<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1999
REGISTRATION NOS. 33-75292/811-3240
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
---------------------
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 62 [X]
</TABLE>
---------------------
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 526-5251
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------
NORI L. GABERT, ESQ.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
PLEASE SEND COPIES OF
ALL COMMUNICATIONS TO:
DIANE E. AMBLER, ESQ.
MAYER, BROWN & PLATT
1909 K STREET, N.W.
WASHINGTON, D.C. 20006-1101
---------------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
X May 1, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
TITLE OF SECURITIES BEING REGISTERED: Group and Individual
Variable Annuity Contracts
SEQUENTIAL NUMBER SYSTEM: PAGE ___ OF ___ PAGES
EXHIBIT INDEX ON SEQUENTIAL PAGE NUMBER ___
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR PLUS
SERIES 1 TO 12
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information, Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Annuity Payments.................................. Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 3
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR PLUS
SERIES 1.20 TO 12.20
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information, Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Annuity Payments.................................. Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 4
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR PLUS
SERIES 1.40 TO 12.40
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information, Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Annuity Payments.................................. Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 5
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR 2
SERIES 2.1 TO 2.12
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Payout Payments................................... Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 6
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR 2
SERIES 2.1.20 TO 2.12.20
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Payout Payments................................... Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 7
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR 2
SERIES 2.1.40 TO 2.12.40
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Payout Payments................................... Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 8
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR T
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Payout Payments................................... Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 9
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value,
Separate Account Expense Reimbursement
7. General Description of Variable Annuity
Contracts......................................... Transfers Between Investment Options Purchase
Period, Payout Period, Surrender of Account
Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefits
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement of Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value; Exchange Privilege
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Payout Payments................................... Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 10
[MOMENTO PHOTO]
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1 -- 12
Units of Interest
Under Group and
Individual Variable
Annuity Contracts
Portfolio Director Plus
Prospectus
May 1, 1999
<PAGE> 11
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1 TO 12 May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain Series of
Portfolio Director Plus that consist of group and individual variable annuity
contracts (the "Contracts") 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 as well as for certain after-tax arrangements that are not part of an
employer's plan.
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 53 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, life insurance contracts, or certain employer-
sponsored retirement plans 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 affiliates.
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 May 1, 1999, 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. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
FEE TABLE.......................................... 2
SUMMARY............................................ 7
SELECTED PURCHASE UNIT DATA........................ 12
GENERAL INFORMATION................................ 18
About Portfolio Director Plus.................. 18
About VALIC.................................... 18
About VALIC Separate Account A................. 18
Units of Interests............................. 19
Distribution of the Contracts.................. 19
VARIABLE ACCOUNT OPTIONS........................... 20
Summary of Funds............................... 20
PURCHASE PERIOD.................................... 49
Purchase Payments.............................. 49
Purchase Units................................. 49
Calculation of Purchase Unit Value............. 49
Choosing Investment Options.................... 50
Fixed Account Options..................... 50
Variable Account Options.................. 50
Stopping Purchase Payments..................... 50
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 51
During the Purchase Period..................... 51
During the Payout Period....................... 51
Communicating Transfer or Reallocation
Instructions................................. 51
Effective Date of Transfer..................... 51
FEES AND CHARGES................................... 52
Account Maintenance Fee........................ 52
Surrender Charge............................... 52
Amount of Surrender Charge................ 52
10% Free Withdrawal....................... 52
Exceptions to Surrender Charge............ 52
Premium Tax Charge............................. 53
Separate Account Charges....................... 53
Fund Annual Expense Charges.................... 53
Other Tax Charges.............................. 53
Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee
Charges...................................... 54
Separate Account Expense Reimbursement......... 54
PAYOUT PERIOD...................................... 55
Fixed Payout................................... 55
Variable Payout................................ 55
Combination Fixed and Variable Payout.......... 55
Payout Date.................................... 55
Payout Options................................. 55
Enhancements to Payout Options................. 56
Payout Information............................. 56
SURRENDER OF ACCOUNT VALUE......................... 57
When Surrenders Are Allowed.................... 57
Amount That May Be Surrendered................. 57
Surrender Restrictions......................... 57
Partial Surrenders............................. 57
Systematic Withdrawals......................... 57
Distributions Required by Federal Tax Law...... 58
EXCHANGE PRIVILEGE................................. 59
Restrictions on Exchange Privilege............. 59
Taxes and Conversion Costs..................... 59
Surrender Charges.............................. 59
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 59
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 60
Comparison of Other Contracts.................. 60
Features of Portfolio Director Plus............ 60
Agents' and Managers' Retirement Plan Exchange
Offer........................................ 60
DEATH BENEFITS..................................... 62
Beneficiary Information........................ 62
Special Information for Individual Non-Tax
Qualified Contracts.......................... 62
During the Purchase Period..................... 62
Interest Guaranteed Death Benefit......... 62
Standard Death Benefit.................... 63
During the Payout Period....................... 63
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 64
Types of Investment Performance Information
Advertised................................... 64
Total Return Performance Information......... 64
Standard Average Annual Total Return......... 64
Nonstandard Average Annual Total Return...... 64
Cumulative Total Return...................... 64
Annual Change in Purchase Unit Value......... 64
Cumulative Change in Purchase Unit Value..... 65
Total Return Based on Different Investment
Amounts................................... 65
An Assumed Account Value of $10,000.......... 65
Yield Performance Information.................. 65
AGSPC Money Market and American General Money
Market Divisions.......................... 65
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 65
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 65
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>
(i)
<PAGE> 13
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................... 51
Annuitant....................... 62
Assumed Investment Rate......... 55
Beneficiary..................... 62
Contract Owner.................. 62
Divisions....................... 64
Fixed Account Options........... 62
Home Office..................... 51
Mutual Fund or Fund............. 18
Participant..................... 01
Participant Year................ 52
Payout Period................... 51
Payout Unit..................... 55
Purchase Payments............... 49, 64
Purchase Period................. 51
Purchase Unit................... 49, 50
VALIC Separate Account A........ 77
Variable Account Options........ 20, 62
</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. 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> 14
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $ 15
</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 Fund(8) 0.25% 0.75% -- 1.00%
AGSPC Capital Conservation Fund 0.25 0.75 -- 1.00
AGSPC Government Securities Fund 0.25 0.75 -- 1.00
AGSPC Growth Fund 0.25 0.75 -- 1.00
AGSPC Growth & Income Fund 0.25 0.75 -- 1.00
AGSPC International Equities Fund 0.25 0.75 -- 1.00
AGSPC International Government Bond Fund 0.25 0.75 -- 1.00
AGSPC MidCap Index Fund 0.25 0.75 -- 1.00
AGSPC Money Market Fund 0.25 0.75 -- 1.00
AGSPC Science & Technology Fund 0.25 0.75 -- 1.00
AGSPC Small Cap Index Fund 0.25 0.75 -- 1.00
AGSPC Social Awareness Fund 0.25 0.75 -- 1.00
AGSPC Stock Index Fund 0.25 0.75 -- 1.00
American Century Ultra Fund(4) 0.25 1.00 (0.21%) 1.04
American General Balanced Fund(4) 0.25 0.75 (0.25) 0.75
American General Conservative Growth Lifestyle
Fund(4) 0.25 0.75 (0.25) 0.75
American General Core Bond Fund(4) 0.25 0.75 (0.25) 0.75
American General Domestic Bond Fund(4) 0.25 0.75 (0.25) 0.75
American General Growth Lifestyle Fund(4) 0.25 0.75 (0.25) 0.75
American General High Yield Bond Fund(4) 0.25 0.75 (0.25) 0.75
American General International Growth Fund(4) 0.25 0.75 (0.25) 0.75
American General International Value Fund(4) 0.25 0.75 (0.25) 0.75
American General Large Cap Growth Fund(4) 0.25 0.75 (0.25) 0.75
American General Large Cap Value Fund(4) 0.25 0.75 (0.25) 0.75
American General Mid Cap Growth Fund(4) 0.25 0.75 (0.25) 0.75
American General Mid Cap Value Fund(4) 0.25 0.75 (0.25) 0.75
American General Moderate Growth Lifestyle
Fund(4) 0.25 0.75 (0.25) 0.75
American General Money Market Fund(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 Value Fund(4) 0.25 0.75 (0.25) 0.75
American General Socially Responsible Fund(4) 0.25 0.75 (0.25) 0.75
American General Strategic Bond Fund(4) 0.25 0.75 (0.25) 0.75
Dreyfus Variable Investment Fund --
Small Cap Portfolio(4) 0.25 1.00 (0.15) 1.10
Evergreen(sm) Equity Trust
Evergreen Growth and Income Fund -- Class A(4) 0.25 1.00 (0.25) 1.00
Evergreen Small Cap Value Fund -- Class A(4) 0.25 1.00 (0.25) 1.00
Evergreen Value Fund -- Class A(4) 0.25 1.00 (0.25) 1.00
Founders Growth Fund(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 Fund -- Class A Shares(4) 0.25 1.00 (0.25) 1.00
Putnam New Opportunities Fund -- Class A
Shares(4) 0.25 1.00 (0.25) 1.00
Putnam OTC & Emerging Growth Fund -- Class A
Shares(4) 0.25 1.00 (0.25) 1.00
Scudder Growth and Income Fund(4) 0.25 1.00 (0.25) 1.00
T. Rowe Price Small-Cap Stock Fund 0.25 1.00 -- 1.25
Templeton Foreign Fund -- Class A(4) 0.25 1.00 (0.25) 1.00
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 0.25 1.00 -- 1.25
Templeton International Fund -- Class 1 0.25 1.00 -- 1.25
Vanguard Long-Term Corporate Fund(5) 0.25 1.00 (0.25) 1.00
Vanguard Long-Term Treasury Fund(5) 0.25 1.00 (0.25) 1.00
Vanguard LifeStrategy Conservative Growth Fund 0.25 1.00 -- 1.25
Vanguard LifeStrategy Growth Fund 0.25 1.00 -- 1.25
Vanguard LifeStrategy Moderate Growth Fund 0.25 1.00 -- 1.25
Vanguard Wellington Fund 0.25 1.00 -- 1.25
Vanguard Windsor II Fund 0.25 1.00 -- 1.25
</TABLE>
2
<PAGE> 15
FEE TABLE -- (CONTINUED)
- --------------------------------------------------------------------------------
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
FEES EXPENSES EXPENSES
(After Fee 12b-1 (AFTER EXPENSE (AFTER EXPENSE
FUND WAIVER) FEES WAIVER)(6) WAIVER)
---- ---------- ----- -------------- --------------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation Fund(8) 0.50% -- 0.04% 0.54%
AGSPC Capital Conservation Fund 0.50 -- 0.04 0.54
AGSPC Government Securities Fund 0.50 -- 0.04 0.54
AGSPC Growth Fund 0.80 -- 0.04 0.84
AGSPC Growth & Income Fund 0.75 -- 0.05 0.80
AGSPC International Equities Fund 0.35 -- 0.05 0.40
AGSPC International Government Bond Fund 0.50 -- 0.05 0.55
AGSPC MidCap Index Fund 0.32 -- 0.04 0.36
AGSPC Money Market Fund 0.50 -- 0.04 0.54
AGSPC Science & Technology Fund 0.90 -- 0.05 0.95
AGSPC Small Cap Index Fund 0.35 -- 0.04 0.39
AGSPC Social Awareness Fund 0.50 -- 0.04 0.54
AGSPC Stock Index Fund 0.27 -- 0.04 0.31
American Century Ultra Fund(11) 1.00 -- -- 1.00
American General Balanced Fund(9) 0.80 -- 0.02 0.82
American General Conservative Growth Lifestyle
Fund(10) 0.10 -- -- 0.10
American General Core Bond Fund(9) 0.50 -- 0.30 0.80
American General Domestic Bond Fund(9) 0.60 -- 0.18 0.78
American General Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General High Yield Bond Fund(9) 0.70 -- 0.29 0.99
American General International Growth Fund(9) 0.90 -- 0.25 1.15
American General International Value Fund(9) 1.00 -- 0.04 1.04
American General Large Cap Growth Fund(9) 0.55 -- 0.31 0.86
American General Large Cap Value Fund(9) 0.50 -- 0.31 0.81
American General Mid Cap Growth Fund(9) 0.65 -- 0.14 0.79
American General Mid Cap Value Fund(9) 0.75 -- 0.30 1.05
American General Moderate Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General Money Market Fund(9) 0.25 -- 0.31 0.56
American General Small Cap Growth Fund(9) 0.85 -- 0.31 1.16
American General Small Cap Value Fund(9) 0.75 -- 0.23 0.98
American General Socially Responsible Fund(9) 0.25 -- 0.31 0.56
American General Strategic Bond Fund(9) 0.60 -- 0.29 0.89
Dreyfus Variable Investment Fund --
Small Cap Portfolio 0.75 -- 0.02 0.77
Evergreen Equity Trust
Evergreen Growth and Income Fund -- Class A 0.90 0.25% 0.31 1.46
Evergreen Small Cap Value Fund -- Class A(11) 1.00 0.25 0.43 1.68
Evergreen Value Fund -- Class A 0.50 0.25 0.25 1.00
Founders Growth Fund 0.67 0.25 0.16 1.08
Neuberger Berman Guardian Trust(7)(11) 0.84 -- 0.03 0.87
Putnam Global Growth Fund -- Class A Shares 0.64 0.25 0.29 1.18
Putnam New Opportunities Fund -- Class A Shares 0.49 0.25 0.24 0.98
Putnam OTC & Emerging Growth Fund -- Class A Shares 0.54 0.25 0.21 1.00
Scudder Growth and Income Fund 0.44 -- 0.30 0.74
T. Rowe Price Small-Cap Stock Fund 0.77 -- 0.24 1.01
Templeton Foreign Fund -- Class A(11) 0.61 0.25 0.26 1.12
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 0.60 -- 0.18 0.78
Templeton International Fund -- Class 1 0.69 -- 0.17 0.86
Vanguard Long-Term Corporate Fund(11) 0.03 -- 0.27 0.30
Vanguard Long-Term Treasury Fund(11) 0.01 -- 0.26 0.27
Vanguard LifeStrategy Conservative Growth
Fund(11)(12) -- -- -- --
Vanguard LifeStrategy Growth Fund(11)(12) -- -- -- --
Vanguard LifeStrategy Moderate Growth Fund(11)(12) -- -- -- --
Vanguard Wellington Fund(11) 0.28 -- 0.03 0.31
Vanguard Windsor II Fund(11) 0.38 -- 0.03 0.41
</TABLE>
3
<PAGE> 16
FEE TABLE -- (CONTINUED)
- --------------------------------------------------------------------------------
- ------------
(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 affiliates 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 (0.21%), American General (0.25%), Dreyfus (0.15%),
Evergreen (0.25%), Founders (0.25%), Neuberger Berman (0.25%), Putnam
(0.25%), Scudder (0.25%) and Templeton Foreign Fund -- Class A (0.25%) With
respect to American 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 equal to or 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 Inc. ("NB"). NB 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. For the Trust's 1998 fiscal year, NB did not bear any expenses.
(8) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(9) In the absence of management fee waiver, other expense waiver and total
annual portfolio operating expense waiver, management fees, other expenses
and total annual portfolio operating expenses, respectively would be:
American General Balanced Fund, 0.80%, 0.80% and 1.60%; American General
Core Bond Fund, 0.50%, 0.86% and 1.36%; American General Domestic Bond
Fund, 0.60%, 0.57% and 1.17%; American General High Yield Bond Fund, 0.70%,
0.83% and 1.53%; American General International Growth Fund, 0.90%, 0.71%
and 1.61%; American General International Value Fund, 1.00%, 0.70% and
1.70%; American General Large Cap Growth Fund, 0.55%, 0.58% and 1.13%;
American General Large Cap Value Fund, 0.50%, 0.58% and 1.08%; American
General Mid Cap Growth Fund, 0.65%, 0.64% and 1.29%; American General Mid
Cap Value Fund, 0.75%, 0.64% and 1.39%; American General Money Market Fund,
0.25%, 0.86% and 1.11%; American General Small Cap Growth Fund, 0.85%,
0.62% and 1.47%; American General Small Cap Value Fund, 0.75%, 0.63% and
1.38%; and American General Socially Responsible Fund, 0.25%, 0.87% and
1.12%; and American General Strategic Bond Fund, 0.60%, 0.90% and 1.50%.
(10) Total Combined Operating Expenses based on estimated total average weighted
combined operating expenses for the American General Conservative Growth
Lifestyle Fund is 1.00%, for American General Growth Lifestyle Fund 1.09%
and for American General Moderate Growth Lifestyle Fund 1.03%. Estimated
Total Combined Operating Expenses of each American General Lifestyle Fund
is based on the Total Fund Operating Expenses of the underlying AGSPC 3
Funds and the American General Lifestyle Funds, assuming each American
General Lifestyle Fund's projected asset allocation among the underlying
AGSPC 3 Funds is maintained.
(11) The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Evergreen Small Cap Value Fund
was formerly known as the Evergreen Small Caps Equity Income Fund. The
Neuberger Berman Guardian Trust was formerly known as the Neuberger&Berman
Guardian Trust. The Templeton Foreign Fund -- Class A was formerly known as
the Templeton Foreign Fund -- Class 1. VALIC Separate Account A purchases
shares of the Templeton Foreign Fund -- Class A at net asset value and
without sales charges generally applicable to Class A shares. The Vanguard
Long-Term Corporate Fund was formerly known as the Vanguard Fixed Income
Securities Fund -- Long-Term Corporate Portfolio; the Vanguard Long-Term
Treasury Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio; the Vanguard LifeStrategy
Conservative Growth Fund was formerly known as the Vanguard LifeStrategy
Conservative Growth Portfolio; the Vanguard LifeStrategy Growth Fund was
formerly known as the Vanguard LifeStrategy Growth Portfolio; the Vanguard
Life Strategy Moderate Growth Fund was formerly known as the Vanguard
LifeStrategy Moderate Growth Portfolio; the Vanguard Wellington Fund was
formerly known as the Vanguard/Wellington Fund and the Vanguard Windsor II
Fund was formerly known as the Vanguard/Windsor II Fund.
(12) The Vanguard LifeStrategy Funds did not incur any expenses in fiscal year
1998. However, while the Funds are expected to operate without expenses,
shareholders in the Vanguard LifeStrategy Funds bear indirectly the
expenses of the underlying Vanguard Funds in which the Funds invest. The
indirect expense ratio that each Fund incurred for the year ended December
31, 1998 was 0.29%.
4
<PAGE> 17
EXAMPLE #1 -- If you do not surrender Portfolio Director Plus at the end of the
period shown or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
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 $16 $50 $ 87 $189
AGSPC Capital Conservation Division 7 16 50 87 189
AGSPC Government Securities Division 8 16 50 87 189
AGSPC Growth Division 15 19 59 102 221
AGSPC Growth & Income Division 16 19 58 100 217
AGSPC International Equities Division 11 15 46 79 174
AGSPC International Government Bond Division 13 16 50 87 190
AGSPC MidCap Index Division 4 14 45 77 169
AGSPC Money Market Division 6 16 50 87 189
AGSPC Science & Technology Division 17 20 63 108 233
AGSPC Small Cap Index Division 14 15 46 79 173
AGSPC Social Awareness Division 12 16 50 87 189
AGSPC Stock Index Division 10 14 43 74 164
American Century Ultra Division 31 21 65 112 242
American General Balanced Division 42 16 51 88 192
American General Conservative Growth Lifestyle Division 50 9 29 50 111
American General Core Bond Division 58 16 50 87 190
American General Domestic Bond Division 43 16 50 86 188
American General Growth Lifestyle Division 48 9 29 50 111
American General High Yield Bond Division 60 18 56 97 211
American General International Growth Division 33 20 61 105 228
American General International Value Division 34 19 58 100 216
American General Large Cap Growth Division 39 17 52 90 197
American General Large Cap Value Division 40 16 51 88 191
American General Mid Cap Growth Division 37 16 50 87 189
American General Mid Cap Value Division 38 19 58 100 217
American General Moderate Growth Lifestyle Division 49 9 29 50 111
American General Money Market Division 44 14 43 74 164
American General Small Cap Growth Division 35 20 61 106 229
American General Small Cap Value Division 36 18 56 96 210
American General Socially Responsible Division 41 14 43 74 164
American General Strategic Bond Division 59 17 53 92 200
Dreyfus Variable Investment Fund --
Small Cap Division 18 19 60 104 225
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 25 78 134 285
Evergreen Small Cap Value -- Class A Division 55 28 85 144 306
Evergreen Value -- Class A Division 57 21 64 110 238
Founders Growth Division 30 22 67 114 246
Neuberger Berman Guardian Trust Division 29 19 60 104 225
Putnam Global Growth -- Class A Shares Division 28 23 70 119 257
Putnam New Opportunities -- Class A Shares Division 26 21 64 109 236
Putnam OTC & Emerging Growth -- Class A Shares Division 27 21 64 110 238
Scudder Growth and Income Division 21 18 56 97 211
T. Rowe Price Small-Cap Stock Division 51 23 72 124 265
Templeton Foreign -- Class A Division 32 22 68 116 251
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 Division 19 21 65 112 241
Templeton International -- Class 1 Division 20 22 68 116 250
Vanguard Long-Term Corporate Division 22 14 43 74 163
Vanguard Long-Term Treasury Division 23 13 42 72 159
Vanguard LifeStrategy Conservative Growth Division 54 13 41 71 157
Vanguard LifeStrategy Growth Division 52 13 41 71 157
Vanguard LifeStrategy Moderate Growth Division 53 13 41 71 157
Vanguard Wellington Division 25 16 51 88 191
Vanguard Windsor II Division 24 17 54 93 202
</TABLE>
5
<PAGE> 18
EXAMPLE #2 -- If you surrender Portfolio Director Plus 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 $100 $137 $189
AGSPC Capital Conservation Division 7 63 100 137 189
AGSPC Government Securities Division 8 63 100 137 189
AGSPC Growth Division 15 65 109 152 221
AGSPC Growth & Income Division 16 65 108 150 217
AGSPC International Equities Division 11 61 96 129 174
AGSPC International Government Bond Division 13 63 100 137 190
AGSPC MidCap Index Division 4 61 95 127 169
AGSPC Money Market Division 6 63 100 137 189
AGSPC Science & Technology Division 17 67 112 158 233
AGSPC Small Cap Index Division 14 61 96 129 173
AGSPC Social Awareness Division 12 63 100 137 189
AGSPC Stock Index Division 10 60 93 124 164
American Century Ultra Division 31 67 115 162 242
American General Balanced Division 42 63 101 138 192
American General Conservative Growth Lifestyle Division 50 56 79 100 111
American General Core Bond Division 58 63 100 137 190
American General Domestic Bond Division 43 63 100 136 188
American General Growth Lifestyle Division 48 56 79 100 111
American General High Yield Bond Division 60 65 106 147 211
American General International Growth Division 33 66 110 155 228
American General International Value Division 34 65 107 150 216
American General Large Cap Growth Division 39 63 102 140 197
American General Large Cap Value Division 40 63 101 138 191
American General Mid Cap Growth Division 37 63 100 137 189
American General Mid Cap Value Division 38 65 108 150 217
American General Moderate Growth Lifestyle Division 49 56 79 100 111
American General Money Market Division 44 60 93 124 164
American General Small Cap Growth Division 35 66 111 156 229
American General Small Cap Value Division 36 65 106 146 210
American General Socially Responsible Division 41 60 93 124 164
American General Strategic Bond Division 59 64 103 142 200
Dreyfus Variable Investment Fund --
Small Cap Division 18 66 110 154 225
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 72 127 184 285
Evergreen Small Cap Value -- Class A Division 55 74 133 194 306
Evergreen Value -- Class A Division 57 67 113 160 238
Founders Growth Division 30 68 116 164 246
Neuberger Berman Guardian Trust Division 29 66 110 154 225
Putnam Global Growth -- Class A Shares Division 28 69 119 169 257
Putnam New Opportunities -- Class A Shares Division 26 67 113 159 236
Putnam OTC & Emerging Growth -- Class A Shares Division 27 67 113 160 238
Scudder Growth and Income Division 21 65 106 147 211
T. Rowe Price Small-Cap Stock Division 51 70 121 174 265
Templeton Foreign -- Class A Division 32 68 117 166 251
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 Division 19 67 114 162 241
Templeton International -- Class 1 Division 20 68 117 166 250
Vanguard Long-Term Corporate Division 22 60 93 124 163
Vanguard Long-Term Treasury Division 23 60 92 122 159
Vanguard LifeStrategy Conservative Growth Division 54 60 91 121 157
Vanguard LifeStrategy Growth Division 52 60 91 121 157
Vanguard LifeStrategy Moderate Growth Division 53 60 91 121 157
Vanguard Wellington Division 25 63 101 138 191
Vanguard Windsor II Division 24 64 103 143 202
</TABLE>
Note: These examples should not be considered representations of past or future
expenses for VALIC Separate Account A or for any Fund. Actual expenses may be
greater or less than those shown above. Similarly, the 5% annual rate of return
assumed in the examples is not an estimate or guarantee of future investment
performance. The purpose of the Fee Table above is to help Contract Owners and
Participants understand the various expenses of VALIC Separate Account A and the
Funds which are, in effect, passed on to the Contract Owners and Participants.
This Fee Table shows all charges and expenses which may be deducted from the
assets of VALIC Separate Account A and from the Funds in which VALIC Separate
Account A invests. For a further description of these charges and expenses, see
"Fees and Charges" in this prospectus and the descriptions of fees and charges
in each of the Fund's prospectuses. Any and all limitations on total charges and
expenses are reflected in this Fee Table.
6
<PAGE> 19
SUMMARY
- --------------------------------------------------------------------------------
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 53 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 Fund* the EAFE Index
--------------------------------------------------------------------------------------------------------------
FUNDS
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund* tracking the S&P MidCap 400(R) Index Company(1)
--------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments tracking VALIC Bankers Trust
Index Fund* the Russell 2000(R) Index Company(1)
--------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments tracking VALIC Bankers Trust
Index Fund* the S&P 500(R) Index Company(1)
- ----------------------------------------------------------------------------------------------------------------------------------
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 N/A
FUNDS Fund* in stocks or securities convertible
into stocks
--------------------------------------------------------------------------------------------------------------
American Century Ultra Capital growth through American Century N/A
Fund investments in common Investment Management,
stock Inc.
--------------------------------------------------------------------------------------------------------------
American General Long-term capital appreciation by VALIC Jacobs Asset
International Growth investing in equity securities of Management
Fund** non-U.S. companies, the majority of
which are expected to be in developed
markets
--------------------------------------------------------------------------------------------------------------
American General Growth of capital and future income VALIC Capital Guardian
International Value through investments in securities of Trust Company
Fund** non-U.S. issuers and securities whose
principal markets are outside of the
United States
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through a broadly VALIC Goldman Sachs Asset
Large Cap Growth diversified portfolio of equity Management
Fund** securities of large cap U.S. issuers
--------------------------------------------------------------------------------------------------------------
American General Total returns exceeding overtime the VALIC State Street Bank &
Large Cap Value Fund** Russell 1000(R) Value Index through Trust Company/State
investments in equity securities Street Global
Advisors
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in medium VALIC Brown Capital
Mid Cap Growth Fund** capitalization equity securities Management Inc.
--------------------------------------------------------------------------------------------------------------
American General Growth through investments in equity VALIC Neuberger Berman
Mid Cap Value Fund** securities of medium capitalization Management Inc.
companies
--------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC JP Morgan
Small Cap Growth in equity securities of small Investment
Fund** capitalization growth companies 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(1)
- ----------------------------------------------------------------------------------------------------------------------------------
* A series of American General Series Portfolio Company ("AGSPC").
** A series of American General Series Portfolio Company 3 ("AGSPC 3").
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998,
Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. The merger is contingent upon various regulatory approvals. On April 20, 1999, the
AGSPC Fund's Board of Directors approved a new investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval and the Trustees of AGSPC 3 also approved a new investment sub-advisory agreement with Bankers Trust
Company, which is not subject to shareholder approval. If the merger is approved and completed, Deutsche Bank AG, as the
Sub-Adviser's new parent company, will control the operations of the Sub-Adviser. Bankers Trust believes that, under this new
arrangement, the services provided to the Fund will be maintained at their current level.
</TABLE>
7
<PAGE> 20
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Growth through investments in smaller The Dreyfus N/A
Investment companies Corporation
Fund -- Small
Cap Portfolio
--------------------------------------------------------------------------------------------------------------
Evergreen Growth and Return composed of capital Evergreen Asset N/A
Income Fund -- Class appreciation in value of its shares Management Corp.
A*** and current income
--------------------------------------------------------------------------------------------------------------
Evergreen Small Cap Return consisting of current income Evergreen Asset N/A
Value Fund -- Class and capital appreciation in value of Management Corp.
A*** its shares
--------------------------------------------------------------------------------------------------------------
Evergreen Value Long-term capital appreciation with Capital Management N/A
Fund -- Class A*** current income as secondary objective Group of First Union
National Bank
--------------------------------------------------------------------------------------------------------------
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 Neuberger Berman Neuberger
Guardian Trust current income by investing primarily Management Inc. Berman, LLC
in common stocks of large-
capitalization companies
--------------------------------------------------------------------------------------------------------------
Putnam Global Growth Capital appreciation through a Putnam Investment N/A
Fund -- Class A Shares globally diversified portfolio of Management Inc.
common stocks
--------------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities
Fund -- Class A Shares 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 -- Class A Shares 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.
--------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------------------
Templeton Foreign Long-term capital growth; invests Templeton Global N/A
Fund -- Class A primarily in equity securities of Advisors Limited
companies outside the U.S., including
emerging markets
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth; invests Templeton Investment N/A
International primarily in stocks and debt Counsel, Inc.
Fund -- Class 1**** obligations of companies outside the
U.S., including emerging markets
--------------------------------------------------------------------------------------------------------------
Vanguard Growth and income through Vanguard N/A
Windsor II Fund 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 Wellington Income and growth through 30 to 40% Vanguard N/A
Fund investment in high quality corporate
bonds 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 Core Maximum income through investment in VALIC American General
Bond Fund** medium to high quality fixed income Investment
securities Management, L.P.
--------------------------------------------------------------------------------------------------------------
American General High income and total return VALIC Capital Guardian
Domestic Bond Fund** consistent with conservation of Trust Company
capital through investments in fixed
income securities and other income
producing securities
--------------------------------------------------------------------------------------------------------------
American General High High total return and income VALIC American General
Yield Bond Fund** consistent with conservation of Investment
capital through investment in high Management, L.P.
yield fixed income securities
- ----------------------------------------------------------------------------------------------------------------------------------
* A series of AGSPC.
** A series AGSPC 3.
*** A series of Evergreen Equity Trust.
**** A series of Templeton Variable Products Series Fund.
</TABLE>
8
<PAGE> 21
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
American General High level of total return and income VALIC American General
Strategic Bond Fund** consistent with conservation of Investment
capital through investment in Management, L.P.
income-producing securities
--------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment Vanguard N/A
Corporate Fund in long-term high quality corporate
bonds
--------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Treasury Fund long-term U.S. Treasury bonds
- ----------------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------------
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 Current income and low-to-moderate Vanguard N/A
Conservative growth of capital
Growth Fund
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy Growth of capital Vanguard N/A
Growth Fund
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy A reasonable level of income and Vanguard N/A
Moderate Growth Fund long-term growth of capital and
income
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Allocation Maximum return through investments in VALIC N/A
ALLOCATION Fund* a mix of stocks, bonds and money
FUNDS market securities
--------------------------------------------------------------------------------------------------------------
Templeton Asset High level of total return, through a Templeton Investment N/A
Allocation flexible policy of investing in Counsel, Inc.
Fund -- Class 1**** stocks and debt obligations of any
nation, including emerging markets,
and money market instruments
- ----------------------------------------------------------------------------------------------------------------------------------
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Templeton Variable Products Series Fund.
</TABLE>
9
<PAGE> 22
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual 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 1/2% 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
Mutual Fund or its affiliate or distributor for providing the Mutual 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
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."
10
<PAGE> 23
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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.
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.
11
<PAGE> 24
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, 1998
Purchase Units in Force 60,237,818 28,751,662 53,729,671 494,997,997 129,550,695 101,811,751
Purchase Unit Value $3.772519 $2.085846 $2.111727 $2.428587 $2.201234 $1.454644
September 22, 1998
Purchase Unit Value(1) $3.401223 $2.048533 $2.098372 $1.923891 $1.772957 $1.205200
<CAPTION>
AGSPC
INTERNATIONAL AGSPC AGSPC
GOVERNMENT MIDCAP MONEY
BOND INDEX MARKET
DIVISION 13 DIVISION 4(2) DIVISION 6
----------- ------------- ----------
<S> <C> <C> <C>
December 31, 1998
Purchase Units in Force 97,473,851 169,039,887 147,547,688
Purchase Unit Value $1.728006 $5.029093 $1.742617
September 22, 1998
Purchase Unit Value(1) $1.653681 $3.941295 $1.723944
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
(2) Effective October 1, 1991, the Fund underlying this Division changed its
name from the Capital Accumulation Fund to the MidCap Index Fund and amended
its investment objective, investment program and investment restrictions
accordingly. Historical purchase unit values prior to October 1, 1991
reflect investment experience before these changes.
12
<PAGE> 25
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
GENERAL
AGSPC AGSPC AGSPC AMERICAN AMERICAN CONSERVATIVE AMERICAN
SCIENCE & SMALL CAP SOCIAL AGSPC CENTURY GENERAL GROWTH GENERAL
TECHNOLOGY INDEX AWARENESS STOCK INDEX ULTRA BALANCED LIFESTYLE CORE BOND
DIVISION 17 DIVISION 14 DIVISION 12 DIVISION 10(3) DIVISION 31 DIVISION 42 DIVISION 50 DIVISION 58
----------- ----------- ----------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
418,601,069 107,321,015 114,382,494 691,680,049 209,221,513 -- -- --
$3.216190 $2.100506 $3.762308 $4.772052 $1.685503 $1.170132 $1.162045 $1.029153
$3.97842959 $1.06279077 $8.1577104 $6.15053124 $9.7745282 $1.021413 $1.025412 $1.012421
<CAPTION>
AMERICAN AMERICAN
AGSPC GENERAL GENERAL
SCIENCE & DOMESTIC GROWTH
TECHNOLOGY BOND LIFESTYLE
DIVISION 17 DIVISION 43 DIVISION 48
----------- ----------- -----------
<S> <C> <C>
418,601,069 -- --
$3.216190 $1.044434 $1.192541
$3.97842959 $1.017417 $1.014416
</TABLE>
- ------------
(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> 26
SELECTED PURCHASE UNIT DATA -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN GENERAL GENERAL AMERICAN AMERICAN AMERICAN
GENERAL HIGH INTERNATIONAL INTERNATIONAL GENERAL LARGE GENERAL LARGE GENERAL MID
YIELD BOND GROWTH VALUE CAP GROWTH CAP VALUE CAP GROWTH
DIVISION 60 DIVISION 33 DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force -- -- -- -- -- --
Purchase Unit Value $1.053096 $1.051722 $1.149900 $1.240768 $1.246581 $1.347693
September 22, 1998 --
Purchase Unit Value(1) $1.000425 $0.941455 $0.945454 $1.011419 $1.070388 $1.069389
<CAPTION>
AMERICAN
GENERAL MID
CAP VALUE
DIVISION 38
-----------
<S> <C>
December 31, 1998
Purchase Units in Force --
Purchase Unit Value $1.254723
September 22, 1998 --
Purchase Unit Value(1) $1.049399
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
14
<PAGE> 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
AMERICAN INVESTMENT
GENERAL AMERICAN AMERICAN AMERICAN FUND
MODERATE GENERAL AMERICAN AMERICAN GENERAL GENERAL ------------
GROWTH MONEY GENERAL SMALL GENERAL SMALL SOCIALLY STRATEGIC SMALL CAP
LIFESTYLE MARKET CAP GROWTH CAP VALUE RESPONSIBLE BOND PORTFOLIO
DIVISION 49 DIVISION 44 DIVISION 35 DIVISION 36 DIVISION 41 DIVISION 59 DIVISION 18
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- 474,215,229
$1.185441 $1.013309 $1.349354 $1.165259 $1.277759 $1.049867 $1.690786
$1.025411 $1.002329 $1.075387 $1.035409 $1.065392 $1.011421 $1.412670
<CAPTION>
EVERGREEN EQUITY TRUST
AMERICAN ------------------------------------------------
GENERAL
MODERATE EVERGREEN EVERGREEN
GROWTH GROWTH AND SMALL EVERGREEN
LIFESTYLE INCOME CAP VALUE VALUE
DIVISION 49 DIVISION 56(4) DIVISION 55(4) DIVISION 57(4)
----------- -------------- -------------- --------------
<S> <C> <C> <C>
-- -- -- --
$1.185441 -- -- --
$1.025411 -- -- --
</TABLE>
- ------------
(4) 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> 28
SELECTED PURCHASE UNIT DATA -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
NEUBERGER PUTNAM OTC & SCUDDER
BERMAN GLOBAL PUTNAM NEW EMERGING GROWTH
FOUNDERS GUARDIAN GROWTH -- OPPORTUNITIES -- GROWTH -- AND
GROWTH TRUST CLASS A CLASS A CLASS A INCOME
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21
----------- ----------- ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 250,777,959 45,261,146 101,468,260 280,523,297 129,463,792 159,815,811
Purchase Unit Value $1.595913 $1.324970 $1.512865 $1.415175 $1.072660 $1.507724
September 22, 1998
Purchase Unit Value(1) $1.337963 $1.109162 $1.237343 $1.109266 $0.839928 $1.348500
<CAPTION>
T. ROWE PRICE TEMPLETON
SMALL-CAP FOREIGN --
STOCK CLASS A
DIVISION 51 DIVISION 32
------------- ------------
<S> <C> <C>
December 31, 1998
Purchase Units in Force 122 198,626,024
Purchase Unit Value $1.141049 $1.069704
September 22, 1998
Purchase Unit Value(1) $1.007776 $0.923717
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
16
<PAGE> 29
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON VARIABLE PRODUCTS
SERIES FUND
--------------------------------
TEMPLETON VANGUARD VANGUARD
ASSET TEMPLETON LIFESTRATEGY VANGUARD VANGUARD VANGUARD LIFESTRATEGY
ALLOCATION -- INTERNATIONAL -- CONSERVATIVE LONG-TERM LONG-TERM LIFESTRATEGY MODERATE
CLASS 1 CLASS 1 GROWTH CORPORATE TREASURY GROWTH GROWTH
DIVISION 19 DIVISION 20 DIVISION 54 DIVISION 22 DIVISION 23 DIVISION 52 DIVISION 53
------------- ---------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
190,963,707 452,419,089 -- 44,122,646 86,673,300 -- --
$1.695764 $1.700398 $1.084026 $1.271278 $1.318263 $1.168111 $1.125919
$1.403278 $1.467274 $1.006776 $1.253982 $1.310099 $1.006276 $1.002175
<CAPTION>
VANGUARD VANGUARD
WELLINGTON WINDSOR II
DIVISION 25 DIVISION 24
----------- ------------
<S> <C>
253,840,498 372,737,595
$1.482836 $1.683226
$1.380127 $1.475161
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
17
<PAGE> 30
GENERAL INFORMATION
- --------------------------------------------------------------------------------
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 "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 were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. 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-three 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 on July 25, 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 SEC as a unit investment trust under the Investment Company Act of 1940
("Act"). 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.
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> 31
- --------------------------------------------------------------------------------
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.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors -- our
address is 2929 Allen Parkway,
Houston, Texas 77019.
For more information
about A.G. DISTRIBUTORS,
see the Statement of
Additional Information
19
<PAGE> 32
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director Plus enables you to participate in Divisions that represent
fifty-three Variable Account Options. These Divisions comprise all of the
Variable Account Options that are made available through VALIC Separate Account
A. According to your retirement program, you may not be able to invest in all
fifty-three 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 (AGSPC) -- offers 13 funds, for which VALIC serves as investment
adviser, for 3 of such funds, Bankers Trust Company serves as sub-adviser and
for 2 of such funds, T. Rowe Price Associates, Inc. serves as sub-adviser.
- - American General Series Portfolio Company 3 (AGSPC 3) -- offers 18 funds for
which VALIC serves as investment adviser and, for 13 of such funds, have one
of the following sub-advisers: American General Investment Management, L.P.,
Bankers Trust Company, Brown Capital Management, Inc., Capital Guardian Trust
Company, Fiduciary Management Associates, Inc., Goldman Sachs Asset
Management, J.P. Morgan Investment Management Inc., Jacobs Asset Management,
Neuberger Berman Management Inc. and State Street Bank & Trust Company/State
Street Global Advisors.
- - American Century Mutual Funds, Inc. -- 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.
- - Evergreen Equity Trust -- offers 3 funds for which either Evergreen Asset
Management Corp. or the Capital Management Group of First Union National Bank
serve 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 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - Templeton Variable Products Series Fund -- offers 2 funds for which Templeton
Investment Counsel, Inc. serves as investment adviser.
- - 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.
Twenty-two 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, the
American General Lifestyle Funds and the Vanguard LifeStrategy Portfolios, each
of which is a non-diversified Fund) is registered as a diversified open-end,
management investment company and is regulated under the Act. 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 as well as the Standard Average Annual Total Return for certain Divisions
for a 1, 3, 5 and 10 year period, if available. If Standard Average Annual
Return for a Division is not available for a stated period, we may show the
Standard Average Annual Return since Division inception. We will show the
Standard Average Annual Total Return for Divisions 51-57, which recently
commenced operations when it becomes
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.
20
<PAGE> 33
- --------------------------------------------------------------------------------
available. The performance information in the tables and graphs 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. They 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 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. The returns shown in the tables
for certain Funds (Divisions 51-54) reflect actual historical performance of the
related Separate Account Division since inception of each Division (September
22, 1998) and hypothetical performance for periods prior to September 22, 1998.
The returns shown in the tables for certain Funds (Divisions 55-57) reflect
actual historical performance of the related Funds since inception of each Fund.
Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. 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. 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.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical periods shown below. 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 the specified period. Premium
taxes are not deducted. This information is calculated for each Division based
on how an initial investment of $1,000 performed at the end of the specified
periods shown.
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.
21
<PAGE> 34
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,581
12/31/90 11,189
12/31/91 13,442
12/31/92 13,212
12/31/93 14,294
12/31/94 13,967
12/31/95 17,255
12/31/96 18,979
12/31/97 23,040
12/31/98 26,999
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/29/89 11,063
12/31/90 10,922
12/31/91 12,669
12/31/92 13,626
12/31/93 15,108
12/30/94 14,044
12/29/95 16,795
12/31/96 16,920
12/31/97 18,187
12/31/98 19,333
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund. The Standard Average Annual Total Return for the AGSPC Asset Allocation
Fund Division 5 for the 1, 3, 5 and 10 year period was 12.12%, 14.78%, 12.89%
and 10.38%, respectively. The Division commenced operations on September 6,
1983.
** The Standard Average Annual Total Return for the AGSPC Capital Conservation
Fund Division 7 for the 1, 3, 5 and 10 year period was 1.46%, 3.20%, 4.16%
and 6.75%, respectively. The Division commenced operations on January 16,
1986.
22
<PAGE> 35
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,103
12/31/90 11,648
12/31/91 13,231
12/31/92 14,044
12/31/93 15,406
12/31/94 14,567
12/31/95 16,943
12/31/96 17,095
12/31/97 18,433
12/31/98 19,883
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 10,018
12/31/95 14,667
12/31/96 17,333
12/31/97 20,765
12/31/98 24,286
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Government Securities
Fund Division 8 for the 1, 3, 5 and 10 year period was 2.95%, 3.90%, 4.35%
and 7.05%, respectively. The Division commenced operations on January 16,
1986.
** The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 11.89%, 17.04% and
20.32%, respectively. The Division commenced operations on April 29, 1994.
23
<PAGE> 36
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
12/31/94 9,932
12/31/95 12,966
12/31/96 15,831
12/31/97 19,409
12/31/98 22,012
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,284
12/31/90 8,134
12/31/91 8,953
12/31/92 7,671
12/31/93 9,864
12/31/94 10,545
12/31/95 11,565
12/31/96 12,229
12/31/97 12,373
12/31/98 14,546
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Growth & Income Fund
Division 16 for the 1 and 3 year period and since inception was 8.35%, 18.04%
and 17.76%, respectively. The Division commenced operations on April 29,
1994.
** The Standard Average Annual Total Return for the AGSPC International Equities
Fund Division 11 for the 1, 3 and 5 year period and since inception was
12.50%, 6.44%, 7.27% and 4.08%, respectively. The Division commenced
operations on October 2, 1989.
24
<PAGE> 37
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
12/31/91 10,905
12/31/92 11,128
12/31/93 12,583
12/31/94 13,014
12/31/95 15,308
12/31/96 15,822
12/31/97 14,906
12/31/98 17,280
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
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***.
<TABLE>
<CAPTION>
Annual Value of $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ----------------------- -------
<S> <C>
10/01/91 $10,000
12/31/91 11,163
12/31/92 12,143
12/31/93 13,574
12/31/94 12,936
12/31/95 16,718
12/31/96 19,661
12/31/97 25,648
12/31/98 30,214
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 10.86%, 2.50%, 5.70% and 7.78%, respectively. The Division
commenced operations on October 1, 1991.
** The Standard Average Annual Total Return for the AGSPC MidCap Index Fund
Division 4 for the 1, 3, and 5 year period and since inception was 12.74%,
20.61%, 16.76% and 16.41%, respectively. On October 1, 1991, the Fund
underlying the AGSPC MidCap Index Fund 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. The performance figures for the AGSPC MidCap Index Division
reflect the performance of the MidCap Index Fund since October 1, 1991.
*** "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"). AGSPC 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.
25
<PAGE> 38
AGSPC MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,792
12/31/90 11,530
12/31/91 12,048
12/31/92 12,316
12/31/93 12,521
12/31/94 12,867
12/31/95 13,447
12/31/96 13,982
12/31/97 14,559
12/31/98 15,160
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,477
12/31/95 19,972
12/31/96 22,505
12/31/97 22,857
12/31/98 32,162
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.62%), 2.45%, 2.97% and
4.19%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 35.63%,
15.92% and 27.92%, respectively. The Division commenced operations on April
29, 1994.
26
<PAGE> 39
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
12/31/92 11,128
12/31/93 12,772
12/31/94 12,223
12/31/95 15,449
12/31/96 17,854
12/31/97 21,636
12/31/98 21,005
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,100
12/31/90 9,877
12/31/91 12,506
12/31/92 12,795
12/31/93 13,670
12/31/94 13,339
12/31/95 18,351
12/31/96 22,527
12/31/97 29,853
12/31/98 37,623
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Small Cap Index Fund
Division 14 for the 1, 3 and 5 year period and since inception was (7.34)%,
9.35%, 9.72% and 11.71%, respectively. The Division commenced operations on
May 1, 1992.
** The Russell(R) Index is a trademark/servicemark of the Frank Russell Trust
Company. Russell(TM) is a trademark of the Frank Russell Company.
*** The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception period was
20.96%, 25.92%, 21.93% and 15.34%, respectively. The Division commenced
operations on October 2, 1989.
27
<PAGE> 40
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,788
12/31/90 12,171
12/31/91 15,543
12/31/92 16,411
12/31/93 17,853
12/31/94 17,799
12/31/95 24,197
12/31/96 29,406
12/31/97 38,748
12/31/98 49,264
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
AMERICAN 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 13,550
12/31/90 14,663
12/31/91 27,052
12/31/92 27,107
12/31/93 32,674
12/31/94 31,162
12/31/95 42,454
12/31/96 47,731
12/31/97 58,109
12/31/98 77,368
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.07%, 25.62%, 21.99%
and 17.23%, respectively. The Division commenced operations on April 20,
1987.
** "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.
*** The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Standard Average Annual Total
Return for the American Century Ultra Fund Division 31 for the 1 year and
since inception was 28.07% and 21.68%, respectively. The Division commenced
operations on July 1, 1996.
28
<PAGE> 41
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.
AMERICAN GENERAL CONSERVATIVE
GROWTH LIFESTYLE FUND
(Division 50)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low to moderate growth of capital through investments
in AGSPC 3 Funds. Through its investments, the Fund allocates 5% to 15% of its
assets to international equity securities, 5% to 15% to small capitalization
equity securities, 5% to 15% to medium capitalization equity securities, 25% to
35% to large capitalization equity securities and 30% to 50% to bonds.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
29
<PAGE> 42
AMERICAN GENERAL CORE
BOND FUND*
(Division 58)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in medium to high quality fixed income securities.
AMERICAN GENERAL DOMESTIC
BOND FUND*
(Division 43)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment primarily in investment grade fixed income securities and
other income producing securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
30
<PAGE> 43
AMERICAN GENERAL GROWTH
LIFESTYLE FUND*
(Division 48)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth through investments in AGSPC 3 Funds. Through its investments, the
Fund allocates 25% to 35% of its assets to international equity securities, 15%
to 25% to small capitalization equity securities, 10% to 20% to medium
capitalization equity securities, 25% to 35% to large capitalization equity
securities and 5% to 15% to bonds.
AMERICAN GENERAL HIGH
YIELD BOND FUND*
(Division 60)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return and income consistent with conservation
of capital through investment in a diversified portfolio of high yielding high
risk fixed income securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
31
<PAGE> 44
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND*
(Division 33)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation by investing in equity
securities of non-U.S. companies, the majority of which are expected to be in
developed markets. The Fund may invest across the capitalization spectrum,
although it intends to emphasize smaller capitalization stocks.
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 Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
32
<PAGE> 45
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 objective.
AMERICAN GENERAL LARGE CAP
VALUE FUND*
(Division 40)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the Russell 1000(R) Value
Index through investments in equity securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
33
<PAGE> 46
AMERICAN GENERAL MID CAP
GROWTH FUND*
(Division 37)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in medium
capitalization equity securities, such as common and preferred stocks and
securities convertible into common stocks. Current income is a secondary
objective.
AMERICAN GENERAL MID CAP
VALUE FUND*
(Division 38)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth through investment in equity securities of medium
capitalization companies using a value-oriented investment approach.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
34
<PAGE> 47
AMERICAN GENERAL MODERATE
GROWTH LIFESTYLE FUND*
(Division 49)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth and current income through investments in AGSPC 3 Funds. Through
its investments, the Fund allocates 10% to 20% of its assets to international
equity securities, 10% to 20% to small capitalization equity securities, 10% to
20% to medium capitalization equity securities, 25% to 30% to large
capitalization equity securities and 20% to 30% to bonds.
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 Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
35
<PAGE> 48
AMERICAN GENERAL SMALL CAP
GROWTH FUND*
(Division 35)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth from a portfolio of equity securities of small
capitalization growth companies.
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 equity securities of small capitalization companies in
terms of revenues and/or market capitalization.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
36
<PAGE> 49
AMERICAN GENERAL SOCIALLY
RESPONSIBLE FUND*
(Division 41)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in equity
securities, in companies which meet the social criteria established for the
Fund.
AMERICAN GENERAL STRATEGIC
BOND FUND*
(Division 59)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return and income consistent with conservation
of capital through investment in a diversified portfolio of income producing
securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
37
<PAGE> 50
DREYFUS VARIABLE INVESTMENT
FUND --
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
12/31/90 10,168
12/31/91 26,105
12/31/92 44,181
12/31/93 73,477
12/31/94 78,125
12/31/95 99,825
12/31/96 114,938
12/31/97 132,607
12/31/98 126,628
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 31
EVERGREEN GROWTH AND
INCOME FUND**
Class A
(Division 56)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a return composed of capital appreciation and current income.
The Fund invests in the securities of companies which are undervalued in the
marketplace relative to those companies' assets, breakup value, earnings or
potential earnings growth.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- --------
<S> <C>
01/03/95 $ 10,000
12/31/95 13,142
12/31/96 16,074
12/31/97 20,842
12/31/98 21,655
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 3, 1995
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Dreyfus Variable Investment
Fund-Small Cap Portfolio Division 18 for the 1 and 3 year period and since
inception was (8.86)%, 6.75% and 11.65%, respectively. The Division commenced
operations on July 11, 1994.
** The Division commenced operations on January 4, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
38
<PAGE> 51
EVERGREEN SMALL CAP
VALUE FUND*
Class A
(Division 55)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a return consisting of current income and capital appreciation.
The Fund invests in common stocks, preferred stocks, securities convertible into
or exchangeable for common stocks and fixed income securities. Under normal
conditions, the Fund will invest at least 65% of its assets in equity securities
(including convertible debt securities) of companies that, at the time of
purchase, have "total market capitalization" of less than $1 billion. The Fund
may invest up to 35% of its total assets in equity securities of companies that
at the time of purchase have a total market capitalization of $1 billion or
more.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- -------
<S> <C>
01/03/95 $10,000
12/31/95 12,764
12/31/96 15,422
12/31/97 20,367
12/31/98 18,237
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 3, 1995
[CHART]
PERIOD ENDED DECEMBER 31
EVERGREEN VALUE FUND**
Class A
(Division 57)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation with current income as a
secondary objective. Normally, at least 75% of the Fund's assets will be
invested in equity securities of U.S. companies with prospects for earnings
growth and dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,566
12/31/90 12,014
12/31/91 14,886
12/31/92 15,907
12/31/93 17,218
12/31/94 17,367
12/31/95 22,671
12/31/96 26,698
12/31/97 33,244
12/31/98 36,049
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund. The Division commenced operations on January 4, 1999.
Accordingly, the Standard Average Annual Total Return for the Division will
be shown when it becomes available.
** The Division commenced operations on January 4, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
39
<PAGE> 52
FOUNDERS GROWTH FUND*
(Division 30)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital. The Fund invests primarily in common stocks
of well established, high-quality growth companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 14,034
12/31/90 12,424
12/31/91 18,131
12/31/92 18,714
12/31/93 23,263
12/31/94 22,264
12/31/95 32,098
12/31/96 37,025
12/31/97 46,376
12/31/98 57,395
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Founders Growth Fund Division
30 for the 1 year period and since inception was 18.69% and 18.97%,
respectively. The Division commenced operations on July 1, 1996.
40
<PAGE> 53
NEUBERGER BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of large-capitalization companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 3, 1993 $ Value
- ------------------------- -------
<S> <C>
08/03/93 $10,000
12/31/93 10,692
12/31/94 10,748
12/31/95 14,047
12/31/96 16,370
12/31/97 19,097
12/31/98 19,353
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 3, 1993
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,333
12/31/90 11,088
12/31/91 12,952
12/31/92 12,855
12/31/93 16,783
12/31/94 16,476
12/31/95 18,731
12/31/96 21,609
12/31/97 24,246
12/31/98 30,909
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Neuberger Berman Guardian Trust was formerly known as Neuberger&Berman
Guardian Trust. The Standard Average Annual Total Return for the Neuberger
Berman Guardian Trust Division 29 for the 1 year period and since inception
was (3.27)% and 10.14% , respectively. The Division commenced operations on
July 1, 1996.
** The Standard Average Annual Total Return for the Putnam Global Growth
Fund -- Class A Division 28 for the 1 year period and since inception was
22.41% and 16.37%, respectively. The Division commenced operations on July 1,
1996.
41
<PAGE> 54
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
12/31/90 11,041
12/31/91 18,317
12/31/92 22,780
12/31/93 29,932
12/31/94 30,620
12/31/95 44,354
12/31/96 48,656
12/31/97 59,023
12/31/98 72,667
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,770
12/31/90 11,401
12/31/91 15,899
12/31/92 17,739
12/31/93 23,196
12/31/94 23,483
12/31/95 36,262
12/31/96 37,540
12/31/97 40,949
12/31/98 44,993
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Putnam New Opportunities
Fund -- Class A Division 26 for the 1 year period and since inception was
18.05% and 13.19%, respectively. The Division commenced operations on July 1,
1996.
** The Standard Average Annual Total Return for the Putnam OTC & Emerging Growth
Fund -- Class A Division 27 for the 1 year period and since inception was
4.87% and 0.91%, respectively. The Division commenced operations on July 1,
1996.
42
<PAGE> 55
SCUDDER GROWTH AND
INCOME FUND*
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,480
12/31/90 12,040
12/31/91 15,241
12/31/92 16,491
12/31/93 18,828
12/31/94 19,079
12/31/95 24,719
12/31/96 29,818
12/31/97 38,404
12/31/98 40,322
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,768
12/31/90 9,241
12/31/91 12,654
12/31/92 14,238
12/31/93 16,652
12/31/94 16,461
12/31/95 21,767
12/31/96 26,028
12/31/97 33,122
12/31/98 31,551
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.21% and
16.20%, respectively. The Division commenced operations on July 1, 1996.
