public
outside of annuity contracts or life insurance contracts will not be available
within your contract.
- --------------------------------------------------------------------------------
VALIC is a member of the Insurance Marketplace Standards Association (IMSA).
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. VALIC's membership in IMSA applies to VALIC only and not to
its products or affiliate.
This prospectus provides you with information you should know before investing
in Portfolio Director Plus. This prospectus is accompanied by the current
prospectuses for the mutual fund options described in this prospectus. Please
read and retain each of these prospectuses for future reference.
A Statement of Additional Information, dated , 1998, has been filed
with the Securities and Exchange Commission. This Statement of Additional
Information contains additional information about Portfolio Director Plus 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.
DO NOT COPY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
PROFILE OF PORTFOLIO DIRECTOR PLUS................. 2
FEE TABLE.......................................... 6
SELECTED PURCHASE UNIT DATA........................ 12
ABOUT PORTFOLIO DIRECTOR PLUS...................... 18
ABOUT VALIC........................................ 18
ABOUT VALIC SEPARATE ACCOUNT A..................... 18
UNITS OF INTERESTS................................. 18
VARIABLE ACCOUNT OPTIONS........................... 19
Summary of Funds............................... 19
PURCHASE PERIOD.................................... 57
Purchase Payments.............................. 57
Purchase Units................................. 57
Calculation of Purchase Unit Value............. 57
Choosing Investment Options.................... 58
Fixed Account Options..................... 58
Variable Account Options.................. 58
Stopping Purchase Payments..................... 58
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 59
During the Purchase Period..................... 59
During the Payout Period....................... 59
Communicating Transfer or Reallocation
Instructions................................. 59
Effective Date of Transfer..................... 59
FEES AND CHARGES................................... 60
Account Maintenance Fee........................ 60
Surrender Charge............................... 60
Amount of Surrender Charge................ 60
10% Free Withdrawal....................... 60
Exceptions to Surrender Charge............ 60
Premium Tax Charge............................. 61
Separate Account Charges....................... 61
Fund Annual Expense Charges.................... 61
Other Tax Charges.............................. 61
Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee
Charges...................................... 62
Separate Account Expense Reimbursement......... 62
PAYOUT PERIOD...................................... 63
Fixed Payout................................... 63
Variable Payout................................ 63
Combination Fixed and Variable Payout.......... 63
Payout Date.................................... 63
Payout Options................................. 63
Enhancements to Payout Options................. 64
Payout Information............................. 64
SURRENDER OF ACCOUNT VALUE......................... 65
When Surrenders are Allowed.................... 65
Amount That May Be Surrendered................. 65
Surrender Restrictions......................... 65
Partial Surrenders............................. 65
Systematic Withdrawals......................... 65
Distributions Required By Federal Tax Law...... 66
EXCHANGE PRIVILEGE................................. 67
Restrictions on Exchange Privilege............. 67
Taxes and Conversion Costs..................... 67
Surrender Charges.............................. 67
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 67
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 68
Comparison of Other Contracts.................. 68
Features of Portfolio Director Plus............ 68
Agents' and Managers' Retirement Plan Exchange
Offer........................................ 68
DEATH BENEFITS..................................... 70
Beneficiary Information........................ 70
Special Information for Individual Non-Tax
Qualified Contracts.......................... 70
During the Purchase Period..................... 70
Interest Guaranteed Death Benefit......... 70
Standard Death Benefit.................... 71
During the Payout Period....................... 71
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 72
Types of Investment Performance Information
Advertised................................... 72
Total Return Performance Information......... 72
Standard Average Annual Total Return......... 72
Nonstandard Average Annual Total
Return....................................... 72
Cumulative Total Return...................... 72
Annual Change in Purchase Unit Value......... 72
Cumulative Change in Purchase Unit Value..... 73
Total Return Based on Different Investment
Amounts................................... 73
An Assumed Account Value of $10,000.......... 73
Yield Performance Information.................. 73
AGSPC Money Market and American General Money
Market Divisions............................. 73
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 73
Comparable Fund Performance Data............. 73
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 73
OTHER CONTRACT FEATURES............................ 86
Changes That May Not Be Made................... 86
Change of Beneficiary.......................... 86
Contingent Owner............................... 86
Cancellation -- The 20 Day "Free Look"......... 86
We Reserve Certain Rights...................... 86
Relationship to Employer's Plan................ 86
VOTING RIGHTS...................................... 87
Who May Give Voting Instructions............... 87
Determination of Fund Shares Attributable to
Your Account................................. 87
During Purchase Period....................... 87
During Payout Period or after a Death Benefit
Has Been Paid............................. 87
How Fund Shares Are Voted...................... 87
FEDERAL TAX MATTERS................................ 88
Type of Plans.................................. 88
Tax Consequences in General.................... 88
Effect of Tax-Deferred Accumulations........... 89
YEAR 2000.......................................... 91
Year 2000 Risks................................ 91
</TABLE>
<PAGE> 3
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:
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- ------------- --------
<S> <C>
Account Value................... 59
Annuitant....................... 70
Assumed Investment Rate......... 63
Beneficiary..................... 70
Contract Owner.................. 70
Divisions....................... 72
Fixed Account Options........... 70
Home Office..................... 59
Mutual Fund or Fund............. 18
Participant..................... 01
Participant Year................ 60
Payout Period................... 59
Payout Unit..................... 63
Purchase Payments............... 57, 72
Purchase Period................. 59
Purchase Unit................... 58
VALIC Separate Account A........ 87
Variable Account Options........ 19, 70
</TABLE>
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
Plus, 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 Plus 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 Plus 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 Plus. This summary is called the "Profile of Portfolio
Director Plus." 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> 4
PROFILE OF PORTFOLIO DIRECTOR PLUS
- --------------------------------------------------------------------------------
Portfolio Director Plus is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director Plus's major features is presented below. For a more detailed
discussion of Portfolio Director Plus, please read the entire prospectus
carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director Plus offers a choice from among 50 Variable Account Options.
You will not be able to invest in all of the Variable Account Options described
below within a single group or individual annuity contract. If your contract is
a tax-deferred nonqualified annuity that is not part of your employer's
retirement plan, those Variable Account Options that are invested in Mutual
Funds available to the public outside of annuity contracts or life insurance
contracts will not be available within your contract. If your contract is part
of your employer's retirement program, that program will describe which Variable
Account Options are available to you. Portfolio Director Plus also offers two
Fixed Account Options.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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 SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Growth through investments tracking VALIC N/A
EQUITY Equities the EAFE Index
--------------------------------------------------------------------------------------------------------------
FUNDS
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund tracking the S&P MidCap 400(R) Index Company
--------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments tracking VALIC Bankers Trust
Index Fund the Russell 2000(R) Index Company
--------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments tracking VALIC Bankers Trust
Index Fund the S&P 500(R) Index Company
--------------------------------------------------------------------------------------------------------------
American General Mid Growth through investments tracking VALIC Bankers Trust
Cap the S&P MidCap 400 Index Company
Index Fund
--------------------------------------------------------------------------------------------------------------
American General S&P Total return through investments VALIC Bankers Trust
500 tracking the S&P 500 Index Company
Index Fund
--------------------------------------------------------------------------------------------------------------
American General Total return through investments VALIC Bankers Trust
Small Cap tracking the Russell 2000 Index Company
Index Fund
- ----------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
--------------------------------------------------------------------------------------------------------------
EQUITY AGSPC Growth & Income Growth and income through investments VALIC ValueLine, Inc.
FUNDS Fund in stocks or securities convertible
into stocks
--------------------------------------------------------------------------------------------------------------
American Century -- Capital growth through American Century N/A
Twentieth Century investments in common Investment Management,
Ultra Fund stock Inc.
--------------------------------------------------------------------------------------------------------------
American General Long-term capital appreciation VALIC Jacobs Asset
International Growth through investments in companies in Management
Fund developed and emerging markets
--------------------------------------------------------------------------------------------------------------
American General Growth of capital and future income VALIC Capital Guardian
International Value through investments in non-U.S. Trust Company
Fund issuers
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC Goldman Sachs Asset
Large Cap Growth Fund in large cap U.S. issuers Management
--------------------------------------------------------------------------------------------------------------
American General Total returns exceeding the S&P 500 VALIC State Street Bank &
Large Cap Value Fund Index through investments in equity Trust Company/State
securities Street Global
Advisors
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in equity VALIC Brown Capital
Mid Cap Growth Fund securities Management Inc.
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC Neuberger&Berman
Mid Cap Value Fund medium-to-large capitalization Management Inc.
companies
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC JP Morgan
Small Cap Growth Fund in small company growth stocks Investment
Management Inc.
--------------------------------------------------------------------------------------------------------------
American General Maximum long-term return through VALIC Fiduciary
Small Cap Value Fund investments in small capitalization Management
companies Associates, Inc.
and
Bankers Trust
Company
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Small Growth through investments in smaller The Dreyfus N/A
Cap Portfolio companies Corporation
--------------------------------------------------------------------------------------------------------------
Founders Long-term growth of capital through Founders N/A
Growth investment in common stocks of well Asset
Fund established, high-quality growth Management LLC
companies
--------------------------------------------------------------------------------------------------------------
Neuberger&Berman Capital appreciation, and secondarily N&B Management Inc. Neuberger&
Guardian Trust current income by investing primarily Berman, LLC
in common stocks of long-established,
high quality companies
--------------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a Putnam Investment N/A
globally
Growth Fund diversified portfolio of common Management Inc.
stocks
--------------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities Fund through investment in common stock Management Inc.
--------------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund small-to-medium companies
--------------------------------------------------------------------------------------------------------------
Scudder Growth Long-term growth of capital, current Scudder Kemper N/A
and Income Fund income and growth of income Investments, Inc.
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through Templeton Global N/A
investments
Foreign in equity and debt securities of Advisors Limited
Fund -- Class 1 companies and
governments outside the U.S.
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through a Templeton Investment N/A
International flexible policy of investing in Counsel, Inc.
Fund stocks and debt obligations of
companies and governments outside the
U.S.
--------------------------------------------------------------------------------------------------------------
T. Rowe Price Long-term capital growth through T. Rowe Price N/A
Small-Cap Stock Fund investments in securities of small to Associates, Inc.
medium-sized companies
--------------------------------------------------------------------------------------------------------------
Vanguard/ Growth and income through Vanguard N/A
Windsor II investment in common stock
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED American General Conservation of principal and VALIC Capital Guardian
FUNDS Balanced Fund long-term growth of capital and Trust Company
income through investments in fixed
income and equity securities
--------------------------------------------------------------------------------------------------------------
Vanguard/ Income and growth through 30 to 40% Vanguard N/A
Wellington investment in high quality corporate
bonds
Fund and 60 to 70% investment in common
stocks
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Income and possible growth through VALIC N/A
FUNDS Conservation Fund investments in high quality debt
securities
--------------------------------------------------------------------------------------------------------------
AGSPC Government Income and possible growth through VALIC N/A
Securities Fund investments in intermediate and
long-term government debt securities
--------------------------------------------------------------------------------------------------------------
AGSPC International Income and possible growth through VALIC N/A
Government investments in high quality foreign
Bond Fund government debt securities
--------------------------------------------------------------------------------------------------------------
American General High income and total return VALIC Capital Guardian
Domestic Bond Fund consistent with conservation of Trust Company
capital through investments in debt
securities
--------------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment Vanguard N/A
Securities in long-term high quality corporate
Fund-Long-Term bonds
Corporate Portfolio
--------------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment in Vanguard N/A
Securities long-term U.S. Treasury bonds
Fund-Long-Term
U.S. Treasury
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Growth through investments in stocks VALIC T. Rowe Price
FUNDS Technology of companies which benefit from Associates, Inc.
Fund development of science and technology
--------------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC N/A
Awareness stocks of companies meeting social
Fund criteria of the Fund
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in stocks VALIC N/A
Socially Responsible of companies meeting social criteria
Fund of the Fund
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUNDS Fund securities
--------------------------------------------------------------------------------------------------------------
American General Money Income through investments in VALIC N/A
Market Fund short-term money market securities
--------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
LIFESTYLE American General Current income and a low to moderate VALIC N/A
FUNDS Conservative Growth level of growth through investments
Lifestyle Fund in American General Series Portfolio
Company Funds
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC N/A
Growth American General Series Portfolio
Lifestyle Fund Company Funds
--------------------------------------------------------------------------------------------------------------
American General Growth and current income through VALIC N/A
Moderate Growth investments in American General
Lifestyle Fund Series Portfolio Company Funds
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy High level of income and moderate Vanguard N/A
Conservative long-term growth of capital and
Growth Portfolio income
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy Growth of capital and income Vanguard N/A
Growth Portfolio
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy A reasonable level of income and Vanguard N/A
Moderate Growth long-term growth of capital and
Portfolio income
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Allocation Maximum return through investments in VALIC N/A
ALLOCATION Fund a mix of stocks, bonds and money
market securities
--------------------------------------------------------------------------------------------------------------
FUNDS
Templeton Asset Flexible policy of investing in Templeton Investment N/A
Allocation Fund stocks and debt obligations of Counsel, Inc.
companies and governments of any
nation and money market instruments
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
- --------------------------------------------------------------------------------
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 Plus 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 Plus 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 Plus'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. Reductions in the account maintenance fee may be available if certain
conditions are met.
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 Charge." 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.
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.
SEPARATE ACCOUNT CHARGES
Depending on the Variable Account Option you choose you may incur a mortality
and expense risk fee and an administration and distribution fee computed at an
aggregate annualized rate of 0.75% to 1.25% on the average daily net asset value
of VALIC Separate Account A. Reductions in the mortality and expense risk fee
and administration and distribution fee may be available for plan types meeting
certain criteria.
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. In addition to the
management fees, each Fund incurs other operating expenses which may vary.
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 or distributor for providing the Fund administrative and
shareholder services. In addition, the Company currently reimburses certain
Divisions a portion of the Company's administration and distribution fee for
providing Variable Account Options. Such reimbursement arrangements are
voluntary. 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 Plus 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.
5
<PAGE> 8
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Account Maintenance Fee ($3.75 per quarter, annualized)(2) $ 15
Maximum Surrender Charge(2) 5.00%
</TABLE>
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
MORTALITY ADMINISTRATION SEPARATE
AND AND ACCOUNT TOTAL
EXPENSE RISK DISTRIBUTION EXPENSE SEPARATE
FUND FEE(3) FEE(3) REIMBURSEMENT ACCOUNT FEE
---- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation(8) 0.25% 0.75% -- 1.00%
AGSPC Capital Conservation 0.25 0.75 -- 1.00
AGSPC Government Securities 0.25 0.75 -- 1.00
AGSPC Growth 0.25 0.75 -- 1.00
AGSPC Growth & Income 0.25 0.75 -- 1.00
AGSPC International Equities 0.25 0.75 -- 1.00
AGSPC International Government Bond 0.25 0.75 -- 1.00
AGSPC MidCap Index 0.25 0.75 -- 1.00
AGSPC Money Market 0.25 0.75 -- 1.00
AGSPC Science & Technology 0.25 0.75 -- 1.00
AGSPC Small Cap Index 0.25 0.75 -- 1.00
AGSPC Social Awareness 0.25 0.75 -- 1.00
AGSPC Stock Index 0.25 0.75 -- 1.00
American Century -- Twentieth Century Ultra(4) 0.25 1.00 (0.21%) 1.04
American General Balanced(4) 0.25 0.75 (0.25) 0.75
American General Conservative Growth Lifestyle(4) 0.25 0.75 (0.25) 0.75
American General Domestic Bond(4) 0.25 0.75 (0.25) 0.75
American General Growth Lifestyle(4) 0.25 0.75 (0.25) 0.75
American General International Growth(4) 0.25 0.75 (0.25) 0.75
American General International Value(4) 0.25 0.75 (0.25) 0.75
American General Large Cap Growth(4) 0.25 0.75 (0.25) 0.75
American General Large Cap Value(4) 0.25 0.75 (0.25) 0.75
American General Mid Cap Growth(4) 0.25 0.75 (0.25) 0.75
American General Mid Cap Index(4) 0.25 0.75 (0.25) 0.75
American General Mid Cap Value(4) 0.25 0.75 (0.25) 0.75
American General Moderate Growth Lifestyle(4) 0.25 0.75 (0.25) 0.75
American General Money Market(4) 0.25 0.75 (0.25) 0.75
American General S&P 500 Index(4) 0.25 0.75 (0.25) 0.75
American General Small Cap Growth Fund(4) 0.25 0.75 (0.25) 0.75
American General Small Cap Index(4) 0.25 0.75 (0.25) 0.75
American General Small Cap Value(4) 0.25 0.75 (0.25) 0.75
American General Socially Responsible(4) 0.25 0.75 (0.25) 0.75
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio(4) 0.25 1.00 (0.15) 1.10
Founders Growth(4) 0.25 1.00 (0.25) 1.00
Neuberger&Berman Guardian Trust(4) 0.25 1.00 (0.25) 1.00
Putnam Global Growth(4) 0.25 1.00 (0.25) 1.00
Putnam New Opportunities(4) 0.25 1.00 (0.25) 1.00
Putnam OTC & Emerging Growth(4) 0.25 1.00 (0.25) 1.00
Scudder Growth and Income(4) 0.25 1.00 (0.25) 1.00
T. Rowe Price Small-Cap Stock 0.25 1.00 -- 1.25
Templeton Foreign(4) 0.25 1.00 (0.25) 1.00
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 0.25 1.00 -- 1.25
Templeton International: Class 1 0.25 1.00 -- 1.25
Vanguard LifeStrategy Conservative Growth
Portfolio 0.25 1.00 -- 1.25
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio(5) 0.25 1.00 (0.25) 1.00
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio(5) 0.25 1.00 (0.25) 1.00
Vanguard LifeStrategy Growth Portfolio 0.25 1.00 -- 1.25
Vanguard LifeStrategy Moderate Growth Portfolio 0.25 1.00 -- 1.25
Vanguard/Wellington 0.25 1.00 -- 1.25
Vanguard/Windsor II 0.25 1.00 -- 1.25
</TABLE>
6
<PAGE> 9
- --------------------------------------------------------------------------------
FUND OPERATING EXPENSES FOR FUNDS WHICH HAVE NOT YET COMMENCED OPERATIONS ARE
BASED ON CURRENT ESTIMATES AND ARE SUBJECT TO MODIFICATION PRIOR TO
EFFECTIVENESS.
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER TOTAL FUND
FUND FEES FEES EXPENSES(6) EXPENSES
---- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation(8) 0.50% -- 0.07% 0.57%
AGSPC Capital Conservation 0.50 -- 0.07 0.57
AGSPC Government Securities 0.50 -- 0.06 0.56
AGSPC Growth 0.80 -- 0.06 0.86
AGSPC Growth & Income 0.75 -- 0.06 0.81
AGSPC International Equities 0.35 -- 0.07 0.42
AGSPC International Government Bond 0.50 -- 0.06 0.56
AGSPC MidCap Index 0.34 -- 0.06 0.40
AGSPC Money Market 0.50 -- 0.07 0.57
AGSPC Science & Technology 0.90 -- 0.06 0.96
AGSPC Small Cap Index 0.35 -- 0.06 0.41
AGSPC Social Awareness 0.50 -- 0.06 0.56
AGSPC Stock Index 0.27 -- 0.07 0.34
American Century -- Twentieth Century Ultra 1.00 -- -- 1.00
American General Balanced(10) 0.16 -- 0.67 0.83
American General Conservative Growth Lifestyle 0.10 -- -- 0.10
American General Domestic Bond(10) 0.10 -- 0.74 0.84
American General Growth Lifestyle 0.10 -- -- 0.10
American General International Growth(10) 0.20 -- 0.96 1.16
American General International Value(10) 0.27 -- 0.78 1.05
American General Large Cap Growth(10) 0.16 -- 0.70 0.86
American General Large Cap Value(10) 0.11 -- 0.70 0.81
American General Mid Cap Growth(10) 0.13 -- 0.67 0.80
American General Mid Cap Index(10) -- -- 0.59 0.59
American General Mid Cap Value(10) 0.38 -- 0.67 1.05
American General Moderate Growth Lifestyle 0.10 -- -- 0.10
American General Money Market(10) -- -- 0.56 0.56
American General S&P 500 Index(10) -- -- 0.58 0.58
American General Small Cap Growth(10) 0.53 -- 0.63 1.16
American General Small Cap Index(10) -- -- 0.59 0.59
American General Small Cap Value(10) 0.36 -- 0.63 0.99
American General Socially Responsible(10) -- -- 0.56 0.56
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio 0.75 -- 0.03 0.78
Founders Growth 0.67 0.25 0.18 1.10
Neuberger&Berman Guardian Trust(7) 0.84 -- 0.04 0.88
Putnam Global Growth 0.64 0.25 0.35 1.24
Putnam New Opportunities 0.50 0.25 0.31 1.06
Putnam OTC & Emerging Growth 0.56 0.25 0.35 1.16
Scudder Growth and Income 0.46 -- 0.30 0.76
T. Rowe Price Small-Cap Stock 0.77 -- 0.25 1.02
Templeton Foreign 0.61 0.25 0.22 1.08
Templeton Variable Products Series
Templeton Asset Allocation: Class 1(9) 0.60 -- 0.18 0.78
Templeton International: Class 1(9) 0.69 -- 0.19 0.88
Vanguard LifeStrategy Conservative Growth Portfolio 0.00 -- 0.29 0.29
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio 0.03 -- 0.29 0.32
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio 0.01 -- 0.26 0.27
Vanguard LifeStrategy Growth Portfolio 0.00 -- 0.29 0.29
Vanguard LifeStrategy Moderate Growth Portfolio 0.00 -- 0.29 0.29
Vanguard/Wellington 0.04 -- 0.25 0.29
Vanguard/Windsor II 0.15 -- 0.22 0.37
</TABLE>
See footnotes on page 11.
7
<PAGE> 10
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 Plus 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 Asset Allocation Division 5 $16 $50 $ 86 $187
AGSPC Capital Conservation Division 7 16 50 86 187
AGSPC Government Securities Division 8 16 49 85 186
AGSPC Growth Division 15 19 59 101 218
AGSPC Growth & Income Division 16 18 57 98 213
AGSPC International Equities Division 11 14 45 78 171
AGSPC International Government Bond Division 13 16 49 85 186
AGSPC MidCap Index Division 4 14 44 77 168
AGSPC Money Market Division 6 16 50 86 187
AGSPC Science & Technology Division 17 20 62 106 229
AGSPC Small Cap Index Division 14 14 45 77 170
AGSPC Social Awareness Division 12 16 49 85 186
AGSPC Stock Index Division 10 14 42 74 162
American Century -- Twentieth Century Ultra
Division 31 21 64 110 237
American General Balanced Division 42 16 50 86 188
American General Conservative Growth Lifestyle Division 50 9 27 47 105
American General Domestic Bond Division 43 16 50 87 189
American General Growth Lifestyle Division 48 9 27 47 105
American General International Growth Division 33 19 60 103 224
American General International Value Division 34 18 56 97 211
American General Large Cap Growth Division 39 16 51 88 192
American General Large Cap Value Division 40 16 49 85 186
American General Mid Cap Growth Division 37 16 49 85 185
American General Mid Cap Index Division 46 14 42 74 162
American General Mid Cap Value Division 38 19 57 98 212
American General Moderate Growth Lifestyle
Division 49 9 27 47 105
American General Money Market Division 44 13 42 72 158
American General S&P 500 Index Division 47 14 42 73 161
American General Small Cap Growth Division 35 19 60 103 224
American General Small Cap Index Division 45 14 42 74 162
American General Small Cap Value Division 36 18 55 94 206
American General Socially Responsible Division 41 13 42 72 158
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 19 59 102 221
Founders Growth Division 30 21 66 113 244
Neuberger&Berman Guardian Trust
Division 29 19 59 102 221
Putnam Global Growth Division 28 23 70 120 258
Putnam New Opportunities Division 26 21 65 111 239
Putnam OTC & Emerging Growth Division 27 22 68 116 250
Scudder Growth and Income Division 21 18 55 96 208
T. Rowe Price Small-Cap Stock Division 51 23 71 122 261
Templeton Foreign Division 32 21 65 112 242
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 21 64 109 236
Templeton International: Class 1 Division 20 22 67 115 247
Vanguard LifeStrategy Conservative Growth Portfolio Division
54 16 49 84 184
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 13 42 72 160
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 13 40 70 154
Vanguard LifeStrategy Growth Portfolio Division 52 16 49 84 184
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 16 49 84 184
Vanguard/Wellington Division 25 16 49 84 184
Vanguard/Windsor II Division 24 16 51 88 193
</TABLE>
8
<PAGE> 11
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 Plus 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 Asset Allocation Division 5 $17 $51 $ 89 $193
AGSPC Capital Conservation Division 7 17 51 89 193
AGSPC Government Securities Division 8 16 51 88 192
AGSPC Growth Division 15 19 60 104 224
AGSPC Growth & Income Division 16 19 59 101 219
AGSPC International Equities Division 11 15 47 81 177
AGSPC International Government Bond Division 13 16 51 88 192
AGSPC MidCap Index Division 4 15 46 80 175
AGSPC Money Market Division 6 17 51 89 193
AGSPC Science & Technology Division 17 20 63 109 235
AGSPC Small Cap Index Division 14 15 46 80 176
AGSPC Social Awareness Division 12 16 51 88 192
AGSPC Stock Index Division 10 14 44 76 168
American Century -- Twentieth Century Ultra Division 31 21 66 113 243
American General Balanced Division 42 17 52 89 194
American General Conservative Growth Lifestyle
Division 50 9 29 50 112
American General Domestic Bond Division 43 17 52 90 195
American General Growth Lifestyle Division 48 9 29 50 112
American General International Growth Division 33 20 62 106 230
American General International Value Division 34 19 58 100 217
American General Large Cap Growth Division 39 17 53 91 198
American General Large Cap Value Division 40 16 51 88 192
American General Mid Cap Growth Division 37 16 51 87 191
American General Mid Cap Index Division 46 14 44 76 168
American General Mid Cap Value Division 38 19 58 100 218
American General Moderate Growth Lifestyle Division 49 9 29 50 112
American General Money Market Division 44 14 43 75 165
American General S&P 500 Index Division 47 14 44 76 167
American General Small Cap Growth Division 35 20 62 106 230
American General Small Cap Index Division 45 14 44 76 168
American General Small Cap Value Division 36 18 57 97 212
American General Socially Responsible Division 41 14 43 75 165
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 20 61 105 226
Founders Growth Division 30 22 68 116 249
Neuberger&Berman Guardian Trust Division 29 20 61 105 226
Putnam Global Growth Division 28 23 72 123 264
Putnam New Opportunities Division 26 21 66 114 245
Putnam OTC & Emerging Growth Division 27 22 69 119 255
Scudder Growth and Income Division 21 18 57 98 214
T. Rowe Price Small-Cap Stock Division 51 24 73 124 267
Templeton Foreign Division 32 22 67 115 247
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 21 65 112 242
Templeton International: Class 1 Division 20 22 68 117 252
Vanguard LifeStrategy Conservative Growth Portfolio
Division 54 16 50 87 190
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 14 44 75 166
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 14 42 73 160
Vanguard LifeStrategy Growth Portfolio Division 52 16 50 87 190
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 16 50 87 190
Vanguard/Wellington Division 25 16 50 87 190
Vanguard/Windsor II Division 24 17 53 91 199
</TABLE>
9
<PAGE> 12
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 Plus 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 Asset Allocation Division 5 $63 $101 $139 $193
AGSPC Capital Conservation Division 7 63 101 139 193
AGSPC Government Securities Division 8 63 101 138 192
AGSPC Growth Division 15 66 110 154 224
AGSPC Growth & Income Division 16 65 108 151 219
AGSPC International Equities Division 11 62 97 131 177
AGSPC International Government Bond Division 13 63 101 138 192
AGSPC MidCap Index Division 4 61 96 130 175
AGSPC Money Market Division 6 63 101 139 193
AGSPC Science & Technology Division 17 67 112 159 235
AGSPC Small Cap Index Division 14 62 96 130 176
AGSPC Social Awareness Division 12 63 101 138 192
AGSPC Stock Index Division 10 61 94 126 168
American Century -- Twentieth Century Ultra Division 31 68 115 163 243
American General Balanced Division 42 63 101 139 194
American General Conservative Growth Lifestyle
Division 50 56 79 100 112
American General Domestic Bond Division 43 63 102 140 195
American General Growth Lifestyle Division 48 56 79 100 112
American General International Growth Division 33 66 111 156 230
American General International Value Division 34 65 108 150 217
American General Large Cap Growth Division 39 63 102 141 198
American General Large Cap Value Division 40 63 101 138 192
American General Mid Cap Growth Division 37 63 100 137 191
American General Mid Cap Index Division 46 61 94 126 168
American General Mid Cap Value Division 38 65 108 150 218
American General Moderate Growth Lifestyle Division 49 56 79 100 112
American General Money Market Division 44 61 93 125 165
American General S&P 500 Index Division 47 61 94 126 167
American General Small Cap Growth Division 35 66 111 156 230
American General Small Cap Index Division 45 61 94 126 168
American General Small Cap Value Division 36 65 106 147 212
American General Socially Responsible Division 41 61 93 125 165
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 66 110 155 226
Founders Growth Division 30 68 116 166 249
Neuberger&Berman Guardian Trust Division 29 66 110 155 226
Putnam Global Growth Division 28 69 121 173 264
Putnam New Opportunities Division 26 68 115 164 245
Putnam OTC & Emerging Growth Division 27 69 118 169 255
Scudder Growth and Income Division 21 65 107 148 214
T. Rowe Price Small-Cap Stock Division 51 70 121 174 267
Templeton Foreign Division 32 68 116 165 247
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 67 114 162 242
Templeton International: Class 1 Division 20 68 117 167 252
Vanguard LifeStrategy Conservative Growth Portfolio
Division 54 63 100 137 190
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 61 94 125 166
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 60 92 123 160
Vanguard LifeStrategy Growth Portfolio Division 52 63 100 137 190
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 63 100 137 190
Vanguard/Wellington Division 25 63 100 137 190
Vanguard/Windsor II Division 24 64 103 141 199
</TABLE>
10
<PAGE> 13
- --------------------------------------------------------------------------------
- ------------
(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, Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee Charges" and "Exceptions to Surrender
Charge" in this prospectus.
(3) Reductions in the mortality and expense risk fee or administration and
distribution fee may be available for plan types meeting certain criteria.
See "Reduction or Waiver of Account Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration Fee Charges" in this prospectus.
(4) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account A mortality and expense risk fee plus the administration and
distribution fee 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 and/or its affiliate or distributors 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 and/or their affiliates or distributors pay
administrative, shareholder service or distribution fees to the Company:
American Century -- Twentieth Century (0.21%), American General Funds
(0.25%), Dreyfus (0.15%), Founders (0.25%), Neuberger&Berman (0.25%),
Putnam (0.25%), Scudder (0.25%) and Templeton (0.25%) With respect to
American Century -- Twentieth Century Ultra Fund, the Fund pays fees to the
Company of 0.20% on assets in excess of $0 but less than $75 million, and
0.25% on assets in excess of $75 million.
(5) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account A mortality and expense risk fee plus the administration and
distribution fee reduced by the Separate Account Expense Reimbursement. The
Separate Account Expense Reimbursement reflects a voluntary expense
reimbursement made by the Company directly to the Division which may be
terminated by the Company at any time without notice.
(6) OTHER EXPENSES includes custody, accounting, reports to shareholders,
audit, legal, administrative and other miscellaneous expenses. See each
Fund's prospectus for a detailed explanation of these fees.
(7) Neuberger&Berman Guardian Trust ("Trust") has identical investment
objectives and policies and invests in, the same portfolio as
Neuberger&Berman Guardian Fund ("Fund"). Both the Fund and the Trust are
managed by Neuberger&Berman Management Incorporated ("N&B"). N&B
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. For this Fund, MANAGEMENT FEES
include administration expenses.
(8) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(9) For these Funds Management fees and Total Fund Expenses have been restated
to reflect the management fee schedule approved by shareholders and
effective May 1, 1997. See Fund prospectus for details. Actual Management
Fees and Total Fund Expenses during 1997 were lower.
(10) After expense reimbursement. In the absence of the expense reimbursement,
management fees, other expenses and total fund operating expenses,
respectively, would be: Balanced Fund, 0.80%, 0.67% and 1.47%; Domestic
Bond Fund, 0.60%, 0.74% and 1.34%; International Growth Fund, 0.90%, 0.96%
and 1.86%; International Value Fund, 1.00%, 0.78% and 1.78%; Large Cap
Growth Fund, 0.55%, 0.70% and 1.25%; Large Cap Value Fund, 0.50%, 0.70% and
1.20%; Mid Cap Growth Fund, 0.65%, 0.67% and 1.32%; Mid Cap Index Fund,
0.28%, 0.76% and 1.04%; Mid Cap Value Fund, 0.75%, 0.67% and 1.42%; Money
Market Fund, 0.25%, 0.75% and 1.00%; S&P 500 Index Fund, 0.27%, 0.61% and
0.88%; Small Cap Growth Fund, 0.85%, 0.63% and 1.48%; Small Cap Index Fund,
0.28%, 0.85% and 1.13%; Small Cap Value Fund, 0.75%, 0.63% and 1.38%; and
Socially Responsible Fund, 0.25%, 0.76% and 1.01%.
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.
11
<PAGE> 14
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC AGSPC
ASSET CAPITAL GOVERNMENT AGSPC GROWTH & INTERNATIONAL
ALLOCATION CONSERVATION SECURITIES GROWTH INCOME EQUITIES
DIVISION 5 DIVISION 7 DIVISION 8 DIVISION 15 DIVISION 16 DIVISION 11
---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997
Purchase Units in Force 53,307,351 28,242,598 45,034,894 453,172,490 132,434,555 122,716,744
Purchase Unit Value $3.219282 $1.962239 $1.957755 $2.076503 $1.940905 $1.237299
December 31, 1996
Purchase Units in Force 65,292,617 30,286,494 47,130,169 366,272,509 108,341,635 156,226,314
Purchase Unit Value $2.651899 $1.825549 $1.815651 $1.733324 $1.583056 $1.222906
July 1, 1996
Initial Offering Value -- -- -- -- -- --
December 31, 1995
Purchase Units in Force 75,851,431 29,573,808 39,847,053 164,417,848 51,779,089 172,564,018
Purchase Unit Value $2.411022 $1.812011 $1.799475 $1.466652 $1.296577 $1.156454
December 31, 1994
Purchase Units in Force 89,377,860 26,859,219 26,667,073 32,633,370 12,386,602 187,749,916
Purchase Unit Value $1.951533 $1.515278 $1.547150 $1.001834 $0.993168 $1.054460
July 11, 1994
Purchase Unit Value(1) -- -- -- -- -- --
April 29, 1994
Purchase Unit Value(1) -- -- -- $1.000000 $1.000000 --
December 31, 1993
Purchase Units in Force 93,899,802 24,628,606 26,563,166 -- -- 117,215,227
Purchase Unit Value $1.997266 $1.630069 $1.636228 -- -- $0.986387
December 31, 1992
Purchase Units in Force 80,637,090 14,922,749 16,609,444 -- -- 52,524,165
Purchase Unit Value $1.846025 $1.470167 $1.491537 -- -- $0.767135
May 1, 1992
Purchase Unit Value(1) -- -- -- -- -- --
December 31, 1991
Purchase Units in Force 76,624,765 11,069,044 11,694,890 -- -- 27,011,169
Purchase Unit Value $1.878219 $1.366905 $1.405236 -- -- $0.895250
October 1, 1991
Purchase Unit Value(1) -- -- -- -- -- --
December 31, 1990
Purchase Units in Force 72,284,139 9,321,049 8,460,327 -- -- 13,776,769
Purchase Unit Value $1.563444 $1.178361 $1.237104 -- -- $0.813423
December 31, 1989
Purchase Units in Force 68,361,149 7,502,717 5,556,464 -- -- 2,247,450
Purchase Unit Value $1.618165 $1.193583 $1.179231 -- -- $1.028405
October 2, 1989
Purchase Unit Value(1) -- -- -- -- -- $1.000000
December 31, 1988
Purchase Units in Force 65,817,325 3,996,455 3,408,919 -- -- --
Purchase Unit Value $1.397280 $1.078919 $1.062082 -- -- --
<CAPTION>
AGSPC
INTERNATIONAL AGSPC AGSPC
GOVERNMENT MIDCAP MONEY
BOND INDEX MARKET
DIVISION 13 DIVISION 4 DIVISION 6
----------- ---------- ----------
<S> <C> <C> <C>
December 31, 1997
Purchase Units in Force 111,480,591 171,065,657 84,182,521
Purchase Unit Value $1.490645 $4.269122 $1.673590
December 31, 1996
Purchase Units in Force 112,601,593 172,816,978 75,124,095
Purchase Unit Value $1.582230 $3.272588 $1.607212
July 1, 1996
Initial Offering Value -- -- --
December 31, 1995
Purchase Units in Force 73,369,250 172,613,690 51,907,757
Purchase Unit Value $1.530780 $2.782677 $1.545802
December 31, 1994
Purchase Units in Force 25,691,713 171,442,018 75,765,781
Purchase Unit Value $1.301357 $2.153183 $1.479129
July 11, 1994
Purchase Unit Value(1) -- -- --
April 29, 1994
Purchase Unit Value(1) -- -- --
December 31, 1993
Purchase Units in Force 18,155,381 134,621,879 24,799,810
Purchase Unit Value $1.258340 $2.259378 $1.439327
December 31, 1992
Purchase Units in Force 6,245,713 81,007,871 23,414,474
Purchase Unit Value $1.112826 $2.021271 $1.415690
May 1, 1992
Purchase Unit Value(1) -- -- --
December 31, 1991
Purchase Units in Force 953,038 49,106,844 25,545,494
Purchase Unit Value $1.090499 $1.858030 $1.384882
October 1, 1991
Purchase Unit Value(1) $1.000000 -- --
December 31, 1990
Purchase Units in Force -- 42,958,640 25,246,481
Purchase Unit Value -- $1.538017 $1.325393
December 31, 1989
Purchase Units in Force -- 40,618,028 15,949,534
Purchase Unit Value -- $1.712671 $1.240599
October 2, 1989
Purchase Unit Value(1) -- -- --
December 31, 1988
Purchase Units in Force -- 38,747,706 9,429,191
Purchase Unit Value -- $1.450217 $1.149516
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
12
<PAGE> 15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
CENTURY- GENERAL AMERICAN
AGSPC AGSPC AGSPC TWENTIETH AMERICAN CONSERVATIVE GENERAL
SCIENCE & SMALL CAP SOCIAL AGSPC CENTURY GENERAL GROWTH DOMESTIC
TECHNOLOGY INDEX AWARENESS STOCK INDEX ULTRA BALANCED LIFESTYLE BOND
DIVISION 17 DIVISION 14 DIVISION 12 DIVISION 10(3) DIVISION 31 DIVISION 42(2) DIVISION 50(2) DIVISION 43(2)
----------- ----------- ----------- -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
397,842,959 106,279,077 81,577,104 615,053,124 97,745,282
$2.285739 $2.163595 $2.985333 $3.753436 $1.265937
315,809,646 103,320,842 46,574,016 536,806,965 16,654,076
$2.250471 $1.785442 $2.252673 $2.848437 $1.039845
-- -- -- -- $1.000000
187,862,232 98,335,995 32,750,120 455,255,243
$1.997175 $1.544896 $1.835102 $2.343900
42,726,137 100,383,839 29,015,764 416,234,288
$1.247713 $1.222329 $1.333899 $1.724134
-- -- -- --
$1.000000 -- -- --
-- 56,159,647 26,230,566 369,550,060
-- $1.277199 $1.366979 $1.729327
-- 9,723,477 16,956,437 283,808,045
-- $1.112790 $1.279516 $1.589718
-- $1.000000 --
-- -- 8,447,711 90,526,907
-- -- $1.250634 $1.505641
-- -- -- --
-- -- 2,947,418 46,016,297
-- -- $0.987666 $1.179000
-- -- 212,636 22,325,990
-- -- $1.010003 $1.238782
-- -- $1.000000 --
-- -- -- 9,213,178
-- -- -- $0.968670
<CAPTION>
AMERICAN AMERICAN
AGSPC GENERAL GENERAL
SCIENCE & GROWTH INTERNATIONAL
TECHNOLOGY LIFESTYLE GROWTH
DIVISION 17 DIVISION 48(2) DIVISION 33(2)
----------- -------------- --------------
<S> <C> <C>
397,842,959
$2.285739
315,809,646
$2.250471
--
187,862,232
$1.997175
42,726,137
$1.247713
--
$1.000000
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
</TABLE>
- ------------
(2) No Selected Purchase Unit Data available at this time.
(3) 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.
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.
13
<PAGE> 16
Selected Purchase Unit Data -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
GENERAL AMERICAN AMERICAN AMERICAN AMERICAN
INTERNATIONAL GENERAL LARGE GENERAL LARGE GENERAL MID GENERAL MID
VALUE CAP GROWTH CAP VALUE CAP GROWTH CAP INDEX
DIVISION 34(2) DIVISION 39(2) DIVISION 40(2) DIVISION 37(2) DIVISION 46(2)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
December 31, 1997
Purchase Units in Force
Purchase Unit Value
December 31, 1996
Purchase Units in Force
Purchase Unit Value
July 1, 1996
Initial Offering Value
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(1)
April 29, 1994
Purchase Unit Value(1)
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(1)
December 31, 1991
Purchase Units in Force
Purchase Unit Value
October 1, 1991
Purchase Unit Value(1)
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(1)
December 31, 1988
Purchase Units in Force
Purchase Unit Value
<CAPTION>
AMERICAN
GENERAL
AMERICAN MODERATE
GENERAL MID GROWTH
CAP VALUE LIFESTYLE
DIVISION 38(2) DIVISION 49(2)
-------------- --------------
<S> <C> <C>
December 31, 1997
Purchase Units in Force
Purchase Unit Value
December 31, 1996
Purchase Units in Force
Purchase Unit Value
July 1, 1996
Initial Offering Value
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(1)
April 29, 1994
Purchase Unit Value(1)
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(1)
December 31, 1991
Purchase Units in Force
Purchase Unit Value
October 1, 1991
Purchase Unit Value(1)
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(1)
December 31, 1988
Purchase Units in Force
Purchase Unit Value
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
(2) No Selected Purchase Unit Data available at this time.
14
<PAGE> 17
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
FUND
AMERICAN AMERICAN -----------
GENERAL AMERICAN AMERICAN AMERICAN AMERICAN GENERAL DREYFUS
MONEY GENERAL S&P GENERAL SMALL GENERAL SMALL GENERAL SMALL SOCIALLY SMALL CAP FOUNDERS
MARKET 500 INDEX CAP GROWTH CAP INDEX CAP VALUE RESPONSIBLE PORTFOLIO GROWTH
DIVISION 44(2) DIVISION 47(2) DIVISION 35(2) DIVISION 45(2) DIVISION 36(2) DIVISION 41(2) DIVISION 18 DIVISION 30
- -------------- -------------- -------------- -------------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
479,851,525 132,167,162
$1.770622 $1.289513
428,883,250 31,197,464
$1.534694 $1.029522
-- $1.000000
267,735,219
$1.332904
85,169,871
$1.043156
$1.000000
<CAPTION>
AMERICAN NEUBERGER
GENERAL & BERMAN
MONEY GUARDIAN
MARKET TRUST
DIVISION 44(2) DIVISION 29
- -------------- -----------
<S> <C>
35,406,663
$1.307438
8,211,592
$1.120770
$1.000000
</TABLE>
- ------------
(2) No Selected Purchase Unit Data available at this time.
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.
15
<PAGE> 18
Selected Purchase Unit Data -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM SCUDDER
PUTNAM OTC & GROWTH T. ROWE PRICE
GLOBAL PUTNAM NEW EMERGING AND SMALL-CAP TEMPLETON
GROWTH OPPORTUNITIES GROWTH INCOME STOCK FOREIGN
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 51(2) DIVISION 32
----------- ------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997
Purchase Units in Force 49,548,732 143,395,066 99,785,041 94,225,984 159,201,107
Purchase Unit Value $1.186775 $1.149453 $0.976262 $1.436011 $1.135778
December 31, 1996
Purchase Units in Force 16,648,600 53,001,699 48,902,828 16,524,046 36,671,828
Purchase Unit Value $1.057690 $0.947573 $0.894978 $1.114950 $1.075896
July 1, 1996
Initial Offering Value $1.000000 $1.000000 $1.000000 $1.000000 $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(1)
April 29, 1994
Purchase Unit Value(1)
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(1)
December 31, 1991
Purchase Units in Force
Purchase Unit Value
October 1, 1991
Purchase Unit Value(1)
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(1)
December 31, 1988
Purchase Units in Force
Purchase Unit Value
<CAPTION>
TEMPLETON VARIABLE
PRODUCTS SERIES FUND
----------------------------
TEMPLETON
ASSET TEMPLETON
ALLOCATION: INTERNATIONAL:
CLASS 1 CLASS 1
DIVISION 19 DIVISION 20
----------- -----------
<S> <C> <C>
December 31, 1997
Purchase Units in Force 196,150,946 463,174,350
Purchase Unit Value $1.613943 $1.575168
December 31, 1996
Purchase Units in Force 137,384,670 378,581,949
Purchase Unit Value $1.414844 $1.399702
July 1, 1996
Initial Offering Value -- --
December 31, 1995
Purchase Units in Force 78,494,505 219,124,926
Purchase Unit Value $1.205181 $1.142586
December 31, 1994
Purchase Units in Force 32,807,602 71,716,511
Purchase Unit Value $0.995860 $0.999282
July 11, 1994
Purchase Unit Value(1) $1.000000 $1.000000
April 29, 1994
Purchase Unit Value(1)
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(1)
December 31, 1991
Purchase Units in Force
Purchase Unit Value
October 1, 1991
Purchase Unit Value(1)
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(1)
December 31, 1988
Purchase Units in Force
Purchase Unit Value
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
(2) No Selected Purchase Unit Data available at this time.
16
<PAGE> 19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VANGUARD VANGUARD
FIXED INCOME FIXED INCOME
VANGUARD SECURITIES SECURITIES VANGUARD
LIFESTRATEGY FUND- FUND- VANGUARD LIFESTRATEGY
CONSERVATIVE LONG-TERM LONG-TERM LIFESTRATEGY MODERATE
GROWTH CORPORATE U.S. TREASURY GROWTH GROWTH VANGUARD/ VANGUARD/
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO WELLINGTON WINDSOR II
DIVISION 54(2) DIVISION 22 DIVISION 23 DIVISION 52(2) DIVISION 53(2) DIVISION 25 DIVISION 24
-------------- ----------- ------------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
17,371,407 20,041,920 116,429,781 187,929,868
$1.176649 $1.178938 $1.340109 $1.464949
3,370,441 4,174,369 22,866,634 37,292,761
$1.047595 $1.048470 $1.101584 $1.120855
$1.000000 $1.000000 $1.000000 $1.000000
</TABLE>
- ------------
(2) No Selected Purchase Unit Data available at this time.
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.
17
<PAGE> 20
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR PLUS
Portfolio Director Plus 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 Plus can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director Plus will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
Plus 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 Plus.
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 Plus. 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.
VALIC is a member of the Insurance Marketplace Standards Association (IMSA).
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. VALIC's membership in IMSA applies to VALIC only and not its
products or affiliates.
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director Plus'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 Plus. 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." Fifty Divisions are
available and represent the Variable Account Options in Portfolio Director Plus.
Each of these Divisions invests in a different Mutual Fund made available
through Portfolio Director Plus. For example, Division Ten represents and
invests in the AGSPC 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 Plus. 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 Plus, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director Plus,
the Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director Plus be held exclusively for the benefit of
the contract owner, participants, annuitants, and beneficiaries of Portfolio
Director Plus. 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.
All inquiries regarding
PORTFOLIO DIRECTOR PLUS
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
18
<PAGE> 21
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director Plus enables you to participate in Divisions that represent
fifty Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available through VALIC Separate Account A. You
may not according to your retirement program be able to invest in all fifty
Variable Account Options described in this prospectus. 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 Plus and include:
- - American General Series Portfolio
Company 1 (AGSPC 1) -- offers 13 funds, for which VALIC serves as investment
adviser.
- - American General Series Portfolio Company 3 (AGSPC 3) -- offers 18 funds for
which VALIC serves as investment adviser.
- - American Century Investments -- offers 1 fund for which American Century
Investment Management, Inc. serves as investment adviser.
- - Dreyfus Variable Investment Fund -- offers 1 fund, for which The Dreyfus
Corporation serves as investment adviser.
- - Founders Funds, Inc. -- offers 1 fund for which Founders Asset Management LLC
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 Kemper Investments, Inc. -- offers 1 fund for which Scudder Kemper
Investments, Inc. serves as investment adviser.
- - T. Rowe Price Small-Cap Stock Fund, Inc. -- offers 1 fund for which T. Rowe
Price Associates, Inc. serves as investment adviser.
- - Templeton Funds Inc. -- offers 3 funds for which Templeton Global Advisors
Limited and Templeton Investment Counsel, Inc. serves as investment advisers.
- - The Vanguard Group Inc. -- offers 7 funds for which Barrow, Hanley, Mewhinney
& Strauss, Inc., Equinox Capital Management, Inc., Tukman Capital Management,
Inc., Vanguard Core Management Group, Wellington Management Company, LLP and
Vanguard Fixed Income Group serve as investment advisers.
Sixteen of the mutual funds are also available to the general public.
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 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 fees plus administration and distribution fees 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 in the graphs reflect
Separate Account performance based on the performance of the underlying Fund for
the last 10 fiscal years or, since inception of the underlying Fund if for less
than 10 years. The returns shown in the tables reflect for the AGSPC 1 Funds
actual historical performance of the related Separate Account Divisions. The
returns shown in the tables for certain Funds (Divisions 18-20) reflect actual
historical performance of the related Separate Account Divisions since inception
of each Division (July 11, 1994) and hypothetical performance for periods prior
to July 11, 1994. The returns shown in the tables for certain Funds (Divisions
21-32) reflect actual historical performance of the related Separate Account
Divisions since inception of each Division (July 1, 1996) and hypothetical
performance for periods prior to July 1, 1996. Hypothetical performance is based
on the actual performance of the underlying Fund reduced by Separate Account
fees that would have been incurred during the hypothetical period. In addition,
because the AGSPC 3 Funds underlying Divisions 33 through 50 began operations on
, 1998, no actual performance history exists. The returns shown in
the tables for those AGSPC 3 Funds reflect the performance of comparable funds
or composites managed by the subadvisers for the Funds as described in the
accompanying narrative. Investment return and principal value will fluctuate
with market conditions, and for foreign investments, currencies and the economic
and political climates of the countries where investments are made. Past
performance cannot predict or guarantee future results.
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 Plus.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
19
<PAGE> 22
AGSPC ASSET ALLOCATION 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,950
03/31/90 11,967
03/31/91 12,949
03/31/92 13,673
03/31/93 14,542
03/31/94 14,618
03/31/95 15,537
03/31/96 18,661
03/31/97 20,307
03/31/98 26,425
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
AGSPC 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,238
03/31/90 11,068
03/31/91 11,406
03/31/92 12,777
03/31/93 14,661
03/31/94 14,723
03/31/95 15,121
03/31/96 16,615
03/31/97 17,105
03/31/98 18,885
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* The AGSPC Asset Allocation Fund was Formerly Known as the Timed OpportunITY
Fund.
20
<PAGE> 23
AGSPC 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,227
03/31/90 11,060
03/31/91 11,971
03/31/92 13,133
03/31/93 14,930
03/31/94 15,035
03/31/95 15,410
03/31/96 16,756
03/31/97 17,178
03/31/98 18,959
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 11,246
03/31/96 15,921
03/31/97 16,507
03/31/98 24,207
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
21
<PAGE> 24
AGSPC 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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 10,762
03/31/96 13,957
03/31/97 15,372
03/31/98 20,864
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
AGSPC 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
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 8,391
03/31/91 8,609
03/31/92 7,751
03/31/93 8,494
03/31/94 10,161
03/31/95 10,616
03/31/96 11,899
03/31/97 11,954
03/31/98 14,040
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
22
<PAGE> 25
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
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 10,325
03/31/93 11,761
03/31/94 12,744
03/31/95 14,720
03/31/96 14,976
03/31/97 14,850
03/31/98 14,937
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
23
<PAGE> 26
AGSPC 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 April 1,
1988 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 12 of this prospectus.
<TABLE>
<CAPTION>
Annual Value of $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ----------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 10,995
03/31/93 12,480
03/31/94 13,035
03/31/95 13,955
03/31/96 17,726
03/31/97 19,303
03/31/98 28,386
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
<TABLE>
<CAPTION>
Annual Value of $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ----------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,044
03/31/90 12,065
03/31/91 12,335
03/31/92 13,139
03/31/93 14,916
03/31/94 15,576
03/31/95 16,677
03/31/96 21,183
03/31/97 23,068
03/31/98 33,922
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400" are
trademarks of Standard and Poor's ("S&P"). AGSCP MidCap 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.
24
<PAGE> 27
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,677
03/31/90 11,486
03/31/91 12,225
03/31/92 12,695
03/31/93 12,945
03/31/94 13,165
03/31/95 13,622
03/31/96 14,215
03/31/97 14,777
03/31/98 15,397
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 13,753
03/31/96 20,465
03/31/97 19,481
03/31/98 26,099
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
25
<PAGE> 28
AGSPC 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
- ------------------------- -------
<S> <C>
05/01/92 $10,000
03/31/93 11,449
03/31/94 12,318
03/31/95 12,759
03/31/96 16,202
03/31/97 16,926
03/31/98 23,731
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 9,962
03/31/91 11,168
03/31/92 11,813
03/31/93 13,361
03/31/94 13,092
03/31/95 14,688
03/31/96 19,332
03/31/97 23,165
03/31/98 33,818
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
* The Russell(R) Index is a trademark/servicemark of the Frank Russell Trust
Company. Russell(TH) is a trademark of the Frank Russell Company.
26
<PAGE> 29
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 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,456
03/31/90 13,391
03/31/91 14,961
03/31/92 16,270
03/31/93 18,537
03/31/94 18,485
03/31/95 21,054
03/31/96 27,487
03/31/97 32,557
03/31/98 47,582
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
AMERICAN CENTURY --
TWENTIETH CENTURY ULTRA FUND
Investor Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,977
03/31/90 13,142
03/31/91 20,926
03/31/92 25,530
03/31/93 27,456
03/31/94 32,524
03/31/95 33,052
03/31/96 43,785
03/31/97 47,294
03/31/98 68,305
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The AGSPC 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.
27
<PAGE> 30
AMERICAN GENERAL
BALANCED FUND
(Division 42)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks balanced accomplishment of (i) conservation of principal and (ii)
long-term growth of capital and income through investment in fixed income and
equity securities.
The Balanced Fund commenced operations on . However, the Fund's
investment objectives, policies and strategies are substantially similar to
those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund is for a composite of such similar accounts ("Sub-adviser Composite").
The Sub-adviser Composite represents the total return, gross of management fees,
of all relevant accounts managed on a discretionary basis by the institutional
investment management division of the Sub-adviser. The inception dates of the
accounts comprising the Sub-adviser Composite range from December 31, 1974 to
September 30, 1997. The discretionary accounts in the Sub-adviser Composite are
not subject to the investment limitations, diversification requirements and
other restrictions imposed on registered mutual funds by the Investment Company
Act of 1940 and the Internal Revenue Code. If the accounts included in the
Sub-adviser Composite had been subject to the requirements imposed on registered
mutual funds, their performance might have been lower. Please refer to the
prospectus for the Fund for further information regarding the Fund's use of
performance information for the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,034
03/31/90 12,458
03/31/91 13,808
03/31/92 15,196
03/31/93 17,074
03/31/94 16,900
03/31/95 18,327
03/31/96 22,474
03/31/97 24,994
03/31/98 32,287
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
28
<PAGE> 31
AMERICAN GENERAL CONSERVATIVE
GROWTH LIFESTYLE FUND
(Division 50)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low to moderate growth of capital through investments
in Series Company Funds.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
29
<PAGE> 32
AMERICAN GENERAL DOMESTIC
BOND FUND
(Division 43)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in debt instruments and other income producing securities.
The Domestic Bond Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund is for a composite of such similar accounts ("Sub-adviser Composite").
The Sub-adviser Composite represents the total return, gross of management fees,
of all relevant accounts managed on a discretionary basis by the institutional
investment management division of the Sub-adviser. The inception date of the
accounts comprising the Sub-adviser Composite range from December 31, 1972 to
March 1, 1998. The discretionary accounts in the Sub-adviser Composite are not
subject to the investment limitations, diversification requirements and other
restrictions imposed on registered mutual funds by the Investment Company Act of
1940 and the Internal Revenue Code. If the accounts included in the Sub-adviser
Composite had been subject to the requirements imposed on registered mutual
funds, their performance might have been lower. Please refer to the prospectus
for the Fund for further information regarding the Fund's use of performance
information for the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,334
03/31/90 11,411
03/31/91 12,836
03/31/92 14,225
03/31/93 16,225
03/31/94 16,081
03/31/95 16,542
03/31/96 18,022
03/31/97 18,724
03/31/98 20,649
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
30
<PAGE> 33
AMERICAN GENERAL GROWTH
LIFESTYLE FUND
(Division 48)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth through investments in Series Company Funds. The Fund is suitable
for investors seeking the potential for capital growth that a fund investing
predominately in common stocks may offer.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
31
<PAGE> 34
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND
(Division 33)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation by investing in equity
securities of companies in developed and emerging markets. The Fund may invest
across the capitalization spectrum, although it intends to emphasize smaller
capitalization stocks.
1. The Templeton Performance Information
The International Growth Fund commenced operations on . The
performance information shown below is for the Templeton International Fund, a
series of the Templeton Variable Products Series Fund, which was managed by Mr.
Jacobs, a principal of the Sub-adviser. The Templeton International Fund has
substantially similar, though not necessarily identical objectives, policies and
strategies as the International Growth Fund. The chart shows the historical
investment performance for the periods ended June 30. The inception date for the
Templeton International Fund was May 1, 1992. During Mr. Jacobs tenure as
portfolio manager, from May 1, 1992 to June 30, 1995, he was primarily
responsible for the day-to-day management of the fund, and no other person had a
significant role in achieving the fund's performance.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
06/30/92 9,708
06/30/93 10,486
06/30/94 12,904
06/30/95 14,114
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED JUNE 30, 1995
32
<PAGE> 35
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND -- (CONTINUED)
(Division 33)
- --------------------------------------------------------------------------------
2. The Separate Account Performance Information
Although the International Growth Fund has no performance record, the Fund's
investment objectives, policies and strategies will be substantially similar to
those employed by the Sub-adviser with respect to certain separately managed
accounts of the Sub-adviser. The chart below shows the historical investment
performance (with the adjustments noted below) for a composite of the
Sub-adviser's similar accounts which use the same investment strategy that the
Sub-adviser will employ on behalf of the Fund. The Sub-adviser Composite
represents the total return, net of all fees and expenses, of all relevant
separately managed accounts of the Sub-adviser. The inception date of the
Sub-adviser Composite was October 1, 1995.
The separately managed account in the Sub-adviser Composite were not subject to
the investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code. If the accounts included in the Sub-adviser Composite has
been subject to the requirements imposed on registered mutual funds, their
performance might have been lower.
Please refer to the prospectus of the Fund for further information regarding the
Fund's use of performance information for the International Growth Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1995 $ Value
- ------------------------- -------
<S> <C>
10/01/95 $10,000
03/31/96 10,584
03/31/97 13,636
03/31/98 16,108
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1995
[CHART]
PERIOD ENDED MARCH 31
33
<PAGE> 36
AMERICAN GENERAL INTERNATIONAL
VALUE FUND
(Division 34)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital and future income through investments
primarily in securities of non-U.S. issuers and securities whose principal
markets are outside of the United States.
The International Value Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund reflects the historical investment performance (with the adjustments
noted below) for a composite of the Sub-adviser's similar accounts which use the
same investment strategy that the Sub-adviser will employ on behalf of the Fund
("Sub-adviser Composite"). The Sub-adviser Composite represents the total return
gross of management fees, of all relevant accounts managed on a discretionary
basis by the institutional investment management division of the Sub-adviser.
The inception date of the discretionary accounts comprising the Sub-adviser
Composite range from December 31, 1978 to March 31, 1998. The discretionary
accounts in the Sub-adviser Composite are not subject to the investment
limitations, diversification requirements and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. If the accounts included in the Sub-adviser Composite had been
subject to the requirements imposed on registered mutual funds, their
performance might have been lower. Please refer to the prospectus for the Fund
for further information regarding the Fund's use of performance information for
the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,581
03/31/90 12,097
03/31/91 12,195
03/31/92 12,510
03/31/93 13,418
03/31/94 16,774
03/31/95 16,599
03/31/96 19,497
03/31/97 21,634
03/31/98 26,366
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
34
<PAGE> 37
AMERICAN GENERAL LARGE CAP
GROWTH FUND
(Division 39)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through a broadly diversified portfolio of
equity securities of large cap U.S. issuers that are expected to have better
prospects for earnings growth than the growth rate of the general domestic
economy. Dividend income is a secondary consideration.
The Large Cap Growth Fund commenced operation on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the Goldman Sachs CORE Large Cap Growth and it is managed in substantially
the same manner and by the same individuals as the Goldman Sachs CORE Large Cap
Growth Fund. Performance information prior to November 11, 1991 (commencement
date for Goldman Sachs CORE Large Cap Growth Fund) is that of a predecessor
separate account adjusted to reflect the higher fees and expenses applicable to
Goldman Sachs CORE Large Cap Growth Fund. Although the predecessor separate
account was managed by the Sub-adviser in substantially the same manner and by
the same individuals as the Goldman Sachs CORE Large Cap Growth Fund, the
separate account was not registered under the Investment Company Act of 1940
("1940 Act") and was not subject to certain investment restrictions imposed by
the 1940 Act and the Internal Revenue Code. If it had been registered under the
1940 Act, performance might have been adversely affected. Please refer to the
prospectus for the Fund for further information regarding the Fund's use of
performance information for the Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
December 1, 1991 $ Value
- ------------------------- -------
<S> <C>
12/01/91 $10,000
03/31/92 10,823
03/31/93 10,908
03/31/94 12,978
03/31/95 14,058
03/31/96 19,270
03/31/97 24,814
03/31/98 31,663
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE DECEMBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
35
<PAGE> 38
AMERICAN GENERAL LARGE CAP
VALUE FUND
(Division 40)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the S&P 500 Index through
investments in equity securities.
The Large Cap Value Fund commenced operations on . However, the
Fund is managed in substantially the same manner and by the same individuals as
those employed by the Sub-adviser for discretionary accounts (the "Discretionary
Accounts") managed by the Sub-adviser with similar investment objectives,
policies and strategies. The Discretionary Accounts are not subject to the
investment limitations, diversification and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. The performance information for the Fund reflects the historical
performance for the Discretionary Accounts. If it had been subject to such
regulation, performance might have been adversely affected. The inception date
for the Discretionary Accounts range from August 1, 1992 through August 1, 1997.
Please refer to the prospectus for the Fund for further information regarding
the Fund's use of related performance information for the Discretionary Account.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 1, 1992 $ Value
- ------------------------- -------
<S> <C>
08/01/92 $10,000
03/31/93 11,403
03/31/94 11,678
03/31/95 12,756
03/31/96 16,674
03/31/97 20,139
03/31/98 31,622
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 1, 1992
[CHART]
PERIOD ENDED MARCH 31
36
<PAGE> 39
AMERICAN GENERAL MID CAP
GROWTH FUND
(Division 37)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in equity securities,
such as common and preferred stocks and securities convertible into common
stocks. Current income is of secondary importance.