** The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
43
<PAGE> 56
TEMPLETON ASSET
ALLOCATION FUND*
Class 1 Shares
(Division 19)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of total return. The Fund tries to achieve its investment
goal through a flexible policy of investing in the following market segments:
stocks and debt securities of any nation, including emerging markets, and money
market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,186
12/31/90 10,164
12/31/91 12,821
12/31/92 13,685
12/31/93 17,050
12/31/94 16,328
12/31/95 19,759
12/31/96 23,197
12/31/97 26,461
12/31/98 27,803
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON FOREIGN FUND**
Class A Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund tries to achieve its investment goal by
a flexible policy of investing primarily in the equity securities of companies
outside the United States, including emerging markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,924
12/31/90 12,413
12/31/91 14,537
12/31/92 14,407
12/31/93 19,517
12/31/94 19,393
12/31/95 21,346
12/31/96 24,920
12/31/97 26,307
12/31/98 24,777
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton Asset Allocation
Fund -- Class 1 Division 19 for the 1 and 3 year period and since inception
was 0.29%, 10.65% and 11.73%, respectively. The Division commenced operations
on July 11, 1994.
** The Templeton Foreign Fund -- Class A Shares was formerly known as the
Templeton Foreign Fund -- Class 1 Shares. The Standard Average Annual Total
Return for the Templeton Foreign Fund -- Class A Division 32 for the 1 year
period and since inception was (10.11)% and 0.80%, respectively. The Division
commenced operations on July 1, 1996. On January 1, 1993, the Templeton
Foreign Fund -- Class A implemented a Rule 12b-1 plan, which affects
subsequent performance.
44
<PAGE> 57
TEMPLETON INTERNATIONAL FUND*
Class 1 Shares
(Division 20)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve long-term capital growth. The Fund invests primarily in stocks
and debt obligations of companies outside the United States, including emerging
markets. Any income realized will be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 10,000
12/31/92 9,311
12/31/93 13,549
12/31/94 13,077
12/31/95 14,952
12/31/96 18,317
12/31/97 20,613
12/31/98 22,251
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
CORPORATE FUND**
(Division 22)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide investors with a high level of current income consistent with
the maintenance of principal and liquidity. The Fund invests in a diversified
portfolio of investment grade corporate and Government bonds. Under normal
circumstances, at least 65% of the Fund's assets are invested in straight debt
corporate bonds rated a minimum of Baa3 by Moody's Investor Service Inc. or BBB-
by Standard and Poor's Ratings Group at the time of purchase. Additionally, at
least 80% of the Fund's assets will normally be invested in a combination of
investment grade corporate bonds and securities of the U.S. Government and its
agencies and instrumentalities. The dollar weighted average maturity of the Fund
is expected to range from 15 to 25 years.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,376
12/31/90 11,933
12/31/91 14,251
12/31/92 15,451
12/31/93 17,472
12/31/94 16,344
12/31/95 20,404
12/31/96 20,256
12/31/97 22,752
12/31/98 24,582
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton International
Fund -- Class 1 Division 20 for the 1 and 3 year period and since inception
was 3.04%, 12.81% and 11.80%, respectively. The Division commenced operations
on July 11, 1994.
** The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund -- Long-Term Corporate Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.12% and 8.26%,
respectively. The Division commenced operations on July 1, 1996.
45
<PAGE> 58
VANGUARD LONG-TERM
TREASURY FUND*
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide a high level of current income consistent with the maintenance
of principal and liquidity. The Fund invests at least 85% of its assets in
long-term securities backed by the full faith and credit of the U.S. Government.
Also, at least 65% of the Fund's assets will be invested in U.S. Treasury bills,
notes and bonds. The dollar weighted average maturity of the Fund is expected to
range from 15 to 30 years.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,649
12/31/90 12,170
12/31/91 14,116
12/31/92 14,974
12/31/93 17,272
12/31/94 15,859
12/31/95 20,380
12/31/96 19,753
12/31/97 22,211
12/31/98 24,835
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LIFESTRATEGY
CONSERVATIVE GROWTH FUND**
(Division 54)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low-to-moderate growth of capital by investing in a
relatively fixed combination of other Vanguard funds. Through its investments in
other funds, LifeStrategy Conservative Growth Fund allocates 25%-50% of its
assets to stocks, 50%-75% of its assets to bonds, and 10%-25% of its assets to
cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,979
12/31/95 12,258
12/31/96 13,361
12/31/97 15,416
12/31/98 17,628
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund-Long-Term U.S. Treasury Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Treasury Fund Division
23 for the 1 year period and since inception was 6.76% and 9.91%,
respectively. The Division commenced operations on July 1, 1996.
** The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
46
<PAGE> 59
VANGUARD LIFESTRATEGY
GROWTH FUND*
(Division 52)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital by investing in a relatively fixed combination of other
Vanguard funds. Through its investments in other funds, LifeStrategy Growth Fund
allocates 65%-90% of its assets to stocks, 10%-35% of its assets to bonds, and
0%-25% of its assets to cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,959
12/31/95 12,715
12/31/96 14,495
12/31/97 17,507
12/31/98 20,969
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LIFESTRATEGY
MODERATE GROWTH FUND*
(Division 53)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital and a reasonable level of current income by investing in
a relatively fixed combination of other Vanguard funds. Through its investments
in other funds, LifeStrategy Moderate Growth Fund allocates 45%-70% of its
assets to stocks, 30%-55% of its assets to bonds, and 0%-25% of its assets to
cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,899
12/31/95 12,512
12/31/96 13,929
12/31/97 16,480
12/31/98 19,353
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
47
<PAGE> 60
VANGUARD WELLINGTON FUND*
(Division 25)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to conserve capital and provide moderate long-term growth and moderate
income. The Fund invests approximately 60% to 70% of its assets in
dividend-paying stocks of established, large- and medium-sized companies that,
in the adviser's opinion, are undervalued but whose prospects are improving. The
remaining 30% to 40% of assets are invested primarily in high-quality,
longer-term corporate bonds with some exposure to U.S. Treasury, government
agency, and mortgage-backed bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,011
12/31/90 11,530
12/31/91 14,082
12/31/92 15,009
12/31/93 16,828
12/31/94 16,540
12/31/95 21,716
12/31/96 24,906
12/31/97 30,299
12/31/98 33,526
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD WINDSOR II FUND**
(Division 24)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital by investing mainly in the equity
securities of large and medium-size companies whose stocks are considered by the
Fund's advisers to be undervalued and out of favor with investors. The Fund's
secondary objective is to provide some dividend income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,625
12/31/90 11,225
12/31/91 14,268
12/31/92 15,781
12/31/93 17,707
12/31/94 17,285
12/31/95 23,703
12/31/96 29,051
12/31/97 37,970
12/31/98 43,627
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund. The Standard Average Annual Total Return for the Vanguard Wellington
Fund Division 25 for the 1 year period and since inception was 5.61% and
15.41%, respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund. The Standard Average Annual Total Return for Vanguard Windsor II Fund
Division 24 for the 1 year period and since inception was 9.84% and 21.61%,
respectively. The Division commenced operations on July 1, 1996.
48
<PAGE> 61
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 Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided, unless you otherwise so specify.
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 the Money Market Division option chosen by your employer.
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 option chosen by your employer. 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.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
49
<PAGE> 62
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the 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 55 investment options offered in Portfolio Director Plus. This
includes 2 Fixed Account Options and 53 Variable Account Options. The Funds that
underlie the Variable Account Options are registered as investment companies
under and are subject to regulation of 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 "Summary" 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. As noted elsewhere in the prospectus, you will not be permitted to
select from more than 30 Variable Account Options, and in some cases less than
30, depending on your employer's plan and the type of annuity contract selected.
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.
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. Any
such account closure will be subject to applicable distribution restrictions
under the contract and/or under your employer's plan.
PURCHASE UNIT -- a measuring unit used to calculate our 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.
50
<PAGE> 63
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 Plus, 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 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.
51
<PAGE> 64
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 that will be deducted from the amount withdrawn. 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.
52
<PAGE> 65
- --------------------------------------------------------------------------------
- - 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 1/2%.
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.
53
<PAGE> 66
- --------------------------------------------------------------------------------
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.
54
<PAGE> 67
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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
PAYOUT DATE
The Payout Date is the dates elected by you on which your payout (annuity)
payments will start. The dates 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> 68
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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, in the form of an
excise tax, if you do not meet an exception under 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,
- The payments will be guaranteed for a 10 year period,
- 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, and
- 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, subject to any limitations under the
contract or the plan.
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> 69
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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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> 70
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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> 71
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. An exchange may require the issuance of a contract or may be subject
to any other requirements that the Company may impose.
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 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 Plus,
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> 72
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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 22 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 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
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<PAGE> 73
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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> 74
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 and by the plan, if any.
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 not exceeding the Beneficiary's life
expectancy.
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 generally 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 is not required to be. Also,
a Contingent Contract
Owner may be designated.
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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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
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. If
Standard Average Annual Return for a Division is not available for a stated
period, we may show the Standard Average Annual Return since Division inception.
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. The SEC
staff takes the position that performance information of an underlying Fund
reduced by Account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted. For Divisions 51-57, which recently
commenced operations, only Nonstandard Average Annual Total Returns are shown.
Accordingly, the Standard Average Annual Total Return for each of these
Divisions will be shown when it becomes available.
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. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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 or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or 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> 77
- --------------------------------------------------------------------------------
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 and the American General Money Market Division the
7-day Current Yield for the last 7 days ended December 31, 1998 was 3.64% and
3.90%, respectively.
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 and the American General Money Market
Division the 7-day Effective Yield for the last 7 days ended December 31, 1998
was 3.71% and 3.97%, respectively.
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.
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 eight 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.
65
<PAGE> 78
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)(1)................... 09/06/83 -- 10.38% 12.89% 14.78% 12.12%
AGSPC Capital Conservation (Division 7).................. 01/16/86 -- 6.75 4.16 3.20 1.46
AGSPC Government Securities (Division 8)................. 01/16/86 -- 7.05 4.35 3.90 2.95
AGSPC Growth (Division 15)............................... 04/29/94 20.32% -- -- 17.04 11.89
AGSPC Growth & Income (Division 16)...................... 04/29/94 17.76 -- -- 18.04 8.35
AGSPC International Equities (Division 11)............... 10/02/89 4.08 -- 7.27 6.44 12.50
AGSPC International Government Bond (Division 13)........ 10/01/91 7.78 -- 5.70 2.50 10.86
AGSPC MidCap Index (Division 4)***....................... 10/01/91*** 16.41 -- 16.76 20.61 12.74
AGSPC Money Market (Division 6).......................... 01/16/86 -- 4.19 2.97 2.45 (0.62)
AGSPC Science & Technology (Division 17)................. 04/29/94 27.92 -- -- 15.92 35.63
AGSPC Small Cap Index (Division 14)...................... 05/01/92 11.71 -- 9.72 9.35 (7.34)
AGSPC Social Awareness (Division 12)..................... 10/02/89 15.34 -- 21.93 25.92 20.96
AGSPC Stock Index (Division 10).......................... 04/20/87 -- 17.23 21.99 25.62 22.07
American Century Ultra (Division 31)..................... 07/01/96 21.68 -- -- -- 28.07
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18).......................................... 07/11/94 11.65 -- -- 6.75 (8.86)
Founders Growth (Division 30)............................ 07/01/96 18.97 -- -- -- 18.69
Neuberger Berman Guardian Trust (Division 29)............ 07/01/96 10.14 -- -- -- (3.27)
Putnam Global Growth -- Class A (Division 28)............ 07/01/96 16.37 -- -- -- 22.41
Putnam New Opportunities -- Class A (Division 26)........ 07/01/96 13.19 -- -- -- 18.05
Putnam OTC & Emerging Growth -- Class A (Division 27).... 07/01/96 0.91 -- -- -- 4.87
Scudder Growth and Income (Division 21)(2)............... 07/01/96 16.20 -- -- -- 0.21
Templeton Foreign -- Class A (Division 32)............... 07/01/96 0.80 -- -- -- (10.11)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19).... 07/11/94 11.73 -- -- 10.65 0.29
Templeton International -- Class 1 (Division 20)....... 07/11/94 11.80 -- -- 12.81 3.04
Vanguard Long-Term Corporate (Division 22)**............. 07/01/96 8.26 -- -- -- 3.12
Vanguard Long-Term Treasury (Division 23)**.............. 07/01/96 9.91 -- -- -- 6.76
Vanguard Wellington (Division 25)........................ 07/01/96 15.41 -- -- -- 5.61
Vanguard Windsor II (Division 24)........................ 07/01/96 21.61 -- -- -- 9.84
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. The Standard Average Annual Total Return for the Evergreen Growth
and Income Fund -- Class A Division 56, the Evergreen Small Cap Value
Fund -- Class A Division 55 the Evergreen Value Fund -- Class A Division
57, the T. Rowe Price Small Cap Stock Fund Division 51, the Vanguard
LifeStrategy Conservative Growth Fund Division 54, the Vanguard
LifeStrategy Growth Fund Division 52 and the Vanguard LifeStrategy Moderate
Growth Fund Division 53 will be shown when it becomes available.
(1) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
66
<PAGE> 79
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31).................. 11/02/81 -- 22.65% 18.24% 20.95% 28.07%
Dreyfus Variable Investment Fund --Small Cap Portfolio
(Division 18)....................................... 08/31/90 35.59% -- 10.78 6.75 (8.86)
Evergreen Growth and Income -- Class A (Division
56)................................................. 01/03/95 20.59 -- -- 16.84 (0.83)
Evergreen Small Cap Value -- Class A (Division
55)(1).............................................. 01/03/95 15.38 -- -- 11.24 (14.53)
Evergreen Value -- Class A (Division 57).............. 04/12/85 -- 13.62 15.30 15.42 3.50
Founders Growth (Division 30)......................... 01/05/62 -- 19.03 19.24 20.17 18.69
Neuberger Berman Guardian Trust (Division 29)......... 08/03/93 12.92 -- 11.91 9.85 (3.27)
Putnam Global Growth -- Class A (Division 28)......... 09/01/67 -- 11.88 12.31 16.90 22.41
Putnam New Opportunities -- Class A (Division 26)..... 08/31/90 26.83 -- 18.85 16.61 18.05
Putnam OTC & Emerging Growth -- Class A (Division
27)................................................. 11/01/82 -- 16.17 13.51 5.93 4.87
Scudder Growth and Income (Division 21)............... 03/15/29 -- 14.90 15.84 16.43 0.21
T. Rowe Price Small Cap Stock (Division 51)........... 06/01/50 12.12 12.96 11.79 (9.08)
Templeton Foreign -- Class A (Division 32)(2)......... 10/05/82 -- 9.44 3.99 3.50 (10.11)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division
19).............................................. 08/24/88 -- 10.71 9.53 10.65 0.29
Templeton International -- Class 1 (Division 20).... 05/01/92 12.68 -- 9.69 12.81 3.04
Vanguard LifeStrategy Conservative Growth (Division
54)................................................. 09/30/94 13.43 -- -- 11.49 9.29
Vanguard LifeStrategy Growth (Division 52)............ 09/30/94 18.29 -- -- 16.87 14.71
Vanguard LifeStrategy Moderate Growth (Division 53)... 09/30/94 16.02 -- -- 14.32 12.37
Vanguard Long-Term Corporate (Division 22)**.......... 07/09/73 -- 9.35 6.23 4.85 3.12
Vanguard Long-Term Treasury (Division 23)**........... 05/19/86 -- 9.46 6.71 5.27 6.76
Vanguard Wellington (Division 25)..................... 07/01/29 -- 12.80 14.13 14.25 5.61
Vanguard Windsor II (Division 24)..................... 06/24/85 -- 15.81 19.20 21.36 9.84
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 55-57. The
Standard Average Annual Total Return for Divisions 51-57 will be shown when
it becomes available. 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 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) The Evergreen Small Cap Value fund was formerly known as the Evergreen Small
Cap Equity Income Fund.
(2) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
67
<PAGE> 80
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)......................... 09/06/83 -- 10.44% 13.56% 16.09% 17.19%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 6.81 5.05 4.80 6.30
AGSPC Government Securities (Division 8).................... 01/16/86 -- 7.11 5.23 5.48 7.86
AGSPC Growth (Division 15).................................. 04/29/94 20.93% -- -- 18.31 16.96
AGSPC Growth & Income (Division 16)......................... 04/29/94 18.41 -- -- 19.30 13.41
AGSPC International Equities (Division 11).................. 10/02/89 4.13 -- 8.08 7.95 17.57
AGSPC International Government Bond (Division 13)........... 10/01/91 7.84 -- 6.55 4.12 15.92
AGSPC MidCap Index (Division 4)***.......................... 10/01/91*** 16.48 -- 17.35 21.81 17.80
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.25 3.90 4.08 4.12
AGSPC Science & Technology (Division 17).................... 04/29/94 28.42 -- -- 17.21 40.71
AGSPC Small Cap Index (Division 14)......................... 05/01/92 11.77 -- 10.46 10.78 (2.92)
AGSPC Social Awareness (Division 12)........................ 10/02/89 15.40 -- 22.44 27.04 26.03
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 17.29 22.51 26.74 27.14
American Century Ultra (Division 31)........................ 07/01/96 23.22 -- -- -- 33.14
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 12.47 -- -- 8.25 (4.51)
Founders Growth (Division 30)............................... 07/01/96 20.56 -- -- -- 23.76
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 11.91 -- -- -- 1.34
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 18.01 -- -- -- 27.48
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 14.90 -- -- -- 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 2.85 -- -- -- 9.87
Scudder Growth and Income (Division 21)..................... 07/01/96 17.85 -- -- -- 4.99
Templeton Foreign -- Class A (Division 32).................. 07/01/96 2.73 -- -- -- (5.82)
Templeton Variable Products Series Fund -- -- -- -- --
Templeton Asset Allocation -- Class 1 (Division 19)....... 07/11/94 12.54 -- -- 12.06 5.07
Templeton International -- Class 1 (Division 20).......... 07/11/94 12.61 -- -- 14.17 7.95
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 10.08 -- -- -- 8.04
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 11.69 -- -- -- 11.82
Vanguard Wellington (Division 25)........................... 07/01/96 17.07 -- -- -- 10.65
Vanguard Windsor II (Division 24)........................... 07/01/96 23.16 -- -- -- 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. The Standard Average Annual Total Return for the Evergreen Growth
and Income Fund -- Class A Division 56, the Evergreen Small Cap Value
Fund -- Class A Division 55, the Evergreen Value Fund -- Class A Division
57, the T. Rowe Price Small Cap Stock Fund Division 51, the Vanguard
LifeStrategy Conservative Growth Fund Division 54, the Vanguard
LifeStrategy Growth Fund Division 52 and the Vanguard LifeStrategy Moderate
Growth Fund Division 53 will be shown when it becomes available.
68
<PAGE> 81
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)....................... 11/02/81 -- 22.70% 18.82% 22.15% 33.14%
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................ 08/31/90 35.63% -- 11.50 8.25 (4.51)
Evergreen Growth and Income -- Class A (Division 56)....... 01/03/95 21.37 -- -- 18.11 3.90
Evergreen Small Cap Value -- Class A (Division 55)......... 01/03/95 16.25 -- -- 12.63 (10.46)
Evergreen Value -- Class A (Division 57)................... 04/12/85 -- 13.68 15.93 16.72 8.44
Founders Growth (Division 30).............................. 01/05/62 -- 19.09 19.80 21.38 23.76
Neuberger Berman Guardian Trust (Division 29).............. 08/03/93 12.98 -- 12.60 11.27 1.34
Putnam Global Growth -- Class A (Division 28).............. 09/01/67 -- 11.95 12.99 18.17 27.48
Putnam New Opportunities -- Class A (Division 26).......... 08/31/90 26.88 -- 19.41 17.89 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 11/01/82 -- 16.23 14.17 7.46 9.87
Scudder Growth and Income (Division 21).................... 03/15/29 -- 14.96 16.45 17.72 4.99
T. Rowe Price Small Cap Stock (Division 51)................ 06/01/50 -- 12.18 13.63 13.17 (4.74)
Templeton Foreign -- Class A (Division 32)(1).............. 10/05/82 -- 9.50 4.89 5.09 (5.82)
Templeton Variable Products Series Fund --
Templeton Asset Allocation -- Class 1 (Division 19)...... 08/24/88 -- 10.77 10.27 12.06 5.07
Templeton International -- Class 1 (Division 20)......... 05/01/92 12.74 -- 10.43 14.17 7.95
Vanguard LifeStrategy Conservative Growth (Division 54).... 09/30/94 14.27 -- -- 12.88 14.35
Vanguard LifeStrategy Growth (Division 52)................. 09/30/94 19.03 -- -- 18.15 19.77
Vanguard LifeStrategy Moderate Growth (Division 53)........ 09/30/94 16.81 -- -- 15.65 17.43
Vanguard Long-Term Corporate (Division 22)**............... 07/09/73 -- 9.41 7.07 6.41 8.04
Vanguard Long-Term Treasury (Division 23)**................ 05/19/86 -- 9.52 7.53 6.81 11.82
Vanguard Wellington (Division 25).......................... 07/01/29 -- 12.86 14.78 15.58 10.65
Vanguard Windsor II (Division 24).......................... 06/24/85 -- 15.87 19.76 22.55 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 55-57. The
Standard Average Annual Total Return for Divisions 51-57 will be shown when
it becomes available. 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 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
69
<PAGE> 82
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)......................... 09/06/83 -- 169.99% 88.88% 56.47% 17.19%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 93.33 27.96 15.11 6.30
AGSPC Government Securities (Division 8).................... 01/16/86 -- 98.83 29.06 17.35 7.86
AGSPC Growth (Division 15).................................. 04/29/94 142.86% -- -- 65.59 16.96
AGSPC Growth & Income (Division 16)......................... 04/29/94 120.12 -- -- 69.77 13.41
AGSPC International Equities (Division 11).................. 10/02/89 45.46 -- 47.47 25.78 17.57
AGSPC International Government Bond (Division 13)........... 10/01/91 72.80 -- 37.32 12.88 15.92
AGSPC MidCap Index (Division 4)***.......................... 10/01/91*** 202.14 -- 122.59 80.73 17.80
AGSPC Money Market (Division 6)............................. 01/16/86 -- 51.60 21.07 12.73 4.12
AGSPC Science & Technology (Division 17).................... 04/29/94 221.62 -- -- 61.04 40.71
AGSPC Small Cap Index (Division 14)......................... 05/01/92 110.05 -- 64.46 35.96 (2.92)
AGSPC Social Awareness (Division 12)........................ 10/02/89 276.23 -- 175.23 105.02 26.03
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 392.64 175.95 103.59 27.14
American Century Ultra (Division 31)........................ 07/01/96 68.55 -- -- -- 33.14
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 69.08 -- -- 26.85 (4.51)
Founders Growth (Division 30)............................... 07/01/96 59.59 -- -- -- 23.76
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 32.50 -- -- -- 1.34
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 51.29 -- -- -- 27.48
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 41.52 -- -- -- 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 7.27 -- -- -- 9.87
Scudder Growth and Income (Division 21)..................... 07/01/96 50.77 -- -- -- 4.99
T. Rowe Price Small Cap Stock (Division 51)................. 09/22/98 16.08 -- -- -- --
Templeton Foreign -- Class A (Division 32).................. 07/01/96 6.97 -- -- -- (5.82)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)....... 07/11/94 69.58 -- -- 40.71 5.07
Templeton International -- Class 1 (Division 20).......... 07/11/94 70.04 -- -- 48.82 7.95
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 7.67 -- -- -- --
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 13.22 -- -- -- --
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 12.35 -- -- -- --
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 27.13 -- -- -- 8.04
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 31.83 -- -- -- 11.82
Vanguard Wellington (Division 25)........................... 07/01/96 48.28 -- -- -- 10.65
Vanguard Windsor II (Division 24)........................... 07/01/96 68.32 -- -- -- 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC3 Funds recently commenced operation no actual performance
exists. The Evergreen Growth and Income Fund -- Class A Division 56, the
Evergreen Small Cap Value Fund -- Class A Division 55 and the Evergreen
Value Fund -- Class A Division 57 have only recently been offered through
Portfolio Director Plus. Accordingly, no performance information is
available for such Divisions.
70
<PAGE> 83
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)........................ 11/02/81 -- 673.68% 136.79% 82.24% 33.14%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)......................... 08/31/90 1,166.28% -- 72.34 26.85 (4.51)
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 116.55 -- -- 64.78 3.90
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 82.37 -- -- 42.89 (10.46)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 260.49 109.37 59.01 8.44
Founders Growth (Division 30)............................... 01/05/62 -- 473.95 146.72 78.81 23.76
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 93.53 -- 81.00 37.77 1.34
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 209.09 84.17 65.01 27.48
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 626.67 -- 142.78 63.83 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 349.93 93.97 24.08 9.87
Scudder Growth and Income (Division 21)..................... 03/15/29 -- 303.22 114.16 63.12 4.99
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 215.51 89.47 44.95 (4.74)
Templeton Foreign -- Class A (Division 32)(1)............... 10/05/82 -- 147.77 26.95 16.07 (5.82)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)....... 08/24/88 -- 178.03 63.07 40.71 5.07
Templeton International -- Class 1 (Division 20).......... 05/01/92 122.51 -- 64.23 48.82 7.95
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 76.28 -- -- 43.82 14.35
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 109.69 -- -- 64.91 19.77
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 93.53 -- -- 54.68 17.43
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 145.82 40.69 20.48 8.04
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 148.35 43.79 21.86 11.82
Vanguard Wellington (Division 25)........................... 07/01/29 -- 235.26 99.22 54.38 10.65
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 336.27 146.38 84.06 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 51-57.
Accordingly, the Standard Average Annual Total Return for Divisions 51-57
will be shown when it becomes available. 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 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
71
<PAGE> 84
TABLE VII
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 DECEMBER 31**
-------------------------------------------------------------------------------------
FUND AND DIVISION***** 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------ ------ ------ ------ ------ ----- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)....... 17.19% 21.40% 9.99% 23.54% (2.29)% 8.19% (1.71)% 20.13% (3.38)% 15.81%
AGSPC Capital Conservation (Division 7)... 6.30 7.49 0.75 19.58 (7.04) 10.88 7.55 16.00 (1.28) 10.63
AGSPC Government Securities (Division
8)...................................... 7.86 7.83 0.90 16.31 (5.44) 9.70 6.14 13.59 4.91 11.03
AGSPC Growth (Division 15)................ 16.96 19.80 18.18 46.40 0.18 -- -- -- -- --
AGSPC Growth & Income (Division 16)....... 13.41 22.60 22.10 30.55 (0.68) -- -- -- -- --
AGSPC International Equities (Division
11)..................................... 17.57 1.18 5.75 9.67 6.90 28.58 (14.31) 10.06 (20.90) 2.84
AGSPC International Government Bond
(Division 13)........................... 15.92 (5.79) 3.36 17.63 3.42 13.08 2.05 9.05 -- --
AGSPC MidCap Index (Division 4)****....... 17.80 30.45 17.61 29.24 (4.70) 11.78 8.79 11.63 -- --
AGSPC Money Market (Division 6)........... 4.12 4.13 3.97 4.51 2.77 1.67 2.22 4.49 6.83 7.92
AGSPC Science & Technology (Division
17)..................................... 40.71 1.57 12.68 60.07 24.77 -- -- -- -- --
AGSPC Small Cap Index (Division 14)....... (2.92) 21.18 15.57 26.39 (4.30) 14.77 11.28 -- -- --
AGSPC Social Awareness (Division 12)...... 26.03 32.52 22.75 37.57 (2.42) 6.84 2.31 26.63 (2.21) 1.00
AGSPC Stock Index (Division 10)........... 27.14 31.77 21.53 35.95 (0.30) 8.78 5.58 27.70 (4.83) 27.88
American Century Ultra (Division 31)...... 33.14 21.74 3.98 -- -- -- -- -- -- --
Dreyfus Variable Investment Fund -- Small
Cap Portfolio (Division 18)............. (4.51) 15.37 15.14 27.78 4.32 -- -- -- -- --
Founders Growth (Division 30)............. 23.76 25.25 2.95 -- -- -- -- -- --
Neuberger Berman Guardian Trust (Division
29)(1).................................. 1.34 16.66 12.08 -- -- -- -- -- -- --
Putnam Global Growth -- Class A (Division
28)..................................... 27.48 12.20 5.77 -- -- -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)........................... 23.12 21.30 (5.24) -- -- -- -- -- -- --
Putnam OTC & Emerging Growth -- Class A
(Division 27)........................... 9.87 9.08 (10.50) -- -- -- -- -- -- --
Scudder Growth and Income (Division 21)... 4.99 28.80 11.50 -- -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51)..................................... 16.08 -- -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)..................................... (5.82) 5.57 7.59 -- -- -- -- -- -- --
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1
(Division 19)......................... 5.07 14.07 17.40 21.02 (0.41) -- -- -- -- --
Templeton International -- Class 1
(Division 20)......................... 7.95 12.54 22.50 14.34 (0.07) -- -- -- -- --
Vanguard LifeStrategy Conservative Growth
(Division 54)........................... 7.67 -- -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52)..................................... 13.22 -- -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)........................... 12.35 -- -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)***.................................. 8.04 12.32 4.76 -- -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***.................................. 11.82 12.44 4.85 -- -- -- -- -- -- --
Vanguard Wellington (Division 25)......... 10.65 21.65 10.16 -- -- -- -- -- -- --
Vanguard Windsor II (Division 24)......... 14.90 30.70 12.09 -- -- -- -- -- -- --
</TABLE>
72
<PAGE> 85
TABLE VII -- (CONTINUED)
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>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
-----------------------------------------------------------------------------------------------
FUND AND DIVISION***** 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -------------------------------- ------ ------ ------ ------ ----- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division
5)............................ 169.99% 130.40% 89.79% 72.55% 39.67% 42.94% 32.12% 34.42% 11.89% 15.81%
AGSPC Capital Conservation
(Division 7).................. 93.33 81.87 69.20 67.95 40.44 51.08 36.26 26.69 9.22 10.63
AGSPC Government Securities
(Division 8).................. 98.83 84.33 70.95 69.43 45.67 54.06 40.44 32.31 16.48 11.03
AGSPC Growth (Division 15)...... 142.86 107.65 73.33 46.67 0.18 -- -- -- -- --
AGSPC Growth & Income (Division
16)........................... 120.12 94.09 58.31 29.66 (0.68) -- -- -- -- --
AGSPC International Equities
(Division 11)................. 45.46 23.73 22.29 15.65 5.45 (1.36) (23.29) (10.48) (18.66) 2.84
AGSPC International Government
Bond (Division 13)............ 72.80 49.06 58.22 53.08 30.14 25.83 11.28 9.05 -- --
AGSPC MidCap Index (Division
4)****........................ 202.14 156.48 96.61 67.18 29.36 35.74 21.43 11.63 -- --
AGSPC Money Market (Division
6)............................ 51.60 45.59 39.82 34.47 28.67 25.21 23.16 20.48 15.30 7.92
AGSPC Science & Technology
(Division 17)................. 221.62 128.57 125.05 99.72 24.77 -- -- -- -- --
AGSPC Small Cap Index (Division
14)........................... 110.05 116.36 78.54 54.49 22.23 27.72 11.28 -- -- --
AGSPC Social Awareness (Division
12)........................... 276.23 198.53 125.27 83.51 33.39 36.70 27.95 25.06 (1.23) 1.00
AGSPC Stock Index (Division
10)........................... 392.64 287.48 194.06 141.97 77.99 78.53 64.11 55.43 21.71 27.88
American Century Ultra (Division
31)........................... 68.55 26.59 3.98 -- -- -- -- -- -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)................. 69.08 77.06 53.47 33.29 4.32 -- -- -- -- --
Founders Growth (Division 30)... 59.59 28.95 2.95 -- -- -- -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)................. 32.50 30.74 12.08 -- -- -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)................. 51.29 18.68 5.77 -- -- -- -- -- -- --
Putnam New
Opportunities -- Class A
(Division 26)................. 41.52 14.95 (5.24) -- -- -- -- -- -- --
Putnam OTC & Emerging
Growth -- Class A (Division
27)........................... 7.27 (2.37) (10.50) -- -- -- -- -- -- --
Scudder Growth and Income
(Division 21)................. 50.77 43.60 11.50 -- -- -- -- -- -- --
T. Rowe Price Small Cap Stock
(Division 51)................. 16.08 -- -- -- -- -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)................. 6.97 13.58 7.59 -- -- -- -- -- -- --
Templeton Variable Products
Series Fund
Templeton Asset
Allocation -- Class 1
(Division 19)............... 69.58 61.39 41.48 20.52 (0.41) -- -- -- -- --
Templeton
International -- Class 1
(Division 20)............... 70.04 57.42 39.97 14.26 (0.07) -- -- -- -- --
Vanguard LifeStrategy
Conservative Growth (Division
54)........................... 7.67 -- -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth
(Division 52)................. 13.22 -- -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate
Growth (Division 53).......... 12.35 -- -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate
(Division 22)***.............. 27.13 17.66 4.76 -- -- -- -- -- -- --
Vanguard Long-Term Treasury
(Division 23)***.............. 31.83 17.89 4.85 -- -- -- -- -- -- --
Vanguard Wellington (Division
25)........................... 48.28 34.01 10.16 -- -- -- -- -- -- --
Vanguard Windsor II (Division
24)........................... 68.32 46.49 12.09 -- -- -- -- -- -- --
</TABLE>
- ------------
* The performance figures in the Table reflect the investment performance
for the Divisions for the stated periods and should not be used to infer
that future performance will be the same. The Annual and Cumulative Change
in Purchase Unit Value figures are based on the average and cumulative
changes in Purchase Unit Value for the stated period in a corresponding
Division of Separate Account A for a different Contract offered by the
Company and have been restated to take into account the fees and charges
under Portfolio Director Plus other than the surrender charge and account
maintenance fee. The Contracts offered by this prospectus became available
for purchase on September 22, 1998.
** For the year in which the underlying Division commenced operations, less
than a full year's performance has been reflected, which is not
annualized.
*** The performance figures 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.
**** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
***** Since the AGSPC3 Fund recently commenced operations no actual performance
exists. The Evergreen Growth and Income Fund -- Class A Division 56, the
Evergreen Small Cap Value Fund -- Class A Division 55, and the Evergreen
Value Fund -- Class A Division 57 have only recently been offered through
Portfolio Director Plus. Accordingly, no performance information is
available for such Divisions.
73
<PAGE> 86
TABLE VIII
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 DECEMBER 31**
--------------------------------------------------------
FUND AND DIVISION*** 1998 1997 1996 1995 1994
- --------------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division 31)... 33.14% 21.74% 12.43% 36.23% (4.63)%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18).... (4.51) 15.37 15.14 27.78 6.33
Evergreen Growth and Income -- Class A
(Division 56)........................ 3.90 29.66 22.31 31.42 --
Evergreen Small Cap Value -- Class A
(Division 55)........................ (10.46) 32.06 20.83 27.64 --
Evergreen Value -- Class A (Division
57).................................. 8.44 24.51 17.77 30.54 0.87
Founders Growth (Division 30).......... 23.76 25.25 15.35 44.17 (4.29)
Neuberger Berman Guardian Trust
(Division 29)........................ 1.34 16.66 16.54 30.69 0.53
Putnam Global Growth -- Class A
(Division 28)........................ 27.48 12.20 15.37 13.68 (1.83)
Putnam New Opportunities -- Class A
(Division 26)........................ 23.12 21.30 9.70 44.85 2.30
Putnam OTC & Emerging Growth -- Class A
(Division 27)........................ 9.87 9.08 3.53 54.42 1.24
Scudder Growth and Income (Division
21).................................. 4.99 28.80 20.63 29.56 1.33
T. Rowe Price Small Cap Stock (Division
51).................................. (4.74) 27.25 19.58 32.24 (1.15)
Templeton Foreign -- Class A (Division
32).................................. (5.82) 5.57 16.74 10.07 (0.63)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1
(Division 19)...................... 5.07 14.07 17.40 21.02 (4.24)
Templeton International -- Class 1
(Division 20)...................... 7.95 12.54 22.50 14.34 (3.49)
Vanguard LifeStrategy Conservative
Growth (Division 54)................. 14.35 15.38 9.00 22.84 (0.21)
Vanguard LifeStrategy Growth (Division
52).................................. 19.77 20.78 14.00 27.68 (0.41)
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ 17.43 18.31 11.33 26.39 (1.01)
Vanguard Long-Term Corporate (Division
22)****.............................. 8.04 12.32 (0.72) 24.84 (6.46)
Vanguard Long-Term Treasury (Division
23)****.............................. 11.82 12.44 (3.08) 28.51 (8.18)
Vanguard Wellington (Division 25)...... 10.65 21.65 14.69 31.29 (1.71)
Vanguard Windsor II (Division 24)...... 14.90 30.70 22.56 37.13 (2.38)
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION*** 1993 1992 1991 1990 1989
- --------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division 31)... 20.54% 0.20% 84.49% 8.22% 35.50%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18).... 66.31 69.24 156.75 1.68 --
Evergreen Growth and Income -- Class A
(Division 56)........................ -- -- -- -- --
Evergreen Small Cap Value -- Class A
(Division 55)........................ -- -- -- -- --
Evergreen Value -- Class A (Division
57).................................. 8.24 6.86 23.90 (4.39) 25.66
Founders Growth (Division 30).......... 24.31 3.22 45.94 (11.48) 40.34
Neuberger Berman Guardian Trust
(Division 29)........................ 6.92 -- -- -- --
Putnam Global Growth -- Class A
(Division 28)........................ 30.55 (0.75) 16.81 (10.09) 23.33
Putnam New Opportunities -- Class A
(Division 26)........................ 31.39 24.37 65.89 10.41 --
Putnam OTC & Emerging Growth -- Class A
(Division 27)........................ 30.76 11.58 39.46 (10.72) 27.70
Scudder Growth and Income (Division
21).................................. 14.17 8.20 26.59 (3.53) 24.80
T. Rowe Price Small Cap Stock (Division
51).................................. 16.96 12.51 36.93 (21.47) 17.68
Templeton Foreign -- Class A (Division
32).................................. 35.47 (0.89) 17.11 (3.96) 29.94
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1
(Division 19)...................... 24.59 6.74 26.13 (9.13) 11.86
Templeton International -- Class 1
(Division 20)...................... 45.51 (6.89) -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54)................. -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52).................................. -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)****.............................. 13.08 8.42 19.42 4.90 13.76
Vanguard Long-Term Treasury (Division
23)****.............................. 15.35 6.08 15.99 4.48 16.49
Vanguard Wellington (Division 25)...... 12.12 6.59 22.13 (4.00) 20.11
Vanguard Windsor II (Division 24)...... 12.20 10.61 27.11 11.09 26.25
</TABLE>
74
<PAGE> 87
TABLE VIII -- (CONTINUED)
ANNUAL AND CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(PERIOD FROM UNDERLYING FUND INCEPTION)
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION*** 1998 1997 1996 1995 1994
- ---------------------------------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division
31)............................. 673.68% 481.09% 377.31% 324.54% 211.62%
Dreyfus Variable Investment
Fund --
Small Cap Portfolio (Division
18)........................... 1,166.28 1,226.07 1,049.38 898.25 681.25
Evergreen Growth and Income --
Class A (Division 56)........... 116.55 108.42 60.74 31.42 --
Evergreen Small Cap Value -- Class
A (Division 55)................. 82.37 103.67 54.22 27.64 --
Evergreen Value -- Class A
(Division 57)................... 260.49 232.44 166.98 126.71 73.67
Founders Growth (Division 30)..... 473.95 363.76 270.25 220.98 122.64
Neuberger Berman Guardian Trust
(Division 29)................... 95.53 90.97 63.70 40.47 7.48
Putnam Global Growth -- Class A
(Division 28)................... 209.09 142.46 116.09 87.31 64.76
Putnam New Opportunities -- Class
A Division 26).................. 626.67 490.23 386.56 343.54 206.20
Putnam OTC & Emerging Growth --
Class A (Division 27)........... 349.93 309.49 275.40 262.62 134.83
Scudder Growth and Income
(Division 21)................... 303.22 284.04 198.18 147.19 90.79
T. Rowe Price Small Cap Stock
(Division 51)................... 215.51 231.22 160.28 117.67 64.61
Templeton Foreign -- Class A
(Division 32)................... 147.77 163.07 149.20 113.46 93.93
Templeton Variable Products Series
Fund
Templeton Asset Allocation --
Class 1 (Division 19)......... 178.03 164.61 131.97 97.59 63.28
Templeton International -- Class
1 (Division 20)............... 122.51 106.13 83.17 49.52 30.77
Vanguard LifeStrategy Conservative
Growth (Division 54)............ 76.28 54.16 33.61 22.58 (0.21)
Vanguard LifeStrategy Growth
(Division 52)................... 109.69 75.07 44.95 27.15 (0.41)
Vanguard LifeStrategy Moderate
Growth (Division 53)............ 93.53 64.80 39.29 25.12 (1.01)
Vanguard Long-Term Corporate
(Division 22)****............... 145.82 127.52 102.56 104.04 63.44
Vanguard Long-Term Treasury
(Division 23)****............... 148.35 122.11 97.53 103.80 58.59
Vanguard Wellington (Division
25)............................. 235.26 202.99 149.06 117.16 65.40
Vanguard Windsor II (Division
24)............................. 336.27 279.70 190.51 137.03 72.85
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION*** 1993 1992 1991 1990 1989
- ---------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division
31)............................. 226.74% 171.07% 170.52% 46.63% 35.50%
Dreyfus Variable Investment
Fund --
Small Cap Portfolio (Division
18)........................... 634.77 341.81 161.05 1.68 --
Evergreen Growth and Income --
Class A (Division 56)........... -- -- -- -- --
Evergreen Small Cap Value -- Class
A (Division 55)................. -- -- -- -- --
Evergreen Value -- Class A
(Division 57)................... 72.18 59.07 48.86 20.14 25.66
Founders Growth (Division 30)..... 132.63 87.14 81.31 24.24 40.34
Neuberger Berman Guardian Trust
(Division 29)................... 6.92 -- -- -- --
Putnam Global Growth -- Class A
(Division 28)................... 67.83 28.55 29.52 10.88 23.33
Putnam New Opportunities -- Class
A Division 26).................. 199.32 127.80 83.17 10.41 --
Putnam OTC & Emerging Growth --
Class A (Division 27)........... 131.96 77.39 58.99 14.01 27.70
Scudder Growth and Income
(Division 21)................... 88.28 64.91 52.41 20.40 24.80
T. Rowe Price Small Cap Stock
(Division 51)................... 66.52 42.38 26.54 (7.59) 17.68
Templeton Foreign -- Class A
(Division 32)................... 95.17 44.07 45.37 24.13 29.24
Templeton Variable Products Series
Fund
Templeton Asset Allocation --
Class 1 (Division 19)......... 70.50 36.85 28.21 1.64 11.86
Templeton International -- Class
1 (Division 20)............... 35.49 (6.89) -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54)............ -- -- -- -- --
Vanguard LifeStrategy Growth
(Division 52)................... -- -- -- -- --
Vanguard LifeStrategy Moderate
Growth (Division 53)............ -- -- -- -- --
Vanguard Long-Term Corporate
(Division 22)****............... 74.72 54.51 42.51 19.33 13.76
Vanguard Long-Term Treasury
(Division 23)****............... 72.72 49.74 41.16 21.70 16.49
Vanguard Wellington (Division
25)............................. 68.28 50.09 40.82 15.30 20.11
Vanguard Windsor II (Division
24)............................. 77.07 57.81 42.68 12.25 26.25
</TABLE>
- ------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that
future performance will be the same.
** 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). With respect to Separate Account Divisions 51-54, the
Table reflects hypothetical performance for periods prior to September 22,
1998 (inception date of each Division). The Table reflects hypothetical
performance for Separate Account Divisions 55-57. Accordingly, the Standard
Average Annual Total Return for Divisions 51-57 will be shown when it
becomes available. 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 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.
75
<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 Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the 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.
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<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's
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 Separate Account A 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> 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, as a Section 408(b) Individual
Retirement Annuity ("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) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs of 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 ("Roth IRA").
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." Such Non-Qualified Contracts generally include unfunded,
nonqualified deferred compensation plans of corporate employers, as well as
individual annuity contracts issued to individuals outside of the context of any
formal employer or employee retirement plan or arrangement. Non-Qualified
Contracts generally may invest only in mutual funds which are not available to
the general public outside of annuity contracts or life insurance contracts.
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 Plus 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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
Distributions are taxed differently depending on the program through which
Portfolio Director Plus 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 or penalty taxes, 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
78
<PAGE> 91
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your tax status. In addition, amounts received under all Contracts may be
subject to state income tax withholding requirements.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although VALIC can provide no assurance that the IRS will not 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 if
such a challenge were made.
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
how ownership of the Mutual Fund shares might be imputed for federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons 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
79
<PAGE> 92
- --------------------------------------------------------------------------------
depending upon the timing of withdrawals. The previous chart represents (without
factoring in fees and charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
federal taxes......... $2,500 $2,500
Current federal income
tax due on Purchase
Payments.............. 0 (700)
Net retirement plan
Purchase Payments..... $2,500 $1,800
</TABLE>
This chart assumes a 28% federal income tax rate. The $700 which is paid toward
current federal income taxes 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> 93
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
81
<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
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<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.............. 9
Types of Variable Annuity Contracts................. 10
Federal Tax Matters................................. 10
Tax Consequences of Purchase Payments........... 10
Tax Consequences of Distributions............... 12
Special Tax Consequences -- Early
Distribution.................................. 13
Special Tax Consequences -- Required
Distributions................................. 14
Tax Free Rollovers, Transfers and Exchanges..... 15
Exchange Privilege.................................. 15
Exchanges From Portfolio Director............... 16
Exchanges From Portfolio Director 2............. 16
Exchanges From Independence Plus Contracts...... 17
Exchanges From V-Plan Contracts................. 18
Exchanges From SA-1 and SA-2 Contracts.......... 19
Exchanges From Impact Contracts................. 20
Exchanges From Compounder Contracts............. 21
Information Which May Be Applicable To Any
Exchange...................................... 22
Calculation of Surrender Charge..................... 23
Illustration of Surrender Charge on Total
Surrender..................................... 23
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 23
Purchase Unit Value................................. 24
Illustration of Calculation of Purchase Unit
Value......................................... 24
Illustration of Purchase of Purchase Units...... 24
Performance Calculations............................ 24
AGSPC Money Market and American General Money
Market Divisions Yields....................... 24
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 24
Calculation of Current Yield for American
General Money Market Division 44.............. 24
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six and American
General Money Market Division 44.............. 24
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 25
Calculation of Effective Yield for American
General Money Market Division 44.............. 25
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six and
American General Money Market Division 44..... 25
Standardized Yield for Bond Fund Divisions.......... 25
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 25
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 25
Calculation of Average Annual Total Return...... 25
Performance Information............................. 27
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 27
Performance Compared to Market Indices.......... 27
AGSPC Asset Allocation Division Five............ 32
AGSPC Capital Conservation Division Seven....... 33
AGSPC Government Securities Division Eight...... 33
AGSPC Growth Division Fifteen................... 34
AGSPC Growth & Income Division Sixteen.......... 34
AGSPC International Equities Division Eleven.... 35
AGSPC International Government Bond Division
Thirteen...................................... 36
AGSPC MidCap Index Division Four................ 36
AGSPC Money Market Division Six................. 37
AGSPC Science & Technology Division Seventeen... 38
AGSPC Small Cap Index Division Fourteen......... 38
AGSPC Social Awareness Division Twelve.......... 39
AGSPC Stock Index Division Ten.................. 40
American 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 Core Bond Division
Fifty-Eight................................... 41
American General Domestic Bond Division
Forty-Three................................... 41
American General Growth Lifestyle Division
Forty-Eight................................... 41
American General High Yield Bond Division
Sixty......................................... 41
American General International Growth Division
Thirty-Three.................................. 41
American General International Value Division
Thirty-Four................................... 41
American General Large Cap Growth Division
Thirty-Nine................................... 41
American General Large Cap Value Division
Forty......................................... 42
American General Mid Cap Growth Division
Thirty-Seven.................................. 42
American General Mid Cap Value Division
Thirty-Eight.................................. 42
American General Moderate Growth Lifestyle
Division Forty-Nine........................... 42
American General Money Market Division
Forty-Four.................................... 42
American General Small Cap Growth Division
Thirty-Five................................... 42
American General Small Cap Value Division
Thirty-Six.................................... 42
American General Socially Responsible Division
Forty-One..................................... 42
American General Strategic Bond Division
Fifty-Nine.................................... 42
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division Eighteen................... 43
Evergreen Growth and Income Division
Fifty-Six..................................... 43
Evergreen Small Cap Value Division Fifty-Five... 44
Evergreen Value Division Fifty-Seven............ 45
Founders Growth Division Thirty................. 45
Neuberger Berman Guardian Trust Division Twenty-
Nine.......................................... 46
Putnam Global Growth -- Class A Division Twenty-
Eight......................................... 47
Putnam New Opportunities -- Class A Division
Twenty-Six.................................... 47
Putnam OTC & Emerging Growth -- Class A Division
Twenty-Seven.................................. 48
Scudder Growth and Income Division Twenty-One... 49
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 49
Templeton Asset Allocation Division Nineteen.... 50
Templeton Foreign Division Thirty-Two........... 51
Templeton International Division Twenty......... 51
Vanguard LifeStrategy Conservative Growth
Division Fifty-Four........................... 52
Vanguard Long-Term Corporate Division
Twenty-Two.................................... 53
Vanguard Long-Term Treasury Division
Twenty-Three.................................. 54
Vanguard LifeStrategy Growth Division
Fifty-Two..................................... 54
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three................................... 55
Vanguard Wellington Division Twenty-Five........ 56
Vanguard Windsor II Division Twenty-Four........ 57
Payout Payments..................................... 58
Assumed Investment Rate......................... 58
Amount of Payout Payments....................... 58
Payout Unit Value............................... 58
Illustration of Calculation of Payout Unit
Value......................................... 59
Illustration of Payout Payments................. 59
Distribution of Variable Annuity Contracts.......... 60
Experts............................................. 60
Comments on Financial Statements.................... 61
</TABLE>
<PAGE> 99
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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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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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<PAGE> 100
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 101
[Momento Photo]
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.20 - 12.20
Prospectus
May 1, 1999
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director Plus
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 102
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.20 TO 12.20 May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain Series of
Portfolio Director Plus that consist of group and individual variable annuity
contracts (the "Contracts") 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, as well as for certain after-tax arrangements that are not part of an
employer's plan.
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 53 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, life insurance contracts or certain employer
sponsored retirement plans 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 affiliates.
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 May 1, 1999, 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. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 103
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
ABOUT THE PROSPECTUS............................... 1
FEE TABLE.......................................... 3
SUMMARY............................................ 8
SELECTED PURCHASE UNIT DATA........................ 12
GENERAL INFORMATION................................ 18
About Portfolio Director Plus.................. 18
About VALIC.................................... 18
About VALIC Separate Account A................. 18
Units of Interests............................. 19
Distribution of the Contracts.................. 19
VARIABLE ACCOUNT OPTIONS........................... 20
Summary of Funds............................... 20
PURCHASE PERIOD.................................... 49
Purchase Payments.............................. 49
Purchase Units................................. 49
Calculation of Purchase Unit Value............. 49
Choosing Investment Options.................... 50
Fixed Account Options..................... 50
Variable Account Options.................. 50
Stopping Purchase Payments..................... 50
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 51
During the Purchase Period..................... 51
During the Payout Period....................... 51
Communicating Transfer or Reallocation
Instructions................................. 51
Effective Date of Transfer..................... 51
FEES AND CHARGES................................... 52
Account Maintenance Fee........................ 52
Surrender Charge............................... 52
Amount of Surrender Charge................ 52
10% Free Withdrawal....................... 52
Exceptions to Surrender Charge............ 52
Premium Tax Charge............................. 53
Separate Account Charges....................... 53
Fund Annual Expense Charges.................... 53
Other Tax Charges.............................. 53
Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee
Charges...................................... 54
Separate Account Expense Reimbursement......... 54
PAYOUT PERIOD...................................... 55
Fixed Payout................................... 55
Variable Payout................................ 55
Combination Fixed and Variable Payout.......... 55
Payout Date.................................... 55
Payout Options................................. 55
Enhancements to Payout Options................. 56
Payout Information............................. 56
SURRENDER OF ACCOUNT VALUE......................... 57
When Surrenders are Allowed.................... 57
Amount That May Be Surrendered................. 57
Surrender Restrictions......................... 57
Partial Surrenders............................. 57
Systematic Withdrawals......................... 57
Distributions Required By Federal Tax Law...... 58
EXCHANGE PRIVILEGE................................. 59
Restrictions on Exchange Privilege............. 59
Taxes and Conversion Costs..................... 59
Surrender Charges.............................. 59
</TABLE>
<TABLE>
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Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 59
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 60
Comparison of Other Contracts.................. 60
Features of Portfolio Director Plus............ 60
Agents' and Managers' Retirement Plan Exchange
Offer........................................ 60
DEATH BENEFITS..................................... 61
Beneficiary Information........................ 61
Special Information for Individual Non-Tax
Qualified Contracts.......................... 62
During the Purchase Period..................... 62
Interest Guaranteed Death Benefit......... 62
Standard Death Benefit.................... 63
During the Payout Period....................... 63
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 63
Types of Investment Performance Information
Advertised................................... 64
Total Return Performance Information......... 64
Standard Average Annual Total Return......... 64
Nonstandard Average Annual Total Return...... 64
Cumulative Total Return...................... 64
Annual Change in Purchase Unit Value......... 64
Cumulative Change in Purchase Unit Value..... 65
Total Return Based on Different Investment
Amounts................................... 65
An Assumed Account Value of $10,000.......... 65
Yield Performance Information.................. 65
AGSPC Money Market and American General Money
Market Divisions............................. 65
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 65
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 65
OTHER CONTRACT FEATURES............................ 72
Changes That May Not Be Made................... 72
Change of Beneficiary.......................... 72
Contingent Owner............................... 72
Cancellation -- The 20 Day "Free Look"......... 72
We Reserve Certain Rights...................... 72
Relationship to Employer's Plan................ 72
VOTING RIGHTS...................................... 73
Who May Give Voting Instructions............... 73
Determination of Fund Shares Attributable to
Your Account................................. 73
During Purchase Period....................... 73
During Payout Period or after a Death Benefit
Has Been Paid............................. 73
How Fund Shares Are Voted...................... 73
FEDERAL TAX MATTERS................................ 74
Type of Plans.................................. 74
Tax Consequences in General.................... 74
Effect of Tax-Deferred Accumulations........... 75
YEAR 2000.......................................... 77
Year 2000 Risks................................ 77
</TABLE>
(i)
<PAGE> 104
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................... 51
Annuitant....................... 62
Assumed Investment Rate......... 55
Beneficiary..................... 62
Contract Owner.................. 62
Divisions....................... 64
Fixed Account Options........... 62
Home Office..................... 51
Mutual Fund or Fund............. 18
Participant..................... 01
Participant Year................ 52
Payout Period................... 51
Payout Unit..................... 55
Purchase Payments............... 49, 64
Purchase Period................. 51
Purchase Unit................... 49, 50
VALIC Separate Account A........ 73
Variable Account Options........ 20, 62
</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. 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
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2
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FEE TABLE
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CONTRACT OWNER/PARTICIPANT EXPENSES(1)
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Maximum Surrender Charge(2) 5.00%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $ 15
</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 Fund(8) 0.25% 0.55% -- 0.80%
AGSPC Capital Conservation Fund 0.25 0.55 -- 0.80
AGSPC Government Securities Fund 0.25 0.55 -- 0.80
AGSPC Growth Fund 0.25 0.55 -- 0.80
AGSPC Growth & Income Fund 0.25 0.55 -- 0.80
AGSPC International Equities Fund 0.25 0.55 -- 0.80
AGSPC International Government Bond Fund 0.25 0.55 -- 0.80
AGSPC MidCap Index Fund 0.25 0.55 -- 0.80
AGSPC Money Market Fund 0.25 0.55 -- 0.80
AGSPC Science & Technology Fund 0.25 0.55 -- 0.80
AGSPC Small Cap Index Fund 0.25 0.55 -- 0.80
AGSPC Social Awareness Fund 0.25 0.55 -- 0.80
AGSPC Stock Index Fund 0.25 0.55 -- 0.80
American Century Ultra Fund(4) 0.25 0.80 (0.21%) 0.84
American General Balanced Fund(4) 0.25 0.55 (0.25) 0.55
American General Conservative Growth Lifestyle
Fund(4) 0.25 0.55 (0.25) 0.55
American General Core Bond Fund(4) 0.25 0.55 (0.25) 0.55
American General Domestic Bond Fund(4) 0.25 0.55 (0.25) 0.55
American General Growth Lifestyle Fund(4) 0.25 0.55 (0.25) 0.55
American General High Yield Bond Fund(4) 0.25 0.55 (0.25) 0.55
American General International Growth Fund(4) 0.25 0.55 (0.25) 0.55
American General International Value Fund(4) 0.25 0.55 (0.25) 0.55
American General Large Cap Growth Fund(4) 0.25 0.55 (0.25) 0.55
American General Large Cap Value Fund(4) 0.25 0.55 (0.25) 0.55
American General Mid Cap Growth Fund(4) 0.25 0.55 (0.25) 0.55
American General Mid Cap Value Fund(4) 0.25 0.55 (0.25) 0.55
American General Moderate Growth Lifestyle
Fund(4) 0.25 0.55 (0.25) 0.55
American General Money Market Fund(4) 0.25 0.55 (0.25) 0.55
American General Small Cap Growth Fund(4) 0.25 0.55 (0.25) 0.55
American General Small Cap Value Fund(4) 0.25 0.55 (0.25) 0.55
American General Socially Responsible Fund(4) 0.25 0.55 (0.25) 0.55
American General Strategic Bond Fund(4) 0.25 0.55 (0.25) 0.55
Dreyfus Variable Investment Fund --
Small Cap Portfolio(4) 0.25 0.80 (0.15) 0.90
Evergreen(sm) Equity Trust
Evergreen Growth and Income Fund -- Class A(4) 0.25 0.80 (0.25) 0.80
Evergreen Small Cap Value Fund -- Class A(4) 0.25 0.80 (0.25) 0.80
Evergreen Value Fund -- Class A(4) 0.25 0.80 (0.25) 0.80
Founders Growth Fund(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 Fund -- Class A Shares(4) 0.25 0.80 (0.25) 0.80
Putnam New Opportunities Fund -- Class A
Shares(4) 0.25 0.80 (0.25) 0.80
Putnam OTC & Emerging Growth Fund -- Class A
Shares(4) 0.25 0.80 (0.25) 0.80
Scudder Growth and Income Fund(4) 0.25 0.80 (0.25) 0.80
T. Rowe Price Small-Cap Stock Fund 0.25 0.80 -- 1.05
Templeton Foreign Fund -- Class A(4) 0.25 0.80 (0.25) 0.80
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 0.25 0.80 -- 1.05
Templeton International Fund -- Class 1 0.25 0.80 -- 1.05
Vanguard Long-Term Corporate Fund(5) 0.25 0.80 (0.25) 0.80
Vanguard Long-Term Treasury Fund(5) 0.25 0.80 (0.25) 0.80
Vanguard LifeStrategy Conservative Growth Fund 0.25 0.80 -- 1.05
Vanguard LifeStrategy Growth Fund 0.25 0.80 -- 1.05
Vanguard LifeStrategy Moderate Growth Fund 0.25 0.80 -- 1.05
Vanguard Wellington Fund 0.25 0.80 -- 1.05
Vanguard Windsor II Fund 0.25 0.80 -- 1.05
</TABLE>
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FEE TABLE -- (CONTINUED)
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FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
OTHER TOTAL FUND
MANAGEMENT EXPENSES EXPENSES
FEES (AFTER 12b-1 (AFTER EXPENSE (AFTER EXPENSE
FUND FEE WAIVER) FEES WAIVER)(6) WAIVER)
---- ----------- ----- -------------- --------------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation Fund(8) 0.50% -- 0.04% 0.54%
AGSPC Capital Conservation Fund 0.50 -- 0.04 0.54
AGSPC Government Securities Fund 0.50 -- 0.04 0.54
AGSPC Growth Fund 0.80 -- 0.04 0.84
AGSPC Growth & Income Fund 0.75 -- 0.05 0.80
AGSPC International Equities Fund 0.35 -- 0.05 0.40
AGSPC International Government Bond Fund 0.50 -- 0.05 0.55
AGSPC MidCap Index Fund 0.32 -- 0.04 0.36
AGSPC Money Market Fund 0.50 -- 0.04 0.54
AGSPC Science & Technology Fund 0.90 -- 0.05 0.95
AGSPC Small Cap Index Fund 0.35 -- 0.04 0.39
AGSPC Social Awareness Fund 0.50 -- 0.04 0.54
AGSPC Stock Index Fund 0.27 -- 0.04 0.31
American Century Ultra Fund(11) 1.00 -- -- 1.00
American General Balanced Fund(9) 0.80 -- 0.02 0.82
American General Conservative Growth Lifestyle
Fund(10) 0.10 -- -- 0.10
American General Core Bond Fund(9) 0.50 -- 0.30 0.80
American General Domestic Bond Fund(9) 0.60 -- 0.18 0.78
American General Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General High Yield Bond Fund(9) 0.70 -- 0.29 0.99
American General International Growth Fund(9) 0.90 -- 0.25 1.15
American General International Value Fund(9) 1.00 -- 0.04 1.04
American General Large Cap Growth Fund(9) 0.55 -- 0.31 0.86
American General Large Cap Value Fund(9) 0.50 -- 0.31 0.81
American General Mid Cap Growth Fund(9) 0.65 -- 0.14 0.79
American General Mid Cap Value Fund(9) 0.75 -- 0.30 1.05
American General Moderate Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General Money Market Fund(9) 0.25 -- 0.31 0.56
American General Small Cap Growth Fund(9) 0.85 -- 0.31 1.16
American General Small Cap Value Fund(9) 0.75 -- 0.23 0.98
American General Socially Responsible Fund(9) 0.25 -- 0.31 0.56
American General Strategic Bond Fund(9) 0.60 -- 0.29 0.89
Dreyfus Variable Investment Fund --
Small Cap Portfolio 0.75 -- 0.02 0.77
Evergreen Equity Trust
Evergreen Growth and Income Fund -- Class A 0.90 0.25% 0.31 1.46
Evergreen Small Cap Value Fund -- Class A(11) 1.00 0.25 0.43 1.68
Evergreen Value Fund -- Class A 0.50 0.25 0.25 1.00
Founders Growth Fund 0.67 0.25 0.16 1.08
Neuberger Berman Guardian Trust(7)(11) 0.84 -- 0.03 0.87
Putnam Global Growth Fund -- Class A Shares 0.64 0.25 0.29 1.18
Putnam New Opportunities Fund -- Class A Shares 0.49 0.25 0.24 .98
Putnam OTC & Emerging Growth Fund -- Class A Shares 0.54 0.25 0.21 1.00
Scudder Growth and Income Fund 0.44 -- 0.30 0.74
T. Rowe Price Small-Cap Stock Fund 0.77 -- 0.24 1.01
Templeton Foreign Fund -- Class A(11) 0.61 0.25 0.26 1.12
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 0.60 -- 0.18 0.78
Templeton International Fund -- Class 1 0.69 -- 0.17 0.86
Vanguard Long-Term Corporate Fund(11) 0.03 -- 0.27 0.30
Vanguard Long-Term Treasury Fund(11) 0.01 -- 0.26 0.27
Vanguard LifeStrategy Conservative Growth
Fund(11)(12) -- -- -- --
Vanguard LifeStrategy Growth Fund(11)(12) -- -- -- --
Vanguard LifeStrategy Moderate Growth Fund(11)(12) -- -- -- --
Vanguard Wellington Fund(11) 0.28 -- 0.03 0.31
Vanguard Windsor II Fund(11) 0.38 -- 0.03 0.41
</TABLE>
4
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FEE TABLE -- (CONTINUED)
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(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 affiliates 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 (0.21%), American General (0.25%), Dreyfus (0.15%),
Evergreen (0.25%), Founders (0.25%), Neuberger Berman (0.25%), Putnam
(0.25%), Scudder (0.25%) and Templeton Foreign Fund -- Class A (0.25%) With
respect to American 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 equal to or 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 Inc. ("NB"). NB 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. For the Trust's 1998 fiscal year, NB did not bear any expenses.
(8) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(9) In the absence of management fee waiver, other expense waiver and total
annual portfolio operating expense waiver, management fees, other expenses
and total annual portfolio operating expenses, respectively would be:
American General Balanced Fund, 0.80%, 0.80% and 1.60%; American General
Core Bond Fund, 0.50%, 0.86% and 1.36%; American General Domestic Bond
Fund, 0.60%, 0.57% and 1.17%; American General High Yield Bond Fund, 0.70%,
0.83% and 1.53%; American General International Growth Fund, 0.90%, 0.71%
and 1.61%; American General International Value Fund, 1.00%, 0.70% and
1.70%; American General Large Cap Growth Fund, 0.55%, 0.58% and 1.13%;
American General Large Cap Value Fund, 0.50%, 0.58% and 1.08%; American
General Mid Cap Growth Fund, 0.65%, 0.64% and 1.29%; American General Mid
Cap Value Fund, 0.75%, 0.64% and 1.39%; American General Money Market Fund,
0.25%, 0.86% and 1.11%; American General Small Cap Growth Fund, 0.85%,
0.62% and 1.47%; American General Small Cap Value Fund, 0.75%, 0.63% and
1.38%; and American General Socially Responsible Fund, 0.25%, 0.87% and
1.12%; and American General Strategic Bond Fund, 0.60%, 0.90% and 1.50%.
(10) Total Combined Operating Expenses based on estimated total average weighted
combined operating expenses for the American General Conservative Growth
Lifestyle Fund is 1.00%, for American General Growth Lifestyle Fund 1.09%
and for American General Moderate Growth Lifestyle Fund 1.03%. Estimated
Total Combined Operating Expenses of each American General Lifestyle Fund
is based on the Total Fund Operating Expenses of the underlying AGSPC 3
Funds and the American General Lifestyle Funds, assuming each American
General Lifestyle Fund's projected asset allocation among the underlying
AGSPC 3 Funds is maintained.
(11) The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Evergreen Small Cap Value Fund
was formerly known as the Evergreen Small Cap Equity Income Fund. The
Neuberger Berman Guardian Trust was formerly known as the Neuberger&Berman
Guardian Trust. The Templeton Foreign Fund -- Class A was formerly known as
the Templeton Foreign Fund -- Class 1. VALIC Separate Account A purchases
shares of the Templeton Foreign Fund -- Class A at net asset value and
without sales charges generally applicable to Class A shares. The Vanguard
Long-Term Corporate Fund was formerly known as the Vanguard Fixed Income
Securities Fund -- Long-Term Corporate Portfolio; the Vanguard Long-Term
Treasury Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio; the Vanguard LifeStrategy
Conservative Growth Fund was formerly known as the Vanguard LifeStrategy
Conservative Growth Portfolio; the Vanguard LifeStrategy Growth Fund was
formerly known as the Vanguard LifeStrategy Growth Portfolio, the Vanguard
Life Strategy Moderate Growth Fund was formerly known as the Vanguard
LifeStrategy Moderate Growth Portfolio; the Vanguard Wellington Fund was
formerly known as the Vanguard/Wellington Fund and the Vanguard Windsor II
Fund was formerly known as the Vanguard/Windsor II Fund.
(12) The Vanguard LifeStrategy Funds did not incur any expenses in fiscal year
1998. However, while the Funds are expected to operate without expenses,
shareholders in the Vanguard LifeStrategy Funds bear indirectly the
expenses of the underlying Vanguard Funds in which the Funds invest. The
indirect expense ratio that each Fund incurred for the year ended December
31, 1998 was 0.29%.
5
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EXAMPLE #1 -- If you do not surrender Portfolio Director Plus at the end of the
period shown or you receive Payout Payments under a Payout Option:
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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 $ 14 $ 44 $ 76 $167
AGSPC Capital Conservation Division 7 14 44 76 167
AGSPC Government Securities Division 8 14 44 76 167
AGSPC Growth Division 15 17 53 92 200
AGSPC Growth & Income Division 16 17 52 90 196
AGSPC International Equities Division 11 13 40 69 151
AGSPC International Government Bond Division 13 14 44 77 168
AGSPC MidCap Index Division 4 12 38 66 147
AGSPC Money Market Division 6 14 44 76 167
AGSPC Science & Technology Division 17 18 57 97 212
AGSPC Small Cap Index Division 14 13 39 68 150
AGSPC Social Awareness Division 12 14 44 76 167
AGSPC Stock Index Division 10 12 37 64 141
American Century Ultra Division 31 19 59 102 221
American General Balanced Division 42 14 45 78 170
American General Conservative Growth Lifestyle Division 50 7 22 39 87
American General Core Bond Division 58 14 44 77 168
American General Domestic Bond Division 43 14 44 76 166
American General Growth Lifestyle Division 48 7 22 39 87
American General High Yield Bond Division 60 16 50 87 189
American General International Growth Division 33 18 55 95 207
American General International Value Division 34 17 52 89 195
American General Large Cap Growth Division 39 15 46 80 175
American General Large Cap Value Division 40 14 45 77 169
American General Mid Cap Growth Division 37 14 44 76 167
American General Mid Cap Value Division 38 17 52 90 196
American General Moderate Growth Lifestyle Division 49 7 22 39 87
American General Money Market Division 44 12 37 64 141
American General Small Cap Growth Division 35 18 55 95 208
American General Small Cap Value Division 36 16 50 86 188
American General Socially Responsible Division 41 12 37 64 141
American General Strategic Bond Division 59 15 47 81 178
Dreyfus Variable Investment Fund -- Small Cap Division 18 17 54 93 203
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 23 72 124 265
Evergreen Small Cap Value -- Class A Division 55 26 79 135 287
Evergreen Value -- Class A Division 57 19 58 100 217
Founders Growth Division 30 20 61 104 226
Neuberger Berman Guardian Trust Division 29 17 54 93 203
Putnam Global Growth -- Class A Shares Division 28 21 64 109 236
Putnam New Opportunities -- Class A Shares Division 26 19 58 99 215
Putnam OTC & Emerging Growth -- Class A Shares Division 27 19 58 100 217
Scudder Growth and Income Division 21 16 50 87 189
T. Rowe Price Small-Cap Stock Division 51 21 66 113 244
Templeton Foreign -- Class A Division 32 20 62 106 230
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 Division 19 19 59 102 220
Templeton International -- Class 1 Division 20 20 61 106 229
Vanguard Long-Term Corporate Division 22 12 37 63 140
Vanguard Long-Term Treasury Division 23 11 36 62 137
Vanguard LifeStrategy Conservative Growth Division 54 11 35 61 134
Vanguard LifeStrategy Growth Division 52 11 35 61 134
Vanguard LifeStrategy Moderate Growth Division 53 11 35 61 134
Vanguard Wellington Division 25 14 45 77 169
Vanguard Windsor II Division 24 15 48 82 180
</TABLE>
6
<PAGE> 110
EXAMPLE #2 -- If you surrender Portfolio Director Plus 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 $ 94 $126 $167
AGSPC Capital Conservation Division 7 61 94 126 167
AGSPC Government Securities Division 8 61 94 126 167
AGSPC Growth Division 15 64 103 142 200
AGSPC Growth & Income Division 16 63 102 140 196
AGSPC International Equities Division 11 59 90 119 151
AGSPC International Government Bond Division 13 61 94 127 168
AGSPC MidCap Index Division 4 59 88 116 147
AGSPC Money Market Division 6 61 94 126 167
AGSPC Science & Technology Division 17 65 106 147 212
AGSPC Small Cap Index Division 14 59 89 118 150
AGSPC Social Awareness Division 12 61 94 126 167
AGSPC Stock Index Division 10 59 87 114 141
American Century Ultra Division 31 66 109 152 221
American General Balanced Division 42 61 95 128 170
American General Conservative Growth Lifestyle Division 50 54 72 89 87
American General Core Bond Division 58 61 94 127 168
American General Domestic Bond Division 43 61 94 126 166
American General Growth Lifestyle Division 48 54 72 89 87
American General High Yield Bond Division 60 63 100 137 189
American General International Growth Division 33 64 105 145 207
American General International Value Division 34 63 101 139 195
American General Large Cap Growth Division 39 61 96 130 175
American General Large Cap Value Division 40 61 95 127 169
American General Mid Cap Growth Division 37 61 94 126 167
American General Mid Cap Value Division 38 63 102 140 196
American General Moderate Growth Lifestyle Division 49 54 72 89 87
American General Money Market Division 44 59 87 114 141
American General Small Cap Growth Division 35 64 105 145 208
American General Small Cap Value Division 36 63 100 136 188
American General Socially Responsible Division 41 59 87 114 141
American General Strategic Bond Division 59 62 97 131 178
Dreyfus Variable Investment Fund -- Small Cap Division 18 64 104 143 203
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 70 121 174 265
Evergreen Small Cap Value -- Class A Division 55 72 127 185 287
Evergreen Value -- Class A Division 57 65 108 150 217
Founders Growth Division 30 66 110 154 226
Neuberger Berman Guardian Trust Division 29 64 104 143 203
Putnam Global Growth -- Class A Shares Division 28 67 113 159 236
Putnam New Opportunities -- Class A Shares Division 26 65 107 149 215
Putnam OTC & Emerging Growth -- Class A Shares Division 27 65 108 150 217
Scudder Growth and Income Division 21 63 100 137 189
T. Rowe Price Small-Cap Stock Division 51 68 115 163 244
Templeton Foreign -- Class A Division 32 66 111 156 230
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 Division 19 65 108 152 220
Templeton International -- Class 1 Division 20 66 111 156 229
Vanguard Long-Term Corporate Division 22 58 87 113 140
Vanguard Long-Term Treasury Division 23 58 86 112 137
Vanguard LifeStrategy Conservative Growth Division 54 58 85 111 134
Vanguard LifeStrategy Growth Division 52 58 85 111 134
Vanguard LifeStrategy Moderate Growth Division 53 58 85 111 134
Vanguard Wellington Division 25 61 95 127 169
Vanguard Windsor II Division 24 62 98 132 180
</TABLE>
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.
7
<PAGE> 111
SUMMARY
- --------------------------------------------------------------------------------
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 53 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>
<CAPTION>
FIXED ACCOUNT
OPTIONS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
FIXED Fixed Guaranteed high current interest -- --
OPTIONS Account Plus income
---------------------------------------------------------------------------------------------------------------
Short-Term Guaranteed current interest income -- --
Fixed Account
- -----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- -----------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Growth through investments VALIC N/A
EQUITY Equities Fund* tracking the EAFE Index
---------------------------------------------------------------------------------------------------------------
FUNDS
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund* tracking the S&P MidCap 400(R) Company(1)
Index
---------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments VALIC Bankers Trust
Index Fund* tracking the Russell 2000(R) Index Company(1)
---------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments VALIC Bankers Trust
Index Fund* tracking the S&P 500(R) Index Company(1)
- -----------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Fund* Growth through investments in VALIC T. Rowe Price
MANAGED service sector companies Associates, Inc.
---------------------------------------------------------------------------------------------------------------
EQUITY AGSPC Growth & Income Growth and income through VALIC N/A
FUNDS Fund* investments in stocks or
securities convertible into stocks
---------------------------------------------------------------------------------------------------------------
American Century Capital growth through investments American Century N/A
Ultra Fund in common stock Investment Management,
Inc.
---------------------------------------------------------------------------------------------------------------
American General Long-term capital appreciation by VALIC Jacobs Asset
International Growth investing in equity securities of Management
Fund** non-U.S. companies, the majority
of which are expected to be in
developed markets
---------------------------------------------------------------------------------------------------------------
American General Growth of capital and future VALIC Capital Guardian Trust
International Value income through investments in Company
Fund** securities of non-U.S. issuers and
securities whose principal markets
are outside of the United States
---------------------------------------------------------------------------------------------------------------
American General Long-term growth through a broadly VALIC Goldman Sachs Asset
Large Cap Growth diversified portfolio of equity Management
Fund** securities of large cap U.S.
issuers
---------------------------------------------------------------------------------------------------------------
American General Total returns exceeding overtime VALIC State Street Bank &
Large Cap Value Fund** the Russell 1000(R) Value Index Trust Company/State
through investments in equity Street Global Advisors
securities
---------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC Brown Capital
Mid Cap Growth Fund** medium capitalization equity Management Inc.
securities
---------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC Neuberger Berman
Mid Cap Value Fund** equity securities of medium Management Inc.
capitalization companies
---------------------------------------------------------------------------------------------------------------
American General Long-term growth through VALIC JP Morgan Investment
Small Cap Growth investments in equity securities Management Inc.
Fund** of small capitalization growth
companies
---------------------------------------------------------------------------------------------------------------
American General Maximum long-term return through VALIC Fiduciary Management
Small Cap Value Fund** investments in small Associates, Inc. and
capitalization companies Bankers Trust
Company(1)
- -----------------------------------------------------------------------------------------------------------------------------------
* A series of American General Series Portfolio Company ("AGSPC").
** A series of American General Series Portfolio Company 3 ("AGSPC 3").
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998,
Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. The merger is contingent upon various regulatory approvals. On April 20, 1999, the
AGSPC Fund's Board of Directors approved a new investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval and the Trustees of AGSPC 3 also approved a new investment sub-advisory agreement with Bankers Trust
Company, which is not subject to shareholder approval. If the merger is approved and completed, Deutsche Bank AG, as the
Sub-Adviser's new parent company, will control the operations of the Sub-Adviser. Bankers Trust believes that, under this new
arrangement, the services provided to the Fund will be maintained at their current level.
</TABLE>
8
<PAGE> 112
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
Dreyfus Variable Growth through investments in The Dreyfus Corporation N/A
Investment Fund -- smaller companies
Small Cap Portfolio
---------------------------------------------------------------------------------------------------------------
Evergreen Growth and Return composed of capital Evergreen Asset N/A
Income Fund -- Class appreciation in value of its Management Corp.
A*** shares and current income
---------------------------------------------------------------------------------------------------------------
Evergreen Small Cap Return consisting of current Evergreen Asset N/A
Value Fund -- Class income and capital appreciation in Management Corp.
A*** value of its shares
---------------------------------------------------------------------------------------------------------------
Evergreen Value Long-term capital appreciation Capital Management N/A
Fund -- Class A*** with current income as secondary Group of First Union
objective National Bank
---------------------------------------------------------------------------------------------------------------
Founders Long-term growth of capital Founders N/A
Growth through investment in common Asset
Fund stocks of well established, Management LLC
high-quality growth companies
---------------------------------------------------------------------------------------------------------------
Neuberger Berman Capital appreciation, and Neuberger Berman Neuberger
Guardian Trust secondarily Management Inc. Berman, LLC
current income by investing
primarily
in common stocks of
large-capitalization companies
---------------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a Putnam Investment N/A
globally
Growth Fund -- Class A diversified portfolio of common Management Inc.
Shares stocks
---------------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities Fund -- through investment in common stock Management Inc.
Class A Shares
---------------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund -- Class A Shares small-to-medium companies
---------------------------------------------------------------------------------------------------------------
Scudder Growth Long-term growth of capital, Scudder Kemper N/A
current
and Income Fund income and growth of income Investments, Inc.
---------------------------------------------------------------------------------------------------------------
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
---------------------------------------------------------------------------------------------------------------
Templeton Foreign Long-term capital growth; invests Templeton Global N/A
Fund -- Class A primarily in equity securities of Advisors Limited
companies outside the U.S.,
including emerging markets
---------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth; invests Templeton Investment N/A
International primarily in stocks and debt Counsel, Inc.
Fund - Class 1**** obligations of companies outside
the U.S., including emerging
markets
---------------------------------------------------------------------------------------------------------------
Vanguard Growth and income through Vanguard N/A
Windsor II Fund investment in common stock
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED American General Conservation of principal and VALIC Capital Guardian Trust
FUNDS Balanced Fund** long-term growth of capital and Company
income through investments in
fixed income and equity securities
---------------------------------------------------------------------------------------------------------------
Vanguard Income and growth through 30 to Vanguard N/A
40%
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 Core Maximum income through investment VALIC American General
Bond Fund** in medium to high quality fixed Investment Management,
income securities L.P.
---------------------------------------------------------------------------------------------------------------
American General High income and total return VALIC Capital Guardian Trust
Domestic Bond Fund** consistent with conservation of Company
capital through investments in
fixed income securities and other
income producing securities
- -----------------------------------------------------------------------------------------------------------------------------------
* A series of AGSPC.
** A series of AGSPC 3.
*** A series of Evergreen Equity Trust.
**** A series of Templeton Variable Products Series Fund.
</TABLE>
9
<PAGE> 113
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
American General High High total return and income VALIC American General
Yield Bond Fund** consistent with conservation of Investment Management,
capital through investment in high L.P.
yield fixed income securities
---------------------------------------------------------------------------------------------------------------
American General High level of total return and VALIC American General
Strategic Bond Fund** income consistent with Investment Management,
conservation of capital through L.P.
investment in income-producing
securities
---------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment Vanguard N/A
Corporate Fund in long-term high quality
corporate bonds
---------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Treasury Fund long-term U.S. Treasury bonds
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Growth through investments in VALIC T. Rowe Price
FUNDS Technology Fund* stocks of companies which benefit Associates, Inc.
from development of science and
technology
---------------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC N/A
Awareness Fund* stocks of companies meeting social
criteria of the Fund
---------------------------------------------------------------------------------------------------------------
American General Growth through investments in VALIC N/A
Socially Responsible stocks of companies meeting social
Fund** criteria 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
- -----------------------------------------------------------------------------------------------------------------------------------
LIFESTYLE American General Current income and a low to VALIC N/A
FUNDS Conservative Growth moderate level of growth through
Lifestyle Fund** investments 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 Current income and low-to-moderate Vanguard N/A
Conservative growth of capital
Growth Fund
---------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy Growth of capital Vanguard N/A
Growth Fund
---------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy A reasonable level of income and Vanguard N/A
Moderate Growth Fund long-term growth of capital and
income
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Allocation Maximum return through investments VALIC N/A
ALLOCATION Fund* in a mix of stocks, bonds and
FUNDS money market securities
---------------------------------------------------------------------------------------------------------------
Templeton Asset High level of total return; Templeton Investment N/A
Allocation Fund -- through a flexible policy of Counsel, Inc.
Class 1**** investing in stocks and debt
obligations of any nation,
including emerging markets, and
money market instruments
- -----------------------------------------------------------------------------------------------------------------------------------
* A series of AGSPC.
** A series of AGSPC 3.
**** A series of Templeton Variable Products Series Fund.
</TABLE>
10
<PAGE> 114
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual 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 1/2% 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
Mutual Fund or its affiliate or distributor for providing the Mutual 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.
11
<PAGE> 115
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, 1998
Purchase Units in Force 31,350 -- -- 4,324,799 -- --
Purchase Unit Value $ 3.882024 $ 2.138060 $ 2.164605 $ 2.448443 $ 2.219368 $ 1.481352
September 22, 1998
Purchase Unit Value(1) $ 3.497989 $ 2.098635 $ 2.149706 $ 1.938540 $ 1.786564 $ 1.226638
<CAPTION>
AGSPC
INTERNATIONAL AGSPC
GOVERNMENT AGSPC MONEY
BOND MIDCAP INDEX MARKET
DIVISION 13 DIVISION 4(2) DIVISION 6
------------- ------------- ----------
<S> <C> <C> <C>
December 31, 1998
Purchase Units in Force 408,156 -- 5,325,479
Purchase Unit Value $ 1.751922 $ 5.183213 $ 1.786658
September 22, 1998
Purchase Unit Value(1) $ 1.675623 $ 4.059808 $ 1.766523
</TABLE>
- ------------
(1) Purchase Unit Value At Date of Inception.
(2) Effective October 1, 1991, the Fund underlying this Division changed its
name from the Capital Accumulation Fund to the MidCap Index Fund and amended
its investment objective, investment program and investment restrictions
accordingly. Historical purchase unit values prior to October 1, 1991
reflect investment experience before these changes.
12
<PAGE> 116
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
GENERAL
AGSPC AGSPC AGSPC AMERICAN AMERICAN CONSERVATIVE AMERICAN
SCIENCE & SMALL CAP SOCIAL AGSPC CENTURY GENERAL GROWTH GENERAL
TECHNOLOGY INDEX AWARENESS STOCK INDEX ULTRA BALANCED LIFESTYLE CORE BOND
DIVISION 17 DIVISION 14 DIVISION 12 DIVISION 10(3) DIVISION 31 DIVISION 42 DIVISION 50 DIVISION 58
----------- ----------- ----------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
3,228,389 58,825 1,218,871 6,859,835 8,116,612 -- -- --
$ 3.241847 $ 2.125983 $ 3.825649 $ 4.875028 $ 1.737734 $ 1.170920 $ 1.162825 $ 1.029846
$ 2.224499 $ 1.824939 $ 3.189972 $ 4.055730 $ 1.415646 $ 1.021530 $ 1.025529 $ 1.012533
<CAPTION>
AMERICAN AMERICAN
AGSPC GENERAL GENERAL
SCIENCE & DOMESTIC GROWTH
TECHNOLOGY BOND LIFESTYLE
DIVISION 17 DIVISION 43 DIVISION 48
----------- ----------- -----------
<S> <C> <C>
3,228,389 -- --
$ 3.241847 $ 1.045141 $ 1.193346
$ 2.224499 $ 1.017530 $ 1.014536
</TABLE>
- ------------
(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> 117
SELECTED PURCHASE UNIT DATA -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN GENERAL GENERAL AMERICAN AMERICAN
GENERAL HIGH INTERNATIONAL INTERNATIONAL GENERAL LARGE GENERAL LARGE
YIELD BOND GROWTH VALUE CAP GROWTH CAP VALUE
DIVISION 60 DIVISION 33 DIVISION 34 DIVISION 39 DIVISION 40
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force -- -- -- -- --
Purchase Unit Value $1.053808 $1.052437 $1.150676 $1.241613 $1.247414
September 22, 1998
Purchase Unit Value(1) $1.000539 $0.941565 $0.945563 $1.011535 $1.070508
<CAPTION>
AMERICAN AMERICAN
GENERAL MID GENERAL MID
CAP GROWTH CAP VALUE
DIVISION 37 DIVISION 38
----------- -----------
<S> <C> <C>
December 31, 1998
Purchase Units in Force -- --
Purchase Unit Value $1.348594 $1.255563
September 22, 1998
Purchase Unit Value(1) $1.069509 $1.049518
</TABLE>
- ------------
(1) Purchase Unit Value At Date of Inception.
14
<PAGE> 118
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
AMERICAN INVESTMENT
GENERAL AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN FUND
MODERATE GENERAL GENERAL GENERAL GENERAL GENERAL ------------
GROWTH MONEY SMALL CAP SMALL CAP SOCIALLY STRATEGIC SMALL CAP
LIFESTYLE MARKET GROWTH VALUE RESPONSIBLE BOND PORTFOLIO
DIVISION 49 DIVISION 44 DIVISION 35 DIVISION 36 DIVISION 41 DIVISION 59 DIVISION 18
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- --
$1.186235 $1.013993 $1.350262 $1.166035 $1.278609 $1.050579 $1.712073
$1.025530 $1.002447 $1.075508 $1.035526 $1.065511 $1.011533 $1.429642
<CAPTION>
EVERGREEN EQUITY TRUST
AMERICAN ------------------------------------------------
GENERAL
MODERATE EVERGREEN EVERGREEN
GROWTH GROWTH AND SMALL CAP EVERGREEN
LIFESTYLE INCOME VALUE VALUE
DIVISION 49 DIVISION 56(4) DIVISION 55(4) DIVISION 57(4)
----------- -------------- -------------- --------------
<S> <C> <C> <C>
-- -- -- --
$1.186235 -- -- --
$1.025530 -- -- --
</TABLE>
- ------------
(4) 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> 119
SELECTED PURCHASE UNIT DATA -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER PUTNAM PUTNAM OTC SCUDDER
BERMAN GLOBAL PUTNAM NEW & EMERGING GROWTH
FOUNDERS GUARDIAN GROWTH -- OPPORTUNITIES -- GROWTH -- AND
GROWTH TRUST CLASS A CLASS A CLASS A INCOME
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21
----------- ----------- ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 7,720,189 1,012,671 6,153,771 10,725,927 3,092,839 4,494,004
Purchase Unit Value $1.633282 $1.368269 $1.549587 $1.434946 $1.098295 $1.542160
September 22, 1998
Purchase Unit Value(1) $1.368506 $1.144758 $1.266657 $1.124122 $0.859512 $1.378514
<CAPTION>
T. ROWE PRICE TEMPLETON
SMALL-CAP FOREIGN --
STOCK CLASS A
DIVISION 51 DIVISION 32
------------- ------------
<S> <C> <C>
December 31, 1998
Purchase Units in Force -- 5,437,288
Purchase Unit Value $1.141641 $1.094954
September 22, 1998
Purchase Unit Value(1) $1.028606 $0.944980
</TABLE>
- ------------
(1) Purchase Unit Value At Date of Inception.
16
<PAGE> 120
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON VARIABLE PRODUCTS
SERIES FUND
--------------------------------
TEMPLETON VANGUARD VANGUARD VANGUARD VANGUARD
ASSET TEMPLETON LIFESTRATEGY LONG- LONG- VANGUARD LIFESTRATEGY
ALLOCATION -- INTERNATIONAL -- CONSERVATIVE TERM TERM LIFESTRATEGY MODERATE VANGUARD
CLASS 1 CLASS 1 GROWTH CORPORATE TREASURY GROWTH GROWTH WELLINGTON
DIVISION 19 DIVISION 20 DIVISION 54 DIVISION 22 DIVISION 23 DIVISION 52 DIVISION 53 DIVISION 25
------------- ---------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
-- -- -- 2,949,044 3,682,809 -- -- 19,636,072
$1.728553 $1.721198 $1,084591 $1.312731 $1.349397 $1.168716 $1.126506 $1.529797
$1.429596 $1.484376 $1.023206 $1.294131 $1.340270 $1.032908 $1.023505 $1.423024
<CAPTION>
TEMPLETO
----------
TEMPLETO
ASSET
ALLOCATION VANGUARD
CLASS 1 WINDSOR II
DIVISION DIVISION 24
---------- -----------
<S> <C>
13,800,156
$1.7285 $1.723020
$1.4295 $1.509170
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
17
<PAGE> 121
GENERAL INFORMATION
- --------------------------------------------------------------------------------
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 "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 were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. 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-three 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 on July 25, 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 SEC as a unit investment trust under the Investment Company Act of 1940
("Act"). 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.
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> 122
- --------------------------------------------------------------------------------
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.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors-our address
is 2929 Allen Parkway,
Houston, Texas 77019
For more information about
A.G. DISTRIBUTORS, see the Statement
of Additional Information
19
<PAGE> 123
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director Plus enables you to participate in Divisions that represent
fifty-three Variable Account Options. These Divisions comprise all of the
Variable Account Options that are made available through VALIC Separate Account
A. According to your retirement program, you may not be able to invest in all
fifty-three 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 (AGSPC) -- offers 13 funds, for which VALIC serves as investment
adviser, for 3 of such funds, Bankers Trust Company serves as sub-adviser and
for 2 of such funds, T. Rowe Price Associates, Inc. serves as sub-adviser.
- - American General Series Portfolio Company 3 (AGSPC 3) -- offers 18 funds for
which VALIC serves as investment adviser and, for 13 of such funds, have one
of the following sub-advisers: American General Investment Management, L.P.,
Bankers Trust Company, Brown Capital Management, Inc., Capital Guardian Trust
Company, Fiduciary Management Associates, Inc., Goldman Sachs Asset
Management, J.P. Morgan Investment Management Inc., Jacobs Asset Management,
Neuberger Berman Management Inc. and State Street Bank & Trust Company/State
Street Global Advisors.
- - American Century Mutual Funds, Inc. -- 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.
- - Evergreen Equity Trust -- offers 3 funds for which either Evergreen Asset
Management Corp. or the Capital Management Group of First Union National Bank
serve 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 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - Templeton Variable Products Series Fund -- offers 2 funds for which Templeton
Investment Counsel, Inc. serves as investment adviser.
- - 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.
Twenty-two 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, the
American General Lifestyle Funds and the Vanguard LifeStrategy Portfolios, each
of which is a non-diversified Fund) is registered as a diversified open-end,
management investment company and is regulated under the Act. 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 as well as the Standard Average Annual Total Return for certain Divisions
for a 1, 3, 5 and 10 year period, if available. If Standard Average Annual
Return for a Division is not available for a stated period, we may show the
Standard Average Annual Return since Division inception. We will show the
Standard Average Annual Return for Divisions 51-57, which recently commenced
operations when it becomes available. The performance information in the tables
and graphs will reflect a deduction for separate
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.
20
<PAGE> 124
- --------------------------------------------------------------------------------
account fees (mortality and expense risk fees plus administration and
distribution fees minus any applicable reimbursements) and underlying fund
charges. They 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 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. The returns shown in the tables
for certain Funds (Divisions 51-54) reflect actual historical performance of the
related Separate Account Division since inception of each Division (September
22, 1998) and hypothetical performance for periods prior to September 22, 1998.
The returns shown in the tables for certain Funds (Divisions 55-57) reflect
actual historical performance of the related Funds since inception of each Fund.
Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. 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. 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.
The Standard Average Annual Total Return figures are based on the average
percentage change in the value of an investment in a corresponding Division for
a different series of Portfolio Director Plus from the beginning to the end of
the historical periods shown and have been restated to take into account the
fees and charges under this series of Portfolio Director Plus. 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 the specified
period. Premium taxes are not deducted. This information is calculated for each
Division based on how an initial investment of $1,000 performed at the end of
the specified periods shown.
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.
21
<PAGE> 125
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,601
12/31/90 11,232
12/31/91 13,516
12/31/92 13,311
12/31/93 14,428
12/31/94 14,127
12/31/95 17,481
12/31/96 19,263
12/31/97 23,424
12/31/98 27,504
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,083
12/31/90 10,964
12/31/91 12,740
12/31/92 13,728
12/31/93 15,249
12/31/94 14,205
12/31/95 17,015
12/31/96 17,176
12/31/97 18,497
12/31/98 19,701
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund. The Standard Average Annual Total Return for the Division for the 1, 3,
5 and 10 year period was 12.35%, 15.00%, 13.10% and 10.59%, respectively. The
Division commenced operations on September 6, 1983.
** The Standard Average Annual Total Return for the AGSPC Capital Conservation
Fund Division 7 for the 1, 3, 5 and 10 year period was 1.66%, 3.41%, 4.37%
and 6.96%, respectively. The Division commenced operations on January 16,
1986.
22
<PAGE> 126
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,123
12/31/90 11,691
12/31/91 13,304
12/31/92 14,148
12/31/93 15,549
12/31/94 14,733
12/31/95 17,165
12/31/96 17,354
12/31/97 18,747
12/31/98 20,262
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 10,032
12/31/95 14,706
12/31/96 17,410
12/31/97 20,893
12/31/98 24,484
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Government Securities
Fund Division 8 for the 1, 3, 5 and 10 year period was 3.16%, 4.11%, 4.56%
and 7.26%, respectively. The Division commenced operations on January 16,
1986.
** The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 12.12%, 17.26% and
20.53%, respectively. The Division commenced operations on April 29, 1994.
23
<PAGE> 127
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
12/31/94 9,945
12/31/95 13,003
12/31/96 15,903
12/31/97 19,530
12/31/98 22,194
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,289
12/31/90 8,158
12/31/91 8,995
12/31/92 7,725
12/31/93 9,949
12/31/94 10,656
12/31/95 11,708
12/31/96 12,404
12/31/97 12,575
12/31/98 14,814
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Growth & Income Fund
Division 16 for the 1 and 3 year period and since inception was 8.57%, 18.26%
and 17.97%, respectively. The Division commenced operations on April 29,
1994.
** The Standard Average Annual Total Return for the AGSPC International Equities
Fund Division 11 for the 1, 3 and 5 year period and since inception was
12.73%, 6.65%, 7.49% and 4.28%, respectively. The Division commenced
operations on October 2, 1989.
24
<PAGE> 128
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
12/31/91 10,909
12/31/92 11,154
12/31/93 12,635
12/31/94 13,092
12/31/95 15,427
12/31/96 15,976
12/31/97 15,083
12/31/98 17,519
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
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***.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
12/31/91 11,166
12/31/92 12,170
12/31/93 13,628
12/31/94 13,014
12/31/95 16,846
12/31/96 19,846
12/31/97 25,931
12/31/98 30,608
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 11.09, 2.72%, 5.91% and 7.98%, respectively. The Division
commenced operations on October 1, 1991.
** The Standard Average Annual Total Return for the AGSPC MidCap Index Fund
Division 4 for the 1, 3 and 5 year period and since inception was 12.97%,
20.83%, 16.97% and 16.62%, respectively. On October 1, 1991, the Fund
underlying the AGSPC MidCap Index Fund 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. The performance figures for the AGSPC MidCap Index Division
reflect the performance of the MidCap Index Fund since October 1, 1991.
*** "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 AGSPC 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.
25
<PAGE> 129
AGSPC MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,812
12/31/90 11,573
12/31/91 12,116
12/31/92 12,409
12/31/93 12,641
12/31/94 13,016
12/31/95 13,629
12/31/96 14,198
12/31/97 14,812
12/31/98 15,454
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,489
12/31/95 20,016
12/31/96 22,596
12/31/97 22,994
12/31/98 32,418
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.42), 2.66%, 3.17% and
4.39%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 35.91%,
16.15% and 28.14%, respectively. The Division commenced operations on April
29, 1994.
26
<PAGE> 130
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
12/31/92 11,141
12/31/93 12,809
12/31/94 12,284
12/31/95 15,551
12/31/96 18,004
12/31/97 21,855
12/31/98 21,260
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,105
12/31/90 9,902
12/31/91 12,558
12/31/92 12,873
12/31/93 13,779
12/31/94 13,473
12/31/95 18,563
12/31/96 22,824
12/31/97 30,296
12/31/98 38,256
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Small Cap Index Fund
Division 14 for the 1, 3 and 5 year period and since inception was (7.15)%,
9.55%, 9.93% and 11.91%, respectively. The Division commenced operations on
May 1, 1992.
** The RussellH Index is a trademark/servicemark of the Frank Russell Trust
Company. Russell(TM) is a trademark of the Frank Russell Company.
*** The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception was 21.21%,
26.15%, 22.14% and 15.55%, respectively. The Division commenced operations
on October 2, 1989.
27
<PAGE> 131
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,809
12/31/90 12,216
12/31/91 15,626
12/31/92 16,530
12/31/93 18,015
12/31/94 17,996
12/31/95 24,502
12/31/96 29,826
12/31/97 39,364
12/31/98 50,146
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
AMERICAN 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 13,570
12/31/90 14,713
12/31/91 27,171
12/31/92 27,281
12/31/93 32,940
12/31/94 31,481
12/31/95 42,951
12/31/96 48,377
12/31/97 58,995
12/31/98 78,707
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.32%, 25.85%, 22.21%
and 17.44%, respectively. The Division commenced operations on April 20,
1987.
** "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.
*** The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Standard Average Annual Total
Return for the American Century Ultra Fund Division 31 for the 1 year period
and since inception was 28.34% and 21.91%, respectively. The Division
commenced operations on July 1, 1996.
28
<PAGE> 132
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.
AMERICAN GENERAL CONSERVATIVE
GROWTH LIFESTYLE FUND*
(Division 50)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low to moderate growth of capital through investments
in AGSPC 3 Funds. Through its investments, the Fund allocates 5% to 15% of its
assets to international equity securities, 5% to 15% to small capitalization
equity securities, 5% to 15% to medium capitalization equity securities, 25% to
35% to large capitalization equity securities and 30% to 50% to bonds.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
29
<PAGE> 133
AMERICAN GENERAL CORE
BOND FUND*
(Division 58)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in medium to high quality fixed income securities.
AMERICAN GENERAL DOMESTIC
BOND FUND*
(Division 43)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment primarily in investment grade fixed income securities and
other income producing securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
30
<PAGE> 134
AMERICAN GENERAL GROWTH
LIFESTYLE FUND*
(Division 48)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth through investments in AGSPC 3 Funds. Through its investments, the
Fund allocates 25% to 35% of its assets to international equity securities, 15%
to 25% to small capitalization equity securities, 10% to 20% to medium
capitalization equity securities, 25% to 35% to large capitalization equity
securities and 5% to 15% to bonds.
AMERICAN GENERAL HIGH
YIELD BOND FUND*
(Division 60)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return and income consistent with conservation
of capital through investment in a diversified portfolio of high yielding high
risk fixed income securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
31
<PAGE> 135
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND*
(Division 33)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation by investing in equity
securities of non-U.S. companies, the majority of which are expected to be in
developed markets. The Fund may invest across the capitalization spectrum,
although it intends to emphasize smaller capitalization stocks.
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 Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
32
<PAGE> 136
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 objective.
AMERICAN GENERAL LARGE CAP
VALUE FUND*
(Division 40)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the Russell 1000(R) Value
Index through investments in equity securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
33
<PAGE> 137
AMERICAN GENERAL MID CAP
GROWTH FUND*
(Division 37)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in medium
capitalization equity securities, such as common and preferred stocks and
securities convertible into common stocks. Current income is of secondary
objective.
AMERICAN GENERAL MID CAP
VALUE FUND*
(Division 38)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth through investment in equity securities of medium
capitalization companies using a value-oriented investment approach.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
34
<PAGE> 138
AMERICAN GENERAL MODERATE
GROWTH LIFESTYLE FUND*
(Division 49)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth and current income through investments in AGSPC 3 Funds. Through
its investments, the Fund allocates 10% to 20% of its assets to international
equity securities, 10% to 20% to small capitalization equity securities, 10% to
20% to medium capitalization equity securities, 25% to 30% to large
capitalization equity securities and 20% to 30% to bonds.
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 Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
35
<PAGE> 139
AMERICAN GENERAL SMALL CAP
GROWTH FUND*
(Division 35)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth from a portfolio of equity securities of small
capitalization growth companies.
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 equity securities of small capitalization companies in
terms of revenues and/or market capitalization.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
36
<PAGE> 140
AMERICAN GENERAL SOCIALLY
RESPONSIBLE FUND*
(Division 41)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in equity
securities, in companies which meet the social criteria established for the
Fund.
AMERICAN GENERAL STRATEGIC
BOND FUND*
(Division 59)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return and income consistent with conservation
of capital through investment in a diversified portfolio of income producing
securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
37
<PAGE> 141
DREYFUS VARIABLE INVESTMENT FUND -- 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
12/31/90 10,174
12/31/91 26,135
12/31/92 44,283
12/31/93 73,732
12/31/94 78,544
12/31/95 100,521
12/31/96 115,943
12/31/97 134,005
12/31/98 128,222
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 31
EVERGREEN GROWTH AND
INCOME FUND**
Class A
(Division 56)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a return composed of capital appreciation and current income.
The Fund invests in the securities of companies which are undervalued in the
marketplace relative to those companies' assets, breakup value, earnings or
potential earnings growth.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- -------
<S> <C>
01/03/95 $10,000
12/31/95 13,165
12/31/96 16,131
12/31/97 20,954
12/31/98 21,811
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 3, 1995
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Dreyfus Variable Investment
Fund -- Small Cap Portfolio Division 18 for the 1 and 3 year period and since
inception was (8.67)%, 6.95% and 11.83%, respectively. The Division commenced
operations on July 11, 1994.
** The Division commenced operations on January 4, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
38
<PAGE> 142
EVERGREEN SMALL CAP
VALUE FUND*
Class A
(Division 55)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a return consisting of current income and capital appreciation.
The Fund invests in common stocks, preferred stocks, securities convertible into
or exchangeable for common stocks and fixed income securities. Under normal
conditions, the Fund will invest at least 65% of its assets in equity securities
(including convertible debt securities) of companies that, at the time of
purchase, have "total market capitalization" of less than $1 billion. The Fund
may invest up to 35% of its total assets in equity securities of companies that
at the time of purchase have a total market capitalization of $1 billion or
more.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- -------
<S> <C>
01/03/95 $10,000
12/31/95 12,786
12/31/96 15,478
12/31/97 20,477
12/31/98 18,369
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 3, 1995
[CHART]
EVERGREEN VALUE FUND**
Class A
(Division 57)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation with current income as a
secondary objective. Normally, at least 75% of the Fund's assets will be
invested in equity securities of U.S. companies with prospects for earnings
growth and dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,588
12/31/90 12,058
12/31/91 14,967
12/31/92 16,024
12/31/93 17,376
12/31/94 17,558
12/31/95 22,962
12/31/96 27,091
12/31/97 33,792
12/31/98 36,711
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
* The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund. The Division commenced operations on January 4, 1999.
Accordingly the Standard Average Annual Total Return for the Division will be
shown when it become available.
** The Division commenced operations on January 4, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
39
<PAGE> 143
FOUNDERS GROWTH FUND*
(Division 30)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital. Fund invests primarily in common stocks of
well established, high-quality growth companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 14,055
12/31/90 12,469
12/31/91 18,223
12/31/92 18,846
12/31/93 23,465
12/31/94 22,504
12/31/95 32,489
12/31/96 37,543
12/31/97 47,101
12/31/98 58,411
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Founders Growth Fund
Division 30 for the 1 year period and since inception was 18.94% and 19.19%,
respectively. The Division commenced operations on July 1, 1996.
40
<PAGE> 144
NEUBERGER BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of large-capitalization companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 3, 1993 $ Value
- ------------------------- -------
<S> <C>
08/03/93 $10,000
12/31/93 10,699
12/31/94 10,777
12/31/95 14,106
12/31/96 16,468
12/31/97 19,245
12/31/98 19,542
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 3, 1993
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,353
12/31/90 11,131
12/31/91 13,025
12/31/92 12,953
12/31/93 16,937
12/31/94 16,661
12/31/95 18,975
12/31/96 21,929
12/31/97 24,650
12/31/98 31,487
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Neuberger Berman Guardian Trust was formerly known as the
Neuberger&Berman Guardian Trust. The Standard Average Annual Total Return for
the Neuberger Berman Guardian Trust Division 29 for the 1 year period and
since inception was (3.08)% and 10.35%, respectively. The Division commenced
operations on July 1, 1996.
** The Standard Average Annual Total Return for the Putnam Global Growth
Fund-Class A Division 28 for the 1 year period and since inception was 22.66%
and 16.60%, respectively. The Division commenced operations on July 1, 1996.
41
<PAGE> 145
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
12/31/90 11,047
12/31/91 18,348
12/31/92 22,857
12/31/93 30,079
12/31/94 30,832
12/31/95 44,723
12/31/96 49,152
12/31/97 59,726
12/31/98 73,682
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,790
12/31/90 11,445
12/31/91 15,984
12/31/92 17,866
12/31/93 23,398
12/31/94 23,735
12/31/95 36,699
12/31/96 36,068
12/31/97 41,604
12/31/98 45,805
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Putnam New Opportunities
Fund-Class A Division 26 for the 1 year period and since inception was 18.30%
and 13.42%, respectively. The Division commenced operations on July 1, 1996.
** The Standard Average Annual Total Return for the Putnam OTC & Emerging Growth
Fund-Class A Division 27 for the 1 year period and since inception was 5.08%
and 1.12%, respectively. The Division commenced operations on July 1, 1996.
42
<PAGE> 146
SCUDDER GROWTH AND
INCOME FUND*
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,499
12/31/90 12,083
12/31/91 15,319
12/31/92 16,605
12/31/93 18,991
12/31/94 19,282
12/31/95 25,018
12/31/96 30,227
12/31/97 38,989
12/31/98 41,018
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,789
12/31/90 9,275
12/31/91 12,723
12/31/92 14,341
12/31/93 16,804
12/31/94 16,641
12/31/95 22,044
12/31/96 26,408
12/31/97 33,665
12/31/98 32,130
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.42% and
16.41%, respectively. The Division commenced operations on July 1, 1996.
** The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
43
<PAGE> 147
TEMPLETON ASSET ALLOCATION FUND*
Class 1 Shares
(Division 19)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of total return. The Fund tries to achieve its investment
goal through a flexible policy of investing in the following market segments:
stocks and debt securities of any nation, including emerging markets, and money
market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,206
12/31/90 10,205
12/31/91 12,892
12/31/92 13,788
12/31/93 17,205
12/31/94 16,511
12/31/95 20,014
12/31/96 23,537
12/31/97 26,897
12/31/98 28,318
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON FOREIGN FUND**
Class A Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund tries to achieve its investment goal by
a flexible policy of investing primarily in the equity securities of companies
outside the United States, including emerging markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,945
12/31/90 12,458
12/31/91 14,615
12/31/92 14,514
12/31/93 19,691
12/31/94 19,605
12/31/95 21,619
12/31/96 25,282
12/31/97 26,740
12/31/98 25,236
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton Asset Allocation
Fund -- Class 1 Division 19 for the 1 and 3 year period and since inception
was 0.49%, 10.86%, and 11.99%, respectively. The Division commenced
operations on July 11, 1994.
** The Templeton Foreign Fund -- Class A Shares was formerly known as the
Templeton Foreign Fund -- Class 1 Shares. The Standard Average Annual Total
Return for the Templeton Foreign Fund -- Class A Division 32 for the 1 year
period and since inception was (9.92)% and 0.99%, respectively. The Division
commenced operations on July 1, 1996. On January 1, 1993, the Templeton
Foreign Fund -- Class A implemented a Rule 12b-1 plan, which affects
subsequent performance.
44
<PAGE> 148
TEMPLETON INTERNATIONAL FUND*
Class 1 Shares
(Division 20)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve long-term capital growth. The Fund invests in stocks and debt
obligations of companies outside the United States, including emerging markets.
Any income realized will be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
12/31/92 9,325
12/31/93 13,587
12/31/94 13,141
12/31/95 15,052
12/31/96 18,469
12/31/97 20,823
12/31/98 22,524
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
CORPORATE FUND**
(Division 22)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide investors with a high level of current income consistent with
the maintenance of principal and liquidity. The Fund invests in a diversified
portfolio of investment grade corporate and Government bonds. Under normal
circumstances, at least 65% of the Fund's assets are invested in straight debt
corporate bonds rated a minimum of Baa3 by Moody's Investor Service Inc. or BBB-
by Standard and Poor's Ratings Group at the time of purchase. Additionally, at
least 80% of the Fund's assets will normally be invested in a combination of
investment grade corporate bonds and securities of the U.S. Government and its
agencies and instrumentalities. The dollar weighted average maturity of the Fund
is expected to range from 15 to 25 years.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,395
12/31/90 11,976
12/31/91 14,325
12/31/92 15,560
12/31/93 17,626
12/31/94 16,522
12/31/95 20,658
12/31/96 20,550
12/31/97 23,122
12/31/98 25,033
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton International
Fund -- Class 1 Division 20 for the 1 and 3 year period and since inception
was 3.24%, 13.03% and 12.17%, respectively. The Division commenced operations
on July 11, 1994.
** The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund-Long-Term Corporate Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.33% and 8.47%,
respectively. The Division commenced operations on July 1, 1996.
45
<PAGE> 149
VANGUARD LONG-TERM
TREASURY FUND*
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide a high level of current income consistent with the maintenance
of principal and liquidity. The Fund invests at least 85% of its assets in
long-term securities backed by the full faith and credit of the U.S. Government.
Also, at least 65% of the Fund's assets will be invested in U.S. Treasury bills,
notes and bonds. The dollar weighted average maturity of the Fund is expected to
range from 15 to 30 years.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,668
12/31/90 12,214
12/31/91 14,190
12/31/92 15,080
12/31/93 17,425
12/31/94 16,034
12/31/95 20,635
12/31/96 20,040
12/31/97 22,574
12/31/98 25,293
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LIFESTRATEGY
CONSERVATIVE GROWTH FUND**
(Division 54)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low-to-moderate growth of capital by investing in a
relatively fixed combination of other Vanguard funds. Through its investments in
other funds, LifeStrategy Conservative Growth Fund allocates 25%-50% of its
assets to stocks, 50%-75% of its assets to bonds, and 10%-25% of its assets to
cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,983
12/31/95 12,285
12/31/96 13,415
12/31/97 15,507
12/31/98 17,766
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund-Long-Term U.S. Treasury Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Treasury Fund Division
23 for the 1 year period and since inception was 6.98% and 10.12%,
respectively. The Division commenced operations on July 1, 1996.