The Mid Cap Growth Fund commenced operations on . However, the
Fund's investment objective and policies and the Fund's strategies are
substantially similar to those employed by the subadviser with respect to
certain discretionary investment management accounts under their management
("Combined Accounts"). The performance information for the Fund reflects the
historical performance for the Combined Accounts ("Combined Accounts
Composite"). The Combined Accounts Composite includes all discretionary accounts
managed by the subadviser invested principally in equity securities of medium
capitalization companies using the same investment strategy that the subadviser
will employ on behalf of the Fund. The inception date of the discretionary
investment management accounts comprising the Combined Accounts Composite range
from January 1, 1993 to October 1, 1997. The discretionary accounts in the
Combined Accounts Composite are not subject to the investment limitations,
diversification requirements and other restrictions imposed on registered mutual
funds by the Investment Company Act of 1940 and the Internal Revenue Code. If
the accounts included in the Combined Accounts Composite had been subject to the
requirements imposed on registered mutual funds, their performances might have
been lower. Please refer to the prospectus for the Fund for further information
regarding the Fund's use of performance information for the Combined Accounts
Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1993 $ Value
- ------------------------- -------
<S> <C>
01/01/93 $10,000
03/31/93 9,720
03/31/94 10,582
03/31/95 11,559
03/31/96 14,897
03/31/97 16,048
03/31/98 22,780
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1993
[CHART]
PERIOD ENDED MARCH 31
37
<PAGE> 40
AMERICAN GENERAL MID CAP
INDEX FUND
(Division 46)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital through investments primarily in a
diversified portfolio of common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P MidCap
400 Index.*
The Mid Cap Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the American General Series Portfolio Company's MidCap Index Fund ("AGSPC
MidCap Index Fund") and it is managed in substantially the same manner and by
the same individuals as AGSPC MidCap Index Fund. The performance information for
the Fund is for the AGSPC MidCap Index Fund and is shown in two separate sets of
tables and graphs for the ten year period beginning April 1, 1988 and for the
period beginning October 1, 1991. The inception date for the AGSPC MidCap Index
Fund was October 13, 1982. Please refer to the prospectus for the Fund for
further information regarding the Fund's use of performance information for the
AGSPC MidCap Index Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,070
03/31/90 12,123
03/31/91 12,422
03/31/92 13,601
03/31/93 15,479
03/31/94 16,192
03/31/95 17,376
03/31/96 22,125
03/31/97 24,150
03/31/98 35,604
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor'sH", "S&PH", "S&P 500H" and "S&P MidCap 400H" are trademarks
of Standard and Poor's ("S&P"). The American General MidCap 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.
38
<PAGE> 41
AMERICAN GENERAL MID CAP
INDEX FUND
(Division 46)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 11,008
03/31/93 12,528
03/31/94 13,105
03/31/95 14,063
03/31/96 17,906
03/31/97 19,545
03/31/98 28,815
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
39
<PAGE> 42
AMERICAN GENERAL MID CAP
VALUE FUND
(Division 38)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth through investment in common stocks of
medium-to-large-capitalization established companies using a value-oriented
investment approach.
The Mid Cap Value Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those of the Neuberger&Berman Partners Fund and it is managed in
substantially the same manner and by the same individuals as the
Neuberger&Berman Partners Fund. The performance information for the Fund is for
the Neuberger&Berman Partners Fund for the period April 1, 1988 through March
31, 1998. The date the Sub-Adviser assumed management of the Neuberger&Berman
Partners Fund was January 20, 1975. Please refer to the prospectus for the Fund
for further information regarding the Fund's use of performance information for
the Neuberger&Berman Partners Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 9,924
03/31/90 11,093
03/31/91 12,135
03/31/92 13,677
03/31/93 16,329
03/31/94 17,184
03/31/95 19,151
03/31/96 25,447
03/31/97 30,032
03/31/98 42,193
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
40
<PAGE> 43
AMERICAN GENERAL MODERATE
GROWTH LIFESTYLE FUND
(Division 49)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth and current income through investments in Series Company Funds.
This Fund is suitable for investors who wish to invest in stocks, but who are
not willing to assume the substantial market risks of the Lifestyle Growth Fund.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
41
<PAGE> 44
AMERICAN GENERAL MONEY
MARKET FUND
(Division 44)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
The Money Market Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those of the American General Series Portfolio Company's Money Market Fund
("AGSPC Money Market Fund") and it is managed in substantially the same manner
and by the same individuals as the AGSPC Money Market Fund. The performance
information for the Fund is for the AGSPC Money Market Fund for the period April
1, 1988 to March 31, 1998. The inception date for the AGSPC Money Market Fund
was January 16, 1986. Please refer to the prospectus for the Fund for further
information regarding the Fund's use of performance information for the AGSPC
Money Market Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,699
03/31/90 11,532
03/31/91 12,299
03/31/92 12,803
03/31/93 13,084
03/31/94 13,317
03/31/95 13,809
03/31/96 14,444
03/31/97 15,048
03/31/98 15,715
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
42
<PAGE> 45
AMERICAN GENERAL S&P 500
INDEX FUND
(Division 47)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide investment results that, before expenses correspond to the
total return (i.e. the combination of capital changes and income) of common
stocks publicly traded in the United States, as represented by the S&P 500
Index.
The S&P 500 Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the BT Pyramid Large Cap Equity Index Fund and it is managed in substantially
the same manner and by the same individuals as the BT Pyramid Large Cap Equity
Index Fund. The performance information for the Fund is for the BT Pyramid Large
Cap Equity Index Fund for the period April 1, 1988 through March 31, 1998. The
inception date for the BT Pyramid Large Cap Equity Index Fund was May 31, 1977.
Please refer to the prospectus for the Fund for further information regarding
the Fund's use of performance information for BT Pyramid Large Cap Equity Index
Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,698
03/31/90 13,660
03/31/91 15,654
03/31/92 17,218
03/31/93 19,664
03/31/94 19,616
03/31/95 22,478
03/31/96 29,455
03/31/97 34,980
03/31/98 51,335
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
43
<PAGE> 46
AMERICAN GENERAL SMALL CAP
GROWTH FUND
(Division 35)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth from a portfolio of small company growth
stocks.
The Small Cap Growth Fund commenced operations on . However, the
Fund's investment objective and policies and the Fund's strategies are
substantially similar to those employed by the subadviser and its affiliates
with respect to certain discretionary investment management accounts under their
management ("Combined Accounts"). The performance information for the Fund
reflects the historical performance for these Combined Accounts ("Combined
Accounts Composite"). The Combined Accounts Composite includes all non-mutual
fund discretionary accounts managed by the subadviser and its affiliates
invested solely in the equity securities of small capitalization companies using
the same investment strategy that the subadviser employs on behalf of the Fund.
The inception date of the discretionary accounts comprising the Combined
Accounts Composite range from September 1, 1994 to June 1, 1997. The
discretionary accounts in the Combined Accounts Composite are not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code. If the accounts included in the Combined Accounts
Composite had been subject to the requirements imposed on registered mutual
funds, their performances might have been lower. Please refer to the prospectus
for the Fund for further information regarding the Fund's use of performance
information for the Combined Accounts Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 1, 1994 $ Value
- ------------------------- -------
<S> <C>
09/01/94 $10,000
03/31/95 10,458
03/31/96 14,555
03/31/97 15,980
03/31/98 24,380
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 1, 1994
[CHART]
PERIOD ENDED MARCH 31
44
<PAGE> 47
AMERICAN GENERAL SMALL CAP
INDEX FUND
(Division 45)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to replicate as closely as possible (before deduction of expenses) the
total return of the Russell 2000 Index, an index consisting of 2,000 small-
capitalization common stocks. The portfolio will include the common stock of one
or more companies included in the Index on the basis of computer-generated
statistical data, that are deemed representative of the industry diversification
of the entire Russell 2000 Index.
The Small Cap Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the BT Pyramid Russell 2000 Index Fund and it is managed in substantially the
same manner and by the same individuals as BT Pyramid Russell 2000 Index Fund.
The performance information for the Fund is for BT Pyramid Russell 2000 Index
Fund for the period April 1, 1988 through March 31, 1998. The inception date for
BT Pyramid Russell 2000 Index Fund was October 31, 1987. Please refer to the
prospectus for the Fund for further information regarding the Fund's use of
performance information for BT Pyramid Russell 2000 Index Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,951
03/31/90 11,503
03/31/91 12,571
03/31/92 15,184
03/31/93 16,695
03/31/94 18,222
03/31/95 19,232
03/31/96 24,412
03/31/97 25,584
03/31/98 36,169
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
45
<PAGE> 48
AMERICAN GENERAL SMALL CAP
VALUE FUND
(Division 36)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks maximum long-term return, consistent with reasonable risk to principal by
investing primarily in common stocks of smaller companies in terms of revenues
and/or market capitalization.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
46
<PAGE> 49
AMERICAN GENERAL SOCIALLY
RESPONSIBLE FUND
(Division 41)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in common
stocks, in companies which meet the social criteria established for the Fund.
The Socially Responsible Fund commenced operations on . However,
the Fund's investment objectives, policies and strategies are substantially
similar to those of the American General Series Portfolio Company's Social
Awareness Fund ("AGSPC Social Awareness Fund") and it is managed in
substantially the same manner and by the same individuals as the AGSPC Social
Awareness Fund. The performance information for the Fund is for the AGSPC Social
Awareness Fund for the period October 2, 1989 through March 31, 1998. The
inception date for the AGSPC Social Awareness Fund was October 2, 1989. Please
refer to the prospectus for the Fund for further information regarding the
Fund's use of performance information for the AGSPC Social Awareness Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 2, 1989 $ Value
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 10,011
03/31/91 11,230
03/31/92 11,905
03/31/93 13,501
03/31/94 13,233
03/31/95 14,882
03/31/96 19,636
03/31/97 23,587
03/31/98 34,522
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
47
<PAGE> 50
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 or services which should enhance
prospects for growth in future earnings.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1990 $ Value
- ------------------------- --------
<S> <C>
08/31/90 $ 10,000
03/31/91 12,859
03/31/92 30,754
03/31/93 49,615
03/31/94 74,397
03/31/95 82,470
03/31/96 104,542
03/31/97 106,926
03/31/98 146,524
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,154
03/31/90 13,300
03/31/91 14,811
03/31/92 17,452
03/31/93 20,212
03/31/94 23,598
03/31/95 24,649
03/31/96 34,670
03/31/97 37,983
03/31/98 53,736
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
48
<PAGE> 51
NEUBERGER&BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of long-established, high quality companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,845
03/31/90 12,819
03/31/91 14,698
03/31/92 17,081
03/31/93 20,536
03/31/94 21,618
03/31/95 24,307
03/31/96 30,002
03/31/97 33,913
03/31/98 44,788
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,759
03/31/90 12,233
03/31/91 12,820
03/31/92 13,194
03/31/93 14,335
03/31/94 16,918
03/31/95 16,792
03/31/96 20,619
03/31/97 22,709
03/31/98 29,021
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* Neuberger&Berman Guardian Trust ("Trust") started operating on August 3,
1993. It has identical investment objectives and policies and invests in the
same portfolio as Neuberger&Berman Guardian Fund(SM) ("Fund"), which is also
managed by Neuberger&Berman Management Incorporated ("N&B Management"). The
performance information for the Trust before August 3, 1993 is for the Fund.
N&B Management voluntarily bears certain operating 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 per annum. This arrangement can be terminated on sixty days' prior
written notice. Absent such arrangement, the average annual total returns of
the Trust would have been less. The total returns for the periods prior to
the Trust's commencement of operations would have been lower had they
reflected the higher expense ratios of the Trust as compared to those of the
Fund.
49
<PAGE> 52
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
- ------------------------- -------
<S> <C>
08/31/90 $10,000
03/31/91 13,862
03/31/92 18,904
03/31/93 22,594
03/31/94 28,587
03/31/95 33,533
03/31/96 47,909
03/31/97 44,535
03/31/98 67,828
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,903
03/31/90 12,599
03/31/91 14,156
03/31/92 15,805
03/31/93 17,933
03/31/94 22,062
03/31/95 25,845
03/31/96 38,746
03/31/97 31,656
03/31/98 47,693
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
50
<PAGE> 53
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,359
03/31/90 12,433
03/31/91 14,056
03/31/92 16,080
03/31/93 18,388
03/31/94 19,199
03/31/95 21,403
03/31/96 27,657
03/31/97 32,398
03/31/98 45,783
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
T. ROWE PRICE SMALL-CAP STOCK FUND
(Division 51)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth through investments in securities of small to
medium-sized companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1992 $ Value
- ------------------------- -------
<S> <C>
08/31/92 $10,000
03/31/93 14,010
03/31/94 13,085
03/31/95 14,010
03/31/96 18,476
03/31/97 20,350
03/31/98 29,148
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1992
[CHART]
PERIOD ENDED MARCH 31
51
<PAGE> 54
TEMPLETON FOREIGN FUND
Class 1 Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. Any income realized will be incidental. The Fund
tries to achieve its goal by a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United States.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,654
03/31/90 14,484
03/31/91 14,722
03/31/92 16,169
03/31/93 17,148
03/31/94 21,458
03/31/95 21,427
03/31/96 24,577
03/31/97 28,360
03/31/98 32,043
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 24, 1988 $ Value
- ------------------------- -------
<S> <C>
08/24/88 $10,000
03/31/89 10,473
03/31/90 11,309
03/31/91 11,427
03/31/92 13,165
03/31/93 14,783
03/31/94 16,789
03/31/95 17,115
03/31/96 21,046
03/31/97 24,554
03/31/98 30,153
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 24, 1988
[CHART]
PERIOD ENDED MARCH 31
52
<PAGE> 55
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 would be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
03/31/93 9,926
03/31/94 13,021
03/31/95 12,859
03/31/96 15,605
03/31/97 18,880
03/31/98 23,778
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED MARCH 31
VANGUARD LIFESTRATEGY
CONSERVATIVE GROWTH PORTFOLIO
(Division 54)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of income and moderate long-term growth of capital and
income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,553
03/31/96 12,387
03/31/97 13,351
03/31/98 16,380
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
53
<PAGE> 56
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
CORPORATE PORTFOLIO
Institutional Class Shares
(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 bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,527
03/31/90 11,576
03/31/91 12,933
03/31/92 14,600
03/31/93 17,085
03/31/94 17,450
03/31/95 18,081
03/31/96 20,234
03/31/97 20,604
03/31/98 23,974
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
U.S. TREASURY PORTFOLIO
Institutional Class Shares
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high level of current income consistent with the maintenance of principal
and liquidity. The Portfolio invests primarily in long-term U.S. Treasury
securities backed by the full faith and credit of the U.S. Government. 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,538
03/31/90 11,610
03/31/91 12,916
03/31/92 14,166
03/31/93 16,590
03/31/94 16,985
03/31/95 17,543
03/31/96 19,775
03/31/97 19,948
03/31/98 23,428
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
54
<PAGE> 57
VANGUARD LIFESTRATEGY
GROWTH PORTFOLIO
(Division 52)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital and income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,682
03/31/96 13,217
03/31/97 14,558
03/31/98 19,541
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
VANGUARD LIFESTRATEGY
MODERATE GROWTH PORTFOLIO
(Division 53)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a reasonable level of income and long-term growth of capital and income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,582
03/31/96 12,814
03/31/97 13,953
03/31/98 17,967
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
55
<PAGE> 58
VANGUARD/WELLINGTON FUND
Institutional Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,378
03/31/90 12,437
03/31/91 13,525
03/31/92 14,852
03/31/93 16,927
03/31/94 17,342
03/31/95 19,214
03/31/96 24,039
03/31/97 26,823
03/31/98 35,014
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
VANGUARD/WINDSOR II
Institutional Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 12,356
03/31/90 13,625
03/31/91 14,942
03/31/92 16,131
03/31/93 19,006
03/31/94 19,099
03/31/95 21,440
03/31/96 28,587
03/31/97 33,321
03/31/98 48,349
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
56
<PAGE> 59
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 Plus 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 Plus 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 is accompanied by 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 establish a
permanent account for you. Under those 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 Plus.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
57
<PAGE> 60
- --------------------------------------------------------------------------------
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 52 investment options offered in Portfolio Director Plus. This
includes 2 Fixed Account Options and 50 Variable Account 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 Plus 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 as permitted by your retirement
program. 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 Plus 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.
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.
58
<PAGE> 61
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 Plus 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
Plus'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
Plus'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.
59
<PAGE> 62
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director Plus, you may be subject to six basic types
of fees and charges:
- - Account Maintenance Fee
- - Surrender Charge
- - 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 Plus 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, Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee 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 CHARGE
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 CHARGE
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 CHARGE
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.
60
<PAGE> 63
- --------------------------------------------------------------------------------
- - 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; or
- - 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 charge may be reduced or waived if Portfolio Director Plus 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 a surrender charge may be reduced
or waived, see the "Reduction or Waiver of Account Maintenance Fee, Surrender,
Mortality and Expense Risk Fee or Administration and Distribution Fee 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 fee and an administration and
distribution fee applied to VALIC Separate Account A. This is a daily charge at
an annualized rate of 0.75% 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 fee is to compensate the Company for assuming
mortality and expense risks under Portfolio Director Plus. 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
Plus, no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk fee and on the
administration and distribution fee.
The administration and distribution fee is to reimburse the Company for our
administrative expenses for providing Variable Account Options. This includes
the expense of administration and marketing (including but not limited to
enrollment, participant communication and education).
For more information about the mortality and expense risk fee and administration
and distribution fee, see the Fee Table in this prospectus.
The mortality and expense risk fee or administration and distribution fee may be
reduced or waived if issued to certain types of plans that are expected to
result in lower costs to VALIC. To learn more about how we determine if the
mortality and expense risk fee or administration and distribution fee may be
reduced or waived, see the "Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or Administration and Distribution Fee
Charges" section of this prospectus.
FUND ANNUAL EXPENSE CHARGES
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.
61
<PAGE> 64
- --------------------------------------------------------------------------------
REDUCTION OR WAIVER OF ACCOUNT
MAINTENANCE FEE, SURRENDER,
MORTALITY AND EXPENSE RISK FEE OR ADMINISTRATION AND DISTRIBUTION FEE CHARGES
We may, as described below, determine that the account maintenance fee,
surrender charges, mortality and expense risk fee or administration and
distribution fee for Portfolio Director Plus 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:
- 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.
- Other factors of which we are not presently aware which could reduce
administrative costs.
We review the following additional factors to determine whether we can reduce
or waive account maintenance fees:
- 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.
We review the following additional factors to determine whether we can reduce or
waive surrender charges:
- 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 use of mass enrollment or related administrative tasks performed by your
employer for your retirement program.
We review the following additional factors to determine whether we can reduce
or waive the mortality and expense risk fee or administration and distribution
fee:
- The frequency of Purchase Payments for your retirement program.
- The size of your retirement program.
- The amount of your retirement program's periodic purchase payment.
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. In addition, the Company currently reimburses certain Divisions a
portion of the Company's administration and distribution fee. Such
reimbursement arrangements are voluntary. See the Fee Table in this prospectus
for an identification of those Funds for which a reimbursement applies.
62
<PAGE> 65
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 from your existing 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:
- From your existing Variable Account Options (payments will vary); with
- Up to 2 Fixed Account Options (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).
63
<PAGE> 66
- --------------------------------------------------------------------------------
- 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. 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.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
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<PAGE> 67
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>
<S> <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
Generally, Internal Revenue Code Section 403(b)(11) permits total or partial
distributions from a 403(b) contract only on account of hardship (employee
contributions only without accrued interest), attainment of age 59 1/2,
separation from service, death or disability.
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>
<S> <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 Plus. 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
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<PAGE> 68
- --------------------------------------------------------------------------------
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.
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 Plus 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 and in the Statement of Additional
Information.
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<PAGE> 69
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director Plus. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director Plus. This exchange privilege will be available
only to other contracts purchased through your employer-sponsored retirement
plan and 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 Plus 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 Plus. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director Plus. 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 Plus.
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 Plus.
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 Plus 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 Plus 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
Plus.)
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 Plus 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 Plus 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 PLUS
The following other contracts may be exchanged.
- Portfolio Director and Portfolio Director 2 Contracts
- 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
67
<PAGE> 70
- --------------------------------------------------------------------------------
Portfolio Director Plus will have the same Account Value (called Accumulation
Value in the other contracts) as the other contracts.
COMPARISON OF PORTFOLIO DIRECTOR AND
PORTFOLIO DIRECTOR 2 CONTRACTS TO PORTFOLIO
DIRECTOR PLUS CONTRACTS
Portfolio Director, Portfolio Director 2 and Portfolio Director Plus contain the
same provisions except as to the level of fees and as to available Variable
Account Options and certain separate Account Expense Reimbursements. Portfolio
Director, Portfolio Director 2 and Portfolio Director Plus are available to
qualified contracts and certain non-qualified contracts. Portfolio Director 2 is
not available to non-qualified contracts issued to individuals.
COMPARISON OF OTHER CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director Plus. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director Plus 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 PLUS
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director Plus.
- Portfolio Director Plus has more investment options to select from.
- Portfolio Director Plus has 16 publicly available mutual funds as investment
options.
- The Portfolio Director Plus 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 Plus has an Interest Guaranteed Death Benefit.
- Portfolio Director Plus's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Different series of Portfolio Director Plus may charge fees higher or lower
than other series of Portfolio Director Plus.
- Portfolio Director Plus'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,
Portfolio Director Contracts and Portfolio Director 2 Contracts for the
equivalent units of interest in Portfolio Director Plus.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director Plus any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director Plus from SA-1,
Independence Plus, Portfolio Director or Portfolio Director 2 Contracts may have
surrender charges and account maintenance fees imposed under Portfolio Director
Plus. 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
68
<PAGE> 71
- --------------------------------------------------------------------------------
their purchase payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract, Portfolio Director
Contract or Portfolio Director 2 Contract.
- Leave current assets in the SA-1 Contract, Independence Plus Contract,
Portfolio Director Contract or Portfolio Director 2 Contract and direct
future Purchase Payments to Portfolio Director Plus; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director Plus.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus Contract or Portfolio Director Contract or Portfolio Director 2 Contract,
future Purchase Payments and current assets will be controlled by the provisions
of the SA-1 Contract, Independence Plus Contract, Portfolio Director Contract,
or Portfolio Director 2 Contract, respectively. If the participant chooses to
leave current assets in the SA-1 Contract, the Independence Plus Contract,
Portfolio Director Contract, Portfolio Director 2 Contract and direct future
Purchase Payments to Portfolio Director Plus, the current assets will be
controlled by the provisions of the SA-1 Contract, the Independence Plus
Contract Portfolio Director Contract or Portfolio Director 2 Contract,
respectively. The future Purchase Payments will be controlled by the terms of
Portfolio Director Plus subject to the exception that surrender charges and
account maintenance fees will not be imposed under Portfolio Director Plus. If
the participant chooses to transfer all current assets and future Purchase
Payments to Portfolio Director Plus, such current assets and future Purchase
Payments will be controlled by the provisions of Portfolio Director Plus subject
to the exception that surrender charges and account maintenance fees will not be
imposed under Portfolio Director Plus.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director Plus the participant will not be permitted to exchange back to the SA-1
Contract, Independence Plus Contract, Portfolio Director Contract or Portfolio
Director 2 Contract. If a participant chooses to transfer future Purchase
Payments but not current assets to Portfolio Director Plus, the participant will
be allowed at a later date to transfer the current assets to Portfolio Director
Plus. For a complete analysis of the differences between the SA-1 contract, the
Independence Plus Contract or Portfolio Director Contract, Portfolio Director 2
Contract and Portfolio Director Plus, 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> 72
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director Plus 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 Plus 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 Plus.
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.
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 Plus 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 Plus. 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> 73
- --------------------------------------------------------------------------------
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 Plus 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.
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<PAGE> 74
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 Plus was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
addition, because other Funds began operations on , 1998, no actual
performance history exists. The returns shown in the tables for those Funds
reflect the performance of comparable funds managed by the subadvisers for the
Funds. In each case, we will use the charges and fees imposed by Portfolio
Director Plus in calculating the Division's investment performance.
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 Plus 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 Plus 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 Plus. 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 Plus.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
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<PAGE> 75
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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 Plus charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual values 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.
AGSPC Money Market and American General Money Market Divisions
We may advertise the AGSPC Money Market and American General Money Market
Divisions' Current Yield and Effective Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market or American General Money Market Divisions 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. For the
AGSPC Money Market Division the 7-day Current Yield for the last 7 days ended
March 31, 1998 was 4.15%.
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. For the AGSPC Money Market Division the 7-day Effective Yield for the
last 7 days ended March 31, 1998 was 4.24%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET
DIVISIONS
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market and American General Money Market Divisions. 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.
COMPARABLE FUND PERFORMANCE DATA
The performance data shown in Tables III, VI and IX for the American General
Fund Divisions listed in those tables are based on the performance data of
comparable funds and composites of comparable funds (each a "Comparable Fund").
Each Fund listed in Tables III, VI and IX is modelled after a Comparable Fund
and will be managed in substantially the same manner and by the same personnel
as its Comparable Fund. Fees and expenses of the American General Funds listed
in Tables III, VI and IX may differ from the fees and expenses historically
incurred by the Comparable Funds. Please see the prospectus for each Fund for
further details.
THE PERFORMANCE INFORMATION IN TABLES III, VI AND IX IS BASED ON FUNDS AND ON
COMPOSITES COMPARABLE TO THE AMERICAN GENERAL FUNDS LISTED IN THOSE TABLES, AND
DOES NOT REFLECT THE ACTUAL PERFORMANCE OF THE AMERICAN GENERAL FUNDS LISTED IN
TABLES III, VI AND IX.
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 eleven tables below.
The information presented does not reflect the advantage under Portfolio
Director Plus 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> 76
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)..... 09/06/83 -- 10.14% 12.00% 18.12% 25.06%
AGSPC Capital Conservation Fund (Division 7).... 01/16/86 -- 6.50 4.30 6.17 5.38
AGSPC Government Securities Fund (Division 8)... 01/16/86 -- 6.55 3.99 5.62 5.35
AGSPC Growth (Division 15)...................... 04/29/94 24.56% -- -- 28.04 41.57
AGSPC Growth & Income Fund (Division 16)........ 04/29/94 19.82 -- -- 23.54 30.65
AGSPC International Equities Fund (Division
11)........................................... 10/02/89 4.02 -- 9.83 8.30 12.38
AGSPC International Government Bond (Division
13)........................................... 10/01/91 6.31 -- 4.00 (1.10) (3.99)
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98.............. 10/13/82 -- 12.88 17.27 25.58 41.97
Period from 10/01/91 to 03/31/98.............. 17.35 -- 17.27 25.58 41.97
AGSPC Money Market (Division 6)................. 01/16/86 -- 4.35 2.59 2.55 (0.55)
AGSPC Science & Technology (Division 17)........ 04/29/94 27.02 -- -- 22.64 28.90
AGSPC Small Cap Index Fund (Division 14)........ 05/01/92 15.65 -- 15.07 21.80 35.13
AGSPC Social Awareness (Division 12)............ 10/02/89 15.37 -- 19.86 31.01 40.91
AGSPC Stock Index (Division 10)................. 04/20/87 -- 16.82 20.21 30.18 41.07
American Century -- Twentieth Century Ultra
(Division 31)................................. 07/01/96 21.81 -- -- -- 39.35
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)..... 07/11/94 18.87 -- -- 19.90 31.96
Founders Growth (Division 30)................... 07/01/96 21.50 -- -- -- 36.39
Neuberger&Berman Guardian Trust (Division
29)(1)........................................ 07/01/96 22.75 -- -- -- 26.99
Putnam Global Growth (Division 28).............. 07/01/96 16.78 -- -- -- 22.73
Putnam New Opportunities (Division 26).......... 07/01/96 14.62 -- -- -- 47.22
Putnam OTC & Emerging Growth (Division 27)...... 07/01/96 4.32 -- -- -- 45.57
Scudder Growth and Income (Division 21)(2)...... 07/01/96 29.22 -- -- -- 36.23
Templeton Foreign (Division 32)................. 07/01/96 11.17 -- -- -- 7.92
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1
(Division 19).............................. 07/11/94 16.11 -- -- 19.56 17.73
Templeton International Fund: Class 1
(Division 20).............................. 07/11/94 16.47 -- -- 21.56 20.87
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division
22)**......................................... 07/01/96 7.60 -- -- -- 11.29
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division
23)**......................................... 07/01/96 7.72 -- -- -- 12.38
Vanguard/Wellington (Division 25)............... 07/01/96 20.65 -- -- -- 25.47
Vanguard/Windsor II (Division 24)............... 07/01/96 30.60 -- -- -- 40.02
</TABLE>
- ---------------
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
(1) Neuberger&Berman Guardian Trust ("Trust") started operating on August 3,
1993. It has identical investment objectives and policies and invests in the
same portfolio as Neuberger&Berman Guardian Fund ("Fund"), which is also
managed by Neuberger&Berman Management Incorporated ("N&B Management"). The
performance information for the Trust before August 3, 1993 is for the Fund.
N&B Management voluntarily bears certain operating 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 per annum. This arrangement can be terminated on sixty days' prior
written notice. Absent such arrangement, the average annual total returns of
the Trust would have been less. The total returns for periods prior to the
Trust's commencement of operations would have been lower had they reflected
the higher expense ratios of the Trust as compared to those of the Fund.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
(3) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(4) The AGSPC 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 reflects
investment experience prior to these changes.
74
<PAGE> 77
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
American Century-Twentieth Century Ultra (Division
31).................................................. 11/02/81 -- 21.12% 19.44% 26.27% 39.35%
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)............ 08/31/90 42.42% -- 23.69 19.90 31.96
Founders Growth (Division 30).......................... 01/05/62 -- 18.25 21.07 28.59 36.39
Neuberger&Berman Guardian Trust (Division 29)(1)....... 06/01/50 -- 16.11 16.27 21.41 26.99
Putnam Global Growth (Division 28)..................... 09/01/67 -- 11.18 14.51 18.77 22.73
Putnam New Opportunities (Division 26)................. 08/31/90 28.66 -- 24.10 25.35 47.22
Putnam OTC & Emerging Growth (Division 27)............. 11/01/82 -- 16.84 21.08 21.47 45.57
Scudder Growth and Income (Division 21)................ 11/13/84 -- 16.37 19.46 27.76 36.23
T. Rowe Price Small-Cap Stock (Division 51)(5)......... 08/31/92 21.04 -- 18.37 26.50 38.08
Templeton Foreign (Division 32)........................ 10/05/82 -- 12.29 12.64 13.00 7.92
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division
19)............................................... 08/24/88 12.12 -- 14.69 19.56 17.73
Templeton International Fund: Class 1 (Division
20)............................................... 05/01/92 15.69 -- 18.52 21.56 20.87
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)........................................ 09/30/94 14.06 -- -- 14.44 17.59
Vanguard Fixed Income Securities Fund-
Long-Term Corporate Portfolio (Division 22)**........ 07/09/73 -- 9.08 6.18 8.40 11.29
Vanguard Fixed Income Securities Fund-
Long-Term U.S. Treasury Portfolio (Division 23)**.... 05/19/86 -- 8.83 6.32 8.67 12.38
Vanguard LifeStrategy Growth Portfolio (Division 52)... 09/30/94 20.13 -- -- 21.08 29.12
Vanguard LifeStrategy Moderate Growth Portfolio
(Division 53)........................................ 09/30/94 17.20 -- -- 18.03 23.67
Vanguard/Wellington (Division 25)...................... 07/01/29 -- 13.29 15.02 20.95 25.47
Vanguard/Windsor II (Division 24)...................... 06/24/85 -- 17.00 19.99 30.09 40.02
</TABLE>
- ---------------
* The Table reflects actual historical performance of the related Separate
Account Divisions 21-32 since inception of each Division (July 1, 1996) and
hypothetical performance for periods prior to July 1, 1996. With respect to
Separate Account Divisions 18-20, the Table reflects hypothetical
performance for periods prior to July 11, 1994 (inception date of each
Division). Hypothetical performance is based on the actual performance of
the underlying Fund reduced by Separate Account fees that would have been
incurred during the hypothetical period.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
(5) T. Rowe Price Small-Cap Stock Fund commenced operations on June 1, 1956. The
performance figures in the Table are for the period that T. Rowe Price
Associates, Inc. assumed management of the Fund on August 31, 1992.
75
<PAGE> 78
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 12.38% 12.87% 19.48% 24.01%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 7.46 4.00 6.11 5.16
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 10.18% -- -- 12.39 5.65
Period from 10/01/95 to 03/31/98.......................... 19.43 -- -- -- 14.39
American General International Value Fund (Division 34)..... -- 10.12 12.15 15.32 16.73
American General Large Cap Growth Fund (Division 39)........ 19.87 -- 23.87 29.97 22.43
American General Large Cap Value Fund (Division 40)......... 22.45 -- 20.99 34.29 51.85
American General Mid Cap Growth Fund (Division 37).......... 16.92 -- 17.98 24.20 36.82
American General Mid Cap Index Fund (Division 46)
Period from 04/01/88 to 03/31/98.......................... -- 13.48 16.97 25.84 42.47
Period from 10/01/91 to 03/31/98.......................... 17.61 -- 16.97 25.84 42.47
American General Mid Cap Value Fund (Division 38)........... -- 19.97 19.19 28.98 35.32
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund (Division 44)............ -- 4.57 2.81 2.77 (0.65)
American General S&P 500 Index Fund (Division 47)........... -- 17.72 20.32 30.56 41.58
American General Small Cap Growth Fund (Division 35)........ 28.25 -- -- 32.13 47.56
American General Small Cap Index Fund (Division 45)......... -- 13.66 16.07 17.76 36.21
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 15.40 -- 19.65 31.28 41.19
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no
actual performance history for such Funds exists. The performance data shown
in the above Table is based on the performance data of Comparable Funds
reduced by Separate Account Fees that would have been incurred during the
applicable period. For a description of the methodology used in determining
Comparable Fund performance for each Fund, please see the "Summary of Funds"
is this prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
76
<PAGE> 79
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5).................... 09/06/83 -- 10.21% 12.69% 19.37% 30.13%
AGSPC Capital Conservation Fund (Division 7)................ 01/16/86 -- 6.56 5.19 7.69 10.40
AGSPC Government Securities Fund (Division 8)............... 01/16/86 -- 6.61 4.89 7.15 10.37
AGSPC Growth (Division 15).................................. 04/29/94 25.30% -- -- 29.12 46.65
AGSPC Growth & Income Fund (Division 16).................... 04/29/94 20.64 -- -- 24.69 35.72
AGSPC International Equities Fund (Division 11)............. 10/02/89 4.08 -- 10.57 9.77 17.45
AGSPC International Government Bond (Division 13)........... 10/01/91 6.37 -- 4.90 0.49 0.59
AGSPC MidCap Index Fund (Division 4)
Period from 04/01/88 to 03/31/98.......................... 10/13/82 -- 12.99 17.86 26.70 47.05
Period from 10/01/91 to 03/31/98.......................... 17.41 -- 17.86 26.70 47.05
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.41 3.53 4.17 4.20
AGSPC Science & Technology (Division 17).................... 04/29/94 27.73 -- -- 23.81 33.98
AGSPC Small Cap Index Fund (Division 14).................... 05/01/92 15.72 -- 15.69 22.98 40.20
AGSPC Social Awareness (Division 12)........................ 10/02/89 15.43 -- 20.41 32.05 45.99
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.88 20.75 31.23 46.15
American Century -- Twentieth Century Ultra (Division
31)....................................................... 07/01/96 24.33 -- -- -- 44.43
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio (Division 18)................. 07/11/94 19.77 -- -- 21.12 37.03
Founders Growth (Division 30)............................... 07/01/96 24.02 -- -- -- 41.47
Neuberger&Berman Guardian Trust (Division 29)(1)............ 07/01/96 25.25 -- -- -- 32.07
Putnam Global Growth (Division 28).......................... 07/01/96 19.37 -- -- -- 27.80
Putnam New Opportunities (Division 26)...................... 07/01/96 17.24 -- -- -- 52.30
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 7.12 -- -- -- 50.66
Scudder Growth and Income (Division 21)..................... 07/01/96 31.63 -- -- -- 41.31
Templeton Foreign (Division 32)............................. 07/01/96 13.85 -- -- -- 12.99
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund: Class 1 (Division 19).... 07/11/94 17.06 -- -- 20.78 22.80
Templeton International Fund: Class 1 (Division 20)....... 07/11/94 17.41 -- -- 22.74 25.95
Vanguard Fixed Income Securities Fund Long-Term Corporate
Portfolio (Division 22)**................................. 07/01/96 10.34 -- -- -- 16.36
Vanguard Fixed Income Securities Fund Long-Term U.S.
Treasury Portfolio (Division 23)**........................ 07/01/96 10.46 -- -- -- 17.45
Vanguard/Wellington (Division 25)........................... 07/01/96 23.18 -- -- -- 30.54
Vanguard/Windsor II (Division 24)........................... 07/01/96 33.00 -- -- -- 45.10
</TABLE>
- ---------------
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
77
<PAGE> 80
TABLE V
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
American Century -- Twentieth Century Ultra (Division 31)... 11/02/81 -- 21.18% 19.99% 27.38% 44.43%
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)................. 08/31/90 42.50% -- 24.18 21.12 37.03
Founders Growth (Division 30)............................... 01/05/62 -- 18.31 21.60 29.66 41.47
Neuberger&Berman Guardian Trust (Division 29)(1)............ 06/01/50 -- 16.18 16.88 22.60 32.07
Putnam Global Growth (Division 28).......................... 09/01/67 -- 11.24 15.15 20.01 27.80
Putnam New Opportunities (Division 26)...................... 08/31/90 28.73 -- 24.59 26.47 52.30
Putnam OTC & Emerging Growth (Division 27).................. 11/01/82 -- 16.91 21.61 22.66 50.66
Scudder Growth and Income (Division 21)..................... 11/13/84 -- 16.43 20.01 28.85 41.31
T. Rowe Price Small-Cap Stock (Division 51)(5).............. 06/01/56 21.11 -- 18.95 27.63 43.24
Templeton Foreign (Division 32)............................. 10/05/82 -- 12.35 13.32 14.36 12.99
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division 19).... 08/24/88 12.18 -- 15.32% 20.78 22.80
Templeton International Fund: Class 1 (Division 20)....... 05/01/92 15.76 -- 19.09 22.74 25.94
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)............................................. 09/30/94 15.14 -- -- 15.77 22.68
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/09/73 -- 9.14 7.01 9.86 16.36
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 05/19/86 -- 8.89 7.15 10.12 17.44
Vanguard LifeStrategy Growth Portfolio (Division 52)........ 09/30/94 21.10 -- -- 22.28 34.23
Vanguard LifeStrategy Moderate Growth Portfolio (Division
53)....................................................... 09/30/94 18.22 -- -- 19.28 28.77
Vanguard/Wellington (Division 25)........................... 07/01/29 -- 13.35 15.65 22.14 30.54
Vanguard/Windsor II (Division 24)........................... 06/24/85 -- 17.07 20.53 31.14 45.10
</TABLE>
- ---------------
* The Table reflects actual historical performance of the related Separate
Account Divisions (21-32) since inception of each Division (July 1, 1996)
and hypothetical performance for periods prior to July 1, 1996. With respect
to Separate Account Divisions 18-20, the Table reflects hypothetical
performance for periods prior to July 11, 1994 (inception date of each
Division). Hypothetical performance is based on the actual performance of
the underlying Fund reduced by Separate Account fees that would have been
incurred during the hypothetical period.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
78
<PAGE> 81
TABLE VI
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 12.44% 13.58% 20.75% 29.17%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 7.52 4.94 7.66 10.28
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 11.50% -- -- 13.75 10.73
Period from 10/01/95 to 03/31/98.......................... 21.02 -- -- -- 18.13
American General International Value Fund (Division 34)..... -- 10.19 14.46 16.66 21.88
American General Large Cap Growth Fund (Division 39)........ 19.94 -- 24.36 31.05 27.60
American General Large Cap Value Fund (Division 40)......... 22.52 -- 21.53 35.30 57.02
American General Mid Cap Growth Fund (Division 37).......... 16.98 -- 18.56 25.35 41.95
American General Mid Cap Index Fund (Division 46)
Period from 04/01/88 to 03/31/98.......................... -- 13.55 17.58 26.99 47.43
Period from 10/01/91 to 03/31/98.......................... 17.68 -- 17.58 26.99 47.43
American General Mid Cap Value Fund (Division 38)........... -- 15.49 19.78 30.09 40.49
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund (Division 44)............ -- 4.63 3.76 4.40 4.44
American General S&P 500 Index Fund (Division 47)........... -- 17.78 20.91 31.66 46.76
American General Small Cap Growth Fund (Division 35)........ 29.56 -- -- 32.56 52.56
American General Small Cap Index Fund (Division 45)......... -- 13.72 16.72 23.43 41.37
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 15.70 -- 20.23 32.34 46.36
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no
actual performance history for such Funds exists. The performance data shown
in the above Table is based on the performance data of Comparable Funds
reduced by Separate Account Fees that would have been incurred during the
applicable period. For a description of the methodology used in determining
Comparable Fund performance for each Fund, please see the "Summary of Funds"
in this prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
79
<PAGE> 82
TABLE VII
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5).................... 09/06/83 -- 164.25% 81.71% 70.08% 30.13%
AGSPC Capital Conservation Fund (Division 7)................ 01/16/86 -- 88.85 28.81 24.89 10.40
AGSPC Government Securities Fund (Division 8)............... 01/16/86 -- 89.59 26.99 23.03 10.37
AGSPC Growth (Division 15).................................. 04/29/94 142.07% -- -- 115.25 46.65
AGSPC Growth & Income Fund (Division 16).................... 04/29/94 108.64 -- -- 93.86 35.72
AGSPC International Equities Fund (Division 11)............. 10/02/89 40.40 -- 65.29 32.25 17.45
AGSPC International Government Bond (Division 13)........... 10/01/91 49.37 -- 27.00 1.47 0.59
AGSPC MidCap Index Fund (Division 4)
Period from 04/01/88 to 03/31/98.......................... 10/13/82 -- 239.22 127.44 103.41 47.05
Period from 10/01/91 to 03/31/98.......................... 183.86 -- 127.44 103.41 47.05
AGSPC Money Market (Division 6)............................. 01/16/86 -- 53.97 18.94 13.03 4.20
AGSPC Science & Technology (Division 17).................... 04/29/94 160.99 -- -- 89.77 33.98
AGSPC Small Cap Index Fund (Division 14).................... 05/01/92 137.31 -- 107.29 85.99 40.20
AGSPC Social Awareness (Division 12)........................ 10/02/89 238.18 -- 153.11 130.24 45.99
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 375.82 156.69 126.00 46.15
American Century -- Twentieth Century Ultra (Division 31)... 07/01/96 46.38 -- -- -- 44.43
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)................. 07/11/94 95.84 -- -- 77.67 37.03
Founders Growth (Division 30)............................... 07/01/96 45.75 -- -- -- 41.47
Neuberger&Berman Guardian Trust (Division 29)(1)............ 07/01/96 48.30 -- -- -- 32.07
Putnam Global Growth (Division 28).......................... 07/01/96 36.33 -- -- -- 27.80
Putnam New Opportunities (Division 26)...................... 07/01/96 32.09 -- -- -- 52.30
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 12.79 -- -- -- 50.66
Scudder Growth and Income (Division 21)..................... 07/01/96 61.77 -- -- -- 41.31
Templeton Foreign (Division 32)............................. 07/01/96 25.47 -- -- -- 12.99
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division 19).... 07/11/94 79.66 -- -- 76.18 22.80
Templeton International Fund: Class 1 (Division 20)....... 07/11/94 81.71 -- -- 84.92 25.95
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/01/96 18.80 -- -- -- 16.36
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 07/01/96 19.01 -- -- -- 17.45
Vanguard/Wellington (Division 25)........................... 07/01/96 44.03 -- -- -- 30.54
Vanguard/Windsor II (Division 24)........................... 07/01/96 64.72 -- -- -- 45.10
</TABLE>
- ---------------
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
80
<PAGE> 83
TABLE VIII
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
American Century -- Twentieth Century Ultra (Division 31)... 11/02/81 -- 583.05% 148.78% 106.66% 44.43%
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio (Division 18)................. 08/31/90 1,365.24% -- 195.32 77.67 37.03
Founders Growth (Division 30)............................... 01/05/62 -- 437.36 165.86 118.00 41.47
Neuberger&Berman Guardian Trust (Division 29)(1)............ 06/01/50 -- 347.88 118.09 84.26 32.07
Putnam Global Growth (Division 28).......................... 09/01/67 -- 190.21 102.46 72.83 27.80
Putnam New Opportunities (Division 26)...................... 08/31/90 578.28 -- 200.20 102.28 52.30
Putnam OTC & Emerging Growth (Division 27).................. 11/01/82 -- 376.93 165.94 84.54 50.66
Scudder Growth and Income (Division 21)..................... 11/13/84 -- 357.83 148.98 113.91 41.31
T. Rowe Price Small-Cap Stock (Division 51)................. 06/01/56 191.48 -- 138.28 108.04 43.24
Templeton Foreign (Division 32)............................. 10/05/82 -- 220.43 86.86 49.54 12.99
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund: Class 1 (Division 19).... 08/24/88 201.53 -- 103.97 76.18 22.80
Templeton International Fund: Class 1 (Division 20)....... 05/01/92 137.78 -- 139.57 84.92 25.95
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)............................................. 09/30/94 63.80 -- -- 55.22 22.68
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/09/73 -- 139.74 40.32 32.59 16.36
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 05/19/86 -- 134.28 41.22 33.54 17.45
Vanguard LifeStrategy Growth Portfolio (Division 52)........ 09/30/94 95.41 -- -- 82.93 34.23
Vanguard LifeStrategy Moderate Growth Portfolio (Division
53)....................................................... 09/30/94 79.67 -- -- 69.78 28.77
Vanguard/Wellington (Division 25)........................... 07/01/29 -- 250.14 106.85 82.23 30.54
Vanguard/Windsor II (Division 24)........................... 06/24/85 -- 383.49 154.38 125.51 45.10
</TABLE>
- ---------------
* The Table reflects actual historical performance of the related Separate
Account Divisions (21-32) since inception of each Division (July 1, 1996)
and hypothetical performance for periods prior to July 1, 1996. With respect
to Separate Account Divisions 18-20, the Table reflects hypothetical
performance for periods prior to July 11, 1994 (inception date of each
Division). Hypothetical performance is based on the actual performance of
the underlying Fund reduced by Separate Account fees that would have been
incurred during the hypothetical period.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
81
<PAGE> 84
TABLE IX
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 222.87% 89.09% 76.17% 29.17%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 106.49 27.27 24.82 10.28
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 41.14% -- -- 47.19 10.73
Period from 10/01/95 to 03/31/98.......................... 61.08 -- -- -- 18.13
American General International Value Fund (Division 34)..... -- 163.66 96.50 58.85 21.88
American General Large Cap Growth Fund (Division 39)........ 216.63 -- 199.22 125.23 27.60
American General Large Cap Value Fund (Division 40)......... 216.22 -- 165.24 147.89 57.02
American General Mid Cap Growth Fund (Division 37).......... 127.80 -- 134.36 97.08 41.95
American General Mid Cap Index Fund(Division 46)
Period from 04/01/88 to 03/31/98.......................... -- 256.04 124.85 104.90 47.43
Period from 10/01/91 to 03/31/98.......................... 188.15 -- 124.85 104.90 47.43
American General Mid Cap Value Fund (Division 38)........... -- 321.93 146.79 120.32 40.49
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund(Division 44)............. -- 57.15 20.30 13.80 4.44
American General S&P 500 Index Fund (Division 47)........... -- 413.35 158.56 128.38 46.76
American General Small Cap Growth Fund (Division 35)........ 143.80 -- -- 133.13 52.56
American General Small Cap Index Fund (Division 45)......... -- 261.69 116.64 88.07 41.37
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 245.22 -- 151.31 131.97 46.36
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no
actual performance history for such Funds exists. The performance data shown
in the above Table is based on the performance data of Comparable Funds
reduced by Separate Account Fees that would have been incurred during the
applicable period. For a description of the methodology used in determining
Comparable Fund performance for each Fund, please see the "Summary of Funds"
in this prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
82
<PAGE> 85
TABLE X
ANNUAL AND CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(PERIOD FROM SEPARATE ACCOUNT DIVISION INCEPTION)
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED MARCH 31, 1998*
--------------------------------------------------------
FUND AND DIVISION 1998 1997 1996 1995 1994
- ----------------------------------- ------- ------ ------- ------ -----
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)...................... 30.13% 8.82% 20.11% 6.29% 0.62%
AGSPC Capital Conservation Fund
(Division 7)...................... 10.40 2.95 9.88 2.70 0.43
AGSPC Government Securities Fund
(Division 8)...................... 10.37 2.52 8.73 2.49 0.70
AGSPC Growth (Division 15)......... 48.85 3.68 41.56 12.46 --
AGSPC Growth & Income Fund
(Division 16)..................... 35.72 10.14 29.68 7.62 --
AGSPC International Equities Fund
(Division 11)..................... 17.45 0.47 12.08 4.48 19.63
AGSPC International Government Bond
(Division 13)..................... 0.59 (0.84) 1.74 15.51 8.36
AGSPC MidCap Index Fund (Division
4)***............................. 47.05 8.90 27.02 7.06 4.44
AGSPC Money Market (Division 6).... 4.20 3.95 4.38 3.46 1.70
AGSPC Science & Technology
(Division 17)..................... 33.98 (4.81) 48.80 37.53 --
AGSPC Small Cap Index Fund
(Division 14)..................... 40.20 4.47 28.98 3.59 7.59
AGSPC Social Awareness (Division
12)............................... 45.99 19.83 31.82 12.19 (2.01)
AGSPC Stock Index (Division 10).... 46.15 18.44 30.68 13.90 (0.28)
American Century -- Twentieth
Century Ultra (Division 31)....... 44.43 1.38 -- -- --
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... 37.03 2.28 26.76 10.12 --
Founders Growth (Division 30)...... 41.47 3.02 -- -- --
Neuberger&Berman Guardian Trust
(Division 29)(1).................. 32.07 12.29 -- -- --
Putnam Global Growth (Division
28)............................... 27.80 6.67 -- -- --
Putnam New Opportunities (Division
26)............................... 52.30 (13.27) -- -- --
Putnam OTC & Emerging Growth
(Division 27)..................... 50.66 (25.13) -- -- --
Scudder Growth and Income (Division
21)............................... 41.31 14.47 -- -- --
Templeton Foreign (Division 32).... 12.99 11.05 -- -- --
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... 22.80 16.67 22.97 1.98 --
Templeton International Fund:
Class 1 (Division 20)........... 25.95 20.98 21.36 (1.74) --
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)**......... 16.36 2.09 -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)**......... 17.45 1.33 -- -- --
Vanguard/Wellington (Division
25)............................... 30.54 10.34 -- -- --
Vanguard/Windsor II (Division
24)............................... 45.10 13.62 -- -- --
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED MARCH 31, 1998*
------------------------------------------------------
FUND AND DIVISION 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)...................... 6.36% 6.59% 8.21% 9.28% 9.50%
AGSPC Capital Conservation Fund
(Division 7)...................... 14.74 12.02 3.06 8.11 2.38
AGSPC Government Securities Fund
(Division 8)...................... 13.69 9.70 8.24 8.14 2.27
AGSPC Growth (Division 15)......... -- -- -- -- --
AGSPC Growth & Income Fund
(Division 16)..................... -- -- -- -- --
AGSPC International Equities Fund
(Division 11)..................... 9.58 (9.96) 2.80 16.09 --
AGSPC International Government Bond
(Division 13)..................... 13.91 3.25 -- -- --
AGSPC MidCap Index Fund (Division
4)***............................. 13.62 6.62 2.24 9.24 10.44
AGSPC Money Market (Division 6).... 1.97 3.85 6.43 7.58 6.77
AGSPC Science & Technology
(Division 17)..................... -- -- -- -- --
AGSPC Small Cap Index Fund
(Division 14)..................... 14.49 -- -- -- --
AGSPC Social Awareness (Division
12)............................... 13.11 5.77 12.11 (0.38) --
AGSPC Stock Index (Division 10).... 13.93 8.75 11.72 16.89 14.56
American Century -- Twentieth
Century Ultra (Division 31)....... -- -- -- -- --
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... -- -- -- -- --
Founders Growth (Division 30)...... -- -- -- -- --
Neuberger&Berman Guardian Trust
(Division 29)(1).................. -- -- -- -- --
Putnam Global Growth (Division
28)............................... -- -- -- -- --
Putnam New Opportunities (Division
26)............................... -- -- -- -- --
Putnam OTC & Emerging Growth
(Division 27)..................... -- -- -- -- --
Scudder Growth and Income (Division
21)............................... -- -- -- -- --
Templeton Foreign (Division 32).... -- -- -- -- --
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... -- -- -- -- --
Templeton International Fund:
Class 1 (Division 20)........... -- -- -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)**......... -- -- -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)**......... -- -- -- -- --
Vanguard/Wellington (Division
25)............................... -- -- -- -- --
Vanguard/Windsor II (Division
24)............................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE MARCH 31, 1989*
--------------------------------------------------------
FUND AND DIVISION 1998 1997 1996 1995 1994
- ----------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)...................... 184.25% 103.07% 88.61% 55.37% 46.18%
AGSPC Capital Conservation Fund
(Division 7)...................... 88.85 71.06 66.15 51.21 47.23
AGSPC Government Securities Fund
(Division 8)...................... 89.59 71.78 67.58 54.10 50.35
AGSPC Growth (Division 15)......... 142.07 65.07 69.21 12.46 --
AGSPC Growth & Income Fund
(Division 16)..................... 108.64 53.72 39.57 7.62 --
AGSPC International Equities Fund
(Division 11)..................... 40.40 19.54 16.99 6.16 1.61
AGSPC International Government Bond
(Division 13)..................... 49.37 48.50 49.76 47.20 27.44
AGSPC MidCap Index Fund (Division
4)***............................. 239.22 130.68 111.83 66.77 55.78
AGSPC Money Market (Division 6).... 63.97 47.77 42.15 36.22 31.65
AGSPC Science & Technology
(Division 17)..................... 160.99 94.81 104.65 37.53 --
AGSPC Small Cap Index Fund
(Division 14)..................... 137.31 69.26 62.02 27.59 23.18
AGSPC Social Awareness (Division
12)............................... 236.18 131.65 93.32 46.88 30.92
AGSPC Stock Index (Division 10).... 375.82 225.57 174.67 110.54 84.85
American Century -- Twentieth
Century Ultra (Division 31)....... 46.38 1.35 -- -- --
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... 95.64 42.77 39.59 10.12 --
Founders Growth (Division 30)...... 45.75 3.02 -- -- --
Neuberger&Berman Guardian Trust
(Division 29)(1).................. 48.30 12.29 -- -- --
Putnam Global Growth (Division
28)............................... 36.33 6.67 -- -- --
Putnam New Opportunities (Division
26)............................... 32.09 (13.27) -- -- --
Putnam OTC & Emerging Growth
(Division 27)..................... 12.79 (25.13) -- -- --
Scudder Growth and Income (Division
21)............................... 61.77 14.47 -- -- --
Templeton Foreign (Division 32).... 25.47 11.05 -- -- --
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... 79.65 46.30 25.40 1.98 --
Templeton International Fund:
Class 1 (Division 20)........... 81.71 44.27 19.25 (1.74) --
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)**......... 18.80 2.09 -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)**......... 19.01 1.33 -- -- --
Vanguard/Wellington (Division
25)............................... 44.03 10.34 -- -- --
Vanguard/Windsor II (Division
24)............................... 64.72 13.62 -- -- --
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE MARCH 31, 1989*
------------------------------------------------------
FUND AND DIVISION 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)...................... 46.42% 38.73% 29.49% 19.67% 9.50%
AGSPC Capital Conservation Fund
(Division 7)...................... 46.61 27.77 14.06 10.68 2.38
AGSPC Government Securities Fund
(Division 8)...................... 49.30 31.33 19.71 10.60 2.27
AGSPC Growth (Division 15)......... -- -- -- -- --
AGSPC Growth & Income Fund
(Division 16)..................... -- -- -- -- --
AGSPC International Equities Fund
(Division 11)..................... (15.08) (22.49) (13.91) (16.09) --
AGSPC International Government Bond
(Division 13)..................... 17.61 3.25 -- -- --
AGSPC MidCap Index Fund (Division
4)***............................. 49.15 31.39 23.35 20.65 10.44
AGSPC Money Market (Division 6).... 29.46 26.95 22.25 14.66 6.77
AGSPC Science & Technology
(Division 17)..................... -- -- -- -- --
AGSPC Small Cap Index Fund
(Division 14)..................... 14.49 -- -- -- --
AGSPC Social Awareness (Division
12)............................... 33.61 18.13 11.88 0.00 --
AGSPC Stock Index (Division 10).... 86.37 62.70 49.61 33.91 14.56
American Century -- Twentieth
Century Ultra (Division 31)....... -- -- -- -- --
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... -- -- -- -- --
Founders Growth (Division 30)...... -- -- -- -- --
Neuberger&Berman Guardian Trust
(Division 29)(1).................. -- -- -- -- --
Putnam Global Growth (Division
28)............................... -- -- -- -- --
Putnam New Opportunities (Division
26)............................... -- -- -- -- --
Putnam OTC & Emerging Growth
(Division 27)..................... -- -- -- -- --
Scudder Growth and Income (Division
21)............................... -- -- -- -- --
Templeton Foreign (Division 32).... -- -- -- -- --
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... -- -- -- -- --
Templeton International Fund:
Class 1 (Division 20)........... -- -- -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)**......... -- -- -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)**......... -- -- -- -- --
Vanguard/Wellington (Division
25)............................... -- -- -- -- --
Vanguard/Windsor II (Division
24)............................... -- -- -- -- --
</TABLE>
83
<PAGE> 86
- ------------
* For the year in which the underlying Fund commenced operations, less than a
full year's performance has been reflected, which is not annualized.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
*** Effective October 1, 1991, the Fund underlying the AGSPC 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%; for the
period from October 1, 1991 through December 31, 1996, the cumulative change
in purchase unit value was 96.61%; and for the period from October 1, 1991
through December 31, 1997, the cumulative change in purchase unit value was
156.48%.
84
<PAGE> 87
TABLE XI
ANNUAL AND CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(PERIOD FROM UNDERLYING FUND INCEPTION)
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED MARCH 31, 1998*
--------------------------------------------------------
FUND AND DIVISION** 1998 1997 1996 1995 1994
- ----------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century -- Twentieth
Century Ultra (Division 31)....... 44.43% 8.01% 32.47% 1.63% 18.46%
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... 37.03 2.28 26.76 10.85 49.95
Founders Growth (Division 30)...... 41.47 9.56 40.66 4.45 18.75
Neuberger&Berman Guardian Trust
(Division 29)(1).................. 32.07 13.03 23.43 12.44 5.27
Putnam Global Growth (Division
28)............................... 27.80 10.13 22.79 (0.75) 18.03
Putnam New Opportunities (Division
26)............................... 52.30 (7.04) 42.87 17.30 26.52
Putnam OTC & Emerging Growth
(Division 27)..................... 50.66 (18.30) 49.92 17.14 23.02
Scudder Growth and Income (Division
21)............................... 41.31 17.14 29.22 11.48 4.41
Templeton Foreign (Division 32).... 12.99 15.39 14.70 (0.15) 25.13
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... 22.80 16.67 22.97 1.94 13.67
Templeton International Fund:
Class 1 (Division 20)........... 25.95 20.98 21.38 (1.24) 31.16
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)***........ 15.38 1.83 11.91 3.61 2.14
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)***........ 17.45 0.87 12.72 3.28 2.38
Vanguard/Wellington (Division
25)............................... 30.54 11.58 25.11 10.80 2.45
Vanguard/Windsor II (Division
24)............................... 45.10 15.58 33.34 12.25 0.49
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED MARCH 31, 1998*
------------------------------------------------------
FUND AND DIVISION** 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century -- Twentieth
Century Ultra (Division 31)....... 7.54% 22.00% 59.23% 9.73% 19.77%
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... 61.35 139.18 28.59 -- --
Founders Growth (Division 30)...... 15.81 17.64 11.36 19.24 11.54
Neuberger&Berman Guardian Trust
(Division 29)(1).................. 20.23 16.22 14.66 6.22 18.45
Putnam Global Growth (Division
28)............................... 8.64 2.92 4.80 13.71 7.59
Putnam New Opportunities (Division
26)............................... 19.52 36.37 36.52 -- --
Putnam OTC & Emerging Growth
(Division 27)..................... 13.47 11.65 12.36 15.55 9.03
Scudder Growth and Income (Division
21)............................... 14.36 14.40 13.05 9.45 13.59
Templeton Foreign (Division 32).... 6.06 9.83 1.64 24.28 16.54
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... 12.29 15.21 1.04 7.98 4.73
Templeton International Fund:
Class 1 (Division 20)........... (0.74) -- -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)***........ 17.02 12.89 11.72 9.97 6.27
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)***........ 17.11 9.68 11.25 10.17 5.38
Vanguard/Wellington (Division
25)............................... 13.97 9.51 8.75 9.30 13.78
Vanguard/Windsor II (Division
24)............................... 17.82 7.96 9.66 10.27 23.56
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE MARCH 31, 1989*
--------------------------------------------------------
FUND AND DIVISION** 1998 1997 1996 1995 1994
- ----------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century -- Twentieth
Century Ultra (Division 31)....... 583.05% 372.94% 337.65% 230.62% 225.24%
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... 1365.24 959.26 945.42 724.70 643.97
Founders Growth (Division 30)...... 437.36 279.83 246.70 146.49 135.98
Neuberger&Berman Guardian Trust
(Division 29)(1).................. 347.88 239.13 200.02 143.07 111.62
Putnam Global Growth (Division
28)............................... 190.21 127.09 106.19 67.92 69.18
Putnam New Opportunities (Division
26)............................... 578.28 345.35 379.09 235.33 185.87
Putnam OTC & Emerging Growth
(Division 27)..................... 376.93 216.56 287.46 158.45 120.62
Scudder Growth and Income (Division
21)............................... 357.83 223.98 176.57 114.03 91.99
Templeton Foreign (Division 32).... 220.43 183.60 145.77 114.27 114.58
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... 201.63 145.54 110.46 71.15 87.89
Templeton International Fund:
Class 1 (Division 20)........... 137.78 88.80 56.05 28.69 30.21
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)***........ 139.74 105.04 102.34 80.81 74.50
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)***........ 134.25 99.48 97.75 76.43 69.85
Vanguard/Wellington (Division
25)............................... 250.14 168.23 140.39 92.14 73.42
Vanguard/Windsor II (Division
24)............................... 383.49 233.21 186.87 114.40 90.99
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE MARCH 31, 1989*
------------------------------------------------------
FUND AND DIVISION** 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century -- Twentieth
Century Ultra (Division 31)....... 174.56% 155.30% 109.25% 31.42% 19.77%
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio
(Division 18)................... 398.15 207.54 28.59 -- --
Founders Growth (Division 30)...... 102.12 74.52 48.11 33.00 11.64
Neuberger&Berman Guardian Trust
(Division 29)(1).................. 105.36 70.81 46.98 28.19 18.45
Putnam Global Growth (Division
28)............................... 43.35 31.94 28.20 22.33 7.59
Putnam New Opportunities (Division
26)............................... 125.94 89.04 36.62 -- --
Putnam OTC & Emerging Growth
(Division 27)..................... 79.33 68.05 41.56 25.99 9.03
Scudder Growth and Income (Division
21)............................... 83.88 60.60 40.56 24.33 13.59
Templeton Foreign (Division 32).... 71.46 61.69 47.22 44.84 18.54
Templeton Variable Products Series
Fund
Templeton Asset Allocation Fund:
Class 1 (Division 19)........... 47.83 31.65 14.27 13.09 4.73
Templeton International Fund:
Class 1 (Division 20)........... (0.74) -- -- -- --
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio (Division 22)***........ 70.85 46.00 29.33 15.76 5.27
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio (Division 23)***........ 65.90 41.66 29.16 16.10 5.38
Vanguard/Wellington (Division
25)............................... 59.27 48.52 35.25 24.37 13.78
Vanguard/Windsor II (Division
24)............................... 90.06 61.31 49.42 36.25 23.56
</TABLE>
- ------------
* For the year in which the underlying Fund commenced operations, less than a
full year's performance has been reflected, which is not annualized.
** The Tables reflect actual historical performance of the related Separate
Account Divisions (21-32) since inception of each Division (July 1, 1996)
and hypothetical performance for periods prior to July 1, 1996. With respect
to Separate Account Divisions 18-20, the Table reflects hypothetical
performance for periods prior to July 11, 1994 (inception date of each
Division). Hypothetical performance is based on the actual performance of
the underlying Fund reduced by Separate Account fees that would have been
incurred during the hypothetical period.
*** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
85
<PAGE> 88
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director Plus 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 Plus 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.
86
<PAGE> 89
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
Plus 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 Plus
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.
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.
87
<PAGE> 90
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director Plus 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 408(b) IRA, or is instead a
nonqualified Contract. Portfolio Director Plus 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 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) simplified deferred
compensation plans of private
employers;
- Section 408(p) SIMPLE retirement accounts.
The foregoing Contracts are "Qualified Contracts." Certain series of Portfolio
Director Plus may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity.
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director Plus 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 portion of a
distribution which is not considered a return of 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))
88
<PAGE> 91
- --------------------------------------------------------------------------------
which specifically exempts these Qualified Contracts, and the IRS has no viable
legal basis or reason to apply the theory 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 Plus 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 risk fee and administration and distribution
fee charges (0.75% - 1.25%) and may also incur account maintenance 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 after-tax 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
89
<PAGE> 92
- --------------------------------------------------------------------------------
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 reduces the actual amount saved in the conventional
savings account to $1,800 while the full $2,500 is contributed to 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.
90
<PAGE> 93
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other insurance companies, financial and business organizations around the
world, each of the Variable Account Options and the underlying mutual funds
could be adversely affected if the computer systems used by the Company, other
service providers and entities with computer systems that are linked to the
Company's records do not properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000 Issue." The Company is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems
that its uses and to obtain satisfactory assurances that comparable steps are
being taken by each of the Variable Account Options' other major service
providers. The Company expects to be substantially complete with its computer
systems projects to address year 2000 issues by the end of 1998. However, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Variable Account Options.
91
<PAGE> 94
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>
<PAGE> 95
(This page intentionally left blank)
<PAGE> 96
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
Plus).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 97
(This page intentionally left blank)
<PAGE> 98
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 8
Types of Variable Annuity Contracts................. 9
Federal Tax Matters................................. 9
Tax Consequences of Purchase Payments........... 9
Tax Consequences of Distributions............... 11
Special Tax Consequences -- Early
Distribution.................................. 12
Special Tax Consequences -- Required
Distributions................................. 13
Tax Free Rollovers, Transfers and Exchanges..... 14
Exchange Privilege.................................. 14
Exchanges From Portfolio Director............... 14
Exchanges From Portfolio Director 2............. 15
Exchanges From Independence Plus Contracts...... 16
Exchanges From V-Plan Contracts................. 17
Exchanges From SA-1 and SA-2 Contracts.......... 18
Exchanges From Impact Contracts................. 19
Exchanges From Compounder Contracts............. 20
Information Which May Be Applicable To Any
Exchange...................................... 21
Calculation of Surrender Charge..................... 22
Illustration of Surrender Charge on Total
Surrender..................................... 22
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 22
Purchase Unit Value................................. 23
Illustration of Calculation of Purchase Unit
Value......................................... 23
Illustration of Purchase of Purchase Units...... 23
Performance Calculations............................ 23
AGSPC Money Market and American General Money
Market Divisions Yields....................... 23
Calculation of Current Yield for AGSPC Money
Market Division Six ...................... 23
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 23
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 24
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 24
Standardized Yield for Bond Fund Divisions.......... 24
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 24
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 24
Calculation of Average Annual Total Return...... 25
Performance Information............................. 26
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 26
Performance Compared to Market Indices.......... 26
AGSPC Asset Allocation Division Five............ 30
AGSPC Capital Conservation Division Seven....... 31
AGSPC Government Securities Division Eight...... 32
AGSPC Growth Division Fifteen................... 33
AGSPC Growth & Income Division Sixteen.......... 34
AGSPC International Equities Division Eleven.... 35
AGSPC International Government Bond Division
Thirteen...................................... 35
AGSPC MidCap Index Division Four................ 36
AGSPC Money Market Division Six................. 37
AGSPC Science & Technology Division Seventeen... 37
AGSPC Small Cap Index Division Fourteen......... 38
AGSPC Social Awareness Division Twelve.......... 38
AGSPC Stock Index Division Ten.................. 39
American Century -- Twentieth Century Ultra
Division Thirty-One........................... 40
American General Balanced Division Forty-Two.... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American General Conservative Growth Lifestyle
Division Fifty................................ 41
American General Domestic Bond Division
Forty-Three................................... 42
American General Growth Lifestyle Division
Forty-Eight................................... 42
American General International Growth Division
Thirty-Three.................................. 43
American General International Value Division
Thirty-Four................................... 44
American General Large Cap Growth Division
Thirty-Nine................................... 45
American General Large Cap Value Division
Forty......................................... 45
American General Mid Cap Growth Division
Thirty-Seven.................................. 46
American General Mid Cap Index Division
Forty-Six..................................... 46
American General Mid Cap Value Division
Thirty-Eight.................................. 47
American General Moderate Lifestyle Division
Forty-Nine.................................... 47
American General Money Market Division
Forty-Four.................................... 48
American General Small Cap Growth Division
Thirty-Five................................... 49
American General Small Cap Index Division
Forty-Five.................................... 49
American General Small Cap Value Division
Thirty-Six.................................... 49
American General Socially Responsible Division
Forty-One..................................... 50
American General S&P 500 Index Division Forty-
Seven......................................... 50
Dreyfus Small Cap Division Eighteen............. 51
Founders Growth Division Thirty................. 52
Neuberger&Berman Guardian Trust Division Twenty-
Nine.......................................... 53
Putnam Global Growth Division Twenty-Eight...... 54
Putnam New Opportunities Division Twenty-Six.... 55
Putnam OTC & Emerging Growth Division Twenty-
Seven......................................... 56
Scudder Growth and Income Division Twenty-One... 56
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 57
Templeton Asset Allocation Division Nineteen.... 58
Templeton Foreign Division Thirty-Two........... 59
Templeton International Division Twenty......... 60
Vanguard LifeStrategy Conservative Growth
Portfolio Division Fifty-Four................. 61
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio Division
Twenty-Two.................................... 62
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio
Division Twenty-Three......................... 63
Vanguard LifeStrategy Growth Portfolio Division
Fifty-Two..................................... 64
Vanguard LifeStrategy Moderate Growth Portfolio
Division Fifty-Three.......................... 64
Vanguard/Wellington Division Twenty-Five........ 65
Vanguard/Windsor II Division Twenty-Four........ 65
Payout Payments..................................... 66
Assumed Investment Rate......................... 66
Amount of Payout Payments....................... 66
Payout Unit Value............................... 66
Illustration of Calculation of Payout Unit
Value......................................... 67
Illustration of Payout Payments................. 67
Distribution of Variable Annuity Contracts.......... 68
Experts............................................. 68
Comments on Financial Statements.................... 69
</TABLE>
<PAGE> 99
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
3535 Grandview Parkway
Suite 200
Birmingham, AL 35243
(205) 967-8955
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
(650) 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 1900
Chicago, IL 60606
(312) 368-1001
11711 N. Meridian St.
Suite 300
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
(248) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
4266 Interstate 55N
Suite 108
Jackson, MS 39211
(601) 981-5801
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 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
Two International Plaza
Suite 601
Nashville, TN 37217
(615) 254-4822
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-six branch offices located throughout the
country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
1-800-44-VALIC
FOR UNIT VALUE INFORMATION CALL: 1-800-42-VALIC & TDD 1-800-24-VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-621-7792
TDD 1-800-35-VALIC
EASYACCESS 1-800-42-VALIC
TDD EASYACCESS 1-800-24-VALIC
================================================================================
<PAGE> 100
LOGO
PRINTED MATTER
PRINTED IN U.S.A. VA 10855 REV 7/98
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 101
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THE STATEMENT OF
ADDITIONAL INFORMATION DOES NOT CONSTITUTE A PROSPECTUS.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 2, 1998
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.20 TO 12.20 , 1998
PROSPECTUS
Certain Series of Portfolio Director Plus consists of group and individual
variable annuity contracts that are offered by The Variable Annuity Life
Insurance Company ("VALIC") to Participants in certain employer sponsored
retirement plans. Portfolio Director Plus 1.20 to 12.20 consists of group
variable annuity contracts that are offered by VALIC to Participants in certain
employer retirement plans. Portfolio Director Plus 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 Plus is composed of the following contract forms:
UIT-194, UITG-194, UITN-194, UIT-IRA-194 and UIT-SEP-194.
Portfolio Director Plus permits you to invest in and receive retirement benefits
in up to 2 Fixed Account Options and/or an array of up to 30 of the 50 Variable
Account Options described in this prospectus. If your contract is part of your
employer's retirement program, that program will describe which Variable Account
Options are available to you. If your contract is a tax-deferred nonqualified
annuity that is not part of your employer's retirement plan, those Variable
Account Options that are invested in Mutual Funds available to the public
outside of annuity contracts or life insurance contracts will not be available
within your contract.
- --------------------------------------------------------------------------------
VALIC is a member of the Insurance Marketplace Standards Association (IMSA).
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. VALIC's membership in IMSA applies to VALIC only and not to
its products or affiliate.
This prospectus provides you with information you should know before investing
in Portfolio Director Plus. This prospectus is accompanied by the current
prospectuses for the mutual fund options described in this prospectus. Please
read and retain each of these prospectuses for future reference.
A Statement of Additional Information, dated , 1998, has been filed
with the Securities and Exchange Commission. This Statement of Additional
Information contains additional information about Portfolio Director Plus 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.
DO NOT COPY
<PAGE> 102
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
PROFILE OF PORTFOLIO DIRECTOR PLUS................. 2
FEE TABLE.......................................... 6
SELECTED PURCHASE UNIT DATA........................ 12
ABOUT PORTFOLIO DIRECTOR PLUS...................... 13
ABOUT VALIC........................................ 13
ABOUT VALIC SEPARATE ACCOUNT A..................... 13
UNITS OF INTERESTS................................. 13
VARIABLE ACCOUNT OPTIONS........................... 14
Summary of Funds............................... 14
PURCHASE PERIOD.................................... 52
Purchase Payments.............................. 52
Purchase Units................................. 52
Calculation of Purchase Unit Value............. 52
Choosing Investment Options.................... 53
Fixed Account Options..................... 53
Variable Account Options.................. 53
Stopping Purchase Payments..................... 53
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 54
During the Purchase Period..................... 54
During the Payout Period....................... 54
Communicating Transfer or Reallocation
Instructions................................. 54
Effective Date of Transfer..................... 54
FEES AND CHARGES................................... 55
Account Maintenance Fee........................ 55
Surrender Charge............................... 55
Amount of Surrender Charge................ 55
10% Free Withdrawal....................... 55
Exceptions to Surrender Charge............ 55
Premium Tax Charge............................. 56
Separate Account Charges....................... 56
Fund Annual Expense Charges.................... 56
Other Tax Charges.............................. 56
Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee
Charges...................................... 57
Separate Account Expense Reimbursement......... 57
PAYOUT PERIOD...................................... 58
Fixed Payout................................... 58
Variable Payout................................ 58
Combination Fixed and Variable Payout.......... 58
Payout Date.................................... 58
Payout Options................................. 58
Enhancements to Payout Options................. 59
Payout Information............................. 59
SURRENDER OF ACCOUNT VALUE......................... 60
When Surrenders are Allowed.................... 60
Amount That May Be Surrendered................. 60
Surrender Restrictions......................... 60
Partial Surrenders............................. 60
Systematic Withdrawals......................... 60
Distributions Required By Federal Tax Law...... 61
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXCHANGE PRIVILEGE................................. 62
Restrictions on Exchange Privilege............. 62
Taxes and Conversion Costs..................... 62
Surrender Charges.............................. 62
Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 62
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 63
Comparison of Other Contracts.................. 63
Features of Portfolio Director Plus............ 63
Agents' and Managers' Retirement Plan Exchange
Offer........................................ 63
DEATH BENEFITS..................................... 65
Beneficiary Information........................ 65
Special Information for Individual Non-Tax
Qualified Contracts.......................... 65
During the Purchase Period..................... 65
Interest Guaranteed Death Benefit......... 65
Standard Death Benefit.................... 66
During the Payout Period....................... 66
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 67
Types of Investment Performance Information
Advertised................................... 67
Total Return Performance Information......... 67
Standard Average Annual Total Return......... 67
Nonstandard Average Annual Total
Return....................................... 67
Cumulative Total Return...................... 67
Annual Change in Purchase Unit Value......... 67
Cumulative Change in Purchase Unit Value..... 68
Total Return Based on Different Investment
Amounts................................... 68
An Assumed Account Value of $10,000.......... 68
Yield Performance Information.................. 68
AGSPC Money Market and American General Money
Market Divisions............................. 68
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 68
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 68
OTHER CONTRACT FEATURES............................ 76
Changes That May Not Be Made................... 76
Change of Beneficiary.......................... 76
Contingent Owner............................... 76
Cancellation -- The 20 Day "Free Look"......... 76
We Reserve Certain Rights...................... 76
Relationship to Employer's Plan................ 76
VOTING RIGHTS...................................... 77
Who May Give Voting Instructions............... 77
Determination of Fund Shares Attributable to
Your Account................................. 77
During Purchase Period....................... 77
During Payout Period or after a Death Benefit
Has Been Paid............................. 77
How Fund Shares Are Voted...................... 77
FEDERAL TAX MATTERS................................ 78
Type of Plans.................................. 78
Tax Consequences in General.................... 78
Effect of Tax-Deferred Accumulations........... 79
YEAR 2000.......................................... 81
Year 2000 Risks................................ 81
</TABLE>
<PAGE> 103
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:
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- ------------- --------
<S> <C>
Account Value................... 54
Annuitant....................... 65
Assumed Investment Rate......... 58
Beneficiary..................... 65
Contract Owner.................. 65
Divisions....................... 67
Fixed Account Options........... 65
Home Office..................... 54
Mutual Fund or Fund............. 13
Participant..................... 01
Participant Year................ 55
Payout Period................... 54
Payout Unit..................... 58
Purchase Payments............... 52, 67
Purchase Period................. 54
Purchase Unit................... 53
VALIC Separate Account A........ 77
Variable Account Options........ 14, 65
</TABLE>
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
Plus, 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 Plus 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 Plus 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 Plus. This summary is called the "Profile of Portfolio
Director Plus." 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> 104
PROFILE OF PORTFOLIO DIRECTOR PLUS
- --------------------------------------------------------------------------------
Portfolio Director Plus is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director Plus's major features is presented below. For a more detailed
discussion of Portfolio Director Plus, please read the entire prospectus
carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director Plus offers a choice from among 50 Variable Account Options.
You will not be able to invest in all of the Variable Account Options described
below within a single group or individual annuity contract. If your contract is
a tax-deferred nonqualified annuity that is not part of your employer's
retirement plan, those Variable Account Options that are invested in Mutual
Funds available to the public outside of annuity contracts or life insurance
contracts will not be available within your contract. If your contract is part
of your employer's retirement program, that program will describe which Variable
Account Options are available to you. Portfolio Director Plus also offers two
Fixed Account Options.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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 SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Growth through investments tracking VALIC N/A
EQUITY Equities the EAFE Index
FUNDS
--------------------------------------------------------------------------------------------------------------
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund tracking the S&P MidCap 400(R) Index Company
--------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments tracking VALIC Bankers Trust
Index Fund the Russell 2000(R) Index Company
--------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments tracking VALIC Bankers Trust
Index Fund the S&P 500(R) Index Company
--------------------------------------------------------------------------------------------------------------
American General Mid Growth through investments tracking VALIC Bankers Trust
Cap the S&P MidCap 400 Index Company
Index Fund
--------------------------------------------------------------------------------------------------------------
American General S&P Total return through investments VALIC Bankers Trust
500 tracking the S&P 500 Index Company
Index Fund
--------------------------------------------------------------------------------------------------------------
American General Total return through investments VALIC Bankers Trust
Small Cap tracking the Russell 2000 Index Company
Index Fund
- ----------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
--------------------------------------------------------------------------------------------------------------
EQUITY AGSPC Growth & Income Growth and income through investments VALIC ValueLine, Inc.
FUNDS Fund in stocks or securities convertible
into stocks
--------------------------------------------------------------------------------------------------------------
American Century -- Capital growth through American Century N/A
Twentieth Century investments in common Investment Management,
Ultra Fund stock Inc.
--------------------------------------------------------------------------------------------------------------
American General Long-term capital appreciation VALIC Jacobs Asset
International Growth through investments in companies in Management
Fund developed and emerging markets
--------------------------------------------------------------------------------------------------------------
American General Growth of capital and future income VALIC Capital Guardian
International Value through investments in non-U.S. Trust Company
Fund issuers
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC Goldman Sachs Asset
Large Cap Growth Fund in large cap U.S. issuers Management
--------------------------------------------------------------------------------------------------------------
American General Total returns exceeding the S&P 500 VALIC State Street Bank &
Large Cap Value Fund Index through investments in equity Trust Company/State
securities Street Global
Advisors
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in equity VALIC Brown Capital
Mid Cap Growth Fund securities Management Inc.
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC Neuberger&Berman
Mid Cap Value Fund medium-to-large capitalization Management Inc.
companies
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC JP Morgan
Small Cap Growth Fund in small company growth stocks Investment
Management Inc.
--------------------------------------------------------------------------------------------------------------
American General Maximum long-term return through VALIC Fiduciary
Small Cap Value Fund investments in small capitalization Management
companies Associates, Inc.
Bankers Trust
Company
--------------------------------------------------------------------------------------------------------------
Dreyfus Small Growth through investments in smaller The Dreyfus N/A
Cap Portfolio companies Corporation
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 105
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- --------------------------------------------------------------------------------------------------------------------------
Founders Long-term growth of capital through Founders N/A
Growth investment in common stocks of well Asset
Fund established, high-quality growth Management LLC
companies
------------------------------------------------------------------------------------------------------
Neuberger&Berman Capital appreciation, and N&B Management Inc. Neuberger&
Guardian Trust secondarily Berman, LLC
current income by investing
primarily
in common stocks of
long-established,
high quality companies
------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a Putnam Investment N/A
globally
Growth Fund diversified portfolio of common Management Inc.
stocks
------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities Fund through investment in common stock Management Inc.
------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund small-to-medium companies
------------------------------------------------------------------------------------------------------
Scudder Growth Long-term growth of capital, current Scudder Kemper N/A
and Income Fund income and growth of income Investments, Inc.
------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through Templeton Global N/A
investments
Foreign in equity and debt securities of Advisors Limited
Fund -- Class 1 companies and
governments outside the U.S.
------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through a Templeton Investment N/A
International flexible policy of investing in Counsel, Inc.
Fund stocks and debt obligations of
companies and governments outside
the U.S.
------------------------------------------------------------------------------------------------------
T. Rowe Price Long-term capital growth through T. Rowe Price N/A
Small-Cap Stock Fund investments in securities of small Associates, Inc.
to medium-sized companies
------------------------------------------------------------------------------------------------------
Vanguard/ Growth and income through Vanguard N/A
Windsor II investment in common stock
- --------------------------------------------------------------------------------------------------------------------------
BALANCED American General Conservation of principal and VALIC Capital Guardian
FUNDS Balanced Fund long-term growth of capital and Trust Company
income through investments in fixed
income and equity securities
------------------------------------------------------------------------------------------------------
Vanguard/ Income and growth through 30 to 40% Vanguard N/A
Wellington investment in high quality corporate
bonds
Fund and 60 to 70% investment in common
stocks
- --------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Income and possible growth through VALIC N/A
FUNDS Conservation Fund investments in high quality debt
securities
------------------------------------------------------------------------------------------------------
AGSPC Government Income and possible growth through VALIC N/A
Securities Fund investments in intermediate and
long-term government debt securities
------------------------------------------------------------------------------------------------------
AGSPC International Income and possible growth through VALIC N/A
Government investments in high quality foreign
Bond Fund government debt securities
------------------------------------------------------------------------------------------------------
American General High income and total return VALIC Capital Guardian
Domestic Bond Fund consistent with conservation of Trust Company
capital through investments in debt
securities
------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment Vanguard N/A
Securities in long-term high quality corporate
Fund-Long-Term bonds
Corporate Portfolio
------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment in Vanguard N/A
Securities long-term U.S. Treasury bonds
Fund-Long-Term
U.S. Treasury
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Growth through investments in stocks VALIC T. Rowe Price
FUNDS Technology of companies which benefit from Associates, Inc.
Fund development of science and
technology
------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC N/A
Awareness stocks of companies meeting social
Fund criteria of the Fund
------------------------------------------------------------------------------------------------------
American General Growth through investments in stocks VALIC N/A
Socially Responsible of companies meeting social criteria
Fund of the Fund
- --------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUNDS Fund securities
------------------------------------------------------------------------------------------------------
American General Income through investments in VALIC N/A
Money Market Fund short-term money market securities
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 106
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
LIFESTYLE American General Current income and a low to moderate VALIC N/A
FUNDS Conservative Growth level of growth through investments
Lifestyle Fund in American General Series Portfolio
Company Funds
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC N/A
Growth American General Series Portfolio
Lifestyle Fund Company Funds
--------------------------------------------------------------------------------------------------------------
American General Growth and current income through VALIC N/A
Moderate Growth investments in American General
Lifestyle Fund Series Portfolio Company Funds
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy High level of income and moderate Vanguard N/A
Conservative long-term growth of capital and
Growth Portfolio income
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy Growth of capital and income Vanguard N/A
Growth Portfolio
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy A reasonable level of income and Vanguard N/A
Moderate Growth long-term growth of capital and
Portfolio income
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Allocation Maximum return through investments in VALIC N/A
ALLOCATION Fund a mix of stocks, bonds and money
market securities
--------------------------------------------------------------------------------------------------------------
FUNDS
Templeton Asset Flexible policy of investing in Templeton Investment N/A
stocks and debt
Allocation Fund obligations of companies and Counsel, Inc.
governments of
any nation and money market
instruments
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 107
- --------------------------------------------------------------------------------
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 Plus 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 Plus 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 Plus'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. Reductions in the account maintenance fee may be available if certain
conditions are met.
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 Charge." 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.
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.
SEPARATE ACCOUNT CHARGES
Depending on the Variable Account Option you choose you may incur a mortality
and expense risk fee and an administration and distribution fee computed at an
aggregate annualized rate of 0.55% to 1.05% during the Purchase Period and 0.75%
to 1.25% during the Payout Period on the average daily net asset value of VALIC
Separate Account A. Reductions in the mortality and expense risk fee and
administration and distribution fee may be available for plan types meeting
certain criteria.
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. In addition to the
management fees, each Fund incurs other operating expenses which may vary.
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 or distributor for providing the Fund administrative and
shareholder services. In addition, the Company currently reimburses certain
Divisions a portion of the Company's administration and distribution fee for
providing Variable Account Options. Such reimbursement arrangements are
voluntary. 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 Plus 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.
5
<PAGE> 108
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Account Maintenance Fee ($3.75 per quarter, annualized)(2) $ 15
Maximum Surrender Charge(2) 5.00%
</TABLE>
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
MORTALITY ADMINISTRATION SEPARATE
AND AND ACCOUNT TOTAL
EXPENSE RISK DISTRIBUTION EXPENSE SEPARATE
FUND FEE(3) FEE(3) REIMBURSEMENT ACCOUNT FEE
---- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation(8) 0.25% 0.55% -- 0.80%
AGSPC Capital Conservation 0.25 0.55 -- 0.80
AGSPC Government Securities 0.25 0.55 -- 0.80
AGSPC Growth 0.25 0.55 -- 0.80
AGSPC Growth & Income 0.25 0.55 -- 0.80
AGSPC International Equities 0.25 0.55 -- 0.80
AGSPC International Government Bond 0.25 0.55 -- 0.80
AGSPC MidCap Index 0.25 0.55 -- 0.80
AGSPC Money Market 0.25 0.55 -- 0.80
AGSPC Science & Technology 0.25 0.55 -- 0.80
AGSPC Small Cap Index 0.25 0.55 -- 0.80
AGSPC Social Awareness 0.25 0.55 -- 0.80
AGSPC Stock Index 0.25 0.55 -- 0.80
American Century -- Twentieth Century Ultra(4) 0.25 0.80 (0.21%) 0.84
American General Balanced(4) 0.25 0.55 (0.25) 0.55
American General Conservative Growth Lifestyle 0.25 0.55 (0.25) 0.55
American General Domestic Bond(4) 0.25 0.55 (0.25) 0.55
American General Growth Lifestyle 0.25 0.55 (0.25) 0.55
American General International Growth(4) 0.25 0.55 (0.25) 0.55
American General International Value(4) 0.25 0.55 (0.25) 0.55
American General Large Cap Growth(4) 0.25 0.55 (0.25) 0.55
American General Large Cap Value(4) 0.25 0.55 (0.25) 0.55
American General Mid Cap Growth(4) 0.25 0.55 (0.25) 0.55
American General Mid Cap Index(4) 0.25 0.55 (0.25) 0.55
American General Mid Cap Value(4) 0.25 0.55 (0.25) 0.55
American General Moderate Growth Lifestyle 0.25 0.55 (0.25) 0.55
American General Money Market(4) 0.25 0.55 (0.25) 0.55
American General S&P 500 Index(4) 0.25 0.55 (0.25) 0.55
American General Small Cap Growth(4) 0.25 0.55 (0.25) 0.55
American General Small Cap Index(4) 0.25 0.55 (0.25) 0.55
American General Small Cap Value(4) 0.25 0.55 (0.25) 0.55
American General Socially Responsible(4) 0.25 0.55 (0.25) 0.55
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio(4) 0.25 0.80 (0.15) 0.90
Founders Growth(4) 0.25 0.80 (0.25) 0.80
Neuberger&Berman Guardian Trust(4) 0.25 0.80 (0.25) 0.80
Putnam Global Growth(4) 0.25 0.80 (0.25) 0.80
Putnam New Opportunities(4) 0.25 0.80 (0.25) 0.80
Putnam OTC & Emerging Growth(4) 0.25 0.80 (0.25) 0.80
Scudder Growth and Income(4) 0.25 0.80 (0.25) 0.80
T. Rowe Price Small-Cap Stock 0.25 0.80 -- 1.05
Templeton Foreign(4) 0.25 0.80 (0.25) 0.80
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 0.25 0.80 -- 1.05
Templeton International: Class 1 0.25 0.80 -- 1.05
Vanguard LifeStrategy Conservative Growth
Portfolio 0.25 0.80 -- 1.05
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio(5) 0.25 0.80 (0.25) 0.80
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio(5) 0.25 0.80 (0.25) 0.80
Vanguard LifeStrategy Growth Portfolio 0.25 0.80 -- 1.05
Vanguard LifeStrategy Moderate Growth Portfolio 0.25 0.80 -- 1.05
Vanguard/Wellington 0.25 0.80 -- 1.05
Vanguard/Windsor II 0.25 0.80 -- 1.05
</TABLE>
6
<PAGE> 109
- --------------------------------------------------------------------------------
FUND OPERATING EXPENSES FOR FUNDS WHICH HAVE NOT YET COMMENCED OPERATIONS ARE
BASED ON
CURRENT ESTIMATES AND ARE SUBJECT TO MODIFICATION PRIOR TO EFFECTIVENESS.
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER TOTAL FUND
FUND FEES FEES EXPENSES(6) EXPENSES
---- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation(8) 0.50% -- 0.07% 0.57%
AGSPC Capital Conservation 0.50 -- 0.07 0.57
AGSPC Government Securities 0.50 -- 0.06 0.56
AGSPC Growth 0.80 -- 0.06 0.86
AGSPC Growth & Income 0.75 -- 0.06 0.81
AGSPC International Equities 0.35 -- 0.07 0.42
AGSPC International Government Bond 0.50 -- 0.06 0.56
AGSPC MidCap Index 0.34 -- 0.06 0.40
AGSPC Money Market 0.50 -- 0.07 0.57
AGSPC Science & Technology 0.90 -- 0.06 0.96
AGSPC Small Cap Index 0.35 -- 0.06 0.41
AGSPC Social Awareness 0.50 -- 0.06 0.56
AGSPC Stock Index 0.27 -- 0.07 0.34
American Century -- Twentieth Century Ultra 1.00 -- -- 1.00
American General Balanced(10) 0.16 -- 0.67 0.83
American General Conservative Growth Lifestyle 0.10 -- -- 0.10
American General Domestic Bond(10) 0.10 -- 0.74 0.84
American General Growth Lifestyle 0.10 -- -- 0.10
American General International Growth(10) 0.20 -- 0.96 1.16
American General International Value(10) 0.27 -- 0.78 1.05
American General Large Cap Growth(10) 0.16 -- 0.70 0.86
American General Large Cap Value(10) 0.11 -- 0.70 0.81
American General Mid Cap Growth(10) 0.13 -- 0.67 0.80
American General Mid Cap Index(10) -- -- 0.59 0.59
American General Mid Cap Value(10) 0.38 -- 0.67 1.05
American General Moderate Growth Lifestyle 0.10 -- -- 0.10
American General Money Market(10) -- -- 0.56 0.56
American General S&P 500 Index(10) -- -- 0.58 0.58
American General Small Cap Growth(10) 0.53 -- 0.63 1.16
American General Small Cap Index(10) -- -- 0.59 0.59
American General Small Cap Value(10) 0.36 -- 0.63 0.99
American General Socially Responsible(10) -- -- 0.56 0.56
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio 0.75 -- 0.03 0.78
Founders Growth 0.67 0.25 0.18 1.10
Neuberger&Berman Guardian Trust(7) 0.84 -- 0.04 0.88
Putnam Global Growth 0.64 0.25 0.35 1.24
Putnam New Opportunities 0.50 0.25 0.31 1.06
Putnam OTC & Emerging Growth 0.56 0.25 0.35 1.16
Scudder Growth and Income 0.46 -- 0.30 0.76
T. Rowe Price Small-Cap Stock 0.77 -- 0.25 1.02
Templeton Foreign 0.61 0.25 0.22 1.08
Templeton Variable Products Series
Templeton Asset Allocation: Class 1(9) 0.60 -- 0.18 0.78
Templeton International: Class 1(9) 0.69 -- 0.19 0.88
Vanguard LifeStrategy Conservative Growth Portfolio -- -- 0.29 0.29
Vanguard Fixed Income Securities Fund -- Long-Term
Corporate Portfolio 0.03 -- 0.29 0.32
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio 0.01 -- 0.26 0.27
Vanguard LifeStrategy Growth Portfolio -- -- 0.29 0.29
Vanguard LifeStrategy Moderate Growth Portfolio -- -- 0.29 0.29
Vanguard/Wellington 0.04 -- 0.25 0.29
Vanguard/Windsor II 0.15 -- 0.22 0.37
</TABLE>
See footnotes on page 11.
7
<PAGE> 110
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 Plus 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 Asset Allocation Division 5 $14 $ 43 $ 75 $165
AGSPC Capital Conservation Division 7 14 43 75 165
AGSPC Government Securities Division 8 14 43 75 164
AGSPC Growth Division 15 17 52 90 197
AGSPC Growth & Income Division 16 16 51 88 192
AGSPC International Equities Division 11 12 39 67 148
AGSPC International Government Bond Division 13 14 43 75 164
AGSPC MidCap Index Division 4 12 38 66 146
AGSPC Money Market Division 6 14 43 75 165
AGSPC Science & Technology Division 17 18 55 96 208
AGSPC Small Cap Index Division 14 12 38 67 147
AGSPC Social Awareness Division 12 14 43 75 164
AGSPC Stock Index Division 10 12 36 63 139
American Century -- Twentieth Century Ultra
Division 31 19 58 100 216
American General Balanced Division 42 14 44 76 166
American General Conservative Growth Lifestyle Division 50 7 21 36 81
American General Domestic Bond Division 43 14 44 76 167
American General Growth Lifestyle Division 48 7 21 36 81
American General International Growth Division 33 17 54 93 202
American General International Value Division 34 16 50 87 189
American General Large Cap Growth Division 39 14 45 77 170
American General Large Cap Value Division 40 14 43 75 164
American General Mid Cap Growth Division 37 14 43 74 163
American General Mid Cap Index Division 46 12 36 63 139
American General Mid Cap Value Division 38 16 51 87 191
American General Moderate Growth Lifestyle
Division 49 7 21 36 81
American General Money Market Division 44 11 35 61 136
American General S&P 500 Index Division 47 12 36 62 138
American General Small Cap Growth Division 35 17 54 93 202
American General Small Cap Index Division 45 12 36 63 139
American General Small Cap Value Division 36 16 49 84 184
American General Socially Responsible Division 41 11 35 61 136
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 14 42 73 161
Founders Growth Division 30 19 60 103 223
Neuberger&Berman Guardian Trust
Division 29 17 53 91 199
Putnam Global Growth Division 28 21 64 110 237
Putnam New Opportunities Division 26 19 59 101 218
Putnam OTC & Emerging Growth Division 27 20 62 106 229
Scudder Growth and Income Division 21 16 49 85 186
T. Rowe Price Small-Cap Stock Division 51 21 65 111 240
Templeton Foreign Division 32 19 59 102 221
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 14 42 73 161
Templeton International: Class 1 Division 20 15 45 78 172
Vanguard LifeStrategy Conservative Growth Portfolio Division
54 14 42 74 162
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio Division 22 11 36 62 137
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio Division 23 11 34 59 131
Vanguard LifeStrategy Growth Portfolio Division 52 14 42 74 162
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 14 42 74 162
Vanguard/Wellington Division 25 14 42 74 162
Vanguard/Windsor II Division 24 14 45 78 171
</TABLE>
8
<PAGE> 111
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 Plus 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 Asset Allocation Division 5 $15 $ 45 $ 78 $171
AGSPC Capital Conservation Division 7 15 45 78 171
AGSPC Government Securities Division 8 14 45 78 170
AGSPC Growth Division 15 17 54 93 203
AGSPC Growth & Income Division 16 17 53 91 198
AGSPC International Equities Division 11 13 40 70 155
AGSPC International Government Bond Division 13 14 45 78 170
AGSPC MidCap Index Division 4 13 39 69 152
AGSPC Money Market Division 6 15 45 78 171
AGSPC Science & Technology Division 17 18 57 98 214
AGSPC Small Cap Index Division 14 13 40 70 153
AGSPC Social Awareness Division 12 14 45 78 170
AGSPC Stock Index Division 10 12 38 66 145
American Century -- Twentieth Century Ultra Division 31 19 60 103 222
American General Balanced Division 42 17 45 79 172
American General Conservative Growth Lifestyle
Division 50 7 23 39 88
American General Domestic Bond Division 43 15 46 79 174
American General Growth Lifestyle Division 48 7 23 39 88
American General International Growth Division 33 18 56 96 208
American General International Value Division 34 17 52 90 195
American General Large Cap Growth Division 39 15 46 80 176
American General Large Cap Value Division 40 14 45 78 170
American General Mid Cap Growth Division 37 14 45 77 169
American General Mid Cap Index Division 46 12 38 66 145
American General Mid Cap Value Division 38 17 52 90 197
American General Moderate Growth Lifestyle Division 49 7 23 39 88
American General Money Market Division 44 12 37 64 142
American General S&P 500 Index Division 47 12 38 65 144
American General Small Cap Growth Division 35 18 56 96 208
American General Small Cap Index Division 45 12 38 66 145
American General Small Cap Value Division 36 16 50 87 190
American General Socially Responsible Division 41 12 37 64 142
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 18 55 94 205
Founders Growth Division 30 20 61 106 229
Neuberger&Berman Guardian Trust Division 29 18 55 94 205
Putnam Global Growth Division 28 21 66 113 243
Putnam New Opportunities Division 26 19 60 104 224
Putnam OTC & Emerging Growth Division 27 20 63 109 235
Scudder Growth and Income Division 21 16 51 88 192
T. Rowe Price Small-Cap Stock Division 51 22 67 114 246
Templeton Foreign Division 32 20 61 105 226
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 19 59 102 221
Templeton International: Class 1 Division 20 20 62 107 232
Vanguard LifeStrategy Conservative Growth Portfolio
Division 54 14 44 76 168
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio Division 22 12 37 65 143
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio Division 23 11 36 62 137
Vanguard LifeStrategy Growth Portfolio Division 52 14 44 76 168
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 14 44 76 168
Vanguard/Wellington Division 25 14 44 76 168
Vanguard/Windsor II Division 24 15 47 81 177
</TABLE>
9
<PAGE> 112
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 Plus 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 Asset Allocation Division 5 $61 $ 95 $128 $171
AGSPC Capital Conservation Division 7 61 95 128 171
AGSPC Government Securities Division 8 61 95 128 170
AGSPC Growth Division 15 64 104 143 203
AGSPC Growth & Income Division 16 63 102 141 198
AGSPC International Equities Division 11 60 90 120 155
AGSPC International Government Bond Division 13 61 95 128 170
AGSPC MidCap Index Division 4 59 90 119 152
AGSPC Money Market Division 6 61 95 128 171
AGSPC Science & Technology Division 17 65 107 148 214
AGSPC Small Cap Index Division 14 60 90 120 153
AGSPC Social Awareness Division 12 61 95 128 170
AGSPC Stock Index Division 10 59 88 116 145
American Century -- Twentieth Century Ultra Division 31 66 109 153 222
American General Balanced Division 42 61 95 129 172
American General Conservative Growth Lifestyle
Division 50 54 73 89 88
American General Domestic Bond Division 43 61 96 129 174
American General Growth Lifestyle Division 48 54 73 89 88
American General International Growth Division 33 64 105 146 208
American General International Value Division 34 63 102 140 195
American General Large Cap Growth Division 39 61 96 130 176
American General Large Cap Value Division 40 61 95 128 170
American General Mid Cap Growth Division 37 61 95 127 169
American General Mid Cap Index Division 46 59 88 116 145
American General Mid Cap Value Division 38 63 102 140 197
American General Moderate Growth Lifestyle Division 49 54 73 89 88
American General Money Market Division 44 59 87 114 142
American General S&P 500 Index Division 47 59 88 115 144
American General Small Cap Growth Division 35 64 105 146 208
American General Small Cap Index Division 45 59 88 116 145
American General Small Cap Value Division 36 63 100 137 190
American General Socially Responsible Division 41 59 87 114 142
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 64 104 144 205
Founders Growth Division 30 66 111 156 229
Neuberger&Berman Guardian Trust Division 29 64 104 144 205
Putnam Global Growth Division 28 68 115 163 243
Putnam New Opportunities Division 26 66 110 154 224
Putnam OTC & Emerging Growth Division 27 67 112 159 235
Scudder Growth and Income Division 21 63 101 138 192
T. Rowe Price Small-Cap Stock Division 51 68 116 164 246
Templeton Foreign Division 32 66 110 155 226
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 66 109 152 221
Templeton International: Class 1 Division 20 67 112 157 232
Vanguard LifeStrategy Conservative Growth Portfolio
Division 54 61 94 126 168
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 59 87 115 143
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 58 86 112 137
Vanguard LifeStrategy Growth Portfolio Division 52 61 94 126 168
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 61 94 126 168
Vanguard/Wellington Division 25 61 94 126 168
Vanguard/Windsor II Division 24 62 97 131 177
</TABLE>
10
<PAGE> 113
- --------------------------------------------------------------------------------
- ------------
(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, Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee Charges" and "Exceptions to Surrender
Charge" in this prospectus.
(3) Reductions in the mortality and expense risk fee or administration and
distribution fee may be available for plan types meeting certain criteria.
See "Reduction or Waiver of Account Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration Fee Charges" in this prospectus.
(4) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account A mortality and expense risk fee plus the administration and
distribution fee 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 and/or its affiliate or distributors 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 and/or their affiliates or distributors pay
administrative, shareholder service or distribution fees to the Company:
American Century -- Twentieth Century (0.21%), American General Funds
(0.25%), Dreyfus (0.15%), Founders (0.25%), Neuberger&Berman (0.25%),
Putnam (0.25%), Scudder (0.25%) and Templeton (0.25%) With respect to
American Century -- Twentieth Century Ultra Fund, the Fund pays fees to the
Company of 0.20% on assets in excess of $0 but less than $75 million, and
0.25% on assets in excess of $75 million.
(5) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account A mortality and expense risk fee plus the administration and
distribution fee reduced by the Separate Account Expense Reimbursement. The
Separate Account Expense Reimbursement reflects a voluntary expense
reimbursement made by the Company directly to the Division which may be
terminated by the Company at any time without notice.
(6) OTHER EXPENSES includes custody, accounting, reports to shareholders,
audit, legal, administrative and other miscellaneous expenses. See each
Fund's prospectus for a detailed explanation of these fees.
(7) Neuberger&Berman Guardian Trust ("Trust") has identical investment
objectives and policies and invests in, the same portfolio as
Neuberger&Berman Guardian Fund ("Fund"). Both the Fund and Trust are
managed by Neuberger&Berman Management Incorporated ("N&B"). N&B
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. For this Fund, MANAGEMENT FEES
include administration expenses.
(8) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(9) For these Funds Management fees and Total Fund Expenses have been restated
to reflect the management fee schedule approved by shareholders and
effective May 1, 1997. See Fund prospectus for details. Actual Management
Fees and Total Fund Expenses during 1997 were lower.
(10) After expense reimbursement. In the absence of the expense reimbursement,
management fees, other expenses and total fund operating expenses,
respectively, would be: Balanced Fund, 0.80%, 0.67% and 1.47%; Domestic
Bond Fund, 0.60%, 0.74% and 1.34%; International Growth Fund, 0.90%, 0.96%
and 1.86%; International Value Fund, 1.00%, 0.78% and 1.78%; Large Cap
Growth Fund, 0.55%, 0.70% and 1.25%; Large Cap Value Fund, 0.50%, 0.70% and
1.20%; Mid Cap Growth Fund, 0.65%, 0.67% and 1.32%; Mid Cap Index Fund,
0.28%, 0.76% and 1.04%; Mid Cap Value Fund, 0.75%, 0.67% and 1.42%; Money
Market Fund, 0.25%, 0.75% and 1.00%; S&P 500 Index Fund, 0.27%, 0.61% and
0.88%; Small Cap Growth Fund, 0.85%, 0.63% and 1.48%; Small Cap Index Fund,
0.28%, 0.85% and 1.13%; Small Cap Value Fund, 0.75%, 0.63% and 1.38%; and
Socially Responsible Fund, 0.25%, 0.76% and 1.01%.
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.
11
<PAGE> 114
Selected Purchase Unit Data
---------------------------------------------------------------------------
Portfolio Director Plus Series 1.20 to 12.20 is a new variable annuity product;
therefore, there is no Selected Purchase Unit Data available at this time.
12
<PAGE> 115
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR PLUS
Portfolio Director Plus 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 Plus can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director Plus will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
Plus 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 Plus.
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 Plus. 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.
VALIC is a member of the Insurance Marketplace Standards Association (IMSA).
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. VALIC's membership in IMSA applies to VALIC only and not its
products or affiliates.
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director Plus'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 Plus. 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." Fifty Divisions are
available and represent the Variable Account Options in Portfolio Director Plus.
Each of these Divisions invests in a different Mutual Fund made available
through Portfolio Director Plus. For example, Division Ten represents and
invests in the AGSPC 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 Plus. 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 Plus, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director Plus,
the Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director Plus be held exclusively for the benefit of
the contract owner, participants, annuitants, and beneficiaries of Portfolio
Director Plus. 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.
All inquiries regarding
PORTFOLIO DIRECTOR PLUS
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
13
<PAGE> 116
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director Plus enables you to participate in Divisions that represent
fifty Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available through VALIC Separate Account A. You
may not according to your retirement program be able to invest in all fifty
Variable Account Options described in this prospectus. 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 Plus and include:
- - American General Series Portfolio
Company 1 (AGSPC 1) -- offers 13 funds, for which VALIC serves as investment
adviser.
- - American General Series Portfolio Company 3 (AGSPC 3) -- offers 18 funds for
which VALIC serves as investment adviser.
- - American Century Investments -- offers 1 fund for which American Century
Investment Management, Inc. serves as investment adviser.
- - Dreyfus Variable Investment Fund -- offers 1 fund, for which The Dreyfus
Corporation serves as investment adviser.
- - Founders Funds, Inc. -- offers 1 fund for which Founders Asset Management LLC
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 Kemper Investments, Inc. -- offers 1 fund for which Scudder Kemper
Investments, Inc. serves as investment adviser.
- - T. Rowe Price Small-Cap Stock Fund, Inc. -- offers 1 fund for which T. Rowe
Price Associates, Inc. serves as investment adviser.
- - Templeton Funds Inc. -- offers 3 funds for which Templeton Global Advisors
Limited and Templeton Investment Counsel, Inc. serves as investment advisers.
- - The Vanguard Group Inc. -- offers 7 funds for which Barrow, Hanley, Mewhinney
& Strauss, Inc., Equinox Capital Management, Inc., Tukman Capital Management,
Inc., Vanguard Core Management Group, Wellington Management Company, LLP and
Vanguard Fixed Income Group serve as investment advisers.
Sixteen of the Mutual Funds offered through VALIC's Separate Account A are also
available to the general public.
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 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 fees plus administration and distribution fees 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 in the graphs reflect
Separate Account performance based on the performance of the underlying Fund for
the last 10 fiscal years or, since inception of the underlying Fund if for less
than 10 years. The returns shown in the tables for all Funds other than the
AGSPC 3 Funds reflect the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
Since the AGSPC 3 Funds began operations on , 1998, no actual
performance history exists. The returns shown in the tables for those AGSPC 3
Funds reflect the performance of comparable funds or composites managed by the
subadvisers for the Funds as described in the accompanying narrative. The actual
performance of each Fund has been reduced by Separate Account fees that would
have been incurred under the Contract. Investment return and principal value
will fluctuate with market conditions, and for foreign investments, currencies
and the economic and political climates of the countries where investments are
made. Past performance cannot predict or guarantee future results.
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 Plus.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
14
<PAGE> 117
AGSPC ASSET ALLOCATION 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,970
03/31/90 12,011
03/31/91 13,021
03/31/92 13,775
03/31/93 14,679
03/31/94 14,784
03/31/95 15,743
03/31/96 18,941
03/31/97 20,649
03/31/98 26,917
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
AGSPC 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,258
03/31/90 11,110
03/31/91 11,472
03/31/92 12,873
03/31/93 14,798
03/31/94 14,890
03/31/95 15,323
03/31/96 16,867
03/31/97 17,398
03/31/98 19,244
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
15
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
<PAGE> 118
AGSPC 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,247
03/31/90 11,102
03/31/91 12,039
03/31/92 13,231
03/31/93 15,059
03/31/94 15,205
03/31/95 15,614
03/31/96 17,010
03/31/97 17,472
03/31/98 19,319
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 11,265
03/31/96 15,969
03/31/97 16,589
03/31/98 24,369
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
16
<PAGE> 119
AGSPC 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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 10,781
03/31/96 14,003
03/31/97 15,451
03/31/98 21,004
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
AGSPC 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
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 8,402
03/31/91 8,637
03/31/92 7,794
03/31/93 8,556
03/31/94 10,253
03/31/95 10,733
03/31/96 12,051
03/31/97 12,132
03/31/98 14,276
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
17
<PAGE> 120
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
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 10,334
03/31/93 11,793
03/31/94 12,802
03/31/95 14,814
03/31/96 15,101
03/31/97 15,003
03/31/98 15,121
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
18
<PAGE> 121
AGSPC 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 April 1,
1988 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 of this prospectus.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 11,004
03/31/93 12,513
03/31/94 13,095
03/31/95 14,045
03/31/96 17,869
03/31/97 19,495
03/31/98 28,713
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,064
03/31/90 12,109
03/31/91 12,405
03/31/92 13,239
03/31/93 15,055
03/31/94 15,754
03/31/95 16,898
03/31/96 21,498
03/31/97 23,454
03/31/98 34,545
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400" are
trademarks of Standard and Poor's ("S&P"). The AGSCP MidCap 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.
19
<PAGE> 122
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,697
03/31/90 11,529
03/31/91 12,294
03/31/92 12,791
03/31/93 13,068
03/31/94 13,317
03/31/95 13,805
03/31/96 14,434
03/31/97 15,033
03/31/98 15,695
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 13,771
03/31/96 20,520
03/31/97 19,574
03/31/98 26,268
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
20
<PAGE> 123
AGSPC 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
- ------------------------- -------
<S> <C>
05/01/92 $10,000
03/31/93 11,467
03/31/94 12,361
03/31/95 12,829
03/31/96 16,316
03/31/97 17,078
03/31/98 23,983
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 9,972
03/31/91 11,200
03/31/92 11,869
03/31/93 13,449
03/31/94 13,205
03/31/95 14,841
03/31/96 19,563
03/31/97 23,482
03/31/98 34,336
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
* The Russell(R) Index is a trademark/servicemark of the Frank Russell Trust
Company. Russell(TM) is a trademark of the Frank Russell Company.
21
<PAGE> 124
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 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,477
03/31/90 13,439
03/31/91 15,041
03/31/92 16,388
03/31/93 18,704
03/31/94 18,688
03/31/95 21,324
03/31/96 27,883
03/31/97 33,082
03/31/98 48,427
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
AMERICAN CENTURY --
TWENTIETH CENTURY ULTRA FUND
Investor Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,998
03/31/90 13,189
03/31/91 21,027
03/31/92 25,697
03/31/93 27,688
03/31/94 32,854
03/31/95 33,454
03/31/96 44,384
03/31/97 48,032
03/31/98 69,484
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The AGSPC 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> 125
AMERICAN GENERAL
BALANCED FUND
(Division 42)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks balanced accomplishment of (i) conservation of principal and (ii)
long-term growth of capital and income through investment in fixed income and
equity securities.
The Balanced Fund commenced operations on . However, the Fund's
investment objectives, policies and strategies are substantially similar to
those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund is for a composite of such similar accounts ("Sub-adviser Composite").
The Sub-adviser Composite represents the total return, gross of management fees,
of all relevant accounts managed on a discretionary basis by the institutional
investment management division of the subadviser. The inception dates of the
accounts comprising the Sub-adviser Composite range from December 31, 1974 to
September 30, 1997. The discretionary accounts in the Sub-adviser Composite are
not subject to the investment limitations, diversification requirements and
other restrictions imposed on register of mutual funds by the Investment Company
Act of 1940 and the Internal Revenue Code. If the accounts included in the
Sub-adviser Composite had been subject to the requirements imposed on registered
mutual funds, their performance might have been lower. Please refer to the
prospectus for the Fund for further information regarding the Fund's use of
performance information for the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,117
03/31/90 12,648
03/31/91 14,125
03/31/92 15,664
03/31/93 17,735
03/31/94 18,069
03/31/95 19,744
03/31/96 24,395
03/31/97 27,338
03/31/98 35,580
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
23
<PAGE> 126
AMERICAN GENERAL CONSERVATIVE
GROWTH LIFESTYLE FUND
(Division 50)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low to moderate growth of capital through investments
in Series Company Funds.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
24
<PAGE> 127
AMERICAN GENERAL DOMESTIC
BOND FUND
(Division 43)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in debt instruments and other income producing securities.
The Domestic Bond Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund is for a composite of such similar accounts ("Sub-adviser Composite").
The Sub-adviser Composite represents the total return, gross of management fees,
of all relevant accounts managed on a discretionary basis by the institutional
investment management division of the Sub-adviser. The inception date of the
accounts comprising the Sub-adviser Composite range from December 31, 1972 to
March 1, 1998. The discretionary accounts in the Subadviser Composite are not
subject to the investment limitations, diversification requirements and other
restrictions imposed on registered mutual funds by the Investment Company Act of
1940 and the Internal Revenue Code. If the accounts included in the Sub-adviser
Composite had been subject to the requirements imposed on registered mutual
funds, their performance might have been lower. Please refer to the prospectus
for the Fund for further information regarding the Fund's use of performance
information for the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,356
03/31/90 11,461
03/31/91 12,920
03/31/92 14,349
03/31/93 16,402
03/31/94 16,292
03/31/95 16,796
03/31/96 18,339
03/31/97 19,095
03/31/98 21,103
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
25
<PAGE> 128
AMERICAN GENERAL GROWTH
LIFESTYLE FUND
(Division 48)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth through investments in Series Company Funds. The Fund is suitable
for investors seeking the potential for capital growth that a fund investing
predominately in common stocks may offer.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
26
<PAGE> 129
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND
(Division 33)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation by investing in equity
securities of companies in developed and emerging markets. The Fund may invest
across the capitalization spectrum, although it intends to emphasize smaller
capitalization stocks.
1. The Templeton Performance Information
The International Growth Fund commenced operations on . The
performance information shown below is for the Templeton International Fund, a
series of the Templeton Variable Products Series Fund, which was managed by Mr.
Jacobs, a principal of the Sub-adviser. The Templeton International Fund has
substantially similar, though not necessarily identical objectives, policies and
strategies as the International Growth Fund. The chart shows the historical
investment performance for the periods ended June 30. The inception date for the
Templeton International Fund was May 1, 1992. During Mr. Jacobs tenure as
portfolio manager, from May 1, 1992 to June 30, 1995, he was primarily
responsible for the day-to-day management of the fund, and no other person had a
significant role in achieving the fund's performance.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
06/30/92 9,711
06/30/93 10,513
06/30/94 12,965
06/30/95 14,209
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED JUNE 30, 1995
27
<PAGE> 130
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND -- (CONTINUED)
(Division 33)
- --------------------------------------------------------------------------------
2. The Separate Account Performance Information
Although the International Growth Fund has no performance record, the Fund's
investment objectives, policies and strategies will be substantially similar to
those employed by the Sub-adviser with respect to certain separately managed
accounts of the Sub-adviser. The chart below shows the historical investment
performance (with the adjustments noted below) for a composite of the
Sub-adviser's similar accounts which use the same investment strategy that the
Sub-adviser will employ on behalf of the Fund. The Sub-adviser Composite
represents the total return, net of all fees and expenses, of all relevant
separately managed accounts of the Sub-adviser. The inception date of the
Sub-adviser Composite was October 1, 1995.
The separately managed account in the Sub-adviser Composite were not subject to
the investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code. If the accounts included in the Sub-adviser Composite has
been subject to the requirements imposed on registered mutual funds, their
performance might have been lower.
Please refer to the prospectus of the Fund for further information regarding the
Fund's use of performance information for the International Growth Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1995 $ Value
- ------------------------- -------
<S> <C>
10/01/95 $10,000
03/31/96 10,596
03/31/97 13,680
03/31/98 16,195
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1995
[CHART]
PERIOD ENDED MARCH 31
28
<PAGE> 131
AMERICAN GENERAL INTERNATIONAL
VALUE FUND
(Division 34)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital and future income through investments
primarily in securities of non-U.S. issuers and securities whose principal
markets are outside of the United States.
The International Value Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund reflects the historical investment performance (with the adjustments
noted below) for a composite of the Sub-adviser's similar accounts which use the
same investment strategy that the subadviser will employ on behalf of the Fund
("Sub-adviser Composite"). The Sub-adviser Composite represents the total return
gross of management fees, of all relevant accounts managed on a discretionary
basis by the institutional investment management division of the Sub-adviser.
The inception date of the discretionary accounts comprising the Sub-adviser
Composite range from December 31, 1978 to March 31, 1998. The discretionary
accounts in the Sub-adviser Composite are not subject to the investment
limitations, diversification requirements and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. If the accounts included in the Sub-adviser Composite had been
subject to the requirements imposed on registered mutual funds, their
performance might have been lower. Please refer to the prospectus for the Fund
for further information regarding the Fund's use of performance information for
the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,606
03/31/90 12,150
03/31/91 12,275
03/31/92 12,620
03/31/93 13,566
03/31/94 16,992
03/31/95 16,851
03/31/96 19,836
03/31/97 22,058
03/31/98 26,941
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AT APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
29
<PAGE> 132
AMERICAN GENERAL LARGE CAP
GROWTH FUND
(Division 39)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through a broadly diversified portfolio of
equity securities of large cap U.S. issuers that are expected to have better
prospects for earnings growth than the growth rate of the general domestic
economy. Dividend income is a secondary consideration.
The Large Cap Growth Fund commenced operation on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the Goldman Sachs CORE Large Cap Growth Fund and it is managed in
substantially the same manner and by the same individuals as the Goldman Sachs
CORE Large Cap Growth Fund. Performance information prior to November 11, 1991
(commencement date for Goldman Sachs CORE Large Cap Growth Fund) is that of a
predecessor separate account adjusted to reflect the higher fees and expenses
applicable to Goldman Sachs CORE Large Cap Growth Fund. Although the predecessor
separate account was managed by the Sub-adviser in substantially the same manner
and by the same individuals as the Goldman Sachs CORE Large Cap Growth Fund, the
separate account was not registered under the Investment Company Act of 1940
(the "1940 Act") and was not subject to certain investment restrictions imposed
by the 1940 Act and the Internal Revenue Code. If it had been registered under
the 1940 Act, performance might have been adversely affected. Please refer to
the prospectus for the Fund for further information regarding the Fund's use of
performance information for the Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
December 1, 1991 $ Value
- ------------------------- -------
<S> <C>
12/01/91 $10,000
03/31/92 10,830
03/31/93 10,940
03/31/94 13,044
03/31/95 14,158
03/31/96 19,448
03/31/97 25,098
03/31/98 32,093
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE DECEMBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
30
<PAGE> 133
AMERICAN GENERAL LARGE CAP
VALUE FUND
(Division 40)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the S&P 500 Index through
investments in equity securities.
The Large Cap Value Fund commenced operations on . However, the
Fund is managed in substantially the same manner and by the same individuals as
those employed by the Sub-adviser for discretionary accounts (the "Discretionary
Accounts") managed by the Sub-adviser with similar investment objectives,
policies and strategies. The Discretionary Accounts are not subject to the
investment limitations, diversification and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. The performance information for the Fund reflects the historical
performance for the Discretionary Accounts. If it had been subject to such
regulation, performance might have been adversely affected. The inception date
for the Discretionary Accounts range from August 1, 1992 through August 1, 1997.
Please refer to the prospectus for the Fund for further information regarding
the Fund's use of related performance information for the Discretionary Account.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 1, 1992 $ Value
- ------------------------- -------
<S> <C>
08/01/92 $10,000
03/31/93 11,419
03/31/94 11,721
03/31/95 12,828
03/31/96 16,803
03/31/97 20,340
03/31/98 32,004
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 1, 1992
[CHART]
PERIOD ENDED MARCH 31
31
<PAGE> 134
AMERICAN GENERAL MID CAP
GROWTH FUND
(Division 37)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in equity securities,
such as common and preferred stocks and securities convertible into common
stocks. Current income is of secondary importance.
The Mid Cap Growth Fund commenced operations on . However, the
Fund's investment objective and policies and the Fund's strategies are
substantially similar to those employed by the Sub-adviser with respect to
certain discretionary investment management accounts under their management
("Combined Accounts"). The performance information for the Fund reflects the
historical performance for the Combined Accounts ("Combined Accounts
Composite"). The Combined Accounts Composite includes all discretionary accounts
managed by the Sub-adviser invested principally in equity securities of medium
capitalization companies using the same investment strategy that the subadviser
will employ on behalf of the Fund. The inception date of the discretionary
investment management accounts comprising the Combined Accounts Composite range
from January 1, 1993 to October 1, 1997. The discretionary accounts in the
Combined Accounts Composite are not subject to the investment limitations,
diversification requirements and other restrictions imposed on registered mutual
funds by the Investment Company Act of 1940 and the Internal Revenue Code. If
the accounts included in the Combined Accounts Composite had been subject to the
requirements imposed on registered mutual funds, then performance might have
been lower. Please refer to the prospectus for the Fund for further information
regarding the Fund's use of performance information for the Combined Accounts
Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1993 $ Value
- ------------------------- -------
<S> <C>
01/01/93 $10,000
03/31/93 9,726
03/31/94 10,610
03/31/95 11,615
03/31/96 15,000
03/31/97 16,194
03/31/98 23,033
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1993
[CHART]
PERIOD ENDED MARCH 31
32
<PAGE> 135
AMERICAN GENERAL MID CAP
INDEX FUND
(Division 46)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital through investments primarily in a
diversified portfolio of common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P MidCap
400 Index*.
The Mid Cap Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the American General Series Portfolio Company's MidCap Index Fund ("AGSPC
MidCap Index Fund") and it is managed in substantially the same manner and by
the same individuals as the AGSPC MidCap Index Fund. The performance information
for the Fund is for the AGSPC MidCap Index Fund and is shown in two separate
sets of tables and graphs for the ten year period beginning April 1, 1988 and
for the period beginning October 1, 1991. The inception date for the AGSPC
MidCap Index Fund was October 13, 1982. Please refer to the prospectus for the
Fund for further information regarding the Fund's use of performance information
for the AGSPC MidCap Index Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 11,020
03/31/93 12,569
03/31/94 13,174
03/31/95 14,168
03/31/96 18,079
03/31/97 19,777
03/31/98 29,218
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
*"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"). The American General Mid Cap 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.
33
<PAGE> 136
AMERICAN GENERAL MID CAP
INDEX FUND
(Division 46)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,094
03/31/90 12,175
03/31/91 12,503
03/31/92 13,721
03/31/93 15,649
03/31/94 16,402
03/31/95 17,640
03/31/96 22,509
03/31/97 24,623
03/31/98 36,378
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
34
<PAGE> 137
AMERICAN GENERAL MID CAP
VALUE FUND
(Division 38)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth through investment in common stocks of
medium-to-large-capitalization established companies using a value-oriented
investment approach.
The Mid Cap Value Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those of the Neuberger&Berman Partners Fund and it is managed in
substantially the same manner and by the same individuals as the
Neuberger&Berman Partners Fund. The performance information for the Fund is for
the Neuberger&Berman Partners Fund for the period April 1, 1988 through March
31, 1998. The inception date for the Neuberger&Berman Partners Fund was January
20, 1975. Please refer to the prospectus for the Fund for further information
regarding the Fund's use of performance information for the Neuberger& Berman
Partners Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 9,945
03/31/90 11,141
03/31/91 12,214
03/31/92 13,796
03/31/93 16,508
03/31/94 17,410
03/31/95 19,441
03/31/96 25,888
03/31/97 30,619
03/31/98 43,109
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
35
<PAGE> 138
AMERICAN GENERAL MODERATE
GROWTH LIFESTYLE FUND
(Division 49)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth and current income through investments in Series Company Funds.
This Fund is suitable for investors who wish to invest in stocks, but who are
not willing to assume the substantial market risks of the Lifestyle Growth Fund.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
36
<PAGE> 139
AMERICAN GENERAL MONEY
MARKET FUND
(Division 44)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
The Money Market Fund commenced operations on . However, the Fund's
investment objectives, policies and strategies are substantially similar to
those of the American General Series Portfolio Company's Money Market Fund
("AGSPC Money Market Fund") and it is managed in substantially the same manner
and by the same individuals as the AGSPC Money Market Fund. The performance
information for the Fund is for the AGSPC Money Market Fund for the period April
1, 1988 to March 31, 1998. The inception date for the AGSPC Money Market Fund
was January 16, 1986. Please refer to the prospectus for the Fund for further
information regarding the Fund's use of performance information for the AGSPC
Money Market Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,723
03/31/90 11,582
03/31/91 12,380
03/31/92 12,915
03/31/93 13,227
03/31/94 13,490
03/31/95 14,019
03/31/96 14,695
03/31/97 15,343
03/31/98 16,059
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
37
<PAGE> 140
AMERICAN GENERAL S&P 500
INDEX FUND
(Division 47)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide investment results that, before expenses correspond to the
total return (i.e. the combination of capital changes and income) of common
stocks publicly traded in the United States, as represented by the S&P 500
Index.