** The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
46
<PAGE> 150
VANGUARD LIFESTRATEGY
GROWTH FUND*
(Division 52)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital by investing in a relatively fixed combination of other
Vanguard funds. Through its investments in other funds, LifeStrategy Growth Fund
allocates 65%-90% of its assets to stocks, 10%-35% of its assets to bonds, and
0%-25% of its assets to cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,963
12/31/95 12,744
12/31/96 14,554
12/31/97 17,610
12/31/98 21,131
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LIFESTRATEGY
MODERATE GROWTH FUND*
(Division 53)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital and a reasonable level of current income by investing in
a relatively fixed combination of other Vanguard funds. Through its investments
in other funds, LifeStrategy Moderate Growth Fund allocates 45%-70% of its
assets to stocks, 30%-55% of its assets to bonds, and 0%-25% of its assets to
cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,904
12/31/95 12,540
12/31/96 13,986
12/31/97 16,577
12/31/98 19,503
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
47
<PAGE> 151
VANGUARD WELLINGTON FUND*
(Division 25)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to conserve capital and provide moderate long-term growth and moderate
income. The Fund invests approximately 60% to 70% of its assets in dividend-
paying stocks of established, large- and medium-sized companies that, in the
adviser's opinion, are undervalued but whose prospects are improving. The
remaining 30% to 40% of assets are invested primarily in high-quality,
longer-term corporate bonds with some exposure to U.S. Treasury, government
agency, and mortgage-backed bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,030
12/31/90 11,573
12/31/91 14,156
12/31/92 15,116
12/31/93 16,978
12/31/94 16,721
12/31/95 21,984
12/31/96 25,256
12/31/97 30,775
12/31/98 34,122
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD WINDSOR II FUND**
(Division 24)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital by investing mainly in the equity
securities of large and medium-size companies whose stocks are considered by the
Fund's advisers to be undervalued and out of favor with investors. The Fund's
secondary objective is to provide some dividend income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,644
12/31/90 11,267
12/31/91 14,343
12/31/92 15,893
12/31/93 17,863
12/31/94 17,473
12/31/95 23,993
12/31/96 29,452
12/31/97 38,551
12/31/98 44,385
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund. The Standard Average Annual Total Return for the Vanguard Wellington
Fund Division 25 for the 1 year period and since inception was 5.83% and
15.62%, respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund. The Standard Average Annual Total Return for Vanguard Windsor II Fund
Division 24 for the 1 year period and since inception was 10.07% and 21.83%,
respectively. The Division commenced operations on July 1, 1996.
48
<PAGE> 152
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director 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 Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided, unless you otherwise so specify.
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 the Money Market Division option
chosen by your employer. 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 option chosen by your employer. 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.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
49
<PAGE> 153
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the 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 55 investment options offered in Portfolio Director Plus. This
includes 2 Fixed Account Options and 53 Variable Account Options. The Funds that
underlie the Variable Account Options are registered as investment companies
under and are subject to regulation of 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 "Summary" 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. As noted elsewhere in the prospectus, you will not be permitted to
select from more than 30 Variable Account Options, and in some cases less than
30, depending on your employer's plan and the type of annuity contract selected.
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.
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. Any
such account closure will be subject to applicable distribution restrictions
under the contract and/or under your employer's plan.
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.
50
<PAGE> 154
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director 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 Plus, 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 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.
51
<PAGE> 155
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 that will be deducted from the amount withdrawn. 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.
52
<PAGE> 156
- --------------------------------------------------------------------------------
- - If you have become totally and permanently disabled, defined as follows: You
are unable, due to mental or physical impairment, to perform the material and
substantial duties of any occupation for which you are suited by means of
education, training or experience; the impairment must have been in existence
for more than 180 days; the impairment must be expected to result in death or
be long-standing and indefinite and proof of disability must be evidenced by a
certified copy of a Social Security Administration determination or a doctor's
verification; 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 1/2%.
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.
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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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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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
PAYOUT DATE
The Payout Date is the date elected by you on which your payout (annuity)
payments will start. The date elected must be the first of any month provided 30
days advance notice has been given to VALIC. Your account will be valued ten
days prior to the end of the month preceding the Payout Date. A request to start
payments must be sent to our Home Office on a form approved by VALIC. Generally,
for qualified contracts, the Payout Date may begin when you attain age 59 1/2 or
separate from service, but must begin no later than April 1 following the
calendar year you reach age 70 1/2 or the calendar year in which you retire. For
nonqualified contracts, the Payout Date may begin at any time prior to your 85th
birthday. For additional information on the minimum distribution rules that
apply to payments under 403(b), 401, 403(a) and 457 plans or simplified employee
plans ("SEPs"), see "Federal Tax Matters" in this prospectus and in the
Statement of Additional Information.
PAYOUT OPTIONS
You may specify the manner in which your Payout Payments are made. You may
select one of the following options:
- LIFE ONLY -- payments are made only to you during your lifetime. Under this
option there is no provision for a death benefit for the beneficiary. For
example, it would be possible under this option for the Annuitant to receive
only one payout payment if he died prior to the date of the second payment,
two if he died before the third payment.
- LIFE WITH GUARANTEED PERIOD -- payments are made to you during your
lifetime; but if you die before the guaranteed period has expired, your
beneficiary will receive payments for the rest of your guaranteed period.
PAYOUT UNIT -- a measuring
unit used to calculate Payout
Payments from your Variable
Account Option. Payout Unit
values will vary with the
investment experience of the
VALIC Separate Account A
Division you have selected.
ASSUMED INVESTMENT
RATE -- the rate used to
determine your first monthly
Payout Payment per
thousand dollars of Account
Value in your Variable
Account Option(s).
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- 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, in the form of an
excise tax, if you do not meet an exception under 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,
- The payments will be guaranteed for a 10 year period,
- 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, and
- 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, subject to any limitations under the
contract or plan.
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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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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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
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<PAGE> 161
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revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
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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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. An exchange may require the issuance of a contract or may be subject
to any other requirements that the Company may impose.
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 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 Plus,
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
Portfolio Director Plus will have the same Account Value (called Accumulation
Value in the other contracts) as the other contracts.
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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 22 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 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
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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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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 and by the plan, if any.
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 not exceeding the Beneficiary's life
expectancy.
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 generally 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 is not required to be. Also,
a Contingent Contract
Owner may be designated.
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.
62
<PAGE> 166
- --------------------------------------------------------------------------------
STANDARD DEATH BENEFIT
The standard death benefit is payable if death occurs on or after age 70.
The Standard Death Benefit will be the greater of:
<TABLE>
<S> <C> <C>
Your Account Value on the Date Proof of Death is
Received by VALIC
OR
100% of Purchase Payments (to Fixed
and/or Variable Account Options)
- -- (MINUS)
Amount of all Prior Withdrawals, Charges
and any portion of Account Value applied
under a Payout Option
</TABLE>
DURING THE PAYOUT PERIOD
If death occurs during the Payout Period, your Beneficiary may receive a death
benefit depending on the Payout Option selected. The amount of death benefits
will also depend on the Payout Option that you selected. The Payout Options
available in Portfolio Director 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.
63
<PAGE> 167
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts or to the general public
before Portfolio Director Plus was first available to you. We may therefore,
advertise investment performance since the inception of the underlying 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
The Standard Average Annual Total Return figures are based on the average
percentage change in the value of an investment in a corresponding Division for
a different series of Portfolio Director Plus from the beginning to the end of
the historical periods shown and have been restated to take into account the
fees and charges under this series of Portfolio Director Plus. 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. If Standard Average Annual Return for a Division
is not available for a stated period, we may show the Standard Average Annual
Return since Division inception.
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. The SEC
staff takes the position that performance information of an underlying trend
reduced by account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted. For Divisions 51-57, which recently
commenced operations, only Nonstandard Average Annual Total Returns are shown.
Accordingly, the Standard Average Annual Total Return for each of these
Divisions will be shown when it becomes available
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. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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, or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or 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.
64
<PAGE> 168
- --------------------------------------------------------------------------------
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director 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 and the American General Money Market Division the
7-day Current Yield for the last 7 days ended December 31, 1998 was 3.84% and
4.09%, respectively.
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 and the American General Money Market
Division the 7-day Effective Yield for the last 7 days ended December 31, 1998
was 3.91% and 4.17%, respectively.
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.
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.
65
<PAGE> 169
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)(1).......... 09/06/83 -- 10.59% 13.10% 15.00% 12.35%
AGSPC Capital Conservation (Division 7)......... 01/16/86 -- 6.96 4.37 3.41 1.66
AGSPC Government Securities (Division 8)........ 01/16/86 -- 7.26 4.56 4.11 3.16
AGSPC Growth (Division 15)...................... 04/29/94 20.53% -- -- 17.26 12.12
AGSPC Growth & Income (Division 16)............. 04/29/94 17.97 -- -- 18.26 8.57
AGSPC International Equities (Division 11)...... 10/02/89 4.28 -- 7.49 6.65 12.73
AGSPC International Government Bond (Division
13)........................................... 10/01/91 7.98 -- 5.91 2.72 11.09
AGSPC MidCap Index (Division 4)***.............. 10/01/91*** 16.62 16.97 20.83 12.97
AGSPC Money Market (Division 6)................. 01/06/86 -- 4.39 3.17 2.66 (0.42)
AGSPC Science & Technology (Division 17)........ 04/29/94 28.14 -- -- 16.15 35.91
AGSPC Small Cap Index (Division 14)............. 05/01/92 11.91 -- 9.93 9.55 (7.15)
AGSPC Social Awareness (Division 12)............ 10/02/89 15.55 -- 22.14 26.15 21.21
AGSPC Stock Index (Division 10)................. 04/20/87 -- 17.44 22.21 25.85 22.32
American Century Ultra (Division 31)............ 07/01/96 21.91 -- -- -- 28.34
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)....................... 07/11/94 11.83 -- -- 6.95 (8.67)
Founders Growth (Division 30)................... 07/01/96 19.19 -- -- -- 18.94
Neuberger Berman Guardian Trust (Division 29)... 07/01/96 10.35 -- -- -- (3.08)
Putnam Global Growth -- Class A (Division 28)... 07/01/96 16.60 -- -- -- 22.66
Putnam New Opportunities -- Class A (Division
26)........................................... 07/01/96 13.42 -- -- -- 18.30
Putnam OTC & Emerging Growth -- Class A
(Division 27)................................. 07/01/96 1.12 -- -- -- 5.08
Scudder Growth and Income (Division 21)(2)...... 07/01/96 16.41 -- -- -- 0.42
Templeton Foreign -- Class A (Division 32)...... 07/01/96 0.99 -- -- -- (9.92)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1
(Division 19).............................. 07/11/94 11.99 -- -- 10.86 0.49
Templeton International -- Class 1 (Division
20)........................................ 07/11/94 12.17 -- -- 13.03 3.24
Vanguard Long-Term Corporate (Division 22)**.... 07/01/96 8.47 -- -- -- 3.33
Vanguard Long-Term Treasury (Division 23)**..... 07/01/96 10.12 -- -- -- 6.98
Vanguard Wellington (Division 25)............... 07/01/96 15.62 -- -- -- 5.83
Vanguard Windsor II (Division 24)............... 07/01/96 21.83 -- -- -- 10.07
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of
an investment in a corresponding Division for a different series of
Portfolio Director Plus from the beginning to the end of the historical
periods shown and have been restated to take into account the fees and
charges under this series of Portfolio Director Plus.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. The Standard Average Annual Total Return for the Evergreen Growth
and Income Fund -- Class A Division 56, the Evergreen Small Cap Value
Fund -- Class A Division 55, the Evergreen Value Fund -- Class A Division
57, the T. Rowe Price Small Cap Stock Fund Division 51, the Vanguard
LifeStrategy Conservative Growth Fund Division 54, the Vanguard
LifeStrategy Growth Fund Division 52 and the Vanguard LifeStrategy Moderate
Growth Fund Division 53 will be shown when it becomes available.
(1) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
66
<PAGE> 170
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31).................. 11/02/81 -- 22.86% 18.46% 21.18% 28.34%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)................... 08/31/90 35.80% -- 10.99 6.95 (8.67)
Evergreen Growth and Income -- Class A (Division
56)................................................. 01/03/95 20.81 -- -- 17.06 (0.65)
Evergreen Small Cap Value -- Class A (Division
55)(1).............................................. 01/03/95 15.59 -- -- 11.45 (14.38)
Evergreen Value -- Class A (Division 57).............. 04/12/85 -- 13.83 15.52 15.63 3.69
Founders Growth (Division 30)......................... 01/05/62 -- 19.24 19.46 20.39 18.94
Neuberger Berman Guardian Trust (Division 29)......... 08/03/93 13.12 12.12 10.06 (3.08)
Putnam Global Growth -- Class A (Division 28)......... 09/01/67 -- 12.09 12.52 17.12 22.66
Putnam New Opportunities -- Class A (Division 26)..... 08/31/90 27.04 -- 19.06 16.83 18.30
Putnam OTC & Emerging Growth -- Class A (Division
27)................................................. 11/01/82 -- 16.38 13.72 6.15 5.08
Scudder Growth and Income (Division 21)............... 03/15/29 -- 15.10 16.04 16.64 0.42
T. Rowe Price Small-Cap Stock (Division 51)........... 06/01/50 -- 12.32 13.17 12.00 (8.91)
Templeton Foreign -- Class A (Division 32)(2)......... 10/05/82 -- 9.64 4.19 3.71 (9.92)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division
19).............................................. 08/24/88 -- 10.91 9.74 10.86 0.49
Templeton International -- Class 1 (Division 20).... 05/01/92 12.88 -- 9.90 13.03 3.24
Vanguard LifeStrategy Conservative Growth (Division
54)................................................. 09/30/94 13.65 -- -- 11.70 9.50
Vanguard LifeStrategy Growth (Division 52)............ 09/30/94 18.51 -- -- 17.09 14.93
Vanguard LifeStrategy Moderate Growth (Division 53)... 09/30/94 16.24 -- -- 14.54 12.59
Vanguard Long-Term Corporate (Division 22)**.......... 07/09/73 -- 9.55 6.44 5.06 3.33
Vanguard Long-Term Treasury (Division 23)**........... 05/19/86 -- 9.66 6.92 5.48 6.98
Vanguard Wellington (Division 25)..................... 07/01/29 -- 13.00 14.34 14.46 5.83
Vanguard Windsor II (Division 24)..................... 06/24/85 -- 16.01 19.41 21.57 10.07
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account Divisions
51-54, the Table reflects hypothetical performance for periods prior to
September 22, 1998 (inception date of each Division). The Table reflects
hypothetical performance for Separate Account Divisions 55-57. The Standard
Average Annual Total Return for Divisions 51-57 will be shown when it becomes
available. 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 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) The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund.
(2) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
67
<PAGE> 171
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)....................... 09/06/83 -- 10.65% 13.77% 16.31% 17.42%
AGSPC Capital Conservation (Division 7)................... 01/16/86 -- 7.02 5.26 5.01 6.51
AGSPC Government Securities (Division 8).................. 01/16/86 -- 7.32 5.44 5.68 8.08
AGSPC Growth (Division 15)................................ 04/29/94 21.14% -- -- 18.52 17.19
AGSPC Growth & Income (Division 16)....................... 04/29/94 18.61 -- -- 19.51 13.64
AGSPC International Equities (Division 11)................ 10/02/89 4.34 -- 8.29 8.16 17.80
AGSPC International Government Bond (Division 13)......... 10/01/91 8.04 -- 6.75 4.33 16.15
AGSPC MidCap Index (Division 4)***........................ 10/01/91*** 16.68 -- 17.57 22.03 18.04
AGSPC Money Market (Division 6)........................... 01/16/86 -- 4.45 4.10 4.28 4.33
AGSPC Science & Technology (Division 17).................. 04/29/94 28.64 -- -- 17.44 40.99
AGSPC Small Cap Index (Division 14)....................... 05/01/92 11.97 -- 10.66 10.99 (2.72)
AGSPC Social Awareness (Division 12)...................... 10/02/89 15.61 -- 22.66 27.26 26.28
AGSPC Stock Index (Division 10)........................... 04/20/87 -- 17.50 22.72 26.96 27.39
American Century -- Twentieth Century Ultra (Division
31)..................................................... 07/01/96 23.45 -- -- -- 33.41
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)........................................... 07/11/94 12.65 -- -- 8.45 (4.32)
Founders Growth (Division 30)............................. 07/01/96 20.78 -- -- -- 24.01
Neuberger Berman Guardian Trust (Division 29)............. 07/01/96 12.12 -- -- -- 1.55
Putnam Global Growth -- Class A (Division 28)............. 07/01/96 18.23 -- -- -- 27.73
Putnam New Opportunities -- Class A (Division 26)......... 07/01/96 15.12 -- -- -- 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)..... 07/01/96 3.06 -- -- -- 10.10
Scudder Growth and Income (Division 21)................... 07/01/96 18.05 -- -- -- 5.21
Templeton Foreign -- Class A (Division 32)................ 07/01/96 2.93 -- -- -- (5.63)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)..... 07/11/94 12.80 -- -- 12.26 5.28
Templeton International -- Class 1 (Division 20)........ 07/11/94 12.98 -- -- 14.38 8.17
Vanguard Long-Term Corporate (Division 22)**.............. 07/01/96 10.28 -- -- -- 8.26
Vanguard Long-Term Treasury (Division 23)**............... 07/01/96 11.90 -- -- -- 12.04
Vanguard Wellington (Division 25)......................... 07/01/96 17.28 -- -- -- 10.87
Vanguard Windsor II (Division 24)......................... 07/01/96 23.37 -- -- -- 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director Plus from the beginning to the end of the historical periods shown
and have been restated to take into account the fees and charges under this
series of Portfolio Director Plus other than the surrender charge and
account maintenance fee.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. The Standard Average Annual Total Return for the Evergreen Growth
and Income Fund -- Class A Division 56, the Evergreen Small Cap Value
Fund -- Class A Division 55, the Evergreen Value Fund -- Class A Division
57, the T. Rowe Price Small Cap Stock Fund Division 51, the Vanguard
LifeStrategy Conservative Growth Fund Division 54, the Vanguard
LifeStrategy Growth Fund Division 52 and the Vanguard LifeStrategy Moderate
Growth Fund Division 53 will be shown when it becomes available.
68
<PAGE> 172
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)...................... 11/02/81 -- 22.91% 19.03% 22.37% 33.41%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)....................... 08/31/90 35.83% -- 11.70 8.45 (4.32)
Evergreen Growth and Income -- Class A (Division 56)...... 01/03/95 21.59 -- -- 18.33 4.09
Evergreen Small Cap Value -- Class A (Division 55)........ 01/03/95 16.46 -- -- 12.84 (10.29)
Evergreen Value -- Class A (Division 57).................. 04/12/85 -- 13.89 16.14 16.93 8.64
Founders Growth (Division 30)............................. 01/05/62 -- 19.30 20.01 21.60 24.01
Neuberger Berman Guardian Trust (Division 29)............. 08/03/93 13.18 -- 12.80 11.48 1.55
Putnam Global Growth -- Class A (Division 28)............. 09/01/67 -- 12.15 13.20 18.39 27.73
Putnam New Opportunities -- Class A (Division 26)......... 08/31/90 27.09 -- 19.62 18.11 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)..... 11/01/82 -- 16.44 14.38 7.67 10.10
Scudder Growth & Income (Division 21)(2).................. 03/15/29 -- 15.16 16.65 17.92 5.21
T. Rowe Price Small Cap Stock (Division 51)............... 06/01/50 -- 12.38 13.84 13.38 (4.56)
Templeton Foreign -- Class A (Division 32)(1)............. 10/05/82 -- 9.70 5.09 5.29 (5.63)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)..... 08/24/88 -- 10.97 10.48 12.26 5.28
Templeton International -- Class 1 (Division 20)........ 05/01/92 12.95 -- 10.64 14.38 8.17
Vanguard LifeStrategy Conservative Growth (Division 54)... 09/30/94 14.48 -- -- 13.08 14.56
Vanguard LifeStrategy Growth (Division 52)................ 09/30/94 19.25 -- -- 18.36 20.00
Vanguard LifeStrategy Moderate Growth (Division 53)....... 09/30/94 17.02 -- -- 15.86 17.65
Vanguard Long-Term Corporate (Division 22)**.............. 07/09/73 -- 9.61 7.27 6.61 8.26
Vanguard Long-Term Treasury (Division 23)**............... 05/19/86 -- 9.72 7.74 7.02 12.04
Vanguard Wellington (Division 25)......................... 07/01/29 -- 13.06 14.98 15.78 10.87
Vanguard Windsor II (Division 24)......................... 06/24/85 -- 16.07 19.97 22.76 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 55-57. The
Standard Average Annual Total Return for Divisions 51-57 will be shown when
it becomes available. 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 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
69
<PAGE> 173
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)...................... 09/06/83 -- 175.04% 90.63% 57.34% 17.42%
AGSPC Capital Conservation (Division 7).................. 01/16/86 -- 97.01 29.20 15.79 6.51
AGSPC Government Securities (Division 8)................. 01/16/86 -- 102.62 30.31 18.04 8.08
AGSPC Growth (Division 15)............................... 04/29/94 144.84% -- -- 66.49 17.19
AGSPC Growth & Income (Division 16)...................... 04/29/94 121.94 -- -- 70.68 13.64
AGSPC International Equities (Division 11)............... 10/02/89 48.14 -- 48.90 26.53 17.80
AGSPC International Government Bond (Division 13)........ 10/01/91 75.19 -- 38.66 13.56 16.15
AGSPC MidCap Index (Division 4)***....................... 10/01/91*** 206.08 -- 124.60 81.70 18.04
AGSPC Money Market (Division 6).......................... 01/16/86 -- 54.54 22.25 13.39 4.33
AGSPC Science & Technology (Division 17)................. 04/29/94 224.18 -- -- 61.96 40.99
AGSPC Small Cap Index (Division 14)...................... 05/01/92 112.60 -- 65.97 36.71 (2.72)
AGSPC Social Awareness (Division 12)..................... 10/02/89 282.56 -- 177.64 106.09 26.28
AGSPC Stock Index (Division 10).......................... 04/20/87 -- 401.46 178.36 104.66 27.39
American Century -- Twentieth Century Ultra (Division
31).................................................... 07/01/96 69.34 -- -- -- 33.41
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18).......................................... 07/11/94 70.29 -- -- 27.56 (4.32)
Founders Growth (Division 30)............................ 07/01/96 60.33 -- -- -- 24.01
Neuberger Berman Guardian Trust (Division 29)............ 07/01/96 33.11 -- -- -- 1.55
Putnam Global Growth -- Class A (Division 28)............ 07/01/96 52.01 -- -- -- 27.73
Putnam New Opportunities -- Class A (Division 26)........ 07/01/96 42.20 -- -- -- 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27).... 07/01/96 7.82 -- -- -- 10.10
Scudder Growth and Income (Division 21).................. 07/01/96 51.42 -- -- -- 5.21
T. Rowe Price Small-Cap Stock (Division 51).............. 09/22/98 13.29 -- -- -- --
Templeton Foreign -- Class A (Division 32)............... 07/01/96 7.48 -- -- -- (5.63)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19).... 07/11/94 71.32 -- -- 41.49 5.28
Templeton International -- Class 1 (Division 20)....... 07/11/94 72.52 -- -- 49.64 8.17
Vanguard LifeStrategy Conservative Growth (Division
54).................................................... 09/22/98 7.73 -- -- -- --
Vanguard LifeStrategy Growth (Division 52)............... 09/22/98 16.15 -- -- -- --
Vanguard LifeStrategy Moderate Growth (Division 53)...... 09/22/98 12.41 -- -- -- --
Vanguard Long-Term Corporate (Division 22)**............. 07/01/96 27.73 -- -- -- 8.26
Vanguard Long-Term Treasury (Division 23)**.............. 07/01/96 32.45 -- -- -- 12.04
Vanguard Wellington (Division 25)........................ 07/01/96 48.94 -- -- -- 10.87
Vanguard Windsor II (Division 24)........................ 07/01/96 69.05 -- -- -- 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Cumulative Return figures are
based on the percentage changes in the value of an investment in a
corresponding Division for a different series of Portfolio Director Plus
from the beginning to the end of the historical periods shown and have been
restated to take into account the fees and charges under this series of
Portfolio Director Plus other than the surrender charge and account
maintenance fee.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC3 Funds recently commenced operation no actual performance
exists. The Evergreen Growth and Income Fund -- Class A Division 56, the
Evergreen Small Cap Value Fund -- Class A Division 55 and the Evergreen
Value Fund -- Class A Division 57 have only recently been offered through
Portfolio Director Plus. Accordingly, no performance information is
available for such Divisions.
70
<PAGE> 174
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)........................ 11/02/81 -- 687.07% 138.94% 83.25% 33.41%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)......................... 08/31/90 1,182.22% -- 73.90 27.56 (4.32)
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 118.11 -- -- 65.67 4.09
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 83.69 -- -- 43.66 (10.29)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 267.11 111.27 59.87 8.64
Founders Growth (Division 30)............................... 01/05/62 -- 484.11 148.93 79.79 24.01
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 95.42 -- 82.65 38.53 1.55
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 214.87 85.91 65.94 27.73
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 636.82 -- 144.96 64.75 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 358.05 95.76 24.81 10.10
Scudder Growth & Income (Division 21)....................... 11/13/84 -- 310.18 115.99 63.95 5.21
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 221.30 91.20 45.75 (4.56)
Templeton Foreign -- Class A (Division 32)(1)............... 10/05/82 -- 152.36 28.16 16.73 (5.63)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)....... 08/24/88 -- 183.18 64.59 41.49 5.28
Templeton International -- Class 1 (Division 20).......... 05/01/92 125.24 -- 65.77 49.64 8.17
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 77.66 -- -- 44.61 14.57
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 111.31 -- -- 65.82 20.00
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 95.03 -- -- 55.53 17.65
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 150.33 42.02 21.18 8.26
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 152.93 45.16 22.57 12.04
Vanguard Wellington (Division 25)........................... 07/01/29 -- 241.22 100.98 55.21 10.87
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 343.85 148.47 85.00 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 55-57.
Accordingly, the Standard Average Annual Total Return for Divisions 51-57
will be shown when it becomes available. 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 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
71
<PAGE> 175
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 Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the 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.
72
<PAGE> 176
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's
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 Separate Account A 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.
73
<PAGE> 177
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, as a Section 408(b) Individual
Retirement Annuity ("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) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs of 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 ("Roth IRA").
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." Such Non-Qualified Contracts generally include unfunded,
nonqualified deferred compensation plans of corporate employers as well as
individual annuity contracts issued to individuals outside of the context of any
formal employer or employee retirement plan or arrangement. Non-Qualified
Contracts generally may invest only in mutual funds which are not available to
the general public outside of annuity contracts or life insurance contracts.
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 Plus 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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
Distributions are taxed differently depending on the program through which
Portfolio Director Plus 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 or penalty taxes, 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.
74
<PAGE> 178
- --------------------------------------------------------------------------------
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although Valic can provide no assurance that the IRS will not 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 if
such a challenge were made.
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
how ownership of the Mutual Fund shares might be imputed for federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons 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
75
<PAGE> 179
- --------------------------------------------------------------------------------
program. THE 8% YIELD ON THE TAX-FAVORED PROGRAM WILL BE REDUCED BY THE IMPACT
OF INCOME TAXES UPON WITHDRAWAL. The yield will vary depending upon the timing
of withdrawals. The previous chart represents (without factoring in fees and
charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
federal taxes......... $2,500 $2,500
Current federal income
tax due on Purchase
Payments.............. 0 (700)
Net retirement plan
Purchase Payments..... $2,500 $1,800
</TABLE>
This chart assumes a 28% federal income tax rate. The $700 which is paid toward
current federal income taxes 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.
76
<PAGE> 180
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- - INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information technology
systems; (2) assess which items in the inventory may expose VALIC to business
interruptions caused by the Year 2000 Problem; (3) reprogram or replace
systems that are not Year 2000 ready; (4) test systems to prove that they will
work correctly into the year 2000; and (5) return the systems to operations.
As of December 31, 1998, we have substantially completed all steps with
respect to our critical systems.
- - EXTERNAL SYSTEMS. VALIC has relationships with various third parties that must
also be Year 2000 ready. Third parties are companies that provide certain
services to VALIC. Third parties are different from internal systems in that
VALIC has less, or no, control over their Year 2000 readiness. VALIC has
developed a plan to review and try to lessen the Year 2000 risks of third
parties. As of December 31, 1998, VALIC has substantially completed its review
of third party Year 2000 risks. VALIC intends to test third party Year 2000
readiness throughout 1999.
- - CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the consequences
of any failures associated with the Year 2000 Problem; (2) determine the
chance of a Year 2000-related failure for systems that have a high chance of
failing; (3) develop an action plan to complete contingency plans for those
systems that rank high in both impact of failure and chance of failure; and
(4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
77
<PAGE> 181
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> 182
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<PAGE> 183
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> 184
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<PAGE> 185
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 9
Types of Variable Annuity Contracts................. 10
Federal Tax Matters................................. 10
Tax Consequences of Purchase Payments........... 10
Tax Consequences of Distributions............... 12
Special Tax Consequences -- Early
Distribution.................................. 13
Special Tax Consequences -- Required
Distributions................................. 14
Tax Free Rollovers, Transfers and Exchanges..... 15
Exchange Privilege.................................. 15
Exchanges From Portfolio Director............... 16
Exchanges From Portfolio Director 2............. 16
Exchanges From Independence Plus Contracts...... 17
Exchanges From V-Plan Contracts................. 18
Exchanges From SA-1 and SA-2 Contracts.......... 19
Exchanges From Impact Contracts................. 20
Exchanges From Compounder Contracts............. 21
Information Which May Be Applicable To Any
Exchange...................................... 22
Calculation of Surrender Charge..................... 23
Illustration of Surrender Charge on Total
Surrender..................................... 23
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 23
Purchase Unit Value................................. 24
Illustration of Calculation of Purchase Unit
Value......................................... 24
Illustration of Purchase of Purchase Units...... 24
Performance Calculations............................ 24
AGSPC Money Market and American General Money
Market Divisions Yields....................... 24
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 24
Calculation of Current Yield for American
General Money Market Division 44.............. 24
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six and American
General Money Market Division 44.............. 24
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 25
Calculation of Effective Yield for American
General Money Market Division 44.............. 25
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six and
American General Money Market Division 44..... 25
Standardized Yield for Bond Fund Divisions.......... 25
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 25
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 25
Calculation of Average Annual Total Return...... 25
Performance Information............................. 27
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 27
Performance Compared to Market Indices.......... 27
AGSPC Asset Allocation Division Five............ 32
AGSPC Capital Conservation Division Seven....... 33
AGSPC Government Securities Division Eight...... 33
AGSPC Growth Division Fifteen................... 34
AGSPC Growth & Income Division Sixteen.......... 34
AGSPC International Equities Division Eleven.... 35
AGSPC International Government Bond Division
Thirteen...................................... 36
AGSPC MidCap Index Division Four................ 36
AGSPC Money Market Division Six................. 37
AGSPC Science & Technology Division Seventeen... 38
AGSPC Small Cap Index Division Fourteen......... 38
AGSPC Social Awareness Division Twelve.......... 39
AGSPC Stock Index Division Ten.................. 40
American Century Ultra Division Thirty-One...... 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American General Balanced Division Forty-Two.... 41
American General Conservative Growth Lifestyle
Division Fifty................................ 41
American General Core Bond Division
Fifty-Eight................................... 41
American General Domestic Bond Division
Forty-Three................................... 41
American General Growth Lifestyle Division
Forty-Eight................................... 41
American General High Yield Bond Division
Sixty......................................... 41
American General International Growth Division
Thirty-Three.................................. 41
American General International Value Division
Thirty-Four................................... 41
American General Large Cap Growth Division
Thirty-Nine................................... 41
American General Large Cap Value Division
Forty......................................... 42
American General Mid Cap Growth Division Thirty-
Seven......................................... 42
American General Mid Cap Value Division Thirty-
Eight......................................... 42
American General Moderate Growth Lifestyle
Division Forty-Nine........................... 42
American General Money Market Division
Forty-Four.................................... 42
American General Small Cap Growth Division
Thirty-Five................................... 42
American General Small Cap Value Division
Thirty-Six.................................... 42
American General Socially Responsible Division
Forty-One..................................... 42
American General Strategic Bond Division
Fifty-Nine.................................... 42
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division Eighteen................... 43
Evergreen Growth and Income Division
Fifty-Six..................................... 43
Evergreen Small Cap Value Division Fifty-Five... 44
Evergreen Value Division Fifty-Seven............ 45
Founders Growth Division Thirty................. 45
Neuberger Berman Guardian Trust Division
Twenty-Nine................................... 46
Putnam Global Growth-Class A Division
Twenty-Eight.................................. 47
Putnam New Opportunities-Class A Division
Twenty-Six.................................... 47
Putnam OTC & Emerging Growth-Class A Division
Twenty-Seven.................................. 48
Scudder Growth and Income Division Twenty-One... 49
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 49
Templeton Asset Allocation Division Nineteen.... 50
Templeton Foreign Division Thirty-Two........... 51
Templeton International Division Twenty......... 51
Vanguard LifeStrategy Conservative Growth
Division Fifty-Four........................... 52
Vanguard Long-Term Corporate Division
Twenty-Two.................................... 53
Vanguard Long-Term Treasury Division
Twenty-Three.................................. 54
Vanguard LifeStrategy Growth Division
Fifty-Two..................................... 54
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three................................... 55
Vanguard Wellington Division Twenty-Five........ 56
Vanguard Windsor II Division Twenty-Four........ 57
Payout Payments..................................... 58
Assumed Investment Rate......................... 58
Amount of Payout Payments....................... 58
Payout Unit Value............................... 58
Illustration of Calculation of Payout Unit
Value......................................... 59
Illustration of Payout Payments................. 59
Distribution of Variable Annuity Contracts.......... 60
Experts............................................. 60
Comments on Financial Statements.................... 61
</TABLE>
<PAGE> 186
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<PAGE> 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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> 188
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-20 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 189
[Momento Photo]
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.40 - 12.40
Prospectus
May 1, 1999
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director Plus
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 190
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.40 TO 12.40 May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain Series of
Portfolio Director Plus that consist of group and individual variable annuity
contracts (the "Contracts") 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, as well as for certain after-tax arrangements that are not part of an
employer's plan.
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 53 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, life insurance contracts or certain employer-
sponsored retirement plans, 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 affiliates.
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 May 1, 1999, 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. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 191
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
FEE TABLE.......................................... 3
SUMMARY............................................ 8
SELECTED PURCHASE UNIT DATA........................ 12
GENERAL INFORMATION................................ 18
About Portfolio Director Plus.................. 18
About VALIC.................................... 18
About VALIC Separate Account A................. 18
Units of Interests............................. 19
Distribution of the Contracts.................. 19
VARIABLE ACCOUNT OPTIONS........................... 20
Summary of Funds............................... 20
PURCHASE PERIOD.................................... 49
Purchase Payments.............................. 49
Purchase Units................................. 49
Calculation of Purchase Unit Value............. 49
Choosing Investment Options.................... 50
Fixed Account Options..................... 50
Variable Account Options.................. 50
Stopping Purchase Payments..................... 50
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 51
During the Purchase Period..................... 51
During the Payout Period....................... 51
Communicating Transfer or Reallocation
Instructions................................. 51
Effective Date of Transfer..................... 51
FEES AND CHARGES................................... 52
Account Maintenance Fee........................ 52
Surrender Charge............................... 52
Amount of Surrender Charge................ 52
10% Free Withdrawal....................... 52
Exceptions to Surrender Charge............ 52
Premium Tax Charge............................. 53
Separate Account Charges....................... 53
Fund Annual Expense Charges.................... 53
Other Tax Charges.............................. 53
Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or
Administration and Distribution Fee
Charges...................................... 54
Separate Account Expense Reimbursement......... 54
PAYOUT PERIOD...................................... 55
Fixed Payout................................... 55
Variable Payout................................ 55
Combination Fixed and Variable Payout.......... 55
Payout Date.................................... 55
Payout Options................................. 55
Enhancements to Payout Options................. 56
Payout Information............................. 56
SURRENDER OF ACCOUNT VALUE......................... 57
When Surrenders are Allowed.................... 57
Amount That May Be Surrendered................. 57
Surrender Restrictions......................... 57
Partial Surrenders............................. 57
Systematic Withdrawals......................... 57
Distributions Required By Federal Tax Law...... 58
EXCHANGE PRIVILEGE................................. 59
Restrictions on Exchange Privilege............. 59
Taxes and Conversion Costs..................... 59
Surrender Charges.............................. 59
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 59
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 60
Comparison of Other Contracts.................. 60
Features of Portfolio Director Plus............ 60
Agents' and Managers' Retirement Plan Exchange
Offer........................................ 60
DEATH BENEFITS..................................... 62
Beneficiary Information........................ 62
Special Information for Individual Non-Tax
Qualified Contracts.......................... 62
During the Purchase Period..................... 62
Interest Guaranteed Death Benefit......... 62
Standard Death Benefit.................... 63
During the Payout Period....................... 63
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 64
Types of Investment Performance Information
Advertised................................... 64
Total Return Performance Information......... 64
Standard Average Annual Total Return......... 64
Nonstandard Average Annual Total Return...... 64
Cumulative Total Return...................... 64
Annual Change in Purchase Unit Value......... 64
Cumulative Change in Purchase Unit Value..... 65
Total Return Based on Different Investment
Amounts................................... 65
An Assumed Account Value of $10,000.......... 65
Yield Performance Information.................. 65
AGSPC Money Market and American General Money
Market Divisions............................. 65
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 65
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 65
OTHER CONTRACT FEATURES............................ 72
Changes That May Not Be Made................... 72
Change of Beneficiary.......................... 72
Contingent Owner............................... 72
Cancellation -- The 20 Day "Free Look"......... 72
We Reserve Certain Rights...................... 72
Relationship to Employer's Plan................ 72
VOTING RIGHTS...................................... 73
Who May Give Voting Instructions............... 73
Determination of Fund Shares Attributable to
Your Account................................. 73
During Purchase Period....................... 73
During Payout Period or after a Death Benefit
Has Been Paid............................. 73
How Fund Shares Are Voted...................... 73
FEDERAL TAX MATTERS................................ 74
Type of Plans.................................. 74
Tax Consequences in General.................... 74
Effect of Tax-Deferred Accumulations........... 75
YEAR 2000.......................................... 77
Year 2000 Risks................................ 77
</TABLE>
(i)
<PAGE> 192
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................... 51
Annuitant....................... 62
Assumed Investment Rate......... 55
Beneficiary..................... 62
Contract Owner.................. 62
Divisions....................... 64
Fixed Account Options........... 62
Home Office..................... 51
Mutual Fund or Fund............. 18
Participant..................... 01
Participant Year................ 52
Payout Period................... 51
Payout Unit..................... 55
Purchase Payments............... 49, 64
Purchase Period................. 51
Purchase Unit................... 49, 50
VALIC Separate Account A........ 73
Variable Account Options........ 20, 62
</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. 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
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2
<PAGE> 194
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $ 15
</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 Fund(8) 0.25% 0.35% -- 0.60%
AGSPC Capital Conservation Fund 0.25 0.35 -- 0.60
AGSPC Government Securities Fund 0.25 0.35 -- 0.60
AGSPC Growth Fund 0.25 0.35 -- 0.60
AGSPC Growth & Income Fund 0.25 0.35 -- 0.60
AGSPC International Equities Fund 0.25 0.35 -- 0.60
AGSPC International Government Bond Fund 0.25 0.35 -- 0.60
AGSPC MidCap Index Fund 0.25 0.35 -- 0.60
AGSPC Money Market Fund 0.25 0.35 -- 0.60
AGSPC Science & Technology Fund 0.25 0.35 -- 0.60
AGSPC Small Cap Index Fund 0.25 0.35 -- 0.60
AGSPC Social Awareness Fund 0.25 0.35 -- 0.60
AGSPC Stock Index Fund 0.25 0.35 -- 0.60
American Century Ultra Fund(4) 0.25 0.60 (0.21%) 0.64
American General Balanced Fund(4) 0.25 0.35 (0.25) 0.35
American General Conservative Growth Lifestyle Fund(4) 0.25 0.35 (0.25) 0.35
American General Core Bond Fund(4) 0.25 0.35 (0.25) 0.35
American General Domestic Bond Fund(4) 0.25 0.35 (0.25) 0.35
American General Growth Lifestyle Fund(4) 0.25 0.35 (0.25) 0.35
American General High Yield Bond Fund(4) 0.25 0.35 (0.25) 0.35
American General International Growth Fund(4) 0.25 0.35 (0.25) 0.35
American General International Value Fund(4) 0.25 0.35 (0.25) 0.35
American General Large Cap Growth Fund(4) 0.25 0.35 (0.25) 0.35
American General Large Cap Value Fund(4) 0.25 0.35 (0.25) 0.35
American General Mid Cap Growth Fund(4) 0.25 0.35 (0.25) 0.35
American General Mid Cap Value Fund(4) 0.25 0.35 (0.25) 0.35
American General Moderate Growth Lifestyle Fund(4) 0.25 0.35 (0.25) 0.35
American General Money Market Fund(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 Value Fund(4) 0.25 0.35 (0.25) 0.35
American General Socially Responsible Fund(4) 0.25 0.35 (0.25) 0.35
American General Strategic Bond Fund(4) 0.25 0.35 (0.25) 0.35
Dreyfus Variable Investment Fund --
Small Cap Portfolio(4) 0.25 0.60 (0.15) 0.70
Evergreen(sm) Equity Trust
Evergreen Growth and Income Fund -- Class A(4) 0.25 0.60 (0.25) 0.60
Evergreen Small Cap Value Fund -- Class A(4) 0.25 0.60 (0.25) 0.60
Evergreen Value Fund -- Class A(4) 0.25 0.60 (0.25) 0.60
Founders Growth Fund(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 Fund -- Class A Shares(4) 0.25 0.60 (0.25) 0.60
Putnam New Opportunities Fund -- Class A Shares(4) 0.25 0.60 (0.25) 0.60
Putnam OTC & Emerging Growth Fund -- Class A Shares(4) 0.25 0.60 (0.25) 0.60
Scudder Growth and Income Fund(4) 0.25 0.60 (0.25) 0.60
T. Rowe Price Small-Cap Stock Fund 0.25 0.60 -- 0.85
Templeton Foreign Fund -- Class A(4) 0.25 0.60 (0.25) 0.60
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 0.25 0.60 -- 0.85
Templeton International Fund -- Class 1 0.25 0.60 -- 0.85
Vanguard Long-Term Corporate Fund(5) 0.25 0.60 (0.25) 0.60
Vanguard Long-Term Treasury Fund(5) 0.25 0.60 (0.25) 0.60
Vanguard LifeStrategy Conservative Growth Fund 0.25 0.60 -- 0.85
Vanguard LifeStrategy Growth Fund 0.25 0.60 -- 0.85
Vanguard LifeStrategy Moderate Growth Fund 0.25 0.60 -- 0.85
Vanguard Wellington Fund 0.25 0.60 -- 0.85
Vanguard Windsor II Fund 0.25 0.60 -- 0.85
</TABLE>
3
<PAGE> 195
FEE TABLE -- (CONTINUED)
- --------------------------------------------------------------------------------
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
OTHER TOTAL FUND
MANAGEMENT EXPENSES EXPENSES
FEES (AFTER (AFTER
(AFTER FEE 12b-1 EXPENSE EXPENSE
FUND WAIVER) FEES WAIVER)(6) WAIVER)
---- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation Fund(8) 0.50% -- 0.04% 0.54%
AGSPC Capital Conservation Fund 0.50 -- 0.04 0.54
AGSPC Government Securities Fund 0.50 -- 0.04 0.54
AGSPC Growth Fund 0.80 -- 0.04 0.84
AGSPC Growth & Income Fund 0.75 -- 0.05 0.80
AGSPC International Equities Fund 0.35 -- 0.05 0.40
AGSPC International Government Bond Fund 0.50 -- 0.05 0.55
AGSPC MidCap Index Fund 0.32 -- 0.04 0.36
AGSPC Money Market Fund 0.50 -- 0.04 0.54
AGSPC Science & Technology Fund 0.90 -- 0.05 0.95
AGSPC Small Cap Index Fund 0.35 -- 0.04 0.39
AGSPC Social Awareness Fund 0.50 -- 0.04 0.54
AGSPC Stock Index Fund 0.27 -- 0.04 0.31
American Century Ultra Fund(11) 1.00 -- -- 1.00
American General Balanced Fund(9) 0.80 -- 0.02 0.82
American General Conservative Growth Lifestyle
Fund(10) 0.10 -- -- 0.10
American General Core Bond Fund(9) 0.50 -- 0.30 0.80
American General Domestic Bond Fund(9) 0.60 -- 0.18 0.78
American General Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General High Yield Bond Fund(9) 0.70 -- 0.29 0.99
American General International Growth Fund(9) 0.90 -- 0.25 1.15
American General International Value Fund(9) 1.00 -- 0.04 1.04
American General Large Cap Growth Fund(9) 0.55 -- 0.31 0.86
American General Large Cap Value Fund(9) 0.50 -- 0.31 0.81
American General Mid Cap Growth Fund(9) 0.65 -- 0.14 0.79
American General Mid Cap Value Fund(9) 0.75 -- 0.30 1.05
American General Moderate Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General Money Market Fund(9) 0.25 -- 0.31 0.56
American General Small Cap Growth Fund(9) 0.85 -- 0.31 1.16
American General Small Cap Value Fund(9) 0.75 -- 0.23 0.98
American General Socially Responsible Fund(9) 0.25 -- 0.31 0.56
American General Strategic Bond Fund(9) 0.60 -- 0.29 0.89
Dreyfus Variable Investment Fund -- Small Cap
Portfolio 0.75 -- 0.02 0.77
Evergreen Equity Trust
Evergreen Growth and Income Fund -- Class A 0.90 0.25% 0.31 1.46
Evergreen Small Cap Value Fund -- Class A(11) 1.00 0.25 0.43 1.68
Evergreen Value Fund -- Class A 0.50 0.25 0.25 1.00
Founders Growth Fund 0.67 0.25 0.16 1.08
Neuberger Berman Guardian Trust(7)(11) 0.84 -- 0.03 0.87
Putnam Global Growth Fund -- Class A Shares 0.64 0.25 0.29 1.18
Putnam New Opportunities Fund -- Class A Shares 0.49 0.25 0.24 0.98
Putnam OTC & Emerging Growth Fund -- Class A Shares 0.54 0.25 0.21 1.00
Scudder Growth and Income Fund 0.44 -- 0.30 0.74
T. Rowe Price Small-Cap Stock Fund 0.77 -- 0.24 1.01
Templeton Foreign Fund -- Class A(11) 0.61 0.25 0.26 1.12
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 0.60 -- 0.18 0.78
Templeton International Fund -- Class 1 0.69 -- 0.17 0.86
Vanguard Long-Term Corporate Fund(11) 0.03 -- 0.27 0.30
Vanguard Long-Term Treasury Fund(11) 0.01 -- 0.26 0.27
Vanguard LifeStrategy Conservative Growth
Fund(11)(12) -- -- -- --
Vanguard LifeStrategy Growth Fund(11)(12) -- -- -- --
Vanguard LifeStrategy Moderate Growth Fund(11)(12) -- -- -- --
Vanguard Wellington Fund(11) 0.28 -- 0.03 0.31
Vanguard Windsor II Fund(11) 0.38 -- 0.03 0.41
</TABLE>
4
<PAGE> 196
- --------------------------------------------------------------------------------
- ------------
(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 affiliates 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 (0.21%), American General (0.25%), Dreyfus (0.15%),
Evergreen (0.25%), Founders (0.25%), Neuberger Berman (0.25%), Putnam
(0.25%), Scudder (0.25%) and Templeton Foreign Fund -- Class A (0.25%) With
respect to American 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 equal to or 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 Inc. ("NB"). NB 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. For the Trust's 1998 fiscal year, NB did not bear any expenses.
(8) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(9) In the absence of management fee waiver, other expense waiver and total
annual portfolio operating expense waiver, management fees, other expenses
and total annual portfolio operating expenses, respectively would be:
American General Balanced Fund, 0.80%, 0.80% and 1.60%; American General
Core Bond Fund, 0.50%, 0.86% and 1.36%; American General Domestic Bond
Fund, 0.60%, 0.57% and 1.17%; American General High Yield Bond Fund, 0.70%,
0.83% and 1.53%; American General International Growth Fund, 0.90%, 0.71%
and 1.61%; American General International Value Fund, 1.00%, 0.70% and
1.70%; American General Large Cap Growth Fund, 0.55%, 0.58% and 1.13%;
American General Large Cap Value Fund, 0.50%, 0.58% and 1.08%; American
General Mid Cap Growth Fund, 0.65%, 0.64% and 1.29%; American General Mid
Cap Value Fund, 0.75%, 0.64% and 1.39%; American General Money Market Fund,
0.25%, 0.86% and 1.11%; American General Small Cap Growth Fund, 0.85%,
0.62% and 1.47%; American General Small Cap Value Fund, 0.75%, 0.63% and
1.38%; and American General Socially Responsible Fund, 0.25%, 0.87% and
1.12%; and American General Strategic Bond Fund, 0.60%, 0.90% and 1.50%.
(10) Total Combined Operating Expenses based on estimated total average weighted
combined operating expenses for the American General Conservative Growth
Lifestyle Fund is 1.00%, for American General Growth Lifestyle Fund 1.09%
and for American General Moderate Growth Lifestyle Fund 1.03%. Estimated
Total Combined Operating Expenses of each American General Lifestyle Fund
is based on the Total Fund Operating Expenses of the underlying AGSPC 3
Funds and the American General Lifestyle Funds, assuming each American
General Lifestyle Fund's projected asset allocation among the underlying
AGSPC 3 Funds is maintained.
(11) The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Evergreen Small Cap Value Fund
was formerly known as the Evergreen Small Cap Equity Income Fund. The
Neuberger Berman Guardian Trust was formerly known as the Neuberger&Berman
Guardian Trust. The Templeton Foreign Fund -- Class A was formerly known as
the Templeton Foreign Fund -- Class 1. VALIC Separate Account A purchases
shares of the Templeton Foreign Fund -- Class A at net asset value and
without sales charges generally applicable to Class A shares. The Vanguard
Long-Term Corporate Fund was formerly known as the Vanguard Fixed Income
Securities Fund -- Long-Term Corporate Portfolio; the Vanguard Long-Term
Treasury Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio; the Vanguard LifeStrategy
Conservative Growth Fund was formerly known as the Vanguard LifeStrategy
Conservative Growth Portfolio; the Vanguard LifeStrategy Growth Fund was
formerly known as the Vanguard LifeStrategy Growth Portfolio, the Vanguard
Life Strategy Moderate Growth Fund was formerly known as the Vanguard
LifeStrategy Moderate Growth Portfolio; the Vanguard Wellington Fund was
formerly known as the Vanguard/Wellington Fund and the Vanguard Windsor II
Fund was formerly known as the Vanguard/Windsor II Fund.
(12) The Vanguard LifeStrategy Funds did not incur any expenses in fiscal year
1998. However, while the Funds are expected to operate without expenses,
shareholders in the Vanguard LifeStrategy Funds bear indirectly the
expenses of the underlying Vanguard Funds in which the Funds invest. The
indirect expense ratio that each Fund incurred for the year ended December
31, 1998 was 0.29%.
5
<PAGE> 197
EXAMPLE #1 -- If you do not surrender Portfolio Director Plus at the end of the
period shown or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
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 $38 $ 65 $145
AGSPC Capital Conservation Division 7 12 38 65 145
AGSPC Government Securities Division 8 12 38 65 145
AGSPC Growth Division 15 15 47 81 178
AGSPC Growth & Income Division 16 15 46 79 174
AGSPC International Equities Division 11 11 33 58 128
AGSPC International Government Bond Division 13 12 38 66 146
AGSPC MidCap Index Division 4 10 32 56 124
AGSPC Money Market Division 6 12 38 65 145
AGSPC Science & Technology Division 17 16 50 87 190
AGSPC Small Cap Index Division 14 11 33 57 127
AGSPC Social Awareness Division 12 12 38 65 145
AGSPC Stock Index Division 10 10 31 53 118
American Century Ultra Division 31 17 53 92 200
American General Balanced Division 42 12 39 67 148
American General Conservative Growth Lifestyle Division 50 5 16 28 63
American General Core Bond Division 58 12 38 66 146
American General Domestic Bond Division 43 12 37 65 143
American General Growth Lifestyle Division 48 5 16 28 63
American General High Yield Bond Division 60 14 44 76 167
American General International Growth Division 33 16 49 84 185
American General International Value Division 34 15 46 79 173
American General Large Cap Growth Division 39 13 40 69 153
American General Large Cap Value Division 40 12 38 66 147
American General Mid Cap Growth Division 37 12 38 65 145
American General Mid Cap Value Division 38 15 46 79 174
American General Moderate Growth Lifestyle Division 49 5 16 28 63
American General Money Market Division 44 10 31 53 118
American General Small Cap Growth Division 35 16 49 85 186
American General Small Cap Value Division 36 14 44 76 166
American General Socially Responsible Division 41 10 31 53 118
American General Strategic Bond Division 59 13 41 71 156
Dreyfus Variable Investment Fund --
Small Cap Division 18 15 48 83 182
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 21 66 113 244
Evergreen Small Cap Value -- Class A Division 55 24 73 125 267
Evergreen Value -- Class A Division 57 17 52 90 196
Founders Growth Division 30 18 54 94 204
Neuberger Berman Guardian Trust Division 29 15 48 83 182
Putnam Global Growth -- Class A Shares Division 28 19 58 99 215
Putnam New Opportunities -- Class A Shares Division 26 17 51 89 194
Putnam OTC & Emerging Growth -- Class A Shares Division 27 17 52 90 196
Scudder Growth and Income Division 21 14 44 76 167
T. Rowe Price Small-Cap Stock Division 51 19 60 103 224
Templeton Foreign -- Class A Division 32 18 56 96 209
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 Division 19 17 53 91 199
Templeton International -- Class 1 Division 20 18 55 95 208
Vanguard Long-Term Corporate Division 22 10 30 53 117
Vanguard Long-Term Treasury Division 23 9 29 51 113
Vanguard LifeStrategy Conservative Growth Division 54 9 29 50 111
Vanguard LifeStrategy Growth Division 52 9 29 50 111
Vanguard LifeStrategy Moderate Growth Division 53 9 29 50 111
Vanguard Wellington Division 25 12 38 66 147
Vanguard Windsor II Division 24 13 41 72 158
</TABLE>
6
<PAGE> 198
EXAMPLE #2 -- If you surrender Portfolio Director Plus 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 $ 88 $115 $145
AGSPC Capital Conservation Division 7 59 88 115 145
AGSPC Government Securities Division 8 59 88 115 145
AGSPC Growth Division 15 62 97 131 178
AGSPC Growth & Income Division 16 61 96 129 174
AGSPC International Equities Division 11 57 83 108 128
AGSPC International Government Bond Division 13 59 88 116 146
AGSPC MidCap Index Division 4 57 82 106 124
AGSPC Money Market Division 6 59 88 115 145
AGSPC Science & Technology Division 17 63 100 137 190
AGSPC Small Cap Index Division 14 57 83 107 127
AGSPC Social Awareness Division 12 59 88 115 145
AGSPC Stock Index Division 10 57 81 103 118
American Century Ultra Division 31 64 103 142 200
American General Balanced Division 42 59 89 117 148
American General Conservative Growth Lifestyle Division 50 52 66 78 63
American General Core Bond Division 58 59 88 116 146
American General Domestic Bond Division 43 59 87 115 143
American General Growth Lifestyle Division 48 52 66 78 63
American General High Yield Bond Division 60 61 94 126 167
American General International Growth Division 33 62 99 134 185
American General International Value Division 34 61 96 129 173
American General Large Cap Growth Division 39 60 90 119 153
American General Large Cap Value Division 40 59 88 116 147
American General Mid Cap Growth Division 37 59 88 115 145
American General Mid Cap Value Division 38 61 96 129 174
American General Moderate Growth Lifestyle Division 49 52 66 78 63
American General Money Market Division 44 57 81 103 118
American General Small Cap Growth Division 35 62 99 135 186
American General Small Cap Value Division 36 61 94 126 166
American General Socially Responsible Division 41 57 81 103 118
American General Strategic Bond Division 59 60 91 121 156
Dreyfus Variable Investment Fund -- Small Cap Division 18 62 98 133 182
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 68 115 163 244
Evergreen Small Cap Value -- Class A Division 55 70 121 175 267
Evergreen Value -- Class A Division 57 63 102 140 196
Founders Growth Division 30 64 104 144 204
Neuberger Berman Guardian Trust Division 29 62 98 133 182
Putnam Global Growth -- Class A Shares Division 28 65 107 149 215
Putnam New Opportunities -- Class A Shares Division 26 63 101 139 194
Putnam OTC & Emerging Growth -- Class A Shares Division 27 63 102 140 196
Scudder Growth and Income Division 21 61 94 126 167
T. Rowe Price Small-Cap Stock Division 51 66 109 153 224
Templeton Foreign -- Class A Division 32 64 105 146 209
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 Division 19 64 103 141 199
Templeton International -- Class 1 Division 20 64 105 145 208
Vanguard Long-Term Corporate Division 22 57 80 103 117
Vanguard Long-Term Treasury Division 23 56 79 101 113
Vanguard LifeStrategy Conservative Growth Division 54 56 79 100 111
Vanguard LifeStrategy Growth Division 52 56 79 100 111
Vanguard LifeStrategy Moderate Growth Division 53 56 79 100 111
Vanguard Wellington Division 25 59 88 116 147
Vanguard Windsor II Division 24 60 91 122 158
</TABLE>
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.