The S&P 500 Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the BT Pyramid Large Cap Equity Index Fund and it is managed in substantially
the same manner and by the same individuals as the BT Pyramid Large Cap Equity
Index Fund. The performance information for the Fund is for the BT Pyramid Large
Cap Equity Index Fund for the period April 1, 1988 to March 31, 1998. The
inception date for the BT Pyramid Large Cap Equity Index Fund was May 31, 1977.
Please refer to the prospectus for the Fund for further information regarding
the Fund's use of performance information for BT Pyramid Large Cap Equity Index
Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,723
03/31/90 13,720
03/31/91 15,756
03/31/92 17,368
03/31/93 19,879
03/31/94 19,870
03/31/95 22,818
03/31/96 29,965
03/31/97 35,662
03/31/98 52,447
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
38
<PAGE> 141
AMERICAN GENERAL SMALL CAP
GROWTH FUND
(Division 35)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth from a portfolio of small company growth
stocks.
The Small Cap Growth Fund commenced operations on . However, the
Fund's investment objective and policies and the Fund's strategies are
substantially similar to those employed by the subadviser and its affiliates
with respect to certain discretionary investment management accounts under their
management ("Combined Accounts"). The performance information for the Fund
reflects the historical performance for these Combined Accounts ("Combined
Accounts Composite"). The Combined Accounts Composite includes all non-mutual
fund discretionary accounts managed by the Sub-adviser and its affiliates
invested solely in the equity securities of small capitalization companies using
the same investment strategy that the Sub-adviser employs on behalf of the Fund.
The inception date of the discretionary accounts comprising the Combined
Accounts Composite range from September 1, 1994 to June 1, 1997. The
discretionary accounts in the Combined Accounts Composite are not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code. If the accounts included in the Combined Accounts
Composite had been subject to the requirements imposed on registered mutual
funds, their performance might have been lower. Please refer to the prospectus
for the Fund for further information regarding the Fund's use of performance
information for the Combined Accounts Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 1, 1994 $ Value
- ------------------------- -------
<S> <C>
09/01/94 $10,000
03/31/95 10,469
03/31/96 14,602
03/31/97 16,067
03/31/98 24,564
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 1, 1994
[CHART]
PERIOD ENDED MARCH 31
39
<PAGE> 142
AMERICAN GENERAL SMALL CAP
INDEX FUND
(Division 45)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to replicate as closely as possible (before deduction of expenses) the
total return of the Russell 2000 Index, an index consisting of 2,000 small-
capitalization common stocks. The portfolio will include the common stock of one
or more companies included in the Index on the basis of computer-generated
statistical data, that are deemed representative of the industry diversification
of the entire Russell 2000 Index.
The Small Cap Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the BT Pyramid Russell 2000 Index Fund and it is managed in substantially the
same manner and by the same individuals as the BT Pyramid Russell 2000 Index
Fund. The performance information for the Fund is for BT Pyramid Russell 2000
Index Fund for the period April 1, 1988 through March 31, 1998. The inception
date for BT Advisor Funds Small Cap Index Fund was October 31, 1987. Please
refer to the prospectus for the Fund for further information regarding the
Fund's use of performance information for BT Pyramid Russell 2000 Index Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,975
03/31/90 11,553
03/31/91 12,654
03/31/92 15,317
03/31/93 16,874
03/31/94 18,458
03/31/95 19,523
03/31/96 24,834
03/31/97 26,084
03/31/98 36,954
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
40
<PAGE> 143
AMERICAN GENERAL SMALL CAP
VALUE FUND
(Division 36)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks maximum long-term return, consistent with reasonable risk to principal by
investing primarily in common stocks of smaller companies in terms of revenues
and/or market capitalization.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
41
<PAGE> 144
AMERICAN GENERAL SOCIALLY
RESPONSIBLE FUND
(Division 41)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in common
stocks, in companies which meet the social criteria established for the Fund.
The Socially Responsible Fund commenced operations on . However,
the Fund's investment objectives, policies and strategies are substantially
similar to those of the American General Series Portfolio Company's Social
Awareness Fund ("AGSPC Social Awareness Fund") and it is managed in
substantially the same manner and by the same individuals as the AGSPC Social
Awareness Fund. The performance information for the Fund is for the AGSPC Social
Awareness Fund for the period October 2, 1989 through March 31, 1998. The
inception date for the AGSPC Social Awareness Fund was October 2, 1989. Please
refer to the prospectus for the Fund for further information regarding the
Fund's use of performance information for the AGSPC Social Awareness Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 2, 1989 $ Value
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 10,022
03/31/91 11,267
03/31/92 11,970
03/31/93 13,604
03/31/94 13,361
03/31/95 15,059
03/31/96 19,912
03/31/97 23,969
03/31/98 35,157
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
42
<PAGE> 145
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 or services which should enhance
prospects for growth in future earnings.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1990 $ Value
- ------------------------- -------
<S> <C>
08/31/90 $10,000
03/31/91 12,869
03/31/92 30,796
03/31/93 49,745
03/31/94 74,691
03/31/95 82,946
03/31/96 105,315
03/31/97 107,928
03/31/98 148,142
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,174
03/31/90 13,347
03/31/91 14,890
03/31/92 17,577
03/31/93 20,392
03/31/94 23,850
03/31/95 24,960
03/31/96 35,158
03/31/97 38,589
03/31/98 54,683
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
43
<PAGE> 146
NEUBERGER&BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of long-established, high quality companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,866
03/31/90 12,865
03/31/91 14,777
03/31/92 17,204
03/31/93 20,718
03/31/94 21,851
03/31/95 24,613
03/31/96 30,430
03/31/97 34,459
03/31/98 45,588
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,779
03/31/90 12,278
03/31/91 12,892
03/31/92 13,294
03/31/93 14,470
03/31/94 17,108
03/31/95 17,014
03/31/96 20,926
03/31/97 23,089
03/31/98 29,561
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* Neuberger&Berman Guardian Trust ("Trust") started operating on August 3,
1993. It has identical investment objectives and policies and invests in the
same portfolio as Neuberger&Berman Guardian Fund(SM) ("Fund"), which is also
managed by Neuberger& Berman Management Incorporated ("N&B Management"). The
performance information for the Trust before August 3, 1993 is for the Fund.
N&B Management voluntarily bears certain operating 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 per annum. This arrangement can be terminated on sixty days' prior
written notice. Absent such arrangement, the average annual total returns of
the Trust would have been less. The total returns for the periods prior to
the Trust's commencement of operations would have been lower had they
reflected the higher expense ratios of the Trust as compared to those of the
Fund.
44
<PAGE> 147
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
- ------------------------- -------
<S> <C>
08/31/90 $10,000
03/31/91 13,871
03/31/92 18,945
03/31/93 22,682
03/31/94 28,745
03/31/95 33,776
03/31/96 48,326
03/31/97 45,018
03/31/98 68,671
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,924
03/31/90 12,645
03/31/91 14,234
03/31/92 15,921
03/31/93 18,098
03/31/94 22,302
03/31/95 26,171
03/31/96 39,287
03/31/97 32,176
03/31/98 48,552
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
45
<PAGE> 148
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,378
03/31/90 12,476
03/31/91 14,130
03/31/92 16,192
03/31/93 18,548
03/31/94 19,403
03/31/95 21,668
03/31/96 28,041
03/31/97 32,902
03/31/98 46,566
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
T. ROWE PRICE SMALL-CAP STOCK FUND
(Division 51)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth through investments in securities of small to
medium-sized companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1992 $ Value
- ------------------------- -------
<S> <C>
08/31/92 $10,000
03/31/93 11,862
03/31/94 13,121
03/31/95 14,074
03/31/96 18,593
03/31/97 20,516
03/31/98 29,438
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1992
[CHART]
PERIOD ENDED MARCH 31
46
<PAGE> 149
TEMPLETON FOREIGN FUND
Class 1 Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. Any income realized will be incidental. The Fund
tries to achieve its goal by a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United States.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,675
03/31/90 14,533
03/31/91 14,801
03/31/92 16,286
03/31/93 17,305
03/31/94 21,689
03/31/95 21,701
03/31/96 24,935
03/31/97 28,823
03/31/98 32,630
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 24, 1988 $ Value
- ------------------------- -------
<S> <C>
08/24/88 $10,000
03/31/89 10,486
03/31/90 11,344
03/31/91 11,485
03/31/92 13,256
03/31/93 14,912
03/31/94 16,965
03/31/95 17,329
03/31/96 21,344
03/31/97 24,945
03/31/98 30,689
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 24, 1988
[CHART]
PERIOD ENDED MARCH 31
47
<PAGE> 150
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 would be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
03/31/93 9,944
03/31/94 13,065
03/31/95 12,929
03/31/96 15,716
03/31/97 19,046
03/31/98 24,032
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED MARCH 31
VANGUARD LIFESTRATEGY
CONSERVATIVE GROWTH PORTFOLIO
(Division 54)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of income and moderate long-term growth of capital and
income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,562
03/31/96 12,420
03/31/97 13,412
03/31/98 16,483
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
48
<PAGE> 151
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
CORPORATE PORTFOLIO
Institutional Class Shares
(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 bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,547
03/31/90 11,619
03/31/91 13,003
03/31/92 14,705
03/31/93 17,236
03/31/94 17,638
03/31/95 18,311
03/31/96 20,527
03/31/97 20,943
03/31/98 24,411
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
U.S. TREASURY PORTFOLIO
Institutional Class Shares
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high level of current income consistent with the maintenance of principal
and liquidity. The Portfolio invests primarily in long-term U.S. Treasury
securities backed by the full faith and credit of the U.S. Government. 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,558
03/31/90 11,652
03/31/91 12,986
03/31/92 14,268
03/31/93 16,737
03/31/94 17,169
03/31/95 17,767
03/31/96 20,062
03/31/97 20,278
03/31/98 23,856
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
49
<PAGE> 152
VANGUARD LIFESTRATEGY
GROWTH LIFESTYLE PORTFOLIO
(Division 52)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital and income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,692
03/31/96 13,253
03/31/97 14,624
03/31/98 19,665
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994 [CHART]
PERIOD ENDED MARCH 31
VANGUARD LIFESTRATEGY
MODERATE GROWTH PORTFOLIO
(Division 53)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a reasonable level of income and long-term growth of capital and income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,592
03/31/96 12,848
03/31/97 14,016
03/31/98 18,081
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
50
<PAGE> 153
VANGUARD/WELLINGTON FUND
Institutional Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,398
03/31/90 12,481
03/31/91 13,598
03/31/92 14,958
03/31/93 17,077
03/31/94 17,529
03/31/95 19,457
03/31/96 24,379
03/31/97 27,250
03/31/98 35,630
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
VANGUARD/WINDSOR II
Institutional Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 12,376
03/31/90 13,671
03/31/91 15,019
03/31/92 16,244
03/31/93 19,171
03/31/94 19,303
03/31/95 21,706
03/31/96 28,983
03/31/97 33,838
03/31/98 49,174
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
51
<PAGE> 154
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 Plus 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 Plus 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 is accompanied by 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 establish a
permanent account for you. Under those 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 Plus.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
52
<PAGE> 155
- --------------------------------------------------------------------------------
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 52 investment options offered in Portfolio Director Plus. This
includes 2 Fixed Account Options and 50 Variable Account 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 Plus 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 as permitted by your retirement
program. 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 Plus 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.
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.
53
<PAGE> 156
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 Plus 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
Plus'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
Plus'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.
54
<PAGE> 157
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director Plus, you may be subject to six basic types
of fees and charges:
- - Account Maintenance Fee
- - Surrender Charge
- - 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 Plus 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, Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee 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 CHARGE
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 CHARGE
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 CHARGE
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.
55
<PAGE> 158
- --------------------------------------------------------------------------------
- - 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; or
- - 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 charge may be reduced or waived if Portfolio Director Plus 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 a surrender charge may be reduced
or waived, see the "Reduction or Waiver of Account Maintenance Fee, Surrender,
Mortality and Expense Risk Fee or Administration and Distribution Fee 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 fee and an administration and
distribution fee applied to VALIC Separate Account A. This is a daily charge at
an aggregate annualized rate of 0.55% to 1.05% during the Purchase Period and
0.75% to 1.25% during the Payout Period 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 fee is to compensate the Company for assuming
mortality and expense risks under Portfolio Director Plus. 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
Plus, no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk fee and on the
administration and distribution fee.
The administration and distribution fee is to reimburse the Company for our
administrative expenses for providing Variable Account Options. This includes
the expense of administration and marketing (including but not limited to
enrollment, participant communication and education).
For more information about the mortality and expense risk fee and administration
and distribution fee, see the Fee Table in this prospectus.
The mortality and expense risk fee or administration and distribution fee may be
reduced or waived if issued to certain types of plans that are expected to
result in lower costs to VALIC. To learn more about how we determine if the
mortality and expense risk fee or administration and distribution fee may be
reduced or waived, see the "Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or Administration and Distribution Fee
Charges" section of this prospectus.
FUND ANNUAL EXPENSE CHARGES
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.
56
<PAGE> 159
- --------------------------------------------------------------------------------
REDUCTION OR WAIVER OF ACCOUNT
MAINTENANCE FEE, SURRENDER,
MORTALITY AND EXPENSE RISK FEE OR ADMINISTRATION AND DISTRIBUTION FEE CHARGES
We may, as described below, determine that the account maintenance fee,
surrender charges, mortality and expense risk fee or administration and
distribution fee for Portfolio Director Plus 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:
- 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.
- Other factors of which we are not presently aware which could reduce
administrative costs.
We review the following additional factors to determine whether we can reduce
or waive account maintenance fees:
- 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.
We review the following additional factors to determine whether we can reduce or
waive surrender charges:
- 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 use of mass enrollment or related administrative tasks performed by your
employer for your retirement program.
We review the following additional factors to determine whether we can reduce
or waive the mortality and expense risk fee or administration and distribution
fee:
- The frequency of Purchase Payments for your retirement program.
- The size of your retirement program.
- The amount of your retirement program's periodic purchase payment.
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. In addition, the Company currently reimburses certain Divisions a
portion of the Company's administration and distribution fee. Such
reimbursement arrangements are voluntary. See the Fee Table in this prospectus
for an identification of those Funds for which a reimbursement applies.
57
<PAGE> 160
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 from your existing 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:
- From your existing Variable Account Options (payments will vary); with
- Up to 2 Fixed Account Options (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> 161
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- 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. 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.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
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<PAGE> 162
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>
<S> <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
Generally, Internal Revenue Code Section 403(b)(11) permits total or partial
distributions from a 403(b) contract only on account of hardship (employee
contributions only without accrued interest), attainment of age 59 1/2,
separation from service, death or disability.
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>
<S> <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 Plus. 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
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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.
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 Plus 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 and in the Statement of Additional
Information.
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<PAGE> 164
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director Plus. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director Plus. This exchange privilege will be available
only to other contracts purchased through your employer-sponsored retirement
plan and 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 Plus 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 Plus. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director Plus. 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 Plus.
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 Plus.
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 Plus 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 Plus 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
Plus.)
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 Plus 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 Plus 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 PLUS
The following other contracts may be exchanged.
- Portfolio Director and Portfolio Director 2 Contracts
- 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
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<PAGE> 165
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Portfolio Director Plus will have the same Account Value (called Accumulation
Value in the other contracts) as the other contracts.
COMPARISON OF PORTFOLIO DIRECTOR AND
PORTFOLIO DIRECTOR 2 CONTRACTS TO PORTFOLIO
DIRECTOR PLUS CONTRACTS
Portfolio Director, Portfolio Director 2 and Portfolio Director Plus contain the
same provisions except as to the level of fees and as to available Variable
Account Options and certain separate Account Expense Reimbursements. Portfolio
Director, Portfolio Director 2 and Portfolio Director Plus are available to
qualified contracts and certain non-qualified contracts. Portfolio Director 2 is
not available to non-qualified contracts issued to individuals.
COMPARISON OF OTHER CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director Plus. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director Plus 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 PLUS
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director Plus.
- Portfolio Director Plus has more investment options to select from.
- Portfolio Director Plus has 16 publicly available mutual funds as investment
options.
- The Portfolio Director Plus 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 Plus has an Interest Guaranteed Death Benefit.
- Portfolio Director Plus's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Different series of Portfolio Director Plus may charge fees higher or lower
than other series of Portfolio Director Plus.
- Portfolio Director Plus'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,
Portfolio Director Contracts and Portfolio Director 2 Contracts for the
equivalent units of interest in Portfolio Director Plus.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director Plus any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director Plus from SA-1,
Independence Plus, Portfolio Director or Portfolio Director 2 Contracts may have
surrender charges and account maintenance fees imposed under Portfolio Director
Plus. 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
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<PAGE> 166
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their purchase payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract, Portfolio Director
Contract or Portfolio Director 2 Contract.
- Leave current assets in the SA-1 Contract, Independence Plus Contract,
Portfolio Director Contract or Portfolio Director 2 Contract and direct
future Purchase Payments to Portfolio Director Plus; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director Plus.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus Contract or Portfolio Director Contract or Portfolio Director 2 Contract,
future Purchase Payments and current assets will be controlled by the provisions
of the SA-1 Contract, Independence Plus Contract, Portfolio Director Contract,
or Portfolio Director 2 Contract, respectively. If the participant chooses to
leave current assets in the SA-1 Contract, the Independence Plus Contract,
Portfolio Director Contract, Portfolio Director 2 Contract and direct future
Purchase Payments to Portfolio Director Plus, the current assets will be
controlled by the provisions of the SA-1 Contract, the Independence Plus
Contract Portfolio Director Contract or Portfolio Director 2 Contract,
respectively. The future Purchase Payments will be controlled by the terms of
Portfolio Director Plus subject to the exception that surrender charges and
account maintenance fees will not be imposed under Portfolio Director Plus. If
the participant chooses to transfer all current assets and future Purchase
Payments to Portfolio Director Plus, such current assets and future Purchase
Payments will be controlled by the provisions of Portfolio Director Plus subject
to the exception that surrender charges and account maintenance fees will not be
imposed under Portfolio Director Plus.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director Plus the participant will not be permitted to exchange back to the SA-1
Contract, Independence Plus Contract, Portfolio Director Contract or Portfolio
Director 2 Contract. If a participant chooses to transfer future Purchase
Payments but not current assets to Portfolio Director Plus, the participant will
be allowed at a later date to transfer the current assets to Portfolio Director
Plus. For a complete analysis of the differences between the SA-1 contract, the
Independence Plus Contract or Portfolio Director Contract, Portfolio Director 2
Contract and Portfolio Director Plus, 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> 167
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director Plus 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 Plus 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 Plus.
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.
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 Plus 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 Plus. 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> 168
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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 Plus 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.
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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 Plus was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
addition, because other Funds began operations on , 1998, no actual
performance history exists. The returns shown in the tables for those Funds
reflect the performance of comparable funds managed by the subadvisers for the
Funds. In each case, we will use the charges and fees imposed by Portfolio
Director Plus in calculating the Division's investment performance.
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 Plus 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 Plus 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 Plus. 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 Plus.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
67
<PAGE> 170
- --------------------------------------------------------------------------------
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 Plus charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual values 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.
AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET DIVISIONS
We may advertise the AGSPC Money Market and American General Money Market
Divisions' Current Yield and Effective Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market or American General Money Market Divisions 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. For the
AGSPC Money Market Division the 7-day Current Yield for the last 7 days ended
March 31, 1998 was 4.27%.
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. For the AGSPC Money Market Division the 7-day Effective Yield for the
last 7 days ended March 31, 1998 was 4.36%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET
DIVISIONS
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market and American General Money Market Divisions. 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.
COMPARABLE FUND PERFORMANCE DATA
The performance data shown in Tables II, IV and VI for the American General Fund
Divisions listed in those tables are based on the performance data of comparable
funds and composites of comparable funds (each a "Comparable Fund"). Each Fund
listed in Tables II, IV and VI is modelled after a
Comparable Fund and will be managed in substantially the same manner and by the
same personnel as its Comparable Fund. Fees and expenses of the American General
Funds listed in Tables II, IV and VI may differ from the fees and expenses
historically incurred by the
Comparable Funds. Please see the prospectus for each Fund for further details.
THE PERFORMANCE INFORMATION IN TABLES II, IV AND VI IS BASED ON FUNDS AND ON
COMPOSITES COMPARABLE TO THE AMERICAN GENERAL FUNDS LISTED IN THOSE TABLES, AND
DOES NOT REFLECT THE ACTUAL PERFORMANCE OF THE AMERICAN GENERAL FUNDS LISTED IN
TABLES II, IV AND VI.
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 six tables below.
The information presented does not reflect the advantage under Portfolio
Director Plus 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 information presented in the following tables reflects the
performance of the underlying Fund after deduction of a mortality and expense
risk fee and administration and distribution fee at an aggregate annualized rate
of 0.55% to 1.05% during the Purchase Period on the daily net asset value of
VALIC Separate Account A. The exact rate depends upon the Variable Account
Option selected.
68
<PAGE> 171
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)............ 09/06/83 -- 10.35% 12.21% 18.33% 25.28%
AGSPC Capital Conservation Fund (Division 7)........... 01/16/86 -- 6.71 4.51 6.38 5.57
AGSPC Government Securities Fund (Division 8).......... 01/16/86 -- 6.75 4.20 5.83 5.54
AGSPC Growth (Division 15)............................. 04/29/94 24.78% -- -- 28.25 41.81
AGSPC Growth & Income Fund (Division 16)............... 04/29/94 20.03 -- -- 23.75 30.87
AGSPC International Equities Fund (Division 11)........ 10/02/89 4.22 -- 10.05 8.52 12.61
AGSPC International Government Bond (Division 13)...... 10/01/91 6.51 -- 4.20 (0.90) (3.81)
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98..................... 10/13/82 -- 13.14 17.48 25.80 42.20
Period from 10/01/91 to 03/31/98..................... 17.55 -- 17.48 25.80 42.20
AGSPC Money Market (Division 6)........................ 01/16/86 -- 4.55 2.79 2.76 (0.35)
AGSPC Science & Technology (Division 17)............... 04/29/94 27.24 -- -- 22.85 29.12
AGSPC Small Cap Index Fund (Division 14)............... 05/01/92 15.86 -- 15.28 22.01 35.35
AGSPC Social Awareness (Division 12)................... 10/02/89 15.57 -- 20.07 31.23 41.14
AGSPC Stock Index (Division 10)........................ 04/20/87 -- 17.02 20.42 30.40 41.30
American Century-Twentieth Century Ultra (Division
31).................................................. 11/02/81 -- 21.32 19.65 26.48 39.58
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)............ 08/31/90 42.63 -- 23.90 20.12 32.18
Founders Growth (Division 30).......................... 01/05/62 -- 18.45 21.28 28.81 36.63
Neuberger&Berman Guardian Trust (Division 29)(1)....... 06/01/50 -- 16.32 16.48 21.62 27.22
Putnam Global Growth (Division 28)..................... 09/01/67 -- 11.39 14.72 18.99 22.96
Putnam New Opportunities (Division 26)................. 08/31/90 28.87 -- 24.32 25.56 47.45
Putnam OTC & Emerging Growth (Division 27)............. 11/01/82 -- 17.05 21.29 21.69 45.81
Scudder Growth and Income (Division 21)(2)............. 11/13/84 -- 16.56 19.66 27.97 36.45
T. Rowe Price Small-Cap Stock (Division 51)(5)......... 08/31/92 21.25 -- 18.42 26.60 38.33
Templeton Foreign (Division 32)........................ 10/05/82 -- 12.49 12.85 13.21 8.14
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division
19)............................................... 08/24/88 12.23 -- 14.90 19.77 17.96
Templeton International Fund: Class 1 (Division
20)............................................... 05/01/92 15.90 -- 18.74 21.77 21.11
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)........................................ 09/30/94 14.27 -- -- 14.59 17.81
Vanguard Fixed Income Securities Fund- Long-Term
Corporate Portfolio (Division 22)**.................. 07/09/73 -- 9.27 6.38 8.60 11.49
Vanguard Fixed Income Securities Fund- Long-Term U.S.
Treasury Portfolio (Division 23)**................... 05/19/86 -- 9.02 6.52 8.87 12.58
Vanguard LifeStrategy Growth Portfolio (Division 52)... 09/30/94 20.36 -- -- 21.24 29.36
Vanguard LifeStrategy Moderate Growth Portfolio
(Division 53)........................................ 09/30/94 17.42 -- -- 18.18 23.90
Vanguard/Wellington (Division 25)...................... 07/01/29 -- 13.49 15.22 21.15 25.68
Vanguard/Windsor II (Division 24)...................... 06/24/85 -- 17.20 20.19 30.29 40.24
</TABLE>
- ---------------
* The table reflects the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
The actual performance of each Fund has been reduced by Separate Account
fees that would have been incurred under the Contract. The Contracts offered
by this prospectus became available for purchase for all Funds other than T.
Rowe Price Small-Cap Stock Fund and the Vanguard LifeStrategy Portfolios on
January 1, 1998. For the T. Rowe Price Small-Cap Stock Fund and the Vanguard
LifeStrategy Portfolios the Contrast became available as of the date of this
prospectus.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
(1) Neuberger&Berman Guardian Trust ("Trust") started operating on August 3,
1993. It has identical investment objectives and policies and invests in the
same portfolio as Neuberger&Berman Guardian Fund ("Fund"), which is also
managed by Neuberger&Berman Management Incorporated ("N&B Management"). The
performance information for the Trust before August 3, 1993 is for the Fund.
N&B Management voluntarily bears certain operating 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 per annum. This arrangement can be terminated on sixty days' prior
written notice. Absent such arrangement, the average annual total returns of
the Trust would have been less. The total returns for periods prior to the
Trust's commencement of operations would have been lower had they reflected
the higher expense ratios of the Trust as compared to those of the Fund.
69
<PAGE> 172
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
(3) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(4) The AGSPC 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.
(5) T. Rowe Price Small-Cap Stock Fund commenced operations on June 1, 1956. The
performance figures in the Table are for the period that T. Rowe Price
Associates, Inc. assumed management of the Fund on August 31, 1992.
70
<PAGE> 173
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 12.62% 12.94% 19.61% 24.29%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 7.70 4.07 6.22 5.40
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 10.42% -- -- 12.52 5.89
Period from 10/01/95 to 03/31/98.......................... 19.70 -- -- -- 14.66
American General International Value Fund (Division 34)..... -- 10.36 12.40 15.47 16.99
American General Large Cap Growth Fund (Division 39)........ 20.13 -- 23.98 30.17 22.71
American General Large Cap Value Fund (Division 40)......... 22.71 -- 21.06 34.42 52.18
American General Mid Cap Growth Fund (Division 37).......... 17.16 -- 18.24 24.46 37.11
American General Mid Cap Index Fund (Division 46)
Period from 04/01/88 to 03/31/98.......................... -- 13.73 17.06 26.01 42.58
Period from 10/01/91 to 03/31/98.......................... 17.86 -- 17.06 26.01 42.58
American General Mid Cap Value Fund (Division 38)........... -- 19.34 19.28 29.14 35.62
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund (Division 44)............ -- 4.79 2.89 2.91 (0.43)
American General S&P 500 Index Fund (Division 47)........... -- 17.97 20.42 30.73 41.90
American General Small Cap Growth Fund (Division 35)........ 28.53 -- -- 32.32 47.89
American General Small Cap Index Fund (Division 45)......... -- 13.90 16.16 17.91 36.51
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 15.65 -- 19.74 31.43 41.50
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no actual
performance history for such Funds exists. The Performance data shown in the
above Table is based on the performance data of Comparable Funds reduced by
Separate Account Fees that would have been incurred during the applicable
period. For a description of the methodology used in determining Comparable
Fund performance for each Fund, please see the "Summary of Funds" in this
prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
71
<PAGE> 174
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)................. 09/06/83 -- 10.41% 12.89% 19.58% 30.35%
AGSPC Capital Conservation Fund (Division 7)................ 01/16/86 -- 6.77 5.40 7.89 10.61
AGSPC Government Securities Fund (Division 8)............... 01/16/86 -- 6.81 5.09 7.36 10.57
AGSPC Growth (Division 15).................................. 04/29/94 25.51% -- -- 29.33 46.89
AGSPC Growth & Income Fund (Division 16).................... 04/29/94 20.84 -- -- 24.90 35.94
AGSPC International Equities Fund (Division 11)............. 10/02/89 4.28 -- 10.78 9.98 17.68
AGSPC International Government Bond (Division 13)........... 10/01/91 6.57 -- 5.10 0.69 0.78
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98.......................... 10/13/82 13.20 18.07 26.92 47.29
Period from 10/01/91 to 03/31/98.......................... 17.62 -- 18.07 26.92 47.29
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.61 3.73 4.37 4.40
AGSPC Science & Technology (Division 17).................... 04/29/94 27.94 -- -- 24.02 34.20
AGSPC Small Cap Index Fund (Division 14).................... 05/01/92 15.92 -- 15.90 23.19 40.43
AGSPC Social Awareness (Division 12)........................ 10/02/89 15.64 -- 20.62 32.26 46.22
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 17.09 20.96 31.44 46.38
American Century -- Twentieth Century Ultra (Division 31)... 11/02/81 -- 21.39 20.20 27.59 44.66
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)................. 08/31/90 42.71 -- 24.39 21.33 37.26
Founders Growth (Division 30)............................... 01/05/62 -- 18.52 21.81 29.88 41.70
Neuberger&Berman Guardian Trust (Division 29)(1)............ 06/01/50 -- 16.38 17.08 22.81 32.30
Putnam Global Growth (Division 28).......................... 09/01/67 -- 11.45 15.36 20.22 28.03
Putnam New Opportunities (Division 26)...................... 08/31/90 28.94 -- 24.80 26.68 52.54
Putnam OTC & Emerging Growth (Division 27).................. 11/01/82 -- 17.12 21.82 22.88 50.90
Scudder Growth and Income (Division 21)(2).................. 11/13/84 -- 16.63 20.21 29.05 41.53
T. Rowe Price Small-Cap Stock (Division 51)(5).............. 06/01/56 21.32 -- 19.17 27.86 43.49
Templeton Foreign (Division 32)............................. 10/05/82 -- 12.55 13.52 14.56 13.21
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division 19).... 08/24/88 12.29 -- 15.53 20.99 23.03
Templeton International Fund: Class 1 (Division 20)....... 05/01/92 15.96 -- 19.30 22.96 26.18
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)............................................. 09/30/94 15.35 -- -- 15.98 22.90
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/09/73 -- 9.33 7.21 10.06 16.56
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 05/19/86 -- 9.08 7.34 10.32 17.65
Vanguard LifeStrategy Growth Portfolio (Division 52)........ 09/30/94 21.31 -- -- 22.50 34.47
Vanguard LifeStrategy Moderate Growth Portfolio (Division
53)....................................................... 09/30/94 18.43 -- -- 19.49 29.00
Vanguard/Wellington (Division 25)........................... 07/01/29 -- 13.55 15.85 22.34 30.75
Vanguard/Windsor II (Division 24)........................... 06/24/85 -- 17.27 20.73 31.34 45.32
</TABLE>
- ---------------
* The table reflects the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
The actual performance of each Fund has been reduced by Separate Account
fees that would have been incurred under the Contract. The Contracts offered
by this prospectus became available for purchase for all Funds other than T.
Rowe Price Small-Cap Stock Fund and the Vanguard LifeStrategy Portfolios on
January 1, 1998. For the T. Rowe Price Small-Cap Stock Fund and the Vanguard
LifeStrategy Portfolios the Contrast became available as of the date of this
prospectus.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
72
<PAGE> 175
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 12.69% 13.83% 21.02% 29.45%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 7.76 5.17 7.90 10.52
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 11.74% -- -- 14.00 10.97
Period from 10/01/95 to 03/31/98.......................... 21.28 -- -- -- 18.38
American General International Value Fund (Division 34)..... -- 10.42 14.70 16.92 22.14
American General Large Cap Growth Fund (Division 39)........ 20.19 -- 24.63 31.33 27.87
American General Large Cap Value Fund (Division 40)......... 22.78 -- 21.79 35.59 57.35
American General Mid Cap Growth Fund (Division 37).......... 17.23 -- 18.81 25.61 42.24
American General Mid Cap Index Fund (Division 46)
Period from 04/01/88 to 03/31/98.......................... -- 13.79 17.84 27.26 47.74
Period from 10/01/91 to 03/31/98.......................... 17.93 -- 17.84 27.26 47.74
American General Mid Cap Value Fund (Division 38)........... -- 15.74 20.04 30.37 40.79
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund (Division 44)............ -- 4.85 3.99 4.63 4.66
American General S&P 500 Index Fund (Division 47)........... -- 18.03 21.17 31.94 47.07
American General Small Cap Growth Fund (Division 35)........ 29.84 -- -- 32.85 52.89
American General Small Cap Index Fund (Division 45)......... -- 13.96 16.97 23.70 41.68
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 15.94 -- 20.49 32.63 46.67
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no
actual performance history for such Funds exists. The Performance data shown
in the above Table is based on the performance data of Comparable Funds
reduced by Separate Account Fees that would have been incurred during the
applicable period. For a description of the methodology used in determining
Comparable Fund performance for each Fund, please see the "Summary of Funds"
in this prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
73
<PAGE> 176
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)................. 09/06/83 -- 169.17% 83.38% 70.97% 30.35%
AGSPC Capital Conservation Fund (Division 7)................ 01/16/86 -- 92.44 30.05 25.59 10.61
AGSPC Government Securities Fund (Division 8)............... 01/16/86 -- 93.19 28.21 23.73 10.57
AGSPC Growth (Division 15).................................. 04/29/94 143.69% -- -- 116.33 46.89
AGSPC Growth & Income Fund (Division 16).................... 04/29/94 110.04 -- -- 94.83 35.94
AGSPC International Equities Fund (Division 11)............. 10/02/89 42.76 -- 66.85 33.01 17.68
AGSPC International Government Bond (Division 13)........... 10/01/91 51.21 -- 28.22 2.07 0.78
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98.......................... -- 245.45 129.46 104.43 47.29
Period from 10/01/91 to 03/31/98.......................... 187.13 -- 129.46 104.43 47.29
AGSPC Money Market (Division 6)............................. 01/16/86 -- 56.95 20.10 13.69 4.40
AGSPC Science & Technology (Division 17).................... 04/29/94 162.68 -- -- 90.75 34.20
AGSPC Small Cap Index Fund (Division 14).................... 05/01/92 139.83 -- 109.15 86.95 40.43
AGSPC Social Awareness (Division 12)........................ 10/02/89 243.36 -- 155.31 131.36 46.22
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 384.27 158.91 127.10 46.38
American Century -- Twentieth Century Ultra (Division 31)... 11/02/81 -- 594.84 150.96 107.70 44.66
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio (Division 18)................. 08/31/90 1,381.42 -- 197.81 78.60 37.26
Founders Growth (Division 30)............................... 01/05/62 -- 446.83 168.16 119.08 41.70
Neuberger&Berman Guardian Trust (Division 29)(1)............ 06/01/50 -- 355.88 120.04 85.22 32.30
Putnam Global Growth (Division 28).......................... 09/01/67 -- 195.61 104.30 73.75 28.03
Putnam New Opportunities (Division 26)...................... 08/31/90 586.71 -- 202.75 103.31 52.54
Putnam OTC & Emerging Growth (Division 27).................. 11/01/82 -- 385.52 168.27 85.52 50.90
Scudder Growth and Income (Division 21)(2).................. 11/13/84 -- 365.66 151.05 114.91 41.53
T. Rowe Price Small-Cap Stock (Division 51)(5).............. 06/01/56 194.38 -- 140.43 109.17 43.49
Templeton Foreign (Division 32)............................. 10/05/82 -- 226.30 88.56 50.36 13.21
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund: Class 1 (Division 19).... 08/24/88 206.89 -- 105.80 77.10 23.03
Templeton International Fund: Class 1 (Division 20)....... 05/01/92 140.32 -- 141.68 85.89 26.18
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)............................................. 09/30/94 64.83 -- -- 56.06 22.90
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/09/73 -- 144.11 41.63 33.31 16.56
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 05/19/86 -- 138.56 42.53 34.27 17.65
Vanguard LifeStrategy Growth Lifestyle Portfolio (Division
52)....................................................... 09/30/94 96.65 -- -- 83.92 34.47
Vanguard LifeStrategy Moderate Growth Lifestyle Portfolio
(Division 53)............................................. 09/30/94 80.81 -- -- 70.70 29.00
Vanguard/Wellington (Division 25)........................... 07/01/29 -- 256.30 108.54 83.12 30.75
Vanguard/Windsor II (Division 24)........................... 06/24/85 -- 391.74 156.50 126.55 45.32
</TABLE>
- ---------------
* The table reflects the historical performance of each Fund based on
investment in a hypothetical Contract form the date of the Fund's inception.
The actual performance of each Fund has been reduced by Separate Account
fees that would have been incurred under the Contract. The Contracts offered
by this prospectus became available for purchase for all Funds other than T.
Rowe Price Small-Cap Stock Fund and the Vanguard LifeStrategy Portfolios on
January 1, 1998. For the T. Rowe Price Small-Cap Stock Fund and the Vanguard
LifeStrategy Portfolios the Contrast became available as of the date of this
prospectus.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
74
<PAGE> 177
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 229.94% 91.15% 77.32% 29.45%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 111.03 28.66 25.64 10.52
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 42.09% -- -- 48.16 10.97
Period from 10/01/95 to 03/31/98.......................... 61.95 -- -- -- 18.38
American General International Value Fund (Division 34)..... -- 169.41 98.60 59.88 22.14
American General Large Cap Growth Fund (Division 39)........ 220.93 -- 202.91 126.68 27.87
American General Large Cap Value Fund (Division 40)......... 220.04 -- 168.11 149.49 57.35
American General Mid Cap Growth Fund (Division 37).......... 130.33 -- 136.84 98.31 42.24
American General Mid Cap Index Fund(Division 46)
Period from 04/01/88 to 03/31/98.......................... -- 263.78 127.29 106.23 47.74
Period from 10/01/91 to 03/31/98.......................... 192.18 -- 127.29 106.23 47.74
American General Mid Cap Value Fund (Division 38)........... -- 331.09 149.38 121.74 40.79
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund(Division 44)............. -- 60.59 21.62 14.55 4.66
American General S&P 500 Index Fund (Division 47)........... -- 424.47 161.36 129.85 47.07
American General Small Cap Growth Fund (Division 35)........ 145.64 -- -- 134.63 52.89
American General Small Cap Index Fund (Division 45)......... -- 269.54 119.00 89.28 41.68
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 251.57 -- 154.03 133.46 46.67
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no
actual performance history for such Funds exists. The Performance data shown
in the above Table is based on the performance data of Comparable Funds
reduced by Separate Account Fees that would have been incurred during the
applicable period. For a description of the methodology used in determining
Comparable Fund performance for each Fund, please see the "Summary of Funds"
in this prospectus.
** These Funds commenced operations on , 1998 and no Comparable
Fund performance information is available for these Funds.
75
<PAGE> 178
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director Plus 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 Plus 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.
76
<PAGE> 179
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
Plus 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 Plus
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.
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.
77
<PAGE> 180
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director Plus 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 408(b) IRA, or is instead a
nonqualified Contract. Portfolio Director Plus 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 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) simplified deferred
compensation plans of private
employers;
- Section 408(p) SIMPLE retirement accounts.
The foregoing Contracts are "Qualified Contracts." Certain series of Portfolio
Director Plus may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity.
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director Plus 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 portion of a
distribution which is not considered a return of 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))
78
<PAGE> 181
- --------------------------------------------------------------------------------
which specifically exempts these Qualified Contracts, and the IRS has no viable
legal basis or reason to apply the theory 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 Plus 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 risk fee and administration and distribution
fee charges (0.55% - 1.05% during the purchase period and 0.75% - 1.25% during
the payout period) and may also incur account maintenance 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 after-tax 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
79
<PAGE> 182
- --------------------------------------------------------------------------------
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 reduces the actual amount saved in the conventional
savings account to $1,800 while the full $2,500 is contributed to 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.
80
<PAGE> 183
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other insurance companies, financial and business organizations around the
world, each of the Variable Account Options and the underlying mutual funds
could be adversely affected if the computer systems used by the Company, other
service providers and entities with computer systems that are linked to the
Company's records do not properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000 Issue." The Company is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems
that its uses and to obtain satisfactory assurances that comparable steps are
being taken by each of the Variable Account Options' other major service
providers. The Company expects to be substantially complete with its computer
systems projects to address year 2000 issues by the end of 1998. However, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Variable Account Options.
81
<PAGE> 184
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>
<PAGE> 185
(This page intentionally left blank)
<PAGE> 186
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
Plus).
(Please Print or Type)
<TABLE>
- --------------------------------------------------------------------------------------
<S> <C>
Name: ............................................. G.A. #-------------------------
Address: .......................................... Policy # ----------------------
Social Security Number: ...........................
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 187
(This page intentionally left blank)
<PAGE> 188
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
3535 Grandview Parkway
Suite 200
Birmingham, AL 35243
(205) 967-8955
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
(650) 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 1900
Chicago, IL 60606
(312) 368-1001
11711 N. Meridian St.
Suite 300
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
(248) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
4266 Interstate 55N
Suite 108
Jackson, MS 39211
(601) 981-5801
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 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
Two International Plaza
Suite 601
Nashville, TN 37217
(615) 254-4822
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-six branch offices located throughout the
country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
1-800-44-VALIC
FOR UNIT VALUE INFORMATION CALL: 1-800-42-VALIC & TDD 1-800-24-VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-621-7792
TDD 1-800-35-VALIC
EASYACCESS 1-800-42-VALIC
TDD EASYACCESS 1-800-24-VALIC
================================================================================
<PAGE> 189
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 8
Types of Variable Annuity Contracts................. 9
Federal Tax Matters................................. 9
Tax Consequences of Purchase Payments........... 9
Tax Consequences of Distributions............... 11
Special Tax Consequences -- Early
Distribution.................................. 12
Special Tax Consequences -- Required
Distributions................................. 13
Tax Free Rollovers, Transfers and Exchanges..... 14
Exchange Privilege.................................. 14
Exchanges From Portfolio Director............... 14
Exchanges From Portfolio Director 2............. 15
Exchanges From Independence Plus Contracts...... 16
Exchanges From V-Plan Contracts................. 17
Exchanges From SA-1 and SA-2 Contracts.......... 18
Exchanges From Impact Contracts................. 19
Exchanges From Compounder Contracts............. 20
Information Which May Be Applicable To Any
Exchange...................................... 21
Calculation of Surrender Charge..................... 22
Illustration of Surrender Charge on Total
Surrender..................................... 22
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 22
Purchase Unit Value................................. 23
Illustration of Calculation of Purchase Unit
Value......................................... 23
Illustration of Purchase of Purchase Units...... 23
Performance Calculations............................ 23
AGSPC Money Market and American General Money
Market Divisions Yields....................... 23
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 23
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 23
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 24
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 24
Standardized Yield for Bond Fund Divisions.......... 24
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 24
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 24
Calculation of Average Annual Total Return...... 25
Performance Information............................. 26
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 26
Performance Compared to Market Indices.......... 26
AGSPC Asset Allocation Division Five............ 30
AGSPC Capital Conservation Division Seven....... 31
AGSPC Government Securities Division Eight...... 32
AGSPC Growth Division Fifteen................... 33
AGSPC Growth & Income Division Sixteen.......... 34
AGSPC International Equities Division Eleven.... 35
AGSPC International Government Bond Division
Thirteen...................................... 35
AGSPC MidCap Index Division Four................ 36
AGSPC Money Market Division Six................. 37
AGSPC Science & Technology Division Seventeen... 37
AGSPC Small Cap Index Division Fourteen......... 38
AGSPC Social Awareness Division Twelve.......... 38
AGSPC Stock Index Division Ten.................. 39
American Century -- Twentieth Century Ultra
Division Thirty-One........................... 40
American General Balanced Division Forty-Two.... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American General Conservative Growth Lifestyle
Division Fifty................................ 41
American General Domestic Bond Division
Forty-Three................................... 42
American General Growth Lifestyle Division
Forty-Eight................................... 42
American General International Growth Division
Thirty-Three.................................. 43
American General International Value Division
Thirty-Four................................... 44
American General Large Cap Growth Division
Thirty-Nine................................... 45
American General Large Cap Value Division
Forty......................................... 45
American General Mid Cap Growth Division Thirty-
Seven......................................... 46
American General MidCap Index Division
Forty-Six..................................... 46
American General Mid Cap Value Division Thirty-
Eight......................................... 47
American General Moderate Lifestyle Division
Forty-Nine.................................... 47
American General Money Market Division
Forty-Four.................................... 48
American General Small Cap Growth Division
Thirty-Five................................... 49
American General Small Cap Index Division Forty-
Five.......................................... 49
American General Small Cap Value Division
Thirty-Six.................................... 49
American General S&P 500 Index Division Forty-
Seven......................................... 50
American General Socially Responsible Division
Forty-One..................................... 50
Dreyfus Small Cap Division Eighteen............. 51
Founders Growth Division Thirty................. 52
Neuberger&Berman Guardian Trust Division
Twenty-Nine................................... 53
Putnam Global Growth Division Twenty-Eight...... 54
Putnam New Opportunities Division Twenty-Six.... 55
Putnam OTC & Emerging Growth Division
Twenty-Seven.................................. 56
Scudder Growth and Income Division Twenty-One... 56
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 57
Templeton Asset Allocation Division Nineteen.... 58
Templeton Foreign Division Thirty-Two........... 59
Templeton International Division Twenty......... 60
Vanguard LifeStrategy Conservative Growth
Portfolio Division Fifty-Four................. 61
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio Division
Twenty-Two.................................... 62
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio
Division Twenty-Three......................... 63
Vanguard LifeStrategy Growth Portfolio Division
Fifty-Two..................................... 64
Vanguard LifeStrategy Moderate Growth Portfolio
Division Fifty-Three.......................... 64
Vanguard/Wellington Division Twenty-Five........ 65
Vanguard/Windsor II Division Twenty-Four........ 65
Payout Payments..................................... 66
Assumed Investment Rate......................... 66
Amount of Payout Payments....................... 66
Payout Unit Value............................... 66
Illustration of Calculation of Payout Unit
Value......................................... 67
Illustration of Payout Payments................. 67
Distribution of Variable Annuity Contracts.......... 68
Experts............................................. 68
Comments on Financial Statements.................... 69
</TABLE>
<PAGE> 190
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THE STATEMENT OF
ADDITIONAL INFORMATION DOES NOT CONSTITUTE A PROSPECTUS.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 2, 1998
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.40 TO 12.40 , 1998
PROSPECTUS
Certain Series of Portfolio Director Plus consists of group and individual
variable annuity contracts that are offered by The Variable Annuity Life
Insurance Company ("VALIC") to Participants in certain employer sponsored
retirement plans. Portfolio Director Plus 1.40 to 12.40 consists of group
variable annuity contracts that are offered by VALIC to Participants in certain
employer retirement plans. Portfolio Director Plus 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 Plus is composed of the following contract forms:
UIT-194, UITG-194, UITN-194, UIT-IRA-194 and UIT-SEP-194.
Portfolio Director Plus permits you to invest in and receive retirement benefits
in up to 2 Fixed Account Options and/or an array of up to 30 of the 50 Variable
Account Options described in this prospectus. If your contract is part of your
employer's retirement program, that program will describe which Variable Account
Options are available to you. If your contract is a tax-deferred nonqualified
annuity that is not a part of your employer's retirement plan, those Variable
Account Options that are invested in Mutual Funds available to the public
outside of annuity contracts or life insurance contracts will not be available
within your contract.
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VALIC is a member of the Insurance Marketplace Standards Association (IMSA).
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. VALIC's membership in IMSA applies to VALIC only and not to
its products or affiliate.
This prospectus provides you with information you should know before investing
in Portfolio Director Plus. This prospectus is accompanied by the current
prospectuses for the mutual fund options described in this prospectus. Please
read and retain each of these prospectuses for future reference.
A Statement of Additional Information, dated , 1998, has been filed
with the Securities and Exchange Commission. This Statement of Additional
Information contains additional information about Portfolio Director Plus 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.
DO NOT COPY
<PAGE> 191
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
ABOUT THE PROSPECTUS............................... 1
PROFILE OF PORTFOLIO DIRECTOR PLUS................. 2
FEE TABLE.......................................... 6
SELECTED PURCHASE UNIT DATA........................ 12
ABOUT PORTFOLIO DIRECTOR PLUS...................... 13
ABOUT VALIC........................................ 13
ABOUT VALIC SEPARATE ACCOUNT A..................... 13
UNITS OF INTERESTS................................. 13
VARIABLE ACCOUNT OPTIONS........................... 14
Summary of Funds............................... 14
PURCHASE PERIOD.................................... 52
Purchase Payments.............................. 52
Purchase Units................................. 52
Calculation of Purchase Unit Value............. 52
Choosing Investment Options.................... 53
Fixed Account Options..................... 53
Variable Account Options.................. 53
Stopping Purchase Payments..................... 53
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 54
During the Purchase Period..................... 54
During the Payout Period....................... 54
Communicating Transfer or Reallocation
Instructions................................. 54
Effective Date of Transfer..................... 54
FEES AND CHARGES................................... 55
Account Maintenance Fee........................ 55
Surrender Charge............................... 55
Amount of Surrender Charge................ 55
10% Free Withdrawal....................... 55
Exceptions to Surrender Charge............ 55
Premium Tax Charge............................. 56
Separate Account Charges....................... 56
Fund Annual Expense Charges.................... 56
Other Tax Charges.............................. 56
Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee
Charges...................................... 57
Separate Account Expense Reimbursement......... 57
PAYOUT PERIOD...................................... 58
Fixed Payout................................... 58
Variable Payout................................ 58
Combination Fixed and Variable Payout.......... 58
Payout Date.................................... 58
Payout Options................................. 58
Enhancements to Payout Options................. 59
Payout Information............................. 59
SURRENDER OF ACCOUNT VALUE......................... 60
When Surrenders are Allowed.................... 60
Amount That May Be Surrendered................. 60
Surrender Restrictions......................... 60
Partial Surrenders............................. 60
Systematic Withdrawals......................... 60
Distributions Required By Federal Tax Law...... 61
</TABLE>
<TABLE>
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EXCHANGE PRIVILEGE................................. 62
Restrictions on Exchange Privilege............. 62
Taxes and Conversion Costs..................... 62
Surrender Charges.............................. 62
Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 62
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 63
Comparison of Other Contracts.................. 63
Features of Portfolio Director Plus............ 63
Agents' and Managers' Retirement Plan Exchange
Offer........................................ 63
DEATH BENEFITS..................................... 65
Beneficiary Information........................ 65
Special Information for Individual Non-Tax
Qualified Contracts.......................... 65
During the Purchase Period..................... 65
Interest Guaranteed Death Benefit......... 65
Standard Death Benefit.................... 66
During the Payout Period....................... 66
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 67
Types of Investment Performance Information
Advertised................................... 67
Total Return Performance Information......... 67
Standard Average Annual Total Return......... 67
Nonstandard Average Annual Total
Return....................................... 67
Cumulative Total Return...................... 67
Annual Change in Purchase Unit Value......... 67
Cumulative Change in Purchase Unit Value..... 68
Total Return Based on Different Investment
Amounts................................... 68
An Assumed Account Value of $10,000.......... 68
Yield Performance Information.................. 68
AGSPC Money Market and American General Money
Market Divisions............................. 68
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 68
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 68
OTHER CONTRACT FEATURES............................ 76
Changes That May Not Be Made................... 76
Change of Beneficiary.......................... 76
Contingent Owner............................... 76
Cancellation -- The 20 Day "Free Look"......... 76
We Reserve Certain Rights...................... 76
Relationship to Employer's Plan................ 76
VOTING RIGHTS...................................... 77
Who May Give Voting Instructions............... 77
Determination of Fund Shares Attributable to
Your Account................................. 77
During Purchase Period....................... 77
During Payout Period or after a Death Benefit
Has Been Paid............................. 77
How Fund Shares Are Voted...................... 77
FEDERAL TAX MATTERS................................ 78
Type of Plans.................................. 78
Tax Consequences in General.................... 78
Effect of Tax-Deferred Accumulations........... 79
YEAR 2000.......................................... 81
Year 2000 Risks................................ 81
</TABLE>
<PAGE> 192
ABOUT THE PROSPECTUS
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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:
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
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<S> <C>
Account Value................... 54
Annuitant....................... 65
Assumed Investment Rate......... 58
Beneficiary..................... 65
Contract Owner.................. 65
Divisions....................... 67
Fixed Account Options........... 65
Home Office..................... 54
Mutual Fund or Fund............. 13
Participant..................... 01
Participant Year................ 55
Payout Period................... 54
Payout Unit..................... 58
Purchase Payments............... 52, 67
Purchase Period................. 54
Purchase Unit................... 53
VALIC Separate Account A........ 77
Variable Account Options........ 14, 65
</TABLE>
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
Plus, 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 Plus 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 Plus 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 Plus. This summary is called the "Profile of Portfolio
Director Plus." 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> 193
PROFILE OF PORTFOLIO DIRECTOR PLUS
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Portfolio Director Plus is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director Plus's major features is presented below. For a more detailed
discussion of Portfolio Director Plus, please read the entire prospectus
carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director Plus offers a choice from among 50 Variable Account Options.
You will not be able to invest in all of the Variable Account Options described
below within a single group or individual annuity contract. If your contract is
a tax-deferred nonqualified annuity that is not part of your employer's
retirement plan, those Variable Account Options that are invested in Mutual
Funds available to the public outside of annuity contracts or life insurance
contracts will not be available within your contract. If your contract is part
of your employer's retirement program, that program will describe which Variable
Account Options are available to you. Portfolio Director Plus also offers two
Fixed Account Options.
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<TABLE>
<S> <C> <C> <C> <C>
FIXED ACCOUNT
OPTIONS
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FIXED Fixed Guaranteed high current -- --
OPTIONS Account Plus interest income
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Short-Term Guaranteed current -- --
Fixed Account interest income
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VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
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INDEX AGSPC International Growth through investments tracking VALIC N/A
EQUITY Equities the EAFE Index
--------------------------------------------------------------------------------------------------------------
FUNDS
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund tracking the S&P MidCap 400(R) Index Company
--------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments tracking VALIC Bankers Trust
Index Fund the Russell 2000(R) Index Company
--------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments tracking VALIC Bankers Trust
Index Fund the S&P 500(R) Index Company
--------------------------------------------------------------------------------------------------------------
American General Mid Growth through investments tracking VALIC Bankers Trust
Cap the S&P MidCap 400 Index Company
Index Fund
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American General S&P Total return through investments VALIC Bankers Trust
500 tracking the S&P 500 Index Company
Index Fund
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American General Total return through investments VALIC Bankers Trust
Small Cap tracking the Russell 2000 Index Company
Index Fund
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ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
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EQUITY AGSPC Growth & Income Growth and income through investments VALIC Value Line, Inc.
FUNDS Fund in stocks or securities convertible
into stocks
--------------------------------------------------------------------------------------------------------------
American Century -- Capital growth through American Century N/A
Twentieth Century investments in common Investment Management,
Ultra Fund stock Inc.
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American General Long-term capital appreciation VALIC Jacobs Asset
International Growth through investments in companies in Management
Fund developed and emerging markets
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American General Growth of capital and future income VALIC Capital Guardian
International Value through investments in non-U.S. Trust Company
Fund issuers
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC Goldman Sachs Asset
Large Cap Growth Fund in large cap U.S. issuers Management
--------------------------------------------------------------------------------------------------------------
American General Total returns exceeding the S&P 500 VALIC State Street Bank &
Large Cap Value Fund Index through investments in equity Trust Company/State
securities Street Global
Advisors
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in equity VALIC Brown Capital
Mid Cap Growth Fund securities Management Inc.
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC Neuberger&Berman
Mid Cap Value Fund medium-to-large capitalization Management Inc.
companies
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American General Long-term growth through investments VALIC JP Morgan
Small Cap Growth Fund in small company growth stocks Investment
Management Inc.
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American General Maximum long-term return through VALIC Fiduciary
Small Cap Value Fund investments in small capitalization Management
companies Associates, Inc.
and
Bankers Trust
Company
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Dreyfus Small Growth through investments in smaller The Dreyfus N/A
Cap Portfolio companies Corporation
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Founders Long-term growth of capital through Founders N/A
Growth investment in common stocks of well Asset
Fund established, high-quality growth Management LLC
companies
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</TABLE>
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<PAGE> 194
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<TABLE>
<S> <C> <C> <C> <C>
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VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
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Neuberger&Berman Capital appreciation, and secondarily N&B Management Inc. Neuberger&
Guardian Trust current income by investing primarily Berman, LLC
in common stocks of long-established,
high quality companies
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Putnam Global Capital appreciation through a Putnam Investment N/A
globally
Growth Fund diversified portfolio of common Management Inc.
stocks
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Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities Fund through investment in common stock Management Inc.
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Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund small-to-medium companies
--------------------------------------------------------------------------------------------------------------
Scudder Growth Long-term growth of capital, current Scudder Kemper N/A
and Income Fund income and growth of income Investments, Inc.
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through Templeton Global N/A
investments
Foreign in equity and debt securities of Advisors Limited
Fund -- Class 1 companies and
governments outside the U.S.
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through a Templeton Investment N/A
International flexible policy of investing in Counsel, Inc.
Fund stocks and debt obligations of
companies and governments outside the
U.S.
--------------------------------------------------------------------------------------------------------------
T. Rowe Price Long-term capital growth through T. Rowe Price N/A
Small-Cap Stock Fund investments in securities of small to Associates, Inc.
medium-sized companies
--------------------------------------------------------------------------------------------------------------
Vanguard/ Growth and income through Vanguard N/A
Windsor II investment in common stock
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BALANCED American General Conservation of principal and VALIC Capital Guardian
FUNDS Balanced Fund long-term growth of capital and Trust Company
income through investments in fixed
income and equity securities
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Vanguard/ Income and growth through 30 to 40% Vanguard N/A
Wellington investment in high quality corporate
bonds
Fund and 60 to 70% investment in common
stocks
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INCOME AGSPC Capital Income and possible growth through VALIC N/A
FUNDS Conservation Fund investments in high quality debt
securities
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AGSPC Government Income and possible growth through VALIC N/A
Securities Fund investments in intermediate and
long-term government debt securities
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AGSPC International Income and possible growth through VALIC N/A
Government investments in high quality foreign
Bond Fund government debt securities
--------------------------------------------------------------------------------------------------------------
American General High income and total return VALIC Capital Guardian
Domestic Bond Fund consistent with conservation of Trust Company
capital through investments in debt
securities
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Vanguard Fixed Income Income through investment Vanguard N/A
Securities in long-term high quality corporate
Fund-Long-Term bonds
Corporate Portfolio
--------------------------------------------------------------------------------------------------------------
Vanguard Fixed Income Income through investment in Vanguard N/A
Securities long-term U.S. Treasury bonds
Fund-Long-Term
U.S. Treasury
Portfolio
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SPECIALTY AGSPC Science & Growth through investments in stocks VALIC T. Rowe Price
FUNDS Technology of companies which benefit from Associates, Inc.
Fund development of science and technology
--------------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC N/A
Awareness stocks of companies meeting social
Fund criteria of the Fund
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in stocks VALIC N/A
Socially Responsible of companies meeting social criteria
Fund of the Fund
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MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUNDS Fund securities
--------------------------------------------------------------------------------------------------------------
American General Money Income through investments in VALIC N/A
Market Fund short-term money market securities
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</TABLE>
3
<PAGE> 195
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<TABLE>
<S> <C> <C> <C> <C>
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VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
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LIFESTYLE American General Current income and a low to moderate VALIC N/A
FUNDS Conservative Growth level of growth through investments
Lifestyle Fund in American General Series Portfolio
Company Funds
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC N/A
Growth American General Series Portfolio
Lifestyle Fund Company Funds
--------------------------------------------------------------------------------------------------------------
American General Growth and current income through VALIC N/A
Moderate Growth investments in American General
Lifestyle Fund Series Portfolio Company Funds
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Vanguard LifeStrategy High level of income and moderate Vanguard N/A
Conservative Growth long-term growth of capital and
Portfolio income
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Vanguard LifeStrategy Growth of capital and income Vanguard N/A
Growth Portfolio
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy A reasonable level of income and Vanguard N/A
Moderate Growth long-term growth of capital and
Portfolio income
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ASSET AGSPC Asset Allocation Maximum return through investments in VALIC N/A
ALLOCATION Fund a mix of stocks, bonds and money
market securities
--------------------------------------------------------------------------------------------------------------
FUNDS Templeton Asset Flexible policy of investing in Templeton Investment N/A
Allocation Fund stocks and debt obligations of Counsel, Inc.
companies and governments of any
nation and money market instruments
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</TABLE>
4
<PAGE> 196
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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 Plus 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 Plus 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 Plus'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. Reductions in the account maintenance fee may be available if certain
conditions are met.
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 Charge." 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.
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.
SEPARATE ACCOUNT CHARGES
Depending on the Variable Account Option you choose you may incur a mortality
and expense risk fee and an administration and distribution fee computed at an
aggregate annualized rate of 0.35% to 0.85% during the Purchase Period and 0.75%
to 1.25% during the Payout Period on the average daily net asset value of VALIC
Separate Account A. Reductions in the mortality and expense risk fee and
administration and distribution fee may be available for plan types meeting
certain criteria.
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. In addition to the
management fees, each Fund incurs other operating expenses which may vary.
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 or distributor for providing the Fund administrative and
shareholder services. In addition, the Company currently reimburses certain
Divisions a portion of the Company's administration and distribution fee for
providing Variable Account Options. Such reimbursement arrangements are
voluntary. 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 Plus 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.
5
<PAGE> 197
FEE TABLE
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CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Account Maintenance Fee ($3.75 per quarter, annualized)(2) $ 15
Maximum Surrender Charge(2) 5.00%
</TABLE>
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
MORTALITY ADMINISTRATION SEPARATE
AND AND ACCOUNT TOTAL
EXPENSE RISK DISTRIBUTION EXPENSE SEPARATE
FUND FEE(3) FEE(3) REIMBURSEMENT ACCOUNT FEE
---- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation(8) 0.25% 0.35% -- 0.60%
AGSPC Capital Conservation 0.25 0.35 -- 0.60
AGSPC Government Securities 0.25 0.35 -- 0.60
AGSPC Growth 0.25 0.35 -- 0.60
AGSPC Growth & Income 0.25 0.35 -- 0.60
AGSPC International Equities 0.25 0.35 -- 0.60
AGSPC International Government Bond 0.25 0.35 -- 0.60
AGSPC MidCap Index 0.25 0.35 -- 0.60
AGSPC Money Market 0.25 0.35 -- 0.60
AGSPC Science & Technology 0.25 0.35 -- 0.60
AGSPC Small Cap Index 0.25 0.35 -- 0.60
AGSPC Social Awareness 0.25 0.35 -- 0.60
AGSPC Stock Index 0.25 0.35 -- 0.60
American Century -- Twentieth Century Ultra(4) 0.25 0.60 (0.21%) 0.64
American General Balanced(4) 0.25 0.35 (0.25) 0.35
American General Conservative Growth Lifestyle(4) 0.25 0.35 (0.25) 0.35
American General Domestic Bond(4) 0.25 0.35 (0.25) 0.35
American General Growth Lifestyle(4) 0.25 0.35 (0.25) 0.35
American General International Growth(4) 0.25 0.35 (0.25) 0.35
American General International Value(4) 0.25 0.35 (0.25) 0.35
American General Large Cap Growth(4) 0.25 0.35 (0.25) 0.35
American General Large Cap Value(4) 0.25 0.35 (0.25) 0.35
American General Mid Cap Growth(4) 0.25 0.35 (0.25) 0.35
American General Mid Cap Index(4) 0.25 0.35 (0.25) 0.35
American General Mid Cap Value(4) 0.25 0.35 (0.25) 0.35
American General Moderate Growth Lifestyle(4) 0.25 0.35 (0.25) 0.35
American General Money Market(4) 0.25 0.35 (0.25) 0.35
American General S&P 500 Index(4) 0.25 0.35 (0.25) 0.35
American General Small Cap Growth Fund(4) 0.25 0.35 (0.25) 0.35
American General Small Cap Index(4) 0.25 0.35 (0.25) 0.35
American General Small Cap Value(4) 0.25 0.35 (0.25) 0.35
American General Socially Responsible(4) 0.25 0.35 (0.25) 0.35
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio(4) 0.25 0.60 (0.15) 0.70
Founders Growth(4) 0.25 0.60 (0.25) 0.60
Neuberger&Berman Guardian Trust(4) 0.25 0.60 (0.25) 0.60
Putnam Global Growth(4) 0.25 0.60 (0.25) 0.60
Putnam New Opportunities(4) 0.25 0.60 (0.25) 0.60
Putnam OTC & Emerging Growth(4) 0.25 0.60 (0.25) 0.60
Scudder Growth and Income(4) 0.25 0.60 (0.25) 0.60
T. Rowe Price Small-Cap Stock 0.25 0.60 -- 0.85
Templeton Foreign(4) 0.25 0.60 (0.25) 0.60
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 0.25 0.60 -- 0.85
Templeton International: Class 1 0.25 0.60 -- 0.85
Vanguard LifeStrategy Conservative Growth
Portfolio 0.25 0.60 -- 0.85
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio(5) 0.25 0.60 (0.25) 0.60
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio(5) 0.25 0.60 (0.25) 0.60
Vanguard LifeStrategy Growth Portfolio 0.25 0.60 -- 0.85
Vanguard LifeStrategy Moderate Growth Portfolio 0.25 0.60 -- 0.85
Vanguard/Wellington 0.25 0.60 -- 0.85
Vanguard/Windsor II 0.25 0.60 -- 0.85
</TABLE>
6
<PAGE> 198
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FUND OPERATING EXPENSES FOR FUNDS WHICH HAVE NOT YET COMMENCED OPERATIONS ARE
BASED ON CURRENT ESTIMATES AND ARE SUBJECT TO MODIFICATION PRIOR TO
EFFECTIVENESS.
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER TOTAL FUND
FUND FEES FEES EXPENSES(6) EXPENSES
---- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation(8) 0.50% -- 0.07% 0.57%
AGSPC Capital Conservation 0.50 -- 0.07 0.57
AGSPC Government Securities 0.50 -- 0.06 0.56
AGSPC Growth 0.80 -- 0.06 0.86
AGSPC Growth & Income 0.75 -- 0.06 0.81
AGSPC International Equities 0.35 -- 0.07 0.42
AGSPC International Government Bond 0.50 -- 0.06 0.56
AGSPC MidCap Index 0.34 -- 0.06 0.40
AGSPC Money Market 0.50 -- 0.07 0.57
AGSPC Science & Technology 0.90 -- 0.06 0.96
AGSPC Small Cap Index 0.35 -- 0.06 0.41
AGSPC Social Awareness 0.50 -- 0.06 0.56
AGSPC Stock Index 0.27 -- 0.07 0.34
American Century -- Twentieth Century Ultra 1.00 -- -- 1.00
American General Balanced(10) 0.16 -- 0.67 0.83
American General Conservative Growth Lifestyle 0.10 -- -- 0.10
American General Domestic Bond(10) 0.10 -- 0.74 0.84
American General Growth Lifestyle 0.10 -- -- 0.10
American General International Growth(10) 0.20 -- 0.96 1.16
American General International Value(10) 0.27 -- 0.78 1.05
American General Large Cap Growth(10) 0.16 -- 0.70 0.86
American General Large Cap Value(10) 0.11 -- 0.70 0.81
American General Mid Cap Growth(10) 0.13 -- 0.67 0.80
American General Mid Cap Index(10) -- -- 0.59 0.59
American General Mid Cap Value(10) 0.38 -- 0.67 1.05
American General Moderate Growth Lifestyle 0.10 -- -- 0.10
American General Money Market(10) -- -- 0.56 0.56
American General S&P 500 Index(10) -- -- 0.58 0.58
American General Small Cap Growth(10) 0.53 -- 0.63 1.16
American General Small Cap Index(10) -- -- 0.59 0.59
American General Small Cap Value(10) 0.36 -- 0.63 0.99
American General Socially Responsible(10) -- -- 0.56 0.56
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio 0.75 -- 0.03 0.78
Founders Growth 0.67 0.25(4) 0.18 1.10
Neuberger&Berman Guardian Trust(7) 0.84 -- 0.04 0.88
Putnam Global Growth 0.64 0.25 0.35 1.24
Putnam New Opportunities 0.50 0.25(4) 0.31 1.06
Putnam OTC & Emerging Growth 0.56 0.25(4) 0.35 1.16
Scudder Growth and Income 0.46 -- 0.30 0.76
T. Rowe Price Small-Cap Stock 0.77 -- 0.25 1.02
Templeton Foreign 0.61 0.25(4) 0.22 1.08
Templeton Variable Products Series
Templeton Asset Allocation: Class 1(9) 0.60 -- 0.18 0.78
Templeton International: Class 1(9) 0.69 -- 0.19 0.88
Vanguard LifeStrategy Conservative Growth Portfolio -- -- 0.29 0.29
Vanguard Fixed Income Securities Fund -- Long-Term
Corporate Portfolio 0.03 -- 0.29 0.32
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio 0.01 -- 0.26 0.27
Vanguard LifeStrategy Growth Portfolio -- -- 0.29 0.29
Vanguard LifeStrategy Moderate Growth Portfolio -- -- 0.29 0.29
Vanguard/Wellington 0.04 -- 0.25 0.29
Vanguard/Windsor II 0.15 -- 0.22 0.37
</TABLE>
See footnotes on page 11.
7
<PAGE> 199
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 Plus 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 Asset Allocation Division 5 $12 $ 37 $ 64 $143
AGSPC Capital Conservation Division 7 12 37 64 143
AGSPC Government Securities Division 8 12 37 64 141
AGSPC Growth Division 15 15 46 80 175
AGSPC Growth & Income Division 16 14 45 77 170
AGSPC International Equities Division 11 10 32 56 125
AGSPC International Government Bond Division 13 12 37 64 141
AGSPC MidCap Index Division 4 10 32 55 123
AGSPC Money Market Division 6 12 37 64 143
AGSPC Science & Technology Division 17 16 49 85 186
AGSPC Small Cap Index Division 14 10 32 56 124
AGSPC Social Awareness Division 12 12 37 64 141
AGSPC Stock Index Division 10 10 30 52 116
American Century -- Twentieth Century Ultra
Division 31 17 52 89 195
American General Balanced Division 42 12 38 65 144
American General Conservative Growth Lifestyle Division 50 5 15 25 57
American General Domestic Bond Division 43 12 38 66 145
American General Growth Lifestyle Division 48 5 14 25 57
American General International Growth Division 33 15 48 82 181
American General International Value Division 34 14 44 76 167
American General Large Cap Growth Division 39 12 38 67 147
American General Large Cap Value Division 40 12 37 64 141
American General Mid Cap Growth Division 37 12 37 63 140
American General Mid Cap Index Division 46 10 30 52 116
American General Mid Cap Value Division 38 14 44 77 168
American General Moderate Growth Lifestyle
Division 49 5 14 26 67
American General Money Market Division 44 9 29 50 112
American General S&P 500 Index Division 47 9 30 52 115
American General Small Cap Growth Division 35 15 48 82 181
American General Small Cap Index Division 45 10 30 52 116
American General Small Cap Value Division 36 14 42 74 162
American General Socially Responsible Division 41 9 29 60 112
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 12 36 62 138
Founders Growth Division 30 17 54 92 201
Neuberger&Berman Guardian Trust
Division 29 15 47 81 177
Putnam Global Growth Division 28 19 58 100 216
Putnam New Opportunities Division 26 17 52 90 197
Putnam OTC & Emerging Growth Division 27 18 55 96 208
Scudder Growth and Income Division 21 14 43 75 164
T. Rowe Price Small-Cap Stock Division 51 19 59 101 220
Templeton Foreign Division 32 17 53 91 199
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 12 36 62 138
Templeton International: Class 1 Division 20 13 39 68 149
Vanguard LifeStrategy Conservative Growth Portfolio Division
54 12 36 63 139
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 9 29 51 114
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 9 28 48 108
Vanguard LifeStrategy, Growth Portfolio Division 52 12 36 63 139
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 12 36 63 139
Vanguard/Wellington Division 25 12 36 63 139
Vanguard/Windsor II Division 24 12 39 67 148
</TABLE>
8
<PAGE> 200
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 Plus 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 Asset Allocation Division 5 $12 $39 $ 67 $149
AGSPC Capital Conservation Division 7 12 39 67 149
AGSPC Government Securities Division 8 12 37 67 148
AGSPC Growth Division 15 15 48 83 181
AGSPC Growth & Income Division 16 15 46 80 176
AGSPC International Equities Division 11 11 34 59 132
AGSPC International Government Bond Division 13 12 39 67 148
AGSPC MidCap Index Division 4 11 34 58 129
AGSPC Money Market Division 6 12 39 67 149
AGSPC Science & Technology Division 17 16 51 88 192
AGSPC Small Cap Index Division 14 11 34 59 131
AGSPC Social Awareness Division 12 12 39 67 148
AGSPC Stock Index Division 10 10 32 55 122
American Century -- Twentieth Century Ultra Division 31 17 53 92 201
American General Balanced Division 42 13 39 68 150
American General Conservative Growth Lifestyle
Division 50 5 16 28 64
American General Domestic Bond Division 43 13 30 68 151
American General Growth Lifestyle Division 48 5 16 28 64
American General International Growth Division 33 16 49 85 187
American General International Value Division 34 15 46 79 174
American General Large Cap Growth Division 39 13 40 70 153
American General Large Cap Value Division 40 12 39 67 148
American General Mid Cap Growth Division 37 12 38 66 147
American General Mid Cap Index Division 46 10 32 55 122
American General Mid Cap Value Division 38 15 46 80 175
American General Moderate Growth Lifestyle Division 49 5 16 28 64
American General Money Market Division 44 10 31 53 119
American General S&P 500 Index Division 47 10 31 55 121
American General Small Cap Growth Division 35 16 49 85 187
American General Small Cap Index Division 45 10 32 55 122
American General Small Cap Value Division 36 14 44 76 168
American General Socially Responsible Division 41 10 31 53 119
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 16 49 84 183
Founders Growth Division 30 18 55 95 207
Neuberger&Berman Guardian Trust Division 29 16 49 84 183
Putnam Global Growth Division 28 19 60 103 222
Putnam New Opportunities Division 26 17 54 93 203
Putnam OTC & Emerging Growth Division 27 18 57 98 214
Scudder Growth and Income Division 21 14 45 77 170
T. Rowe Price Small-Cap Stock Division 51 20 61 104 225
Templeton Foreign Division 32 18 55 94 205
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 17 53 92 200
Templeton International: Class 1 Division 20 18 56 97 211
Vanguard LifeStrategy Conservative Growth Portfolio
Division 54 12 38 66 145
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 10 31 54 120
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 9 30 51 114
Vanguard LifeStrategy Growth Portfolio Division 52 12 38 66 145
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 12 38 66 145
Vanguard/Wellington Division 25 12 38 66 145
Vanguard/Windsor II Division 24 13 40 70 155
</TABLE>
9
<PAGE> 201
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 Plus 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 Asset Allocation Division 5 $59 $ 89 $117 $149
AGSPC Capital Conservation Division 7 59 89 117 149
AGSPC Government Securities Division 8 59 89 117 148
AGSPC Growth Division 15 62 98 133 181
AGSPC Growth & Income Division 16 62 96 130 176
AGSPC International Equities Division 11 58 84 109 132
AGSPC International Government Bond Division 13 59 89 117 148
AGSPC MidCap Index Division 4 58 84 108 129
AGSPC Money Market Division 6 59 89 117 149
AGSPC Science & Technology Division 17 63 101 138 192
AGSPC Small Cap Index Division 14 58 84 109 131
AGSPC Social Awareness Division 12 59 89 117 148
AGSPC Stock Index Division 10 57 82 105 122
American Century -- Twentieth Century Ultra Division 31 64 103 142 201
American General Balanced Division 42 59 89 118 150
American General Conservative Growth Lifestyle Division 50 52 66 78 64
American General Domestic Bond Division 43 59 90 118 151
American General Growth Lifestyle Division 48 52 66 78 64
American General International Growth Division 33 62 99 135 187
American General International Value Division 34 61 96 129 174
American General Large Cap Growth Division 39 60 90 120 153
American General Large Cap Value Division 40 59 89 117 148
American General Mid Cap Growth Division 37 59 88 116 147
American General Mid Cap Index Division 46 57 82 105 122
American General Mid Cap Value Division 38 61 96 130 175
American General Moderate Growth Lifestyle Division 49 52 66 78 64
American General Money Market Division 44 57 81 103 119
American General S&P 500 Index Division 47 57 81 105 121
American General Small Cap Growth Division 35 62 99 135 187
American General Small Cap Index Division 45 57 82 105 122
American General Small Cap Value Division 36 61 94 126 168
American General Socially Responsible Division 41 57 81 103 119
Dreyfus Variable Investment
Dreyfus Small Cap Portfolio Division 18 62 98 134 183
Founders Growth Division 30 64 105 145 207
Neuberger&Berman Guardian Trust Division 29 62 98 134 183
Putnam Global Growth Division 28 66 109 153 222
Putnam New Opportunities Division 26 64 104 143 203
Putnam OTC & Emerging Growth Division 27 65 107 148 214
Scudder Growth and Income Division 21 61 95 127 170
T. Rowe Price Small-Cap Stock Division 51 66 110 154 225
Templeton Foreign Division 32 64 104 144 205
Templeton Variable Products Series
Templeton Asset Allocation: Class 1 Division 19 63 103 142 200
Templeton International: Class 1 Division 20 65 106 147 211
Vanguard LifeStrategy Conservative Growth Portfolio Division
54 59 88 116 145
Vanguard Fixed Income Securities Fund -- Long-Term Corporate
Portfolio Division 22 57 81 104 120
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division 23 56 80 101 114
Vanguard LifeStrategy Growth Portfolio Division 52 59 88 116 145
Vanguard LifeStrategy Moderate Growth Portfolio Division 53 59 88 116 145
Vanguard/Wellington Division 25 59 88 116 145
Vanguard/Windsor II Division 24 60 90 120 155
</TABLE>
10
<PAGE> 202
- --------------------------------------------------------------------------------
- ------------
(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, Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee Charges" and "Exceptions to Surrender
Charge" in this prospectus.
(3) Reductions in the mortality and expense risk fee or administration and
distribution fee may be available for plan types meeting certain criteria.
See "Reduction or Waiver of Account Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration Fee Charges" in this prospectus.
(4) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account A mortality and expense risk fee plus the administration and
distribution fee 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 and/or its affiliate or distributors 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 and/or their affiliates or distributors pay
administrative, shareholder service or distribution fees to the Company:
American Century -- Twentieth Century (0.21%), American General Funds
(0.25%), Dreyfus (0.15%), Founders (0.25%), Neuberger&Berman (0.25%),
Putnam (0.25%), Scudder (0.25%) and Templeton (0.25%) With respect to
American Century -- Twentieth Century Ultra Fund, the Fund pays fees to the
Company of 0.20% on assets in excess of $0 but less than $75 million, and
0.25% on assets in excess of $75 million.
(5) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account A mortality and expense risk fee plus the administration and
distribution fee reduced by the Separate Account Expense Reimbursement. The
Separate Account Expense Reimbursement reflects a voluntary expense
reimbursement made by the Company directly to the Division which may be
terminated by the Company at any time without notice.
(6) OTHER EXPENSES includes custody, accounting, reports to shareholders,
audit, legal, administrative and other miscellaneous expenses. See each
Fund's prospectus for a detailed explanation of these fees.
(7) Neuberger&Berman Guardian Trust ("Trust") has identical investment
objectives and policies and invests in, the same portfolio as
Neuberger&Berman Guardian Fund ("Fund"). Both the Fund and the Trust are
managed by Neuberger&Berman Management Incorporated ("N&B"). N&B
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. For this Fund, MANAGEMENT FEES
include administration expenses.
(8) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(9) For these Funds Management fees and Total Fund Expenses have been restated
to reflect the management fee schedule approved by shareholders and
effective May 1, 1997. See Fund prospectus for details. Actual Management
Fees and Total Fund Expenses during 1997 were lower.
(10) After expense reimbursement. In the absence of the expense reimbursement,
management fees, other expenses and total fund operating expenses,
respectively, would be: Balanced Fund, 0.80%, 0.67% and 1.47%; Domestic
Bond Fund, 0.60%, 0.74% and 1.34%; International Growth Fund, 0.90%, 0.96%
and 1.86%; International Value Fund, 1.00%, 0.78% and 1.78%; Large Cap
Growth Fund, 0.55%, 0.70% and 1.25%; Large Cap Value Fund, 0.50%, 0.70% and
1.20%; Mid Cap Growth Fund, 0.65%, 0.67% and 1.32%; Mid Cap Index Fund,
0.28%, 0.76% and 1.04%; Mid Cap Value Fund, 0.75%, 0.67% and 1.42%; Money
Market Fund, 0.25%, 0.75% and 1.00%; S&P 500 Index Fund, 0.27%, 0.61% and
0.88%; Small Cap Growth Fund, 0.85%, 0.63% and 1.48%; Small Cap Index Fund,
0.28%, 0.85% and 1.13%; Small Cap Value Fund, 0.75%, 0.63% and 1.38%; and
Socially Responsible Fund, 0.25%, 0.76% and 1.01%.
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.
11
<PAGE> 203
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
Portfolio Director Plus Series 1.40 to 12.40 is a new variable annuity product;
therefore, there is no Selected Purchase Unit Data available at this time.
12
<PAGE> 204
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR PLUS
Portfolio Director Plus 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 Plus can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director Plus will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
Plus 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 Plus.
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 Plus. 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.
VALIC is a member of the Insurance Marketplace Standards Association (IMSA).
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. VALIC's membership in IMSA applies to VALIC only and not its
products or affiliates.
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director Plus'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 Plus. 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." Fifty Divisions are
available and represent the Variable Account Options in Portfolio Director Plus.
Each of these Divisions invests in a different Mutual Fund made available
through Portfolio Director Plus. For example, Division Ten represents and
invests in the AGSPC 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 Plus. 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 Plus, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director Plus,
the Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director Plus be held exclusively for the benefit of
the contract owner, participants, annuitants, and beneficiaries of Portfolio
Director Plus. 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.
All inquiries regarding
PORTFOLIO DIRECTOR PLUS
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
13
<PAGE> 205
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director Plus enables you to participate in Divisions that represent
fifty Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available through VALIC Separate Account A. You
may not according to your retirement program be able to invest in all fifty
Variable Account Options described in this prospectus. 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 Plus and include:
- - American General Series Portfolio
Company 1 (AGSPC 1) -- offers 13 funds, for which VALIC serves as investment
adviser.
- - American General Series Portfolio Company 3 (AGSPC 3) -- offers 18 funds for
which VALIC serves as investment adviser.
- - American Century Investments -- offers 1 fund for which American Century
Investment Management, Inc. serves as investment adviser.
- - Dreyfus Variable Investment Fund -- offers 1 fund, for which The Dreyfus
Corporation serves as investment adviser.
- - Founders Funds, Inc. -- offers 1 fund for which Founders Asset Management LLC
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 Kemper Investments, Inc. -- offers 1 fund for which Scudder Kemper
Investments, Inc. serves as investment adviser.
- - T. Rowe Price Small-Cap Stock Fund, Inc. -- offers 1 fund for which T. Rowe
Price Associates, Inc. serves as investment adviser.
- - Templeton Funds Inc. -- offers 3 funds for which Templeton Global Advisors
Limited and Templeton Investment Counsel, Inc. serves as investment advisers.
- - The Vanguard Group Inc. -- offers 7 funds for which Barrow, Hanley, Mewhinney
& Strauss, Inc., Equinox Capital Management, Inc., Tukman Capital Management,
Inc., Vanguard Core Management Group, Wellington Management Company, LLP and
Vanguard Fixed Income Group serve as investment advisers.
Sixteen of the Mutual Funds offered through VALIC's Separate Account A are also
available to the general public.
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 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 fees plus administration and distribution fees 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 in the graphs reflect
Separate Account performance based on the performance of the underlying Fund for
the last 10 fiscal years or, since inception of the underlying Fund if for less
than 10 years. The returns shown in the tables for all Funds other than the
AGSPC 3 Funds reflect the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
Since the AGSPC 3 Funds began operations on , 1998, no actual
performance history exists. The returns shown in the tables for those AGSPC 3
Funds reflect the performance of comparable funds or composites managed by the
subadvisers for the Funds as described in the accompanying narrative. The actual
performance of each Fund has been reduced by Separate Account fees that would
have been incurred under the Contract. Investment return and principal value
will fluctuate with market conditions, and for foreign investments, currencies
and the economic and political climates of the countries where investments are
made. Past performance cannot predict or guarantee future results.
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 Plus.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
14
<PAGE> 206
AGSPC ASSET ALLOCATION 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,992
03/31/90 12,059
03/31/91 13,099
03/31/92 13,886
03/31/93 14,826
03/31/94 14,963
03/31/95 15,965
03/31/96 19,247
03/31/97 21,024
03/31/98 27,461
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
AGSPC 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,278
03/31/90 11,155
03/31/91 11,541
03/31/92 12,977
03/31/93 14,946
03/31/94 15,070
03/31/95 15,539
03/31/96 17,140
03/31/97 17,714
03/31/98 19,633
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
15
<PAGE> 207
AGSPC 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,267
03/31/90 11,146
03/31/91 12,112
03/31/92 13,338
03/31/93 15,221
03/31/94 15,389
03/31/95 15,835
03/31/96 17,284
03/31/97 17,789
03/31/98 19,710
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 11,285
03/31/96 16,031
03/31/97 16,687
03/31/98 24,560
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
16
<PAGE> 208
AGSPC 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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 10,800
03/31/96 14,056
03/31/97 15,541
03/31/98 21,169
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
AGSPC 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
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 8,410
03/31/91 8,663
03/31/92 7,833
03/31/93 8,617
03/31/94 10,346
03/31/95 10,852
03/31/96 12,209
03/31/97 12,315
03/31/98 14,521
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
17
<PAGE> 209
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
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 10,345
03/31/93 11,829
03/31/94 12,866
03/31/95 14,918
03/31/96 15,237
03/31/97 15,169
03/31/98 15,318
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
18
<PAGE> 210
AGSPC 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 April 1,
1988 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 of this prospectus.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,086
03/31/90 12,158
03/31/91 12,479
03/31/92 13,345
03/31/93 15,206
03/31/94 15,944
03/31/95 17,136
03/31/96 21,845
03/31/97 23,880
03/31/98 35,243
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 11,015
03/31/93 12,551
03/31/94 13,160
03/31/95 14,144
03/31/96 18,030
03/31/97 19,711
03/31/98 29,089
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400" are
trademarks of Standard and Poor's ("S&P"). The AGSCP MidCap 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.
19
<PAGE> 211
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,719
03/31/90 11,575
03/31/91 12,368
03/31/92 12,894
03/31/93 13,200
03/31/94 13,478
03/31/95 14,000
03/31/96 14,667
03/31/97 15,306
03/31/98 16,012
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
04/29/94 $10,000
03/31/95 13,796
03/31/96 20,599
03/31/97 19,688
03/31/98 26,475
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED MARCH 31
20
<PAGE> 212
AGSPC 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
- ------------------------- -------
<S> <C>
05/01/92 $10,000
03/31/93 11,488
03/31/94 12,408
03/31/95 12,904
03/31/96 16,444
03/31/97 17,247
03/31/98 24,269
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED MARCH 31
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
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 9,982
03/31/91 11,234
03/31/92 11,928
03/31/93 13,543
03/31/94 13,324
03/31/95 15,005
03/31/96 19,819
03/31/97 23,837
03/31/98 34,925
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
* The Russell(R) Index is a trademark/service mark of the Frank Russell Trust
Company. Russell(TM) is a trademark of the Frank Russell Company.
21
<PAGE> 213
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 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,500
03/31/90 13,492
03/31/91 15,132
03/31/92 16,519
03/31/93 18,892
03/31/94 18,914
03/31/95 21,625
03/31/96 28,333
03/31/97 33,684
03/31/98 49,406
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
AMERICAN CENTURY --
TWENTIETH CENTURY ULTRA FUND
Investor Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 12,022
03/31/90 13,242
03/31/91 21,154
03/31/92 25,903
03/31/93 27,966
03/31/94 33,251
03/31/95 33,926
03/31/96 45,100
03/31/97 48,905
03/31/98 70,888
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The AGSPC 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> 214
AMERICAN GENERAL
BALANCED FUND
(Division 42)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks balanced accomplishment of (i) conservation of principal and (ii)
long-term growth of capital and income through investment in fixed income and
equity securities.
The Balanced Fund commenced operations on . However, the Fund's
investment objectives, policies and strategies are substantially similar to
those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund is for a composite of such similar accounts ("Sub-adviser Composite").
The Sub-adviser Composite represents the total return, gross of management fees,
of all relevant accounts managed on a discretionary basis by the institutional
investment management division of the Sub-adviser. The inception dates of the
accounts comprising the Sub-adviser Composite range from December 31, 1974 to
September 30, 1997. The discretionary accounts in the Sub-adviser Composite are
not subject to the investment limitations, diversification requirements and
other restrictions imposed on registered mutual funds by the Investment Company
Act of 1940 and the Internal Revenue Code. If the accounts included in the
Sub-adviser Composite had been subject to the requirements imposed on registered
mutual funds, their performance might have been lower. Please refer to the
prospectus for the Fund for further information regarding the Fund's use of
performance information for the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,077
03/31/90 12,557
03/31/91 13,973
03/31/92 15,439
03/31/93 17,417
03/31/94 17,309
03/31/95 18,845
03/31/96 23,201
03/31/97 25,906
03/31/98 33,596
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
23
<PAGE> 215
AMERICAN GENERAL CONSERVATIVE
GROWTH LIFESTYLE FUND
(Division 50)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low to moderate growth of capital through investments
in Series Company Funds.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
24
<PAGE> 216
AMERICAN GENERAL DOMESTIC
BOND FUND
(Division 43)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in debt instruments and other income producing securities.
The Domestic Bond Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those employed by the Sub-adviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund is for a composite of such similar accounts ("Sub-adviser Composite").
The Sub-adviser Composite represents the total return, gross of management fees,
of all relevant accounts managed on a discretionary basis by the institutional
investment management division of the Sub-adviser. The inception date of the
accounts comprising the Sub-adviser Composite range from December 31, 1972 to
March 1, 1998. The discretionary accounts in the Sub-adviser Composite are not
subject to the investment limitations, diversification requirements and other
restrictions imposed on registered mutual funds by the Investment Company Act of
1940 and the Internal Revenue Code. If the accounts included in the Sub-adviser
Composite had been subject to the requirements imposed on registered mutual
funds, their performance might have been lower. Please refer to the prospectus
for the Fund for further information regarding the Fund's use of performance
information for the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,375
03/31/90 11,503
03/31/91 12,990
03/31/92 14,454
03/31/93 16,551
03/31/94 16,470
03/31/95 17,011
03/31/96 18,607
03/31/97 19,409
03/31/98 21,489
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
25
<PAGE> 217
AMERICAN GENERAL GROWTH
LIFESTYLE FUND
(Division 48)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth through investments in Series Company Funds. The Fund is suitable
for investors seeking the potential for capital growth that a fund investing
predominately in common stocks may offer.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
26
<PAGE> 218
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND
(Division 33)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation by investing in equity
securities of companies in developed and emerging markets. The Fund may invest
across the capitalization spectrum, although it intends to emphasize smaller
capitalization stocks.
1. The Templeton Performance Information
The International Growth Fund commenced operations on . The
performance information shown below is for the Templeton International Fund, a
series of the Templeton Variable Products Series Fund, which was managed by Mr.
Jacobs, a principal of the Sub-adviser. The Templeton International Fund has
substantially similar, though not necessarily identical objectives, policies and
strategies as the International Growth Fund. The chart shows the historical
investment performance for the periods ended June 30. The inception date for the
Templeton International Fund was May 1, 1992. During Mr. Jacobs tenure as
portfolio manager, from May 1, 1992 to June 30, 1995, he was primarily
responsible for the day-to-day management of the fund, and no other person had a
significant role in achieving the fund's performance.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
06/30/92 9,714
06/30/93 10,535
06/30/94 13,016
06/30/95 14,288
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED JUNE 30, 1995
27
<PAGE> 219
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND -- (CONTINUED)
(Division 33)
- --------------------------------------------------------------------------------
2. The Separate Account Performance Information
Although the International Growth Fund has no performance record, the Fund's
investment objectives, policies and strategies will be substantially similar to
those employed by the Sub-adviser with respect to certain separately managed
accounts of the Sub-adviser. The chart below shows the historical investment
performance (with the adjustments noted below) for a composite of the
Sub-adviser's similar accounts which use the same investment strategy that the
Sub-adviser will employ on behalf of the Fund. The Sub-adviser Composite
represents the total return, net of all fees and expenses, of all relevant
separately managed accounts of the Sub-adviser. The inception date of the
Sub-adviser Composite was October 1, 1995.
The separately managed account in the Sub-adviser Composite were not subject to
the investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code. If the accounts included in the Sub-adviser Composite has
been subject to the requirements imposed on registered mutual funds, their
performance might have been lower.
Please refer to the prospectus of the Fund for further information regarding the
Fund's use of performance information for the International Growth Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1995 $ Value
- ------------------------- -------
<S> <C>
10/01/95 $10,000
03/31/96 10,605
03/31/97 13,717
03/31/98 16,268
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1995
[CHART]
PERIOD ENDED MARCH 31
28
<PAGE> 220
AMERICAN GENERAL INTERNATIONAL
VALUE FUND
(Division 34)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital and future income through investments
primarily in securities of non-U.S. issuers and securities whose principal
markets are outside of the United States.
The International Value Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those employed by the subadviser with respect to certain discretionary
investment accounts managed by the Sub-adviser. The performance information for
the Fund reflects the historical investment performance (with the adjustments
noted below) for a composite of the Sub-adviser's similar accounts which use the
same investment strategy that the Sub-adviser will employ on behalf of the Fund
("Sub-adviser Composite"). The Sub-adviser Composite represents the total return
gross of management fees, of all relevant accounts managed on a discretionary
basis by the institutional investment management division of the Sub-adviser.
The inception date of the discretionary accounts comprising the Sub-adviser
Composite range from December 31, 1978 to March 31, 1998. The discretionary
accounts in the Sub-adviser Composite are not subject to the investment
limitations, diversification requirements and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. If the accounts included in the Sub-advisor Composite had been
subject to the requirements imposed on registered mutual funds, their
performance might have been lower. Please refer to the prospectus for the Fund
for further information regarding the Fund's use of performance information for
the Sub-adviser Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,627
03/31/90 12,194
03/31/91 12,342
03/31/92 12,712
03/31/93 13,689
03/31/94 17,175
03/31/95 17,064
03/31/96 20,123
03/31/97 22,417
03/31/98 27,430
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
29
<PAGE> 221
AMERICAN GENERAL LARGE CAP
GROWTH FUND
(Division 39)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through a broadly diversified portfolio of
equity securities of large cap U.S. issuers that are expected to have better
prospects for earnings growth than the growth rate of the general domestic
economy. Dividend income is a secondary consideration.
The Large Cap Growth Fund commenced operation on . However, the
Funds' investment objectives, policies and strategies are substantially similar
to the Goldman Sachs CORE Large Cap Growth and it is managed in substantially
the same manner and by the same individuals as the Goldman Sachs CORE Large Cap
Growth Fund. Performance information prior to November 11, 1991 (commencement
date for Goldman Sachs CORE Large Cap Growth Fund) is that of a predecessor
separate account adjusted to reflect the higher fees and expenses applicable to
Goldman Sachs CORE Large Cap Growth Fund. Although the predecessor separate
account was managed by the Sub-adviser in substantially the same manner and by
the same individuals as the Goldman Sachs CORE Large Cap Growth Fund, the
separate account was not registered under the Investment Company Act of 1940
(the "1940 Act") and was not subject to certain investment restrictions imposed
by the 1940 Act and the Internal Revenue Code. If it had been registered under
the 1940 Act, performance might have been adversely affected. Please refer to
the prospectus for the Fund for further information regarding the Fund's use of
performance information for the Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
December 1, 1991 $ Value
- ------------------------- -------
<S> <C>
12/01/91 $10,000
03/31/92 10,837
03/31/93 10,967
03/31/94 13,099
03/31/95 14,241
03/31/96 19,597
03/31/97 25,336
03/31/98 32,456
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE DECEMBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
30
<PAGE> 222
AMERICAN GENERAL LARGE CAP
VALUE FUND
(Division 40)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the S&P 500 Index through
investments in equity securities.
The Large Cap Value Fund commenced operations on . However, the
Fund is managed in substantially the same manner and by the same individuals as
those employed by the Sub-adviser for discretionary accounts (the "Discretionary
Accounts") managed by the Sub-adviser with similar investment objectives,
policies and strategies. The Discretionary Accounts are not subject to the
investment limitations, diversification and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. The performance information for the Fund reflects the historical
performance for the Discretionary Accounts. If it had been subject to such
regulation, performance might have been adversely affected. The inception date
for the Discretionary Accounts range from August 1, 1992 through August 1, 1997.
Please refer to the prospectus for the Fund for further information regarding
the Fund's use of related performance information for the Discretionary Account.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 1, 1992 $ Value
- ------------------------- -------
<S> <C>
08/01/92 $10,000
03/31/93 11,433
03/31/94 11,756
03/31/95 12,888
03/31/96 16,912
03/31/97 20,508
03/31/98 32,327
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 1, 1992
[CHART]
PERIOD ENDED MARCH 31
31
<PAGE> 223
AMERICAN GENERAL MID CAP
GROWTH FUND
(Division 37)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in equity securities,
such as common and preferred stocks and securities convertible into common
stocks. Current income is of secondary importance.
The Mid Cap Growth Fund commenced operations on . However, the
Fund's investment objective and policies and the Fund's strategies are
substantially similar to those employed by the Sub-adviser with respect to
certain discretionary investment management accounts under their management
("Combined Accounts"). The performance information for the Fund reflects the
historical performance for the Combined Accounts ("Combined Accounts
Composite"). The Combined Accounts Composite includes all discretionary accounts
managed by the Sub-adviser invested principally in equity securities of medium
capitalization companies using the same investment strategy that the Sub-
adviser will employ on behalf of the Fund. The inception date of the
discretionary investment management accounts comprising the Combined Accounts
Composite range from January 1, 1993 to October 1, 1997. The discretionary
accounts in the Combined Accounts Composite are not subject to the investment
limitations, diversification requirements and other restrictions imposed on
registered mutual funds by the Investment Company Act of 1940 and the Internal
Revenue Code. If the accounts included in the Combined Accounts Composite had
been subject to the requirements imposed on registered mutual funds, their
performance might have been lower. Please refer to the prospectus for the Fund
for further information regarding the Fund's use of performance information for
the Combined Accounts Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1993 $ Value
- ------------------------- -------
<S> <C>
01/01/93 10,000
03/31/93 9,730
03/31/94 10,634
03/31/95 11,662
03/31/96 15,087
03/31/97 16,316
03/31/98 23,247
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1993
[CHART]
PERIOD ENDED MARCH 31
32
<PAGE> 224
AMERICAN GENERAL MID CAP
INDEX FUND
(Division 46)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital through investments primarily in a
diversified portfolio of common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P MidCap
400 Index*.
The Mid Cap Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the American General Services Portfolio Company's MidCap Index Fund ("AGSPC
MidCap Index Fund") and it is managed in substantially the same manner and by
the same individuals as AGSPC MidCap Index Fund". The performance information
for the Fund is for the AGSPC MidCap Index Fund and is shown in two separate
sets of tables and graphs for the ten year period beginning April 1, 1988 and
for the period beginning October 1, 1991. The inception date for the AGSPC
MidCap Index Fund was October 13, 1982. Please refer to the prospectus for the
Fund for further information regarding the Fund's use of performance information
for the AGSPC MidCap Index Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,115
03/31/90 12,220
03/31/91 12,571
03/31/92 13,821
03/31/93 15,791
03/31/94 16,579
03/31/95 17,862
03/31/96 22,834
03/31/97 25,024
03/31/98 37,036
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" and "S&P MidCap 400(R)" are
trademarks of Standard and Poor's ("S&P"). The American General MidCap 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.
33
<PAGE> 225
AMERICAN GENERAL MID CAP
INDEX FUND -- (CONTINUED)
(Division 46)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
03/31/92 11,030
03/31/93 12,603
03/31/94 13,231
03/31/95 14,256
03/31/96 18,223
03/31/97 19,971
03/31/98 29,558
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED MARCH 31
34
<PAGE> 226
AMERICAN GENERAL MID CAP
VALUE FUND
(Division 38)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth through investment in common stocks of
medium-to-large-capitalization established companies using a value-oriented
investment approach.
The Mid Cap Value Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to those of the Neuberger&Berman Partners Fund and it is managed in
substantially the same manner and by the same individuals as the
Neuberger&Berman Partners Fund. The performance information for the Fund is for
the Neuberger &Berman Partners Fund for the period April 1, 1998 through March
31, 1998. The inception date for the Neuberger&Berman Partners Fund was January
20, 1975. Please refer to the prospectus for the Fund for further information
regarding the Fund's use of performance information for the Neuberger&Berman
Partners Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 9,964
03/31/90 11,182
03/31/91 12,281
03/31/92 13,897
03/31/93 16,658
03/31/94 17,600
03/31/95 19,686
03/31/96 26,261
03/31/97 31,117
03/31/98 43,887
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
35
<PAGE> 227
AMERICAN GENERAL MODERATE
GROWTH LIFESTYLE FUND
(Division 49)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth and current income through investments in Series Company Funds.
This Fund is suitable for investors who wish to invest in stocks, but who are
not willing to assume the substantial market risks of the Lifestyle Growth Fund.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
36
<PAGE> 228
AMERICAN GENERAL MONEY
MARKET FUND
(Division 44)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
The Money Market Fund commenced operations on . However,
the Fund's investment objectives, policies and strategies are substantially
similar to those of the American General Series Portfolio Company's Money Market
Fund ("AGSPC Money Market Fund") and it is managed in substantially the same
manner and by the same individuals as the AGSPC Money Market Fund. The
performance information for the Fund is for the AGSPC Money Market Fund for the
period April 1, 1988 to March 31, 1998. The inception date for the AGSPC Money
Market Fund was January 16, 1986. Please refer to the prospectus for the Fund
for further information regarding the Fund's use of performance information for
the AGSPC Money Market Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,742
03/31/90 11,624
03/31/91 12,447
03/31/92 13,009
03/31/93 13,348
03/31/94 13,636
03/31/95 14,197
03/31/96 14,909
03/31/97 15,594
03/31/98 16,351
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
37
<PAGE> 229
AMERICAN GENERAL S&P 500
INDEX FUND
(Division 47)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide investment results that, before expenses correspond to the
total return (i.e. the combination of capital changes and income) of common
stocks publicly traded in the United States, as represented by the S&P 500
Index.
The S&P 500 Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the BT Pyramid Large Cap Equity Index Fund and it is managed in substantially
the same manner and by the same individuals as the BT Pyramid Large Cap Equity
Index Fund. The performance information for the Fund is for the BT Pyramid Large
Cap Equity Index Fund for the period April 1, 1988 through March 31, 1998. The
inception date for the BT Pyramid Large Cap Equity Index Fund was May 31, 1977.
Please refer to the prospectus for the Fund for further information regarding
the Fund's use of performance information for BT Pyramid Large Cap Equity Index
Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,745
03/31/90 13,769
03/31/91 15,842
03/31/92 17,494
03/31/93 20,059
03/31/94 20,084
03/31/95 23,105
03/31/96 30,396
03/31/97 36,241
03/31/98 53,393
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
38
<PAGE> 230
AMERICAN GENERAL SMALL CAP
GROWTH FUND
(Division 35)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth from a portfolio of small company growth
stocks.
The Small Cap Growth Fund commenced operations on . However, the
Fund's investment objective and policies and the Fund's strategies are
substantially similar to those employed by the subadviser and its affiliates
with respect to certain discretionary investment management accounts under their
management ("Combined Accounts"). The performance information for the Fund
reflects the historical performance for these Combined Accounts ("Combined
Accounts Composite"). The Combined Accounts Composite includes all non-mutual
fund discretionary accounts managed by the subadviser and its affiliates
invested solely in the equity securities of small capitalization companies using
the same investment strategy that the subadviser employs on behalf of the Fund.
The inception date of the discretionary accounts comprising the Combined
Accounts Composite range from September 1, 1994 to June 1, 1997. The
discretionary accounts in the Combined Accounts Composite are not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code. If the accounts included in the Combined Accounts
Composite had been subject to the requirements imposed on registered mutual
funds, their performance might have been lower. Please refer to the prospectus
for the Fund for further information regarding the Fund's use of performance
information for the Combined Accounts Composite.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 1, 1994 $ Value
- ------------------------- -------
<S> <C>
09/01/94 $10,000
03/31/95 10,478
03/31/96 14,641
03/31/97 16,139
03/31/98 24,718
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 1, 1994
[CHART]
PERIOD ENDED MARCH 31
39
<PAGE> 231
AMERICAN GENERAL SMALL CAP
INDEX FUND
(Division 45)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to replicate as closely as possible (before deduction of expenses) the
total return of the Russell 2000 Index, an index consisting of 2,000 small-
capitalization common stocks. The portfolio will include the common stock of one
or more companies included in the Index on the basis of computer-generated
statistical data that are deemed representative of the industry diversification
of the entire Russell 2000 Index.
The Small Cap Index Fund commenced operations on . However, the
Fund's investment objectives, policies and strategies are substantially similar
to the BT Pyramid Russell 2000 Index Fund and it is managed in substantially the
same manner and by the same individuals as the BT Pyramid Russell 2000 Index
Fund. The performance information for the Fund is for BT Pyramid Russell 2000
Index Fund for the period April 1, 1988 through March 31, 1998. The inception
date for BT Pyramid Russell 2000 Index Fund was October 31, 1987. Please refer
to the prospectus for the Fund for further information regarding the Fund's use
of performance information for BT Pyramid Russell 2000 Index Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,994
03/31/90 11,596
03/31/91 12,723
03/31/92 15,428
03/31/93 17,025
03/31/94 18,656
03/31/95 19,769
03/31/96 25,192
03/31/97 26,508
03/31/98 37,622
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
40
<PAGE> 232
AMERICAN GENERAL SMALL CAP
VALUE FUND
(Division 36)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks maximum long-term return, consistent with reasonable risk to principal by
investing primarily in common stocks of smaller companies in terms of revenues
and/or market capitalization.
* The Fund commenced operations on , 1998. Accordingly, no performance
for the Fund is available.
41
<PAGE> 233
AMERICAN GENERAL SOCIALLY
RESPONSIBLE FUND
(Division 41)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in common
stocks, in companies which meet the social criteria established for the Fund.
The Socially Responsible Fund commenced operations on . However,
the Fund's investment objectives, policies and strategies are substantially
similar to those of the American General Series Portfolio Company's Social
Awareness Fund ("AGSPC Social Awareness Fund") and it is managed in
substantially the same manner and by the same individuals as the AGSPC Social
Awareness Fund. The performance information for the Fund is for the AGSPC Social
Awareness Fund for the period October 2, 1989 through March 31, 1998. The
inception date for the AGSPC Social Awareness Fund was October 2, 1989. Please
refer to the prospectus for the Fund for further information regarding the
Fund's use of performance information for the AGSPC Social Awareness Fund.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 2, 1989 $ Value
- ------------------------- -------
<S> <C>
10/02/89 $10,000
03/31/90 10,031
03/31/91 11,297
03/31/92 12,024
03/31/93 13,690
03/31/94 13,469
03/31/95 15,207
03/31/96 20,145
03/31/97 24,293
03/31/98 35,694
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
42
<PAGE> 234
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 or services which should enhance
prospects for growth in future earnings.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1990 $ Value
- ------------------------- -------
<S> <C>
08/31/90 $10,000
03/31/91 12,884
03/31/92 30,894
03/31/93 50,002
03/31/94 75,228
03/31/95 83,710
03/31/96 106,498
03/31/97 109,360
03/31/98 150,407
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,197
03/31/90 13,401
03/31/91 14,981
03/31/92 17,718
03/31/93 20,597
03/31/94 24,138
03/31/95 25,312
03/31/96 35,726
03/31/97 39,290
03/31/98 55,788
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
43
<PAGE> 235
NEUBERGER&BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of long-established, high quality companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,889
03/31/90 12,916
03/31/91 14,866
03/31/92 17,342
03/31/93 20,927
03/31/94 22,115
03/31/95 24,960
03/31/96 30,921
03/31/97 35,085
03/31/98 46,509
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,800
03/31/90 12,327
03/31/91 12,970
03/31/92 13,401
03/31/93 14,616
03/31/94 17,314
03/31/95 17,254
03/31/96 21,264
03/31/97 23,509
03/31/98 30,159
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
* Neuberger&Berman Guardian Trust ("Trust") started operating on August 3,
1993. It has identical investment objectives and policies and invests in the
same portfolio as Neuberger&Berman Guardian Fund(SM) ("Fund"), which is also
managed by Neuberger&Berman Management Incorporated ("N&B Management"). The
performance information for the Trust before August 3, 1993 is for the Fund.
N&B Management voluntarily bears certain operating 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 per annum. This arrangement can be terminated on sixty days' prior
written notice. Absent such arrangement, the average annual total returns of
the Trust would have been less. The total returns for the periods prior to
the Trust's commencement of operations would have been lower had they
reflected the higher expense ratios of the Trust as compared to those of the
Fund.
44
<PAGE> 236
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
- ------------------------- -------
<S> <C>
08/31/90 $10,000
03/31/91 13,888
03/31/92 19,005
03/31/93 22,800
03/31/94 28,952
03/31/95 34,088
03/31/96 48,869
03/31/97 45,615
03/31/98 69,721
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED MARCH 31
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,945
03/31/90 12,696
03/31/91 14,320
03/31/92 16,049
03/31/93 18,280
03/31/94 22,571
03/31/95 26,540
03/31/96 39,921
03/31/97 32,760
03/31/98 49,533
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
45
<PAGE> 237
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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,401
03/31/90 12,526
03/31/91 14,215
03/31/92 16,323
03/31/93 18,735
03/31/94 19,637
03/31/95 21,974
03/31/96 28,494
03/31/97 33,500
03/31/98 47,508
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
T. ROWE PRICE SMALL-CAP STOCK FUND
(Division 51)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth through investments in securities of small to
medium-sized companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1992 $ Value
- ------------------------- -------
<S> <C>
08/31/92 $10,000
03/31/93 11,877
03/31/94 13,163
03/31/95 14,150
03/31/96 18,734
03/31/97 20,716
03/31/98 29,789
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1992
[CHART]
PERIOD ENDED MARCH 31
46
<PAGE> 238
TEMPLETON FOREIGN FUND
Class 1 Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. Any income realized will be incidental. The Fund
tries to achieve its goal by a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United States.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,698
03/31/90 14,591
03/31/91 14,890
03/31/92 16,417
03/31/93 17,479
03/31/94 21,951
03/31/95 22,007
03/31/96 25,338
03/31/97 29,347
03/31/98 33,289
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
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.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 24, 1988 $ Value
- ------------------------- -------
<S> <C>
08/24/88 $10,000
03/31/89 10,500
03/31/90 11,382
03/31/91 11,547
03/31/92 13,353
03/31/93 15,052
03/31/94 17,158
03/31/95 17,561
03/31/96 21,674
03/31/97 25,381
03/31/98 31,289
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 24, 1988
[CHART]
PERIOD ENDED MARCH 31
47
<PAGE> 239
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 would be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
03/31/93 9,962
03/31/94 13,115
03/31/95 13,004
03/31/96 15,840
03/31/97 19,234
03/31/98 24,318
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED MARCH 31
VANGUARD LIFESTRATEGY
CONSERVATIVE GROWTH PORTFOLIO
(Division 54)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of income and moderate long-term growth of capital and
income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,574
03/31/96 12,461
03/31/97 13,485
03/31/98 16,609
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
48
<PAGE> 240
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
CORPORATE PORTFOLIO
Institutional Class Shares
(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 bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,568
03/31/90 11,665
03/31/91 13,081
03/31/92 14,823
03/31/93 17,409
03/31/94 17,851
03/31/95 18,569
03/31/96 20,858
03/31/97 21,323
03/31/98 24,904
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
VANGUARD FIXED
INCOME SECURITIES
FUND -- LONG-TERM
U.S. TREASURY PORTFOLIO
Institutional Class Shares
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high level of current income consistent with the maintenance of principal
and liquidity. The Portfolio invests primarily in long-term U.S. Treasury
securities backed by the full faith and credit of the U.S. Government. 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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 10,579
03/31/90 11,699
03/31/91 13,064
03/31/92 14,383
03/31/93 16,906
03/31/94 17,376
03/31/95 18,018
03/31/96 20,386
03/31/97 20,646
03/31/98 24,338
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
49
<PAGE> 241
VANGUARD LIFESTRATEGY
GROWTH PORTFOLIO
(Division 52)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide growth of capital and income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,704
03/31/96 13,296
03/31/97 14,704
03/31/98 19,814
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
VANGUARD LIFESTRATEGY
MODERATE GROWTH PORTFOLIO
(Division 53)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a reasonable level of income and long-term growth of capital and income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
03/31/95 10,603
03/31/96 12,890
03/31/97 14,092
03/31/98 18,218
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED MARCH 31
50
<PAGE> 242
VANGUARD/WELLINGTON FUND
Institutional Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 11,421
03/31/90 12,531
03/31/91 13,679
03/31/92 15,079
03/31/93 17,249
03/31/94 17,741
03/31/95 19,731
03/31/96 24,773
03/31/97 27,745
03/31/98 36,350
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
VANGUARD/WINDSOR II
Institutional Class Shares
(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
April 1, 1988 $ Value
- ------------------------- -------
<S> <C>
04/01/88 $10,000
03/31/89 12,400
03/31/90 13,725
03/31/91 15,109
03/31/92 16,375
03/31/93 19,364
03/31/94 19,536
03/31/95 22,012
03/31/96 29,450
03/31/97 34,453
03/31/98 50,168
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 1, 1988
[CHART]
PERIOD ENDED MARCH 31
51
<PAGE> 243
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 Plus 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 Plus 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 is accompanied by 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 establish a
permanent account for you. Under those 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 Plus.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
52
<PAGE> 244
- --------------------------------------------------------------------------------
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 52 investment options offered in Portfolio Director Plus. This
includes 2 Fixed Account Options and 50 Variable Account 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 Plus 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 as permitted by your retirement
program. 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 Plus 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.
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.
53
<PAGE> 245
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 Plus 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
Plus'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
Plus'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.
54
<PAGE> 246
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director Plus, you may be subject to six basic types
of fees and charges:
- - Account Maintenance Fee
- - Surrender Charge
- - 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 Plus 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, Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee 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 CHARGE
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 CHARGE
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 CHARGE
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.
55
<PAGE> 247
- --------------------------------------------------------------------------------
- - 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; or
- - 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 charge may be reduced or waived if Portfolio Director Plus 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 a surrender charge may be reduced
or waived, see the "Reduction or Waiver of Account Maintenance Fee, Surrender,
Mortality and Expense Risk Fee or Administration and Distribution Fee 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 fee and an administration and
distribution fee applied to VALIC Separate Account A. This is a daily charge at
an aggregate annualized rate of 0.35% to 0.85% during the Purchase Period and
0.75% to 1.25% during the Payout Period 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 fee is to compensate the Company for assuming
mortality and expense risks under Portfolio Director Plus. 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
Plus, no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk fee and on the
administration and distribution fee.
The administration and distribution fee is to reimburse the Company for our
administrative expenses for providing Variable Account Options. This includes
the expense of administration and marketing (including but not limited to
enrollment, participant communication and education).
For more information about the mortality and expense risk fee and administration
and distribution fee, see the Fee Table in this prospectus.
The mortality and expense risk fee or administration and distribution fee may be
reduced or waived if issued to certain types of plans that are expected to
result in lower costs to VALIC. To learn more about how we determine if the
mortality and expense risk fee or administration and distribution fee may be
reduced or waived, see the "Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or Administration and Distribution Fee
Charges" section of this prospectus.
FUND ANNUAL EXPENSE CHARGES
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.
56
<PAGE> 248
- --------------------------------------------------------------------------------
REDUCTION OR WAIVER OF ACCOUNT
MAINTENANCE FEE, SURRENDER,
MORTALITY AND EXPENSE RISK FEE OR ADMINISTRATION AND DISTRIBUTION FEE CHARGES
We may, as described below, determine that the account maintenance fee,
surrender charges, mortality and expense risk fee or administration and
distribution fee for Portfolio Director Plus 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:
- 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.
- Other factors of which we are not presently aware which could reduce
administrative costs.
We review the following additional factors to determine whether we can reduce
or waive account maintenance fees:
- 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.
We review the following additional factors to determine whether we can reduce or
waive surrender charges:
- 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 use of mass enrollment or related administrative tasks performed by your
employer for your retirement program.
We review the following additional factors to determine whether we can reduce
or waive the mortality and expense risk fee or administration and distribution
fee:
- The frequency of Purchase Payments for your retirement program.
- The size of your retirement program.
- The amount of your retirement program's periodic purchase payment.
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. In addition, the Company currently reimburses certain Divisions a
portion of the Company's administration and distribution fee. Such
reimbursement arrangements are voluntary. See the Fee Table in this prospectus
for an identification of those Funds for which a reimbursement applies.
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<PAGE> 249
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 from your existing 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:
- From your existing Variable Account Options (payments will vary); with
- Up to 2 Fixed Account Options (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> 250
- --------------------------------------------------------------------------------
- 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. 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.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
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<PAGE> 251
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>
<S> <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
Generally, Internal Revenue Code Section 403(b)(11) permits total or partial
distributions from a 403(b) contract only on account of hardship (employee
contributions only without accrued interest), attainment of age 59 1/2,
separation from service, death or disability.
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>
<S> <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 Plus. 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
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<PAGE> 252
- --------------------------------------------------------------------------------
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.
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 Plus 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 and in the Statement of Additional
Information.
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<PAGE> 253
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director Plus. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director Plus. This exchange privilege will be available
only to other contracts purchased through your employer-sponsored retirement
plan and 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 Plus 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 Plus. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director Plus. 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 Plus.
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 Plus.
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 Plus 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 Plus 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
Plus.)
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 Plus 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 Plus 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 PLUS
The following other contracts may be exchanged.
- Portfolio Director and Portfolio Director 2 Contracts
- 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
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<PAGE> 254
- --------------------------------------------------------------------------------
Portfolio Director Plus will have the same Account Value (called Accumulation
Value in the other contracts) as the other contracts.
COMPARISON OF PORTFOLIO DIRECTOR AND
PORTFOLIO DIRECTOR 2 CONTRACTS TO PORTFOLIO
DIRECTOR PLUS CONTRACTS
Portfolio Director, Portfolio Director 2 and Portfolio Director Plus contain the
same provisions except as to the level of fees and as to available Variable
Account Options and certain separate Account Expense Reimbursements. Portfolio
Director, Portfolio Director 2 and Portfolio Director Plus are available to
qualified contracts and certain non-qualified contracts. Portfolio Director 2 is
not available to non-qualified contracts issued to individuals.
COMPARISON OF OTHER CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director Plus. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director Plus 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 PLUS
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director Plus.
- Portfolio Director Plus has more investment options to select from.
- Portfolio Director Plus has 16 publicly available mutual funds as investment
options.
- The Portfolio Director Plus 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 Plus has an Interest Guaranteed Death Benefit.
- Portfolio Director Plus's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Different series of Portfolio Director Plus may charge fees higher or lower
than other series of Portfolio Director Plus.
- Portfolio Director Plus'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,
Portfolio Director Contracts and Portfolio Director 2 Contracts for the
equivalent units of interest in Portfolio Director Plus.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director Plus any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director Plus from SA-1,
Independence Plus, Portfolio Director or Portfolio Director 2 Contracts may have
surrender charges and account maintenance fees imposed under Portfolio Director
Plus. 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
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<PAGE> 255
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their purchase payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract, Portfolio Director
Contract or Portfolio Director 2 Contract.
- Leave current assets in the SA-1 Contract, Independence Plus Contract,
Portfolio Director Contract or Portfolio Director 2 Contract and direct
future Purchase Payments to Portfolio Director Plus; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director Plus.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus Contract or Portfolio Director Contract or Portfolio Director 2 Contract,
future Purchase Payments and current assets will be controlled by the provisions
of the SA-1 Contract, Independence Plus Contract, Portfolio Director Contract,
or Portfolio Director 2 Contract, respectively. If the participant chooses to
leave current assets in the SA-1 Contract, the Independence Plus Contract,
Portfolio Director Contract, Portfolio Director 2 Contract and direct future
Purchase Payments to Portfolio Director Plus, the current assets will be
controlled by the provisions of the SA-1 Contract, the Independence Plus
Contract Portfolio Director Contract or Portfolio Director 2 Contract,
respectively. The future Purchase Payments will be controlled by the terms of
Portfolio Director Plus subject to the exception that surrender charges and
account maintenance fees will not be imposed under Portfolio Director Plus. If
the participant chooses to transfer all current assets and future Purchase
Payments to Portfolio Director Plus, such current assets and future Purchase
Payments will be controlled by the provisions of Portfolio Director Plus subject
to the exception that surrender charges and account maintenance fees will not be
imposed under Portfolio Director Plus.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director Plus the participant will not be permitted to exchange back to the SA-1
Contract, Independence Plus Contract, Portfolio Director Contract or Portfolio
Director 2 Contract. If a participant chooses to transfer future Purchase
Payments but not current assets to Portfolio Director Plus, the participant will
be allowed at a later date to transfer the current assets to Portfolio Director
Plus. For a complete analysis of the differences between the SA-1 contract, the
Independence Plus Contract or Portfolio Director Contract, Portfolio Director 2
Contract and Portfolio Director Plus, 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> 256
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director Plus 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 Plus 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 Plus.
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.
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 Plus 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 Plus. 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> 257
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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 Plus 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.
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<PAGE> 258
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 Plus was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
addition, because other Funds began operations on , 1998, no actual
performance history exists. The returns shown in the tables for those Funds
reflect the performance of comparable funds managed by the subadvisers for the
Funds. In each case, we will use the charges and fees imposed by Portfolio
Director Plus in calculating the Division's investment performance.
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 Plus 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 Plus 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 Plus. 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 Plus.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
67
<PAGE> 259
- --------------------------------------------------------------------------------
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 Plus charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual values 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.
AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET DIVISIONS
We may advertise the AGSPC Money Market and American General Money Market
Divisions' Current Yield and Effective Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market or American General Money Market Divisions 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. For the
AGSPC Money Market Division the 7-day Current Yield for the last 7 days ended
March 31, 1998 was 4.47%.
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. For the AGSPC Money Market Division the 7-day Effective Yield for the
last 7 days ended March 31, 1998 was 4.57%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET
DIVISIONS
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market and American General Money Market Divisions. 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.
COMPARABLE FUND PERFORMANCE DATA
The performance data shown in Tables II, IV and VI for the American General Fund
Divisions listed in those tables are based on the performance data of comparable
funds and composites of comparable funds (each a "Comparable Fund"). Each Fund
listed in Tables II, IV and VI is modelled after a Comparable Fund and will be
managed in substantially the same manner and by the same personnel as its
Comparable Fund. Fees and expenses of the American General Funds listed in
Tables II, IV and VI may differ from the fees and expenses historically incurred
by the Comparable Funds. Please see the prospectus for each Fund for further
details.
THE PERFORMANCE INFORMATION IN TABLES II, IV AND VI IS BASED ON FUNDS AND ON
COMPOSITES COMPARABLE TO THE AMERICAN GENERAL FUNDS LISTED IN THOSE TABLES, AND
DOES NOT REFLECT THE ACTUAL PERFORMANCE OF THE AMERICAN GENERAL FUNDS LISTED IN
TABLES II, IV AND VI.
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 six tables below.
The information presented does not reflect the advantage under Portfolio
Director Plus 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 information presented in the following tables reflects the
performance of the underlying Fund after deduction of a mortality and expense
risk fee and administration and distribution fee at an aggregate annualized rate
of 0.35% to 0.85% during the Purchase Period on the daily average net asset
value of VALIC Separate Account A. The exact rate depends upon the Variable
Account Option selected.
68
<PAGE> 260
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)............ 09/06/83 -- 10.57% 12.44% 18.57% 25.54%
AGSPC Capital Conservation Fund (Division 7)........... 01/16/86 -- 6.92 4.73 6.60 5.78
AGSPC Government Securities Fund (Division 8).......... 01/16/86 -- 6.96 4.42 6.05 5.75
AGSPC Growth (Division 15)............................. 04/29/94 25.03% -- -- 28.52 42.10
AGSPC Growth & Income Fund (Division 16)............... 04/29/94 20.28 -- -- 24.00 31.14
AGSPC International Equities Fund (Division 11)........ 10/02/89 4.43 -- 10.27 8.74 12.85
AGSPC International Government Bond (Division 13)...... 10/01/91 6.72 -- 4.42 (0.70) (3.61)
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98..................... -- 13.36 17.73 26.06 42.50
Period from 10/01/91 to 03/31/98..................... 17.79 -- 17.73 26.06 42.50
AGSPC Money Market (Division 6)........................ 01/16/86 -- 4.76 3.01 2.97 (0.15)
AGSPC Science & Technology (Division 17)............... 04/29/94 27.50 -- -- 23.11 29.39
AGSPC Small Cap Index Fund (Division 14)............... 05/01/92 16.09 -- 15.51 22.26 35.63
AGSPC Social Awareness (Division 12)................... 10/02/89 15.79 -- 20.32 31.49 41.43
AGSPC Stock Index (Division 10)........................ 04/20/87 -- 17.26 20.66 30.67 41.59
American Century-Twentieth Century Ultra (Division
31).................................................. 11/02/81 -- 21.58 19.90 26.74 39.87
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)............ 08/31/90 42.95 -- 24.15 20.36 32.46
Founders Growth (Division 30).......................... 01/05/62 -- 18.70 21.53 29.07 36.91
Neuberger&Berman Guardian Trust (Division 29)(1)....... 06/01/50 -- 16.55 16.72 21.87 27.49
Putnam Global Growth (Division 28)..................... 09/01/67 -- 11.61 14.96 19.23 23.22
Putnam New Opportunities (Division 26)................. 08/31/90 29.14 -- 24.57 25.82 47.76
Putnam OTC & Emerging Growth (Division 27)............. 11/01/82 -- 17.29 21.54 21.94 46.12
Scudder Growth and Income (Division 21)(2)............. 11/13/84 -- 16.80 19.91 28.23 36.73
T. Rowe Price Small-Cap Stock (Division 51)(5)......... 08/31/92 21.51 -- 18.49 26.71 38.63
Templeton Foreign (Division 32)........................ 10/05/82 -- 12.72 13.08 13.45 8.37
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division
19)............................................... 08/24/88 12.46 -- 15.13 20.02 18.21
Templeton International Fund: Class 1 (Division
20)............................................... 05/01/92 16.13 -- 18.98 22.02 21.36
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)........................................ 09/30/94 14.53 -- -- 14.77 18.08
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**........ 07/09/73 -- 9.49 6.60 8.83 11.73
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**.... 05/19/86 -- 9.24 6.74 9.10 12.82
Vanguard LifeStrategy Growth Portfolio (Division 52)... 09/30/94 20.62 -- -- 21.42 29.64
Vanguard LifeStrategy Moderate Growth Portfolio
(Division 53)........................................ 09/30/94 17.68 -- -- 18.36 24.18
Vanguard/Wellington (Division 25)...................... 07/01/29 -- 13.71 15.46 21.40 25.94
Vanguard/Windsor II (Division 24)...................... 06/24/85 -- 17.44 20.43 30.56 40.53
</TABLE>
- ---------------
* The table reflects the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
The actual performance of each Fund has been reduced by Separate Account
fees that would have been incurred under the Contract. The Contracts offered
by this prospectus became available for purchase for all funds other than T.