7
<PAGE> 199
SUMMARY
- --------------------------------------------------------------------------------
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 53 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 Fund* the EAFE Index
----------------------------------------------------------------------------------------------------------
FUNDS
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund* tracking the S&P MidCap 400(R) Index Company(1)
----------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments tracking VALIC Bankers Trust
Index Fund* the Russell 2000(R) Index Company(1)
----------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments tracking VALIC Bankers Trust
Index Fund* the S&P 500(R) Index Company(1)
- ------------------------------------------------------------------------------------------------------------------------------
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
FUNDS Fund* in stocks or securities convertible
into stocks
----------------------------------------------------------------------------------------------------------
American Century Ultra Capital growth through American Century N/A
Fund investments in common Investment
stock Management, Inc.
----------------------------------------------------------------------------------------------------------
American General Long-term capital appreciation by VALIC Jacobs Asset
International Growth investing in equity securities of Management
Fund** non-U.S. companies, the majority of
which are expected to be in developed
markets
----------------------------------------------------------------------------------------------------------------
American General Growth of capital and future income VALIC Capital Guardian
International Value through investments in securities of Trust Company
Fund** non-U.S. issuers and securities whose
principal markets are outside of the
United States
----------------------------------------------------------------------------------------------------------------
American General Long-term growth through a broadly VALIC Goldman Sachs Asset
Large Cap Growth diversified portfolio of equity Management
Fund** securities of large cap U.S. issuers
----------------------------------------------------------------------------------------------------------------
American General Total returns exceeding over time the VALIC State Street Bank &
Large Cap Value Fund** Russell 1000H Value Index through Trust Company/State
investments in equity securities Street Global
Advisors
----------------------------------------------------------------------------------------------------------------
American General Growth through investments in medium VALIC Brown Capital
Mid Cap Growth Fund** capitalization equity securities Management Inc.
----------------------------------------------------------------------------------------------------------------
American General Growth through investments in equity VALIC Neuberger Berman
Mid Cap Value Fund** securities of medium capitalization Management Inc.
companies
----------------------------------------------------------------------------------------------------------------
American General Long-term growth through investments VALIC JP Morgan
Small Cap Growth in equity securities of small Investment
Fund** capitalization growth companies 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(1)
- ------------------------------------------------------------------------------------------------------------------------------------
* A series of American General Series Portfolio Company ("AGSPC").
** A series of American General Series Portfolio Company 3 ("AGSPC 3").
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998,
Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. The merger is contingent upon various regulatory approvals. On April 20, 1999, the
AGSPC Fund's Board of Directors approved a new investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval and the Trustees of AGSPC 3 also approved a new investment sub-advisory agreement with Bankers Trust
Company, which is not subject to shareholder approval. If the merger is approved and completed, Deutsche Bank AG, as the Sub-
Adviser's new parent company, will control the operations of the Sub-Adviser. Bankers Trust believes that, under this new
arrangement, the services provided to the Fund will be maintained at their current level.
</TABLE>
8
<PAGE> 200
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Growth through investments in smaller The Dreyfus N/A
Investment companies Corporation
Fund -- Small Cap
Portfolio
--------------------------------------------------------------------------------------------------------------
Evergreen Growth and Return composed of capital Evergreen Asset N/A
Income Fund -- Class appreciation in value of its shares Management Corp.
A*** and current income
--------------------------------------------------------------------------------------------------------------
Evergreen Small Cap Return consisting of current income Evergreen Asset N/A
Value Fund -- Class and capital appreciation in value of Management Corp.
A*** its shares
--------------------------------------------------------------------------------------------------------------
Evergreen Value Long-term capital appreciation with Capital Management N/A
Fund -- Class A*** current income as secondary objective Group of First Union
National Bank
--------------------------------------------------------------------------------------------------------------
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 Neuberger Berman Neuberger
Guardian Trust current income by investing primarily Management Inc. Berman, LLC
in common stocks of
large-capitalization companies
--------------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a Putnam Investment N/A
Growth Fund -- Class A globally diversified portfolio of Management Inc.
Shares common stocks
--------------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities Fund -- through investment in common stock Management Inc.
Class A Shares
--------------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund -- Class A Shares 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.
--------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth; invests Templeton Global N/A
Foreign primarily in equity securities of Advisors Limited
Fund -- Class A companies outside the U.S., including
emerging markets
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth; invests Templeton Investment N/A
International primarily in stocks and debt Counsel, Inc.
Fund -- Class 1**** obligations of companies outside the
U.S., including emerging markets
--------------------------------------------------------------------------------------------------------------
Vanguard Growth and income through investment Vanguard N/A
Windsor II Fund 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
Fund bonds
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 Bond Fund* investments in high quality foreign
government debt securities
--------------------------------------------------------------------------------------------------------------
American General Core Maximum income through investment in VALIC American General
Bond Fund** medium to high quality fixed income Investment
securities Management, L.P.
--------------------------------------------------------------------------------------------------------------
American General High income and total return VALIC Capital Guardian
Domestic Bond Fund** consistent with conservation of Trust Company
capital through investments in fixed
income securities and other income
producing securities
--------------------------------------------------------------------------------------------------------------
American General High High total return and income VALIC American General
Yield Bond Fund** consistent with conservation of Investment
capital through investment in high Management, L.P.
yield fixed income securities
- ----------------------------------------------------------------------------------------------------------------------------------
* A series of AGSPC.
** A series of AGSPC 3.
*** A series of Evergreen Equity Trust.
**** A series of Templeton Variable Products Series Fund.
</TABLE>
9
<PAGE> 201
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
American General High level of total return and income VALIC American General
Strategic Bond Fund** consistent with conservation of Investment
capital through investment in Management, L.P.
income-producing securities
--------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Corporate Fund long-term high quality corporate
bonds
--------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Treasury Fund long-term U.S. Treasury bonds
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY FUNDS AGSPC Science & Growth through investments in stocks VALIC T. Rowe Price
Technology Fund* of companies which benefit from Associates, Inc.
development of science and technology
--------------------------------------------------------------------------------------------------------------
AGSPC Social Awareness Growth through investments in stocks VALIC N/A
Fund* of companies meeting social
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 MARKET FUNDS AGSPC Money Market Income through investments in VALIC N/A
Fund* short-term money market securities
--------------------------------------------------------------------------------------------------------------
American General Money Income through investments in VALIC N/A
Market Fund** short-term money market securities
- ----------------------------------------------------------------------------------------------------------------------------------
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 Current income and low-to-moderate Vanguard N/A
Conservative Growth growth of capital
Fund
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy Growth of capital Vanguard N/A
Growth Fund
--------------------------------------------------------------------------------------------------------------
Vanguard LifeStrategy A reasonable level of income and Vanguard N/A
Moderate Growth Fund long-term growth of capital and
income
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Allocation Maximum return through investments in VALIC N/A
ALLOCATION Fund* a mix of stocks, bonds and money
FUNDS market securities
--------------------------------------------------------------------------------------------------------------
Templeton Asset High level of total return; through a Templeton Investment N/A
Allocation Fund -- flexible policy of investing in Counsel, Inc.
Class 1**** stocks and debt obligations of any
nation, including emerging markets,
and money market instruments
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series of AGSPC 3.
**** A series of Templeton Variable Products Series Fund.
10
<PAGE> 202
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual 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 1/2% 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
Mutual Fund or its affiliate or distributor for providing the Mutual 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.
11
<PAGE> 203
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, 1998
Purchase Units in Force -- -- -- 3,570 -- --
Purchase Unit Value $4.003086 $2.194489 $2.221715 $2.471473 $2.240246 $1.509070
September 22, 1998
Purchase Unit Value(1) $3.605017 $2.152785 $2.205164 $1.955660 $1.802345 $1.248880
<CAPTION>
AGSPC
INTERNATIONAL AGSPC
GOVERNMENT AGSPC MONEY
BOND MIDCAP INDEX MARKET
DIVISION 13 DIVISION 4(2) DIVISION 6
------------- ------------- ----------
<S> <C> <C> <C>
December 31, 1998
Purchase Units in Force 1,531 -- 475
Purchase Unit Value $1.777571 $5.354659 $1.833793
September 22, 1998
Purchase Unit Value(1) $1.699184 $4.191708 $1.812091
</TABLE>
- ------------
(1) Purchase Unit Value At Date of Inception.
(2) Effective October 1, 1991, the Fund underlying this Division changed its
name from the Capital Accumulation Fund to the MidCap Index Fund and amended
its investment objective, investment program and investment restrictions
accordingly. Historical purchase unit values prior to October 1, 1991
reflect investment experience before these changes.
12
<PAGE> 204
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
GENERAL
AGSPC AGSPC AGSPC AGSPC AMERICAN AMERICAN CONSERVATIVE AMERICAN
SCIENCE & SMALL CAP SOCIAL STOCK CENTURY GENERAL GROWTH GENERAL
TECHNOLOGY INDEX AWARENESS INDEX ULTRA BALANCED LIFESTYLE CORE BOND
DIVISION 17 DIVISION 14 DIVISION 12 DIVISION 10(3) DIVISION 31 DIVISION 42 DIVISION 50 DIVISION 58
----------- ----------- ----------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
6,377 -- 1,451 30,811 23,002 -- -- --
$3.272354 $2.154574 $3.897214 $4.991135 $1.798208 $1.171721 $1.163619 $1.030555
$2.244150 $1.848434 $3.247795 $4.149958 $1.464079 $1.021648 $1.025646 $1.012652
<CAPTION>
AMERICAN AMERICAN
AGSPC GENERAL GENERAL
SCIENCE & DOMESTIC GROWTH
TECHNOLOGY BOND LIFESTYLE
DIVISION 17 DIVISION 43 DIVISION 48
----------- ----------- -----------
<S> <C> <C>
6,377 -- --
$3.272354 $1.045861 $1.194164
$2.244150 $1.017652 $1.014651
</TABLE>
- ------------
(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> 205
SELECTED PURCHASE UNIT DATA -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN GENERAL GENERAL AMERICAN AMERICAN
GENERAL HIGH INTERNATIONAL INTERNATIONAL GENERAL LARGE GENERAL LARGE
YIELD BOND GROWTH VALUE CAP GROWTH CAP VALUE
DIVISION 60 DIVISION 33 DIVISION 34 DIVISION 39 DIVISION 40
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force -- -- -- -- --
Purchase Unit Values $1.054539 $1.053156 $1.151468 $1.242458 $1.248274
September 22, 1998
Purchase Unit Value(1) $1.000656 $0.941675 $0.945673 $1.011650 $1.070634
<CAPTION>
AMERICAN AMERICAN
GENERAL MID GENERAL MID
CAP GROWTH CAP VALUE
DIVISION 37 DIVISION 38
----------- -----------
<S> <C> <C>
December 31, 1998
Purchase Units in Force -- --
Purchase Unit Values $1.349521 $1.256427
September 22, 1998
Purchase Unit Value(1) $1.069634 $1.049640
</TABLE>
- ------------
(1) Purchase Unit Value At Date of Inception.
14
<PAGE> 206
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
AMERICAN INVESTMENT
GENERAL AMERICAN AMERICAN AMERICAN FUND
MODERATE GENERAL AMERICAN AMERICAN GENERAL GENERAL ------------
GROWTH MONEY GENERAL SMALL GENERAL SMALL SOCIALLY STRATEGIC SMALL CAP
LIFESTYLE MARKET CAP GROWTH CAP VALUE RESPONSIBLE BOND PORTFOLIO
DIVISION 49 DIVISION 44 DIVISION 35 DIVISION 36 DIVISION 41 DIVISION 59 DIVISION 18
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- --
$1.187049 $1.014694 $1.351189 $1.166837 $1.279494 $1.051306 $1.740909
$1.025647 $1.002560 $1.075632 $1.035646 $1.065636 $1.011653 $1.452893
<CAPTION>
EVERGREEN EQUITY TRUST
AMERICAN ------------------------------------------------
GENERAL
MODERATE EVERGREEN EVERGREEN
GROWTH GROWTH AND SMALL CAP EVERGREEN
LIFESTYLE INCOME VALUE VALUE
DIVISION 49 DIVISION 56(4) DIVISION 55(4) DIVISION 57(4)
----------- -------------- -------------- --------------
<S> <C> <C> <C>
-- -- -- --
$1.187049 -- -- --
$1.025647 -- -- --
</TABLE>
- ------------
(4) 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> 207
SELECTED PURCHASE UNIT DATA -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
NEUBERGER PUTNAM OTC &
BERMAN GLOBAL PUTNAM NEW EMERGING
FOUNDERS GUARDIAN GROWTH -- OPPORTUNITIES -- GROWTH --
GROWTH TRUST CLASS A CLASS A CLASS A
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27
----------- ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 12,861 253 5,760 10,797 3,073
Purchase Unit Value $1.676366 $1.418252 $1.591007 $1.459115 $1.127653
September 22, 1998
Purchase Unit Value(1) $1.403809 $1.185901 $1.299768 $1.142402 $0.881983
<CAPTION>
SCUDDER T. ROWE PRICE TEMPLETON
GROWTH AND SMALL-CAP FOREIGN --
INCOME STOCK CLASS A
DIVISION 21 DIVISION 51 DIVISION 32
----------- ------------- ------------
<S> <C> <C> <C>
December 31, 1998
Purchase Units in Force 3,163 -- 2,604
Purchase Unit Value $1.582856 $1.142234 $1.123840
September 22, 1998
Purchase Unit Value(1) $1.414085 $1.007688 $0.969355
</TABLE>
- ------------
(1) Purchase Unit Value At Date of Inception.
16
<PAGE> 208
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON VARIABLE PRODUCTS
SERIES FUND
--------------------------------
TEMPLETON VANGUARD VANGUARD
ASSET TEMPLETON LIFESTRATEGY VANGUARD VANGUARD VANGUARD LIFESTRATEGY
ALLOCATION -- INTERNATIONAL -- CONSERVATIVE LONG-TERM LONG-TERM LIFESTRATEGY MODERATE VANGUARD
CLASS 1 CLASS 1 GROWTH CORPORATE TREASURY GROWTH GROWTH WELLINGTON
DIVISION 19 DIVISION 20 DIVISION 54 DIVISION 22 DIVISION 23 DIVISION 52 DIVISION 53 DIVISION 25
------------- ---------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
-- -- -- 883 7,820 -- -- 9,214
$1.765016 $1.744358 $1.085160 $1.360696 $1.384079 $1.169326 $1.127094 $1.585688
$1.458916 $1.503490 $1.006687 $1.340643 $1.373932 $1.006188 $1.002087 $1.474171
<CAPTION>
TEMPLETO
----------
TEMPLETO
ASSET
ALLOCATION VANGUARD
CLASS 1 WINDSOR II
DIVISION DIVISION 24
---------- -----------
<S> <C>
29,953
$1.7650 $1.770257
$1.4589 $1.549662
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
17
<PAGE> 209
GENERAL INFORMATION
- --------------------------------------------------------------------------------
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 "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 were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. 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-three 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 on July 25 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 SEC
as a unit investment trust under the Investment Company Act of 1940 ("Act").
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
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> 210
- --------------------------------------------------------------------------------
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.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors-our address
is 2929 Allen Parkway,
Houston, Texas 77019
For more information about
A.G. DISTRIBUTORS, see the
Statement of Additional
Information
19
<PAGE> 211
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director Plus enables you to participate in Divisions that represent
fifty-three Variable Account Options. These Divisions comprise all of the
Variable Account Options that are made available through VALIC Separate Account
A. According to your retirement program, you may not be able to invest in all
fifty-three 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 (AGSPC ) -- offers 13 funds, for which VALIC serves as investment
adviser, for 3 of such funds, Bankers Trust Company serves as sub-adviser and
for 2 of such funds, T. Rowe Price Associates, Inc. serves as sub-adviser.
- - American General Series Portfolio Company 3 (AGSPC 3) -- offers 18 funds for
which VALIC serves as investment adviser and, for 13 of such funds, have one
of the following sub-advisers: American General Investment Management, L.P.,
Bankers Trust Company, Brown Capital Management, Inc., Capital Guardian Trust
Company, Fiduciary Management Associates, Inc., Goldman Sachs Asset
Management, J.P. Morgan Investment Management Inc., Jacobs Asset Management,
Neuberger Berman Management Inc. and State Street Bank & Trust Company/State
Street Global Advisors.
- - American Century Mutual Funds, Inc. -- 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.
- - Evergreen Equity Trust -- offers 3 funds for which either Evergreen Asset
Management Corp. or the Capital Management Group of First Union National Bank
serve 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 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - Templeton Variable Products Series Fund -- offers 2 funds for which Templeton
Investment Counsel, Inc. serves as investment adviser.
- - 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.
Twenty-two 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, the
American General Lifestyle Funds and the Vanguard LifeStrategy Portfolios, each
of which is a non-diversified Fund) is registered as a diversified open-end,
management investment company and is regulated under the Act. 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 as well as the Standard Average Annual Total Return for certain Divisions
for a 1, 3, 5 and 10 year period, if available. If Standard Average
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.
20
<PAGE> 212
- --------------------------------------------------------------------------------
Annual Return for a Division is not available for a stated period, we may show
the Standard Average Annual Return since Division inception. We will show the
Standard Average Annual Return for Divisions 51-57, which recently commenced
operations when it becomes available. The performance information in the tables
and graphs 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. They 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 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. The returns shown in the tables
for certain Funds (Divisions 51-54) reflect actual historical performance of the
related Separate Account Division since inception of each Division (September
22, 1998) and hypothetical performance for periods prior to September 22, 1998.
The returns shown in the tables for certain Funds (Divisions 55-57) reflect
actual historical performance of the related Funds since inception of each Fund.
Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. 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. 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.
The Standard Average Annual Total Return figures are based on the average
percentage change in the value of an investment in a corresponding Division for
a different series of Portfolio Director Plus from the beginning to the end of
the historical periods shown and have been restated to take into account the
fees and charges under this series of Portfolio Director Plus. 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 the specified
period. Premium taxes are not deducted. This information is calculated for each
Division based on how an initial investment of $1,000 performed at the end of
the period shown.
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.
21
<PAGE> 213
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,624
12/31/90 11,277
12/31/91 13,597
12/31/92 13,418
12/31/93 14,573
12/31/94 14,297
12/31/95 17,728
12/31/96 19,574
12/31/97 23,850
12/31/98 28,061
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,105
12/31/90 11,008
12/31/91 12,817
12/31/92 13,838
12/31/93 15,402
12/31/94 14,376
12/31/95 17,255
12/31/96 17,454
12/31/97 18,833
12/31/98 20,100
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund. The Standard Average Annual Total Return for the Division for the 1, 3,
5 and 10 year period was 12.59%, 15.24%, 13.34% and 10.81%, respectively. The
Division commenced operations on September 16, 1983.
** The Standard Average Annual Total Return for the AGSPC Capital Conservation
Fund Division 7 for the 1, 3, 5 and 10 year period was 1.87%, 3.63%, 4.59%
and 7.17%, respectively. The Division commenced operations on January 16,
1986.
22
<PAGE> 214
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,145
12/31/90 11,738
12/31/91 13,384
12/31/92 14,261
12/31/93 15,705
12/31/94 14,911
12/31/95 17,407
12/31/96 17,634
12/31/97 19,088
12/31/98 20,672
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 10,045
12/31/95 14,755
12/31/96 17,503
12/31/97 21,047
12/31/98 24,715
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Government Securities
Fund Division 8 for the 1, 3, 5 and 10 year period was 3.37%, 4.33 %, 4.77%
and 7.47%, respectively. The Division commenced operations on January 16,
1986.
** The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 12.36%, 17.50 % and
20.78%, respectively. The Division commenced operations on April 29, 1994.
23
<PAGE> 215
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
12/31/94 9,958
12/31/95 13,047
12/31/96 15,988
12/31/97 19,674
12/31/98 22,402
</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
12/31/89 10,294
12/31/90 8,178
12/31/91 9,036
12/31/92 7,776
12/31/93 10,034
12/31/94 10,768
12/31/95 11,855
12/31/96 12,585
12/31/97 12,785
12/31/98 15,091
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED MARCH 31
* The Standard Average Annual Total Return for the AGSPC Growth & Income Fund
Division 16 for the 1 and 3 year period and since inception was 8.80%, 18.51%
and 18.21%, respectively. The Division commenced operations on April 29,
1994.
** The Standard Average Annual Total Return for the AGSPC International Equities
Fund Division 11 for the 1, 3 and 5 year period and since inception was
12.97%, 6.88%, 7.71% and 4.49%, respectively. The Division commenced
operations on October 2, 1989.
24
<PAGE> 216
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
12/31/91 10,914
12/31/92 11,182
12/31/93 12,692
12/31/94 13,178
12/31/95 15,559
12/31/96 16,145
12/31/97 15,273
12/31/98 17,776
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
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***.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
12/31/91 11,172
12/31/92 12,200
12/31/93 13,690
12/31/94 13,099
12/31/95 16,990
12/31/96 20,055
12/31/97 26,258
12/31/98 31,056
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 11.32%, 2.93%, 6.13% and 8.20%, respectively. The Division
commenced operations on October 1, 1991.
** The Standard Average Annual Total Return for the AGSPC MidCap Index Fund
Division 4 for the 1, 3 and 5 year period and since inception was 13.21%,
21.08%, 17.21% and 16.85%, respectively. On October 1, 1991, the Fund
underlying the AGSPC MidCap Index Fund 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. The performance figures for the AGSPC MidCap Index Division
reflect the performance of the MidCap Index Fund since October 1, 1991.
*** "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 AGSPC 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.
25
<PAGE> 217
AGSPC MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,834
12/31/90 11,620
12/31/91 12,189
12/31/92 12,509
12/31/93 12,768
12/31/94 13,173
12/31/95 13,821
12/31/96 14,427
12/31/97 15,082
12/31/98 15,767
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,506
12/31/95 20,083
12/31/96 22,716
12/31/97 23,163
12/31/98 32,724
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (.22%), 2.88%, 3.39% and
4.60%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 36.19%,
16.39% and 28.40%, respectively. The Division commenced operations on April
29, 1994.
26
<PAGE> 218
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
12/31/92 11,156
12/31/93 12,852
12/31/94 12,350
12/31/95 15,666
12/31/96 18,173
12/31/97 22,104
12/31/98 21,546
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,110
12/31/90 9,927
12/31/91 12,615
12/31/92 12,957
12/31/93 13,897
12/31/94 13,615
12/31/95 18,796
12/31/96 23,158
12/31/97 30,800
12/31/98 38,972
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Small Cap Index Fund
Division 14 for the 1, 3 and 5 year period and since inception was (6.96)%,
9.78%, 10.15% and 12.13%, respectively. The Division commenced operations on
May 1, 1992.
** The Russell(R) Index is a trademark/servicemark of the Frank Russell Trust
Company. Russell(TM) is a trademark of the Frank Russell Company.
*** The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception was 21.46%,
26.41%, 22.39% and 15.78%, respectively. The Division commenced operations
on October 2, 1989.
27
<PAGE> 219
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,834
12/31/90 12,265
12/31/91 15,720
12/31/92 16,662
12/31/93 18,196
12/31/94 18,214
12/31/95 24,847
12/31/96 30,307
12/31/97 40,079
12/31/98 51,161
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
AMERICAN 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 13,597
12/31/90 14,772
12/31/91 27,335
12/31/92 27,500
12/31/93 33,271
12/31/94 31,861
12/31/95 43,557
12/31/96 49,158
12/31/97 60,068
12/31/98 80,300
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.58%, 26.11%, 22.46%
and 17.67%, respectively. The Division commenced operations on April 20,
1987.
** "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.
*** The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Standard Average Annual Total
Return for the American Century Ultra Fund Division 31 for the 1 year period
and since inception was 28.61% and 22.16%, respectively. The Division
commenced operations on July 1, 1996.
28
<PAGE> 220
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.
AMERICAN GENERAL CONSERVATIVE
GROWTH LIFESTYLE FUND*
(Division 50)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low to moderate growth of capital through investments
in AGSPC 3 Funds. Through its investments, the Fund allocates 5% to 15% of its
assets to international equity securities, 5% to 15% to small capitalization
equity securities, 5% to 15% to medium capitalization equity securities, 25% to
35% to large capitalization equity securities and 30% to 50% to bonds.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
29
<PAGE> 221
AMERICAN GENERAL DOMESTIC
BOND FUND*
(Division 43)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment primarily in investment grade fixed income securities and
other income producing securities.
AMERICAN GENERAL CORE
BOND FUND*
(Division 58)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with conservation of capital
through investment in medium to high quality fixed income securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
30
<PAGE> 222
AMERICAN GENERAL GROWTH
LIFESTYLE FUND*
(Division 48)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth through investments in AGSPC 3 Funds. Through its investments, the
Fund allocates 25% to 35% of its assets to international equity securities, 15%
to 25% to small capitalization equity securities, 10% to 20% to medium
capitalization equity securities, 25% to 35% to large capitalization equity
securities and 5% to 15% to bonds.
AMERICAN GENERAL HIGH
YIELD BOND FUND*
(Division 60)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return and income consistent with conservation
of capital through investment in a diversified portfolio of high yielding high
risk fixed income securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
31
<PAGE> 223
AMERICAN GENERAL INTERNATIONAL
GROWTH FUND*
(Division 33)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation by investing in equity
securities of non-U.S. companies, the majority of which are expected to be in
developed markets. The Fund may invest across the capitalization spectrum,
although it intends to emphasize smaller capitalization stocks.
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 Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
32
<PAGE> 224
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 objective.
AMERICAN GENERAL LARGE CAP
VALUE FUND*
(Division 40)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed over time the Russell 1000(R) Value
Index through investments in equity securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
33
<PAGE> 225
AMERICAN GENERAL MID CAP
GROWTH FUND*
(Division 37)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in medium
capitalization equity securities, such as common and preferred stocks and
securities convertible into common stocks. Current income is of secondary
objective.
AMERICAN GENERAL MID CAP
VALUE FUND*
(Division 38)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital growth through investment in equity securities of medium
capitalization companies using a value-oriented investment approach.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
34
<PAGE> 226
AMERICAN GENERAL MODERATE
GROWTH LIFESTYLE FUND*
(Division 49)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth and current income through investments in AGSPC 3 Funds. Through
its investments, the Fund allocates 10% to 20% of its assets to international
equity securities, 10% to 20% to small capitalization equity securities, 10% to
20% to medium capitalization equity securities, 25% to 30% to large
capitalization equity securities and 20% to 30% to bonds.
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 Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
35
<PAGE> 227
AMERICAN GENERAL SMALL CAP
GROWTH FUND*
(Division 35)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth from a portfolio of equity securities of small
capitalization growth companies.
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 equity securities of small capitalization companies in
terms of revenues and/or market capitalization.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
36
<PAGE> 228
AMERICAN GENERAL SOCIALLY
RESPONSIBLE FUND*
(Division 41)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in equity
securities, in companies which meet the social criteria established for the
Fund.
AMERICAN GENERAL STRATEGIC
BOND FUND*
(Division 59)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return and income consistent with conservation
of capital through investment in a diversified portfolio of income producing
securities.
* The Fund recently commenced operations. Accordingly, no performance for the
Fund is available.
37
<PAGE> 229
DREYFUS VARIABLE INVESTMENT
FUND -- 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
12/31/90 10,181
12/31/91 26,205
12/31/92 44,490
12/31/93 74,225
12/31/94 79,228
12/31/95 101,599
12/31/96 117,422
12/31/97 135,987
12/31/98 130,382
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 31
EVERGREEN GROWTH AND
INCOME FUND**
Class A
(Division 56)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a return composed of capital appreciation and current income.
The Fund invests in the securities of companies which are undervalued in the
marketplace relative to those companies' assets, breakup value, earnings or
potential earnings growth.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- -------
<S> <C>
01/03/95 $10,000
12/31/95 13,193
12/31/96 16,201
12/31/97 21,089
12/31/98 22,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 3, 1995
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Dreyfus Variable Investment
Fund -- Small Cap Portfolio Division 18 for the 1 and 3 year period and since
inception was (8.49%), 7.18% and 12.07%, respectively. The Division commenced
operations on July 11, 1994.
** The Division commenced operations on January 4, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
38
<PAGE> 230
EVERGREEN SMALL CAP
VALUE FUND*
Class A
(Division 55)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a return consisting of current income and capital appreciation.
The Fund invests in common stocks, preferred stocks, securities convertible into
or exchangeable for common stocks and fixed income securities. Under normal
conditions, the Fund will invest at least 65% of its assets in equity securities
(including convertible debt securities) of companies that, at the time of
purchase, have "total market capitalization" of less than $1 billion. The Fund
may invest up to 35% of its total assets in equity securities of companies that
at the time of purchase have a total market capitalization of $1 billion or
more.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- -------
<S> <C>
01/03/95 $10,000
12/31/95 12,813
12/31/96 15,544
12/31/97 20,609
12/31/98 18,529
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 3, 1995
[CHART]
EVERGREEN VALUE FUND**
Class A
(Division 57)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation with current income as a
secondary objective. Normally, at least 75% of the Fund's assets will be
invested in equity securities of U.S. companies with prospects for earnings
growth and dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
-------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,615
12/31/90 12,111
12/31/91 15,065
12/31/92 16,165
12/31/93 17,567
12/31/94 17,791
12/31/95 23,316
12/31/96 27,567
12/31/97 34,461
12/31/98 37,519
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
* The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund. The Division commenced operations on January 4, 1999.
Accordingly the Standard Average Annual Total Return for the Division will be
shown when it becomes available.
** The Division commenced operations on January 4, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
39
<PAGE> 231
FOUNDERS GROWTH FUND*
(Division 30)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital. Fund invests primarily in common stocks of
well established, high-quality growth companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 14,083
12/31/90 12,519
12/31/91 18,333
12/31/92 18,997
12/31/93 23,701
12/31/94 22,776
12/31/95 32,947
12/31/96 38,149
12/31/97 47,957
12/31/98 59,593
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Founders Growth Fund
Division 30 for the 1 year period and since inception was 19.19% and 19.44%,
respectively. The Division commenced operations on July 1, 1996.
40
<PAGE> 232
NEUBERGER BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of large-capitalization companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 3, 1993 $ Value
- ------------------------- -------
<S> <C>
08/03/93 $10,000
12/31/93 10,708
12/31/94 10,807
12/31/95 14,175
12/31/96 16,581
12/31/97 19,415
12/31/98 19,756
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 3, 1993
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,378
12/31/90 11,175
12/31/91 13,103
12/31/92 13,057
12/31/93 17,107
12/31/94 16,863
12/31/95 19.243
12/31/96 22,283
12/31/97 25,098
12/31/98 32,124
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Neuberger Berman Guardian Trust was formerly known as the
Neuberger&Berman Guardian Trust. The Standard Average Annual Total Return for
the Neuberger Berman Guardian Trust Division 29 for the 1 year period and
since inception was (2.88)% and 10.58%, respectively. The Division commenced
operations on July 1, 1996.
** The Standard Average Annual Total Return for the Putnam Global Growth
Fund -- Class A Division 28 for the 1 year period and since inception was
22.92% and 16.84%, respectively. The Division commenced operations on July 1,
1996.
41
<PAGE> 233
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
12/31/90 11,054
12/31/91 18,397
12/31/92 22,964
12/31/93 30,281
12/31/94 31,100
12/31/95 45,203
12/31/96 49,779
12/31/97 60,609
12/31/98 74,923
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,816
12/31/90 11,491
12/31/91 16,080
12/31/92 18,010
12/31/93 23,634
12/31/94 24,022
12/31/95 37,216
12/31/96 38,682
12/31/97 42,360
12/31/98 46,732
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Putnam New Opportunities
Fund -- Class A Division 26 for the 1 year period and since inception was
18.55% and 13.66%, respectively. The Division commenced operations on July 1,
1996.
** The Standard Average Annual Total Return for the Putnam OTC & Emerging Growth
Fund -- Class A Division 27 for the 1 year period and since inception was
5.30% and 1.32%, respectively. The Division commenced operations on July 1,
1996.
42
<PAGE> 234
SCUDDER GROWTH AND
INCOME FUND*
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,524
12/31/90 12,131
12/31/91 15,411
12/31/92 16,739
12/31/93 19,182
12/31/94 19,515
12/31/95 25,371
12/31/96 30,715
12/31/97 39,697
12/31/98 41,849
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,815
12/31/90 9,316
12/31/91 12,807
12/31/92 14,467
12/31/93 16,988
12/31/94 16,860
12/31/95 22,382
12/31/96 26,870
12/31/97 34,328
12/31/98 32,835
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART TO COME]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.62% and
16.65%, respectively. The Division commenced operations on July 1, 1996.
** The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
43
<PAGE> 235
TEMPLETON ASSET
ALLOCATION FUND*
Class 1 Shares
(Division 19)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of total return. The Fund tries to achieve its investment
goal through a flexible policy of investing in the following market segments:
stocks and debt securities of any nation, including emerging markets and money
market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,228
12/31/90 10,245
12/31/91 12,970
12/31/92 13,898
12/31/93 17,378
12/31/94 16,710
12/31/95 20,297
12/31/96 23,917
12/31/97 27,386
12/31/98 28,891
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON FOREIGN FUND**
Class A Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund tries to achieve its investment goal by
a flexible policy of investing primarily in the equity securities of companies,
and governments outside the United States, including emerging markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,971
12/31/90 12,508
12/31/91 14,703
12/31/92 14,630
12/31/93 19,889
12/31/94 19,842
12/31/95 21,924
12/31/96 25,690
12/31/97 27,226
12/31/98 25,746
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton Asset Allocation
Fund -- Class 1 Division 19 for the 1 and 3 year period and since inception
was 0.69%, 11.09%, and 12.22%, respectively. The Division commenced
operations on July 11, 1994.
** The Templeton Foreign-Fund Class A Shares was formerly known as the Templeton
Foreign Fund -- Class 1 Shares. The Standard Average Annual Total Return for
the Templeton Foreign Fund -- Class A Division 32 for the 1 year period and
since inception was (9.74)% and 1.20%, respectively. The Division commenced
operations on July 1, 1996. On January 1, 1993, the Templeton Foreign
Fund -- Class A implemented a Rule 12b-1 plan, which affects subsequent
performance.
44
<PAGE> 236
TEMPLETON INTERNATIONAL FUND*
Class 1 Shares
(Division 20)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve long-term capital growth. The Fund invests in stocks and debt
obligations of companies outside the United States, including emerging markets.
Any income realized will be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
12/31/92 9,337
12/31/93 13,633
12/31/94 13,211
12/31/95 15,163
12/31/96 18,643
12/31/97 21,060
12/31/98 22,827
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
CORPORATE FUND**
(Division 22)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide investors with a high level of current income consistent with
the maintenance of principal and liquidity. The Fund invests in a diversified
portfolio of investment grade corporate and Government bonds. Under normal
circumstances, at least 65% of the Fund's assets are invested in straight debt
corporate bonds rated a minimum of Baa3 by Moody's Investor Service Inc. or BBB-
by Standard and Poor's Ratings Group at the time of purchase. Additionally, at
least 80% of the Fund's assets will normally be invested in a combination of
investment grade corporate bonds and securities of the U.S. Government and its
agencies and instrumentalities. The dollar weighted average maturity of the Fund
is expected to range from 15 to 25 years.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,418
12/31/90 12,024
12/31/91 14,411
12/31/92 15,685
12/31/93 17,803
12/31/94 16,722
12/31/95 20,950
12/31/96 20,882
12/31/97 23,543
12/31/98 25,539
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton International
Fund -- Class 1 Division 20 for the 1 and 3 year period and since inception
was 3.45%, 13.26% and 12.40%, respectively. The Division commenced operations
on July 11, 1994.
** The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund-Long-Term Corporate Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.54% and 8.70%,
respectively. The Division commenced operations on July 1, 1996.
45
<PAGE> 237
VANGUARD LONG-TERM
TREASURY FUND*
(Division 23)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide a high level of current income consistent with the maintenance
of principal and liquidity. The Fund invests at least 85% of its assets in
long-term securities backed by the full faith and credit of the U.S. Government.
Also, at least 65% of the Fund's assets will be invested in U.S. Treasury bills,
notes and bonds. The dollar weighted average maturity of the Fund is expected to
range from 15 to 30 years.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,691
12/31/90 12,263
12/31/91 14,275
12/31/92 15,201
12/31/93 17,600
12/31/94 16,227
12/31/95 20,926
12/31/96 20,364
12/31/97 22,984
12/31/98 25,805
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LIFESTRATEGY
CONSERVATIVE GROWTH FUND**
(Division 54)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income and low-to-moderate growth of capital by investing in a
relatively fixed combination of other Vanguard funds. Through its investments in
other funds, LifeStrategy Conservative Growth Fund allocates 25%-50% of its
assets to stocks, 50%-75% of its assets to bonds, and 10%-25% of its assets to
cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,989
12/31/95 12,318
12/31/96 13,481
12/31/97 15,617
12/31/98 17,930
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund-Long-Term U.S. Treasury Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Treasury Fund Division
23 for the 1 year period and since inception was 7.21% and 10.35%,
respectively. The Division commenced operations on July 1, 1996.
** The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
46
<PAGE> 238
VANGUARD LIFESTRATEGY
GROWTH FUND*
(Division 52)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital by investing in a relatively fixed combination of other
Vanguard funds. Through its investments in other funds, LifeStrategy Growth Fund
allocates 65%-90% of its assets to stocks, 10%-35% of its assets to bonds, and
0%-25% of its assets to cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,969
12/31/95 12,778
12/31/96 14,625
12/31/97 17,734
12/31/98 21,326
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LIFESTRATEGY
MODERATE GROWTH FUND*
(Division 53)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital and a reasonable level of current income by investing in
a relatively fixed combination of other Vanguard funds. Through its investments
in other funds, LifeStrategy Moderate Growth Fund allocates 45%-70% of its
assets to stocks, 30%-55% of its assets to bonds, and 0%-25% of its assets to
cash reserves.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
September 30, 1994 $ Value
- ------------------------- -------
<S> <C>
09/30/94 $10,000
12/31/94 9,909
12/31/95 12,574
12/31/96 14,054
12/31/97 16,694
12/31/98 19,683
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Division commenced operations on September 22, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
47
<PAGE> 239
VANGUARD WELLINGTON FUND*
(Division 25)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to conserve capital and provide moderate long-term growth and moderate
income. The Fund invests approximately 60% to 70% of its assets in dividend-
paying stocks of established, large- and medium-sized companies that, in the
adviser's opinion, are undervalued but whose prospects are improving. The
remaining 30% to 40% of assets are invested primarily in high-quality,
longer-term corporate bonds with some exposure to U.S. Treasury, government
agency, and mortgage-backed bonds.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,054
12/31/90 11,619
12/31/91 14,241
12/31/92 15,238
12/31/93 17,149
12/31/94 16,923
12/31/95 22,294
12/31/96 25,664
12/31/97 31,335
12/31/98 34,812
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD WINDSOR II FUND**
(Division 24)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital by investing mainly in the equity
securities of large and medium-size companies whose stocks are considered by the
Fund's advisers to be undervalued and out of favor with investors. The Fund's
secondary objective is to provide some dividend income.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,670
12/31/90 11,312
12/31/91 14,430
12/31/92 16,020
12/31/93 18,043
12/31/94 17,684
12/31/95 24,331
12/31/96 29,927
12/31/97 39,252
12/31/98 45,284
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund. The Standard Average Annual Total Return for the Vanguard Wellington
Fund Division 25 for the 1 year period and since inception was 6.04% and
15.86%, respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund. The Standard Average Annual Total Return for Vanguard Windsor II Fund
Division 24 for the 1 year period and since inception was 10.30% and 22.08%,
respectively. The Division commenced operations on July 1, 1996.
48
<PAGE> 240
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 Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments, within 5 business days, if the requested information is not
provided, unless you otherwise so specify.
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 the Money Market Division option
chosen by your employer. 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 option chosen by your employer. 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.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
49
<PAGE> 241
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the 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 55 investment options offered in Portfolio Director Plus. This
includes 2 Fixed Account Options and 53 Variable Account Options. The Funds that
underlie the Variable Account Options are registered as investment companies
under and are subject to regulation of 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 "Summary" 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. As noted elsewhere in the prospectus, you will not be permitted to
select from more than 30 Variable Account Options, and in some cases less than
30, depending on your employer's plan and the type of annuity contract selected.
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.
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. Any
such account closure will be subject to applicable distribution restrictions
under the contract and/or under your employer's plan.
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.
50
<PAGE> 242
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 Plus, 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 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.
51
<PAGE> 243
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 that will be deducted from the amount withdrawn. 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.
52
<PAGE> 244
- --------------------------------------------------------------------------------
- - 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 1/2%.
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.
53
<PAGE> 245
- --------------------------------------------------------------------------------
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.
54
<PAGE> 246
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 choose 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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
PAYOUT DATE
The Payout Date is the date elected by you on which your payout (annuity)
payments will start. The date elected must be the first of any month provided 30
days advance notice has been given to VALIC. Your account will be valued ten
days prior to the end of the month preceding the Payout Date. A request to start
payments must be sent to our Home Office on a form approved by VALIC. Generally,
for qualified contracts, the Payout Date may begin when you attain age 59 1/2 or
separate from service, but must begin no later than April 1 following the
calendar year you reach age 70 1/2 or the calendar year in which you retire. For
nonqualified contracts, the Payout Date may begin at any time prior to your 85th
birthday. For additional information on the minimum distribution rules that
apply to payments under 403(b), 401, 403(a) and 457 plans or simplified employee
plans ("SEPs"), see "Federal Tax Matters" in this prospectus and in the
Statement of Additional Information.
PAYOUT OPTIONS
You may specify the manner in which your Payout Payments are made. You may
select one of the following options:
- LIFE ONLY -- payments are made only to you during your lifetime. Under this
option there is no provision for a death benefit for the beneficiary. For
example, it would be possible under this option for the Annuitant to receive
only one payout payment if he died prior to the date of the second payment,
two if he died before the third payment.
- LIFE WITH GUARANTEED PERIOD -- payments are made to you during your
lifetime; but if you die before the guaranteed period has expired, your
beneficiary will receive payments for the rest of your guaranteed period.
PAYOUT UNIT -- a measuring
unit used to calculate Payout
Payments from your Variable
Account Option. Payout Unit
values will vary with the
investment experience of the
VALIC Separate Account A
Division you have selected.
ASSUMED INVESTMENT
RATE -- the rate used to
determine your first monthly
Payout Payment per
thousand dollars of Account
Value in your Variable
Account Option(s).
55
<PAGE> 247
- --------------------------------------------------------------------------------
- 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, in the form of an
excise tax, if you do not meet an exception under 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,
- The payments will be guaranteed for a 10 year period,
- 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, and
- 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, subject to any limitations under the
contract or plan.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
56
<PAGE> 248
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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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
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revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
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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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. An exchange may require the issuance of a contract or may be subject
to any other requirements that the Company may impose.
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 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 Plus,
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> 251
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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 22 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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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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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 and by the plan, if any.
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
not exceeding the Beneficiary's life expectancy.
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 generally 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 is not required to be. Also,
a Contingent Contract
Owner may be designated.
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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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
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 figures are based on the average percentage
change in the value of an investment in a corresponding Division for a different
series of Portfolio Director Plus from the beginning to the end of the given
historical periods shown and have been restated to take into account the fees
and charges under this series of Portfolio Director Plus. 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. If Standard Average Annual Return for a Division is not
available for a stated period, we may show the Standard Average Annual Return
since Division inception.
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. The SEC
staff takes the position that performance of an underlying Fund reduced by
Account fees for a period prior to the inception of the corresponding Division
is nonstandard performance information regardless of whether all account fees
and charges are deducted. For Divisions 51-57, which recently commenced
operations, only Nonstandard Average Annual Total Returns are shown.
Accordingly, the Standard Average Annual Total Return for each of these
Divisions will be shown when it becomes available
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. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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, or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or year.
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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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.
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 and the American General Money Market Division the
7-day Current Yield for the last 7 days ended December 31, 1998 was 4.04% and
4.29%, respectively.
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 and the American General Money Market
Division the 7-day Effective Yield for the last 7 days ended December 31, 1998
was 4.12% and 4.39%, respectively.
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.
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.
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<PAGE> 257
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)(1)......... 09/06/83 -- 10.81% 13.34% 15.24% 12.59%
AGSPC Capital Conservation (Division 7)........ 01/16/86 -- 7.17 4.59 3.63 1.87
AGSPC Government Securities (Division 8)....... 01/16/86 -- 7.47 4.77 4.33 3.37
AGSPC Growth (Division 15)..................... 04/29/94 20.78% -- -- 17.50 12.36
AGSPC Growth & Income (Division 16)............ 04/29/94 18.21 -- -- 18.51 8.80
AGSPC International Equities (Division 11)..... 10/02/89 4.49 -- 7.71 6.88 12.97
AGSPC International Government Bond (Division
13).......................................... 10/01/91 8.20 -- 6.13 2.93 11.32
AGSPC MidCap Index (Division 4)***............. 10/01/91*** 16.85 -- 17.21 21.08 13.21
AGSPC Money Market (Division 6)................ 01/16/86 -- 4.60 3.39 2.88 (0.22)
AGSPC Science & Technology (Division 17)....... 04/29/94 28.40 -- -- 16.39 36.19
AGSPC Small Cap Index (Division 14)............ 05/01/92 12.13 -- 10.15 9.78 (6.96)
AGSPC Social Awareness (Division 12)........... 10/02/89 15.78 -- 22.39 26.41 21.46
AGSPC Stock Index (Division 10)................ 04/20/87 -- 17.67 22.46 26.11 22.58
American Century -- Twentieth Century Ultra
(Division 31)................................ 07/01/96 22.16 -- -- -- 28.61
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)............ 07/11/94 12.07 -- -- 7.18 (8.49)
Founders Growth (Division 30).................. 07/01/96 19.44 -- -- -- 19.19
Neuberger Berman Guardian Trust (Division
29).......................................... 07/01/96 10.58 -- -- -- (2.88)
Putnam Global Growth -- Class A (Division
28).......................................... 07/01/96 16.84 -- -- -- 22.92
Putnam New Opportunities -- Class A (Division
26).......................................... 07/01/96 13.66 -- -- -- 18.55
Putnam OTC & Emerging Growth -- Class A
(Division 27)................................ 07/01/96 1.32 -- -- -- 5.30
Scudder Growth and Income (Division 21)(2)..... 07/01/96 16.65 -- -- -- 0.62
Templeton Foreign -- Class A (Division 32)..... 07/01/96 1.20 -- -- -- (9.74)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1
(Division 19)............................. 07/11/94 12.22 -- -- 11.09 0.69
Templeton International -- Class 1 (Division
20)....................................... 07/11/94 12.40 -- -- 13.26 3.45
Vanguard Long-Term Corporate (Division 22)**... 07/01/96 8.70 -- -- -- 3.54
Vanguard Long-Term Treasury (Division 23)**.... 07/01/96 10.35 -- -- -- 7.21
Vanguard Wellington (Division 25).............. 07/01/96 15.86 -- -- -- 6.04
Vanguard Windsor II (Division 24).............. 07/01/96 22.08 -- -- -- 10.30
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of
an investment in a corresponding Division for a different series of
Portfolio Director Plus from the beginning to the end of the historical
periods shown and have been restated to take into account the fees and
charges under this series of Portfolio Director Plus.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC 3 Funds recently commenced operations no actual performance
exists. The Standard Average Annual Total Return for the Evergreen Growth
and Income Fund -- Class A Division 56, the Evergreen Small Cap Value
Fund -- Class A Division 55, the Evergreen Value Fund -- Class A Division
57, the T. Rowe Price Small Cap Stock Fund Division 51, the Vanguard
LifeStrategy Conservative Growth Fund Division 54, the Vanguard
LifeStrategy Growth Fund Division 52 and the Vanguard LifeStrategy Moderate
Growth Fund Division 53 will be shown when it becomes available.
(1) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
66
<PAGE> 258
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31).................. 11/02/81 -- 23.11% 18.70% 21.43% 28.61%
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)............................. 08/31/90 36.07% -- 11.22 7.18 (8.49)
Evergreen Growth and Income -- Class A (Division
56)................................................. 01/03/95 21.08 -- -- 17.32 (0.43)
Evergreen Small Cap Value -- Class A (Division
55)(1).............................................. 01/03/95 15.85 -- -- 11.70 (14.19)
Evergreen Value -- Class A (Division 57).............. 04/12/85 -- 14.08 15.77 15.89 3.92
Founders Growth (Division 30)......................... 01/05/62 -- 19.48 19.70 20.64 19.19
Neuberger Berman Guardian Trust (Division 29)......... 08/03/93 13.35 -- 12.35 10.29 (2.88)
Putnam Global Growth -- Class A (Division 28)......... 09/01/67 -- 12.32 12.76 17.36 22.92
Putnam New Opportunities -- Class A (Division 26)..... 08/31/90 27.29 -- 19.31 17.08 18.55
Putnam OTC & Emerging Growth -- Class A (Division
27)................................................. 11/01/82 -- 16.61 13.96 6.37 5.30
Scudder Growth & Income (Division 21)................. 03/15/29 -- 15.33 16.28 16.88 0.62
T. Rowe Price Small Cap Stock (Division 51)........... 06/01/50 -- 12.56 13.43 12.26 (8.71)
Templeton Foreign -- Class A (Division 32)(2)......... 10/05/82 -- 9.86 4.41 3.92 (9.74)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division
19).............................................. 08/24/88 -- 11.13 9.96 11.09 0.69
Templeton Informational -- Class 1 (Division 20).... 05/01/92 13.11 -- 10.13 13.26 3.45
Vanguard LifeStrategy Conservative Growth (Division
54)................................................. 09/30/94 13.90 -- -- 11.95 9.75
Vanguard LifeStrategy Growth (Division 52)............ 09/30/94 18.77 -- -- 17.35 15.19
Vanguard LifeStrategy Moderate Growth (Division 53)... 09/30/94 16.50 -- -- 14.80 12.84
Vanguard Long-Term Corporate (Division 22)**.......... 07/09/73 -- 9.77 6.66 5.28 3.54
Vanguard Long-Term Treasury (Division 23)**........... 05/19/86 -- 9.88 7.15 5.70 7.21
Vanguard Wellington (Division 25)..................... 07/01/29 -- 13.22 14.57 14.70 6.04
Vanguard Windsor II (Division 24)..................... 06/24/85 -- 16.24 19.66 21.83 10.30
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 55-57. The
Standard Average Annual Total Return for Divisions 51-57 will be shown when
it becomes available. 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 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) The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund.
(2) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
67
<PAGE> 259
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)....................... 09/06/83 -- 10.87% 14.00% 16.54% 17.66%
AGSPC Capital Conservation (Division 7)................... 01/16/86 -- 7.23 5.47 5.22 6.73
AGSPC Government Securities (Division 8).................. 01/16/86 -- 7.53 5.65 5.90 8.30
AGSPC Growth (Division 15)................................ 04/29/94 21.38% -- -- 18.76 17.42
AGSPC Growth & Income (Division 16)....................... 04/29/94 18.85 -- -- 19.75 13.87
AGSPC International Equities (Division 11)................ 10/02/89 4.55 -- 8.50 8.38 18.04
AGSPC International Government Bond (Division 13)......... 10/01/91 8.26 -- 6.97 4.54 16.39
AGSPC MidCap Index (Division 4)***........................ 10/01/91*** 16.92 -- 17.80 22.27 18.27
AGSPC Money Market (Division 6)........................... 01/16/86 -- 4.66 4.31 4.49 4.54
AGSPC Science & Technology (Division 17).................. 04/29/94 28.90 -- -- 17.67 41.27
AGSPC Small Cap Index (Division 14)....................... 05/01/92 12.20 -- 10.89 11.21 (2.53)
AGSPC Social Awareness (Division 12)...................... 10/02/89 15.84 -- 22.90 27.51 26.53
AGSPC Stock Index (Division 10)........................... 04/20/87 -- 17.73 22.97 27.22 27.65
American Century -- Twentieth Century Ultra (Division
31)..................................................... 07/01/96 23.70 -- -- -- 33.68
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)....................... 07/11/94 12.87 -- -- 8.67 (4.12)
Founders Growth (Division 30)............................. 07/01/96 21.03 -- -- -- 24.26
Neuberger Berman Guardian Trust (Division 29)............. 07/01/96 12.34 -- -- -- 1.75
Putnam Global Growth -- Class A (Division 28)............. 07/01/96 18.47 -- -- -- 27.99
Putnam New Opportunities -- Class A (Division 26)......... 07/01/96 15.36 -- -- -- 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)..... 07/01/96 3.26 -- -- -- 10.32
Scudder Growth and Income (Division 21)................... 07/01/96 18.29 -- -- -- 5.42
Templeton Foreign Fund -- Class A (Division 32)........... 07/01/96 3.14 -- -- -- (5.44)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)..... 07/11/94 13.03 -- -- 12.49 5.50
Templeton International -- Class 1 (Division 20)........ 07/11/94 13.20 -- -- 14.61 8.39
Vanguard Long-Term Corporate (Division 22)**.............. 07/01/96 10.51 -- -- -- 8.48
Vanguard Long-Term Treasury (Division 23)**............... 07/01/96 12.12 -- -- -- 12.27
Vanguard Wellington (Division 25)......................... 07/01/96 17.51 -- -- -- 11.10
Vanguard Windsor II (Division 24)......................... 07/01/96 23.62 -- -- -- 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. Since the end of the stated periods
equity markets have moved erratically and the performance of certain
Divisions may have diminished. The Average Annual Total Return figures are
based on the average percentage change in the value of an investment in a
corresponding Division for a different series of Portfolio Director Plus
from the beginning to the end of the historical periods shown and have been
restated to take into account the fees and charges under this series of
Portfolio Director Plus other than the surrender charge and account
maintenance fee.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC3 Funds recently commenced operations no actual performance
exists. The Standard Average Annual Total Return for the Evergreen Growth
and Income Fund -- Class A Division 56, the Evergreen Small Cap Value
Fund -- Class A Division 55, the Evergreen Value Fund -- Class A Division
57, the T. Rowe Price Small Cap Stock Fund Division 51, the Vanguard
LifeStrategy Conservative Growth Fund Division 54, the Vanguard
LifeStrategy Growth Fund Division 52 and the Vanguard LifeStrategy Moderate
Growth Fund Division 53 will be shown when it becomes available.
68
<PAGE> 260
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)....................... 11/02/81 -- 23.16% 19.27% 22.62% 33.68%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)........................ 08/31/90 36.11% -- 11.93 8.67 (4.12)
Evergreen Growth and Income -- Class A (Division 56)....... 01/03/95 21.85 -- -- 18.58 4.32
Evergreen Small Cap Value -- Class A (Division 55)......... 01/03/95 16.72 -- -- 13.08 (10.09)
Evergreen Value -- Class A (Division 57)................... 04/12/85 -- 14.14 16.39 17.18 8.87
Founders Growth (Division 30).............................. 01/05/62 -- 19.54 20.25 21.84 24.26
Neuberger Berman Guardian Trust (Division 29).............. 08/03/93 13.41 -- 13.03 11.70 1.75
Putnam Global Growth -- Class A (Division 28).............. 09/01/67 -- 12.38 13.43 18.63 27.99
Putnam New Opportunities -- Class A (Division 26).......... 08/31/90 27.35 -- 19.86 18.35 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 11/01/82 -- 16.67 14.61 7.88 10.32
Scudder Growth and Income (Division 21)(1)................. 03/15/29 -- 15.39 16.89 18.15 5.42
T. Rowe Price Small-Cap Stock (Division 51)................ 06/01/50 -- 12.62 14.09 13.63 (4.35)
Templeton Foreign -- Class A (Division 32)(1).............. 10/05/82 -- 9.92 5.30 5.50 (5.44)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)...... 08/24/88 -- 11.19 10.70 12.49 5.50
Templeton International -- Class 1 (Division 20)......... 05/01/92 13.17 -- 10.86 14.61 8.39
Vanguard LifeStrategy Conservative Growth (Division 54).... 09/30/94 14.73 -- -- 13.33 14.81
Vanguard LifeStrategy Growth (Division 52)................. 09/30/94 19.51 -- -- 18.62 20.26
Vanguard LifeStrategy Moderate Growth (Division 53)........ 09/30/94 17.27 -- -- 16.11 17.91
Vanguard Long-Term Corporate (Division 22)**............... 07/09/73 -- 9.83 7.48 6.83 8.48
Vanguard Long-Term Treasury (Division 23)**................ 05/19/86 -- 9.94 7.95 7.24 12.27
Vanguard Wellington (Division 25).......................... 07/01/29 -- 13.29 15.21 16.01 11.10
Vanguard Windsor II (Division 24).......................... 06/24/85 -- 16.30 20.21 23.01 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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 1, 1994
(inception date of each Division). The Table reflects hypothetical
performance for Separate Account Divisions 55-57. The Standard Average Total
Return for Divisions 51-57 will be shown when it becomes available.
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 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
69
<PAGE> 261
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5)......................... 09/06/83 -- 180.61% 92.55% 58.29% 17.66%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 101.00 30.50 16.49 6.73
AGSPC Government Securities (Division 8).................... 01/16/86 -- 106.72 31.63 18.75 8.30
AGSPC Growth (Division 15).................................. 04/29/94 147.15% -- -- 67.50 17.42
AGSPC Growth & Income (Division 16)......................... 04/29/94 124.02 -- -- 71.71 13.87
AGSPC International Equities (Division 11).................. 10/02/89 50.91 -- 50.40 27.29 18.04
AGSPC International Government Bond (Division 13)........... 10/01/91 77.76 -- 40.05 14.25 16.39
AGSPC MidCap Index (Division 4)***.......................... 10/01/91*** 210.56 -- 126.86 82.79 18.27
AGSPC Money Market (Division 6)............................. 01/16/86 -- 57.67 23.48 14.08 4.54
AGSPC Science & Technology (Division 17).................... 04/29/94 227.24 -- -- 62.94 41.27
AGSPC Small Cap Index (Division 14)......................... 05/01/92 115.46 -- 67.64 37.54 (2.53)
AGSPC Social Awareness (Division 12)........................ 10/02/89 289.72 -- 180.44 107.34 26.53
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 411.61 181.17 105.90 27.65
American Century -- Twentieth Century Ultra (Division 31)... 07/01/96 70.19 -- -- -- 33.68
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)......................... 07/11/94 71.82 -- -- 28.33 (4.12)
Founders Growth (Division 30)............................... 07/01/96 61.14 -- -- -- 24.26
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 33.78 -- -- -- 1.75
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 52.77 -- -- -- 27.99
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 42.92 -- -- -- 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 8.36 -- -- -- 10.32
Scudder Growth and Income (Division 21)..................... 07/01/96 52.18 -- -- -- 5.42
T. Rowe Price Small-Cap Stock (Division 51)................. 09/22/98 13.35 -- -- -- --
Templeton Foreign -- Class A (Division 32).................. 07/01/96 8.03 -- -- -- (5.44)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)....... 07/11/94 72.87 -- -- 42.34 5.50
Templeton International -- Class 1 (Division 20).......... 07/11/94 74.08 -- -- 50.55 8.39
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 7.80 -- -- -- --
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 16.21 -- -- -- --
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 12.47 -- -- -- --
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 28.37 -- -- -- 8.48
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 33.11 -- -- -- 12.27
Vanguard Wellington (Division 25)........................... 07/01/96 49.69 -- -- -- 11.10
Vanguard Windsor II (Division 24)........................... 07/01/96 69.90 -- -- -- 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. Since the end of the stated periods
equity markets have moved erratically and the performance of certain
Divisions may have diminished. The Cumulative Return figures are based on
the percentage changes in the value of an investment in a corresponding
Division for a different series of Portfolio Director Plus from the
beginning to the end of the historical periods shown and have been restated
to take into account the fees and charges under this series of Portfolio
Director Plus other than the surrender charge and account maintenance fee.
** The performance figures 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.
*** On 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991.
**** Since the AGSPC 3 Funds recently commenced operation no actual performance
exists. The Evergreen Growth and Income Fund -- Class A Division 56, the
Evergreen Small Cap Value Fund -- Class A Division 55 and the Evergreen
Value Fund -- Class A Division 57 have only recently been offered through
Portfolio Director Plus. Accordingly, no performance information is
available for such Divisions.
70
<PAGE> 262
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)........................ 11/02/81 -- 703.00% 141.35% 84.36% 33.68%
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18)......................... 08/31/90 1,203.82% -- 75.66 28.33 (4.12)
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 120.00 -- -- 66.75 4.32
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 85.29 -- -- 44.60 (10.09)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 275.19 113.57 60.92 8.87
Founders Growth (Division 30)............................... 01/05/62 -- 495.93 151.44 80.88 24.26
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 97.56 -- 84.49 39.37 1.75
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 221.24 87.78 66.94 27.99
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 649.23 -- 147.43 65.75 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 367.32 97.74 25.57 10.32
Scudder Growth and Income (Division 21)(2).................. 03/15/29 -- 318.49 118.17 64.95 5.42
T. Rowe Price Small-Cap Stock (Division 51)................. 06/01/50 -- 228.35 93.29 46.70 (4.35)
Templeton Foreign -- Class A (Division 32)(1)............... 10/05/82 -- 157.46 29.45 17.43 (5.44)
Templeton Variable Products Series Fund
Templeton Asset Allocation -- Class 1 (Division 19)....... 08/24/88 -- 188.91 66.25 42.34 5.50
Templeton International -- Class 1 (Division 20).......... 05/01/92 128.27 -- 67.44 50.55 8.39
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 79.30 -- -- 45.55 14.81
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 113.26 -- -- 66.90 20.26
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 96.83 -- -- 56.54 17.91
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 155.39 43.45 21.91 8.48
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 158.05 46.62 23.31 12.27
Vanguard Wellington (Division 25)........................... 07/01/29 -- 248.12 103.00 56.15 11.10
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 352.84 150.98 86.12 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. 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). With respect to Separate Account
Divisions 51-54, the Table reflects hypothetical performance for periods
prior to September 22, 1998 (inception date of each Division). The Table
reflects hypothetical performance for Separate Account Divisions 55-57.
Accordingly, the Standard Average Annual Total Return for Divisions 51-57
will be shown when it becomes available. 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 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
71
<PAGE> 263
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 Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the 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.
72
<PAGE> 264
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's
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 Separate Account A 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.
73
<PAGE> 265
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, as a Section 408(b) Individual
Retirement Annuity ("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) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs of 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 ("Roth IRA").
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." Such Non-Qualified Contracts generally include unfunded,
nonqualified deferred compensation plans of corporate employers as well as
individual annuity contracts issued to individuals outside of the context of any
formal employer or employee retirement plan or arrangement. Non-Qualified
Contracts generally may invest only in mutual funds which are not available to
the general public outside of annuity contracts or life insurance contracts.
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 Plus 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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
Distributions are taxed differently depending on the program through which
Portfolio Director Plus 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 or penalty taxes, 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
74
<PAGE> 266
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your tax status. In addition, amounts received under all Contracts may be
subject to state income tax withholding requirements.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although Valic can provide no assurance that the IRS will not 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 if
such a challenge were made.
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
how ownership of the Mutual Fund shares might be imputed for federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons 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.
75
<PAGE> 267
- --------------------------------------------------------------------------------
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 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.
76
<PAGE> 268
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the Year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
77
<PAGE> 269
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> 270
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<PAGE> 271
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> 272
(This page intentionally left blank)
<PAGE> 273
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 9
Types of Variable Annuity Contracts................. 10
Federal Tax Matters................................. 10
Tax Consequences of Purchase Payments........... 10
Tax Consequences of Distributions............... 12
Special Tax Consequences -- Early
Distribution.................................. 13
Special Tax Consequences -- Required
Distributions................................. 14
Tax Free Rollovers, Transfers and Exchanges..... 15
Exchange Privilege.................................. 15
Exchanges From Portfolio Director............... 16
Exchanges From Portfolio Director 2............. 16
Exchanges From Independence Plus Contracts...... 17
Exchanges From V-Plan Contracts................. 18
Exchanges From SA-1 and SA-2 Contracts.......... 19
Exchanges From Impact Contracts................. 20
Exchanges From Compounder Contracts............. 21
Information Which May Be Applicable To Any
Exchange...................................... 22
Calculation of Surrender Charge..................... 23
Illustration of Surrender Charge on Total
Surrender..................................... 23
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 23
Purchase Unit Value................................. 24
Illustration of Calculation of Purchase Unit
Value......................................... 24
Illustration of Purchase of Purchase Units...... 24
Performance Calculations............................ 24
AGSPC Money Market and American General Money
Market Divisions Yields....................... 24
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 24
Calculation of Current Yield for American
General Money Market Division 44.............. 24
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six and American
General Money Market Division 44.............. 24
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 25
Calculation of Effective Yield for American
General Money Market Division 44.............. 25
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six and
American General Money Market Division 44..... 25
Standardized Yield for Bond Fund Divisions.......... 25
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 25
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 25
Calculation of Average Annual Total Return...... 25
Performance Information............................. 27
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 27
Performance Compared to Market Indices.......... 27
AGSPC Asset Allocation Division Five............ 32
AGSPC Capital Conservation Division Seven....... 33
AGSPC Government Securities Division Eight...... 33
AGSPC Growth Division Fifteen................... 34
AGSPC Growth & Income Division Sixteen.......... 34
AGSPC International Equities Division Eleven.... 35
AGSPC International Government Bond Division
Thirteen...................................... 36
AGSPC MidCap Index Division Four................ 36
AGSPC Money Market Division Six................. 37
AGSPC Science & Technology Division Seventeen... 38
AGSPC Small Cap Index Division Fourteen......... 38
AGSPC Social Awareness Division Twelve.......... 39
AGSPC Stock Index Division Ten.................. 40
American 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 Core Bond Division
Fifty-Eight................................... 41
American General Domestic Bond Division
Forty-Three................................... 41
American General Growth Lifestyle Division
Forty-Eight................................... 41
American General High Yield Bond Division
Sixty......................................... 41
American General International Growth Division
Thirty-Three.................................. 41
American General International Value Division
Thirty-Four................................... 41
American General Large Cap Growth Division
Thirty-Nine................................... 41
American General Large Cap Value Division
Forty......................................... 42
American General Mid Cap Growth Division
Thirty-Seven.................................. 42
American General Mid Cap Value Division
Thirty-Eight.................................. 42
American General Moderate Lifestyle Division
Forty-Nine.................................... 42
American General Money Market Division
Forty-Four.................................... 42
American General Small Cap Growth Division
Thirty-Five................................... 42
American General Small Cap Value Division
Thirty-Six.................................... 42
American General Socially Responsible Division
Forty-One..................................... 42
American General Strategic Bond Division
Fifty-Nine.................................... 42
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division Eighteen................... 43
Evergreen Growth and Income Division
Fifty-Six..................................... 43
Evergreen Small Cap Value Division Fifty-Five... 44
Evergreen Value Division Fifty-Seven............ 45
Founders Growth Division Thirty................. 45
Neuberger Berman Guardian Trust Division
Twenty-Nine................................... 46
Putnam Global Growth -- Class A Division
Twenty-Eight.................................. 47
Putnam New Opportunities -- Class A Division
Twenty-Six.................................... 47
Putnam OTC & Emerging Growth -- Class A Division
Twenty-Seven.................................. 48
Scudder Growth and Income Division Twenty-One... 49
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 49
Templeton Asset Allocation Division Nineteen.... 50
Templeton Foreign Division Thirty-Two........... 50
Templeton International Division Twenty......... 51
Vanguard LifeStrategy Conservative Growth
Division Fifty-Four........................... 52
Vanguard Long-Term Corporate Division
Twenty-Two.................................... 53
Vanguard Long-Term Treasury Division
Twenty-Three.................................. 54
Vanguard LifeStrategy Growth Division
Fifty-Two..................................... 54
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three................................... 55
Vanguard Wellington Division Twenty-Five........ 56
Vanguard Windsor II Division Twenty-Four........ 57
Payout Payments..................................... 58
Assumed Investment Rate......................... 58
Amount of Payout Payments....................... 58
Payout Unit Value............................... 58
Illustration of Calculation of Payout Unit
Value......................................... 59
Illustration of Payout Payments................. 59
Distribution of Variable Annuity Contracts.......... 60
Experts............................................. 60
Comments on Financial Statements.................... 61
</TABLE>
<PAGE> 274
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<PAGE> 275
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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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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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<PAGE> 276
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-40 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 277
[MOMENTO PHOTO]
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1 - 2.12
Units of Interest
Under Group and
Individual Variable
Annuity Contracts
Portfolio Director 2
Prospectus
May 1, 1999
<PAGE> 278
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1 TO 2.12 May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain Series of
Portfolio Director 2 that consist of group and individual variable annuity
contracts (the "Contracts") to Participants in certain employer sponsored
retirement plans. Portfolio Director 2 may be available to you when you
participate in a retirement program that qualifies for deferral of federal
income taxes. Non-qualified contracts are also available for certain employer
plans as well as for certain after-tax arrangements that are not part of an
employer's plan.
Portfolio Director 2 permits you to invest in and receive retirement benefits in
up to 2 Fixed Account Options and/or an array of up to 18 Variable Account
Options. 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, life
insurance contracts, or certain employer-sponsored retirement plans will not be
available within your contract. Each of these investment options is explained
more fully in this prospectus. Here is a list of these investment options:
TWO FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
EIGHTEEN VARIABLE ACCOUNT OPTIONS*
<TABLE>
<S> <C> <C>
American General Series Portfolio Founders Funds, Inc.: Templeton Funds, Inc.:
Company (AGSPC): Founders Growth Fund Templeton Foreign Fund --
Growth Fund Neuberger Berman Management Inc.: Class A
International Government Bond Fund Neuberger Berman Guardian Trust
Money Market Fund The Vanguard Group, Inc.:
Science & Technology Fund Putnam Investments: Vanguard Long-Term
Social Awareness Fund Putnam Global Growth Corporate Fund
Stock Index Fund Fund -- Class A Shares Vanguard Long-Term
Putnam New Opportunities Treasury Fund
American Century Investment Fund -- Class A Shares Vanguard Wellington Fund
Management, Inc.: Putnam OTC & Emerging Growth Vanguard Windsor II Fund
American Century Ultra Fund Fund -- Class A Shares
Scudder Kemper Investments, Inc.:
Scudder Growth and Income Fund
</TABLE>
* Each of these mutual funds is publicly available except for the six AGSPC
Funds.
- --------------------------------------------------------------------------------
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 affiliates.
This prospectus provides you with information you should know before investing
in Portfolio Director 2. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1999, contains additional
information about Portfolio Director 2 and is part of this prospectus. For a
free copy, complete and return the form contained in the back of this prospectus
or call 1-800-44-VALIC. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 279
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 5
SELECTED PURCHASE UNIT DATA................... 8
GENERAL INFORMATION........................... 10
About Portfolio Director 2............... 10
About VALIC.............................. 10
About VALIC Separate Account A........... 10
Units of Interests....................... 11
Distribution of the Contracts............ 11
VARIABLE ACCOUNT OPTIONS...................... 12
Summary of Funds......................... 12
PURCHASE PERIOD............................... 23
Purchase Payments........................ 23
Purchase Units........................... 23
Calculation of Purchase Unit Value....... 23
Choosing Investment Options.............. 24
Fixed Account Options............... 24
Variable Account Options............ 24
Stopping Purchase Payments............... 24
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 25
During the Purchase Period............... 25
During the Payout Period................. 25
Communicating Transfer or Reallocation
Instructions........................... 25
Effective Date of Transfer............... 25
FEES AND CHARGES.............................. 26
Account Maintenance Fee.................. 26
Surrender Charge......................... 26
Amount of Surrender Charge.......... 26
10% Free Withdrawal................. 26
Exceptions to Surrender Charge...... 26
Premium Tax Charge....................... 27
Separate Account Charges................. 27
Fund Annual Expense Charges.............. 27
Other Tax Charges........................ 27
Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration
and Distribution Fee Charges........... 27
Separate Account Expense Reimbursement... 28
PAYOUT PERIOD................................. 29
Fixed Payout............................. 29
Variable Payout.......................... 29
Combination Fixed and Variable Payout.... 29
Payout Date.............................. 29
Payout Options........................... 29
Enhancements to Payout Options........... 30
Payout Information....................... 30
SURRENDER OF ACCOUNT VALUE.................... 31
When Surrenders Are Allowed.............. 31
Amount That May Be Surrendered........... 31
Surrender Restrictions................... 31
Partial Surrenders....................... 31
Systematic Withdrawals................... 31
Distributions Required by Federal Tax
Law.................................... 32
EXCHANGE PRIVILEGE............................ 33
Restrictions on Exchange Privilege....... 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Taxes and Conversion Costs............... 33
Surrender Charges........................ 33
Exchange Offers for Contracts Other Than
Portfolio Director and Portfolio
Director 2............................. 33
Exchange Offer for Portfolio Director and
Portfolio Director 2................... 34
Comparison of Contracts.................. 34
Features of Portfolio Director 2......... 34
Agents' and Managers' Retirement Plan
Exchange Offer......................... 34
DEATH BENEFITS................................ 36
Beneficiary Information.................. 36
Special Information for Individual
Non-Tax Qualified Contracts............ 36
During the Purchase Period............... 36
Interest Guaranteed Death Benefit... 36
Standard Death Benefit.............. 36
During the Payout Period................. 37
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 38
Types of Investment Performance
Information Advertised................. 38
Total Return Performance Information... 38
Standard Average Annual Total Return... 38
Nonstandard Average Annual Total
Return.............................. 38
Cumulative Total Return................ 38
Annual Change in Purchase Unit Value... 38
Cumulative Change in Purchase Unit
Value............................... 39
Total Return Based on Different
Investment Amounts.................. 39
An Assumed Account Value of $10,000.... 39
Yield Performance Information............ 39
AGSPC Money Market Division............ 39
Divisions Other Than The AGSPC Money
Market Division..................... 39
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 39
OTHER CONTRACT FEATURES....................... 46
Changes That May Not Be Made............. 46
Change of Beneficiary.................... 46
Contingent Owner......................... 46
Cancellation -- The 20 Day "Free Look"... 46
We Reserve Certain Rights................ 46
Relationship to Employer's Plan.......... 46
VOTING RIGHTS................................. 47
Who May Give Voting Instructions......... 47
Determination of Fund Shares Attributable
to Your Account........................ 47
During Purchase Period................. 47
During Payout Period or after a Death
Benefit Has Been Paid............... 47
How Fund Shares Are Voted................ 47
FEDERAL TAX MATTERS........................... 48
Type of Plans............................ 48
Tax Consequences in General.............. 48
Effect of Tax-Deferred Accumulations..... 49
YEAR 2000..................................... 51
Year 2000 Risks.......................... 51
</TABLE>
(i)
<PAGE> 280
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 25
Annuitant 36
Assumed Investment Rate 29
Beneficiary 36
Contract Owner 36
Division 38
Fixed Account Options 36
Home Office 25
Mutual Fund or Fund 10
Participant 01
Participant Year 26
Payout Period 25
Payout Unit 29
Purchase Payments 23,38
Purchase Period 25
Purchase Unit 23,24
VALIC Separate Account A 47
Variable Account Options 12,36
</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 2,
and saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in VALIC's
Separate Account A are offered. Portfolio Director 2 will allow you to
accumulate retirement dollars in Fixed Account Options and/or Variable Account
Options. This prospectus describes only the variable aspects of Portfolio
Director 2 except where the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
Portfolio Director 2. 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> 281
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
</TABLE>
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $15
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 Growth Fund 0.25% 0.75% -- 1.00%
AGSPC International Government
Bond Fund 0.25 0.75 -- 1.00
AGSPC Money Market Fund 0.25 0.75 -- 1.00
AGSPC Science & Technology Fund 0.25 0.75 -- 1.00
AGSPC Social Awareness Fund 0.25 0.75 -- 1.00
AGSPC Stock Index Fund 0.25 0.75 -- 1.00
American Century Ultra Fund(4)(8) 0.25 1.00 (0.21%) 1.04
Founders Growth Fund(4) 0.25 1.00 (0.25) 1.00
Neuberger Berman Guardian
Trust(4)(8) 0.25 1.00 (0.25) 1.00
Putnam Global Growth Fund -- Class
A Shares(4) 0.25 1.00 (0.25) 1.00
Putnam New Opportunities Fund --
Class A Shares(4) 0.25 1.00 (0.25) 1.00
Putnam OTC & Emerging Growth
Fund -- Class A Shares(4) 0.25 1.00 (0.25) 1.00
Scudder Growth and Income Fund(4) 0.25 1.00 (0.25) 1.00
Templeton Foreign Fund -- Class
A(4)(8) 0.25 1.00 (0.25) 1.00
Vanguard -- Long-Term Corporate
Fund(5)(8) 0.25 1.00 (0.25) 1.00
Vanguard -- Long-Term Treasury
Fund(5)(8) 0.25 1.00 (0.25) 1.00
Vanguard Wellington Fund(8) 0.25 1.00 -- 1.25
Vanguard Windsor II Fund(8) 0.25 1.00 -- 1.25
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER TOTAL FUND
FUND FEES FEES EXPENSES(6) EXPENSES
---- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AGSPC Growth Fund 0.80% -- 0.04% 0.84%
AGSPC International Government Bond Fund 0.50 -- 0.05 0.55
AGSPC Money Market Fund 0.50 -- 0.04 0.54
AGSPC Science & Technology Fund 0.90 -- 0.05 0.95
AGSPC Social Awareness Fund 0.50 -- 0.04 0.54
AGSPC Stock Index Fund 0.27 -- 0.04 0.31
American Century Ultra Fund 1.00 -- -- 1.00
Founders Growth Fund 0.67 0.25%(4) 0.16 1.08
Neuberger Berman Guardian Trust(7) 0.84 -- 0.03 0.87
Putnam Global Growth Fund -- Class A Shares 0.64 0.25 0.29 1.18
Putnam New Opportunities Fund -- Class A
Shares 0.49 0.25(4) 0.24 0.98
Putnam OTC & Emerging Growth Fund -- Class
A Shares 0.54 0.25(4) 0.21 1.00
Scudder Growth and Income Fund 0.44 -- 0.30 0.74
Templeton Foreign Fund -- Class A 0.61 0.25(4) 0.26 1.12
Vanguard -- Long-Term Corporate Fund 0.03 -- 0.27 0.30
Vanguard -- Long-Term Treasury Fund 0.01 -- 0.26 0.27
Vanguard Wellington Fund 0.28 -- 0.03 0.31
Vanguard Windsor II Fund 0.38 -- 0.03 0.41
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
(2) Reductions in the surrender charge and the account maintenance fee are
available if certain conditions are met. See "Reduction or Waiver of Account
Maintenance Fee, 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.
2
<PAGE> 282
- --------------------------------------------------------------------------------
(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 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 pay administrative, shareholder
service or distribution fees to the Company: American Century (0.21%),
Founders (0.25%), Neuberger Berman (0.25%), Putnam (0.25%), Scudder (0.25%)
and Templeton Foreign Fund -- Class A (0.25%) With respect to American
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 equal to or 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 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 Inc. ("NB"). NB 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. For the Trust's 1998 fiscal year, NB did not bear any expenses.
(8) The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Neuberger Berman Guardian Trust
was formerly known as the Neuberger & Berman Guardian Trust. The Templeton
Foreign Fund -- Class A was formerly known as the Templeton Foreign
Fund -- Class 1. VALIC Separate Account A purchases shares of the Templeton
Foreign Fund -- Class A at net asset value and without sales charges
generally applicable to Class A shares. The Vanguard Long-Term Corporate
Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio; the Vanguard Long-Term Treasury Fund
was formerly known as the Vanguard Fixed Income Securities Fund -- Long-Term
U.S. Treasury Portfolio; the Vanguard Wellington Fund was formerly known as
the Vanguard/Wellington Fund and the Vanguard Windsor II Fund was formerly
known as the Vanguard/Windsor II Fund.
3
<PAGE> 283
EXAMPLE #1 -- If you do not surrender Portfolio Director 2 at the end of the
period shown or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director 2 Contract without a surrender charge
imposed, invested in a single Separate Account Division as listed below,
assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $19 $59 $102 $221
AGSPC International Government Bond Division 13 16 50 87 190
AGSPC Money Market Division 6 16 50 87 189
AGSPC Science & Technology Division 17 20 63 108 233
AGSPC Social Awareness Division 12 16 50 87 189
AGSPC Stock Index Division 10 14 43 74 164
American Century Ultra Division 31 21 65 112 242
Founders Growth Division 30 22 67 114 246
Neuberger Berman Guardian Trust
Division 29 19 60 104 225
Putnam Global Growth -- Class A Shares Division
28 23 70 119 257
Putnam New Opportunities -- Class A Shares
Division 26 21 64 109 236
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 21 64 110 238
Scudder Growth and Income Division 21 18 56 97 211
Templeton Foreign -- Class A Division 32 22 68 116 251
Vanguard Long-Term Corporate Division 22 14 43 74 164
Vanguard Long-Term Treasury Division 23 13 42 72 159
Vanguard Wellington Division 25 16 51 88 191
Vanguard Windsor II Division 24 17 54 93 202
</TABLE>
EXAMPLE #2 -- If you surrender Portfolio Director 2 at the end of the period
shown:
- --------------------------------------------------------------------------------
Total Expenses: You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director 2 Contract invested in a single Separate
Account Division as listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $66 $109 $152 $221
AGSPC International Government Bond Division 13 63 100 137 190
AGSPC Money Market Division 6 63 100 137 189
AGSPC Science & Technology Division 17 67 112 158 233
AGSPC Social Awareness Division 12 63 100 137 189
AGSPC Stock Index Division 10 60 93 124 164
American Century Ultra Division 31 67 115 162 242
Founders Growth Division 30 68 116 164 246
Neuberger Berman Guardian Trust Division 29 66 110 154 225
Putnam Global Growth -- Class A Shares Division 28 69 119 169 257
Putnam New Opportunities -- Class A Shares Division
26 67 113 159 236
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 67 113 160 238
Scudder Growth and Income Division 21 65 106 147 211
Templeton Foreign -- Class A Division 32 68 117 166 251
Vanguard Long-Term Corporate Division 22 60 93 124 164
Vanguard Long-Term Treasury Division 23 60 92 122 159
Vanguard Wellington Division 25 63 101 138 191
Vanguard Windsor II Division 24 64 103 143 202
</TABLE>
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.
4
<PAGE> 284
SUMMARY
- --------------------------------------------------------------------------------
Portfolio Director 2 is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director 2's major features is presented below. For a more detailed
discussion of Portfolio Director 2, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director 2 offers you a choice from among 18 Variable Account Options
and two Fixed Account Options. There may be certain limitations on how many
investment options you may invest in at any one time.
- --------------------------------------------------------------------------------
<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 SUBADVISER
- --------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Growth through investments tracking VALIC Bankers Trust
EQUITY Index the S&P 500(R) Index Company(1)
FUND Fund
- --------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
------------------------------------------------------------------------------------------------------------
EQUITY American Century Capital growth through American Century N/A
FUNDS Ultra Fund investments in common Investment Management,
stock Inc.
------------------------------------------------------------------------------------------------------------
Founders Long-term growth of capital through Founders Asset N/A
Growth investment in common stocks of well Management
Fund established, high-quality growth
companies
------------------------------------------------------------------------------------------------------------
Neuberger Berman Capital appreciation, and secondarily Neuberger Berman Neuberger Berman,
Guardian Trust current income by investing primarily Management Inc. LLC
in common stocks of large-capitalization
companies
------------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a globally Putnam Investment N/A
Growth Fund -- diversified portfolio of common stocks Management Inc.
Class A Shares
------------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities Fund -- through investment in common stock Management Inc.
Class A Shares
------------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund -- Class A Shares 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; invests Templeton Global N/A
primarily
Foreign in equity securities of companies Advisors Limited
Fund -- Class A outside the U.S., including emerging
markets
------------------------------------------------------------------------------------------------------------
Vanguard Growth and income through Vanguard N/A
Windsor II Fund investment in common stock
- --------------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard Income and growth through 30 to 40% Vanguard N/A
FUND Wellington investment in high quality corporate
bonds
Fund and 60 to 70% investment in common
stocks
- --------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Income and possible growth through VALIC N/A
FUNDS Government investments in high quality foreign
Bond Fund government debt securities
------------------------------------------------------------------------------------------------------------
Vanguard Income through investment Vanguard N/A
Long-Term in long-term high quality corporate
bonds
Corporate Fund
------------------------------------------------------------------------------------------------------------
Vanguard Income through investment in Vanguard N/A
Long-Term long-term U.S. Treasury bonds
Treasury Fund
- --------------------------------------------------------------------------------------------------------------------------------
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998,
Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. The merger is contingent upon various regulatory approvals. On April 20, 1999,
the AGSPC Fund's Board of Directors approved a new investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval. If the merger is approved and completed, Deutsche Bank AG, as the Sub-Adviser's new parent company,
will control the operations of the Sub-Adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
</TABLE>
5
<PAGE> 285
<TABLE>
<S> <C> <C> <C> <C>
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUBADVISER
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUND Fund securities
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 286
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual Fund can be
found in the section of the prospectus entitled "Variable Account Options," and
also in the current prospectus for each Fund mentioned.
INTEREST GUARANTEED DEATH
BENEFIT
Portfolio Director 2 offers a death benefit with an interest guarantee when
death occurs prior to your reaching age 70.
This contract provision is not available in some states.
LOANS
Portfolio Director 2 offers a tax-free loan provision for tax-qualified
contracts that gives you access to your money in either of the Fixed Account
Options, subject to a minimum loan amount of $1,000. The availability of loans
is subject to government regulations, as well as your employer's plan
provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans which
are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among Portfolio
Director 2's investment options. You may transfer your Account Values between
Variable Account Options at any time during the Purchase Period.
Your Account Value in the Short-Term Fixed Account must remain there for at
least 90 days before it can be transferred to other investment options. In Fixed
Account Plus, up to 20% of your Account Value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among Variable Account Options once each contract
year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Between Investment Options" section in the prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE
If any of your account is invested in Variable Account Options, a quarterly
account maintenance fee of $3.75 is charged to your account. If you invest only
in Fixed Account Options during a calendar quarter no account maintenance fee is
assessed. 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 1/2% 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 1.00% 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
Mutual Fund or its affiliate or distributor for providing the Mutual 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
PAYOUT OPTIONS
Although deferred annuity contracts such as Portfolio Director 2 can be
purchased with after-tax dollars, they are primarily used in connection with
retirement programs which receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
Purchase Payments may be made at any time and in any amount, subject to plan
limitations.
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.
7
<PAGE> 287
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL AGSPC AGSPC AGSPC AMERICAN
AGSPC GOVERNMENT MONEY SCIENCE & SOCIAL AGSPC CENTURY
GROWTH BOND MARKET TECHNOLOGY AWARENESS STOCK INDEX ULTRA
DIVISION 15 DIVISION 13 DIVISION 6 DIVISION 17 DIVISION 12 DIVISION 10(1) DIVISION 31
----------- ----------- ---------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in
Force 494,997,997 97,473,851 147,547,688 418,601,069 114,382,494 691,680,049 209,221,513
Purchase Unit Value $2.428587 $1.728006 $1.742617 $3.216190 $3.762308 $4.772052 $1.685503
December 31, 1997
Purchase Units in
Force 453,172,490 111,480,591 84,182,521 397,842,959 81,577,104 615,053,124 97,745,282
Purchase Unit Value $2.076503 $1.490645 $1.673590 $2.285739 $2.985333 $3.753436 $1.265937
December 31, 1996
Purchase Units in
Force 366,272,509 112,601,593 75,124,095 315,809,646 46,574,016 536,806,965 16,654,076
Purchase Unit Value $1.733324 $1.582230 $1.607212 $2.250471 $2.252673 $2.848437 $1.039845
July 1, 1996
Purchase Unit Value(2) $1.656467 $1.502160 $1.575923 $2.103343 $2.017275 $2.564931 $1.000000
<CAPTION>
NEUBERGER
BERMAN
FOUNDERS GUARDIAN
GROWTH TRUST
DIVISION 30 DIVISION 29
----------- -----------
<S> <C> <C>
December 31, 1998
Purchase Units in
Force 250,777,959 45,261,146
Purchase Unit Value $1.595913 $1.324970
December 31, 1997
Purchase Units in
Force 132,167,162 35,406,663
Purchase Unit Value $1.289513 $1.307438
December 31, 1996
Purchase Units in
Force 31,197,464 8,211,592
Purchase Unit Value $1.029522 $1.120770
July 1, 1996
Purchase Unit Value(2) $1.000000 $1.000000
</TABLE>
- ------------
(1) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(2) Purchase Unit Value At Date Of Inception.
8
<PAGE> 288
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM OTC & SCUDDER
GLOBAL PUTNAM NEW EMERGING GROWTH TEMPLETON VANGUARD VANGUARD
GROWTH -- OPPORTUNITIES -- GROWTH -- AND FOREIGN -- LONG-TERM LONG-TERM VANGUARD VANGUARD
CLASS A CLASS A CLASS A INCOME CLASS A CORPORATE TREASURY WELLINGTON WINDSOR II
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 32 DIVISION 22 DIVISION 23 DIVISION 25 DIVISION 24
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
101,468,260 280,523,297 129,463,792 159,815,811 198,626,024 44,122,646 86,673,300 253,840,498 372,737,595
$1.512865 $1.415175 $1.072660 $1.507724 $1.069704 $1.271278 $1.318263 $1.482836 $1.683226
49,548,732 143,395,066 99,785,041 94,225,984 159,201,107 17,371,407 20,041,920 116,429,781 187,929,868
$1.186775 $1.149453 $0.976262 $1.436011 $1.135778 $1.176649 $1.178938 $1.340109 $1.464949
16,648,600 53,001,699 48,902,828 16,524,046 36,671,828 3,370,441 4,174,369 22,866,634 37,292,761
$1.057690 $0.947573 $0.894978 $1.114950 $1.075896 $1.047595 $1.048470 $1.101584 $1.120855
$1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
Contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
9
<PAGE> 289
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR 2
Portfolio Director 2 was developed to help you save money for your retirement.
It offers you a combination of fixed and variable investment options that you
can invest in to help you reach your retirement savings goals. Your
contributions to Portfolio Director 2 can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director 2 will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
2 called "Purchase Payments." The second, is when you receive your retirement
payouts. For more information, see "Purchase Period" and the "Payout Period" in
this prospectus.
You may choose, depending upon your retirement savings goals, your personal risk
tolerances, and your retirement plan, to invest in the Fixed Account Options
and/or the Variable Account Options described in this prospectus. When you
decide to retire, or otherwise withdraw your money, you can select from a wide
array of payout options including both fixed and variable payments. In addition,
this prospectus will describe for you all fees and charges that may apply to
your participation in Portfolio Director 2.
ABOUT VALIC
We were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director 2. Our principal offices are located
at 2929 Allen Parkway, Houston, Texas 77019. We have Regional Offices throughout
the United States. The addresses for these offices are given in the back of this
prospectus.
VALIC is a member of the American General Corporation group of companies.
Members of the American General Corporation group of companies operate in each
of the 50 states, the District of Columbia, and Canada and collectively provide
financial services with activities heavily weighted toward insurance.
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 2's Variable Account Options, you
will be sending that money through VALIC's Separate Account A. You do not invest
directly in the Mutual Funds made available in Portfolio Director 2. VALIC's
Separate Account A invests in the Mutual Funds on behalf of your account.
VALIC Separate Account A is made up of what we call "Divisions." Eighteen
Divisions are available and represent the Variable Account Options in Portfolio
Director 2. Each of these Divisions invests in a different Mutual Fund made
available through Portfolio Director 2. For example, Division Ten represents and
invests in the Stock Index Fund. The earnings (or losses) of each Division are
credited to (or charged against) the assets of that Division, and do not affect
the performance of the other Divisions of VALIC Separate Account A.
VALIC established Separate Account A on July 25, 1979 under Texas insurance law
to allow you to be able to invest in a number of Variable Account Options
available in Portfolio Director 2. VALIC Separate Account A is registered with
the Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940 ("Act"). Units of interest in VALIC Separate
Account A are registered as securities under the Securities Act of 1933.
VALIC Separate Account A is administered and accounted for as part of VALIC's
business operations. However, the income, capital gains or capital losses,
whether or not realized of each Division of VALIC Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of Portfolio Director 2, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director 2, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director 2 be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director 2. When we discuss performance information in this prospectus, we mean
the performance of a VALIC Separate Account A Division.
All inquiries regarding
PORTFOLIO DIRECTOR 2
may be directed to your
VALIC Regional Office at
the addresses shown in the
back of this prospectus.
MUTUAL FUND OR FUND --
the investment portfolio(s)
of a registered open-end
management investment
company, which serves as
the underlying investment
vehicle for each Division
represented in VALIC
Separate Account A.
For more information about
VALIC, see the Statement of
Additional Information
10
<PAGE> 290
GENERAL INFORMATION -- (CONTINUED)
- --------------------------------------------------------------------------------
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.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc., ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors --
our address is
2929 Allen Parkway,
Houston, Texas 77019.
For more information
about A.G. DISTRIBUTORS,
see the Statement of
Additional Information
11
<PAGE> 291
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director 2 enables you to participate in Divisions that represent
eighteen Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available to you through VALIC Separate Account A.
According to your retirement program, you may not be able to invest in all
eighteen 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 2 and include:
- - American General Series Portfolio
Company (AGSPC) -- offers 6 funds, for which VALIC serves as investment
adviser, for 2 of such funds, T. Rowe Price & Associates, Inc. serves as
investment sub-adviser and for 1 of such funds, Bankers Trust Company serves
as investment sub-adviser.
- - American Century Mutual Funds, Inc. -- offers 1 fund for which American
Century Investment Management, Inc. 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.
- - Templeton Funds Inc. -- offers 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - The Vanguard Group Inc. -- offers 4 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.
Twelve 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 Act. 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 as well as the Standard Average Annual Total Return for a 1, 3, 5 and 10
year period or since inception, if available. If Standard Average Annual Return
for a Division is not available for a stated period, we may show the Standard
Average Annual Return since Division inception. The performance information in
the tables and graphs 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. They 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 Funds actual historical performance of the
related Separate Account Divisions. The returns shown in the tables for the
other 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. 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.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond
to Separate Account
Divisions offered by
Portfolio Director 2.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
12
<PAGE> 292
- --------------------------------------------------------------------------------
periodsshown below. The results shown are after all charges and fees have been
applied against the Division. This will include account maintenance fees and
surrender charges that would have been deducted if you surrendered Portfolio
Director 2 at the end of the specified period. Premium taxes are not deducted.
This information is calculated for each Division based on how an initial
investment of $1,000 performed at the end of the specified periods shown.
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.
13
<PAGE> 293
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
12/31/94 10,018
12/31/95 14,667
12/31/96 17,333
12/31/97 20,765
12/31/98 24,286
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
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
12/31/91 10,905
12/31/92 11,128
12/31/93 12,583
12/31/94 13,014
12/31/95 15,308
12/31/96 15,822
12/31/97 14,906
12/31/98 17,280
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 11.89%, 17.02% and
20.29%, respectively. The Division commenced operations on April 29, 1994.
** The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 10.86%, 2.49%, 5.68% and 7.75%, respectively. The Division
commenced operations on October 1, 1991.
14
<PAGE> 294
AGSPC
MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,792
12/31/90 11,530
12/31/91 12,048
12/31/92 12,316
12/31/93 12,521
12/31/94 12,867
12/31/95 13,447
12/31/96 13,982
12/31/97 14,559
12/31/98 15,160
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,477
12/31/95 19,972
12/31/96 22,505
12/31/97 22,857
12/31/98 32,162
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.62)%, 2.44%, 2.94% and
4.16%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 35.63%,
15.90% and 27.90%, respectively. The Division commenced operations on April
29, 1994.
15
<PAGE> 295
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
12/31/89 10,100
12/31/90 9,877
12/31/91 12,506
12/31/92 12,795
12/31/93 13,670
12/31/94 13,339
12/31/95 18,351
12/31/96 22,527
12/31/97 29,853
12/31/98 37,623
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,788
12/31/90 12,171
12/31/91 15,543
12/31/92 16,411
12/31/93 17,853
12/31/94 17,799
12/31/95 24,197
12/31/96 29,406
12/31/97 38,748
12/31/98 49,264
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception period was
20.96%, 25.91%, 21.90% and 15.31%, respectively. The Division commenced
operations on October 2, 1989.
** The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.07%, 25.61%, 21.97%
and 17.20%, respectively. The Division commenced operations on April 20,
1987.
*** "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability
of investing in this Fund.
16
<PAGE> 296
AMERICAN 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 13,550
12/31/90 14,663
12/31/91 27,052
12/31/92 27,107
12/31/93 32,674
12/31/94 31,162
12/31/95 42,454
12/31/96 47,731
12/31/97 58,109
12/31/98 77,368
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 14,034
12/31/90 12,424
12/31/91 18,131
12/31/92 18,714
12/31/93 23,263
12/31/94 22,264
12/31/95 32,098
12/31/96 37,025
12/31/97 46,376
12/31/98 57,395
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Standard Average Annual Total
Return for the American Century Ultra Fund Division 31 for the 1 year and
since inception was 28.07% and 21.66%, respectively. The Division commenced
operations on July 1, 1996.
** The Standard Average Annual Total Return for the Founders Growth Fund
Division 30 for the 1 year period and since inception was 18.69% and 18.95%,
respectively. The Division commenced operations on July 1, 1996.
17
<PAGE> 297
NEUBERGER BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of large-capitalization companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 3, 1993 $ Value
- ------------------------- -------
<S> <C>
08/03/93 $10,000
12/31/93 10,692
12/31/94 10,748
12/31/95 14,047
12/31/96 16,370
12/31/97 19,097
12/31/98 19,353
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 3, 1993
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,333
12/31/90 11,088
12/31/91 12,952
12/31/92 12,855
12/31/93 16,783
12/31/94 16,476
12/31/95 18,731
12/31/96 21,609
12/31/97 24,246
12/31/98 30,909
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Neuberger Berman Guardian Trust was formerly known as Neuberger&Berman
Guardian Trust. The Standard Average Annual Total Return for the Neuberger
Berman Guardian Trust Division 29 for the 1 year period and since inception
was (3.27)% and 10.13%, respectively. The Division commenced operations on
July 1, 1996.
** The Standard Average Annual Total Return for the Putnam Global Growth
Fund -- Class A Division 28 for the 1 year period and since inception was
22.41% and 16.35%, respectively. The Division commenced operations on July 1,
1996.
18
<PAGE> 298
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
12/31/90 11,041
12/31/91 18,317
12/31/92 22,780
12/31/93 29,932
12/31/94 30,620
12/31/95 44,354
12/31/96 48,656
12/31/97 59,023
12/31/98 72,667
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,770
12/31/90 11,401
12/31/91 15,899
12/31/92 17,739
12/31/93 23,196
12/31/94 23,483
12/31/95 36,262
12/31/96 37,540
12/31/97 40,949
12/31/98 44,993
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Putnam New Opportunities
Fund -- Class A Division 26 for the 1 year period and since inception was
18.05% and 13.18%, respectively. The Division commenced operations on July 1,
1996.
** The Standard Average Annual Total Return for the Putnam OTC & Emerging Growth
Fund -- Class A Division 27 for the 1 year period and since inception was
4.87% and 0.90%, respectively. The Division commenced operations on July 1,
1996.
19
<PAGE> 299
SCUDDER GROWTH AND
INCOME FUND*
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,480
12/31/90 12,040
12/31/91 15,241
12/31/92 16,491
12/31/93 18,828
12/31/94 19,079
12/31/95 24,719
12/31/96 29,818
12/31/97 38,404
12/31/98 40,322
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON FOREIGN FUND**
Class A Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund tries to achieve its investment goal by
a flexible policy of investing primarily in the equity securities of companies
outside the United States, including emerging markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,924
12/31/90 12,413
12/31/91 14,537
12/31/92 14,407
12/31/93 19,517
12/31/94 19,393
12/31/95 21,346
12/31/96 24,920
12/31/97 26,307
12/31/98 24,777
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.21% and
16.19%, respectively. The Division commenced operations on July 1, 1996.
** The Templeton Foreign Fund -- Class A Shares was formerly known as the
Templeton Foreign Fund -- Class 1 Shares. The Standard Average Annual Total
Return for the Templeton Foreign Fund -- Class A Division 32 for the 1 year
period and since inception was (10.11)% and 0.79%, respectively. The Division
commenced operations on July 1, 1996. On January 1, 1993, the Templeton
Foreign Fund -- Class A implemented a Rule 12b-1 plan, which affects
subsequent performance.
20
<PAGE> 300
VANGUARD LONG-TERM
CORPORATE FUND*
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,376
12/31/90 11,933
12/31/91 14,251
12/31/92 15,451
12/31/93 17,472
12/31/94 16,344
12/31/95 20,404
12/31/96 20,256
12/31/97 22,752
12/31/98 24,582
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
TREASURY FUND**
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,649
12/31/90 12,170
12/31/91 14,116
12/31/92 14,974
12/31/93 17,272
12/31/94 15,859
12/31/95 20,380
12/31/96 19,753
12/31/97 22,211
12/31/98 24,835
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund-Long-Term Corporate Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.12% and 8.25%,
respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund-Long-Term U.S. Treasury Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Treasury Fund Division
23 for the 1 year period and since inception was 6.76% and 9.90%,
respectively. The Division commenced operations on July 1, 1996.
21
<PAGE> 301
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,011
12/31/90 11,530
12/31/91 14,082
12/31/92 15,009
12/31/93 16,828
12/31/94 16,540
12/31/95 21,716
12/31/96 24,906
12/31/97 30,299
12/31/98 33,526
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD WINDSOR II FUND**
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,625
12/31/90 11,225
12/31/91 14,268
12/31/92 15,781
12/31/93 17,707
12/31/94 17,285
12/31/95 23,703
12/31/96 29,051
12/31/97 37,970
12/31/98 43,627
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund. The Standard Average Annual Total Return for the Vanguard Wellington
Fund Division 25 for the 1 year period and since inception was 5.61% and
15.39%, respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund. The Standard Average Annual Total Return for Vanguard Windsor II Fund
Division 24 for the 1 year period and since inception was 9.84% and 21.60%,
respectively. The Division commenced operations on July 1, 1996.
22
<PAGE> 302
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director 2 account is surrendered before the Payout Period. The
amount, number, and frequency of your Purchase Payments is determined by the
retirement plan for which Portfolio Director 2 was purchased.
PURCHASE PAYMENTS
You may establish an account only through a VALIC representative. Initial
Purchase Payments must be received by VALIC either with, or after, a completed
application. Your employer is usually responsible for remitting Purchase
Payments to us. The employer is responsible for furnishing instructions to us (a
premium flow report) as to the amount being applied to your account.
Minimum initial and subsequent Purchase Payments are as follows:
<TABLE>
<CAPTION>
Initial Subsequent
Contract Type Payment Payment
- ----------------------- ------- ----------
<S> <C> <C>
Periodic Payment $ 30 $ 30
Single Payment $1,000 -0-
</TABLE>
Periodic Payment minimums apply to each Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided, unless you otherwise so specify.
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 2.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
23
<PAGE> 303
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the Exchange is open.
Step 2: Calculate net investment rate for any day as follows:
Net Investment Rate
= (EQUALS)
Gross Investment Rate (calculated in Step 1)
- - (MINUS)
Separate Account charges and any income tax charges.
Step 3: Determine Purchase Unit Value for that day.
Purchase Unit Value for that day.
= (EQUALS)
Purchase Unit Value for immediate preceding day.
X (MULTIPLIED BY)
Net Investment Rate (as calculated in Step 2) plus 1.00.
CHOOSING INVESTMENT OPTIONS
There are 20 investment options offered in Portfolio Director 2. This includes 2
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 20 options. The Funds that underlie the
Variable Account Options are registered as investment companies under and are
subject to regulation of the 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 "Summary" 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 2 account has been surrendered. 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. Any
such account closure will be subject to applicable distribution restrictions
under the Contract and/or under your employer's plan.
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.
24
<PAGE> 304
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director 2 without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director 2's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ----------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer
was previously
made
into Short-Term
Fixed
Account.(2)
</TABLE>
- ---------------
(1) Your employer may further limit or expand the restrictions. We may charge
for those modified restrictions if specified in your employer's retirement
plan.
(2) VALIC may change this holding period at any time in the future, but it will
never be more than 180 days.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between Portfolio Director 2's
investment options subject to the following limitations:
<TABLE>
<CAPTION>
% OF ACCOUNT
----------------------------------- OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- ---------------- -------------- ------------------- ------------
<S> <C> <C> <C>
Variable: Up to 100% Once every 365 days None
Combination
Fixed
and Variable Up to 100% Once every 365 days None
Payout: of money in
variable
option payout
Fixed: Not permitted -- --
</TABLE>
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 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.
25
<PAGE> 305
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director 2, you may be subject to six basic types of
fees and charges:
- - Account Maintenance Fee
- - Surrender 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 2 is issued to certain types of plans which are expected to result in
lower costs to VALIC. To learn more about how we determine if account
maintenance fees may be reduced or waived, see the "Reduction or Waiver of
Account Maintenance Fee, 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 that will be deducted from the amount withdrawn. 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;
- - 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
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
26
<PAGE> 306
- --------------------------------------------------------------------------------
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 2 is issued
to certain types of plans which are expected to result in lower costs to VALIC.
To learn more about how we determine if 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 1/2%.
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 1.00% 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. The mortality risk that
the Company assumes is the obligation to provide payments during the Payout
Period for your life no matter how long that might be. In addition, the Company
assumes the obligation to pay during the Purchase Period an interest guaranteed
death benefit. For more information about the interest guaranteed death benefit
see the "Death Benefit" section of this prospectus. The expense risk is our
obligation to cover the cost of issuing and administering Portfolio Director 2,
no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk 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.
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 2 may be reduced or waived. We may
reduce or waive these fees and charges if we determine that your retirement
program will allow us to reduce or eliminate administrative or sales expenses
that we usually incur for retirement programs. There are a number of factors we
will review in determining whether your retirement program will
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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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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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
Up to seven Variable Account Options may be chosen, or up to six Variable
Account Options if the Fixed Payout is chosen.
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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- 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, in the form of an
excise tax, if you do not meet an exception under 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,
- 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, and
- 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, subject to any limitations under the
contract or plan.
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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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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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 2. There will be no surrender charge for withdrawals using this method,
which provides for:
- Payments to be made to you;
- Payment over a stated period of time (but not less than five years);
- Payment of a stated yearly dollar amount or percentage (the amount or
percentage may not exceed 20% of your Account Value at the time election is
made).
We may require a minimum withdrawal amount under this method. The portion of
your account that has not been withdrawn will continue to receive the investment
return of the Variable Account Options which you selected. A systematic
withdrawal election may not be changed but can be revoked at no charge. Once
revoked, a systematic withdrawal may not be
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<PAGE> 311
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elected again. No more than one systematic withdrawal election may be in effect
at any one time. We reserve the right to discontinue any or all systematic
withdrawals or to change its terms, at any time.
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW. There will be no surrender charge on
a minimum distribution required by federal tax law (known as No Charge Minimum
Distribution), if the withdrawal:
- Is made payable to you; and
- Does not exceed the amount required under federal tax law as determined by
the values in your Portfolio Director 2 Contract and VALIC.
This contract feature will not be available in any year that an amount has been
withdrawn under the no charge systematic withdrawal method. See "Federal Tax
Matters" in this prospectus and in the Statement of Additional Information for
more information about required distributions imposed by tax law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus and in the Statement of Additional
Information.
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<PAGE> 312
EXCHANGE PRIVILEGE
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We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director 2. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director 2. This exchange privilege will be available
only to other contracts 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. An exchange may require the issuance of a Contract or may be subject
to any other requirements that the Company may impose.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges.
- Partial exchanges are not permitted.
- Exchanges from Portfolio Director 2 to contract forms other than Portfolio
Director Plus 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 2. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director 2. For example, you
will be subject to the rules concerning transfers among investment options as
stated in the Transfers Between Investment Options section in this prospectus.
We may, at our option, waive any transfer restrictions for a stated period of
time. If we waive these transfer restrictions, you will be allowed to exchange
to any investment option available in Portfolio Director 2.
WE RESERVE THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THESE EXCHANGE PRIVILEGES
AT ANY TIME.
TAXES AND CONVERSION COSTS
We will impose no fee or charge for these exchanges. Please read the "Federal
Tax Matters" section in this prospectus for information about the federal income
tax treatment of Portfolio Director 2.
SURRENDER CHARGES
We will generally not impose nor waive existing surrender charges as a result of
your electing to exchange from one of the other contracts.
For purposes of determining surrender charges, we often consider time in the
contract. For SPQ181 and SPQ181-1 Contracts, the contract date for determining
surrender charges under Portfolio Director 2 will be the SPQ181 and SPQ181-1
contract date plus one year. For example, if you have an SPQ181 contract with a
contract date of January 1, 1993, upon exchange into Portfolio Director 2, the
contract date for surrender charges purposes becomes January 1, 1994.
For any other contract, the contract date for determining surrender charges
under Portfolio Director 2 will be the same date as the other contract, but no
earlier than January 1, 1982. (The effect of this is to potentially shorten the
charge period for Purchase Payments subsequently made to Portfolio Director 2.)
If there is no surrender charge on assets within another contract, we will not
impose charges on those assets as a result of an exchange. If surrender charges
are to be based on Purchase Payments within a contract, we will consider
purchase payments in the other contract to have been transferred to Portfolio
Director 2 for purposes of calculating the surrender charge. The effective dates
of these Purchase Payments will also be retained for surrender charge purposes.
The Portfolio Director 2 surrender charge is calculated assuming the most recent
Purchase Payments are removed first. This policy may cause exchanged funds to be
accessible only after charges are imposed.
EXCHANGE OFFERS FOR CONTRACTS OTHER THAN
PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
Portfolio Director 2 will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
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<PAGE> 313
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EXCHANGE OFFER FOR PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
Subject to the restrictions stated below and the general restrictions on
exchange privileges stated above you may exchange from Portfolio Director to
Portfolio Director 2. Additionally, you may also make exchanges among the series
of Portfolio Director 2. Once you have made any of the exchanges described in
this paragraph you must wait 120 days before making another exchange between
Portfolio Director and Portfolio Director 2.
Both Portfolio Director and Portfolio Director 2 are available to qualified
contracts and certain non-qualified contracts. Portfolio Director 2 is not
available to non-qualified contracts issued to individuals. Please read the
"Federal Tax Matters" in this prospectus for information about the federal
income tax treatment of Portfolio Director 2.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director 2. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director 2 is provided in the Statement of Additional Information.
Portfolio Director and Portfolio Director 2 contain the same provisions except
as to the level of fees and as to available Variable Account Options and certain
Separate Account Expense Reimbursements. See "Fees and Changes" in this
prospectus.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
Please refer to the prospectus and Statement of Additional Information for
Portfolio Director and the different series of Portfolio Director 2 for
information about the specific features and charges of such products.
FEATURES OF PORTFOLIO DIRECTOR 2
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director 2.
- Portfolio Director 2 has more investment options to select from.
- Portfolio Director 2 has 12 publicly available mutual funds as investment
options.
- The Portfolio Director 2 surrender charge is calculated assuming the most
recent Purchase Payments are removed first. This policy may cause exchanged
funds to be accessible only after charges are imposed.
- Portfolio Director 2 has an Interest Guaranteed Death Benefit.
- Portfolio Director 2's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Different series of Portfolio Director 2 may charge fees higher or lower
than other series of Portfolio Director 2.