Rowe Price Small-Cap Stock Fund and the Vanguard LifeStrategy Portfolios on
January 1, 1998. For the T. Rowe Price Small-Cap Stock Fund and the Vanguard
LifeStrategy Portfolios, the Contract became available as of the date of
this prospectus.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
(1) Neuberger&Berman Guardian Trust ("Trust") started operating on August 3,
1993. It has identical investment objectives and policies and invests in the
same portfolio as Neuberger&Berman Guardian Fund ("Fund"), which is also
managed by Neuberger&Berman Management Incorporated ("N&B Management"). The
performance information for the Trust
69
<PAGE> 261
before August 3, 1993 is for the Fund. N&B Management voluntarily bears
certain operating 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 per annum. This
arrangement can be terminated on sixty days' prior written notice. Absent
such arrangement, the average annual total returns of the Trust would have
been less. The total returns for periods prior to the Trust's commencement
of operations would have been lower had they reflected the higher expense
ratios of the Trust as compared to those of the Fund.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
(3) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(4) The AGSPC 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.
(5) T. Rowe Price Small-Cap Stock Fund commenced operations on June 1, 1956. The
performance figures in the Table are for the period that T. Rowe Price
Associates, Inc. assumed management of the Fund on August 31, 1992.
70
<PAGE> 262
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 12.83% 13.00% 19.71% 24.52%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 7.89 4.12 6.31 5.60
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 08/30/95....................... 10.62% -- -- 12.63 6.09
Period from 10/01/95 to 03/31/98....................... 19.92 -- -- -- 14.88
American General International Value Fund (Division 34)..... -- 10.56 12.61 15.60 17.21
American General Large Cap Growth Fund (Division 39)........ 20.34 -- 24.08 30.33 22.94
American General Large Cap Value Fund (Division 40)......... 22.93 -- 21.12 34.53 52.46
American General Mid Cap Growth Fund (Division 37).......... 17.37 -- 18.45 24.68 37.35
American General Mid Cap Index Fund (Division 46)
Period from 04/01/88 to 03/31/98....................... -- 13.93 17.13 26.13 42.84
Period from 10/01/91 to 03/31/98....................... 18.07 -- 17.44 26.35 42.84
American General Mid Cap Value Fund (Division 38)........... -- 18.82 19.35 29.28 35.87
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund (Division 44)............ -- 4.98 2.97 3.03 (0.24)
American General S&P 500 Index Fund (Division 47)........... -- 18.18 20.50 30.88 42.16
American General Small Cap Growth Fund (Division 35)........ 28.76 -- -- 32.48 48.16
American General Small Cap Index Fund (Division 45)......... -- 14.11 16.24 18.03 36.76
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 15.86 -- 19.80 31.56 41.76
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no actual
performance history for such Funds exists. The performance data shown in the
above Table is based on the performance data of Comparable Funds reduced by
Separate Account Fees that would have been incurred during the applicable
period. For a description of the methodology used in determining Comparable
Fund performance for each Fund, please see the "Summary of Funds" in this
prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
71
<PAGE> 263
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)................. 09/06/83 -- 10.63% 13.12% 19.82% 30.61%
AGSPC Capital Conservation Fund (Division 7)................ 01/16/86 -- 6.98 5.61 8.11 10.83
AGSPC Government Securities Fund (Division 8)............... 01/16/86 -- 7.02 5.31 7.57 10.80
AGSPC Growth (Division 15).................................. 04/29/94 25.76% -- -- 29.59 47.19
AGSPC Growth & Income Fund (Division 16).................... 04/29/94 21.09 -- -- 25.15 36.21
AGSPC International Equities Fund (Division 11)............. 10/02/89 4.49 -- 11.00 10.20 17.91
AGSPC International Government Bond (Division 13)........... 10/01/91 6.78 -- 5.31 0.89 0.98
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98.......................... 10/13/82 -- 13.42 18.31 27.17 47.58
Period from 10/01/91 to 03/31/98.......................... 17.85 -- 18.31 27.17 47.58
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.82 3.94 4.58 4.61
AGSPC Science & Technology (Division 17).................... 04/29/94 28.19 -- -- 24.27 34.47
AGSPC Small Cap Index Fund (Division 14).................... 05/01/92 16.16 -- 16.13 23.44 40.71
AGSPC Social Awareness (Division 12)........................ 10/02/89 15.85 -- 20.86 32.53 46.52
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 17.32 21.20 31.71 46.68
American Century -- Twentieth Century Ultra (Division 31)... 11/02/81 -- 21.63 20.44 27.84 44.95
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)................. 08/31/90 42.99 -- 24.64 21.57 37.53
Founders Growth (Division 30)............................... 01/05/62 -- 18.76 22.05 30.14 41.99
Neuberger&Berman Guardian Trust (Division 29)(1)............ 06/01/50 -- 16.61 17.32 23.05 32.56
Putnam Global Growth (Division 28).......................... 09/01/67 -- 11.67 15.59 20.46 28.29
Putnam New Opportunities (Division 26)...................... 08/31/90 29.20 -- 25.05 26.94 52.84
Putnam OTC & Emerging Growth (Division 27).................. 11/01/82 -- 17.35 22.06 23.12 51.20
Scudder Growth and Income (Division 21)(2).................. 11/13/84 -- 16.86 20.45 29.31 41.81
T. Rowe Price Small-Cap Stock (Division 51)(5).............. 08/31/92 21.58 -- 19.42 28.13 43.79
Templeton Foreign (Division 32)............................. 10/05/82 -- 12.78 13.75 14.79 13.43
Templeton Variable Products Series Fund --
Templeton Asset Allocation Fund: Class 1 (Division 19).... 08/24/88 12.52 -- 15.76 21.23 23.27
Templeton International Fund: Class 1 (Division 20)....... 05/01/92 16.20 -- 19.54 23.20 26.43
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)............................................. 09/30/94 15.60 -- -- 16.23 23.17
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/09/73 -- 9.55 7.42 10.28 16.79
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 05/19/86 -- 9.30 7.56 10.54 17.88
Vanguard LifeStrategy Growth Portfolio (Division 52)........ 09/30/94 21.58 -- -- 22.76 34.75
Vanguard LifeStrategy Moderate Growth Portfolio (Division
53)....................................................... 09/30/94 18.69 -- -- 19.75 29.28
Vanguard/Wellington (Division 25)........................... 07/01/29 -- 13.78 16.08 22.59 31.01
Vanguard/Windsor II (Division 24)........................... 06/24/85 -- 17.50 20.97 31.60 45.61
</TABLE>
- ---------------
* The table reflects the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
The actual performance of each Fund has been reduced by Separate Account
fees that would have been incurred under the Contract. The Contracts offered
by this prospectus became available for purchase for all Funds other than T.
Rowe Price Small-Cap Stock Fund and the Vanguard LifeStrategy Portfolios on
January 1, 1998. For the T. Rowe Price Small-Cap Stock Fund and the Vanguard
LifeStrategy Portfolios the Contract became available as of the date of this
prospectus.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
72
<PAGE> 264
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 12.89% 14.03% 21.23% 29.68%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 7.95 5.36 8.09 10.72
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 11.94 -- -- 14.21 11.17
Period from 10/01/95 to 03/31/98.......................... 21.50 -- -- -- 18.60
American General International Value Fund (Division 34)..... -- 10.62 14.90 17.13 22.36
American General Large Cap Growth Fund (Division 39)........ 20.41 -- 24.85 31.57 28.10
American General Large Cap Value Fund (Division 40)......... 23.00 -- 22.01 35.83 57.63
American General Mid Cap Growth Fund (Division 37).......... 17.43 -- 19.02 25.83 42.47
American General Mid Cap Index Fund (Division 46)
Period from 04/01/88 to 03/31/98....................... -- 14.00 18.05 27.49 48.00
Period from 10/01/91 to 03/31/98....................... 18.14 -- 18.05 27.49 48.00
American General Mid Cap Value Fund (Division 38)........... -- 15.95 20.26 30.60 41.04
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund (Division 44)............ -- 5.04 4.18 4.82 4.85
American General S&P 500 Index Fund (Division 47)........... -- 18.24 21.39 32.17 47.33
American General Small Cap Growth Fund (Division 35)........ 30.07 -- -- 33.08 53.16
American General Small Cap Index Fund (Division 45)......... -- 14.17 17.18 23.92 41.93
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 16.15 -- 20.70 32.86 46.93
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no
actual performance history for such Funds exists. The performance data shown
in the above Table is based on the performance data of Comparable Funds
reduced by Separate Account Fees that would have been incurred during the
applicable period. For a description of the methodology used in determining
Comparable Fund performance for each Fund, please see the "Summary of Funds"
in this prospectus.
** These Funds commenced operations on , 1998 and no Comparable
Fund performance information is available for these Funds.
73
<PAGE> 265
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION* DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(3)................. 09/06/83 -- 174.61% 85.22% 72.00% 30.61%
AGSPC Capital Conservation Fund (Division 7)................ 01/16/86 -- 96.33 31.36 26.35 10.83
AGSPC Government Securities Fund (Division 8)............... 01/16/86 -- 97.10 29.49 24.47 10.80
AGSPC Growth (Division 15).................................. 04/29/94 145.62% -- -- 117.63 47.19
AGSPC Growth & Income Fund (Division 16).................... 04/29/94 111.70 -- -- 96.01 36.21
AGSPC International Equities Fund (Division 11)............. 10/02/89 45.21 -- 68.53 33.81 17.91
AGSPC International Government Bond (Division 13)........... 10/01/91 53.18 -- 29.50 2.69 0.98
AGSPC MidCap Index Fund (Division 4)(4)
Period from 04/01/88 to 03/31/98.......................... -- 252.43 131.77 105.66 47.58
Period from 10/01/91 to 03/31/98.......................... 190.89 -- 131.77 105.66 47.58
AGSPC Money Market (Division 6)............................. 01/16/86 60.12 21.30 14.37 4.61
AGSPC Science & Technology (Division 17).................... 04/29/94 164.76 -- -- 91.89 34.47
AGSPC Small Cap Index Fund (Division 14).................... 05/01/92 142.69 -- 111.25 88.07 40.71
AGSPC Social Awareness (Division 12)........................ 10/02/89 249.25 -- 157.88 132.75 46.52
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 394.06 161.52 128.47 46.68
American Century -- Twentieth Century Ultra (Division 31)... 11/02/81 -- 608.88 153.48 108.95 44.95
Dreyfus Variable Investment Fund
Dreyfus Small Cap Portfolio (Division 18)................. 08/31/90 1404.07 -- 200.80 79.68 37.53
Founders Growth (Division 30)............................... 01/05/62 -- 457.88 170.85 120.40 41.99
Neuberger&Berman Guardian Trust (Division 29)(1)............ 06/01/50 -- 365.09 122.25 86.33 32.56
Putnam Global Growth (Division 28).......................... 09/01/67 -- 201.59 106.35 74.80 28.29
Putnam New Opportunities (Division 26)...................... 08/31/90 597.21 -- 205.79 104.53 52.84
Putnam OTC & Emerging Growth (Division 27).................. 11/01/82 -- 395.33 170.97 86.64 51.20
Scudder Growth and Income (Division 21)(2).................. 11/13/84 -- 375.08 153.58 116.20 41.81
T. Rowe Price Small-Cap Stock (Division 51)(5).............. 08/31/92 197.89 -- 143.04 110.52 43.79
Templeton Foreign (Division 32)............................. 10/05/82 -- 232.89 90.46 51.27 13.43
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund: Class 1 (Division 19).... 08/24/88 212.89 -- 107.87 78.17 23.27
Templeton International Fund: Class 1 (Division 20)....... 05/01/92 143.18 -- 144.11 87.00 26.43
Vanguard LifeStrategy Conservative Growth Portfolio
(Division 54)............................................. 09/30/94 66.09 -- -- 57.08 23.17
Vanguard Fixed Income Securities Fund --
Long-Term Corporate Portfolio (Division 22)**............. 07/09/73 -- 149.04 43.05 34.12 16.79
Vanguard Fixed Income Securities Fund --
Long-Term U.S. Treasury Portfolio (Division 23)**......... 05/19/86 -- 143.38 43.96 35.08 17.88
Vanguard LifeStrategy Growth Portfolio (Division 52)........ 09/30/94 98.14 -- -- 85.11 34.75
Vanguard LifeStrategy Moderate Growth Portfolio (Division
53)....................................................... 09/30/94 82.18 -- -- 71.81 29.28
Vanguard/Wellington (Division 25)........................... 07/01/29 -- 263.50 110.74 84.22 31.01
Vanguard/Windsor II (Division 24)........................... 06/24/85 -- 401.68 159.08 127.91 45.61
</TABLE>
- ---------------
* The table reflects the historical performance of each Fund based on
investment in a hypothetical Contract from the date of the Fund's inception.
The actual performance of each Fund has been reduced by Separate Account
fees that would have been incurred under the Contract. The Contracts offered
by this prospectus became available for purchase for all Funds other than T.
Rowe Price Small-Cap Stock Fund and the Vanguard LifeStrategy Portfolios on
January 1, 1998. For the T. Rowe Price Small-Cap Stock Fund and the Vanguard
LifeStrategy Portfolios the Contract became available as of the date of this
prospectus.
** The performance figures for the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio (Division 22) and the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio (Division 23) in
the Table do not take into account the Separate Account Reimbursement made
by the Company directly to those Divisions. If such reimbursements were
included, the performance figures for the Divisions would be higher.
74
<PAGE> 266
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED
(FROM COMPARABLE FUND INCEPTION TO MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION* INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------------ --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
American General Balanced Fund (Division 42)................ -- 235.96% 92.89% 78.28% 29.68%
American General Conservative Growth Lifestyle Fund
(Division 50)**........................................... -- -- -- -- --
American General Domestic Bond Fund (Division 43)........... -- 114.89 29.84 26.33 10.72
American General Growth Lifestyle Fund (Division 48)**...... -- -- -- -- --
American General International Growth Fund (Division 33)
Period from 05/01/92 to 06/30/95.......................... 42.88% -- -- 48.96 11.17
Period from 10/01/95 to 03/31/98.......................... 62.68 -- -- -- 18.60
American General International Value Fund (Division 34)..... -- 174.30 100.37 60.75 22.36
American General Large Cap Growth Fund (Division 39)........ 224.56 -- 206.02 127.90 28.10
American General Large Cap Value Fund (Division 40)......... 223.27 -- 170.53 150.82 57.63
American General Mid Cap Growth Fund (Division 37).......... 132.47 -- 138.92 99.34 42.47
American General Mid Cap Index Fund(Division 46)
Period from 04/01/88 to 03/31/98........................ -- 270.36 129.35 107.34 48.00
Period from 10/01/91 to 03/31/98........................ 195.58 -- 129.35 107.34 48.00
American General Mid Cap Value Fund (Division 38)........... -- 338.87 151.63 122.93 41.04
American General Moderate Growth Lifestyle Fund (Division
49)**..................................................... -- -- -- -- --
American General Money Market Fund(Division 44)............. -- 63.51 22.73 15.18 4.85
American General S&P 500 Index Fund (Division 47)........... -- 433.93 163.72 131.09 47.33
American General Small Cap Growth Fund (Division 35)........ 147.18 -- -- 135.89 53.16
American General Small Cap Index Fund (Division 45)......... -- 276.22 120.98 90.31 41.93
American General Small Cap Value Fund (Division 36)**....... -- -- -- -- --
American General Socially Responsible Fund (Division 41).... 256.94 -- 156.33 134.72 46.93
</TABLE>
- ---------------
* These Funds commenced operations on , 1998. Accordingly, no actual
performance history for such Funds exists. The performance data shown in the
above Table is based on the performance data of Comparable Funds reduced by
Separate Account Fees that would have been incurred during the applicable
period. For a description of the methodology used in determining Comparable
Fund performance for each Fund, please see the "Summary of Funds" in this
prospectus.
** These Funds commenced operations on , 1998 and no Comparable Fund
performance information is available for these Funds.
75
<PAGE> 267
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director Plus 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 Plus 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.
76
<PAGE> 268
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
Plus 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 Plus
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.
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.
77
<PAGE> 269
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director Plus 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 408(b) IRA, or is instead a
nonqualified Contract. Portfolio Director Plus 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 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) simplified deferred
compensation plans of private
employers;
- Section 408(p) SIMPLE retirement accounts.
The foregoing Contracts are "Qualified Contracts." Certain series of Portfolio
Director Plus may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity.
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director Plus 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 portion of a
distribution which is not considered a return of 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))
78
<PAGE> 270
- --------------------------------------------------------------------------------
which specifically exempts these Qualified Contracts, and the IRS has no viable
legal basis or reason to apply the theory 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 Plus 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 risk fee and administration and distribution
fee charges (0.35% - 0.85% during the purchase period and 0.75% - 1.25% during
the payout period) and may also incur account maintenance 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 after-tax 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
79
<PAGE> 271
- --------------------------------------------------------------------------------
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 reduces the actual amount saved in the conventional
savings account to $1,800 while the full $2,500 is contributed to 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.
80
<PAGE> 272
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other insurance companies, financial and business organizations around the
world, each of the Variable Account Options and the underlying mutual funds
could be adversely affected if the computer systems used by the Company, other
service providers and entities with computer systems that are linked to the
Company's records do not properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000 Issue." The Company is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems
that its uses and to obtain satisfactory assurances that comparable steps are
being taken by each of the Variable Account Options' other major service
providers. The Company expects to be substantially complete with its computer
systems projects to address year 2000 issues by the end of 1998. However, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Variable Account Options.
81
<PAGE> 273
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>
<PAGE> 274
(This page intentionally left blank)
<PAGE> 275
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
Plus).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 276
(This page intentionally left blank)
<PAGE> 277
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 8
Types of Variable Annuity Contracts................. 9
Federal Tax Matters................................. 9
Tax Consequences of Purchase Payments........... 9
Tax Consequences of Distributions............... 11
Special Tax Consequences -- Early
Distribution.................................. 12
Special Tax Consequences -- Required
Distributions................................. 13
Tax Free Rollovers, Transfers and Exchanges..... 14
Exchange Privilege.................................. 14
Exchanges From Portfolio Director............... 14
Exchanges From Portfolio Director 2............. 15
Exchanges From Independence Plus Contracts...... 16
Exchanges From V-Plan Contracts................. 17
Exchanges From SA-1 and SA-2 Contracts.......... 18
Exchanges From Impact Contracts................. 19
Exchanges From Compounder Contracts............. 20
Information Which May Be Applicable To Any
Exchange...................................... 21
Calculation of Surrender Charge..................... 22
Illustration of Surrender Charge on Total
Surrender..................................... 22
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 22
Purchase Unit Value................................. 23
Illustration of Calculation of Purchase Unit
Value......................................... 23
Illustration of Purchase of Purchase Units...... 23
Performance Calculations............................ 23
AGSPC Money Market and American General Money
Market Divisions Yields....................... 23
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 23
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 23
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 24
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 24
Standardized Yield for Bond Fund Divisions.......... 24
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 24
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 24
Calculation of Average Annual Total Return...... 25
Performance Information............................. 26
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 26
Performance Compared to Market Indices.......... 26
AGSPC Asset Allocation Division Five............ 30
AGSPC Capital Conservation Division Seven....... 31
AGSPC Government Securities Division Eight...... 32
AGSPC Growth Division Fifteen................... 33
AGSPC Growth & Income Division Sixteen.......... 34
AGSPC International Equities Division Eleven.... 35
AGSPC International Government Bond Division
Thirteen...................................... 35
AGSPC MidCap Index Division Four................ 36
AGSPC Money Market Division Six................. 37
AGSPC Science & Technology Division Seventeen... 37
AGSPC Small Cap Index Division Fourteen......... 38
AGSPC Social Awareness Division Twelve.......... 38
AGSPC Stock Index Division Ten.................. 39
American Century -- Twentieth Century Ultra
Division Thirty-One........................... 40
American General Balanced Division Forty-Two.... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American General Conservative Growth Lifestyle
Division Fifty................................ 41
American General Domestic Bond Division
Forty-Three................................... 42
American General Growth Lifestyle Division
Forty-Eight................................... 42
American General International Growth Division
Thirty-Three.................................. 43
American General International Value Division
Thirty-Four................................... 44
American General Large Cap Growth Division
Thirty-Nine................................... 45
American General Large Cap Value Division
Forty......................................... 45
American General Mid Cap Growth Division Thirty-
Seven......................................... 46
American General Mid Cap Index Division
Forty-Six..................................... 46
American General Mid Cap Value Division Thirty-
Eight......................................... 47
American General Moderate Lifestyle Division
Forty-Nine.................................... 47
American General Money Market Division
Forty-Four.................................... 48
American General Small Cap Growth Division
Thirty-Five................................... 49
American General Small Cap Index Division Forty-
Five.......................................... 49
American General Small Cap Value Division
Thirty-Six.................................... 49
American General Socially Responsible Division
Forty-One..................................... 50
American General S&P 500 Index Division Forty-
Seven......................................... 50
Dreyfus Small Cap Division Eighteen............. 51
Founders Growth Division Thirty................. 52
Neuberger&Berman Guardian Trust Division
Twenty-Nine................................... 53
Putnam Global Growth Division Twenty-Eight...... 54
Putnam New Opportunities Division Twenty-Six.... 55
Putnam OTC & Emerging Growth Division
Twenty-Seven.................................. 56
Scudder Growth and Income Division Twenty-One... 56
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 57
Templeton Asset Allocation Division Nineteen.... 58
Templeton Foreign Division Thirty-Two........... 59
Templeton International Division Twenty......... 60
Vanguard LifeStrategy Conservative Growth
Portfolio Division Fifty-Four................. 61
Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio Division
Twenty-Two.................................... 62
Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio
Division Twenty-Three......................... 63
Vanguard LifeStrategy Growth Portfolio Division
Fifty-Two..................................... 64
Vanguard LifeStrategy Moderate Growth Portfolio
Division Fifty-Three.......................... 64
Vanguard/Wellington Division Twenty-Five........ 65
Vanguard/Windsor II Division Twenty-Four........ 65
Payout Payments..................................... 66
Assumed Investment Rate......................... 66
Amount of Payout Payments....................... 66
Payout Unit Value............................... 66
Illustration of Calculation of Payout Unit
Value......................................... 67
Illustration of Payout Payments................. 67
Distribution of Variable Annuity Contracts.......... 68
Experts............................................. 68
Comments on Financial Statements.................... 69
</TABLE>
<PAGE> 278
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-40 REV 7/98
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 279
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
3535 Grandview Parkway
Suite 200
Birmingham, AL 35243
(205) 967-8955
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
(650) 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 1900
Chicago, IL 60606
(312) 368-1001
11711 N. Meridian St.
Suite 300
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
(248) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
4266 Interstate 55N
Suite 108
Jackson, MS 39211
(601) 981-5801
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 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
Two International Plaza
Suite 601
Nashville, TN 37217
(615) 254-4822
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-six branch offices located throughout the
country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
1-800-44-VALIC
FOR UNIT VALUE INFORMATION CALL: 1-800-42-VALIC & TDD 1-800-24-VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-621-7792
TDD 1-800-35-VALIC
EASYACCESS 1-800-42-VALIC
TDD EASYACCESS 1-800-24-VALIC
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THE STATEMENT OF ADDITIONAL INFORMATION DOES NOT
CONSTITUTE A PROSPECTUS.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED JULY 2, 1998
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR PLUS
FOR SERIES 1 TO 12,
SERIES 1.20 TO 12.20
AND SERIES 1.40 TO 12.40
--------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
FORM N-4 PART B
, 1998
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for Portfolio
Director Plus dated , 1998 ("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 Plus is composed of Contract Forms UIT-194, UITG-194,
UITN-194, UIT-IRA-194, and UIT-SEP-194.)
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TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 8
Types of Variable Annuity Contracts......................... 9
Federal Tax Matters......................................... 9
Tax Consequences of Purchase Payments..................... 9
Tax Consequences of Distributions......................... 11
Special Tax Consequences -- Early Distribution............ 12
Special Tax Consequences -- Required Distributions........ 13
Tax Free Rollovers, Transfers and Exchanges............... 14
Exchange Privilege.......................................... 14
Exchanges from Portfolio Director......................... 14
Exchanges from Portfolio Director 2....................... 15
Exchanges From Independence Plus Contracts................ 16
Exchanges From V-Plan Contracts........................... 17
Exchanges From SA-1 and SA-2 Contracts.................... 18
Exchanges From Impact Contracts........................... 19
Exchanges From Compounder Contracts....................... 20
Information Which May Be Applicable To Any Exchange....... 21
Calculation of Surrender Charge............................. 22
Illustration of Surrender Charge on Total Surrender....... 22
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 22
Purchase Unit Value......................................... 23
Illustration of Calculation of Purchase Unit Value........ 23
Illustration of Purchase of Purchase Units................ 23
Performance Calculations.................................... 23
AGSPC Money Market and American General Money Market
Divisions Yields....................................... 23
Calculation of Current Yield for AGSPC Money Market
Division Six........................................... 23
Illustration of Calculation of Current Yield for AGSPC
Money Market Division Six.............................. 23
Calculation of Effective Yield for AGSPC Money Market
Division Six........................................... 24
Illustration of Calculation of Effective Yield for AGSPC
Money Market Division Six.............................. 24
Standardized Yield for Bond Fund Divisions.................. 24
Calculation of Standardized Yield for Bond Fund
Divisions.............................................. 24
Illustration of Calculation of Standardized Yield for Bond
Fund Divisions......................................... 24
Calculation of Average Annual Total Return................ 25
Performance Information..................................... 26
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to Benchmark Tables........................ 26
Performance Compared to Market Indices.................... 26
AGSPC Asset Allocation Division Five...................... 30
AGSPC Capital Conservation Division Seven................. 31
AGSPC Government Securities Division Eight................ 32
AGSPC Growth Division Fifteen............................. 33
AGSPC Growth & Income Division Sixteen.................... 34
AGSPC International Equities Division Eleven.............. 35
AGSPC International Government Bond Division Thirteen..... 35
AGSPC MidCap Index Division Four.......................... 36
AGSPC Money Market Division Six........................... 37
AGSPC Science & Technology Division Seventeen............. 37
AGSPC Small Cap Index Division Fourteen................... 38
AGSPC Social Awareness Division Twelve.................... 38
AGSPC Stock Index Division Ten............................ 39
American Century -- Twentieth Century Ultra Division
Thirty-One............................................. 40
American General Balanced Division Forty-Two.............. 41
</TABLE>
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<TABLE>
<S> <C>
American General Conservative Growth Lifestyle Division
Fifty.................................................. 41
American General Domestic Bond Division Forty-Three....... 42
American General Growth Lifestyle Division Forty-Eight.... 42
American General International Growth Division
Thirty-Three........................................... 43
American General International Value Division
Thirty-Four............................................ 44
American General Large Cap Growth Division Thirty-Nine.... 45
American General Large Cap Value Division Forty........... 45
American General Mid Cap Growth Division Thirty-Seven..... 46
American General Mid Cap Index Division Forty-Six......... 46
American General Mid Cap Value Division Thirty-Eight...... 47
American General Moderate Growth Lifestyle Division
Forty-Nine............................................. 47
American General Money Market Division Forty-Four......... 48
American General Small Cap Growth Division Thirty-Five.... 49
American General Small Cap Index Division Forty-Five...... 49
American General Small Cap Value Division Thirty-Six...... 49
American General S&P 500 Index Division Forty-Seven....... 50
American General Socially Responsible Division
Forty-One.............................................. 50
Dreyfus Small Cap Division Eighteen....................... 51
Founders Growth Division Thirty........................... 52
Neuberger&Berman Guardian Trust Division Twenty-Nine...... 53
Putnam Global Growth Division Twenty-Eight................ 54
Putnam New Opportunities Division Twenty-Six.............. 55
Putnam OTC & Emerging Growth Division Twenty-Seven........ 56
Scudder Growth and Income Division Twenty-One............. 56
T. Rowe Price Small-Cap Stock Division Fifty-One.......... 57
Templeton Asset Allocation Division Nineteen.............. 58
Templeton Foreign Division Thirty-Two..................... 59
Templeton International Division Twenty................... 60
Vanguard LifeStrategy Conservative Growth Portfolio
Division Fifty-Four.................................... 61
Vanguard Fixed Income Securities Fund -- Long-Term
Corporate Portfolio Division Twenty-Two................ 62
Vanguard Fixed Income Securities Fund -- Long-Term U.S.
Treasury Portfolio Division Twenty-Three............... 63
Vanguard LifeStrategy Growth Portfolio Division
Fifty-Two.............................................. 64
Vanguard LifeStrategy Moderate Growth Portfolio Division
Fifty-Three............................................ 64
Vanguard/Wellington Division Twenty-Five.................. 65
Vanguard/Windsor II Division Twenty-Four.................. 65
Payout Payments
Assumed Investment Rate................................... 66
Amount of Payout Payments................................. 66
Payout Unit Value......................................... 66
Illustration of Calculation of Payout Unit Value.......... 67
Illustration of Payout Payments........................... 67
Distribution of Variable Annuity Contracts.................. 68
Experts..................................................... 68
Comments on Financial Statements............................ 69
</TABLE>
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GENERAL INFORMATION
MARKETING INFORMATION
The Company has targeted organizations in specific market sectors 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,
primary and secondary schools, colleges and universities, healthcare
organizations, state and local governments and other 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
$3.4 billion as of December 31, 1997. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,739,191
accounts as of December 31, 1997. The number of employer groups which have
purchased Contracts has increased by 195 percent in the past ten years to more
than 26,392 as of December 31, 1997. As of December 31, 1997, 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, 1997 the Company's assets totaled more than $33
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
As of December 31, 1997, the Company was marketing Contracts in more than
9,795 public and private, primary and secondary schools with more than 464,729
participant accounts for employees in public and private schools nationwide.
From December 31, 1986 to December 31, 1997, the cash value of investments in
these Contracts has increased by 291 percent while the number of public and
private school groups in these Contracts increased 104 percent and the number of
participant accounts in these Contracts increased by 115 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1987 to December 31, 1997, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 176 percent and for the same period the
number of participant accounts has increased 141 percent. For the same time
period cash values for participants have increased 315 percent. As of December
31, 1997, nearly 33 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 market segment. From
December 31, 1987 to December 31, 1997 Contract cash values have increased 795
percent. During the same period the number of healthcare groups that have
purchased these Contracts increased 290 percent and the number of participant
accounts increased 774 percent.
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1986 to December 31, 1997, Contract
cash values for participants in these groups have increased 309 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 233 percent and the number of employer groups has
increased 371 percent.
Additionally, many states operate, as an alternative to state administered
defined benefit retirement programs, Optional Retirement Plans (ORPs). A state
that sponsors an ORP will select one or more carriers 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 28 of the 31
states to sponsor ORPs with multiple carriers, as of December 31, 1997. From
December 31, 1992 to December 31, 1997, in these ORPs the number of participant
accounts increased 105 percent and cash values increased 153 percent to nearly
$2.3 billion.
The Company may, from time to time, refer to American General Retirement
Services. American General Retirement Services is a financial reporting segment
of American General Corporation. The Company and American General Annuity
Insurance Company are the two insurance companies that constitute American
General Retirement Services.
The Company may, from time to time, refer to a general investment strategy
known as indexing. 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
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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 Planning includes:
(1) personal, face-to-face service from highly trained VALIC Retirement Planning
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; and (6) 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, Morningstar, Inc. 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
categories, such as stocks, bonds, cash equivalents, etc. The Company may also
discuss investment volatility (standard deviation) including the range of
returns for different asset categories and classes over different time horizons,
and the correlation between the returns of different asset categories and
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 healthcare segment. 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 American Century Investment
Management, Inc. (ACIM) as investment adviser to the American
Century -- Twentieth Century Ultra Fund (underlying Division Thirty-One). The
nation's fourth-largest family of direct-marketed, no-load mutual funds,
American Century also represents the 15th-largest family of funds overall.
American Century offers nearly 70 no-load funds and manages assets for more than
2 million investors. ACIM, or its predecessor, has been providing investment
advisory services to American Century since its founding in 1958. ACIM was
formerly known as Investors Research Corporation. American Century, as of
December 31, 1997, had more than $61 billion of assets under management.
The Company may, from time to time, refer to The Dreyfus Corporation as the
investment 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 March 31,
1998, the firm had approximately $100 billion in assets under management.
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<PAGE> 285
The Company may, from time-to-time, refer to Founders Asset Management LLC
(FAM) as investment adviser to Founders Growth Fund (underlying Division
Thirty). FAM and its predecessor companies have been offering tools to help
investors pursue their financial goals since 1938. FAM offers a range of no-load
mutual funds, sub-advisory services and separately managed accounts matched to
specific client needs. FAM has established a growth-style management investment
process which is consistent throughout all portfolios. The FAM story includes
themes of teamwork, experience and strong historical results. These themes weave
together into a number of unique products and services which may be suitable for
institutions and individuals. FAM, as of December 31, 1997, had over $6 billion
of assets under management.
The Company may, from time to time, refer to Neuberger&Berman Management
Inc. (N&B Management) as investment manager to the Portfolio in which
Neuberger&Berman Guardian Trust (underlying Division Twenty-Nine) invests. In
1939, Roy Neuberger established Neuberger&Berman, LLC, which was then a
partnership to manage equity portfolios for individual investors. In 1950, he
introduced one of the first no-load mutual funds, Guardian Mutual Fund. N&B
Management, an affiliate of Neuberger&Berman, LLC, was later established and now
manages a family of mutual funds. N&B Management follows a value approach for
Neuberger&Berman Guardian Trust which is intended to provide solid performance
in good markets and minimize losses when conditions are less favorable. N&B
Management, as of December 31, 1997, had approximately $21.2 billion of assets
under management.
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 is one of the nation's oldest and largest investment
complexes, managing more than 90 different funds and serving more than 9 million
shareholder accounts. For the past seven years, PIM and its affiliates have been
rated among the top service providers in the nation, according to DALBAR
Financial Services, which monitors and evaluates the quality of service provided
by virtually every mutual fund family. PIM credits its strength in the financial
industry to its highly diversified product line, professional portfolio
management and award-winning service. Including institutional accounts, PIM and
its affiliates, as of December 31, 1997, had approximately $240 billion of
assets under management.
The Company may, from time to time, refer to Scudder Kemper Investments,
Inc. (Scudder Kemper) as investment adviser to the Scudder Growth and Income
Fund (underlying Division Twenty-One). Scudder Kemper, is one of the largest and
most experienced investment management organizations worldwide, managing assets
globally for mutual fund investors, retirement and pension plans, institutional
and corporate clients, insurance companies and private family and individual
accounts. It is a member of the Zurich Group, an internationally recognized
leader in financial services, which includes property/casualty and life
insurance, reinsurance and asset management. Scudder Kemper, as of January 1,
1998, had more than $200 billion in assets under management.
The Company may, from time to time, refer to T. Rowe Price Associates, Inc.
(T. Rowe Price) as investment adviser to the T. Rowe Price Small-Cap Stock Fund
(underlying Division Fifty-One). The firm, which was founded by Thomas Rowe
Price Jr. in 1937, is one of the pioneers of the growth stock theory of
investing. T. Rowe Price, one of the nation's leading no-load fund managers, and
its affiliates manage over $139 billion of assets as of March 31, 1998. Its
approach to managing money is based on proprietary research and a strict
investment discipline developed over six decades.
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). For more than 40 years, the Templeton organization has
been a leading global investment management company with offices in the U.S.,
Australia, Bahamas, Canada, Hong Kong, Luxembourg, Singapore, Russia, Scotland
and Germany. Templeton is a member of the $221 billion Franklin Templeton Group
with over 6 million individual and institutional accounts. The Franklin
Templeton Group provides investment management and advisory services to a
world-wide client base and maintains a disciplined, long-term approach to
value-oriented global and international investing. Templeton Advisers, as of
December 31, 1997, had more than $94 billion in assets under management.
The Company may, from time to time, refer to Templeton Investment Counsel
Inc. as the investment adviser for the Templeton Asset Allocation Fund
(underlying Division Nineteen) and the Templeton International Fund (underlying
Divi-
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sion Twenty). For more than 40 years the Templeton organization has been a
leading global investment management company with offices in the US., Australia,
Bahamas, Canada, Germany, Hong Kong, Luxemburg, Russia, Scotland and Singapore.
Templeton is a member of the $221 billion Franklin Templeton Group with over 6
million individual and institutional accounts. Templeton Advisers, as of
December 31, 1997, has more than $94 billion of assets under management. The
Franklin Templeton Group provides 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 sources. Securities are selected for a
fund's portfolio on the basis of fundamental company by company analysis.
From time to time, the Company may refer to Vanguard as the investment
adviser to the Vanguard Funds underlying Vanguard LifeStrategy Conservative
Growth Portfolio (underlying Division Fifty-Four), Vanguard LifeStrategy
Moderate Growth Portfolio (underlying Division Fifty-Three) and Vanguard
LifeStrategy Growth Portfolio (underlying Division Fifty-Two). Since its
founding in 1974, Vanguard has emerged as one of America's largest mutual fund
organizations. Today Vanguard provides competitive investment performance, a
diversity of fund alternatives and the lowest possible fund operating expenses
to nearly 9 million shareholders. Vanguard, as of December 31, 1997, had more
than $330 billion of assets under management.
The Company may, from time to time, refer to the Wellington Management
Company, LLP (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.
The Company may, from time to time, refer to Vanguard Fixed Income Group
(VFIG) as investment adviser to the Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio (underlying Division Twenty-Three).
VFIG provides investment advisory services to more than 39 Vanguard money market
and bond portfolios.
The Company may, from time to time, refer to Barrow, Hanley, Mewhinney &
Strauss, Inc., Equinox Capital Management, Inc., Tukman Capital Management, Inc.
and Vanguard Core Management Group. 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. Equinox Capital Management, Inc., a
Delaware corporation, Tukman Capital Management, Inc., a Maryland corporation,
and Vanguard Core Management Group manage the investment and reinvestment of a
portion of the equity allocation of Vanguard/ Windsor II.
The Company may, from time to time, refer to the following investment
subadvisers; Bankers Trust Company investment subadviser to AGSPC Stock Index
Fund (underlying Division 10), AGSPC MidCap Index Fund (underlying Division 4),
AGSPC Small Cap Index Fund (underlying Division 14), American General S&P 500
Index Fund (underlying Division 47), American General Mid Cap Index Fund
(underlying Division 46), American General Small Cap Index Fund (underlying
Division 45) and American General Small Cap Value Fund (underlying Division 36);
T. Rowe Price Associates, Inc. investment subadviser to AGSPC Growth Fund
(underlying Division 15) and AGSPC Science & Technology Fund (underlying
Division 17), Neuberger&Berman LLC investment subadviser to Neuberger&Berman
Guardian Trust (underlying Division 29), Value Line Inc. investment subadviser
to the AGSPC Growth & Income Fund (underlying Division 16), Jacobs Asset
Management investment subadviser to American General International Growth Fund
(underlying Division 33), Goldman Sachs Asset Management investment subadviser
to American General Large Cap Growth Fund (underlying Division 39), Brown
Capital Management Inc. investment subadviser to American General Mid Cap Growth
Fund (underlying Division 37), J.P. Morgan Investment Management Inc. investment
subadviser to American General Small Cap Growth Fund (underlying Division 35),
Capital Guardian Trust Company investment subadviser to American General
International Value Fund (underlying Division 34), American General Balanced
Fund (underlying Division 42), American General Domestic Bond Fund (underlying
Division 43), State Street Bank & Trust Company/State Street Global Advisors
investment subadviser to American General Large Cap Value Fund (underlying
Division 40), Neuberger&Berman Management Inc. investment subadviser to American
General Mid Cap Value Fund (underlying Division 38), Fiduciary Management
Associates Inc. investment
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subadviser to American General Small Cap Value Fund (underlying Division 36).
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 Plus 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, refer in its advertisements to Schwab
Personal Choice Retirement Accounts ("PCRA"). The PCRA is a self-directed
brokerage account that may be used by VALIC Participants to directly invest in
publicly available mutual funds. PCRA is marketed through the VALIC Investment
Services Company.
The Company may from time to time compare the performance of the mutual
funds that serve as the investment vehicles for Portfolio Director Plus to the
performance of certain market 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.
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.
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 Cate-
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gory. 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 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 Plus, 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.
For Non-Qualified Contracts, not all Variable Account Options are available
within your contract. Variable Account Options that are invested in Mutual Funds
available to the public outside of annuity contracts or life insurance contracts
will be offered only to non-natural persons pursuant to the meaning of Section
72 of the Code. In that case, 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.
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 and nonelective salary reduction contributions.
Your voluntary salary reduction contributions are generally limited to
$10,000 ($9,500 before 1998), although additional, "catch-up" contributions are
permitted under certain circumstances. Combined employer and salary reduction
contribu-
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tions are generally limited to the smallest of $30,000; approximately 25% of
salary; or an exclusion allowance which takes into account a number of factors.
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 ("408(b) IRAs"). Annual
tax-deductible contributions for 408(b) IRA Contracts are limited to the lesser
of $2,000 or 100% of compensation, and generally may be made only by individuals
who:
(i) are not active participants in another retirement plan, and are not
married;
(ii) are not active participants in another retirement plan, are married, but
either (a) the spouse is not an active participant in another retirement
plan, or (b) the spouse is an active participant, but the couple's
adjusted gross income does not exceed $150,000.
(iii) are active participants in another retirement plan, are unmarried, and
have adjusted gross income of $30,000 or less ($25,000 or less prior to
1998; adjusted upward for inflation after 1998); or
(iv) are active participants in another retirement plan, are married, and have
adjusted gross income of $50,000 or less ($40,000 or less prior to in
1998; adjusted upward for inflation after 1998).
Active participants in other retirement plans whose adjusted gross income
exceeds the limits in (ii), (iii) or (iv) by less than $10,000 are entitled to
make deductible 408(b) IRA contributions in proportionately reduced amounts. If
a 408(b) 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 of an amount
equal to the 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 contributions of eligible rollover amounts from other
qualified plans and contracts. See Tax-Free Rollovers, Transfers and Exchanges.
408A "Roth" Individual Retirement Annuities ("408A "Roth" IRAs"). After
1997, annual nondeductible contributions for 408A "Roth" IRA Contracts are
limited to the lesser of $2,000 or 100% of compensation, and may be made only by
individuals who:
(i) are unmarried and have adjusted gross income of $95,000 or less; or
(ii) are married and filing jointly, and have adjusted gross income of $150,000
or less.
The available nondeductible 408A "Roth" IRA contribution is reduced
proportionately to zero where adjusted gross income exceeds the limit in (i) by
$15,000 or less, or the limit in (ii) by $10,000 or less. Similarly, individuals
who are married and filing separately and whose adjusted gross income is less
than $15,000 may make a contribution to a Roth IRA of a portion of the otherwise
applicable $2,000 or 100% of compensation limit.
All contributions to 408(b) IRAs, traditional nondeductible IRAs and 408A
"Roth" IRAs must be aggregated for purposes of the $2,000 annual contribution
limit.
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"), in 1998 you may
contribute (and defer tax on) the lesser of $8,000 (indexed for inflation) or
33 1/3% of your "includible" compensation (compensation from the employer
currently
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includible in taxable income). Additionally, catch-up deferrals are permitted in
the final three years before the year you reach normal retirement age.
The employer uses deferred amounts to purchase the Contracts offered by
this prospectus. For plans maintained by a unit of a state or local government,
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 any 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 or annuity 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) were permitted to establish plans allowing employees to
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. Such plans if established by December 31, 1996, may still allow employees
to make these contributions.
SIMPLE IRA. Employer and employees contributions under a SIMPLE Retirement
Account Plan are made to a separate individual retirement account or annuity for
each employee. Employee salary reduction contributions cannot exceed $6,000 in
any year. Employer contributions can be a matching or a nonelective contribution
of a percentage as specified in the Code. Only employers with 100 or fewer
employees can maintain a SIMPLE IRA plan, which must also be the only plan the
employer maintains.
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).
Similar restrictions will apply to all amounts transferred from a section
403(b)(7) custodial account other than rollover contributions.
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) IRA, SEPs and SIMPLE IRAs. Distributions are generally taxed as
ordinary income to the recipient. Rollovers from an IRA to a Roth IRA, and
conversions of an IRA to a Roth IRA, where permitted, are generally taxable in
the year of the rollover or conversion. Such rollovers of conversions completed
in 1998 are generally eligible for pro-rata federal income taxation over four
years. Individuals with adjusted gross income over $100,000 are generally
ineligible for such conversions, regardless of marital status, as are married
individuals who file separately.
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408A "Roth" IRAs. "Qualified" distributions upon attainment of age 59 1/2,
upon death, disability or for first-time homebuyer expenses are tax-free as long
as five or more years have passed since the first contribution to taxpayer's
first 408A "Roth" IRA. A later date may apply to distributions from a Roth IRA
which contains one or more rollover contributions from a traditional IRA, to
determine if the distribution is qualified distribution. Qualified distributions
may be subject to state income tax in some states. Other distributions are
generally taxable to the extent that the distribution exceeds purchase payments.
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. Partial redemptions from a Non-Qualified Contract
purchased after August 13, 1982 (or allocated to post-August 13, 1982 Purchase
Payments under a pre-existing Contract), 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. Partial redemptions from a Non-Qualified Contract
purchased before August 14, 1982 are taxed only after the Contract Owner has
received all of his pre-August 14, 1982 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 Owner's investment in the Contract. Two or more Contracts purchased
from VALIC (or an affiliated company) by a Contract Owner within the same
calendar year, after October 21, 1998, 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, SEPs and
SIMPLE IRAs. 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 (only applies to
403(b), 401(a), 403(a));
(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.
Separation from service is not required for distributions from an IRA, SEP or
SIMPLE IRA under #4 above. Certain distributions from a SIMPLE IRA within two
years after first participating in the plan may be subject to a 20% penalty,
rather than a 10% penalty.
After 1997, distributions from 408(b) IRAs on account of the following
additional reasons are also excepted from this penalty tax:
(6) distributions up to $10,000 (in the aggregate) to cover costs of acquiring,
constructing or reconstructing the residence of a first-time homebuyer, and
(7) distributions to cover certain costs of higher education tuition, fees,
books, supplies and equipment for the IRA owner, a spouse, child or
grandchild, and
(8) distributions to cover certain medical care or long term care insurance
premiums, for individuals who have received federal or state unemployment
compensation for 12 consecutive months.
408A "Roth" IRAs. Distributions, other than "qualified" distributions where
the five-year holding rule is met, are generally subject to the same 10% penalty
tax as other IRAs. Distributions of rollover or conversion contributions from an
IRA which are
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not qualified distributions, may be subject to additional penalty taxes.
457 Plans. Distributions generally may be made under an EDCP prior to
separation from service only for unforeseeable emergencies, or for amounts under
$5,000 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
(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.
A participant generally may aggregate his or her 403(b) contracts and
accounts for purposes of satisfying these requirements, and withdraw the
required distribution in any combination from such contracts or accounts, unless
the plan, contract, or account otherwise provides.
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, and multiple plans may
not be aggregated to satisfy the requirement.
408(b) IRAs, SEPs and SIMPLE IRAs. 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.
A participant generally may aggregate his or her IRAs for purposes of
satisfying these requirements, and withdraw the required distribution in any
combination from such contracts or accounts, unless the contract or account
otherwise provides.
408A "Roth" IRAs. Minimum distribution requirements generally applicable to
403(b) Annuities, 401(a) and 403(a) Qualified Plans, 408(b) IRAs, SEPs and 457
Plans do not apply to 408A "Roth" IRAs during the owner's lifetime, but
generally do apply at the owner's death.
A participant generally may aggregate his or her Roth IRAs for purposes of
satisfying these requirements, and withdraw the required distribution in any
combination from such contracts or accounts, unless the contract or account
otherwise provides.
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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, and multiple plans may not be
aggregated to satisfy the requirement.
Non-Qualified Contracts. Non-Qualified Contracts do not require
commencement of distributions at any particular time during the Owner's
lifetime, provided that the Owner is a natural person, and generally 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 408(b) 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 a 408(b) individual
retirement account or annuity, or to another such plan.
408(b) IRAs. Funds may be transferred tax-free to a 408(b) 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 408(b) IRA (other than a Roth
IRA) to another provided that no more than one such rollover is made during any
twelve-month period.
408A "Roth" IRAs. Funds may be transferred tax-free from one 408A "Roth"
IRA to another. Funds in a 408(b) IRA may be rolled in a taxable transaction to
a 408A "Roth" IRA by individuals who:
(i) have adjusted gross income of $100,000 or less, whether single or married
filing jointly;
(ii) are not married filing separately.
Special, complicated rules governing holding periods, escape from the 10%
penalty tax and ratable recognition of 1998 income also apply to rollovers from
408(b) IRAs to 408A "Roth" IRAs, and may be subject to further modification by
Congress. You should consult your tax advisor regarding the application of these
rules.
SEPs. Funds may be rolled over tax free from one SEP only to another SEP or
a 408(b) IRA.
457 Plans. Tax-free transfer of EDCP amounts are permitted only to another
EDCP.
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 Plus. 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
Plus provided below.
EXCHANGES FROM PORTFOLIO DIRECTOR
Sales/Surrender Charges.
Portfolio Director and Portfolio Director Plus have the same provisions for
imposing surrender charges upon total or partial surrenders. Portfolio Director
and Portfolio Director Plus 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 Charge" in the prospectus, Portfolio
Director Plus will be deemed to have been issued on the same date as Portfolio
Director. Purchase Payments exchanged into Portfolio Director Plus will be
treated as Purchase Payments under Portfolio Director Plus for purposes of
calculating the surrender charge. Exchanged payments will be deemed to have been
made under Portfolio Director Plus on the date they were made to Portfolio
Director for purposes of calculating the surrender charge under Portfolio
Director Plus.
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Other Charges
Portfolio Director and Portfolio Director Plus have the same provisions for
imposing the quarterly account maintenance fee.
Portfolio Director and Portfolio Director Plus impose an additional daily
charge with an annualized rate of 0.75% to 1.25% (or lower amounts during the
Purchase Period for different series of Portfolio Director Plus), 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 fee and to compensate the Company for assuming mortality and
expense risks and administration expenses. Under Portfolio Director Plus 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 .28% to .90% of each portfolio's or mutual fund's average
daily net assets. Two fixed investment options are also available.
Under Portfolio Director Plus, fifty divisions of VALIC Separate Account A
are available, thirteen of which invest in different investment portfolios of
AGSPC 1, eighteen of which invest in different investment portfolios of AGSPC 3
and nineteen of which invest in other 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
Portfolio Director and Portfolio Director Plus provide the same annuity
options.
EXCHANGE FROM PORTFOLIO DIRECTOR 2
Sales/Surrender Charges.
Portfolio Director 2 and Portfolio Director Plus have the same provisions
for imposing surrender charges upon total or partial surrenders. Portfolio
Director 2 and Portfolio Director Plus 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 Charge" in the
prospectus, Portfolio Director Plus will be deemed to have been issued on the
same date as Portfolio Director 2. Purchase Payments exchanged into Portfolio
Director Plus will be treated as Purchase Payments under Portfolio Director Plus
for purposes of calculating the surrender charge. Exchanged payments will be
deemed to have been made under Portfolio Director Plus on the date they were
made to Portfolio Director 2 for purposes of calculating the surrender charge
under Portfolio Director Plus.
Other Charges
Portfolio Director 2 and Portfolio Director Plus have the same provisions
for imposing the quarterly account maintenance fee.
Portfolio Director 2 and Portfolio Director Plus impose an additional daily
charge with an annualized rate of 0.75% to 1.25% (or lower amounts during the
Purchase Period for different series of Portfolio Director 2 and Portfolio
Director Plus), 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 fee and to compensate the
Company for assuming mortality and expense risks and administration expenses.
Under Portfolio Director Plus 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 2, eighteen divisions of VALIC Separate Account A
are available, six of which invest in a different 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 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.
Under Portfolio Director Plus, fifty divisions of VALIC Separate Account A
are available, thirteen of which invest in different investment portfolios of
AGSPC 1, eighteen of which invest in different investment portfolios of AGSPC 3
and nineteen of which invest in other mutual fund portfolios. These mutual fund
portfolios are managed either by the Company or other investment managers for
advisory
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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
Portfolio Director, Portfolio Director 2 and Portfolio Director Plus
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
Plus imposes a similar surrender charge upon total or partial surrenders. Both
the Portfolio Director Plus and Independence Plus Contracts have other similar
provisions where surrender charges are not imposed. However, Portfolio Director
Plus 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 Charge" in the prospectus.) For purposes of satisfying
the fifteen-year and five-year holding requirements described under "Surrender
Charge" in the prospectus, Portfolio Director Plus 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 Plus and which were made within five years before the
date of exchange will be treated as Purchase Payments under Portfolio Director
Plus for purposes of calculating the surrender charge. Exchanged payments will
be deemed to have been made under Portfolio Director Plus on the date they were
made to Independence Plus Contracts for purposes of calculating the surrender
charge under Portfolio Director Plus.
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 Plus, a quarterly
account maintenance fee 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 fee is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No fee is assessed for any calendar quarter if the Account Value is
credited only to the Fixed Account Options throughout the quarter. Such fee
begins immediately if an exchange is made into any Variable Account Option
offered under Portfolio Director Plus. The fee may also be reduced or waived by
the Company for Portfolio Director Plus if the administrative expenses are
expected to be lower for that Contract. (See "Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality and Expense Risk Fee or Administration and
Distribution Fee Charges" in the prospectus). To cover expenses not covered by
the account maintenance fee and to compensate the Company for assuming mortality
risks and administration and distribution expenses under Portfolio Director
Plus, an additional daily charge with an annualized rate of 0.75% to 1.25% (or
lower amounts during the Purchase Period for different series of Portfolio
Director Plus), 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 Plus. (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 .28% to .50% of each respective portfolio's average daily net
assets. In addition, two fixed investment options are available. Under Portfolio
Director Plus, fifty divisions of VALIC Separate Account A are available,
thirteen of which invest in different investment portfolios of AGSPC 1, eighteen
of which invest in different portfolios of AGSPC 3 and nineteen of which invest
in other 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 0.01% to 1.00% of each portfolio's or mutual fund's average daily
net assets. Two fixed investment options are also available.
16
<PAGE> 296
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 Plus permits
annuity payments for a designated period between of 5 and 30 years on a fixed
basis only. Independence Plus Contracts and Portfolio Director Plus 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 Plus also imposes
a surrender charge upon total or partial surrenders. However, the surrender
charge under Portfolio Director Plus 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
Plus provides at least two additional provisions, not included in V-Plan
Contracts, under which no surrender charge will be imposed. Those Portfolio
Director Plus provisions include no surrender charge 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 Charge" in the prospectus.) For purposes of satisfying
the fifteen-year and five-year holding requirements, Portfolio Director Plus
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 Plus and which were made within five years before the date
of exchange will be treated as Purchase Payments under Portfolio Director Plus
for purposes of calculating the surrender charge. Exchanged payments will be
deemed to have been made under Portfolio Director Plus on the date they were
made to the V-Plan Contract for purposes of calculating the surrender charge
under Portfolio Director Plus.
Other Charges. There are no administrative and risk charges under V-Plan
Contracts. For Portfolio Director Plus, a quarterly account maintenance fee 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 fee is to reimburse the Company for some of the administrative
expenses associated with the Variable Account Options. No fee is assessed for
any calendar quarter if the Account Value is credited only to the Fixed Account
Options throughout the quarter. Such fees begin immediately if an exchange is
made into any Variable Account Option offered under Portfolio Director Plus. The
fee may also be reduced or waived by the Company on Portfolio Director Plus if
the administrative expenses are expected to be lower for that Contract. (See
"Reduction or Waiver of Account Maintenance Fee, Surrender, Mortality and
Expense Risk Fee or Administration and Distribution Fee Charges" in the
prospectus.) To cover expenses not covered by the account maintenance fee and to
compensate the Company for assuming mortality risks and administration and
distribution expenses under Portfolio Director Plus, an additional daily charge
with an annualized rate of 0.75% to 1.25% (or lower amounts during the Purchase
Period for different series of Portfolio Director Plus), 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 Plus. (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 Plus permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Under
Portfolio Director Plus, Payout Payments may be made on a fixed or variable
basis, or a combination of both. Portfolio Director Plus does not provide for
commutation. V-Plan
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<PAGE> 297
Contracts and Portfolio Directors Plus 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 Plus the surrender charge under Portfolio Director Plus will not apply
to the amount of Account Value applied to Portfolio Director Plus ("Exchanged
Amount"). Purchase Payments made to Portfolio Director Plus, however, would be
subject to a surrender charge. In the case of a partial surrender, all Purchase
Payments to Portfolio Director Plus 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 Plus, 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
Charge" 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 Plus, a quarterly account
maintenance fee 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 fee is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No fee is assessed for any calendar quarter if the Account Value is
credited only to the Fixed Account Options throughout the quarter. Such fee
begins immediately if an exchange is made into any Variable Account Option
offered under Portfolio Director Plus. The fee may also be reduced or waived by
the Company on Portfolio Director Plus if the administrative expenses are
expected to be lower for that Contract. (See "Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality and Expense Risk Fee or Administration and
Distribution Fee Charges" in the prospectus.) To cover expenses not covered by
the account maintenance fee and to compensate the Company for assuming mortality
risks and administration and distribution expenses under Portfolio Director
Plus, an additional daily charge with an annualized rate of 0.75% to 1.25% (or
lower amounts during the Purchase Period for different series of Portfolio
Director Plus), 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 Plus. (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 .28% 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 Plus, fifty divisions
of VALIC Separate Account A are available, thirteen of which invest in different
investment portfolios of AGSPC 1, eighteen of which invest in different
portfolios of AGSPC 3 and nineteen of which invest in other 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 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. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on
18
<PAGE> 298
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 Plus permits Payout Payments for a designated
period of between 5 and 30 years on a fixed basis only. Portfolio Director Plus
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 Plus. 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 Plus does not provide this option. SA-1 and Portfolio
Director Plus, 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 Plus 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 Plus 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 Plus 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 Plus which were made within three
years before the date of exchange will be treated as Purchase Payments under
Portfolio Director Plus for purposes of calculating the surrender charge.
Exchanged payments will be deemed to have been made under Portfolio Director
Plus on the date they were made to Impact Contracts for purposes of calculating
the surrender charge under Portfolio Director Plus.
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 Plus, a quarterly account maintenance fee 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 fee is to
reimburse the Company for some of the administrative expenses associated with
the Variable Account Options. No fee is assessed for any calendar quarter if the
Account Value is credited only to the Fixed Account Options throughout the
quarter. Such fee begins immediately if an exchange is made into any Variable
Account Option offered under Portfolio Director Plus. The fee may also be
reduced or waived by the Company on Portfolio Director Plus if the
administrative expenses are expected to be lower for that Contract. (See
"Reduction or Waiver of Account Maintenance Fee, Surrender, Mortality and
Expense Risk Fee or Administration and Distribution Fee Charges" in the
prospectus.) To cover expenses not covered by the account maintenance fee and to
compensate the Company for assuming mortality risks and administration and
distribution expenses under Portfolio Director Plus, an additional daily charge
with an annualized rate of 0.75% to 1.25% (or lower amounts during the Purchase
Period for different series of Portfolio Director Plus), depending upon the
Variable Account Options selected, if any, on the daily net asset value of the
Separate Account is attributable to Portfolio Director Plus. (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 .28% to
.50% of each respective portfolio's average daily net assets. Under Portfolio
Director Plus, fifty divisions of VALIC Separate Account A are available,
thirteen of which invest in different investment portfolios of AGSPC 1, eighteen
of
19
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which invest in different portfolios of AGSPC 3 and nineteen of which invest in
other 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 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. 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 Plus permits Payout Payments for a designated period
of between 5 and 30 years on a fixed basis only. Portfolio Director Plus does
not provide for commutation. Impact Contracts and the Portfolio Director Plus
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
Plus the surrender charge under Portfolio Director Plus will not apply to the
amount of Account Value applied to Portfolio Director Plus. Purchase Payments
made to Portfolio Director Plus, however, would be subject to the surrender
charge under Portfolio Director Plus. In the case of a partial surrender, all
Purchase Payments to Portfolio Director Plus will be deemed to be withdrawn
before any Exchanged Amount is deemed to be withdrawn. Under Portfolio Director
Plus, 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 Charge" 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 Plus, a quarterly
account maintenance fee 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 fee is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No fee is assessed for any calendar quarter if the Account Value is
credited only to the Fixed Account Options throughout the quarter. Such fee
begins immediately if an exchange is made into any Variable Account Option
offered under Portfolio Director Plus. The fee may also be reduced or waived by
the Company for Portfolio Director Plus if the administrative expenses are
expected to be lower for that Contract. (See "Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality and Expense Risk Fee or Administration and
Distribution Fee Charges" in this prospectus.) To cover expenses not covered by
the account maintenance fee and to compensate the Company for assuming mortality
risks and administration and distribution expenses under Portfolio Director
Plus, an additional daily charge with an annualized rate of 0.75% to 1.25% (or
lower amounts during the Purchase Period for different series of Portfolio
Director Plus), depending upon the Variable Account Options selected, if any, on
the daily net asset value of the Separate Account is attributable to Portfolio
Director Plus. (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 Plus 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
Plus does not provide for commutation. Unlike Portfolio Director 2, the
Compounder Contracts contain no "betterment of rates" provision.
20
<PAGE> 300
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 Plus 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 Plus 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 Plus 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 Plus 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.
21
<PAGE> 301
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>
2/1/92.......................... Purchase Payment $10,000
2/1/93.......................... Purchase Payment 5,000
2/1/94.......................... Purchase Payment 15,000
2/1/95.......................... Purchase Payment 2,000
2/1/96.......................... Purchase Payment 3,000
2/1/97.......................... Purchase Payment 4,000
7/1/97.......................... 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 2/1/92......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/93......... $ 250
3. Surrender Charge against Purchase Payment of 2/1/94......... $ 750
4. Surrender Charge against Purchase Payment of 2/1/95......... $ 100
5. Surrender Charge against Purchase Payment of 2/1/96......... $ 150
6. Surrender Charge against Purchase Payment of 2/1/97......... $ 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>
2/1/92.......................... Purchase Payment $10,000
2/1/93.......................... Purchase Payment 5,000
2/1/94.......................... Purchase Payment 15,000
2/1/95.......................... Purchase Payment 2,000
2/1/96.......................... Purchase Payment 3,000
2/1/97.......................... Purchase Payment 4,000
7/1/97.......................... 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
8/1/97.......................... 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.