- Portfolio Director 2's guaranteed annuity rates and guaranteed interest
rates may be less favorable than the other contracts.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the Company's Agents' and Managers' Retirement Plan ("Plan"). We
grant to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts, Independence Plus Contracts
and Portfolio Director for the equivalent units of interest in Portfolio
Director 2.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director 2 any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director 2 from SA-1,
Independence Plus or Portfolio Director Contracts may have surrender charges and
account maintenance fees imposed under Portfolio Director 2. All other
provisions with regard to exchange offers referenced in the section entitled
"Exchange Offers" will apply to the Agents' and Managers' Retirement Plan
Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will have
three options to choose from. As to the funding vehicle for their purchase
payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract or Portfolio
Director.
- Leave current assets in the SA-1 Contract, Independence Plus or Portfolio
Director and direct future Purchase Payments to Portfolio Director 2; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director 2.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus Contract or Portfolio Director, future Purchase Payments and current assets
will be controlled by the provisions
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of the SA-1 Contract, Independence Plus Contract or Portfolio Director,
respectively. If the participant chooses to leave current assets in the SA-1
Contract, the Independence Plus Contract or Portfolio Director and direct future
Purchase Payments to Portfolio Director 2, the current assets will be controlled
by the provisions of the SA-1 Contract, the Independence Plus Contract or
Portfolio Director, respectively. The future Purchase Payments will be
controlled by the terms of Portfolio Director 2 subject to the exception that
surrender charges and account maintenance fees will not be imposed under
Portfolio Director 2. If the participant chooses to transfer all current assets
and future Purchase Payments to Portfolio Director 2, such current assets and
future Purchase Payments will be controlled by the provisions of Portfolio
Director 2 subject to the exception that surrender charges and account
maintenance fees will not be imposed under Portfolio Director 2.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director 2 the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. See "Exchange Offer for Portfolio
Director and Portfolio Director 2" in this prospectus. If a participant chooses
to transfer future Purchase Payments but not current assets to Portfolio
Director 2, the participant will be allowed at a later date to transfer the
current assets to Portfolio Director 2. For a complete analysis of the
differences between the SA-1 contract, the Independence Plus Contract or
Portfolio Director and Portfolio Director 2, you should refer to the Statement
of Additional Information and the form of the contract or certificate for its
terms and conditions.
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DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director 2 will pay death benefits during either the Purchase Period
or the Payout Period. How these death benefits will be paid are discussed below.
The death benefit provisions in Portfolio Director 2 may vary from state to
state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law and by the plan, if any.
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, not exceeding the Beneficiary's life
expectancy.
If the Annuitant dies before the Annuity Date, the Beneficiary as named by you
may receive the payout.
Payments certain or payments for a designated period cannot be for a greater
period of time than the Beneficiary's life expectancy. After choosing a payment
option, a Beneficiary may exercise many of the investment options and other
rights that the Participant or Contract Owner had under Portfolio Director 2.
SPECIAL INFORMATION FOR INDIVIDUAL
NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Tax
Qualified Contract are not the same person. If this is the case, and the
Contract Owner dies, there will be no death benefit payable since the death
benefit is only due in the event of the Annuitant's death. However, the Contract
will be transferred to the Contingent Owner,
if any, or to the Contract Owner's estate. Such transfers will be considered a
taxable event by the IRS.
DURING THE PURCHASE PERIOD
Two types of benefits are available if death occurs during the Purchase Period.
Interest Guaranteed Death Benefit and Standard Death Benefit.
INTEREST GUARANTEED DEATH BENEFIT
The interest guaranteed death benefit is payable when death occurs prior to your
reaching the age of 70. This contract provision is not available in some states.
The amount payable under the interest guaranteed death benefit will be at least
equal to the sum of your Account Value in the Fixed Account Option(s) and the
Variable Account Option(s) on the date VALIC receives proof of death.
Here is how to calculate the death benefit:
Step 1: Determine your Fixed Account Option Value by taking the greater of:
<TABLE>
<S> <C> <C>
Value of Fixed Account Option on date
proof of death Is received by VALIC
OR
100% of Purchase Payments placed
in Fixed Account Option
- - (MINUS)
Amount of all prior withdrawals, charges and
any portion of Account Value applied under
a Payout Option
</TABLE>
Step 2: Determine your Variable Account Option Value by taking the greater of:
<TABLE>
<S> <C> <C>
Value of Variable Account Option on date
proof of death is received by VALIC
OR
100% of Purchase Payments placed in
Variable Account Options
- - (MINUS)
Prior withdrawals (out of) or transfers
(out of) the Variable Account Option
+ (PLUS)
Interest at an annual rate of 3%
</TABLE>
Step 3: Add step 1 + 2 = Death Benefit
For purposes of this calculation amounts transferred into the Variable Account
Option will be treated as Purchase Payments.
STANDARD DEATH BENEFIT
The standard death benefit is payable if death occurs on or after age 70.
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 is not required to be.
Also, a Contingent Contract
Owner may be designated.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase
Payments and Account Value
may be allocated to fixed
investment options. Currently,
the Fixed Account Options in
Portfolio Director 2 are Fixed
Account Plus and Short-Term
Fixed Account. Each option
of this type is guaranteed to
earn at least a minimum rate
of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond to
VALIC Separate Account A
Divisions offered by Portfolio
Director 2. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
36
<PAGE> 316
- --------------------------------------------------------------------------------
The Standard Death Benefit will be the greater of:
<TABLE>
<S> <C> <C>
Your Account Value on the Date Proof of Death is
Received by VALIC
OR
100% of Purchase Payments (to Fixed
and/or Variable Account Options)
- -- (MINUS)
Amount of all Prior Withdrawals, Charges
and any portion of Account Value applied
under a Payout Option
</TABLE>
DURING THE PAYOUT PERIOD
If death occurs during the Payout Period, your Beneficiary may receive a death
benefit depending on the Payout Option selected. The amount of death benefits
will also depend on the Payout Option that you selected. The Payout Options
available in Portfolio Director 2 are described in the "Payout Period" section
of this prospectus.
- If the Life Only Option or Joint and Survivor Life Option were chosen, there
will be no death benefit.
- If the Life With Guaranteed Period Option, Joint and Survivor Life with
Guaranteed Periods Option, Life with Cash or Unit Refund Option or Payment
for a Designated Period Option were chosen, and the entire amount guaranteed
has not been paid, the Beneficiary may choose one of the following within 60
days after death benefits are payable:
- Receive the present value of any remaining payments in a lump sum; or
- Receive the remaining payments under the same terms of the guaranteed
period option chosen by the deceased Participant; or
- Receive the present value of any remaining payments applied under the
Payment for a Designated Period Option for a period equal to or shorter
than the period remaining. Spouse beneficiaries may be entitled to more
favorable treatment under federal tax law.
37
<PAGE> 317
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts or to the general public
before Portfolio Director 2 was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
each case, we will use the charges and fees imposed by Portfolio Director 2 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 2 at the end of each period shown. Premium taxes are not deducted. This
information is calculated for each Division based on how an initial assumed
payment of $1,000 performed at the end of 1, 3, 5 and 10 year periods. If
Standard Average Annual Return for a Division is not available for a stated
period, we may show the Standard Average Annual Return since Division inception.
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. The SEC
staff takes the position that performance information of an underlying Fund
reduced by account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director 2 will stay
in the Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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 or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or 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 2. Each Division
invests in a different mutual
fund, each having its own
investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director 2.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
38
<PAGE> 318
- --------------------------------------------------------------------------------
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director 2 charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual 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 Division
We may advertise the AGSPC Money Market Division's Current Yield and Effective
Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market Division over a given 7-day period. The Current Yield does not take
into account surrender charges, account maintenance fees or premium taxes. The
income produced over a 7 day period is then "annualized." This means we are
assuming the amount of income produced during the 7-day period will continue to
be produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The annualized 7-day Current Yield for the last 7
days ended December 31, 1998 was 3.64%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield. The annualized 7-day Effective Yield for the last 7 days ended December
31, 1998 was 3.71%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION:
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate Account A
Division is printed in the eight tables below.
The information presented does not reflect the advantage under Portfolio
Director 2 of deferring federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments (see "Federal Tax Matters" in the
prospectus and in the Statement of Additional Information.) The information
presented also does not reflect the advantage under Qualified Contracts of
deferring federal income tax on Purchase Payments.
The performance results shown in the following tables are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
39
<PAGE> 319
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth (Division 15)............................ 04/29/94 20.29% -- -- 17.02% 11.89%
AGSPC International Government Bond (Division 13)..... 10/01/91 7.75 -- 5.68% 2.49 10.86
AGSPC Money Market (Division 6)....................... 01/16/86 -- 4.16% 2.94 2.44 (0.62)
AGSPC Science & Technology (Division 17).............. 04/29/94 27.90 -- -- 15.90 35.63
AGSPC Social Awareness (Division 12).................. 10/02/89 15.31 -- 21.90 25.91 20.96
AGSPC Stock Index (Division 10)....................... 04/20/87 -- 17.20 21.97 25.61 22.07
American Century Ultra (Division 31).................. 07/01/96 21.66 -- -- -- 28.07
Founders Growth (Division 30)......................... 07/01/96 18.95 -- -- -- 18.69
Neuberger Berman Guardian Trust (Division 29)......... 07/01/96 10.13 -- -- -- (3.27)
Putnam Global Growth -- Class A (Division 28)......... 07/01/96 16.35 -- -- -- 22.41
Putnam New Opportunities -- Class A (Division 26)..... 07/01/96 13.18 -- -- -- 18.05
Putnam OTC & Emerging Growth -- Class A (Division
27)................................................. 07/01/96 0.90 -- -- -- 4.87
Scudder Growth and Income (Division 21)(1)............ 07/01/96 16.19 -- -- -- 0.21
Templeton Foreign -- Class A (Division 32)............ 07/01/96 0.79 -- -- -- (10.11)
Vanguard Long-Term Corporate (Division 22)**.......... 07/01/96 8.25 -- -- -- 3.12
Vanguard Long-Term Treasury (Division 23)**........... 07/01/96 9.90 -- -- -- 6.76
Vanguard Wellington (Division 25)..................... 07/01/96 15.39 -- -- -- 5.61
Vanguard Windsor II (Division 24)..................... 07/01/96 21.60 -- -- -- 9.84
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The performance figures 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) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
40
<PAGE> 320
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)................. 11/02/81 -- 22.64% 18.22% 20.93% 28.07%
Founders Growth (Division 30)........................ 01/05/62 -- 19.02 19.21 20.15 18.69
Neuberger Berman Guardian Trust (Division 29)........ 08/03/93 12.89% -- 11.88 9.83 (3.27)
Putnam Global Growth -- Class A (Division 28)........ 09/01/67 -- 11.86 12.28 16.88 22.41
Putnam New Opportunities -- Class A (Division 26).... 08/31/90 26.82% -- 18.82 16.59 18.05
Putnam OTC & Emerging Growth -- Class A (Division
27)................................................ 11/01/82 -- 16.15 13.49 5.92 4.87
Scudder Growth and Income (Division 21).............. 11/13/84 -- 14.88 15.81 16.42 0.21
Templeton Foreign -- Class A (Division 32)(1)........ 10/05/82 -- 9.42 3.97 3.49 (10.11)
Vanguard Long-Term Corporate (Division 22)**......... 07/09/73 -- 9.32 6.21 4.84 3.12
Vanguard Long-Term Treasury (Division 23)**.......... 05/19/86 -- 9.44 6.69 5.25 6.76
Vanguard Wellington (Division 25).................... 07/01/29 -- 12.78 14.11 14.23 5.61
Vanguard Windsor II (Division 24).................... 06/24/85 -- 15.79 19.18 21.34 9.84
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth (Division 15)................................. 04/29/94 20.93% -- -- 18.31% 16.96%
AGSPC International Government Bond
(Division 13)............................................ 10/01/91 7.84 -- 6.55% 4.12 15.92
AGSPC Money Market (Division 6)............................ 01/16/86 -- 4.25% 3.90 4.08 4.12
AGSPC Science & Technology (Division 17)................... 04/29/94 28.42 -- -- 17.21 40.71
AGSPC Social Awareness (Division 12)....................... 10/02/89 15.40 -- 22.44 27.04 26.03
AGSPC Stock Index (Division 10)............................ 04/20/87 -- 17.29 22.51 26.74 27.14
American Century Ultra (Division 31)....................... 07/01/96 23.22 -- -- -- 33.14
Founders Growth (Division 30).............................. 07/01/96 20.56 -- -- -- 23.76
Neuberger Berman Guardian Trust (Division 29).............. 07/01/96 11.91 -- -- -- 1.34
Putnam Global Growth -- Class A (Division 28).............. 07/01/96 18.01 -- -- -- 27.48
Putnam New Opportunities -- Class A (Division 26).......... 07/01/96 14.90 -- -- -- 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 07/01/96 2.85 -- -- -- 9.87
Scudder Growth and Income (Division 21).................... 07/01/96 17.85 -- -- -- 4.99
Templeton Foreign -- Class A (Division 32)................. 07/01/96 2.73 -- -- -- (5.82)
Vanguard Long-Term Corporate (Division 22)**............... 07/01/96 10.08 -- -- -- 8.04
Vanguard Long-Term Treasury (Division 23)**................ 07/01/96 11.69 -- -- -- 11.82
Vanguard Wellington (Division 25).......................... 07/01/96 17.07 -- -- -- 10.65
Vanguard Windsor II (Division 24).......................... 07/01/96 23.16 -- -- -- 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same.
** The performance figures 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.
41
<PAGE> 321
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)....................... 11/02/81 -- 22.70% 18.82% 22.15% 33.14%
Founders Growth (Division 30).............................. 01/05/62 -- 19.09 19.80 21.38 23.76
Neuberger Berman Guardian Trust (Division 29).............. 08/03/93 12.98% -- 12.60 11.27 1.34
Putnam Global Growth -- Class A (Division 28).............. 09/01/67 -- 11.95 12.99 18.17 27.48
Putnam New Opportunities -- Class A (Division 26).......... 08/31/90 26.88 -- 19.41 17.89 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 11/01/82 -- 16.23 14.17 7.46 9.87
Scudder Growth and Income (Division 21).................... 11/13/84 -- 14.96 16.45 17.72 4.99
Templeton Foreign -- Class A (Division 32)(1).............. 10/05/82 -- 9.50 4.89 5.09 (5.82)
Vanguard Long-Term Corporate (Division 22)**............... 07/09/73 -- 9.41 7.07 6.41 8.04
Vanguard Long-Term Treasury (Division 23)**................ 05/19/86 -- 9.52 7.53 6.81 11.82
Vanguard Wellington (Division 25).......................... 07/01/29 -- 12.86 14.78 15.58 10.65
Vanguard Windsor II (Division 24).......................... 06/24/85 -- 15.87 19.76 22.55 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a
Rule 12b-1 plan, which affects subsequent performance. VALIC Separate
Account A purchases shares of this fund at net asset value and without
sales charges generally applicable to Class A shares.
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth (Division 15).................................. 04/29/94 142.86% -- -- 65.59% 16.96%
AGSPC International Government Bond (Division 13)........... 10/01/91 72.80 -- 37.32% 12.88 15.92
AGSPC Money Market (Division 6)............................. 01/16/86 -- 51.60% 21.07 12.73 4.12
AGSPC Science & Technology (Division 17).................... 04/29/94 221.62 -- -- 61.04 40.71
AGSPC Social Awareness (Division 12)........................ 10/02/89 276.23 -- 175.23 105.02 26.03
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 392.64 175.95 103.59 27.14
American Century Ultra (Division 31)........................ 07/01/96 68.55 -- -- -- 33.14
Founders Growth (Division 30)............................... 07/01/96 59.59 -- -- -- 23.76
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 32.50 -- -- -- 1.34
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 51.29 -- -- -- 27.48
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 41.52 -- -- -- 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 7.27 -- -- -- 9.87
Scudder Growth and Income (Division 21)..................... 07/01/96 50.77 -- -- -- 4.99
Templeton Foreign -- Class A (Division 32).................. 07/01/96 6.97 -- -- -- (5.82)
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 27.13 -- -- -- 8.04
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 31.83 -- -- -- 11.82
Vanguard Wellington (Division 25)........................... 07/01/96 48.28 -- -- -- 10.65
Vanguard Windsor II (Division 24)........................... 07/01/96 68.32 -- -- -- 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same.
** The performance figures 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.
42
<PAGE> 322
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)........................ 11/02/81 -- 673.68% 136.79% 82.24% 33.14%
Founders Growth (Division 30)............................... 01/05/62 -- 473.95 146.72 78.81 23.76
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 93.53% -- 81.00 37.77 1.34
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 209.09 84.17 65.01 27.48
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 626.67 -- 142.78 63.83 23.12
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 349.93 93.97 24.08 9.87
Scudder Growth and Income (Division 21)..................... 11/13/84 -- 303.22 114.16 63.12 4.99
Templeton Foreign -- Class A (Division 32)(1)............... 10/05/82 -- 147.77 26.95 16.07 (5.82)
Vanguard Long-Term Corporate (Division 22)***............... 07/09/73 -- 145.82 40.69 20.48 8.04
Vanguard Long-Term Treasury (Division 23)***................ 05/19/86 -- 148.35 43.79 21.86 11.82
Vanguard Wellington (Division 25)........................... 07/01/29 -- 235.26 99.22 54.38 10.65
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 336.27 146.38 84.06 14.90
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects 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.
*** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a
Rule 12b-1 plan, which affects subsequent performance. VALIC Separate
Account A purchases shares of this fund at net asset value and without
sales charges generally applicable to Class A shares.
43
<PAGE> 323
TABLE VII
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 DECEMBER 31**
--------------------------------------------------------
FUND AND DIVISION 1998 1997 1996 1995 1994
- ----------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 16.96% 19.80% 18.18% 46.40% 0.18%
AGSPC International Government Bond
(Division 13)(1).................. 15.92 (5.79) 3.36 17.63 3.42
AGSPC Money Market (Division
6)(1)............................. 4.12 4.13 3.97 4.51 2.77
AGSPC Science & Technology
(Division 17)(1).................. 40.71 1.57 12.68 60.07 24.77
AGSPC Social Awareness (Division
12)(1)............................ 26.03 32.52 22.75 37.57 (2.42)
AGSPC Stock Index (Division
10)(1)............................ 27.14 31.77 21.53 35.95 (0.30)
American Century Ultra (Division
31)............................... 33.14 21.74 3.99 -- --
Founders Growth (Division 30)...... 23.76 25.25 2.95 -- --
Neuberger Berman Guardian Trust
(Division 29)..................... 1.34 16.66 12.08 -- --
Putnam Global Growth -- Class A
(Division 28)..................... 27.48 12.20 5.77 -- --
Putnam New Opportunities -- Class A
(Division 26)..................... 23.12 21.31 (5.53) -- --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 9.87 9.08 (11.73) -- --
Scudder Growth and Income (Division
21)............................... 4.99 28.80 11.50 -- --
Templeton Foreign -- Class A
(Division 32)..................... (5.82) 5.57 7.59 -- --
Vanguard Long-Term Corporate
(Division 22)***.................. 8.04 12.32 4.76 -- --
Vanguard Long-Term Treasury
(Division 23)***.................. 11.82 12.44 4.85 -- --
Vanguard Wellington (Division
25)............................... 10.65 21.65 10.16 -- --
Vanguard Windsor II (Division
24)............................... 14.90 30.70 12.09 -- --
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR
THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... -- -- -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 13.08% 2.05% 9.05% -- --
AGSPC Money Market (Division
6)(1)............................. 1.67 2.22 4.49 6.83% 7.92%
AGSPC Science & Technology
(Division 17)(1).................. -- -- -- -- --
AGSPC Social Awareness (Division
12)(1)............................ 6.84 2.31 26.63 (2.21) 1.00
AGSPC Stock Index (Division
10)(1)............................ 8.78 5.58 27.70 (4.83) 27.88
American Century Ultra (Division
31)............................... -- -- -- -- --
Founders Growth (Division 30)...... -- -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)..................... -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)..................... -- -- -- -- --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... -- -- -- -- --
Scudder Growth and Income (Division
21)............................... -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)..................... -- -- -- -- --
Vanguard Long-Term Corporate
(Division 22)***.................. -- -- -- -- --
Vanguard Long-Term Treasury
(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 DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION 1998 1997 1996 1995 1994
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 142.86% 107.65% 73.33% 46.67% 0.18%
AGSPC International Government Bond
(Division 13)(1).................. 72.80 49.06 58.22 53.08 30.14
AGSPC Money Market (Division
6)(1)............................. 51.60 45.59 39.82 34.47 28.67
AGSPC Science & Technology
(Division 17)(1).................. 221.62 128.57 125.05 99.72 24.77
AGSPC Social Awareness (Division
12)(1)............................ 276.23 198.53 125.27 83.51 33.39
AGSPC Stock Index (Division
10)(1)............................ 392.64 287.48 194.06 141.97 77.99
American Century Ultra (Division
31)............................... 68.55 26.59 3.99 -- --
Founders Growth (Division 30)...... 59.59 28.95 2.95 -- --
Neuberger Berman Guardian Trust
(Division 29)..................... 32.50 30.75 12.08 -- --
Putnam Global Growth -- Class A
(Division 28)..................... 51.29 18.68 5.77 -- --
Putnam New Opportunities -- Class A
(Division 26)..................... 41.52 14.95 (5.53) -- --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 7.27 (2.37) (11.73) -- --
Scudder Growth & Income (Division
21)............................... 50.77 43.60 11.50 -- --
Templeton Foreign -- Class A
(Division 32)..................... 6.97 13.58 7.59 -- --
Vanguard Long-Term Corporate
(Division 22)***.................. 27.13 17.67 4.76 -- --
Vanguard Long-Term Treasury
(Division 23)***.................. 31.83 17.89 4.85 -- --
Vanguard Wellington (Division
25)............................... 48.28 34.01 10.16 -- --
Vanguard Windsor II (Division
24)............................... 68.32 46.50 12.09 -- --
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR
EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... -- -- -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 25.83% 11.28% 9.05% -- --
AGSPC Money Market (Division
6)(1)............................. 25.21 23.16 20.48 15.30% 7.92%
AGSPC Science & Technology
(Division 17)(1).................. -- -- -- -- --
AGSPC Social Awareness (Division
12)(1)............................ 36.70 27.95 25.06 (1.23) 1.00
AGSPC Stock Index (Division
10)(1)............................ 78.53 64.11 55.43 21.71 27.88
American Century Ultra (Division
31)............................... -- -- -- -- --
Founders Growth (Division 30)...... -- -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)..................... -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)..................... -- -- -- -- --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... -- -- -- -- --
Scudder Growth & Income (Division
21)............................... -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)..................... -- -- -- -- --
Vanguard Long-Term Corporate
(Division 22)***.................. -- -- -- -- --
Vanguard Long-Term Treasury
(Division 23)***.................. -- -- -- -- --
Vanguard Wellington (Division
25)............................... -- -- -- -- --
Vanguard Windsor II (Division
24)............................... -- -- -- -- --
</TABLE>
- ------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same.
** 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 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) For periods prior to 1996, the Annual and Cumulative Change in Purchase Unit
Value figures are based on the average and cumulative changes in Purchase
Unit Value for a stated period in a corresponding Division of Separate
Account A for a different Contract offered by the Company and have been
restated to take into account the fees and charges under Portfolio Director
2 other than the surrender charge and account maintenance fee. The Contracts
offered by this prospectus became available for purchase on July 1, 1996.
44
<PAGE> 324
TABLE VIII
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 DECEMBER 31**
--------------------------------------------------------
FUND AND DIVISION*** 1998 1997 1996 1995 1994
- ----------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division
31)............................... 33.14% 21.74% 12.43% 36.23% (4.62)%
Founders Growth (Division 30)...... 23.76 25.25 15.35 44.15 (4.29)
Neuberger Berman Guardian Trust
(Division 29)..................... 1.34 16.66 16.54 30.69 0.53
Putnam Global Growth -- Class A
(Division 28)..................... 27.48 12.20 15.37 13.68 (1.84)
Putnam New Opportunities -- Class A
(Division 26)..................... 23.12 21.31 9.70 44.87 2.29
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 9.87 9.08 3.53 54.45 1.22
Scudder Growth and Income (Division
21)............................... 4.99 28.80 20.63 29.58 1.33
Templeton Foreign -- Class A
(Division 32)*****................ (5.82) 5.57 16.74 10.07 (0.62)
Vanguard Long-Term Corporate
(Division 22)****................. 8.04 12.32 (0.72) 24.86 (6.47)
Vanguard Long-Term Treasury
(Division 23)****................. 11.82 12.44 (3.08) 28.51 (8.17)
Vanguard Wellington (Division
25)............................... 10.65 21.65 14.69 31.30 (1.71)
Vanguard Windsor II (Division
24)............................... 14.90 30.70 22.56 37.14 (2.38)
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR
THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION*** 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division
31)............................... 20.54% 0.20% 84.49% 8.21% 35.50%
Founders Growth (Division 30)...... 24.30 3.21 45.94 (11.48) 40.34
Neuberger Berman Guardian Trust
(Division 29)..................... 6.92 -- -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... 30.56 (0.76) 16.81 (10.11) 23.33
Putnam New Opportunities -- Class A
(Division 26)..................... 31.40 24.37 65.93 10.41 --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 30.77 11.58 39.47 (10.75) 27.70
Scudder Growth and Income (Division
21)............................... 14.17 8.22 26.60 (3.55) 24.80
Templeton Foreign -- Class A
(Division 32)*****................ 35.48 (0.89) 17.10 (3.95) 29.24
Vanguard Long-Term Corporate
(Division 22)****................. 13.08 8.41 19.42 4.90 13.76
Vanguard Long-Term Treasury
(Division 23)****................. 15.36 6.09 15.98 4.48 16.49
Vanguard Wellington (Division
25)............................... 12.12 6.58 22.13 (4.01) 20.11
Vanguard Windsor II (Division
24)............................... 12.21 10.59 27.11 (11.10) 26.25
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR
EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION*** 1998 1997 1996 1995 1994
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division
31)............................... 673.68% 481.09% 377.31% 324.54% 211.62%
Founders Growth (Division 30)...... 473.95 363.76 270.25 220.98 122.64
Neuberger Berman Guardian Trust
(Division 29)..................... 93.53 90.97 63.70 40.47 7.48
Putnam Global Growth -- Class A
(Division 28)..................... 209.09 142.46 116.09 87.31 64.76
Putnam New Opportunities -- Class A
(Division 26)..................... 626.67 490.23 386.56 343.54 206.20
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 349.93 309.49 275.40 262.62 134.83
Scudder Growth and Income (Division
21)............................... 303.22 284.04 198.18 147.19 90.79
Templeton Foreign -- Class A
(Division 32)*****................ 147.77 163.07 149.20 113.46 93.93
Vanguard Long-Term Corporate
(Division 22)****................. 145.82 127.52 102.56 104.04 63.44
Vanguard Long-Term Treasury
(Division 23)****................. 148.35 122.11 97.53 103.80 58.59
Vanguard Wellington (Division
25)............................... 235.26 202.99 149.06 117.16 65.40
Vanguard Windsor II (Division
24)............................... 336.27 279.70 190.51 137.03 72.85
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR
EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION*** 1993 1992 1991 1990 1989
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
American Century Ultra (Division
31)............................... 226.74% 171.07% 170.52% 46.63% 35.50%
Founders Growth (Division 30)...... 132.63 87.14 81.31 24.24 40.34
Neuberger Berman Guardian Trust
(Division 29)..................... 6.92
Putnam Global Growth -- Class A
(Division 28)..................... 67.83 28.55 29.52 10.88 23.33
Putnam New Opportunities -- Class A
(Division 26)..................... 199.32 127.80 83.17 10.41 --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 131.96 77.39 58.99 14.01 27.70
Scudder Growth and Income (Division
21)............................... 88.28 64.91 52.41 20.40 24.80
Templeton Foreign -- Class A
(Division 32)*****................ 95.17 44.07 45.37 24.13 29.24
Vanguard Long-Term Corporate
(Division 22)****................. 74.72 54.51 42.51 19.33 13.76
Vanguard Long-Term Treasury
(Division 23)****................. 72.72 49.74 41.16 21.70 16.49
Vanguard Wellington (Division
25)............................... 68.28 50.09 40.82 15.30 20.11
Vanguard Windsor II (Division
24)............................... 77.07 57.81 42.68 12.25 26.25
</TABLE>
- ------------
* The performance figures in the Table reflect the investment performance
for the Funds for the stated periods and should not be used to infer that
future performance will be the same.
** 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 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.
**** The performance figures 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.
***** On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a
Rule 12b-1 plan, which affects subsequent performance. VALIC Separate
Account A purchases shares of this Fund at net asset value and without
sales charges general applicable to Class A shares.
45
<PAGE> 325
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director 2 may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the Act, if registration is no
longer required;
- Stop accepting new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
If the Contract is being offered as a retirement plan through your employer, you
should always refer to the terms and conditions in your employer's plan when
reviewing the description of Portfolio Director 2 in this prospectus.
Plan loans from the Fixed Account Options may be allowed by your employer's
plan. Refer to your plan for a description of charges and other information.
46
<PAGE> 326
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About VALIC Separate Account A" section of this prospectus,
VALIC Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Participant, you may be entitled to give voting instructions to us
as to how VALIC Separate Account A should vote its Fund shares on these matters.
Those persons entitled to give voting instructions will be determined before the
shareholders meeting is held. For more information about these shareholder
meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. This will be true even if your
employer is the Contract Owner. Contract Owners will instruct VALIC Separate
Account A in accordance with these instructions. You will receive proxy material
and a form on which voting instructions may be given before the shareholder
meeting is held.
You will not have the right to give voting instructions if Portfolio Director 2
was issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
DURING PURCHASE PERIOD
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
DURING PAYOUT PERIOD OR AFTER A DEATH
BENEFIT HAS BEEN PAID
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in Portfolio Director 2
may have a number of shareholders including VALIC Separate Account A, VALIC
other affiliated insurance company separate accounts and retirement plans within
the American General group of companies and public shareholders.
VALIC Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the
Participants invested in that Fund entitled to give instructions at that
shareholder meeting. VALIC Separate Account A will vote the shares of the Funds
it holds for which it receives no voting instruction in the same proportion as
the shares for which voting instructions have been received.
VALIC Separate Account A 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.
47
<PAGE> 327
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director 2 provides tax-deferred accumulation over time, but is
subject to federal income and excise taxes, mentioned briefly below. You should
refer to the Statement of Additional Information for further details. Section
references are to the Internal Revenue Code ("Code"). We do not attempt to
describe any potential estate or gift tax, or any applicable state, local or
foreign tax law other than possible premium taxes mentioned under "Premium Tax
Charge." Remember that future legislation could modify the rules discussed
below, and always consult your personal tax adviser regarding how the current
rules apply to your specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or 408(b) IRA, as a Section 408(b)
Individual Retirement Annuity ("IRA"), or is instead a nonqualified Contract.
Portfolio Director 2 is used under the following types of retirement
arrangements:
- Section 403(b) annuities for employees
of public schools and
Section 501(c)(3) tax-exempt
organizations;
- Section 401(a) and 403(a) qualified plans of for-profit employers and other
employers (including self-employed individuals);
- Section 408(b) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs;
- Section 408(p) SIMPLE retirement accounts.
The foregoing Contracts are "Qualified Contracts." Certain series of Portfolio
Director 2 may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity ("Roth IRA").
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director 2 is also available through "Non-Qualified
Contracts" to the extent acquired by "Non-Natural Persons." Such Non-Qualified
Contracts generally include unfunded, nonqualified deferred compensation plans
of corporate employers, as well as individual annuity contracts issued to
individuals outside of the context of any formal employer or employee retirement
plan or arrangement. Non-Qualified Contracts generally may invest only in mutual
funds which are not available to the general public outside of annuity contracts
or life insurance contracts.
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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
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 or penalty taxes, 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
48
<PAGE> 328
- --------------------------------------------------------------------------------
under all Contracts may be subject to state income tax withholding requirements.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although VALIC can provide no assurance that the IRS will not 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 if
such a challenge were made.
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
how ownership of the Mutual Fund shares might be imputed for federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons will be taxed currently to the owner and such contracts
will not be treated as annuities for federal income tax purposes.
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- Portfolio Director 2 Contract issued to a tax favored retirement program
purchased with pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- Conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[BAR GRAPH]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. The deduction of
fees and charges for both tax-deferred plans is reflected in the chart. Variable
options incur mortality and expense risk fee and administration and distribution
fee charges (1% - 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
49
<PAGE> 329
- --------------------------------------------------------------------------------
fees and charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
federal taxes......... $2,500 $2,500
Current federal income
tax due on Purchase
Payments.............. 0 (700)
Net retirement plan
Purchase Payments..... $2,500 $1,800
</TABLE>
This chart assumes a 28% federal income tax rate. The $700 which is paid toward
current federal income taxes 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.
50
<PAGE> 330
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the Year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
51
<PAGE> 331
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>
52
<PAGE> 332
(This page intentionally left blank)
53
<PAGE> 333
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director
2).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 334
(This page intentionally left blank)
55
<PAGE> 335
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............... 15
Exchanges From Independence Plus Contracts...... 15
Exchanges From V-Plan Contracts................. 16
Exchanges From SA-1 and SA-2 Contracts.......... 17
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 Division 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 Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 29
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 30
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 30
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 31
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 32
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 32
Founders Growth Division Thirty Compared to S&P
500 Index..................................... 33
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 33
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MCSI World Index and S&P 500
Index......................................... 34
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 35
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 35
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 36
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 36
Vanguard Long-Term Corporate Division Twenty-two
Compared to Merrill Lynch Corporate Master
Index......................................... 37
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 37
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 38
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 39
Payout Payments..................................... 40
Assumed Investment Rate......................... 40
Amount of Payout Payments....................... 40
Payout Unit Value............................... 40
Illustration of Calculation of Payout Unit
Value......................................... 41
Illustration of Payout Payments................. 41
Distribution of Variable Annuity Contracts.......... 42
Experts............................................. 42
Comments on Financial Statements.................... 43
</TABLE>
56
<PAGE> 336
(This page intentionally left blank)
57
<PAGE> 337
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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> 338
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 339
[Momento Photo]
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1.20-2.12.20
Prospectus
May 1, 1999
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director 2
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 340
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1.20 TO 2.12.20 May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain series of
Portfolio Director 2 that consist of group and individual variable annuity
contracts (the "Contracts") to Participants in certain employer sponsored
retirement plans. Portfolio Director 2 Series 2.1.20 to 2.12.20 consists of
group variable annuity contracts that are offered by VALIC to Participants in
certain employer sponsored retirement plans as well as for certain after-tax
arrangements that are not part of an employer's plan. Portfolio Director 2 may
be available to you when you participate in a retirement program that qualifies
for deferral of federal income taxes. Non-qualified contracts are also available
for certain employer plans only.
Portfolio Director 2 permits you to invest in and receive retirement benefits in
up to 2 Fixed Account Options and/or an array of up to 18 Variable Account
Options. 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, life
insurance contracts, or certain employer-sponsored retirement plans will not be
available within your contract. Each of these investment options is explained
more fully in this prospectus. Here is a list of these investment options:
TWO FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
EIGHTEEN VARIABLE ACCOUNT OPTIONS*
<TABLE>
<S> <C> <C>
American General Series Portfolio Founders Funds, Inc.: Templeton Funds, Inc.:
Company (AGSPC): Founders Growth Fund Templeton Foreign Fund -- Class A
Growth Fund
International Government Bond Fund Neuberger Berman Management Inc.:
Money Market Fund Neuberger Berman Guardian Trust The Vanguard Group, Inc.:
Science & Technology Fund Vanguard Long-Term
Social Awareness Fund Putnam Investments: Corporate Fund
Stock Index Fund Putnam Global Growth Fund -- Class Vanguard Long-Term
A Shares Treasury Fund
American Century Investment Putnam New Opportunities Fund -- Vanguard Wellington Fund
Management, Inc.: Class A Shares Vanguard Windsor II Fund
American Century Ultra Fund Putnam OTC & Emerging Growth
Fund -- Class A Shares
Scudder Kemper Investments, Inc.:
Scudder Growth and Income Fund
</TABLE>
* Each of these mutual funds is publicly available except for the six AGSPC
Funds.
- --------------------------------------------------------------------------------
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 affiliates.
This prospectus provides you with information you should know before investing
in Portfolio Director 2. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1999, contains additional
information about Portfolio Director 2 and is part of this prospectus. For a
free copy, complete and return the form contained in the back of this prospectus
or call 1-800-44-VALIC. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 341
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS........................... 1
FEE TABLE...................................... 2
SUMMARY........................................ 5
SELECTED PURCHASE UNIT DATA.................... 8
GENERAL INFORMATION............................ 10
About Portfolio Director 2................ 10
About VALIC............................... 10
About VALIC Separate Account A............ 10
Units of Interests........................ 11
Distribution of the Contracts............. 11
VARIABLE ACCOUNT OPTIONS....................... 12
Summary of Funds.......................... 12
PURCHASE PERIOD................................ 23
Purchase Payments......................... 23
Purchase Units............................ 23
Calculation of Purchase Unit Value........ 23
Choosing Investment Options............... 24
Fixed Account Options................ 24
Variable Account Options............. 24
Stopping Purchase Payments................ 24
TRANSFERS BETWEEN INVESTMENT OPTIONS........... 25
During the Purchase Period................ 25
During the Payout Period.................. 25
Communicating Transfer or Reallocation
Instructions............................ 25
Effective Date of Transfer................ 25
FEES AND CHARGES............................... 26
Account Maintenance Fee................... 26
Surrender Charge.......................... 26
Amount of Surrender Charge........... 26
10% Free Withdrawal.................. 26
Exceptions to Surrender Charge....... 26
Premium Tax Charge........................ 27
Separate Account Charges.................. 27
Fund Annual Expense Charges............... 27
Other Tax Charges......................... 27
Reduction or Waiver of Account Maintenance
Fee, Surrender, Mortality and Expense
Risk Fee or Administration and
Distribution Fee Charges................ 28
Separate Account Expense Reimbursement.... 28
PAYOUT PERIOD.................................. 29
Fixed Payout.............................. 29
Variable Payout........................... 29
Combination Fixed and Variable Payout..... 29
Payout Date............................... 29
Payout Options............................ 29
Enhancements to Payout Options............ 30
Payout Information........................ 30
SURRENDER OF ACCOUNT VALUE..................... 31
When Surrenders Are Allowed............... 31
Amount That May Be Surrendered............ 31
Surrender Restrictions.................... 31
Partial Surrenders........................ 31
Systematic Withdrawals.................... 31
Distributions Required by Federal Tax
Law..................................... 32
EXCHANGE PRIVILEGE............................. 33
Restrictions on Exchange Privilege........ 33
Taxes and Conversion Costs................ 33
Surrender Charges......................... 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director and Portfolio
Director 2.............................. 33
Exchange Offer for Portfolio Director and
Portfolio Director 2.................... 34
Comparison of Contracts................... 34
Features of Portfolio Director 2.......... 34
Agents' and Managers' Retirement Plan
Exchange Offer.......................... 34
DEATH BENEFITS................................. 36
Beneficiary Information................... 36
Special Information for Individual Non-Tax
Qualified Contracts..................... 36
During the Purchase Period................ 36
Interest Guaranteed Death Benefit.... 36
Standard Death Benefit............... 37
During the Payout Period.................. 37
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS................... 38
Types of Investment Performance
Information Advertised.................. 38
Total Return Performance Information.... 38
Standard Average Annual Total Return.... 38
Nonstandard Average Annual Total
Return.................................. 38
Cumulative Total Return................. 38
Annual Change in Purchase Unit Value.... 38
Cumulative Change in Purchase Unit
Value................................ 39
Total Return Based on Different
Investment Amounts................... 39
An Assumed Account Value of $10,000..... 39
Yield Performance Information............. 39
AGSPC Money Market Division............. 39
Divisions Other Than The AGSPC Money
Market Division...................... 39
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in Purchase
Unit Value Tables....................... 39
OTHER CONTRACT FEATURES........................ 43
Changes That May Not Be Made.............. 43
Change of Beneficiary..................... 43
Contingent Owner.......................... 43
Cancellation -- The 20 Day "Free Look".... 43
We Reserve Certain Rights................. 43
Relationship to Employer's Plan........... 43
VOTING RIGHTS.................................. 44
Who May Give Voting Instructions.......... 44
Determination of Fund Shares Attributable
to Your Account......................... 44
During Purchase Period.................. 44
During Payout Period or after a Death
Benefit Has Been Paid................ 44
How Fund Shares Are Voted................. 44
FEDERAL TAX MATTERS............................ 45
Type of Plans............................. 45
Tax Consequences in General............... 45
Effect of Tax-Deferred Accumulations...... 46
YEAR 2000...................................... 48
Year 2000 Risks........................... 48
</TABLE>
(i)
<PAGE> 342
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 25
Annuitant 36
Assumed Investment Rate 29
Beneficiary 36
Contract Owner 36
Division 38
Fixed Account Options 36
Home Office 25
Mutual Fund or Fund 10
Participant 01
Participant Year 26
Payout Period 25
Payout Unit 29
Purchase Payments 23,38
Purchase Period 25
Purchase Unit 23,24
VALIC Separate Account A 44
Variable Account Options 12,36
</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 2,
and saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in VALIC's
Separate Account A are offered. Portfolio Director 2 will allow you to
accumulate retirement dollars in Fixed Account Options and/or Variable Account
Options. This prospectus describes only the variable aspects of Portfolio
Director 2 except where the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
Portfolio Director 2. 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> 343
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $ 15
</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 Growth Fund 0.25% 0.55% -- 0.80%
AGSPC International Government
Bond Fund 0.25 0.55 -- 0.80
AGSPC Money Market Fund 0.25 0.55 -- 0.80
AGSPC Science & Technology Fund 0.25 0.55 -- 0.80
AGSPC Social Awareness Fund 0.25 0.55 -- 0.80
AGSPC Stock Index Fund 0.25 0.55 -- 0.80
American Century Ultra
Fund(4)(8) 0.25 0.80 (0.21%) 0.84
Founders Growth Fund(4) 0.25 0.80 (0.25) 0.80
Neuberger Berman Guardian Trust
Fund(4)(8) 0.25 0.80 (0.25) 0.80
Putnam Global Growth Fund --
Class A Shares(4) 0.25 0.80 (0.25) 0.80
Putnam New Opportunities
Fund -- Class A Shares(4) 0.25 0.80 (0.25) 0.80
Putnam OTC & Emerging Growth
Fund -- Class A Shares(4) 0.25 0.80 (0.25) 0.80
Scudder Growth and Income
Fund(4) 0.25 0.80 (0.25) 0.80
Templeton Foreign Fund -- Class
A(4)(8) 0.25 0.80 (0.25) 0.80
Vanguard Long-Term Corporate
Fund(5)(8) 0.25 0.80 (0.25) 0.80
Vanguard Long-Term Treasury
Fund(5)(8) 0.25 0.80 (0.25) 0.80
Vanguard Wellington Fund(8) 0.25 0.80 -- 1.05
Vanguard Windsor II Fund(8) 0.25 0.80 -- 1.05
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12b-1 OTHER TOTAL FUND
FUND FEES FEES EXPENSES(6) EXPENSES
---- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AGSPC Growth Fund 0.80% -- 0.04% 0.84%
AGSPC International Government Bond
Fund 0.50 -- 0.05 0.55
AGSPC Money Market Fund 0.50 -- 0.04 0.54
AGSPC Science & Technology Fund 0.90 -- 0.05 0.95
AGSPC Social Awareness Fund 0.50 -- 0.04 0.54
AGSPC Stock Index Fund 0.27 -- 0.04 0.31
American Century Ultra Fund 1.00 -- -- 1.00
Founders Growth Fund 0.67 0.25%(4) 0.16 1.08
Neuberger Berman Guardian Trust
Fund(7) 0.84 -- 0.03 0.87
Putnam Global Growth Fund -- Class A
Shares 0.64 0.25(4) 0.29 1.18
Putnam New Opportunities Fund -- Class
A Shares 0.49 0.25(4) 0.24 0.98
Putnam OTC & Emerging Growth
Fund -- Class A Shares 0.54 0.25(4) 0.21 1.00
Scudder Growth and Income Fund 0.44 -- 0.30 0.74
Templeton Foreign Fund - Class A 0.61 0.25(4) 0.26 1.12
Vanguard Long-Term Corporate Fund 0.03 -- 0.27 0.30
Vanguard Long-Term Treasury Fund 0.01 -- 0.26 0.27
Vanguard Wellington Fund 0.28 -- 0.03 0.31
Vanguard Windsor II Fund 0.38 -- 0.03 0.41
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
2
<PAGE> 344
- --------------------------------------------------------------------------------
(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) The mortality and expense risk fee and administration and distribution fee
reflected in the Fee Table is deducted during the Purchase Period. The
mortality and expense risk fee and administration and distribution fee
deducted during the Payout Period is computed at an annualized rate of 1.00%
to 1.25%, depending upon the Variable Account Option selected.
(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 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 pay administrative, shareholder
service or distribution fees to the Company: American Century (0.21%),
Founders (0.25%), Neuberger Berman (0.25%), Putnam (0.25%), Scudder (0.25%)
and Templeton Foreign Fund -- Class A (0.25%). With respect to American
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 equal to or in
excess of $75 million.
(5) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account 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 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 Inc. ("NB"). NB 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. For the Trust's 1998 fiscal year, NB did not bear any expenses.
(8) The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Neuberger Berman Guardian Trust
was formerly known as the Neuberger&Berman Guardian Trust. The Templeton
Foreign Fund -- Class A was formerly known as the Templeton Foreign
Fund -- Class 1. VALIC Separate Account A purchases shares of the Templeton
Foreign Fund -- Class A at net asset value and without sales charges
generally applicable to Class A shares. The Vanguard Long-Term Corporate
Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio and the Vanguard Long-Term Treasury
Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury Portfolio. The Vanguard Wellington Fund was
formerly known as the Vanguard/Wellington Fund and the Vanguard Windsor II
Fund was formerly known as the Vanguard/Windsor II Fund.
3
<PAGE> 345
EXAMPLE #1 -- If you do not surrender Portfolio Director 2 at the end of the
period shown or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director 2 Contract without a surrender charge
imposed, invested in a single Separate Account Division as listed below,
assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $17 $53 $ 92 $200
AGSPC International Government Bond Division 13 14 44 77 168
AGSPC Money Market Division 6 14 44 76 167
AGSPC Science & Technology Division 17 18 57 97 212
AGSPC Social Awareness Division 12 14 44 76 167
AGSPC Stock Index Division 10 12 37 64 141
American Century Ultra Division 31 19 59 102 221
Founders Growth Division 30 20 61 104 226
Neuberger Berman Guardian Trust Division 29 17 54 93 203
Putnam Global Growth -- Class A Shares Division
28 21 64 109 236
Putnam New Opportunities -- Class A Shares
Division 26 19 58 99 215
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 19 58 100 217
Scudder Growth and Income Division 21 16 50 87 189
Templeton Foreign -- Class A Division 32 20 62 106 230
Vanguard Long-Term Corporate Division 22 12 37 64 141
Vanguard Long-Term Treasury Division 23 11 36 62 137
Vanguard Wellington Division 25 14 45 77 169
Vanguard Windsor II Division 24 15 48 82 180
</TABLE>
EXAMPLE #2 -- If you surrender Portfolio Director 2 at the end of the period
shown:
- --------------------------------------------------------------------------------
Total Expenses: You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director 2 Contract invested in a single Separate
Account Division as listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $64 $103 $142 $200
AGSPC International Government Bond Division 13 61 94 127 168
AGSPC Money Market Division 6 61 94 126 167
AGSPC Science & Technology Division 17 65 106 147 212
AGSPC Social Awareness Division 12 61 94 126 167
AGSPC Stock Index Division 10 59 87 114 141
American Century Ultra Division 31 66 109 152 221
Founders Growth Division 30 66 110 154 226
Neuberger Berman Guardian Trust Division 29 64 104 143 203
Putnam Global Growth -- Class A Shares Division 28 67 113 159 236
Putnam New Opportunities -- Class A Shares Division
26 65 107 149 215
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 65 108 150 217
Scudder Growth and Income Division 21 63 100 137 189
Templeton Foreign -- Class A Division 32 66 111 156 230
Vanguard Long-Term Corporate Division 22 59 87 114 141
Vanguard Long-Term Treasury Portfolio Division 23 58 86 112 137
Vanguard Wellington Division 25 61 95 127 169
Vanguard Windsor II Division 24 62 98 132 180
</TABLE>
- ------------
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.
4
<PAGE> 346
SUMMARY
- --------------------------------------------------------------------------------
Portfolio Director 2 is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director 2's major features is presented below. For a more detailed
discussion of Portfolio Director 2, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director 2 offers you a choice from among 18 Variable Account Options
and two Fixed Account Options. There may be certain limits on how many
investment options you may invest to at any one time.
- --------------------------------------------------------------------------------
<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 SUBADVISER
- --------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Growth through investments tracking VALIC Bankers Trust
EQUITY Index the S&P 500(R) Index Company(1)
FUND Fund
- --------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
------------------------------------------------------------------------------------------------------------
EQUITY American Century Capital growth through American Century N/A
FUNDS Ultra Fund investments in common Investment
stock Management, Inc.
------------------------------------------------------------------------------------------------------------
Founders Long-term growth of capital through Founders Asset N/A
Growth investment in common stocks of well Management
Fund established, high-quality growth
companies
------------------------------------------------------------------------------------------------------------
Neuberger Berman Capital appreciation, and secondarily Neuberger Berman Neuberger
Guardian Trust current income by investing primarily Management Inc. Berman, LLC
in common stocks of large-capitalization
companies
------------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a globally Putnam Investment N/A
Growth Fund -- Class A diversified portfolio of common stocks Management Inc.
Shares
------------------------------------------------------------------------------------------------------------
Putnam New Long-term capital appreciation Putnam Investment N/A
Opportunities through investment in common stock Management Inc.
Fund -- Class A Shares
------------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment N/A
Emerging Growth investments in common stocks of Management Inc.
Fund -- Class A Shares 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; invests Templeton Global N/A
Foreign primarily in equity securities Advisors Limited
Fund -- Class A of companies outside the U.S.,
including emerging markets
------------------------------------------------------------------------------------------------------------
Vanguard Growth and income through Vanguard N/A
Windsor II Fund investment in common stock
- --------------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard Income and growth through 30 to 40% Vanguard N/A
FUND Wellington investment in high quality corporate
Fund bonds and 60 to 70% investment
in common stocks
- --------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Income and possible growth through VALIC N/A
FUNDS Government investments in high quality foreign
Bond Fund government debt securities
------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Corporate Fund long-term high quality corporate bonds
------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Treasury Fund long-term U.S. Treasury bonds
- --------------------------------------------------------------------------------------------------------------------------------
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998,
Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. The merger is contingent upon various regulatory approvals. On April 20, 1999,
the AGSPC Fund's Board of Directors approved a new investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval. If the merger is approved and completed, Deutsche Bank AG, as the Sub-Adviser's new parent company,
will control the operations of the Sub-Adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
</TABLE>
5
<PAGE> 347
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER SUBADVISER
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUND Fund securities
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 348
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual Fund can be
found in the section of the prospectus entitled "Variable Account Options," and
also in the current prospectus for each Fund mentioned.
INTEREST GUARANTEED DEATH
BENEFIT
Portfolio Director 2 offers a death benefit with an interest guarantee when
death occurs prior to your reaching age 70.
This contract provision is not available in some states.
LOANS
Portfolio Director 2 offers a tax-free loan provision for tax-qualified
contracts that gives you access to your money in either of the Fixed Account
Options, subject to a minimum loan amount of $1,000. The availability of loans
is subject to government regulations, as well as your employer's plan
provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans which
are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among Portfolio
Director 2's investment options. You may transfer your Account Values between
Variable Account Options at any time during the Purchase Period.
Your Account Value in the Short-Term Fixed Account must remain there for at
least 90 days before it can be transferred to other investment options. In Fixed
Account Plus, up to 20% of your Account Value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among Variable Account Options once each contract
year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Between Investment Options" section in the prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE
If any of your account is invested in Variable Account Options, a quarterly
account maintenance fee of $3.75 is charged to your account. If you invest only
in Fixed Account Options during a calendar quarter no account maintenance fee is
assessed. 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 1/2% 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 0.80% to 1.05% during the purchase period and 1.00%
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
Mutual Fund or its affiliate or distributor for providing the Mutual Fund
administrative and shareholder services. In addition, the Company currently
reimburses to 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 2 can be
purchased with after-tax dollars, they are primarily used in connection with
retirement programs which receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
Purchase Payments may be made at any time and in any amount, subject to plan
limitations.
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.
7
<PAGE> 349
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL AGSPC AGSPC AGSPC AMERICAN
AGSPC GOVERNMENT MONEY SCIENCE & SOCIAL AGSPC CENTURY
GROWTH BOND MARKET TECHNOLOGY AWARENESS STOCK INDEX ULTRA
DIVISION 15 DIVISION 13 DIVISION 6 DIVISION 17 DIVISION 12 DIVISION 10(1) DIVISION 31
----------- ------------- ---------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 4,324,799 408,156 5,325,479 3,228,389 1,218,871 6,859,835 8,116,612
Purchase Unit Value $ 2.448443 $1.751922 $ 1.786658 $ 3.241847 $ 3.825649 $ 4.875028 $ 1.737734
January 2, 1998
Purchase Unit Value(2) $ 2.089333 $1.508273 $ 1.712478 $ 2.299405 $ 3.029567 $ 3.826834 $ 1.302531
<CAPTION>
NEUBERGER
BERMAN
FOUNDERS GUARDIAN
GROWTH TRUST
DIVISION 30 DIVISION 29
----------- -----------
<S> <C> <C>
December 31, 1998
Purchase Units in Force 7,720,189 1,012,671
Purchase Unit Value $ 1.633282 $ 1.368269
January 2, 1998
Purchase Unit Value(2) $ 1.317029 $ 1.347434
</TABLE>
- ------------
(1) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(2) Purchase Unit Value At Date Of Inception.
8
<PAGE> 350
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM OTC & SCUDDER
GLOBAL PUTNAM NEW EMERGING GROWTH TEMPLETON VANGUARD VANGUARD
GROWTH -- OPPORTUNITIES -- GROWTH -- AND FOREIGN -- LONG-TERM LONG-TERM VANGUARD VANGUARD
CLASS A CLASS A CLASS A INCOME CLASS A CORPORATE TREASURY WELLINGTON WINDSOR II
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 32 DIVISION 22 DIVISION 23 DIVISION 25 DIVISION 24
- ----------- ---------------- ----------- ----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6,153,771 10,725,927 3,092,839 4,494,004 5,437,288 2,949,044 3,682,809 19,636,072 13,800,156
$ 1.549587 $ 1.434946 $ 1.098295 $ 1.542160 $ 1.094954 $ 1.312731 $ 1.349397 $ 1.529797 $ 1.723020
$ 1.213127 $ 1.163156 $ 0.997579 $ 1.465844 $ 1.160235 $ 1.212562 $ 1.204344 $ 1.379756 $ 1.496544
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
Contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
9
<PAGE> 351
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR 2
Portfolio Director 2 was developed to help you save money for your retirement.
It offers you a combination of fixed and variable investment options that you
can invest in to help you reach your retirement savings goals. Your
contributions to Portfolio Director 2 can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director 2 will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
2 called "Purchase Payments." The second, is when you receive your retirement
payouts. For more information, see "Purchase Period" and the "Payout Period" in
this prospectus.
You may choose, depending upon your retirement savings goals, your personal risk
tolerances, and your retirement plan, to invest in the Fixed Account Options
and/or the Variable Account Options described in this prospectus. When you
decide to retire, or otherwise withdraw your money, you can select from a wide
array of payout options including both fixed and variable payments. In addition,
this prospectus will describe for you all fees and charges that may apply to
your participation in Portfolio Director 2.
ABOUT VALIC
We were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director 2. Our principal offices are located
at 2929 Allen Parkway, Houston, Texas 77019. We have Regional Offices throughout
the United States. The addresses for these offices are given in the back of this
prospectus.
VALIC is a member of the American General Corporation group of companies.
Members of the American General Corporation group of companies operate in each
of the 50 states, the District of Columbia, and Canada and collectively provide
financial services with activities heavily weighted toward insurance.
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 affiliates.