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<PAGE> 302
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 separate account fee*.......... .000027
*Mortality and expense risk fee and
administration and distribution
fee of 1% per annum used for
illustrative purposes.
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*
AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET DIVISIONS YIELDS**
CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Current Yield: 4.15%
ILLUSTRATION OF CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION
SIX*
Example 5.
The current yield quotation above is based on the seven days ended March
31, 1998, 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.
- ---------------
* For different series of Portfolio Director Plus which may have lower charges
in the Purchase Period the amount of the current yield, the effective yield
or the standardized yield, for the respective Division will be higher.
** The Fund commenced operations on . Accordingly, no yield
information is available.
23
<PAGE> 303
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 4.24%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION
SIX AND AMERICAN GENERAL MONEY MARKET DIVISION FORTY-FOUR
Example 6.
The effective yield quotation above is based on the seven days ended March
31, 1998, 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
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. 7 DIV. 8 DIV. 13 DIV. 22 DIV. 23 DIV. 43
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Standardized Yield...................... 5.04% 4.51% 3.46% 5.49% 5.10% *
</TABLE>
- ------------------
* The Fund commenced operations on . Accordingly, no yield information
is available.
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR BOND FUND DIVISIONS
Example 7.
The standardized yield quotation based on a 30-day period ended March 31,
1998, 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.
24
<PAGE> 304
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1997, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual
compounded 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.
25
<PAGE> 305
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. For
different series of Portfolio Director Plus which may have lower charges during
the purchase period those amounts shown in the following tables will be higher.
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 fees and administration and
distribution fees, net of any expense reimbursements from the Underlying Fund.
Surrender charges, maintenance fees 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 Asset Allocation Division Five may be compared to
a benchmark comprised of a weighted average of three market sectors in which the
Division, through the AGSPC Asset Allocation Fund, will invest. The base
allocation is: 55% in equity securities, 35% in intermediate or long-term debt
securities and 10% in money market or short-term debt securities. The Division's
actual asset allocation is determined daily by the Bankers Trust Asset
Allocation Model. The performance of the equity securities sector of the
Division may be compared to the S&P 500(R) 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 AGSPC Capital Conservation Division Seven and 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
26
<PAGE> 306
of these corporate bond holdings are approximately 12 years.
The performance of AGSPC Growth Division Fifteen, AGSPC Growth & Income
Division Sixteen, AGSPC Science & Technology Division Seventeen, AGSPC Social
Awareness Division Twelve, AGSPC Stock Index Division Ten, American General
Large Cap Value Division Forty, American General S&P 500 Index Division
Forty-Seven, American General Socially Responsible Division Forty-One, 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(R) 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 73% of the
aggregate United States equity markets capitalization.
Performance of AGSPC 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
Treasury securities issues with all such issues having a maturity of greater
than one year.
The AGSPC International Equities Division Eleven and 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 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 667 issues from sixteen
foreign countries. These countries include Austria, Australia, Belgium, Canada,
Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands,
Spain, Sweden, Switzerland and the United Kingdom.
The performance of the AGSPC MidCap Index Division Four may be compared to
the record of the S&P 500(R) Index and S&P MidCap 400 Index. American General
Mid Cap Value Division Thirty-Eight, American General Mid Cap Index Division
Forty-Six and the American General Mid Cap Growth Division Thirty-Seven may be
compared to the record of the S&P MidCap 400 Index. 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 AGSPC Money Market Division Six and American General
Money Market Division Forty-Four 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
- ---------------
* "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"). The AGSPC MidCap Index Fund, AGSPC
Stock Index Fund, American General Mid Cap Index Fund and American General S&P
500 Index Fund are not sponsored, endorsed, sold or promoted by S&P and S&P
makes no representation regarding the advisability of investing in these
Funds.
27
<PAGE> 307
than $100,000. The Index for 30 days is published daily.
The performance of the AGSPC Small Cap Index Division Fourteen, American
General Small Cap Index Division Forty-Five, American General Small Cap Growth
Division Thirty-Five, American General Small Cap Value Division Thirty-Six,
Dreyfus Small Cap Division Eighteen, Putnam OTC & Emerging Growth Division
Twenty-Seven, and T. Rowe Price Small-Cap Stock Division Fifty-One 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 performance of the American Century-Twentieth Century Ultra Division
Thirty-One may be compared to both the S&P 500(R) Index and the National
Association of Securities Dealers Automated Quotations (NASDAQ) Composite Price
Index. 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.
The performance of the American General Balanced Division Forty-Two may be
compared to both the S&P 500(R) Index and the Lehman Brothers Government and
Corporate Index. The performance of the American General Domestic Bond Division
Forty-Three may be compared to the Lehman Brothers Government and Corporate
Index. The Lehman Brothers Government and Corporate Index is a subset of the
Lehman Brothers Aggregate Bond Index. The Lehman Brothers Government and
Corporate Index represents both Treasury and agency government issues and SEC
registered Corporate and Yankee bond issuers, with maturities of over one year.
The corporate bond subset is representative of all of the major industries. The
index was developed in January, 1973.
The performance of the American General Large Cap Growth Division
Thirty-Nine may be compared to the Russell 1000 Index. The Russell 1000 Index
consists of the largest 1000 companies in the Russell 3000 Index. This Index
represents the universe of large capitalization stocks from which most active
money managers typically select. The Index was developed with a base value of
130.00 as of December 31, 1986. The Russell 3000 Index is composed of 3000 large
U.S. companies, as determined by market capitalization. This portfolio of
securities represents approximately 98% of the investable U.S. equity market.
The Russell 3000 Index is comprised of stocks within the Russell 1000 and the
Russell 2000 Indices. The Index was developed with a base value of 140.00 as of
December 31, 1986.
The performance of American General International Growth Division
Thirty-Three and American General International Value Division Thirty-Four may
be compared to the Salomon Primary Market Index World ("Salomon World Index").
The Salomon Primary Market Index World is a comprehensive float-weighted equity
index consisting of every company with an investable market capitalization of
over $100 million in 22 countries. The Broad Market Index (BMI) is segregated
into the Primary Market Index (PMI) and Extended Market Index (EMI) consisting
of large and small capitalization issues, respectively.
The Putnam Global Growth Division Twenty-Eight and 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 weighed index consisting of more than 1,500
issues from 22 countries as well as certain South African
- ---------------
** The "Russell 2000(R) Index" and the "Russell 1000(R) Index" are
trademark/service marks of the Frank Russell Trust Company. Russell(TM) is a
trademark of the Frank Russell Trust Company.
28
<PAGE> 308
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 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-U.S. 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 weighted index consisting of more than 1500 issues from 22
countries as well as certain South African gold mining issues. The Salomon World
Index is an unmanaged aggregate index composed of approximately 850 issues from
seventeen countries.
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 was initiated in 1976 and is composed of
all bonds covered by the Lehman Brothers 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 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.
29
<PAGE> 309
See "How to Review Investment Performance of Separate Account Divisions" in the
prospectus for information about how these returns were calculated.
AGSPC ASSET ALLOCATION* 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 APRIL 1, 1988
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 BLENDED
DIVISION FIVE INDEX INDEX**
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
04/01/88.................................. $10,000 $10,000 $10,000
03/31/89.................................. 10,950 11,815 11,250
03/31/90.................................. 11,967 14,091 13,017
03/31/91.................................. 12,949 16,122 14,752
03/31/92.................................. 13,673 17,903 16,341
03/31/93.................................. 14,542 20,629 18,578
03/31/94.................................. 14,618 20,932 18,984
03/31/95.................................. 15,537 24,191 20,979
03/31/96.................................. 18,661 31,956 25,496
03/31/97.................................. 20,307 38,297 28,778
03/31/98.................................. 26,425 56,670 37,478
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Asset Allocation Division Five.............. 164.25% 81.71% 70.08% 30.13%
Benchmark Comparison
S&P 500 Index..................................... 466.70% 174.71% 134.26% 47.97%
Blended Index**................................... 274.78% 101.73% 78.64% 30.23%
</TABLE>
- ---------------
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
** 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.
30
<PAGE> 310
AGSPC 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 APRIL 1, 1988
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- --------------------------------------------------------------- ----------------
<S> <C> <C>
04/01/88............................................. $10,000 $10,000
03/31/89............................................. 10,238 10,651
03/31/90............................................. 11,068 11,916
03/31/91............................................. 11,406 13,357
03/31/92............................................. 12,777 15,141
03/31/93............................................. 14,661 17,474
03/31/94............................................. 14,723 18,113
03/31/95............................................. 15,121 19,069
03/31/96............................................. 16,615 21,415
03/31/97............................................. 17,105 22,509
03/31/98............................................. 18,885 25,479
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Capital Conservation Division Seven........... 88.85% 28.81% 24.89% 10.40%
Benchmark Comparison
Merrill Lynch Corporate Master Index................ 154.79% 45.82% 33.62% 13.20%
</TABLE>
31
<PAGE> 311
AGSPC 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 APRIL 1, 1988
<TABLE>
<CAPTION>
LEHMAN BROS.
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- ---------------------------------------------------------------- ---------------
<S> <C> <C>
04/01/88.............................................. $10,000 $10,000
03/31/89.............................................. 10,227 10,471
03/31/90.............................................. 11,060 11,904
03/31/91.............................................. 11,971 13,119
03/31/92.............................................. 13,133 14,568
03/31/93.............................................. 14,930 16,626
03/31/94.............................................. 15,035 17,110
03/31/95.............................................. 15,410 17,812
03/31/96.............................................. 16,756 19,684
03/31/97.............................................. 17,178 20,504
03/31/98.............................................. 18,959 22,987
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Government Securities Division
Eight..................................... 89.59% 26.99% 23.03% 10.37%
Benchmark Comparison
Lehman Bros. U.S. Treasury Composite
Index..................................... 129.87% 38.25% 29.05% 12.11%
</TABLE>
32
<PAGE> 312
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
03/31/95................................................... 11,246 11,420
03/31/96................................................... 15,921 15,086
03/31/97................................................... 16,507 18,080
03/31/98................................................... 24,207 26,753
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Growth Division Fifteen............. 142.07% -- 115.25% 46.65%
Benchmark Comparison
S&P 500 Index............................. 167.53% -- 134.26% 47.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
33
<PAGE> 313
AGSPC GROWTH AND INCOME DIVISION SIXTEEN 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 & INCOME S&P 500
DIVISION SIXTEEN INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
03/31/95................................................... 10,762 11,420
03/31/96................................................... 13,957 15,086
03/31/97................................................... 15,372 18,080
03/31/98................................................... 20,864 26,753
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Growth & Income Division Sixteen... 108.64% -- 93.86% 35.72%
Benchmark Comparison
S&P 500 Index............................ 167.53% -- 134.26% 47.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
34
<PAGE> 314
AGSPC 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
03/31/90................................................... 8,391 8,397
03/31/91................................................... 8,609 8,608
03/31/92................................................... 7,751 7,918
03/31/93................................................... 8,494 8,836
03/31/94................................................... 10,161 10,825
03/31/95................................................... 10,616 11,483
03/31/96................................................... 11,899 12,899
03/31/97................................................... 11,954 13,086
03/31/98................................................... 14,040 15,521
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC International Equities Division
Eleven..................................... 40.40% 65.29% 32.25% 17.45%
Benchmark Comparison
EAFE Index................................... 55.21% 75.66% 35.17% 18.61%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
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
03/31/92................................................... 10,325 10,503
03/31/93................................................... 11,761 12,217
03/31/94................................................... 12,744 13,495
03/31/95................................................... 14,720 16,010
03/31/96................................................... 14,976 16,399
03/31/97................................................... 14,850 16,319
03/31/98................................................... 14,937 16,633
</TABLE>
35
<PAGE> 315
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC International Government Bond Division
Thirteen.................................... 49.37% 27.00% 1.47% 0.59%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World Government
Bond Index.................................. 66.33% 36.15% 3.89% 1.92%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
AGSPC 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 APRIL 1, 1988
<TABLE>
<CAPTION>
S&P
MIDCAP INDEX S&P 500 MIDCAP 400
DIVISION FOUR INDEX INDEX
- -------------------------------------------------- ------- ----------
<S> <C> <C> <C>
04/01/88................................ $10,000 $10,000 $10,000
03/31/89................................ 11,044 11,815 11,715
03/31/90................................ 12,065 14,091 14,043
03/31/91................................ 12,335 16,122 16,910
03/31/92................................ 13,139 17,903 20,538
03/31/93................................ 14,916 20,629 23,860
03/31/94................................ 15,576 20,932 25,325
03/31/95................................ 16,677 24,191 27,458
03/31/96................................ 21,183 31,956 35,278
03/31/97................................ 23,068 38,297 39,044
03/31/98................................ 33,922 56,670 58,173
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC MidCap Index Division Four........ 239.22% 127.44% 103.41% 47.05%
Benchmark Comparison
S&P 500 Index........................... 466.70% 174.71% 134.26% 47.97%
S&P MidCap 400 Index.................... 481.73% 143.81% 111.87% 49.00%
</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.
36
<PAGE> 316
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 APRIL 1, 1988
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- -------------------------------------------------- --------
<S> <C> <C>
04/01/88................................ $10,000 $10,000
03/31/89................................ 10,677 10,803
03/31/90................................ 11,486 11,713
03/31/91................................ 12,225 12,610
03/31/92................................ 12,695 13,205
03/31/93................................ 12,945 13,591
03/31/94................................ 13,165 13,946
03/31/95................................ 13,622 14,525
03/31/96................................ 14,215 15,224
03/31/97................................ 14,777 15,919
03/31/98................................ 15,397 16,686
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Money Market Division Six................ 53.97% 18.94% 13.03% 4.20%
Benchmark Comparison
Primary CD Index............................... 66.86% 22.77% 14.88% 4.82%
</TABLE>
AGSPC SCIENCE & TECHNOLOGY DIVISION SEVENTEEN 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>
AGSPC SCIENCE & TECHNOLOGY S&P 500
DIVISION SEVENTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
03/31/95................................................... 13,753 11,420
03/31/96................................................... 20,465 15,086
03/31/97................................................... 19,481 18,080
03/31/98................................................... 26,099 26,753
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Science & Technology Division
Seventeen............................... 160.99% -- 89.77% 33.98%
Benchmark Comparison
S&P 500 Index............................. 167.53% -- 134.26% 47.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on April 29, 1994.
37
<PAGE> 317
AGSPC SMALL CAP INDEX DIVISION FOURTEEN PERFORMANCE COMPARED TO RUSSELL 2000
INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
SMALL CAP INDEX RUSSELL 2000
DIVISION FOURTEEN INDEX
- ------------------------------------------------------------------ ------------
<S> <C> <C>
05/01/92................................................ $10,000 $10,000
03/31/93................................................ 11,449 11,904
03/31/94................................................ 12,318 13,210
03/31/95................................................ 12,759 13,939
03/31/96................................................ 16,202 17,987
03/31/97................................................ 16,926 18,906
03/31/98................................................ 23,731 26,849
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Small Cap Index Division Fourteen...... 137.31% 107.29% 85.99% 40.20%
Benchmark Comparison
Russell 2000 Index........................... 168.49% 125.55% 92.63% 42.01%
</TABLE>
- ---------------
* This Division was initiated on May 1, 1992.
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
03/31/90................................................... 9,962 9,907
03/31/91................................................... 11,168 11,335
03/31/92................................................... 11,813 12,586
03/31/93................................................... 13,361 14,503
03/31/94................................................... 13,092 14,716
03/31/95................................................... 14,688 17,008
03/31/96................................................... 19,332 22,467
03/31/97................................................... 23,165 26,925
03/31/98................................................... 33,818 39,841
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Social Awareness Division Twelve...... 238.18% 153.11% 130.24% 45.99%
Benchmark Comparison
S&P 500 Index............................... 298.41% 174.71% 134.26% 47.97%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
38
<PAGE> 318
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 1, 1988
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
04/01/88................................................. $ 10,000 $ 10,000
03/31/89................................................. 11,456 11,815
03/31/90................................................. 13,391 14,091
03/31/91................................................. 14,961 16,122
03/31/92................................................. 16,270 17,903
03/31/93................................................. 18,537 20,629
03/31/94................................................. 18,485 20,932
03/31/95................................................. 21,054 24,191
03/31/96................................................. 27,487 31,956
03/31/97................................................. 32,557 38,297
03/31/98................................................. 47,582 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Division
AGSPC Stock Index Division Ten............. 375.82% 156.69% 126.00% 46.15%
Benchmark Comparison
S&P 500 Index.............................. 466.70% 174.71% 134.26% 47.97%
</TABLE>
39
<PAGE> 319
AMERICAN CENTURY -- TWENTIETH CENTURY ULTRA DIVISION THIRTY-ONE PERFORMANCE
COMPARED TO S&P 500 INDEX AND NASDAQ COMPOSITE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
NASDAQ
ULTRA S&P 500 COMPOSITE
DIVISION THIRTY-ONE INDEX INDEX*
- -------------------------------------------------- ------- ---------
<S> <C> <C> <C>
04/01/88................................. $10,000 $10,000 $10,000
03/31/89................................. 11,977 11,815 10,857
03/31/90................................. 13,142 14,091 11,626
03/31/91................................. 20,926 16,122 12,874
03/31/92................................. 25,530 17,903 16,116
03/31/93................................. 27,456 20,629 18,421
03/31/94................................. 32,524 20,932 19,845
03/31/95................................. 33,052 24,191 21,813
03/31/96................................. 43,785 31,956 29,398
03/31/97................................. 47,294 38,297 32,610
03/31/98................................. 68,305 56,670 48,999
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American Century -- Twentieth Century
Ultra Division Thirty-One.............. 583.05% 148.78% 106.66% 44.43%
Benchmark Comparison
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
NASDAQ Composite Index*.................. 389.99% 165.99% 124.63% 50.26%
</TABLE>
- ---------------
* Does not include dividends reinvested.
40
<PAGE> 320
AMERICAN GENERAL BALANCED DIVISION FORTY-TWO PERFORMANCE COMPARED TO S&P 500
INDEX AND LEHMAN BROTHERS GOVERNMENT AND CORPORATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
LEHMAN BROS.
GOVERNMENT &
BALANCED S&P 500 CORPORATE
DIVISION FORTY-TWO INDEX INDEX
- ------------------------------------------------ ------- ------------
<S> <C> <C> <C>
04/01/88............................... $10,000 $10,000 $10,000
03/31/89............................... 11,034 11,815 10,498
03/31/90............................... 12,458 14,091 11,726
03/31/91............................... 13,808 16,122 13,153
03/31/92............................... 15,196 17,903 14,648
03/31/93............................... 17,074 20,629 16,735
03/31/94............................... 16,900 20,932 17,132
03/31/95............................... 18,327 24,191 17,919
03/31/96............................... 22,474 31,956 18,970
03/31/97............................... 24,994 38,297 19,809
03/31/98............................... 32,287 56,670 22,615
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Balanced Division
Forty-Two.............................. 222.87% 89.09% 76.17% 29.17%
Benchmark Comparison
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
Lehman Brothers Government & Corporate... 126.15% 35.13% 26.20% 14.16%
</TABLE>
AMERICAN GENERAL CONSERVATIVE GROWTH LIFESTYLE DIVISION FIFTY
The performance of the Fund is not compared to a benchmark.
41
<PAGE> 321
AMERICAN GENERAL DOMESTIC BOND DIVISION FORTY-THREE PERFORMANCE COMPARED TO
LEHMAN BROTHERS GOVERNMENT AND CORPORATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
LEHMAN BROS.
GOVERNMENT &
DOMESTIC BOND CORPORATE
DIVISION FORTY-THREE INDEX
- ---------------------------------------------------------------- ------------
<S> <C> <C>
04/01/88............................................... $10,000 $10,000
03/31/89............................................... 10,334 10,498
03/31/90............................................... 11,411 11,726
03/31/91............................................... 12,836 13,153
03/31/92............................................... 14,225 14,648
03/31/93............................................... 16,225 16,735
03/31/94............................................... 16,081 17,132
03/31/95............................................... 16,542 17,919
03/31/96............................................... 18,022 18,970
03/31/97............................................... 18,724 19,809
03/31/98............................................... 20,649 22,615
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Domestic Bond Division
Forty-Three............................ 106.49% 27.27% 24.82% 10.28%
Benchmark Comparison
Lehman Brothers Government & Corporate... 126.15% 35.13% 26.20% 14.16%
</TABLE>
AMERICAN GENERAL GROWTH LIFESTYLE DIVISION FORTY-EIGHT
The performance of the Fund is not compared to a benchmark.
42
<PAGE> 322
AMERICAN GENERAL INTERNATIONAL GROWTH DIVISION THIRTY-THREE PERFORMANCE COMPARED
TO SALOMON PRIMARY MARKET INDEX WORLD
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
SALOMON
PRIMARY MARKET
INTERNATIONAL GROWTH INDEX
DIVISION THIRTY-THREE WORLD
- --------------------------------------------------------------------- --------------
<S> <C> <C>
05/01/92................................................... $10,000 $10,000
06/30/92................................................... 9,708 10,109
06/30/93................................................... 10,486 11,759
06/30/94................................................... 12,904 13,389
06/30/95................................................... 14,114 13,597
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED JUNE 30, 1995)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General International Growth
Division Thirty-Three.................... 41.14% -- 47.19% 10.73%
Benchmark Comparison
Salomon Primary Market Index World......... 35.97% -- 34.50% 1.55%
</TABLE>
AMERICAN GENERAL INTERNATIONAL GROWTH DIVISION THIRTY-THREE PERFORMANCE COMPARED
TO SALOMON PRIMARY MARKET INDEX WORLD
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1995
<TABLE>
<CAPTION>
SALOMON
PRIMARY MARKET
INTERNATIONAL GROWTH INDEX
DIVISION THIRTY-THREE WORLD
- --------------------------------------------------------------------- --------------
<S> <C> <C>
10/01/95................................................... $10,000 $10,000
03/31/96................................................... 10,584 10,585
03/31/97................................................... 13,636 10,851
03/31/98................................................... 16,108 13,059
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General International Growth
Division Thirty-Three.................... 61.08% -- -- 18.13%
Benchmark Comparison
Salomon Primary Market Index World......... 30.59% -- -- 20.35%
</TABLE>
43
<PAGE> 323
AMERICAN GENERAL INTERNATIONAL VALUE DIVISION THIRTY-FOUR
PERFORMANCE COMPARED TO SALOMON PRIMARY MARKET INDEX WORLD
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1987
<TABLE>
<CAPTION>
SALOMON
PRIMARY MARKET
INTERNATIONAL VALUE INDEX
DIVISION THIRTY-FOUR WORLD
- --------------------------------------------------------------------- --------------
<S> <C> <C>
04/01/88................................................... $10,000
03/31/89................................................... 11,581
03/31/90................................................... 12,097 $12,097
03/31/91................................................... 12,195 12,161
03/31/92................................................... 12,510 11,025
03/31/93................................................... 13,418 12,042
03/31/94................................................... 16,774 14,226
03/31/95................................................... 16,599 14,931
03/31/96................................................... 19,497 16,521
03/31/97................................................... 21,634 16,936
03/31/98................................................... 26,366 20,382
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General International Value
Division Thirty-Four..................... 163.66% 96.50% 58.85% 21.88%
Benchmark Comparison
Salomon Primary Market Index World......... * 69.26% 44.98% 20.34%
</TABLE>
- ---------------
* The Salomon Primary Market Index commenced on June 1, 1989. The cumulative
return since commencement through March 31, 1998 was 68.48%.
44
<PAGE> 324
AMERICAN GENERAL LARGE CAP GROWTH DIVISION THIRTY-NINE PERFORMANCE COMPARED TO
RUSSELL 1000 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE DECEMBER 1, 1991
<TABLE>
<CAPTION>
LARGE CAP GROWTH RUSSELL 1000
DIVISION THIRTY-NINE INDEX
- ------------------------------------------------------------------ ------------
<S> <C> <C>
12/01/91................................................ $10,000 $10,000
03/31/92................................................ 10,823 10,901
03/31/93................................................ 10,908 12,644
03/31/94................................................ 12,978 12,846
03/31/95................................................ 14,058 14,702
03/31/96................................................ 19,270 19,515
03/31/97................................................ 24,814 22,998
03/31/98................................................ 31,663 34,110
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Large Cap Growth
Division Thirty-Nine.................. 216.63% 190.27% 125.23% 27.60%
Benchmark Comparison
Russell 1000 Index...................... 241.10% 169.78% 132.01% 48.32%
</TABLE>
AMERICAN GENERAL LARGE CAP VALUE DIVISION FORTY PERFORMANCE COMPARED TO S&P 500
INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 1, 1992
<TABLE>
<CAPTION>
LARGE CAP VALUE S&P 500
DIVISION FORTY INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
08/01/92................................................... $10,000 $10,000
03/31/93................................................... 11,403 10,864
03/31/94................................................... 11,678 11,024
03/31/95................................................... 12,756 12,740
03/31/96................................................... 16,674 16,830
03/31/97................................................... 20,139 20,169
03/31/98................................................... 31,622 29,845
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Large Cap Value
Division Forty........................ 216.22% 165.24% 147.89% 57.02%
Benchmark Comparison
S&P 500 Index........................... 198.45% 174.71% 134.26% 47.97%
</TABLE>
45
<PAGE> 325
AMERICAN GENERAL MID CAP GROWTH DIVISION THIRTY-SEVEN PERFORMANCE COMPARED TO
S&P MIDCAP 400 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1993
<TABLE>
<CAPTION>
S&P
MID CAP GROWTH MIDCAP 400
DIVISION THIRTY-SEVEN INDEX
- --------------------------------------------------------------------- ----------
<S> <C> <C>
01/01/93................................................... $10,000 $10,000
03/31/93................................................... 9,720 10,328
03/31/94................................................... 10,582 10,962
03/31/95................................................... 11,559 11,885
03/31/96................................................... 14,897 15,271
03/31/97................................................... 16,048 16,901
03/31/98................................................... 22,780 25,181
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Mid Cap Growth Division
Thirty-Seven.......................... 127.80% 134.36% 97.08% 41.95%
Benchmark Comparison
S&P MidCap 400 Index.................... 151.81% 143.81% 111.87% 49.00%
</TABLE>
AMERICAN GENERAL MID CAP INDEX DIVISION FORTY-SIX PERFORMANCE COMPARED TO S&P
MIDCAP 400 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
S&P
MID CAP INDEX MIDCAP 400
DIVISION FORTY-SIX INDEX
- --------------------------------------------------------------------- ----------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 11,070 11,715
03/31/90................................................... 12,123 14,043
03/31/91................................................... 12,422 16,910
03/31/92................................................... 11,008 20,538
03/31/93................................................... 12,528 23,860
03/31/94................................................... 13,105 25,325
03/31/95................................................... 14,063 27,458
03/31/96................................................... 17,906 35,278
03/31/97................................................... 19,545 39,044
03/31/98................................................... 28,815 58,173
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Mid Cap Index Division
Forty-Six............................. 168.15% 124.85% 104.90% 47.43%
Benchmark Comparison
S&P MidCap 400 Index.................... 481.73% 143.81% 111.87% 49.00%
</TABLE>
46
<PAGE> 326
AMERICAN GENERAL MID CAP VALUE DIVISION THIRTY-EIGHT PERFORMANCE COMPARED TO
S&P MIDCAP 400 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
S&P
MID CAP VALUE MIDCAP 400
DIVISION THIRTY-EIGHT INDEX
- --------------------------------------------------------------------- ----------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 9,924 11,715
03/31/90................................................... 11,093 14,043
03/31/91................................................... 12,135 16,910
03/31/92................................................... 13,677 20,538
03/31/93................................................... 16,329 23,860
03/31/94................................................... 17,184 25,325
03/31/95................................................... 19,151 27,458
03/31/96................................................... 25,447 35,278
03/31/97................................................... 30,032 39,044
03/31/98................................................... 42,193 58,173
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Mid Cap Value Division
Thirty-Eight.......................... 321.93% 146.79% 120.32% 40.49%
Benchmark Comparison
S&P MidCap 400 Index.................... 481.73% 143.81% 111.87% 49.00%
</TABLE>
AMERICAN GENERAL MODERATE GROWTH LIFESTYLE DIVISION FORTY-NINE.
The performance of the Fund is not compared to a benchmark.
47
<PAGE> 327
AMERICAN GENERAL MONEY MARKET DIVISION FORTY-FOUR 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 APRIL 1, 1988
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION FORTY-FOUR CD INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 10,699 10,803
03/31/90................................................... 11,532 11,713
03/31/91................................................... 12,299 12,610
03/31/92................................................... 12,803 13,205
03/31/93................................................... 13,084 13,591
03/31/94................................................... 13,317 13,946
03/31/95................................................... 13,809 14,525
03/31/96................................................... 14,444 15,224
03/31/97................................................... 15,048 15,819
03/31/98................................................... 15,715 16,686
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Money Market Division
Forty-Four............................... 57.15% 20.30% 13.80% 4.44%
Benchmark Comparison
Primary CD Index........................... 66.86% 22.77% 14.88% 4.82%
</TABLE>
48
<PAGE> 328
AMERICAN GENERAL SMALL CAP GROWTH DIVISION THIRTY-FIVE PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 1, 1994
<TABLE>
<CAPTION>
SMALL CAP GROWTH RUSSELL 2000
DIVISION THIRTY-FIVE INDEX
- --------------------------------------------------------------------- ------------
<S> <C> <C>
09/01/94................................................... $10,000 $10,000
03/31/95................................................... 10,458 10,234
03/31/96................................................... 14,555 13,206
03/31/97................................................... 15,980 13,881
03/31/98................................................... 24,380 19,713
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Small Cap Growth
Division Thirty-Five.................... 143.80% -- 133.13% 52.56%
Benchmark Comparison
Russell 2000 Index........................ 97.13% -- 92.63% 42.01%
</TABLE>
AMERICAN GENERAL SMALL CAP INDEX DIVISION FORTY-FIVE PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
SMALL CAP INDEX RUSSELL 2000
DIVISION FORTY-FIVE INDEX
- --------------------------------------------------------------------- ------------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 10,951 11,307
03/31/90................................................... 11,503 11,931
03/31/91................................................... 12,571 12,750
03/31/92................................................... 16,184 16,428
03/31/93................................................... 16,695 17,722
03/31/94................................................... 18,222 19,666
03/31/95................................................... 19,232 20,751
03/31/96................................................... 24,412 26,779
03/31/97................................................... 25,584 28,147
03/31/98................................................... 36,169 39,973
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Small Cap Index
Division Forty-Five..................... 261.69% 116.64% 88.07% 41.37%
Benchmark Comparison
Russell 2000 Index........................ 299.73% 125.55% 92.63% 42.01%
</TABLE>
49
<PAGE> 329
AMERICAN GENERAL SMALL CAP VALUE DIVISION THIRTY-SIX PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX
The Fund commenced operations on , 1998. Accordingly, no
performance for the Fund is available.
AMERICAN GENERAL S&P 500 INDEX DIVISION FORTY-SEVEN PERFORMANCE COMPARED TO S&P
500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1,1988
<TABLE>
<CAPTION>
S&P 500 INDEX S&P 500
DIVISION FORTY-SEVEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 11,698 11,815
03/31/90................................................... 13,660 14,091
03/31/91................................................... 15,654 16,122
03/31/92................................................... 17,218 17,903
03/31/93................................................... 19,664 20,629
03/31/94................................................... 19,616 20,932
03/31/95................................................... 22,478 24,191
03/31/96................................................... 29,455 31,956
03/31/97................................................... 34,980 38,297
03/31/98................................................... 51,335 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General S&P 500 Index Division
Forty-Seven............................. 413.35% 158.56% 128.38% 46.76%
Benchmark Comparison
S&P 500 Index............................. 466.70% 174.71% 134.26% 47.97%
</TABLE>
50
<PAGE> 330
AMERICAN GENERAL SOCIALLY RESPONSIBLE DIVISION FORTY-ONE 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>
SOCIALLY RESPONSIBLE S&P 500
DIVISION FORTY-ONE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
10/02/89................................................... $10,000 $10,000
03/31/90................................................... 10,011 9,907
03/31/91................................................... 11,230 11,335
03/31/92................................................... 11,905 12,586
03/31/93................................................... 13,501 14,503
03/31/94................................................... 13,233 14,716
03/31/95................................................... 14,882 17,008
03/31/96................................................... 19,636 22,467
03/31/97................................................... 23,587 26,925
03/31/98................................................... 34,522 39,841
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
American General Socially Responsible
Division Forty-One...................... 248.22% 151.31% 131.97% 46.36%
Benchmark Comparison
S&P 500 Index............................. 298.41% 174.71% 134.26% 47.97%
</TABLE>
51
<PAGE> 331
DREYFUS SMALL CAP DIVISION EIGHTEEN PERFORMANCE COMPARED TO RUSSELL 2000 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE*
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 31, 1990
<TABLE>
<CAPTION>
DREYFUS SMALL CAP RUSSELL 2000
DIVISION EIGHTEEN INDEX
- ----------------------------------------------------------------- ------------
<S> <C> <C>
08/31/90............................................... $ 10,000 $10,000
03/31/91............................................... 12,859 12,433
03/31/92............................................... 30,754 15,044
03/31/93............................................... 49,615 17,280
03/31/94............................................... 74,397 19,176
03/31/95............................................... 82,470 20,234
03/31/96............................................... 104,542 26,112
03/31/97............................................... 106,926 27,446
03/31/98............................................... 146,524 38,977
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Dreyfus Small Cap Division Eighteen..... 1,365.24% 195.32% 77.67% 37.03%
Benchmark Comparison
Russell 2000 Index...................... 289.77% 125.55% 92.63% 42.01%
</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 Portfolio 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.
52
<PAGE> 332
FOUNDERS GROWTH DIVISION THIRTY PERFORMANCE COMPARED TO S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
FOUNDERS GROWTH S&P 500
DIVISION THIRTY INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
04/01/88................................................. $10,000 $10,000
03/31/89................................................. 11,154 11,815
03/31/90................................................. 13,300 14,091
03/31/91................................................. 14,811 16,122
03/31/92................................................. 17,452 17,903
03/31/93................................................. 20,212 20,629
03/31/94................................................. 23,598 20,932
03/31/95................................................. 24,649 24,191
03/31/96................................................. 34,670 31,956
03/31/97................................................. 37,983 38,297
03/31/98................................................. 53,736 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Founders Growth Division Thirty.......... 437.36% 165.86% 118.00% 41.47%
Benchmark Comparison
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
</TABLE>
53
<PAGE> 333
NEUBERGER&BERMAN GUARDIAN TRUST DIVISION TWENTY-NINE PERFORMANCE COMPARED TO
S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
GUARDIAN TRUST S&P 500
DIVISION TWENTY-NINE* INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 11,845 11,815
03/31/90................................................... 12,819 14,091
03/31/91................................................... 14,698 16,122
03/31/92................................................... 17,081 17,903
03/31/93................................................... 20,536 20,629
03/31/94................................................... 21,618 20,932
03/31/95................................................... 24,307 24,191
03/31/96................................................... 30,002 31,956
03/31/97................................................... 33,913 38,297
03/31/98................................................... 44,788 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Neuberger&Berman Guardian Trust Division
Twenty-Nine............................ 347.88% 118.09% 84.26% 32.07%
Benchmark Comparison
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
</TABLE>
- ---------------
* Neuberger&Berman Guardian Trust ("Trust") started operating on August 3, 1993.
It has identical investment objectives and policies and invests in, the same
portfolio as Neuberger&Berman Guardian Fund ("Fund"), which is also managed by
Neuberger&Berman Management Incorporated ("N&B"). The performance information
for the Trust before August 3, 1993 is for the Fund. N&B 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. Absent such arrangement, the average annual total returns of the
Trust would have been less. The total returns for the periods prior to the
Trust's commencement of operations would have been lower had they reflected
the higher expense ratios of the Trust as compared to those of the Fund.
54
<PAGE> 334
PUTNAM GLOBAL GROWTH DIVISION TWENTY-EIGHT PERFORMANCE COMPARED TO MSCI WORLD
INDEX AND S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
MSCI
GLOBAL GROWTH WORLD S&P 500
DIVISION TWENTY-EIGHT INDEX INDEX
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
04/01/88.................................. $10,000 $10,000 $10,000
03/31/89.................................. 10,759 11,297 11,815
03/31/90.................................. 12,233 11,038 14,091
03/31/91.................................. 12,820 11,742 16,122
03/31/92.................................. 13,194 11,614 17,903
03/31/93.................................. 14,335 13,015 20,629
03/31/94.................................. 16,918 14,774 20,932
03/31/95.................................. 16,792 16,151 24,191
03/31/96.................................. 20,619 19,385 31,956
03/31/97.................................. 22,709 21,199 38,297
03/31/98.................................. 29,021 27,974 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Putnam Global Growth
Division Twenty-Eight........................ 190.21% 102.46% 72.83% 27.80%
Benchmark Comparison
MSCI World Index............................... 179.74% 114.94% 73.20% 31.96%
S&P 500 Index.................................. 466.70% 174.71% 134.26% 47.97%
</TABLE>
55
<PAGE> 335
PUTNAM NEW OPPORTUNITIES DIVISION TWENTY-SIX PERFORMANCE 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
03/31/91................................................... 13,862 11,872
03/31/92................................................... 18,904 13,183
03/31/93................................................... 22,594 15,190
03/31/94................................................... 28,587 15,414
03/31/95................................................... 33,533 17,814
03/31/96................................................... 47,909 23,532
03/31/97................................................... 44,535 28,201
03/31/98................................................... 67,828 41,730
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Putnam New Opportunities
Division Twenty-Six.......................... 578.28% 200.20% 102.28% 52.30%
Benchmark Comparison
S&P 500 Index.................................. 317.30% 174.71% 134.26% 47.97%
</TABLE>
- ---------------
* The Fund underlying this Division was initiated on August 31, 1990.
56
<PAGE> 336
PUTNAM OTC & EMERGING GROWTH DIVISION TWENTY-SEVEN PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX AND S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
OTC & EMERGING GROWTH RUSSELL S&P 500
DIVISION TWENTY-SEVEN 2000 INDEX
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
04/01/88.................................. $10,000 $10,000 $10,000
03/31/89.................................. 10,903 11,307 11,815
03/31/90.................................. 12,599 11,931 14,091
03/31/91.................................. 14,156 12,750 16,122
03/31/92.................................. 15,805 15,428 17,903
03/31/93.................................. 17,933 17,722 20,629
03/31/94.................................. 22,062 19,666 20,932
03/31/95.................................. 25,845 20,751 24,191
03/31/96.................................. 38,746 26,779 31,956
03/31/97.................................. 31,656 28,147 38,297
03/31/98.................................. 47,693 39,973 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Putnam OTC & Emerging Growth
Division Twenty-Seven.................. 376.93% 165.94% 84.54% 50.66%
Benchmark Comparison
Russell 2000 Index....................... 299.73% 125.55% 92.63% 42.01%
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
</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 APRIL 1, 1988
<TABLE>
<CAPTION>
SCUDDER GROWTH AND INCOME S&P 500
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 11,359 11,815
03/31/90................................................... 12,433 14,091
03/31/91................................................... 14,056 16,122
03/31/92................................................... 16,080 17,903
03/31/93................................................... 18,388 20,629
03/31/94................................................... 19,199 20,932
03/31/95................................................... 21,403 24,191
03/31/96................................................... 27,657 31,956
03/31/97................................................... 32,398 38,297
03/31/98................................................... 45,783 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Scudder Growth and Income
Division Twenty-One.................... 357.83% 148.98% 113.91% 41.31%
Benchmark Comparison
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
</TABLE>
57
<PAGE> 337
T. ROWE PRICE SMALL-CAP STOCK DIVISION FIFTY-ONE PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE FEBRUARY 1, 1992
<TABLE>
<CAPTION>
T. ROWE PRICE SMALL-CAP STOCK RUSSELL 2000
DIVISION FIFTY-ONE INDEX
- ---------------------------------------------------------------------- ------------
<S> <C> <C>
08/31/92.................................................... $10,000 $10,000
03/31/93.................................................... 11,850 12,262
03/31/94.................................................... 13,085 13,607
03/31/95.................................................... 14,010 14,358
03/31/96.................................................... 18,476 18,529
03/31/97.................................................... 20,350 19,475
03/31/98.................................................... 27,737 27,658
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
T. Rowe Price Small-Cap Stock Division
Fifty-One.............................. 164.71% 145.97% 108.04% 43.24%
Benchmark Comparison
Russell 2000 Index....................... 176.58% 125.55% 92.63% 42.01%
</TABLE>
58
<PAGE> 338
TEMPLETON ASSET ALLOCATION DIVISION NINETEEN PERFORMANCE COMPARED TO MSCI WORLD
INDEX,
SALOMON BROTHERS WORLD GOVERNMENT BOARD 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
03/31/89...................................... 10,473 11,687 11,125
03/31/90...................................... 11,309 11,419 11,215
03/31/91...................................... 11,427 12,147 12,336
03/31/92...................................... 13,165 12,015 12,882
03/31/93...................................... 14,783 13,464 14,453
03/31/94...................................... 16,789 15,284 15,955
03/31/95...................................... 17,115 16,709 17,593
03/31/96...................................... 21,046 20,054 19,902
03/31/97...................................... 24,554 21,930 21,101
03/31/98...................................... 30,153 28,939 25,226
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Templeton Asset Allocation
Division Nineteen....................... 201.53% 103.97% 76.18% 22.80%
Benchmark Comparison
MSCI World Index.......................... 189.39% 114.94% 73.20% 31.96%
Blended Index**........................... 152.26% 74.54% 43.39% 19.55%
</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 Banks, 30 Day index.
59
<PAGE> 339
TEMPLETON FOREIGN DIVISION THIRTY-TWO PERFORMANCE COMPARED TO EAFE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
FOREIGN EAFE
DIVISION THIRTY-TWO INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
04/01/88................................................. $ 10,000 $ 10,000
03/31/89................................................. 11,654 11,161
03/31/90................................................. 14,484 9,870
03/31/91................................................. 14,722 10,118
03/31/92................................................. 16,169 9,307
03/31/93................................................. 17,148 10,387
03/31/94................................................. 21,458 12,725
03/31/95................................................. 21,427 13,498
03/31/96................................................. 24,577 15,162
03/31/97................................................. 28,360 15,382
03/31/98................................................. 32,043 18,245
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Templeton Foreign Division Thirty-Two...... 220.43% 86.86% 49.54% 12.99%
Benchmark Comparison
EAFE Index................................. 82.45% 75.66% 35.17% 18.61%
</TABLE>
60
<PAGE> 340
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
03/31/93.................................................... 9,926 11,055
03/31/94.................................................... 13,021 12,550
03/31/95.................................................... 12,859 13,720
03/31/96.................................................... 15,605 16,467
03/31/97.................................................... 18,880 18,007
03/31/98.................................................... 23,778 23,762
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Templeton International Division
Twenty................................. 137.78% 139.57% 84.92% 25.95%
Benchmark Comparison
MSCI World Index......................... 137.62% 114.94% 73.20% 31.96%
</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 to determining
pro forma hypothetical account values and cumulative returns.
61
<PAGE> 341
VANGUARD LIFESTRATEGY CONSERVATIVE GROWTH PORTFOLIO DIVISION FIFTY-FOUR
The performance of the Fund is not compared to a benchmark.
62
<PAGE> 342
VANGUARD FIXED INCOME SECURITIES FUND -- LONG-TERM CORPORATE PORTFOLIO DIVISION
TWENTY-TWO PERFORMANCE COMPARED TO MERRILL LYNCH CORPORATE MASTER INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
MERRILL LYNCH
LONG-TERM CORPORATE CORPORATE MASTER
DIVISION TWENTY-TWO INDEX
- ----------------------------------------------------------------- ----------------
<S> <C> <C>
04/01/88............................................... $10,000 $10,000
03/31/89............................................... 10,527 10,651
03/31/90............................................... 11,576 11,916
03/31/91............................................... 12,933 13,357
03/31/92............................................... 14,600 15,141
03/31/93............................................... 17,085 17,474
03/31/94............................................... 17,450 18,113
03/31/95............................................... 18,081 19,069
03/31/96............................................... 20,234 21,415
03/31/97............................................... 20,604 22,509
03/31/98............................................... 23,974 25,479
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<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
Division Twenty-Two............................ 139.74% 40.32% 32.59% 16.36%
Benchmark Comparison
Merrill Lynch Corporate Master Index............. 154.79% 45.82% 33.62% 13.20%
</TABLE>
63
<PAGE> 343
VANGUARD FIXED INCOME SECURITIES FUND -- LONG-TERM U.S. TREASURY PORTFOLIO
DIVISION TWENTY-THREE PERFORMANCE COMPARED TO LEHMAN BROTHERS U.S. TREASURY
LONG-TERM INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
LEHMAN BROS.
U.S. TREASURY
LONG-TERM U.S. TREASURY LONG-TERM
DIVISION TWENTY-THREE INDEX
- ----------------------------------------------------------------- -------------
<S> <C> <C>
04/01/88............................................... $10,000 $10,000
03/31/89............................................... 10,538 10,614
03/31/90............................................... 11,610 11,957
03/31/91............................................... 12,916 13,549
03/31/92............................................... 14,166 15,163
03/31/93............................................... 16,590 18,103
03/31/94............................................... 16,985 18,704
03/31/95............................................... 17,543 19,574
03/31/96............................................... 19,775 22,428
03/31/97............................................... 19,948 23,069
03/31/98............................................... 23,428 27,842
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<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
Division Twenty-Three.......................... 134.28% 41.22% 33.54% 17.45%
Benchmark Comparison
Lehman Brothers U.S. Treasury
Long-Term Index................................ 178.42% 53.80% 42.24% 20.69%
</TABLE>
64
<PAGE> 344
VANGUARD LIFESTRATEGY GROWTH PORTFOLIO DIVISION FIFTY-TWO
The performance of the Fund is not compared to a benchmark.
VANGUARD LIFESTRATEGY MODERATE GROWTH PORTFOLIO DIVISION FIFTY-THREE
The performance of the Fund is not compared to a benchmark.
65
<PAGE> 345
VANGUARD/WELLINGTON DIVISION TWENTY-FIVE PERFORMANCE 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 APRIL 1, 1988
<TABLE>
<CAPTION>
VANGUARD/WELLINGTON BLENDED
DIVISION TWENTY-FIVE INDEX*
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 11,378 11,403
03/31/90................................................... 12,437 13,321
03/31/91................................................... 13,525 15,167
03/31/92................................................... 14,852 16,992
03/31/93................................................... 16,927 19,600
03/31/94................................................... 17,342 20,046
03/31/95................................................... 19,214 22,437
03/31/96................................................... 24,039 28,021
03/31/97................................................... 26,823 32,119
03/31/98................................................... 35,014 43,377
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Vanguard/Wellington Division
Twenty-Five............................. 250.14% 106.85% 82.23% 30.54%
Benchmark Comparison
Blended Index*............................ 333.77% 121.31% 93.33% 35.05%
</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 PERFORMANCE COMPARED TO S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 1, 1988
<TABLE>
<CAPTION>
VANGUARD/WINDSOR II S&P 500
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/01/88................................................... $10,000 $10,000
03/31/89................................................... 12,356 11,815
03/31/90................................................... 13,625 14,091
03/31/91................................................... 14,942 16,122
03/31/92................................................... 16,131 17,903
03/31/93................................................... 19,006 20,629
03/31/94................................................... 19,099 20,932
03/31/95................................................... 21,440 24,191
03/31/96................................................... 28,587 31,956
03/31/97................................................... 33,321 38,297
03/31/98................................................... 48,349 56,670
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Vanguard/Windsor II Division
Twenty-Four............................ 383.49% 154.38% 125.51% 45.10%
Benchmark Comparison
S&P 500 Index............................ 466.70% 174.71% 134.26% 47.97%
</TABLE>
66
<PAGE> 346
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 is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Purchase Period" in the prospectus.) The
calcula-
67
<PAGE> 347
tion 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>
68
<PAGE> 348
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 paid for the years 1996
and 1997 were $11,530,000 and $46,521,000, respectively.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997,
and the financial statements of the Company's Separate Account A at December 31,
1997 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.
69
<PAGE> 349
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.
The Separate Account financial statements contained herein reflect the
composition of the Separate Account as of December 31, 1997, and for the fiscal
year then ended.
70
<PAGE> 350
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, 1997
and 1996, 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, 1997. 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, 1997
and 1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 18, 1998
- --------------------------------------------------------------------------------
1
<PAGE> 351
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS Investments - Notes 2, 6, 7, 8:
Fixed maturity securities
(amortized cost: $20,651,381 in 1997 and $19,667,491 in 1996) $21,641,084 $20,189,473
Equity securities (cost: $5,581 in 1997 and $8,624 in 1996) 5,456 8,589
Mortgage loans on real estate 1,259,029 1,349,855
Real estate, net of accumulated depreciation
of $69 in 1997 and $69 in 1996 28,569 37,130
Policy loans 719,127 639,200
Other long-term invested assets 45,474 35,945
Short-term investments 60,904 53,000
----------- -----------
Total investments 23,759,643 22,313,192
----------- -----------
Investment income receivable 347,358 315,118
Cash 32,181 24,360
Receivable for securities sold 32,825 18,654
Deferred policy acquisition costs - Note 3 392,346 557,748
Due from reinsurer, net 14,545 15,700
Other assets 52,104 45,798
Assets held in Separate Accounts 10,564,220 7,134,412
----------- -----------
Total assets $35,195,222 $30,424,982
----------- -----------
LIABILITIES Policy reserves for fixed annuity investment contracts $21,994,804 $21,067,429
Payable for securities purchased 19,027 575
Remittances not allocated 79,392 66,473
Commissions, general expenses, and taxes (other than income taxes) 39,546 41,642
Other liabilities 61,756 75,636
Income tax liabilities - Note 4 377,072 265,160
Liabilities related to Separate Accounts 10,564,220 7,134,412
----------- -----------
Total liabilities 33,135,817 28,651,327
----------- -----------
STOCKHOLDER'S Common stock (voting) par value $1 per share, 5,000 shares authorized
EQUITY and 3,575 issued and outstanding in 1997 and 1996 - Note 5 3,575 3,575
Additional paid-in capital 710,624 459,281
Retained earnings 1,038,731 1,143,947
Net unrealized gains - Note 2 306,475 166,852
----------- -----------
Total stockholder's equity 2,059,405 1,773,655
----------- -----------
Total liabilities and stockholder's equity $35,195,222 $30,424,982
----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 352
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES Surrender charges $ 12,405 $ 12,348 $ 9,967
Mortality charges 94,162 59,955 34,965
Expense charges 6,102 5,654 5,122
Net investment income - Note 2 1,729,541 1,654,496 1,597,681
Net reinsurance income 1,303 1,528 1,573
Realized investment gains (losses) - Note 2 20,235 21,551 (7,149)
Other income 15,320 10,920 6,878
----------- ----------- -----------
Total revenues 1,879,068 1,766,452 1,649,037
----------- ----------- -----------
COSTS AND Policy costs:
EXPENSES Increase in policy reserves for fixed annuity contracts 1,286,010 1,243,993 1,203,986
----------- ----------- -----------
Total costs 1,286,010 1,243,993 1,203,986
----------- ----------- -----------
Expenses:
Commissions 110,960 97,630
84,670
Salaries 58,873 54,016 48,227
Data processing 14,876 12,088 13,200
Postage and telephone 12,253 11,308 10,710
Sales promotion 10,161 10,394 9,361
Depreciation expense on furniture and equipment 8,964 8,920 8,924
Rent 7,931 7,524 7,477
Taxes, licenses, and fees 6,874 6,208 4,989
Printing and supplies 4,496 5,290 4,721
Guaranty association assessments - Note 9 30 2,678 18,961
Other expenses 35,172 27,223 22,665
Amortization of deferred policy acquisition costs - Note 3 42,101 31,201 16,841
Policy acquisition costs deferred - Note 3 (137,655) (116,818) (104,702)
----------- ----------- -----------
Total expenses 175,036 157,662 146,044
----------- ----------- -----------
Total costs and expenses 1,461,046 1,401,655 1,350,030
----------- ----------- -----------
EARNINGS Income before income tax expense 418,022 364,797 299,007
Income tax expense - Note 4 144,238 124,370 99,720
----------- ----------- -----------
Net income $ 273,784 $ 240,427 $ 199,287
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 353
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31,
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK Balance at beginning and end of year $ 3,575 $ 3,575 $ 3,575
----------- ----------- -----------
ADDITIONAL Balance at beginning of year 459,281 384,126 382,733
PAID-IN-CAPITAL Capital contribution from stockholder 251,343 75,155 1,393
----------- ----------- -----------
Balance at end of year 710,624 459,281 384,126
----------- ----------- -----------
RETAINED Balance at beginning of year 1,143,947 1,014,520 910,233
EARNINGS Net income 273,784 240,427 199,287
Dividends paid to stockholder (379,000) (111,000) (95,000)
----------- ----------- -----------
Balance at end of year 1,038,731 1,143,947 1,014,520
----------- ----------- -----------
NET UNREALIZED Balance at beginning of year 166,852 396,620 (563,481)
INVESTMENT Change during year 139,623 (229,768) 960,101
GAINS(LOSSES) ----------- ----------- -----------
Balance at end of year 306,475 166,852 396,620
----------- ----------- -----------
STOCKHOLDER'S
EQUITY Balance at end of year $ 2,059,405 $ 1,773,655 $ 1,798,841
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 354
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING Net income $ 273,784 $ 240,427 $ 199,287
ACTIVITIES Reconciling adjustments to net cash provided by operating
activities:
Insurance and annuity liabilities 1,286,010 1,243,993 1,203,986
Deferred policy acquisition costs (95,554) (85,617) (87,861)
Other, net (51,241) (50,233) 28,179
------------ ------------ ------------
Net cash provided by operating activities 1,412,999 1,348,570 1,343,591
------------ ------------ ------------
INVESTING Investment purchases (18,403,013) (14,883,271) (9,671,304)
ACTIVITIES Investment calls, maturities, and sales 17,500,312 13,897,479 8,025,420
Net (increase) decrease in short-term investments (7,904) (13,722) 120,745
------------ ------------ ------------
Net cash used for investing activities (910,605) (999,514) (1,525,139)
------------ ------------ ------------
FINANCING Policyholder account deposits 3,385,303 2,896,090 2,553,928
ACTIVITIES Policyholder account withdrawals (1,427,005) (1,276,008) (996,324)
Transfers to Separate Accounts (2,325,214) (1,936,727) (1,273,778)
Capital contribution from stockholder 251,343 75,155 1,607
Dividends paid (379,000) (111,000) (95,000)
------------ ------------ ------------
Net cash used for or provided by financing activities (494,573) (352,490) 190,433
------------ ------------ ------------
NET CHANGE Net increase (decrease) in cash 7,821 (3,434) 8,885
IN CASH Cash at beginning of year 24,360 27,794 18,909
------------ ------------ ------------
Cash at end of year $ 32,181 $ 24,360 $ 27,794
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 355
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 1997
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 ACCOUNTING CHANGES
NEW ACCOUNTING STANDARDS NOT YET ADOPTED. In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in the financial statements. Beginning first quarter
1998, VALIC must adopt this statement for all periods presented. Application of
this statement will not change recognition or measurement of net income and,
therefore, will not impact VALIC's consolidated results of operations or
financial position.
1.4 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.
Loans for which VALIC determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired.
VALIC generally looks to the underlying collateral for repayment of impaired
loans. Therefore, impaired loans are considered to be collateral dependent and
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.
1.5 DERIVATIVES RELATED TO INVESTMENTS
VALIC's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (call swaptions). VALIC accounts for its derivative
financial instruments as hedges.
INTEREST RATE AND CURRENCY SWAP AGREEMENTS. Interest rate swap agreements
convert specific investment securities from a floating to a fixed-rate basis, or
vice versa. Currency swap agreements are used to convert cash flows from
specific investment securities denominated in foreign currencies into U.S.
dollars at specified exchange rates, and to hedge against currency rate
fluctuations on anticipated security purchases.
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.
- --------------------------------------------------------------------------------
6
<PAGE> 356
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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.
CALL SWAPTIONS. Options to enter into interest rate swap agreements are
used to limit VALIC's exposure to reduced spreads between investment yields and
interest crediting rates should interest rates decline significantly over
prolonged periods. During such periods, the spread between investment yields and
interest crediting rates may be reduced as a result of certain limitations on
VALIC's ability to manage interest crediting rates. Call swaptions allow VALIC
to enter into interest rate swap agreements to receive fixed rates and pay lower
floating rates, effectively increasing the spread between investment yields and
interest crediting rates.
Premiums paid to purchase call swaptions are included in investments and
are amortized to net investment income over the exercise period of the
swaptions. If a call swaption is terminated, any gain is deferred and amortized
to insurance and annuity benefits over the expected life of the insurance and
annuity contracts and any unamortized premium is charged to income. If a call
swaption ceases to be an effective hedge, any gain or loss is recognized in
income.
1.6 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) in 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.
1.7 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.
1.8 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%.
1.9 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.
1.10 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.
- --------------------------------------------------------------------------------
7
<PAGE> 357
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
1.11 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>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 237,719 $ 213,686 $ 157,622
---------- ---------- ----------
Stockholder's equity $1,189,278 $1,077,366 $ 926,654
---------- ---------- ----------
</TABLE>
2
- --------------------------------------------------------------------------------
INVESTMENTS
- --------------------------------------------------------------------------------
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,562,802 $1,471,879 $1,414,644
Affiliated fixed
maturity securities 2,588 2,851 3,181
Equity securities 483 782 4,281
Mortgage loans on
real estate 123,591 140,492 149,974
Other 53,543 51,040 36,473
---------- ---------- ----------
Gross investment income 1,743,007 1,667,044 1,608,553
Investment expenses 13,466 12,548 10,872
---------- ---------- ----------
Net investment income $1,729,541 $1,654,496 $1,597,681
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income during
1997 totaled $12,516 or 0.05% 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, 1997.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 6,075 $ 1,417 $ 832
Equity securities 21 15,795 7,706
Mortgage loans on
real estate 21,647 4,635 (24,465)
Real estate 3,802 389 3,767
Other (11,310) (685) 5,011
-------- -------- --------
Realized investment gains
(losses) before taxes 20,235 21,551 (7,149)
Income tax expense (benefit) 7,082 7,543 (1,414)
-------- -------- --------
Net realized investment
gains (losses) $ 13,153 $ 14,008 $ (5,735)
-------- -------- --------
</TABLE>
Proceeds from sales of fixed maturity securities were $3,269,801,
$3,052,550, and $1,432,183 during 1997, 1996, and 1995, respectively. Gross
gains of $23,967, $28,173, and $15,722 and gross losses of $22,489, $36,802, and
$30,518, were realized on those sales during 1997, 1996, and 1995, respectively.
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
------------------------- ---------------------
1997 1996 1997 1996
----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 175,771 $ 219,426 $ 25,101 $ 20,025
Obligations of states and
political subdivisions 32,264 32,308 1,193 840
Debt securities issued by
foreign governments 248,838 241,908 14,018 10,958
Corporate securities 15,207,118 13,211,735 755,877 457,461
Mortgage-backed securities 4,959,198 5,932,878 214,418 150,021
Affiliated fixed maturity securities 28,192 29,236 67 --
----------- ----------- ---------- --------
Total fixed maturity securities $20,651,381 $19,667,491 $1,010,674 $639,305
----------- ----------- ---------- --------
Equity securities $ 5,581 $ 8,624 $ 114 $ 61
----------- ----------- ---------- --------
<CAPTION>
Gross Unrealized Losses Fair Value
----------------------- -------------------------
1997 1996 1997 1996
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (3) $ (465) $ 200,869 $ 238,986
Obligations of states and
political subdivisions _ (197) 33,457 32,951
Debt securities issued by
foreign governments (1,988) (122) 260,868 252,744
Corporate securities (16,179) (76,389) 15,946,816 13,592,807
Mortgage-backed securities (2,801) (40,150) 5,170,815 6,042,749
Affiliated fixed maturity securities -- -- 28,259 29,236
-------- --------- ----------- -----------
Total fixed maturity securities $(20,971) $(117,323) $21,641,084 $20,189,473
-------- --------- ----------- -----------
Equity securities $ (239) $ (96) $ 5,456 $ 8,589
-------- --------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 358
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1997 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 $ 103,239 $ 104,677
In years two through five 4,106,448 4,284,682
In years six through ten 7,443,520 7,812,438
After ten years 3,842,984 4,067,083
Mortgage-backed securities 5,155,190 5,372,204
----------- -----------
Total fixed maturity securities $20,651,381 $21,641,084
----------- -----------
</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>
1997 1996
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 1,010,788 $ 639,366
Gross unrealized losses (21,210) (117,419)
DPAC adjustments (511,037) (261,363)
Deferred federal income taxes (172,066) (93,732)
----------- -----------
Net unrealized gains
on securities $ 306,475 $ 166,852
----------- -----------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE
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>
1997 1996
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 614,627 $ 656,073
Pacific and Mountain 355,006 406,948
Central 310,535 331,411
Allowance for losses (21,139) (44,577)
----------- -----------
Total mortgage loans $ 1,259,029 $ 1,349,855
----------- -----------
Property type:
Office $ 467,326 $ 456,818
Retail 396,934 451,668
Industrial 246,241 221,532
Apartments 145,272 190,583
Residential and other 24,395 73,831
Allowance for losses (21,139) (44,577)
----------- -----------
Total mortgage loans $ 1,259,029 $ 1,349,855
----------- -----------
</TABLE>
ALLOWANCE. Activity in the allowance for mortgage loan losses was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1 $ 44,577 $ 54,213 $ 55,665
Provision for mortgage
loan losses (18,178) (2,967) 25,418
Deductions (5,260) (6,669) (26,870)
----------- ----------- -----------
Balance at December 31 $ 21,139 $ 44,577 $ 54,213
----------- ----------- -----------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans on real estate and related interest
income were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Impaired loans:
With allowance* $ 28,317 $ 46,346
Without allowance -- 236
---------- ----------
Total impaired loans $ 28,317 $ 46,582
---------- ----------
Average investment $ 37,449 $ 56,163
Interest income earned 2,887 4,816
Interest income - cash basis -- 4,617
---------- ----------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of $9,317
and $6,848, respectively.
- --------------------------------------------------------------------------------
9
<PAGE> 359
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
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>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 557,748 $ 182,546 $ 910,479
Deferrals:
Commissions 76,327 62,760 52,959
Other acquisition costs 61,328 54,058 51,743
Amortization:
Accretion of interest 65,388 59,810 54,086
Operating earnings (107,489) (91,011) (70,927)
Offset to realized
(gains) losses (11,282) (676) 4,991
Effect of net unrealized
(gains) losses on securities (249,674) 290,261 (820,785)
--------- --------- ---------
Balance at December 31 $ 392,346 $ 557,748 $ 182,546
--------- --------- ---------
</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>
1997 1996
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ 2,027 $ (4,551)
--------- ---------
Deferred tax liabilities, applicable to:
Basis differential of investments 368,591 201,122
DPAC 134,541 192,815
Other 18,576 8,025
--------- ---------
Total deferred tax liabilities 521,708 401,962
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (138,555) (118,595)
Basis differential of investments (1,545) (6,219)
Other (6,563) (7,437)
--------- ---------
Total deferred tax assets (146,663) (132,251)
--------- ---------
Net deferred tax liabilities 375,045 269,711
--------- ---------
Total income tax liabilities $ 377,072 $ 265,160
--------- ---------
</TABLE>
4.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $ 114,138 $ 99,560 $ 99,273
State 3,099 2,842 3,224
---------- ---------- ----------
Total current income
tax expense 117,237 102,402 102,497
---------- ---------- ----------
Deferred, applicable to:
DPAC 29,113 29,308 32,174
Policy reserves (14,920) (18,581) (28,780)
Basis differential of
investments 3,569 2,754 (786)
Other, net 9,239 8,487 (5,385)
---------- ---------- ----------
Total deferred income
tax expense (benefit) 27,001 21,968 (2,777)
---------- ---------- ----------
Income tax expense $ 144,238 $ 124,370 $ 99,720
---------- ---------- ----------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 146,308 $ 127,679 $ 104,652
Dividends received
deduction (5,212) (4,935) (3,883)
Tax-exempt interest (ESOP) (3,326) (3,865) (4,426)
State income taxes 3,695 3,311 2,918
Other items 2,773 2,180 459
--------- --------- ---------
Income tax expense $ 144,238 $ 124,370 $ 99,720
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1997, 1996, and 1995 were $106,338, $114,478,
and $52,790, respectively. State income taxes paid in 1997, 1996, and 1995 were
$2,978, $3,060, and $2,653, respectively.
- --------------------------------------------------------------------------------
10
<PAGE> 360
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
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 1998 is
$233,582.
6
- --------------------------------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
Interest rate and currency swap agreements related to investment securities
at December 31, 1997 were as follows:
<TABLE>
<S> <C>
Interest rate swap agreements to pay fixed rate
Notional amount $ 107,000
Average receive rate 6.92%
Average pay rate 6.25
-----------
Currency swap agreements (receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $ 123,326
Average exchange rate 1.49
-----------
</TABLE>
During 1997, VALIC purchased call swaptions that expire in 1998. These call
swaptions had a notional amount of $1.15 billion and strike rates ranging from
4.5% to 5.5% at December 31, 1997. Should the strike rates remain below market
rates, the call swaptions will expire and VALIC's exposure would be limited to
the premiums paid.
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>
1997 1996
-------------------------- --------------------------
Fair Carrying Fair Carrying
Value Amount Value Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $21,646,540* $ 21,646,540* $20,198,062* $20,198,062
Mortgage loans on real estate 1,288,702 1,259,029 1,352,994 1,349,855
Policy loans 721,089 719,127 637,870 639,200
Liabilities
Insurance investment contracts 21,536,809 21,994,804 19,753,088 21,067,429
----------- ----------- ----------- -----------
</TABLE>
* Includes derivative financial instruments with negative fair value of $2,967
in 1997 and negative fair value of $7,872 in 1996.
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> 361
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
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, 1997 were as follows:
Operating expenses include $22,061 in 1997, $17,533 in 1996, and $21,173 in
1995 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 $501 in 1997, $455 in 1996, and $1,662 in 1995.
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, 1997, 1996, and 1995. VALIC recognized $1,292 in interest income
during 1997, $1,372 for 1996, and $1,452 for 1995.
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, 1997, 1996, and 1995.
VALIC recognized $1,296, $1,479, and $1,729 of interest income on the note
during 1997, 1996, and 1995, respectively.
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.
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.
VALIC paid common stock dividends of $379,000, $106.01 per share; $111,000,
$31.05 per share; and $95,000, $26.57 per share, in 1997, 1996, and 1995,
respectively.
VALIC received capital contributions of $250,000 and $75,000 from AGL on
March 31, 1997 and December 30, 1996, respectively.
VALIC acquired from American General Life and Accident Insurance Company
bonds of various issuers at a cost of $22,154 and $25,892 on January 30, 1997
and April 8, 1997, respectively.
On December 5, 1997, VALIC acquired from Western National Life Insurance
Company bonds of various issuers at a cost of $129,715.
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 $30, $2,678, and $18,961, for the
years ended December 31, 1997, 1996, and 1995, respectively. The accrued
liability for anticipated assessments was $7,402, $13,661, and $20,249, at
December 31, 1997, 1996, and 1995, respectively. The 1997 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 continue annually no more than the maximum amount that can be
deducted for federal income tax purposes.
- --------------------------------------------------------------------------------
12
<PAGE> 362
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
10.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1,045 $ 917 $ 601
Interest cost on projected
benefit obligation 1,034 843 635
Actual return on plan assets (2,734) (2,785) (1,249)
Amortization of unrecognized
net asset existing at date of
initial application -- (23) (72)
Amortization of unrecognized
prior service cost 45 44 44
Deferral of net asset gain 1,933 2,210 749
---------- ---------- ----------
Total pension expense $ 1,323 $ 1,206 $ 708
---------- ---------- ----------
Weighted-average discount rate
on benefit obligation 7.25% 7.50 % 7.25%
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, 1997 and 1996 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 10,919 $ 8,265
Nonvested 1,485 1,251
----------- -----------
Accumulated benefit obligation 12,404 9,516
Effect of increase in compensation levels 3,340 2,474
----------- -----------
Projected benefit obligation 15,744 11,990
Plan assets at fair value 11,759 9,120
----------- -----------
Projected benefit obligation in excess of
plan assets (3,985) (2,870)
Unrecognized net gain 1,367 1,266
Unrecognized prior service cost 18 62
----------- -----------
Net pension liability $ (2,600) $ (1,542)
----------- -----------
</TABLE>
Equity and fixed maturity securities were 63% and 28%, 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 1997, 1996, and
1995 was $295, $282, and $228, respectively.
The plans' combined funded status and the accrued postretirement benefit
cost included in other liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 8 $ 21
Fully eligible active plan participants 151 103
Other active plan participants 2,082 1,479
--------- ---------
Accumulated postretirement
benefit obligations 2,241 1,603
Unrecognized net gain (452) (66)
Net funding (5) (17)
--------- ---------
Accrued benefit cost $ 1,784 $ 1,520
--------- ---------
Discount rate on postretirement
benefit obligations 7.25% 7.50%
--------- ---------
</TABLE>
11
- --------------------------------------------------------------------------------
IMPACT OF YEAR 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
VALIC is in the process of modifying its computer systems to be Year 2000
compliant and expects to substantially complete this project during 1998. During
1997, VALIC incurred and expensed $6.0 million (pretax) related to this project.
VALIC estimates that it will incur future costs in excess of $9.3 million
(pretax) for additional internal staff, third-party vendors, and other expenses
to render its systems Year 2000 compliant.
The costs of the project and the date on which VALIC believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
- --------------------------------------------------------------------------------
<PAGE> 363
================================================================================
PRESIDENT'S LETTER 1
================================================================================
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1997, 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.
During 1997 equity markets produced returns well above those of 1996. The stock
market, as measured by the Standard & Poor's 500 Index (S&P 500(R)) had a total
return of 33.36%. The mid-sized companies followed closely, with the Standard &
Poor's MidCap 400 (MidCap 400) earning 32.24% and the Russell 2000(R) producing
22.36%.
The average mutual fund returns showed greater variability than that evidenced
by the broader averages. In the large capitalization area, growth and value were
rather close with one year returns of 26.45% and 26.60% respectively. However,
the mid-cap sector experienced wide variability with growth returning 15.53% and
value returning 26.80%. A somewhat similar experience occurred in the small-cap
arena where growth funds provided average returns of 14.42% while the value
sector returned 27.75%. The orientation of any specific fund was a major factor
in the performance differences.
The yield on the 30-year treasury bond opened the year at 6.64% and rose during
the spring on fears the strengthening economy would force the Federal Reserve
(Fed) to push up short-term rates. On March 25, the Fed raised the Fed Funds
rate 0.25%; subsequently on April 14, the 30-year T-bond yield hit 7.17%. Later
in April, as fears of further rate hikes subsided and inflation fell, yields
began to fall and bond prices rose.
The second half of the year, marked by low inflation and little fear of Fed
action, was a good period for the fixed-income investor. A strong dollar, aided
by the turmoil and uncertainty in Asia, encouraged investors to flee to the
safety of U.S. bonds.
The European markets were positive throughout the year as home market and cross
border mergers boosted returns and dollar-sensitive exporters had strong sales
and profits. Asian markets were decimated in the fourth quarter as a fearsome
currency, banking and debtor crisis started in Thailand and spread to most
Pacific Rim economies.
Throughout the developed world international bond prices rallied and yields
declined to thirty year lows. Inflation was minimal and most nations pursued
sound fiscal policy. The Asian crisis helped as investors bought high quality
government bonds as a safe haven asset allocation.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ THOMAS L. WEST, JR.
Thomas L. West, Jr., President and CEO
The Variable Annuity Life Insurance Company
February 6, 1998
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.
<PAGE> 364
================================================================================
2 PRESIDENT'S LETTER
================================================================================
<TABLE>
<CAPTION>
ONE YEAR
TOTAL RETURNS
GROUP PORTFOLIO PORTFOLIO FOR YEAR ENDING
UNIT INDEPENDENCE DIRECTOR DIRECTOR DECEMBER 31,
PURCHASE IMPACT PLUS 1 2 ------------------
DIVISION DIVISION DIVISION DIVISION DIVISION 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund........... -- -- 11 11 -- 1.18% 5.75%
Putnam Global Growth Fund................... -- -- -- -- 28 12.20 15.37
Templeton Foreign Fund...................... -- -- -- -- 32 5.57 16.74
Templeton International Fund................ -- -- -- 20 -- 12.54 22.50
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund............. -- -- -- 17 17 1.57 12.68
AGSPC Small Cap Index Fund.................. -- -- 14 14 -- 21.18 15.57
Dreyfus Small Cap Portfolio................. -- -- -- 18 -- 15.37 15.14
Putnam New Opportunities Fund............... -- -- -- -- 26 21.31 9.70
Putnam OTC & Emerging Growth Fund........... -- -- -- -- 27 9.08 3.53
GROWTH
AGSPC Growth Fund........................... -- -- -- 15 15 19.80 18.18
AGSPC MidCap Index Fund..................... -- 4 4 4 -- 30.45 17.61
American Century -
Twentieth Century Ultra Fund............. -- -- -- -- 31 21.74 12.43
Founders Growth Fund........................ -- -- -- -- 30 25.25 15.35
GROWTH & INCOME
AGSPC Growth & Income Fund.................. -- -- -- 16 -- 22.60 22.10
AGSPC Social Awareness Fund................. -- -- 12 12 12 32.52 22.75
AGSPC Stock Index Fund ..................... 10A, 10B 10D 10C 10C 10C 31.77 21.53
Neuberger&Berman Guardian Trust............. -- -- -- -- 29 16.66 16.54
Scudder Growth and Income Fund.............. -- -- -- -- 21 28.80 20.63
Vanguard/Windsor II......................... -- -- -- -- 24 30.70 22.56
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund............. -- -- -- 19 -- 14.07 17.40
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund................. -- 5 5 5 -- 21.40 9.99
Vanguard/Wellington Fund.................... -- -- -- -- 25 21.65 14.69
CURRENT INCOME
AGSPC Intl Government Bond Fund............. -- -- 13 13 13 (5.79) 3.36
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund............. -- 1 7 7 -- 7.49 0.75
AGSPC Government Securities Fund............ -- -- 8 8 -- 7.83 0.90
Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio............ -- -- -- -- 22 12.32 (0.72)
Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio....... -- -- -- -- 23 12.44 (3.08)
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund..................... -- 2 6 6 6 4.13 3.97
</TABLE>
The total returns 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.
<PAGE> 365
================================================================================
FINANCIAL STATEMENTS 3
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1997
ASSETS: ALL DIVISIONS
---------------
<S> <C>
Total investment in shares of mutual funds, at market
(cost $8,087,103,381) ........................................ $10,324,166,205
Balance due from VALIC general account .......................... 3,148,203
---------------
NET ASSETS ...................................................... $10,327,314,408
===============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans-- partial
withdrawals with right of reinvestment) ............... $10,307,955,440
Reserves for annuity contracts on benefit ....................... 19,358,968
---------------
TOTAL CONTRACT OWNER RESERVES ................................... $10,327,314,408
===============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME: ALL DIVISIONS
---------------
<S> <C>
Dividends from mutual funds ..................................... $ 121,206,942
---------------
EXPENSES:
Mortality and expense charges ................................... 92,522,835
Reimbursement of expenses (Note C) .............................. (2,073,989)
===============
Total expenses ......................................... 90,448,846
===============
NET INVESTMENT INCOME ........................................... 30,758,096
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................................ 161,505,567
Capital gains distributions from mutual funds ................... 289,703,358
Net unrealized appreciation of investments during the year ...... 1,001,756,337
===============
Net realized and unrealized gain on investments ........ 1,452,965,262
===============
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 1,483,723,358
===============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS ALL DIVISIONS
-------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................... $ 30,758,096 $ 31,159,663
Net realized gain on investments ......................................................... 161,505,567 96,618,063
Capital gains distributions from mutual funds ............................................ 289,703,358 175,625,286
Net unrealized appreciation of investments during the year ............................... 1,001,756,337 539,282,575
---------------- ----------------
Increase in net assets resulting from operations ................................ 1,483,723,358 842,685,587
================ ================
PRINCIPAL TRANSACTIONS:
Purchase payments ........................................................................ 1,798,552,034 1,307,543,093
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ...... (328,105,329) (210,060,345)
Annuity benefit payments ................................................................. (2,273,125) (1,897,648)
Amounts transferred from VALIC general account ........................................... 518,857,110 647,659,402
---------------- ----------------
Increase in net assets resulting from principal transactions .................... 1,987,030,690 1,743,244,502
---------------- ----------------
TOTAL INCREASE IN NET ASSETS ............................................................. 3,470,754,048 2,585,930,089
================ ================
NET ASSETS:
Beginning of year ........................................................................ 6,856,560,360 4,270,630,271
---------------- ----------------
End of year .............................................................................. $ 10,327,314,408 $ 6,856,560,360
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 366
================================================================================
4 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC PUTNAM
INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
STATEMENTS OF NET ASSETS EQUITIES GROWTH FOREIGN INTERNATIONAL
December 31, 1997 FUND FUND FUND FUND
DIVISION 11 DIVISION 28 DIVISION 32 DIVISION 20
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 152,510,209 $ 58,836,553 $ 180,677,558 $ 731,342,182
Balance due (to) from VALIC general account ................ (509,427) (2,145) 174,443 (1,602,995)
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 152,000,782 $ 58,834,408 $ 180,852,001 $ 729,739,187
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with
right of reinvestment) .................................. $ 151,837,305 $ 58,803,197 $ 180,817,115 $ 729,577,415
Reserves for annuity contracts on benefit .................. 163,477 31,211 34,886 161,772
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 152,000,782 $ 58,834,408 $ 180,852,001 $ 729,739,187
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY - AGSPC AGSPC
TWENTIETH FOUNDERS GROWTH & SOCIAL
STATEMENTS OF NET ASSETS CENTURY ULTRA GROWTH INCOME AWARENESS
December 31, 1997 FUND FUND FUND FUND
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 123,498,148 $ 170,135,993 $ 256,933,935 $ 243,460,767
Balance due (to) from VALIC general account ................ 270,241 332,238 162,040 119,205
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 123,768,389 $ 170,468,231 $ 257,095,975 $ 243,579,972
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans -- partial withdrawals
with right of reinvestment) ............................. $ 123,739,369 $ 170,431,273 $ 257,042,890 $ 243,534,821
Reserves for annuity contracts on benefit .................. 29,020 36,958 53,085 45,151
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 123,768,389 $ 170,468,231 $ 257,095,975 $ 243,579,972
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC
STATEMENTS OF NET ASSETS TEMPLETON ASSET VANGUARD/ INTERNATIONAL
December 31, 1997 ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
FUND FUND FUND BOND FUND
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 316,804,111 $ 184,445,969 $ 155,754,286 $ 166,189,923
Balance due (to) from VALIC general account ................ 70,174 132,023 290,261 9,834
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 316,874,285 $ 184,577,992 $ 156,044,547 $ 166,199,757
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of
reinvestment) ........................................... $ 316,576,446 $ 184,488,524 $ 156,028,597 $ 166,177,986
Reserves for annuity contracts on benefit .................. 297,839 89,468 15,950 21,771
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 316,874,285 $ 184,577,992 $ 156,044,547 $ 166,199,757
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 367
================================================================================
SEPARATE ACCOUNT A 5
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP DREYFUS NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX SMALL CAP OPPORTUNITIES GROWTH GROWTH INDEX
FUND FUND PORTFOLIO FUND FUND FUND FUND
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 911,151,116 $ 230,728,350 $ 850,402,328 $ 164,603,317 $ 97,480,884 $ 941,261,746 $ 730,544,269
(1,489,662) (659,600) (578,020) 233,261 (24,754) 161,723 69,416
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 909,661,454 $ 230,068,750 $ 849,824,308 $ 164,836,578 $ 97,456,130 $ 941,423,469 $ 730,613,685
============== ============== ============== ============== ============== ============== ==============
$ 909,365,168 $ 229,944,880 $ 849,635,667 $ 164,825,889 $ 97,416,344 $ 941,014,035 $ 730,300,161
296,286 123,870 188,641 10,689 39,786 409,434 313,524
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 909,661,454 $ 230,068,750 $ 849,824,308 $ 164,836,578 $ 97,456,130 $ 941,423,469 $ 730,613,685
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& SCUDDER
BERMAN GROWTH AND
AGSPC STOCK INDEX FUND GUARDIAN INCOME VANGUARD/
- ------------------------------------------------------------------------- TRUST FUND WINDSOR II
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 470,449,397 $ 36,956,225 $2,310,257,611 $ 49,705,360 $ 46,258,362 $ 135,121,244 $ 275,114,738
(666,014) (10,194) 69,889 (32,333) 48,461 263,157 282,461
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 469,783,383 $ 36,946,031 $2,310,327,500 $ 49,673,027 $ 46,306,823 $ 135,384,401 $ 275,397,199
============== ============== ============== ============== ============== ============== ==============
$ 456,754,846 $ 35,140,766 $2,308,562,536 $ 49,487,144 $ 46,292,017 $ 135,309,549 $ 275,307,672
13,028,537 1,805,265 1,764,964 185,883 14,806 74,852 89,527
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 469,783,383 $ 36,946,031 $2,310,327,500 $ 49,673,027 $ 46,306,823 $ 135,384,401 $ 275,397,199
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
GOVERNMENT SECURITIES FUND - SECURITIES FUND -
AGSPC CAPITAL CONSERVATION FUND SECURITIES L/T CORPORATE L/T U.S. TREASURY AGSPC MONEY MARKET FUND
- --------------------------------- FUND PORTFOLIO PORTFOLIO ---------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,412,016 $ 55,381,861 $ 88,209,203 $ 20,418,430 $ 23,933,498 $ 4,526,778 $ 134,659,838
15,510 36,867 (41,915) 21,619 (295,284) 52,979 6,244,744
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,427,526 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,638,214 $ 4,579,757 $ 140,904,582
============== ============== ============== ============== ============== ============== ==============
$ 6,422,800 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,628,181 $ 4,579,757 $ 140,887,025
4,726 -- -- -- 10,033 -- 17,557
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,427,526 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,638,214 $ 4,579,757 $ 140,904,582
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 368
================================================================================
6 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC PUTNAM
STATEMENTS OF OPERATIONS INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
For the year ended December 31, 1997 EQUITIES GROWTH FOREIGN INTERNATIONAL
FUND FUND FUND FUND
DIVISION 11 DIVISION 28 DIVISION 32 DIVISION 20
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................. $ 3,295,464 $ 1,207,561 $ 4,714,678 $ 15,319,152
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ....................... 1,749,279 476,142 1,434,900 8,274,446
Reimbursement of expenses (Note C) ...................... -- (94,544) (286,433) --
------------ ------------ ------------ ------------
Total expenses ....................................... 1,749,279 381,598 1,148,467 8,274,446
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ 1,546,185 825,963 3,566,211 7,044,706
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ................. 8,844,811 172,968 180,290 24,143,886
Capital gains distributions from mutual funds ........... 4,593,062 9,300,593 12,359,374 6,157,699
Net unrealized appreciation (depreciation)
of investments during the year ....................... (11,693,489) (7,591,166) (16,286,999) 33,826,345
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments .. 1,744,384 1,882,395 (3,747,335) 64,127,930
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 3,290,569 $ 2,708,358 $ (181,124) $ 71,172,636
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY - AGSPC AGSPC
STATEMENTS OF OPERATIONS TWENTIETH FOUNDERS GROWTH & SOCIAL
For the year ended December 31, 1997 CENTURY ULTRA GROWTH INCOME AWARENESS
FUND FUND FUND FUND
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................. $ 46,196 $ 679,687 $ 1,001,521 $ 1,994,870
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ....................... 807,995 1,135,755 2,207,637 1,713,350
Reimbursement of expenses (Note C) ...................... (128,556) (226,231) -- --
------------ ------------ ------------ ------------
Total expenses ....................................... 679,439 909,524 2,207,637 1,713,350
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ (633,243) (229,837) (1,206,116) 281,520
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........................ 316,651 270,661 3,270,580 1,158,707
Capital gains distributions from mutual funds ........... 24,559,704 21,678,474 2,863,622 9,560,562
Net unrealized appreciation (depreciation)
of investments during the year ....................... (16,326,801) (6,466,051) 38,217,716 33,369,211
------------ ------------ ------------ ------------
Net realized and unrealized gain on investments ......... 8,549,554 15,483,084 44,351,918 44,088,480
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 7,916,311 $ 15,253,247 $ 43,145,802 $ 44,370,000
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 369
================================================================================
SEPARATE ACCOUNT A 7
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP DREYFUS NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX SMALL CAP OPPORTUNITIES GROWTH GROWTH INDEX
FUND FUND PORTFOLIO FUND FUND FUND FUND
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ 2,345,234 $ 905,477 $ -- $ -- $ 301,605 $ 6,916,070
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,359,405 2,023,765 9,406,874 1,313,649 899,240 7,852,023 6,380,871
-- -- (624,143) (261,355) (179,227) -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,359,405 2,023,765 8,782,731 1,052,294 720,013 7,852,023 6,380,871
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(8,359,405) 321,469 (7,877,254) (1,052,294) (720,013) (7,550,418) 535,199
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
27,202,326 7,403,801 10,514,976 242,887 (47,363) 6,207,654 19,471,600
-- 17,477,318 47,781,324 3,494,327 -- 15,041,175 39,891,431
(11,571,856) 13,195,192 56,534,602 18,445,868 8,912,297 132,575,644 109,426,279
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,630,470 38,076,311 114,830,902 22,183,082 8,864,934 153,824,473 168,789,310
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 7,271,065 $ 38,397,780 $ 106,953,648 $ 21,130,788 $ 8,144,921 $ 146,274,055 $ 169,324,509
============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER & SCUDDER
BERMAN GROWTH AND
AGSPC STOCK INDEX FUND GUARDIAN INCOME VANGUARD/
- ----------------------------------------------------------------------- TRUST FUND WINDSOR II
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,376,307 $ 509,353 $ 28,785,179 $ 696,438 $ 163,304 $ 1,817,754 $ 4,925,455
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,346,291 195,472 19,442,387 474,226 328,578 854,677 1,887,542
-- (85,996) -- -- (65,533) (121,971) --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,346,291 109,476 19,442,387 474,226 263,045 732,706 1,887,542
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,030,016 399,877 9,342,792 222,212 (99,741) 1,085,048 3,037,913
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,392,823 2,137,197 19,691,626 3,421,747 406,993 269,953 741,743
2,365,369 185,844 11,611,427 249,976 3,161,542 8,952,194 18,541,072
89,338,679 6,910,324 475,943,738 9,003,055 (1,574,737) 4,003,711 16,110,878
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
115,096,871 9,233,365 507,246,791 12,674,778 1,993,798 13,225,858 35,393,693
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 117,126,887 $ 9,633,242 $ 516,589,583 $ 12,896,990 $ 1,894,057 $ 14,310,906 $ 38,431,606
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 370
================================================================================
8 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
STATEMENTS OF OPERATIONS TEMPLETON ASSET VANGUARD/ INTERNATIONAL
For the year ended December 31, 1997 ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
FUND FUND FUND BOND FUND
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 6,145,468 $ 5,564,660 $ 4,059,866 $ 6,334,867
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ......................... 3,318,569 1,796,304 1,047,948 1,739,103
Reimbursement of expenses (Note C) ........................ -- -- -- --
------------ ------------ ------------ ------------
Total expenses ......................................... 3,318,569 1,796,304 1,047,948 1,739,103
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ..................................... 2,826,899 3,768,356 3,011,918 4,595,764
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ................... 982,063 5,941,975 713,048 (3,911,328)
Capital gains distributions from mutual funds ............. 11,661,872 10,546,782 7,375,024 136,607
Net unrealized appreciation (depreciation)
of investments during the year ......................... 13,366,704 14,486,554 3,998,391 (11,068,351)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments .... 26,010,639 30,975,311 12,086,463 (14,843,072)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 28,837,538 $ 34,743,667 $ 15,098,381 $(10,247,308)
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 371
================================================================================
SEPARATE ACCOUNT A 9
================================================================================
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
GOVERNMENT SECURITIES FUND - SECURITIES FUND -
AGSPC CAPITAL CONSERVATION FUND SECURITIES L/T CORPORATE L/T U.S. TREASURY AGSPC MONEY MARKET FUND
- -------------------------------- FUND PORTFOLIO PORTFOLIO --------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 408,376 $ 3,451,243 $ 5,076,640 $ 621,319 $ 708,134 $ 235,282 $ 6,599,782
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,768 537,683 846,335 114,664 140,570 46,769 1,306,618
-- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,768 537,683 846,335 114,664 140,570 46,769 1,306,618
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
344,608 2,913,560 4,230,305 506,655 567,564 188,513 5,293,164
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,005 (805,486) (985,278) 36,716 94,335 -- --
-- -- -- 156,984 -- -- --
90,579 1,739,391 3,130,717 643,127 1,066,785 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
113,584 933,905 2,145,439 836,827 1,161,120 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 458,192 $ 3,847,465 $ 6,375,744 $ 1,343,482 $ 1,728,684 $ 188,513 $ 5,293,164
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 372
================================================================================
10 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES
FUND PUTNAM GLOBAL GROWTH FUND
--------------------------------- ----------------------------------
DIVISION 11 DIVISION 28
--------------------------------- ----------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) ...................... $ 1,546,185 $ 1,591,421 $ 825,963 $ 354,551
Net realized gain on investments .................. 8,844,811 10,405,298 172,968 1,237
Capital gains distributions from mutual funds ..... 4,593,062 6,021,502 9,300,593 765,977
Net unrealized appreciation (depreciation)
of investments during the year ................. (11,693,489) (6,663,813) (7,591,166) (504,554)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting
from operations ............................ 3,290,569 11,354,408 2,708,358 617,211
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................. 21,604,936 34,022,917 18,196,466 3,174,282
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............. (8,085,959) (8,616,063) (812,004) (15,952)
Annuity benefit payments .......................... (10,712) (13,432) (1,799) --
Amounts transferred interdivision, and (to) from
VALIC general account .......................... (56,024,580) (45,208,742) 21,134,329 13,833,517
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...... (42,516,315) (19,815,320) 38,516,992 16,991,847
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........... (39,225,746) (8,460,912) 41,225,350 17,609,058
NET ASSETS:
Beginning of year ................................. 191,226,528 199,687,440 17,609,058 --
------------- ------------- ------------- -------------
End of year ....................................... $ 152,000,782 $ 191,226,528 $ 58,834,408 $ 17,609,058
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............. 156,226,314 172,564,018 16,648,600 --
Purchase payments ................................. 17,325,859 28,526,458 15,748,353 3,377,941
Surrenders ........................................ (6,456,410) (7,207,422) (675,628) (16,466)
Transfers -- interdivision and (to) from VALIC
general account ................................ (44,379,019) (37,656,740) 17,827,407 13,287,125
------------- ------------- ------------- -------------
Accumulation units end of year .................... 122,716,744 156,226,314 49,548,732 16,648,600
============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31:
--------------------------------- ----------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation unit value .......................... $ 1.237299 $ 1.222906 $ 1.186775 $ 1.057690
============= ============= ============= =============
Annuity unit value assuming a 3.5%
discount factor .................................. $ 0.931882 $ 0.953246 $ 1.127017 $ 1.039552
============= ============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 373
================================================================================
SEPARATE ACCOUNT A 11
================================================================================
<TABLE>
<CAPTION>
AGSPC
AGSPC SMALL CAP
TEMPLETON FOREIGN FUND TEMPLETON INTERNATIONAL FUND SCIENCE & TECHNOLOGY FUND INDEX FUND
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
DIVISION 32 DIVISION 20 DIVISION 17 DIVISION 14
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
1997 1996* 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,566,211 $ 482,633 $ 7,044,706 $ (394,601) $ (8,359,405) $ (5,521,307) $ 321,469 $ 637,395
180,290 125 24,143,886 3,551,468 27,202,326 20,659,560 7,403,801 4,544,601
12,359,374 285,587 6,157,699 1,324,253 -- 32,117,202 17,477,318 11,216,991
(16,286,999) 1,121,790 33,826,345 78,888,709 (11,571,856) 15,569,750 13,195,192 7,711,563
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(181,124) 1,890,135 71,172,636 83,369,829 7,271,065 62,825,205 38,397,780 24,110,550
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,929,059 9,386,263 127,443,761 121,376,573 203,196,325 181,422,903 26,031,893 31,004,229
(2,231,179) (122,577) (21,498,080) (9,699,818) (27,661,660) (14,164,178) (8,101,115) (7,478,000)
(1,149) -- (6,675) (3,367) (17,353) (40,073) (6,381) (563)
79,881,321 28,301,252 22,603,734 84,599,243 15,908,913 105,706,951 (10,731,749) (15,148,966)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,578,052 37,564,938 128,542,740 196,272,631 191,426,225 272,925,603 7,192,648 8,376,700
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,396,928 39,455,073 199,715,376 279,642,460 198,697,290 335,750,808 45,590,428 32,487,250
39,455,073 -- 530,023,811 250,381,351 710,964,164 375,213,356 184,478,322 151,991,072
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 180,852,001 $ 39,455,073 $ 729,739,187 $ 530,023,811 $ 909,661,454 $ 710,964,164 $ 230,068,750 $ 184,478,322
============= ============= ============= ============= ============= ============= ============= =============
36,671,828 -- 378,581,949 219,124,926 315,809,646 187,862,232 103,320,842 98,335,995
55,441,897 10,156,940 81,609,273 97,229,761 88,179,109 84,389,312 13,258,805 18,844,484
(1,875,284) (116,295) (13,712,830) (7,187,616) (11,448,429) (6,049,987) (4,191,154) (4,305,572)
68,962,666 26,631,183 16,695,958 69,414,878 5,302,633 49,608,089 (6,109,416) (9,554,065)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
159,201,107 36,671,828 463,174,350 378,581,949 397,842,959 315,809,646 106,279,077 103,320,842
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.135778 $ 1.075896 $ 1.575168 $ 1.399702 $ 2.285739 $ 2.250471 $ 2.163595 $ 1.785442
============= ============= ============= ============= ============= ============= ============= =============
$ 1.078588 $ 1.057446 $ 1.397849 $ 1.285567 $ 2.014348 $ 2.052612 $ 1.780625 $ 1.520786
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 374
================================================================================
12 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS SMALL CAP PORTFOLIO PUTNAM NEW OPPORTUNITIES FUND
----------------------------- ------------------------------
DIVISION 18 DIVISION 26
----------------------------- ------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ (7,877,254) $ (5,324,689) $ (1,052,294) $ (91,811)
Net realized gain (loss) on investments ........................... 10,514,976 1,994,033 242,887 9,737
Capital gains distributions from mutual funds ..................... 47,781,324 19,221,026 3,494,327 333,297
Net unrealized appreciation (depreciation)
of investments during the year ................................. 56,534,602 56,124,110 18,445,868 (1,619,779)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations .. 106,953,648 72,014,480 21,130,788 (1,368,556)
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 152,268,343 168,538,535 51,769,269 11,510,093
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (25,995,894) (13,795,343) (2,540,805) (87,148)
Annuity benefit payments .......................................... (13,079) (8,413) (61) --
Amounts transferred interdivision, and (to) from VALIC general
account ........................................................ (41,774,769) 74,732,906 44,254,408 40,168,590
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 84,484,601 229,467,685 93,482,811 51,591,535
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ...................................... 191,438,249 301,482,165 114,613,599 50,222,979
NET ASSETS:
Beginning of year ................................................. 658,386,059 356,903,894 50,222,979 --
------------- ------------- ------------- -------------
End of year ....................................................... $ 849,824,308 $ 658,386,059 $ 164,836,578 $ 50,222,979
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 428,883,250 267,735,219 53,001,699 --
Purchase payments ................................................. 92,300,416 117,376,109 49,995,408 13,342,250
Surrenders ........................................................ (15,764,818) (8,756,141) (2,517,125) (87,502)
Transfers -- interdivision and (to) from VALIC general account .... (25,567,323) 52,528,063 42,915,084 39,746,951
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 479,851,525 428,883,250 143,395,066 53,001,699
============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation unit value .......................................... $ 1.770622 $ 1.534694 $ 1.149453 $ 0.947573
============= ============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.571300 $ 1.409551 $ 1.091574 $ 0.931324
============= ============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 375
================================================================================
SEPARATE ACCOUNT A 13
================================================================================
<TABLE>
<CAPTION>
PUTNAM OTC & EMERGING AGSPC AGSPC AMERICAN CENTURY -
GROWTH FUND GROWTH FUND MIDCAP INDEX FUND TWENTIETH CENTURY ULTRA FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 27 DIVISION 15 DIVISION 4 DIVISION 31
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1997 1996* 1997 1996 1997 1996 1997 1996*
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (720,013) $ (87,360) $ (7,550,418) $ (2,278,501) $ 535,199 $ 1,513,296 $ (633,243) $ (37,059)
(47,363) 9,014 6,207,654 130,878 19,471,600 17,436,698 316,651 18,993
-- 2,846,114 15,041,175 11,891,551 39,891,431 33,690,174 24,559,704 884,238
8,912,297 (4,620,592) 132,575,644 58,161,783 109,426,279 33,029,566 (16,326,801) (659,907)
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
8,144,921 (1,852,824) 146,274,055 67,905,711 169,324,509 85,669,734 7,916,311 206,265
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
32,976,492 11,571,920 185,814,571 164,255,730 66,141,090 76,583,041 43,175,072 4,513,492
(1,887,137) (77,988) (24,997,689) (10,378,550) (24,993,718) (21,727,656) (1,444,132) (29,941)
(1,777) -- (18,116) (38,688) (20,499) (19,036) (950) --
14,456,676 34,125,847 (764,959) 172,227,639 (45,549,090) (55,201,966) 56,804,430 12,627,842
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
45,544,254 45,619,779 160,033,807 326,066,131 (4,422,217) (365,617) 98,534,420 17,111,393
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
53,689,175 43,766,955 306,307,862 393,971,842 164,902,292 85,304,117 106,450,731 17,317,658
43,766,955 -- 635,115,607 241,143,765 565,711,393 480,407,276 17,317,658 --
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
$ 97,456,130 $ 43,766,955 $941,423,469 $635,115,607 $730,613,685 $565,711,393 $123,768,389 $ 17,317,658
============================== ============================== ============================== ==============================
48,902,828 -- 366,272,509 164,417,848 172,816,978 172,613,690 16,654,076 --
36,775,163 13,681,504 99,349,760 101,043,809 17,600,471 25,301,831 36,243,458 4,747,541
(2,370,530) (82,877) (12,033,793) (5,693,969) (6,688,206) (7,030,990) (1,152,164) (27,374)
16,477,580 35,304,201 (415,986) 106,504,821 (12,663,586) (18,067,553) 45,999,912 11,933,909
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
99,785,041 48,902,828 453,172,490 366,272,509 171,065,657 172,816,978 97,745,282 16,654,076
============================== ============================== ============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.976262 $ 0.894978 $ 2.076503 $ 1.733324 $ 4.269122 $ 3.272588 $ 1.265937 $ 1.039845
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
$ 0.927104 $ 0.879630 $ 1.829953 $ 1.580931 $ 2.577196 $ 2.044683 $ 1.202193 $ 1.022013
============================== ============================== ============================== ==============================
</TABLE>
<PAGE> 376
================================================================================
14 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
FOUNDERS GROWTH FUND GROWTH & INCOME FUND
------------------------------ ------------------------------
DIVISION 30 DIVISION 16
------------------------------ ------------------------------
1997 1996* 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ (229,837) $ (28,065) $ (1,206,116) $ (402,222)
Net realized gain on investments............................... 270,661 -- 3,270,580 483,596
Capital gains distributions from mutual funds.................. 21,678,474 2,106,129 2,863,622 3,131,642
Net unrealized appreciation (depreciation)
of investments during the year.............................. (6,466,051) (1,697,540) 38,217,716 19,205,904
------------------------------ ------------------------------
Increase in net assets resulting from operations.......... 15,253,247 380,524 43,145,802 22,418,920
------------------------------ ------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 54,770,398 8,595,522 44,825,180 41,180,652
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (1,863,811) (36,494) (8,344,519) (2,962,157)
Annuity benefit payments....................................... (66) -- (2,954) (1,598)
Amounts transferred (to) from VALIC general account............ 70,189,987 23,178,924 5,944,261 43,756,812
------------------------------ ------------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 123,096,508 31,737,952 42,421,968 81,973,709
------------------------------ ------------------------------
TOTAL INCREASE IN NET ASSETS................................... 138,349,755 32,118,476 85,567,770 104,392,629
NET ASSETS:
Beginning of year.............................................. 32,118,476 -- 171,528,205 67,135,576
------------------------------ ------------------------------
End of year.................................................... $170,468,231 $ 32,118,476 $257,095,975 $171,528,205
============================== ==============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 31,197,464 -- 108,341,635 51,779,089
Purchase payments.............................................. 45,575,203 9,274,157 24,988,066 28,095,895
Surrenders..................................................... (1,491,261) (32,596) (4,697,640) (1,842,881)
Transfers - interdivision and (to) from VALIC general account.. 56,885,756 21,955,903 3,802,494 30,309,532
------------------------------ ------------------------------
Accumulation units end of year................................. 132,167,162 31,197,464 132,434,555 108,341,635
============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 1.289513 $ 1.029522 $ 1.940905 $ 1.583056
------------------------------ ------------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 1.224581 $ 1.011867 $ 1.710454 $ 1.443874
============================== ==============================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 377
================================================================================
SEPARATE ACCOUNT A 15
================================================================================
<TABLE>
<CAPTION>
AGSPC
SOCIAL AWARENESS FUND AGSPC STOCK INDEX FUND
- ------------------------------ ---------------------------------------------------------------
DIVISION 12 DIVISION 10A DIVISION 10B
- ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 281,520 $ 546,469 $ 2,030,016 $ 3,186,584 $ 399,877 $ 462,074
1,158,707 778,115 23,392,823 12,767,086 2,137,197 2,085,848
9,560,562 10,715,745 2,365,369 2,739,498 185,844 222,372
33,369,211 4,483,540 89,338,679 51,675,655 6,910,324 3,182,195
- ------------------------------ ------------------------------ ------------------------------
44,370,000 16,523,869 117,126,887 70,368,823 9,633,242 5,952,489
- ------------------------------ ------------------------------ ------------------------------
44,746,508 18,543,307 3,670,819 4,265,439 231,218 501,306
(5,475,293) (3,798,307) (24,373,318) (22,309,652) (2,331,031) (2,364,484)
- - (1,717,390) (1,401,028) (285,785) (250,350)
55,022,728 13,547,350 (3,572,644) (13,443,730) (1,027,537) (1,406,730)
- ------------------------------ ------------------------------ ------------------------------
94,293,943 28,292,350 (25,992,533) (32,888,971) (3,413,135) (3,520,258)
- ------------------------------ ------------------------------ ------------------------------
138,663,943 44,816,219 91,134,354 37,479,852 6,220,107 2,432,231
104,916,029 60,099,810 378,649,029 341,169,177 30,725,924 28,293,693
- ------------------------------ ------------------------------ ------------------------------
$243,579,972 $104,916,029 $469,783,383 $378,649,029 $ 36,946,031 $ 30,725,924
============================== ============================== ==============================
46,574,016 32,750,120 27,379,389 29,995,363 1,380,401 1,560,525
16,505,152 9,143,695 226,321 323,038 9,647 26,729
(1,970,414) (1,827,332) (1,529,579) (1,822,126) (92,576) (123,291)
20,468,350 6,507,533 (240,198) (1,116,886) (40,498) (83,562)
- ------------------------------ ------------------------------ ------------------------------
81,577,104 46,574,016 25,835,933 27,379,389 1,256,974 1,380,401
============================== ============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.985333 $ 2.252673 $ 17.679054 $ 13.413891 $ 27.956641 $ 21.070956
- ------------------------------ ------------------------------ ------------------------------
$ 2.248428 $ 1.755941 $ 4.932202 $ 3.873132 $ 6.632506 $ 5.173716
============================== ============================== ==============================
</TABLE>
<PAGE> 378
================================================================================
16 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC Stock Index Fund
------------------------------------------------------------------
DIVISION 10C DIVISION 10D
--------------------------------- ------------------------------
1997 1996 1997 1996
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ 9,342,792 $ 11,741,408 $ 222,212 $ 363,909
Net realized gain on investments............................... 19,691,626 10,129,542 3,421,747 2,391,364
Capital gains distributions from mutual funds.................. 11,611,427 11,061,404 249,976 307,213
Net unrealized appreciation (depreciation)
of investments during the year.............................. 475,943,738 222,475,966 9,003,055 4,964,983
--------------------------------- ------------------------------
Increase in net assets resulting from operations.......... 516,589,583 255,408,320 12,896,990 8,027,469
--------------------------------- ------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 264,734,800 210,185,191 789,193 1,004,698
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (73,944,144) (49,624,470) (2,598,402) (2,219,367)
Annuity benefit payments....................................... (120,896) (61,625) (13,201) (10,433)
Amounts transferred (to) from VALIC general account............ 72,721,787 47,055,243 (3,872,680) (5,536,446)
--------------------------------- ------------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 263,391,547 207,554,339 (5,695,090) (6,761,548)
--------------------------------- ------------------------------
TOTAL INCREASE IN NET ASSETS................................... 779,981,130 462,962,659 7,201,900 1,265,921
NET ASSETS:
Beginning of year.............................................. 1,530,346,370 1,067,383,711 42,471,127 41,205,206
--------------------------------- ------------------------------
End of year.................................................... $2,310,327,500 $1,530,346,370 $ 49,673,027 $ 42,471,127
================================= ==============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 536,806,965 455,255,243 8,381,704 9,885,873
Purchase payments.............................................. 77,757,636 80,768,570 132,628 231,458
Surrenders..................................................... (20,920,257) (18,096,464) (430,026) (486,940)
Transfers - interdivision and (to) from VALIC general account.. 21,408,780 18,879,616 (645,769) (1,248,687)
--------------------------------- ------------------------------
Accumulation units end of year................................. 615,053,124 536,806,965 7,438,537 8,381,704
================================= ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
--------------------------------- ------------------------------
1997 1996 1997 1996
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 3.753436 $ 2.848437 $ 6.652806 $ 5.049088
--------------------------------- ------------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 2.655080 $ 2.085358 $ 3.860513 $ 3.032347
================================= ==============================
</TABLE>
*For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 379
================================================================================
SEPARATE ACCOUNT A 17
================================================================================
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SCUDDER GROWTH AND
GUARDIAN TRUST INCOME FUND VANGUARD/WINDSOR II
- ------------------------------ -------------------------------- --------------------------------
DIVISION 29 DIVISION 21 DIVISION 24
- ------------------------------ -------------------------------- --------------------------------
1997 1996* 1997 1996* 1997 1996*
- ------------------------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ (99,741) $ 15,594 $ 1,085,048 $ 120,254 $ 3,037,913 $ 488,057
406,993 10,864 269,953 22,419 741,743 11,774
3,161,542 128,127 8,952,194 607,596 18,541,072 1,554,790
(1,574,737) 348,451 4,003,711 84,718 16,110,878 (217,368)
- ------------------------------ -------------------------------- --------------------------------
1,894,057 503,036 14,310,906 834,987 38,431,606 1,837,253
- ------------------------------ -------------------------------- --------------------------------
14,861,097 2,108,685 37,754,331 4,643,308 82,698,118 10,178,409
(661,852) (21,439) (1,502,937) (23,004) (3,075,223) (103,527)
-- -- (2,106) -- (1,497) --
21,010,215 6,613,024 66,400,722 12,968,194 115,544,417 29,887,643
- ------------------------------ -------------------------------- --------------------------------
35,209,460 8,700,270 102,650,010 17,588,498 195,165,815 39,962,525
- ------------------------------ -------------------------------- --------------------------------
37,103,517 9,203,306 116,960,916 18,423,485 233,597,421 41,799,778
9,203,306 -- 18,423,485 -- 41,799,778 --
- ------------------------------ -------------------------------- --------------------------------
$ 46,306,823 $ 9,203,306 $ 135,384,401 $ 18,423,485 $ 275,397,199 $ 41,799,778
============================== ================================ ================================
8,211,592 -- 16,524,046 -- 37,292,761 --
11,711,541 2,109,025 28,874,922 4,726,075 63,199,633 10,359,662
(501,980) (19,267) (1,088,301) (21,254) (2,242,658) (91,924)
15,985,510 6,121,834 49,915,317 11,819,225 89,680,132 27,025,023
- ------------------------------ -------------------------------- --------------------------------
35,406,663 8,211,592 94,225,984 16,524,046 187,929,868 37,292,761
============================== ================================ ================================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ -------------------------------- --------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.307438 $ 1.120770 $ 1.436011 $ 1.114950 $ 1.464949 $ 1.120855
- ------------------------------ -------------------------------- --------------------------------
$ 1.241604 $ 1.101550 $ 1.363703 $ 1.095830 $ 1.391183 $ 1.101634
============================== ================================ ================================
<CAPTION>
TEMPLETON ASSET
ALLOCATION FUND
- --------------------------------
DIVISION 19
- --------------------------------
1997 1996
- --------------------------------
<S> <C>
$ 2,826,899 $ 1,458,222
982,063 430,651
11,661,872 2,566,073
13,366,704 19,843,521
- --------------------------------
28,837,538 24,298,467
- --------------------------------
61,278,823 46,026,342
(9,457,167) (3,839,217)
(19,742) (39,584)
41,633,946 33,529,527
- --------------------------------
93,435,860 75,677,068
- --------------------------------
122,273,398 99,975,535
194,600,887 94,625,352
- --------------------------------
$ 316,874,285 $ 194,600,887
================================
137,384,670 78,494,505
38,574,901 35,369,271
(5,822,716) (2,676,756)
26,014,091 26,197,650
- --------------------------------
196,150,946 137,384,670
================================
<CAPTION>
DECEMBER 31:
- --------------------------------
1997 1996
- --------------------------------
<C> <C>
$ 1.613943 $ 1.414844
- --------------------------------
$ 1.432259 $ 1.299474
================================
</TABLE>
<PAGE> 380
================================================================================
18 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
ASSET ALLOCATION
FUND VANGUARD/WELLINGTON FUND
-------------------------------- --------------------------------
DIVISION 5 DIVISION 25
-------------------------------- --------------------------------
1997 1996 1997 1996*
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................................... $ 3,768,356 $ 4,134,407 $ 3,011,918 $ 326,600
Net realized gain (loss) on investments.................. 5,941,975 7,668,485 713,048 --
Capital gains distributions from mutual funds............ 10,546,782 18,741,770 7,375,024 818,129
Net unrealized appreciation (depreciation)
of investments during the year........................ 14,486,554 (13,565,417) 3,998,391 (444,072)
-------------------------------- --------------------------------
Increase (decrease) in net assets resulting
from operations.................................. 34,743,667 16,979,245 15,098,381 700,657
-------------------------------- --------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments........................................ 11,497,764 15,126,160 51,882,204 7,042,246
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees..................... (10,611,952) (11,037,733) (2,456,686) (12,075)
Annuity benefit payments................................. (8,301) (7,329) (68) --
Amounts transferred (to) from VALIC general account...... (24,272,661) (30,784,573) 66,331,198 17,458,690
-------------------------------- --------------------------------
Increase (decrease) in net assets
resulting from principal transactions............. (23,395,150) (26,703,475) 115,756,648 24,488,861
-------------------------------- --------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 11,348,517 (9,724,230) 130,855,029 25,189,518
NET ASSETS:
Beginning of year........................................ 173,229,475 182,953,705 25,189,518 --
-------------------------------- --------------------------------
End of year.............................................. $ 184,577,992 $ 173,229,475 $ 156,044,547 $ 25,189,518
================================ ================================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year..................... 65,292,617 75,851,431 22,866,634 --
Purchase payments........................................ 3,898,053 6,003,535 42,072,769 7,335,077
Surrenders............................................... (3,591,047) (4,376,494) (1,913,812) (12,748)
Transfers - interdivision and (to) from VALIC
general account....................................... (8,292,272) (12,185,855) 53,404,190 15,544,305
-------------------------------- --------------------------------
Accumulation units end of year........................... 57,307,351 65,292,617 116,429,781 22,866,634
================================ ================================
<CAPTION>
DECEMBER 31: DECEMBER 31:
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value.................................. $ 3.219282 $ 2.651899 $ 1.340109 $ 1.101584
-------------------------------- --------------------------------
Annuity unit value assuming a 3.5% discount factor....... $ 1.971210 $ 1.680570 $ 1.272630 $ 1.082693
================================ ================================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 381
================================================================================
SEPARATE ACCOUNT A 19
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
INTERNATIONAL GOVERNMENT AGSPC GOVERNMENT SECURITIES
BOND FUND CAPITAL CONSERVATION FUND FUND
- -------------------------------- ------------------------------------------------------------- ------------------------------
DIVISION 13 DIVISION 1 DIVISION 7 DIVISION 8
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,595,764 $ 6,561,676 $ 344,608 $ 385,044 $ 2,913,560 $ 3,053,956 $ 4,230,305 $ 4,076,937
(3,911,328) 1,815,703 23,005 60,355 (805,486) (425,696) (985,278) (378,294)
136,607 295,588 -- -- -- -- -- --
(11,068,351) (2,362,017) 90,579 (428,426) 1,739,391 (2,170,354) 3,130,717 (2,658,037)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(10,247,308) 6,310,950 458,192 16,973 3,847,465 457,906 6,375,744 1,040,606
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
40,582,861 48,300,297 366,816 280,092 7,324,860 10,990,401 12,424,460 18,451,360
(6,757,210) (4,925,561) (389,473) (624,478) (3,026,469) (2,515,394) (3,958,609) (3,354,710)
(274) (33) (526) (512) -- -- -- --
(35,550,483) 16,174,338 (509,353) (953,654) (8,016,607) (7,231,500) (12,246,246) (2,269,092)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(1,725,106) 59,549,041 (532,536) (1,298,552) (3,718,216) 1,243,507 (3,780,395) 12,827,558
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(11,972,414) 65,859,991 (74,344) (1,281,579) 129,249 1,701,413 2,595,349 13,868,164
178,172,171 112,312,180 6,501,870 7,783,449 55,289,479 53,588,066 85,571,939 71,703,775
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
$ 166,199,757 $ 178,172,171 $ 6,427,526 $ 6,501,870 $ 55,418,728 $ 55,289,479 $ 88,167,288 $ 85,571,939
================================ ============================ ============================== ==============================
112,601,593 73,369,250 1,991,536 2,402,085 30,286,494 29,573,808 47,130,169 39,847,053
27,009,353 31,815,367 109,285 87,169 3,840,755 6,098,740 6,646,726 10,391,393
(4,696,042) (3,112,236) (116,952) (196,821) (1,555,673) (1,343,357) (2,143,349) (1,871,516)
(23,434,313) 10,529,212 (151,908) (300,897) (4,328,978) (4,042,697) (6,598,652) (1,236,761)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
111,480,591 112,601,593 1,831,961 1,991,536 28,242,598 30,286,494 45,034,894 47,130,169
================================ ============================ ============================== ==============================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.490645 $ 1.582230 $ 3.505970 $ 3.262402 $ 1.962239 $ 1.825549 $ 1.957755 $ 1.815651
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
$ 1.203136 $ 1.321708 $ 1.863379 $ 1.794552 $ 1.303657 $ 1.255251 $ 1.300676 $ 1.248443
================================ ============================ ============================== ==============================
</TABLE>
<PAGE> 382
================================================================================
20 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VANGUARD FIXED INCOME VANGUARD FIXED INCOME
SECURITIES FUND - L/T SECURITIES FUND - L/T
CORPORATE PORTFOLIO U.S. TREASURY PORTFOLIO
------------------------------ ----------------------------
DIVISION 22 DIVISION 23
------------------------------ ----------------------------
1997 1996* 1997 1996*
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................................... $ 506,655 $ 36,167 $ 567,564 $ 46,282
Net realized gain on investments............................... 36,716 2,260 94,335 2,349
Capital gains distributions from mutual funds.................. 156,984 31,298 -- --
Net unrealized appreciation (depreciation)
of investments during the year.............................. 643,127 (11,407) 1,066,785 33,654
------------------------------ ----------------------------
Increase in net assets resulting from operations.......... 1,343,482 58,318 1,728,684 82,285
------------------------------ ----------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 6,013,744 1,030,635 6,985,216 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (167,812) (3,212) (265,787) (9,447)
Annuity benefit payments....................................... -- -- (176) --
Amounts transferred (to) from VALIC general account............ 9,719,778 2,445,116 10,813,576 3,186,574
------------------------------ ----------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 15,565,710 3,472,539 17,532,829 4,294,416
------------------------------ ----------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 16,909,192 3,530,857 19,261,513 4,376,701
NET ASSETS:
Beginning of year.............................................. 3,530,857 -- 4,376,701 --
------------------------------ ----------------------------
End of year.................................................... $ 20,440,049 $ 3,530,857 $ 23,638,214 $ 4,376,701
============================== ============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 3,370,441 -- 4,174,369 --
Purchase payments.............................................. 5,633,849 1,099,573 6,619,458 1,138,211
Surrenders..................................................... (151,626) (3,347) (227,789) (9,203)
Transfers - interdivision and (to) from VALIC general account.. 8,518,743 2,274,215 9,475,882 3,045,361
------------------------------ ----------------------------
Accumulation units end of year................................. 17,371,407 3,370,441 20,041,920 4,174,369
============================== ============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ ----------------------------
1997 1996 1997 1996
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 1.176649 $ 1.047595 $ 1.178938 $ 1.048470
------------------------------ ----------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 1.117400 $ 1.029630 $ 1.119575 $ 1.030490
============================== ============================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 383
================================================================================
SEPARATE ACCOUNT A 21
================================================================================
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND
- ------------------------------------------------------------
DIVISION 2 DIVISION 6
- ---------------------------- ----------------------------
1997 1996 1997 1996
- ---------------------------- ----------------------------
<S> <C> <C> <C>
$ 188,513 $ 216,537 $ 5,293,164 $ 3,525,805
-- -- -- --
-- -- -- --
-- -- -- --
- ---------------------------- ----------------------------
188,513 216,537 5,293,164 3,525,805
- ---------------------------- ----------------------------
123,738 163,293 58,442,609 40,448,483
(277,223) (465,203) (16,317,039) (13,617,200)
-- -- (1,592) (1,584)
(334,772) (1,426,148) (27,271,186) 10,145,727
- ---------------------------- ----------------------------
(488,257) (1,728,058) 14,852,792 36,975,426
- ---------------------------- ----------------------------
(299,744) (1,511,521) 20,145,956 40,501,231
4,879,501 6,391,022 120,758,626 80,257,395
- ---------------------------- ----------------------------
$ 4,579,757 $ 4,879,501 $ 140,904,582 $120,758,626
============================ ============================
2,142,534 2,917,361 75,124,095 51,907,757
53,405 73,255 35,256,772 25,572,924
(119,264) (208,252) (10,205,685) (8,565,366)
(145,236) (639,830) (15,992,661) 6,208,780
- ---------------------------- ----------------------------
1,931,439 2,142,534 84,182,521 75,124,095
============================ ============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------- ----------------------------
1997 1996 1997 1996
- ---------------------------- ----------------------------
<S> <C> <C> <C>
$ 2.371163 $ 2.277444 $ 1.673590 $ 1.607212
- ---------------------------- ----------------------------
$ 1.407542 $ 1.399179 $ 1.099730 $ 1.093041
============================ ============================
</TABLE>
<PAGE> 384
================================================================================
22 NOTES TO FINANCIAL STATEMENTS
================================================================================
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 Asset Allocation Fund (formerly 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)
American Century - 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 assumed investment rates between 3.0% and 6.0%,
as regulated by the applicable state laws.
<PAGE> 385
================================================================================
SEPARATE ACCOUNT A 23
================================================================================
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment adviser, transfer agent, and accounting services
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 21, 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20% (effective December 8, 1997 the
expense reduction for Division 31 became 0.20% on the first $75,000,000, and
0.25% on the excess over $75,000,000); for Division 18, 0.15% (commencing
July 1, 1997).
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, 1997 and December 31, 1996, VALIC reduced expenses of
Division 10B by $85,996 and $73,695, 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 $4,510,903 and $3,625,368 for the years ended December
31, 1997, and December 31, 1996, respectively.
VALIC received surrender charges of $2,769,370 and $1,998,356 for the years
ended December 31, 1997 and December 31, 1996, respectively. In addition, VALIC
received $63,727 and $7,426 for the year ended December 31, 1997, in sales load
on variable annuity purchase payments for Divisions 10A and 10B, respectively.
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.
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, 1997:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC International Equities Fund........ 11 14,442,247 $ 10.56 $ 152,510,209 $ 159,616,851 (7,106,642)
Putnam Global Growth Fund................ 28 5,907,316 9.96 58,836,553 66,932,273 (8,095,720)
Templeton Foreign Fund................... 32 18,158,539 9.95 180,677,558 195,842,767 (15,165,209)
Templeton International Fund............. 20 36,240,937 20.18 731,342,182 597,457,072 133,885,110
AGSPC Science & Technology Fund.......... 17 45,443,952 20.05 911,151,116 863,149,718 48,001,398
AGSPC Small Cap Index Fund............... 14 13,430,059 17.18 230,728,350 186,936,772 43,791,578
Dreyfus Small Cap Portfolio.............. 18 14,882,781 57.14 850,402,328 690,666,534 159,735,794
Putnam New Opportunities Fund............ 26 3,383,421 48.65 164,603,317 147,777,228 16,826,089
Putnam OTC & Emerging Growth Fund........ 27 6,050,956 16.11 97,480,884 93,189,180 4,291,704
AGSPC Growth Fund........................ 15 46,551,005 20.22 941,261,746 711,090,283 230,171,463
AGSPC MidCap Index Fund.................. 4 31,073,774 23.51 730,544,269 505,009,548 225,534,721
American Century - Twentieth Century
Ultra Fund............................ 31 4,523,746 27.30 123,498,148 140,484,856 (16,986,708)
Founders Growth Fund..................... 30 9,845,834 17.28 170,135,993 178,299,584 (8,163,591)
AGSPC Growth & Income Fund............... 16 13,572,839 18.93 256,933,935 190,630,650 66,303,285
AGSPC Social Awareness Fund.............. 12 12,327,131 19.75 243,460,767 197,838,989 45,621,778
AGSPC Stock Index Fund................... 10A,B,C,D 96,544,410 29.70 2,867,368,593 1,632,114,793 1,235,253,800
Neuberger&Berman Guardian Trust.......... 29 2,673,859 17.30 46,258,362 47,484,648 (1,226,286)
Scudder Growth and Income Fund........... 21 4,944,060 27.33 135,121,244 131,032,815 4,088,429
Vanguard/Windsor II...................... 24 9,612,687 28.62 275,114,738 259,221,228 15,893,510
Templeton Asset Allocation Fund.......... 19 14,174,679 22.35 316,804,111 272,387,404 44,416,707
AGSPC Asset Allocation Fund.............. 5 14,166,349 13.02 184,445,969 161,483,128 22,962,841
Vanguard/Wellington Fund................. 25 5,288,776 29.45 155,754,286 152,199,967 3,554,319
AGSPC Intl Government Bond Fund.......... 13 14,931,704 11.13 166,189,923 177,006,856 (10,816,933)
AGSPC Capital Conservation Fund.......... 1 & 7 6,430,166 9.61 61,793,877 60,854,930 938,947
AGSPC Government Securities Fund......... 8 8,785,778 10.04 88,209,203 86,589,002 1,620,201
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio......... 22 2,205,013 9.26 20,418,430 19,786,709 631,721
Long-Term U.S. Treasury Portfolio .... 23 2,249,389 10.64 23,933,498 22,833,059 1,100,439
AGSPC Money Market Fund.................. 2 & 6 139,186,616 1.00 139,186,616 139,186,616 -
10,324,166,205 8,087,103,460 2,237,062,745
</TABLE>
<PAGE> 386
================================================================================
24 NOTES TO FINANCIAL STATEMENTS - continued
================================================================================
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, 1997, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
---------------------------------
<S> <C> <C>
AGSPC International Equities Fund Division 11 ................ $ 86,790,464 $ 122,541,754
Putnam Global Growth Fund Division 28 ........................ 50,459,460 1,699,287
Templeton Foreign Fund Division 32 ........................... 160,310,836 2,593,318
Templeton International Fund Division 20 ..................... 218,671,212 74,944,745
AGSPC Science & Technology Fund Division 17 .................. 258,533,591 72,590,864
AGSPC Small Cap Index Fund Division 14 ....................... 52,449,672 26,841,519
Dreyfus Small Cap Portfolio Division 18 ...................... 157,428,080 31,479,333
Putnam New Opportunities Fund Division 26 .................... 98,274,415 2,172,704
Putnam OTC & Emerging Growth Fund Division 27 ................ 49,539,022 4,465,936
AGSPC Growth Fund Division 15 ................................ 181,937,002 13,277,956
AGSPC MidCap Index Fund Division 4 ........................... 85,646,062 49,680,500
American Century - Twentieth Century Ultra Fund Division 31 .. 123,895,156 1,646,296
Founders Growth Fund Division 30 ............................. 146,266,635 1,807,870
AGSPC Growth & Income Fund Division 16 ....................... 51,440,343 7,278,659
AGSPC Social Awareness Fund Division 12 ...................... 107,158,295 2,998,054
AGSPC Stock Index Fund:
Division 10A .............................................. 21,747,453 42,886,487
Division 10B .............................................. 1,302,470 4,114,905
Division 10C .............................................. 322,262,616 37,384,769
Division 10D .............................................. 2,169,786 7,370,870
Neuberger&Berman Guardian Trust Division 29 .................. 40,109,321 1,827,836
Scudder Growth and Income Fund Division 21 ................... 113,908,912 1,386,588
Vanguard/Windsor II Division 24 .............................. 219,813,022 2,987,200
Templeton Asset Allocation Fund Division 19 .................. 112,031,546 3,848,099
AGSPC Asset Allocation Fund Division 5 ....................... 19,398,830 28,526,541
Vanguard/Wellington Fund Division 25 ......................... 132,887,405 6,870,260
AGSPC International Government Bond Fund Division 13 ......... 54,824,769 51,676,974
AGSPC Capital Conservation Fund:
Division 1 ................................................ 696,514 886,751
Division 7 ................................................ 10,599,204 11,407,082
AGSPC Government Securities Fund Division 8 .................. 14,228,467 13,735,066
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 ................. 17,995,829 1,785,593
Long-Term U.S. Treasury Portfolio Division 23 ............. 20,859,345 2,676,268
AGSPC Money Market Fund:
Division 2 ................................................ 2,451,062 2,794,492
Division 6 ................................................ 315,474,364 301,193,083
---------------------------------
Total .................................................. $3,251,561,160 $ 939,377,659
=================================
</TABLE>
NOTE G -- YEAR 2000 (UNAUDITED)
VALIC is in the process of modifying its information technology to be ready
for the year 2000. VALIC expects the project to be substantially complete by
late 1998. All costs associated with required modifications will be paid for by
VALIC.
<PAGE> 387
================================================================================
REPORT OF INDEPENDENT AUDITORS 25
================================================================================
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, 1997. 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 have audited the statements of changes in
net assets for the year ended December 31, 1997 and 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, 1997, 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, 1997, 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
February 6, 1998
<PAGE> 388
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