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director 2's Variable Account Options, you
will be sending that money through VALIC's Separate Account A. You do not invest
directly in the Mutual Funds made available in Portfolio Director 2. VALIC's
Separate Account A invests in the Mutual Funds on behalf of your account.
VALIC Separate Account A is made up of what we call "Divisions." Eighteen
Divisions are available and represent the Variable Account Options in Portfolio
Director 2. Each of these Divisions invests in a different Mutual Fund made
available through Portfolio Director 2. For example, Division Ten represents and
invests in the Stock Index Fund. The earnings (or losses) of each Division are
credited to (or charged against) the assets of that Division, and do not affect
the performance of the other Divisions of VALIC Separate Account A.
VALIC established Separate Account A on July 25, 1979 under Texas insurance law
to allow you to be able to invest in a number of Variable Account Options
available in Portfolio Director 2. VALIC Separate Account A is registered with
the Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940 ("Act"). Units of interest in VALIC Separate
Account A are registered as securities under the Securities Act of 1933.
VALIC Separate Account A is administered and accounted for as part of VALIC's
business operations. However, the income, capital gains or capital losses,
whether or not realized of each Division of VALIC Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of Portfolio Director 2, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director 2, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director 2 be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director 2. When we discuss performance information in this prospectus, we mean
the performance of a VALIC Separate Account A Division.
All inquiries regarding
PORTFOLIO DIRECTOR 2
may be directed to your
VALIC Regional Office at
the addresses shown in the
back of this prospectus.
MUTUAL FUND OR FUND --
the investment portfolio(s)
of a registered open-end
management investment
company, which serves as
the underlying investment
vehicle for each Division
represented in VALIC
Separate Account A.
For more information about
VALIC, see the Statement of
Additional Information
10
<PAGE> 352
GENERAL INFORMATION -- (CONTINUED)
- --------------------------------------------------------------------------------
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.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors -- our
address is 2929 Allen Parkway,
Houston, Texas 77019.
For more information
about A.G. DISTRIBUTORS,
see the Statement of
Additional Information
11
<PAGE> 353
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director 2 enables you to participate in Divisions that represent
eighteen Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available to you through VALIC Separate Account A.
According to your retirement program, you may not be able to invest in all
eighteen 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 2 and include:
- - American General Series Portfolio
Company (AGSPC) -- offers 6 funds, for which VALIC serves as investment
adviser, for 2 of such funds, T. Rowe Price & Associates, Inc. serves as
investment sub-adviser and for 1 of such funds, Bankers Trust Company serves
as investment sub-adviser.
- - American Century Mutual Funds, Inc. -- offers 1 fund for which American
Century Investment Management, Inc. 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.
- - Templeton Funds Inc. -- offers 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - The Vanguard Group Inc. -- offers 4 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.
Twelve 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 Act. 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 as well as the Standard Average Annual Total Return for a 1, 3, 5 and 10
year period, if available. If Standard Average Annual Return for a Division is
not available for a stated period, we may show the Standard Average Annual
Return since Division inception. The performance information in the tables and
graphs 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. They will not reflect any deduction
for account maintenance fees, surrender charges and premium taxes. These charges
would further reduce your return. The Account Values in the graphs shown 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 Funds
actual historical performance of the related Separate Account Divisions. The
returns shown in the tables for the other 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. 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.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical periods shown below. The results shown are after
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond
to Separate Account
Divisions offered by
Portfolio Director 2.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
12
<PAGE> 354
- --------------------------------------------------------------------------------
all charges and fees have been applied against the Division. This will include
account maintenance fees and surrender charges that would have been deducted if
you surrendered Portfolio Director 2 at the end of the specified period. Premium
taxes are not deducted. This information is calculated for each Division based
on how an initial investment of $1,000 performed at the end of the specified
periods shown.
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.
13
<PAGE> 355
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
12/31/94 10,032
12/31/95 14,706
12/31/96 17,410
12/31/97 20,893
12/31/98 24,484
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
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
12/31/91 10,909
12/31/92 11,154
12/31/93 12,635
12/31/94 13,092
12/31/95 15,427
12/31/96 15,976
12/31/97 15,083
12/31/98 17,519
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 12.12%, 17.24% and
20.51%, respectively. The Division commenced operations on April 29, 1994.
** The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 11.09%, 2.70%, 5.89% and 7.96%, respectively. The Division
commenced operations on October 1, 1991.
14
<PAGE> 356
AGSPC
MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,812
12/31/90 11,573
12/31/91 12,116
12/31/92 12,409
12/31/93 12,641
12/31/94 13,016
12/31/95 13,629
12/31/96 14,198
12/31/97 14,812
12/31/98 15,454
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,489
12/31/95 20,016
12/31/96 22,596
12/31/97 22,994
12/31/98 32,418
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.42%), 2.65%, 3.15% and
4.37%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 35.91%,
16.13% and 28.12%, respectively. The Division commenced operations on April
29, 1994.
15
<PAGE> 357
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
12/31/89 10,105
12/31/90 9,902
12/31/91 12,558
12/31/92 12,873
12/31/93 13,779
12/31/94 13,473
12/31/95 18,563
12/31/96 22,824
12/31/97 30,296
12/31/98 38,256
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,809
12/31/90 12,216
12/31/91 15,626
12/31/92 16,530
12/31/93 18,015
12/31/94 17,996
12/31/95 24,502
12/31/96 29,826
12/31/97 39,364
12/31/98 50,146
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception period was
21.21%, 26.13%, 22.12% and 15.52%, respectively. The Division commenced
operations on October 2, 1989.
** The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.32%, 25.83%, 22.18%
and 17.41%, respectively. The Division commenced operations on April 20,
1987.
*** "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability
of investing in this Fund.
16
<PAGE> 358
AMERICAN 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 13,570
12/31/90 14,713
12/31/91 27,171
12/31/92 27,281
12/31/93 32,940
12/31/94 31,481
12/31/95 42,951
12/31/96 48,377
12/31/97 58,995
12/31/98 78,707
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 14,055
12/31/90 12,469
12/31/91 18,223
12/31/92 18,846
12/31/93 23,465
12/31/94 22,504
12/31/95 32,489
12/31/96 37,543
12/31/97 47,101
12/31/98 58,411
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The American Century Ultra Fund was formerly known as the American
Century-Twentieth Century Ultra Fund. The Standard Average Annual Total
Return for the American Century Ultra Division 31 for the 1 year and since
inception was 28.34% and 21.90%, respectively. The Division commenced
operations on July 1, 1996.
** The Standard Average Annual Total Return for the Founders Growth Fund
Division 30 for the 1 year period and since inception was 18.94% and 19.18%,
respectively. The Division commenced operations on July 1, 1996.
17
<PAGE> 359
NEUBERGER BERMAN
GUARDIAN TRUST*
(Division 29)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation and, secondarily, current income. The Trust invests
primarily in common stocks of large-capitalization companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 3, 1993 $ Value
- ------------------------- -------
<S> <C>
08/03/93 $10,000
12/31/93 10,699
12/31/94 10,777
12/31/95 14,106
12/31/96 16,468
12/31/97 19,245
12/31/98 19,542
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 3, 1993
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,353
12/31/90 11,131
12/31/91 13,025
12/31/92 12,953
12/31/93 16,937
12/31/94 16,661
12/31/95 18,975
12/31/96 21,929
12/31/97 24,650
12/31/98 31,487
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Neuberger Berman Guardian Trust was formerly known as Neuberger&Berman
Guardian Trust. The Standard Average Annual Total Return for the Neuberger
Berman Guardian Trust Division 29 for the 1 year period and since inception
was (3.08)% and 10.34%, respectively. The Division commenced operations on
July 1, 1996.
** The Standard Average Annual Total Return for the Putnam Global Growth
Fund -- Class A Division 28 for the 1 year period and since inception was
22.66% and 16.58%, respectively. The Division commenced operations on July 1,
1996.
18
<PAGE> 360
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
12/31/90 11,047
12/31/91 18,348
12/31/92 22,857
12/31/93 30,079
12/31/94 30,832
12/31/95 44,723
12/31/96 49,152
12/31/97 59,726
12/31/98 73,682
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,790
12/31/90 11,445
12/31/91 15,984
12/31/92 17,866
12/31/93 23,398
12/31/94 23,735
12/31/95 36,699
12/31/96 38,068
12/31/97 41,604
12/31/98 45,805
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Putnam New Opportunities
Fund -- Class A Division 26 for the 1 year period and since inception was
18.30% and 13.41%, respectively. The Division commenced operations on July 1,
1996.
** The Standard Average Annual Total Return for the Putnam OTC & Emerging Growth
Fund -- Class A Division 27 for the 1 year period and since inception was
5.08% and 1.11%, respectively. The Division commenced operations on July 1,
1996.
19
<PAGE> 361
SCUDDER GROWTH AND
INCOME FUND*
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,499
12/31/90 12,083
12/31/91 15,319
12/31/92 16,605
12/31/93 18,991
12/31/94 19,282
12/31/95 25,018
12/31/96 30,227
12/31/97 38,989
12/31/98 41,018
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON FOREIGN FUND**
Class A Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund tries to achieve its investment goal by
a flexible policy of investing primarily in the equity securities of companies
outside the United States, including emerging markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,945
12/31/90 12,458
12/31/91 14,615
12/31/92 14,514
12/31/93 19,691
12/31/94 19,605
12/31/95 21,619
12/31/96 25,282
12/31/97 26,740
12/31/98 25,236
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.42% and
16.40%, respectively. The Division commenced operations on July 1, 1996.
** The Templeton Foreign Fund Class A Shares was formerly known as the Templeton
Foreign Fund Class 1 Shares. The Standard Average Annual Total Return for the
Templeton Foreign Fund -- Class A Division 32 for the 1 year period and since
inception was (9.92)% and 0.98%, respectively. The Division commenced
operations on July 1, 1996. On January 1, 1993, the Templeton Foreign
Fund -- Class A implemented a Rule 12b-1 plan, which affects subsequent
performance.
20
<PAGE> 362
VANGUARD LONG-TERM
CORPORATE FUND*
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,395
12/31/90 11,976
12/31/91 14,325
12/31/92 15,560
12/31/93 17,626
12/31/94 16,522
12/31/95 20,658
12/31/96 20,550
12/31/97 23,122
12/31/98 25,033
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
TREASURY FUND**
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,668
12/31/90 12,214
12/31/91 14,190
12/31/92 15,080
12/31/93 17,425
12/31/94 16,034
12/31/95 20,635
12/31/96 20,040
12/31/97 22,574
12/31/98 25,293
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund -- Long-Term Corporate Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.33% and 8.46%,
respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Treasury Fund Division
23 for the 1 year period and since inception was 6.98% and 10.11%,
respectively. The Division commenced operations on July 1, 1996.
21
<PAGE> 363
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,030
12/31/90 11,573
12/31/91 14,156
12/31/92 15,116
12/31/93 16,978
12/31/94 16,721
12/31/95 21,984
12/31/96 25,256
12/31/97 30,775
12/31/98 34,122
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD WINDSOR II FUND**
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,644
12/31/90 11,267
12/31/91 14,343
12/31/92 15,893
12/31/93 17,863
12/31/94 17,473
12/31/95 23,993
12/31/96 29,452
12/31/97 38,551
12/31/98 44,385
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund. The Standard Average Annual Total Return for the Vanguard Wellington
Fund Division 25 for the 1 year period and since inception was 5.83% and
15.60%, respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund. The Standard Average Annual Total Return for Vanguard Windsor II Fund
Division 24 for the 1 year period and since inception was 10.07% and 21.81%,
respectively. The Division commenced operations on July 1, 1996.
22
<PAGE> 364
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director 2 account is surrendered before the Payout Period. The
amount, number, and frequency of your Purchase Payments is determined by the
retirement plan for which Portfolio Director 2 was purchased.
PURCHASE PAYMENTS
You may establish an account only through a VALIC representative. Initial
Purchase Payments must be received by VALIC either with, or after, a completed
application. Your employer is usually responsible for remitting Purchase
Payments to us. The employer is responsible for furnishing instructions to us (a
premium flow report) as to the amount being applied to your account.
Minimum initial and subsequent Purchase Payments are as follows:
<TABLE>
<CAPTION>
Initial Subsequent
Contract Type Payment Payment
- ----------------------- ------- ----------
<S> <C> <C>
Periodic Payment $ 30 $ 30
Single Payment $1,000 -0-
</TABLE>
Periodic Payment minimums apply to each Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided unless you otherwise so specify.
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 these circumstances, we will take one of the
following actions:
Return Purchase Payments. If we do not have your name, address or social
security number, we will return the Purchase Payment to your employer unless
this information is immediately provided to us.
Employer-Directed Account. If we have your name, address and social security
number and we have an Employer-Directed Account Agreement from your employer,
generally we will deposit your Purchase Payment in an "Employer-Directed"
account invested in our Money Market Division Option. You may not transfer
these amounts until VALIC has received a completed application or enrollment
form.
Starter Account. If we have your name, address and social security number, but
we do not have an Employer-Directed Account Agreement from your employer, we
will deposit your Purchase Payment in a "starter" account invested in the
Money Market Division. We will send you follow-up letters requesting the
information necessary to complete the application, including your allocation
instructions. Unless a completed application or enrollment form is received by
us within 105 days of establishment of your starter account, the account
balance, including earnings, will be returned to your employer. We are not
responsible for any adverse tax consequences to you that may result from the
return of your employer's contributions.
PURCHASE UNITS
A Purchase Unit is a unit of interest owned by you in your Variable Account
Option. Purchase Units apply only to the Variable Account Options selected for
your account. Purchase Unit values are calculated at the close of regular
trading of the New York Stock Exchange (the "Exchange"), currently 4:00 p.m. New
York time (see Calculation of Purchase Unit Value below for more information.)
Purchase Units will be credited the same business day if Purchase Payments are
received by our Home Office before the close of the Exchange. If not, they will
be calculated and credited the next business day. Purchase Unit values will vary
depending on the net investment results of each of the Variable Account Options.
This means the value of your Variable Account Option will fluctuate.
CALCULATION OF PURCHASE UNIT VALUE
The Purchase Unit value for a Division is calculated as shown below:
Step 1: Calculate the gross investment rate:
Gross Investment Rate
= (EQUALS)
The Division's investment income and capital gains and losses (whether
realized or unrealized) on that day from the assets attributable to the
Division.
/ (DIVIDED BY)
The value of the Division for the immediately preceding day on which the
values are calculated.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director 2.
PURCHASE UNIT -- a
measuring unit used to
calculate your Account Value
The value of a Purchase Unit
will vary with the investment
experience of the Separate
Account Division you have
selected.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
23
<PAGE> 365
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the Exchange is open.
Step 2: Calculate net investment rate for any day as follows:
Net Investment Rate
= (EQUALS)
Gross Investment Rate (calculated in Step 1)
- - (MINUS)
Separate Account charges and any income tax charges.
Step 3: Determine Purchase Unit Value for that day.
Purchase Unit Value for that day.
= (EQUALS)
Purchase Unit Value for immediate preceding day.
X (MULTIPLIED BY)
Net Investment Rate (as calculated in Step 2) plus 1.00.
Choosing Investment Options
There are 20 investment options offered in Portfolio Director 2. This includes 2
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 20 options. The Funds that underlie the
Variable Account Options are registered as investment companies under and are
subject to regulation of the 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 "Summary" 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 2 account has been surrendered. 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. Any
such account closure will be subject to applicable distribution restrictions
under the Contract and/or under your employer's plan.
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.
24
<PAGE> 366
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director 2 without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director 2's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ----------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer
was previously
made
into Short-Term
Fixed
Account.(2)
</TABLE>
- ---------------
(1) Your employer may further limit or expand the restrictions. We may charge
for those modified restrictions if specified in your employer's retirement
plan.
(2) VALIC may change this holding period at any time in the future, but it will
never be more than 180 days.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between Portfolio Director 2's
investment options subject to the following limitations:
<TABLE>
<CAPTION>
% OF ACCOUNT
---------------------------------- OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- ---------------- ------------- ------------------- ------------
<S> <C> <C> <C>
Variable: Up to 100% Once every 365 days None
Combination
Fixed
and Variable Up to 100% Once every 365 days None
Payout: of money in
variable
option payout
Fixed: Not permitted -- --
</TABLE>
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 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.
25
<PAGE> 367
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director 2, you may be subject to six basic types of
fees and charges:
- - Account Maintenance Fee
- - Surrender 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 2 is issued to certain types of plans which are expected to result in
lower costs to VALIC. To learn more about how we determine if account
maintenance fees may be reduced or waived, see the "Reduction or Waiver of
Account Maintenance Fee, 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 that will be deducted from the amount withdrawn. 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.
26
<PAGE> 368
- --------------------------------------------------------------------------------
- - 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 2 is issued
to certain types of plans which are expected to result in lower costs to VALIC.
To learn more about how we determine if 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 1/2%.
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 0.80% to 1.05% during the Purchase Period and
1.00% 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. The mortality risk that
the Company assumes is the obligation to provide payments during the Payout
Period for your life no matter how long that might be. In addition, the Company
assumes the obligation to pay during the Purchase Period an interest guaranteed
death benefit. For more information about the interest guaranteed death benefit
see the "Death Benefit" section of this prospectus. The expense risk is our
obligation to cover the cost of issuing and administering Portfolio Director 2,
no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk 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.
27
<PAGE> 369
- --------------------------------------------------------------------------------
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 2 may be reduced or waived. We may
reduce or waive these fees and charges if we determine that your retirement
program will allow us to reduce or eliminate administrative or sales expenses
that we usually incur for retirement programs. There are a number of factors we
will review in determining whether your retirement program will allow us to
reduce or eliminate these administrative or sales expenses:
- 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 to 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 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.
28
<PAGE> 370
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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
Up to seven Variable Account Options may be chosen, or up to six Variable
Account Options if the Fixed Payout is chosen.
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).
29
<PAGE> 371
- --------------------------------------------------------------------------------
- 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, in the form of an
excise tax, if you do not meet an exception under 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,
- 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, and
- 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, subject to any limitations under the
contract or plan.
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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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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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 2. There will be no surrender charge for withdrawals using this method,
which provides for:
- Payments to be made to you;
- Payment over a stated period of time (but not less than five years);
- Payment of a stated yearly dollar amount or percentage (the amount or
percentage may not exceed 20% of your Account Value at the time election is
made).
We may require a minimum withdrawal amount under this method. The portion of
your account that has not been withdrawn will continue to receive the investment
return of the Variable Account Options which you selected. A systematic
withdrawal election may not be changed but can be revoked at no charge. Once
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<PAGE> 373
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revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW. There will be no surrender charge on
a minimum distribution required by federal tax law (known as No Charge Minimum
Distribution), if the withdrawal:
- Is made payable to you; and
- Does not exceed the amount required under federal tax law as determined by
the values in your Portfolio Director 2 Contract and VALIC.
This contract feature will not be available in any year that an amount has been
withdrawn under the no charge systematic withdrawal method. See "Federal Tax
Matters" in this prospectus and in the Statement of Additional Information for
more information about required distributions imposed by tax law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus and in the Statement of Additional
Information.
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<PAGE> 374
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director 2. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director 2. This exchange privilege will be available
only to other contracts 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. An exchange may require the issuance of a Contract or may be subject
to any other requirements that the Company may impose.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges.
- Partial exchanges are not permitted.
- Exchanges from Portfolio Director 2 to contract forms other than Portfolio
Director Plus 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 2. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director 2. For example, you
will be subject to the rules concerning transfers among investment options as
stated in the Transfers Between Investment Options section in this prospectus.
We may, at our option, waive any transfer restrictions for a stated period of
time. If we waive these transfer restrictions, you will be allowed to exchange
to any investment option available in Portfolio Director 2.
WE RESERVE THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THESE EXCHANGE PRIVILEGES
AT ANY TIME.
TAXES AND CONVERSION COSTS
We will impose no fee or charge for these exchanges. Please read the "Federal
Tax Matters" section in this prospectus for information about the federal income
tax treatment of Portfolio Director 2.
SURRENDER CHARGES
We will generally not impose nor waive existing surrender charges as a result of
your electing to exchange from one of the other contracts.
For purposes of determining surrender charges, we often consider time in the
contract. For SPQ181 and SPQ181-1 Contracts, the contract date for determining
surrender charges under Portfolio Director 2 will be the SPQ181 and SPQ181-1
contract date plus one year. For example, if you have an SPQ181 contract with a
contract date of January 1, 1993, upon exchange into Portfolio Director 2, the
contract date for surrender charges purposes becomes January 1, 1994.
For any other contract, the contract date for determining surrender charges
under Portfolio Director 2 will be the same date as the other contract, but no
earlier than January 1, 1982. (The effect of this is to potentially shorten the
charge period for Purchase Payments subsequently made to Portfolio Director 2.)
If there is no surrender charge on assets within another contract, we will not
impose charges on those assets as a result of an exchange. If surrender charges
are to be based on Purchase Payments within a contract, we will consider
purchase payments in the other contract to have been transferred to Portfolio
Director 2 for purposes of calculating the surrender charge. The effective dates
of these Purchase Payments will also be retained for surrender charge purposes.
The Portfolio Director 2 surrender charge is calculated assuming the most recent
Purchase Payments are removed first. This policy may cause exchanged funds to be
accessible only after charges are imposed.
EXCHANGE OFFERS FOR CONTRACTS OTHER THAN
PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
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<PAGE> 375
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Portfolio Director 2 will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
EXCHANGE OFFER FOR PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
Subject to the restrictions stated below and the general restrictions on
exchange privileges stated above you may exchange from Portfolio Director to
Portfolio Director 2. Additionally, you may also make exchanges among the series
of Portfolio Director 2. Once you have made any of the exchanges described in
this paragraph you must wait 120 days before making another exchange between
Portfolio Director and Portfolio Director 2.
Both Portfolio Director and Portfolio Director 2 are available to qualified
contracts and certain non-qualified contracts. Portfolio Director 2 is not
available to non-qualified contracts issued to individuals. Please read the
"Federal Tax Matters" in this prospectus for information about the federal
income tax treatment of Portfolio Director 2.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director 2. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director 2 is provided in the Statement of Additional Information.
Portfolio Director and Portfolio Director 2 contain the same provisions except
as to the level of fees and as to available Variable Account Options and certain
Separate Account Expense Reimbursements. See "Fees and Changes" in this
prospectus.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
Please refer to the prospectus and Statement of Additional Information for
Portfolio Director and the different series of Portfolio Director 2 for
information about the specific features and charges of such products.
Features of Portfolio Director 2
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director 2.
- Portfolio Director 2 has more investment options to select from.
- Portfolio Director 2 has 12 publicly available mutual funds as investment
options.
- The Portfolio Director 2 surrender charge is calculated assuming the most
recent Purchase Payments are removed first. This policy may cause exchanged
funds to be accessible only after charges are imposed.
- Portfolio Director 2 has an Interest Guaranteed Death Benefit.
- Portfolio Director 2's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Different series of Portfolio Director 2 may charge fees higher or lower
than other series of Portfolio Director 2.
- Portfolio Director 2's guaranteed annuity rates and guaranteed interest
rates may be less favorable than the other contracts.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the Company's Agents' and Managers' Retirement Plan ("Plan"). We
grant to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts, Independence Plus Contracts
and Portfolio Director for the equivalent units of interest in Portfolio
Director 2.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director 2 any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director 2 from SA-1,
Independence Plus or Portfolio Director Contracts may have surrender charges and
account maintenance fees imposed under Portfolio Director 2. All other
provisions with regard to exchange offers referenced in the section entitled
"Exchange Offers" will apply to the Agents' and Managers' Retirement Plan
Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will have
three options to choose from. As to the funding vehicle for
34
<PAGE> 376
- --------------------------------------------------------------------------------
their purchase payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract or Portfolio
Director.
- Leave current assets in the SA-1 Contract, Independence Plus or Portfolio
Director and direct future Purchase Payments to Portfolio Director 2; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director 2.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus Contract or Portfolio Director, future Purchase Payments and current assets
will be controlled by the provisions of the SA-1 Contract, Independence Plus
Contract or Portfolio Director, respectively. If the participant chooses to
leave current assets in the SA-1 Contract, the Independence Plus Contract or
Portfolio Director and direct future Purchase Payments to Portfolio Director 2,
the current assets will be controlled by the provisions of the SA-1 Contract,
the Independence Plus Contract or Portfolio Director, respectively. The future
Purchase Payments will be controlled by the terms of Portfolio Director 2
subject to the exception that surrender charges and account maintenance fees
will not be imposed under Portfolio Director 2. If the participant chooses to
transfer all current assets and future Purchase Payments to Portfolio Director
2, such current assets and future Purchase Payments will be controlled by the
provisions of Portfolio Director 2 subject to the exception that surrender
charges and account maintenance fees will not be imposed under Portfolio
Director 2.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director 2 the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. See "Exchange Offer for Portfolio
Director and Portfolio Director 2" in this prospectus. If a participant chooses
to transfer future Purchase Payments but not current assets to Portfolio
Director 2, the participant will be allowed at a later date to transfer the
current assets to Portfolio Director 2. For a complete analysis of the
differences between the SA-1 contract, the Independence Plus Contract or
Portfolio Director and Portfolio Director 2, you should refer to the Statement
of Additional Information and the form of the contract or certificate for its
terms and conditions.
35
<PAGE> 377
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director 2 will pay death benefits during either the Purchase Period
or the Payout Period. How these death benefits will be paid are discussed below.
The death benefit provisions in Portfolio Director 2 may vary from state to
state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law and by the plan, if any.
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 not exceeding the Beneficiary's life
expectancy
If the Annuitant dies before the Annuity Date, the Beneficiary as named by you
may receive the payout.
Payments certain or payments for a designated period cannot be for a greater
period of time than the Beneficiary's life expectancy. After choosing a payment
option, a Beneficiary may exercise many of the investment options and other
rights that the Participant or Contract Owner had under Portfolio Director 2.
SPECIAL INFORMATION FOR INDIVIDUAL
NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Tax
Qualified Contract are not the same person. If this is the case, and the
Contract Owner dies, there will be no death benefit payable since the death
benefit is only due in the event of the Annuitant's death. However, the Contract
will be transferred to the Contingent Owner,
if any, or to the Contract Owner's estate. Such transfers will be considered a
taxable event by the IRS.
DURING THE PURCHASE PERIOD
Two types of benefits are available if death occurs during the Purchase Period.
Interest Guaranteed Death Benefit and Standard Death Benefit.
INTEREST GUARANTEED DEATH BENEFIT
The interest guaranteed death benefit is payable when death occurs prior to your
reaching the age of 70. This contract provision is not available in some states.
The amount payable under the interest guaranteed death benefit will be at least
equal to the sum of your Account Value in the Fixed Account Option(s) and the
Variable Account Option(s) on the date VALIC receives proof of death.
Here is how to calculate the death benefit:
Step 1: Determine your Fixed Account Option Value by taking the greater of:
Value of Fixed Account Option on date
proof of death Is received by VALIC
OR
100% of Purchase Payments placed
in Fixed Account Option
- - (minus)
Amount of all prior withdrawals, charges and
any portion of Account Value applied under
a Payout Option
Step 2: Determine your Variable Account Option Value by taking the greater of:
Value of Variable Account Option on date
proof of death is received by VALIC
OR
100% of Purchase Payments placed in
Variable Account Options
- - (minus)
Prior withdrawals (out of) or transfers
(out of) the Variable Account Option
+ (plus)
Interest at an annual rate of 3%
Step 3: Add step 1 + 2 = Death Benefit
For purposes of this calculation amounts transferred into the Variable Account
Option will be treated as Purchase Payments.
BENEFICIARY -- the person
designated to receive Payout
Payments upon the death of
an Annuitant.
ANNUITANT -- the individual,
(in most cases this person is
you) to whom Payout
Payments will be paid.
CONTRACT OWNER -- either
your employer or organization
in the case of a group
contract or the Annuitant in
the case of an individual
contract. If the contract is an
individual non-qualified type,
this is generally the Annuitant
but is not required to
be. Also, a Contingent
Contract Owner may be designated.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase
Payments and Account Value
may be allocated to fixed
investment options. Currently,
the Fixed Account Options in
Portfolio Director 2 are Fixed
Account Plus and Short-Term
Fixed Account. Each option
of this type is guaranteed to
earn at least a minimum rate
of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond to
VALIC Separate Account A
Divisions offered by Portfolio
Director 2. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
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<PAGE> 378
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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 2 are described in the "Payout Period" section
of this prospectus.
- If the Life Only Option or Joint and Survivor Life Option were chosen, there
will be no death benefit.
- If the Life With Guaranteed Period Option, Joint and Survivor Life with
Guaranteed Periods Option, Life with Cash or Unit Refund Option or Payment
for a Designated Period Option were chosen, and the entire amount guaranteed
has not been paid, the Beneficiary may choose one of the following within 60
days after death benefits are payable:
- Receive the present value of any remaining payments in a lump sum; or
- Receive the remaining payments under the same terms of the guaranteed
period option chosen by the deceased Participant; or
- Receive the present value of any remaining payments applied under the
Payment for a Designated Period Option for a period equal to or shorter
than the period remaining. Spouse beneficiaries may be entitled to more
favorable treatment under federal tax law.
37
<PAGE> 379
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts or to the general public
before Portfolio Director 2 was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
each case, we will use the charges and fees imposed by Portfolio Director 2 in
calculating the Division's investment performance for earlier time frames.
TYPES OF INVESTMENT PERFORMANCE
INFORMATION ADVERTISED
We may advertise the Division's Total Return Performance information and Yield
Performance information.
TOTAL RETURN PERFORMANCE
INFORMATION
Total Return Performance Information is based on the overall dollar or
percentage change in value of an assumed investment in a Division over a given
period of time.
There are seven ways Total Return Performance Information may be advertised:
- Standard Average Annual Total Return
- Nonstandard Average Annual Total Return
- Cumulative Total Return
- Annual Change in Purchase Unit Value
- Cumulative Change in Purchase Unit Value
- Total Return Based on Different Investment Amounts
- An Assumed Account Value of $10,000
Each of these is described below.
STANDARD AVERAGE ANNUAL TOTAL RETURN
Standard Average Annual Total Return shows the average percentage change in the
value of an investment in the Division from the beginning to the end of a given
historical period. The results shown are after all charges and fees have been
applied against the Division. This will include account maintenance fees and
surrender charges that would have been deducted if you surrendered Portfolio
Director 2 at the end of each period shown. Premium taxes are not deducted. This
information is calculated for each Division based on how an initial assumed
payment of $1,000 performed at the end of 1, 3, 5 and 10 year periods. If
Standard Average Annual Return for a Division is not available for a stated
period, we may show the Standard Average Annual Return since Division inception.
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. The SEC
staff takes the position that performance information of an underlying Fund
reduced by Account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director 2 will stay
in the Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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 or since inception. 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 period or year;
DIVISIONS -- subaccounts of
VALIC Separate Account A
which represent the Variable
Account Options in Portfolio
Director 2. Each Division
invests in a different mutual
fund, each having its own
investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director 2.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
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<PAGE> 380
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- The difference is divided by the Purchase Unit Value at the start of the
period or 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.
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director 2 charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual 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 DIVISION
We may advertise the AGSPC Money Market Division's Current Yield and Effective
Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market Division over a given 7-day period. The Current Yield does not take
into account surrender charges, account maintenance fees or premium taxes. The
income produced over a 7 day period is then "annualized." This means we are
assuming the amount of income produced during the 7-day period will continue to
be produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The annualized 7-day Current Yield for the last 7
days ended December 31, 1998 was 3.84%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause
the Effective Yield to be higher than the Current Yield. The annualized 7-day
Effective Yield for the last 7 days ended December 31, 1998 was 3.91%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION:
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate Account A
Division is printed in the six tables below.
The information presented does not reflect the advantage under Portfolio
Director 2 of deferring federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments (see "Federal Tax Matters" in the
prospectus and in the Statement of Additional Information.) The information
presented also does not reflect the advantage under Qualified Contracts of
deferring federal income tax on Purchase Payments.
The performance 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 0.80% 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.
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.
39
<PAGE> 381
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth Fund (Division 15)........................ 04/29/94 20.51% -- -- 17.24% 12.12%
AGSPC International Government Bond Fund (Division
13).................................................. 10/01/91 7.96 -- 5.89% 2.70 11.09
AGSPC Money Market Fund (Division 6)................... 01/16/86 -- 4.37% 3.15 2.65 (0.42)
AGSPC Science & Technology Fund (Division 17).......... 04/29/94 28.12 -- -- 16.13 35.91
AGSPC Social Awareness Fund (Division 12).............. 10/02/89 15.52 -- 22.12 26.13 21.21
AGSPC Stock Index Fund (Division 10)................... 04/20/87 -- 17.41 22.18 25.83 22.32
American Century Ultra (Division 31)................... 07/01/96 21.90 -- -- -- 28.34
Founders Growth (Division 30).......................... 07/01/96 19.18 -- -- -- 18.94
Neuberger Berman Guardian Trust (Division 29).......... 07/01/96 10.34 -- -- -- (3.08)
Putnam Global Growth -- Class A (Division 28).......... 07/01/96 16.58 -- -- -- 22.66
Putnam New Opportunities -- Class A (Division 26)...... 07/01/96 13.41 -- -- -- 18.30
Putnam OTC & Emerging Growth -- Class A (Division
27).................................................. 07/01/96 1.11 -- -- -- 5.08
Scudder Growth and Income (Division 21)(1)............. 07/01/96 16.40 -- -- -- 0.42
Templeton Foreign -- Class A (Division 32)............. 07/01/96 0.98 -- -- -- (9.92)
Vanguard Long-Term Corporate (Division 22)**........... 07/01/96 8.46 -- -- -- 3.33
Vanguard Long-Term Treasury (Division 23)**............ 07/01/96 10.11 -- -- -- 6.98
Vanguard Wellington (Division 25)...................... 07/01/96 15.60 -- -- -- 5.83
Vanguard Windsor II (Division 24)...................... 07/01/96 21.81 -- -- -- 10.07
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director 2 from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director 2.
** The performance figures 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) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)................... 11/02/81 -- 22.85% 18.44% 21.16% 28.34%
Founders Growth (Division 30).......................... 01/05/62 -- 19.23 19.43 20.37 18.94
Neuberger Berman Guardian Trust (Division 29).......... 08/03/93 13.10% -- 12.09 10.04 (3.08)
Putnam Global Growth -- Class A (Division 28).......... 09/01/67 -- 12.07 12.50 17.10 22.66
Putnam New Opportunities -- Class A (Division 26)...... 08/31/90 27.03 -- 19.04 16.82 18.30
Putnam OTC & Emerging Growth -- Class A (Division
27).................................................. 11/01/82 -- 16.36 13.70 6.13 5.08
Scudder Growth and Income (Division 21)................ 11/13/84 -- 15.08 16.02 16.62 0.42
Templeton Foreign -- Class A (Division 32)(1).......... 10/05/82 -- 9.62 4.17 3.69 (9.92)
Vanguard Long-Term Corporate (Division 22)**........... 07/09/73 -- 9.52 6.42 5.05 3.33
Vanguard Long-Term Treasury (Division 23)**............ 5/19/86 -- 9.64 6.90 5.47 6.98
Vanguard Wellington (Division 25)...................... 07/01/29 -- 12.97 14.32 14.44 5.83
Vanguard Windsor II (Division 24)...................... 06/24/85 -- 15.99 19.39 21.56 10.07
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects the 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
40
<PAGE> 382
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION FUND INCEPTION TO DECEMBER 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 Growth Fund (Division 15)............................ 04/29/94 21.14% -- -- 18.52% 17.19%
AGSPC International Government Bond Fund
(Division 13)............................................ 10/01/91 8.04 -- 6.75% 4.33 16.15
AGSPC Money Market Fund (Division 6)....................... 01/16/86 -- 4.45% 4.10 4.28 4.33
AGSPC Science & Technology Fund (Division 17).............. 04/29/94 28.64 -- -- 17.44 40.99
AGSPC Social Awareness Fund (Division 12).................. 10/02/89 15.61 -- 22.66 27.26 26.28
AGSPC Stock Index Fund (Division 10)....................... 04/20/87 -- 17.50 22.72 26.96 27.39
American Century Ultra (Division 31)....................... 07/01/96 23.45 -- -- -- 33.41
Founders Growth (Division 30).............................. 07/01/96 20.78 -- -- -- 24.01
Neuberger Berman Guardian Trust (Division 29).............. 07/01/96 12.12 -- -- -- 1.55
Putnam Global Growth -- Class A (Division 28).............. 07/01/96 18.23 -- -- -- 27.73
Putnam New Opportunities -- Class A (Division 26).......... 07/01/96 15.12 -- -- -- 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 07/01/96 3.06 -- -- -- 10.10
Scudder Growth and Income (Division 21).................... 07/01/96 18.05 -- -- -- 5.21
Templeton Foreign -- Class A (Division 32)................. 07/01/96 2.93 -- -- -- (5.63)
Vanguard Long-Term Corporate Portfolio (Division 22)**..... 07/01/96 10.28 -- -- -- 8.26
Vanguard Long-Term Treasury Portfolio (Division 23)**...... 07/01/96 11.90 -- -- -- 12.04
Vanguard Wellington (Division 25).......................... 07/01/96 17.28 -- -- -- 10.87
Vanguard Windsor II (Division 24).......................... 07/01/96 23.37 -- -- -- 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director 2 from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director 2.
** The performance figures 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.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)....................... 11/02/81 -- 22.91% 19.03% 22.37% 33.41%
Founders Growth (Division 30).............................. 01/05/62 -- 19.30 20.01 21.60 24.01
Neuberger Berman Guardian Trust (Division 29).............. 08/03/93 13.18% -- 12.80 11.48 1.55
Putnam Global Growth -- Class A (Division 28).............. 09/01/67 -- 12.15 13.20 18.39 27.73
Putnam New Opportunities -- Class A (Division 26).......... 08/31/90 27.09 -- 19.62 18.11 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 11/01/82 -- 16.44 14.38 7.67 10.10
Scudder Growth and Income (Division 21).................... 11/13/84 -- 15.16 16.65 17.92 5.21
Templeton Foreign -- Class A (Division 32)(1).............. 10/05/82 -- 9.70 5.09 5.29 (5.63)
Vanguard Long-Term Corporate Portfolio (Division 22)**..... 07/09/73 -- 9.61 7.27 6.61 8.26
Vanguard Long-Term Treasury Portfolio (Division 23)**...... 05/19/86 -- 9.72 7.74 7.02 12.04
Vanguard Wellington (Division 25).......................... 07/01/29 -- 13.06 14.98 15.78 10.87
Vanguard Windsor II (Division 24).......................... 06/24/85 -- 16.07 19.97 22.76 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
41
<PAGE> 383
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth Fund (Division 15)............................. 04/29/94 144.84% -- -- 66.49% 17.19%
AGSPC International Government Bond Fund (Division 13)...... 10/01/91 75.19 -- 38.66% 13.56 16.15
AGSPC Money Market Fund (Division 6)........................ 01/16/86 -- 54.54% 22.25 13.39 4.33
AGSPC Science & Technology Fund (Division 17)............... 04/29/94 224.18 -- -- 61.96 40.99
AGSPC Social Awareness Fund (Division 12)................... 10/02/89 282.56 -- 177.64 106.09 26.28
AGSPC Stock Index Fund (Division 10)........................ 04/20/87 -- 401.46 178.36 104.66 27.39
American Century Ultra (Division 31)........................ 07/01/96 69.34 -- -- -- 33.41
Founders Growth (Division 30)............................... 07/01/96 60.33 -- -- -- 24.01
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 33.11 -- -- -- 1.55
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 52.01 -- -- -- 27.73
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 42.20 -- -- -- 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 7.82 -- -- -- 10.10
Scudder Growth and Income (Division 21)..................... 07/01/96 51.42 -- -- -- 5.21
Templeton Foreign -- Class A (Division 32).................. 07/01/96 7.48 -- -- -- (5.63)
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 27.73 -- -- -- 8.26
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 32.45 -- -- -- 12.04
Vanguard Wellington (Division 25)........................... 07/01/96 48.94 -- -- -- 10.87
Vanguard Windsor II (Division 24)........................... 07/01/96 69.05 -- -- -- 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director 2 from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director 2.
** The performance figures 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.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)........................ 11/02/81 -- 687.07% 138.94% 83.25% 33.41%
Founders Growth (Division 30)............................... 01/05/62 -- 484.11 148.93 79.79 24.01
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 95.42% -- 82.65 38.53 1.55
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 214.87 85.91 65.94 27.73
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 636.82 -- 144.96 64.75 23.37
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/07/82 -- 358.05 95.76 24.81 10.10
Scudder Growth and Income (Division 21)..................... 11/13/84 -- 310.18 115.99 63.95 5.21
Templeton Foreign -- Class A (Division 32)(1)............... 10/05/82 -- 152.36 28.16 16.73 (5.63)
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 150.33 42.02 21.18 8.26
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 152.93 45.16 22.57 12.04
Vanguard Wellington (Division 25)........................... 07/01/29 -- 241.22 100.98 55.21 10.87
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 343.85 148.47 85.00 15.13
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
42
<PAGE> 384
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director 2 may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the Act, if registration is no
longer required;
- Stop accepting new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
If the Contract is being offered as a retirement plan through your employer, you
should always refer to the terms and conditions in your employer's plan when
reviewing the description of Portfolio Director 2 in this prospectus.
Plan loans from the Fixed Account Options may be allowed by your employer's
plan. Refer to your plan for a description of charges and other information.
43
<PAGE> 385
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About VALIC Separate Account A" section of this prospectus,
VALIC Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Participant, you may be entitled to give voting instructions to us
as to how VALIC Separate Account A should vote its Fund shares on these matters.
Those persons entitled to give voting instructions will be determined before the
shareholders meeting is held. For more information about these shareholder
meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. This will be true even if your
employer is the Contract Owner. Contract Owners will instruct VALIC Separate
Account A in accordance with these instructions. You will receive proxy material
and a form on which voting instructions may be given before the shareholder
meeting is held.
You will not have the right to give voting instructions if Portfolio Director 2
was issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
DURING PURCHASE PERIOD
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
DURING PAYOUT PERIOD OR AFTER A DEATH
BENEFIT HAS BEEN PAID
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in Portfolio Director 2
may have a number of shareholders including VALIC Separate Account A, VALIC
other affiliated insurance company separate accounts and retirement plans within
the American General group of companies and public shareholders.
VALIC Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the
Participants invested in that Fund entitled to give instructions at that
shareholder meeting. VALIC Separate Account A will vote the shares of the Funds
it holds for which it receives no voting instruction in the same proportion as
the shares for which voting instructions have been received.
VALIC Separate Account A 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.
44
<PAGE> 386
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director 2 provides tax-deferred accumulation over time, but is
subject to federal income and excise taxes, mentioned briefly below. You should
refer to the Statement of Additional Information for further details. Section
references are to the Internal Revenue Code ("Code"). We do not attempt to
describe any potential estate or gift tax, or any applicable state, local or
foreign tax law other than possible premium taxes mentioned under "Premium Tax
Charge." Remember that future legislation could modify the rules discussed
below, and always consult your personal tax adviser regarding how the current
rules apply to your specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or 408(b) IRA, as a Section 408(b)
Individual Retirement Annuity ("IRA"), or is instead a nonqualified Contract.
Portfolio Director 2 is used under the following types of retirement
arrangements:
- Section 403(b) annuities for employees
of public schools and
Section 501(c)(3) tax-exempt
organizations;
- Section 401(a) and 403(a) qualified plans of for-profit employers and other
employers (including self-employed individuals);
- Section 408(b) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs.
- Section 408(p) SIMPLE Retirement
Accounts
The foregoing Contracts are "Qualified Contracts." Certain series of Portfolio
Director 2 may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity ("Roth IRA").
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director 2 is also available through "Non-Qualified
Contracts" to the extent acquired by "Non-Natural Persons." Such Non-Qualified
Contracts generally include unfunded, nonqualified deferred compensation plans
of corporate employers as well as individual annuity contracts issued to
individuals outside of the context of any formal employer or employee retirement
plan or arrangement. Non-Qualified Contracts generally may invest only in mutual
funds which are not available to the general public outside of annuity contracts
or life insurance contracts.
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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
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 or penalty taxes, 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
45
<PAGE> 387
- --------------------------------------------------------------------------------
under all Contracts may be subject to state income tax withholding requirements.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although VALIC can provide no assurance that the IRS will not 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 if
such a challenge were made.
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
how ownership of the Mutual Fund shares might be imputed for federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons will be taxed currently to the owner and such contracts
will not be treated as annuities for federal income tax purposes.
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- Portfolio Director 2 Contract issued to a tax favored retirement program
purchased with pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- Conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[BAR GRAPH]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. The deduction of
fees and charges for both tax-deferred plans is reflected in the chart. Variable
options incur mortality and expense risk fee and administration and distribution
fee charges (0.80% - 1.05% during the purchase period and 1%-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
46
<PAGE> 388
- --------------------------------------------------------------------------------
depending upon the timing of withdrawals. The previous chart represents (without
factoring in fees and charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
federal taxes......... $2,500 $2,500
Current federal income
tax due on Purchase
Payments.............. 0 (700)
Net retirement plan
Purchase Payments..... $2,500 $1,800
</TABLE>
This chart assumes a 28% federal income tax rate. The $700 which is paid toward
current federal income taxes 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.
47
<PAGE> 389
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
48
<PAGE> 390
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49
<PAGE> 391
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>
50
<PAGE> 392
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director
2).
(Please Print or Type)
- --------------------------------------------------------------------------------
Name: G.A. #
---------------------------------- -----------------------------
Address: Policy #
------------------------------- ---------------------------
Social Security Number:
---------------------------
- --------------------------------------------------------------------------------
<PAGE> 393
(This page intentionally left blank)
<PAGE> 394
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............... 15
Exchanges From Independence Plus Contracts...... 15
Exchanges From V-Plan Contracts................. 16
Exchanges From SA-1 and SA-2 Contracts.......... 17
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 Division 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 Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 29
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 30
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 30
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 31
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 32
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 32
Founders Growth Division Thirty Compared to S&P
500 Index..................................... 33
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 33
Putnam Global Growth -- Class A Division
Twenty-eight Compared to MCSI World Index and
S&P 500 Index................................. 34
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 35
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 35
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 36
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 36
Vanguard Long-Term Corporate Division Twenty-two
Compared to Merrill Lynch Corporate Master
Index......................................... 37
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 37
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 38
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 39
Payout Payments..................................... 40
Assumed Investment Rate......................... 40
Amount of Payout Payments....................... 40
Payout Unit Value............................... 40
Illustration of Calculation of Payout Unit
Value......................................... 41
Illustration of Payout Payments................. 41
Distribution of Variable Annuity Contracts.......... 42
Experts............................................. 42
Comments on Financial Statements.................... 43
</TABLE>
<PAGE> 395
(This page intentionally left blank)
<PAGE> 396
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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> 397
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875-20 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 398
[Momento Photo]
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1.40-2.12.40
Prospectus
May 1, 1999
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director 2
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 399
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1.40 TO 2.12.40 May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain series of
Portfolio Director 2 that consist of group and individual variable annuity
contracts (the "Contracts") to Participants in certain employer sponsored
retirement plans. Portfolio Director 2 Series 2.1.40 to 2.12.40 consists of
group variable annuity contracts that are offered by Valic to Participants in
certain employer sponsored retirement plans as well as for certain after-tax
arrangements that are not part of an employer plan. Portfolio Director 2 may be
available to you when you participate in a retirement program that qualifies for
deferral of federal income taxes. Non-qualified contracts are also available for
certain employer plans only.
Portfolio Director 2 permits you to invest in and receive retirement benefits in
up to 2 Fixed Account Options and/or an array of up to 18 Variable Account
Options. 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, life
insurance contracts, or certain employer-sponsored retirement plans will not be
available within your contract. Each of these investment options is explained
more fully in this prospectus. Here is a list of these investment options:
TWO FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
EIGHTEEN VARIABLE ACCOUNT OPTIONS*
<TABLE>
<S> <C> <C>
American General Series Portfolio Founders Funds, Inc.: Scudder Kemper Investments, Inc.:
Company (AGSPC): Founders Growth Fund Scudder Growth and Income Fund
Growth Fund Neuberger Berman Management Inc.: Templeton Funds, Inc.:
International Government Bond Fund Neuberger Berman Guardian Trust Templeton Foreign Fund --
Money Market Fund Class A
Science & Technology Fund Putnam Investments:
Social Awareness Fund Putnam Global Growth Fund -- The Vanguard Group, Inc.:
Stock Index Fund Class A Shares Vanguard Long-Term Corporate
Putnam New Opportunities Fund -- Fund
American Century Investment Class A Shares Vanguard Long-Term Treasury Fund
Management, Inc.: Putnam OTC & Emerging Growth Vanguard Wellington Fund
American Century Ultra Fund Fund -- Class A Shares Vanguard Windsor II Fund
</TABLE>
* Each of these mutual funds is publicly available except for the six AGSPC
Funds.
- --------------------------------------------------------------------------------
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 affiliates.
This prospectus provides you with information you should know before investing
in Portfolio Director 2. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1999, contains additional
information about Portfolio Director 2 and is part of this prospectus. For a
free copy, complete and return the form contained in the back of this prospectus
or call 1-800-44-VALIC. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 400
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 5
SELECTED PURCHASE UNIT DATA................... 8
GENERAL INFORMATION........................... 10
ABOUT PORTFOLIO DIRECTOR 2.................. 10
ABOUT VALIC................................. 10
ABOUT VALIC SEPARATE ACCOUNT A.............. 10
UNITS OF INTERESTS.......................... 10
DISTRIBUTION OF THE CONTRACTS............... 10
VARIABLE ACCOUNT OPTIONS...................... 11
Summary of Funds......................... 11
PURCHASE PERIOD............................... 21
Purchase Payments........................ 21
Purchase Units........................... 21
Calculation of Purchase Unit Value....... 21
Choosing Investment Options.............. 22
Fixed Account Options............... 22
Variable Account Options............ 22
Stopping Purchase Payments............... 22
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 23
During the Purchase Period............... 23
During the Payout Period................. 23
Communicating Transfer or Reallocation
Instructions........................... 23
Effective Date of Transfer............... 23
FEES AND CHARGES.............................. 24
Account Maintenance Fee.................. 24
Surrender Charge......................... 24
Amount of Surrender Charge.......... 24
10% Free Withdrawal................. 24
Exceptions to Surrender
Charge............................ 24
Premium Tax Charge....................... 25
Separate Account Charges................. 25
Fund Annual Expense Charge............... 25
Other Tax Charges........................ 25
Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration
and Distribution Fee Charges........... 26
Separate Account Expense
Reimbursement.......................... 26
PAYOUT PERIOD................................. 27
Fixed Payout............................. 27
Variable Payout.......................... 27
Combination Fixed and Variable Payout.... 27
Payout Date.............................. 27
Payout Options........................... 27
Enhancements to Payout Options........... 28
Payout Information....................... 28
SURRENDER OF ACCOUNT VALUE.................... 29
When Surrenders are Allowed.............. 29
Amount That May Be Surrendered........... 29
Surrender Restrictions................... 29
Partial Surrenders....................... 29
Systematic Withdrawals................... 29
Distributions Required By Federal Tax
Law.................................... 30
EXCHANGE PRIVILEGE............................ 31
Restrictions on Exchange Privilege....... 31
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Taxes and Conversion Costs............... 31
Surrender Charge......................... 31
Exchange Offers for Contracts Other Than
Portfolio Director and Portfolio
Director 2............................. 31
Exchange Offer for Portfolio Director and
Portfolio Director 2................... 32
Comparison of Contracts.................. 32
Features of Portfolio Director 2......... 32
Agents' and Managers' Retirement Plan
Exchange Offer......................... 32
DEATH BENEFITS................................ 34
Beneficiary Information.................. 34
Special Information for Individual
Non-Tax Qualified Contracts............ 34
During the Purchase Period............... 34
Interest Guaranteed Death Benefit... 34
Standard Death Benefit.............. 35
During the Payout Period................. 35
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 36
Types of Investment Performance
Information Advertised................. 36
Total Return Performance Information... 36
Standard Average Annual Total Return... 36
Nonstandard Average Annual Total
Return................................. 36
Cumulative Total Return................ 36
Annual Change in Purchase Unit Value... 36
Cumulative Change in Purchase Unit
Value............................... 37
Total Return Based on Different
Investment Amounts.................. 37
An Assumed Account Value of $10,000.. 37
Yield Performance Information............ 37
AGSPC Money Market Division............ 37
Divisions Other Than The AGSPC Money
Market Division..................... 37
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 37
OTHER CONTRACT FEATURES....................... 41
Changes That May Not Be Made............. 41
Change of Beneficiary.................... 41
Contingent Owner......................... 41
Cancellation -- The 20 Day "Free Look"... 41
We Reserve Certain Rights................ 41
Relationship to Employer's Plan.......... 41
VOTING RIGHTS................................. 42
Who May Give Voting Instructions......... 42
Determination of Fund Shares Attributable
to Your Account........................ 42
During Purchase Period................. 42
During Payout Period or after a Death
Benefit Has Been Paid............... 42
How Fund Shares Are Voted................ 42
FEDERAL TAX MATTERS........................... 43
Type of Plans............................ 43
Tax Consequences in General.............. 43
Effect of Tax-Deferred Accumulations..... 44
YEAR 2000..................................... 46
Year 2000 Risks.......................... 46
</TABLE>
(i)
<PAGE> 401
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 23
Annuitant 34
Assumed Investment Rate 27
Beneficiary 34
Contract Owner 34
Division 36
Fixed Account Options 34
Home Office 23
Mutual Fund or Fund 10
Participant 01
Participant Year 24
Payout Period 23
Payout Unit 27
Purchase Payments 36
Purchase Period 21
Purchase Unit 21, 22
VALIC Separate Account A 42
Variable Account Options 11, 34
</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 2,
and saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in VALIC's
Separate Account A are offered. Portfolio Director 2 will allow you to
accumulate retirement dollars in Fixed Account Options and/or Variable Account
Options. This prospectus describes only the variable aspects of Portfolio
Director 2 except where the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
Portfolio Director 2. 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> 402
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $ 15
</TABLE>
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
MORTALITY ADMINISTRATION SEPARATE
AND AND ACCOUNT
EXPENSE RISK DISTRIBUTION EXPENSE TOTAL SEPARATE
FUND FEE(3) FEE(3) REIMBURSEMENT ACCOUNT FEE
---- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
AGSPC Growth Fund 0.25% 0.35% -- 0.60%
AGSPC International Government
Bond Fund 0.25 0.35 -- 0.60
AGSPC Money Market Fund 0.25 0.35 -- 0.60
AGSPC Science & Technology Fund 0.25 0.35 -- 0.60
AGSPC Social Awareness Fund 0.25 0.35 -- 0.60
AGSPC Stock Index Fund 0.25 0.35 -- 0.60
American Century Ultra Fund(4)(8) 0.25 0.60 (0.21%) 0.64
Founders Growth Fund(4) 0.25 0.60 (0.25) 0.60
Neuberger Berman Guardian Trust
Fund(4)(8) 0.25 0.60 (0.25) 0.60
Putnam Global Growth Fund -- Class
A Shares(4) 0.25 0.60 (0.25) 0.60
Putnam New Opportunities Fund --
Class A Shares(4) 0.25 0.60 (0.25) 0.60
Putnam OTC & Emerging Growth
Fund -- Class A Shares(4) 0.25 0.60 (0.25) 0.60
Scudder Growth and Income Fund(4) 0.25 0.60 (0.25) 0.60
Templeton Foreign Fund -- Class
A(4) 0.25 0.60 (0.25) 0.60
Vanguard Long-Term
Corporate Fund(5)(8) 0.25 0.60 (0.25) 0.60
Vanguard Long-Term Treasury
Fund(5)(8) 0.25 0.60 (0.25) 0.60
Vanguard Wellington Fund(8) 0.25 0.60 -- 0.85
Vanguard Windsor II Fund(8) 0.25 0.60 -- 0.85
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER TOTAL FUND
FUND FEES FEES EXPENSES(6) EXPENSES
---- ---------- ----- ----------- ----------
<S> <C> <C> <C> <C>
AGSPC Growth Fund 0.80% -- 0.04% 0.84%
AGSPC International Government Bond Fund 0.50 -- 0.05 0.55
AGSPC Money Market Fund 0.50 -- 0.04 0.54
AGSPC Science & Technology Fund 0.90 -- 0.05 0.95
AGSPC Social Awareness Fund 0.50 -- 0.04 0.54
AGSPC Stock Index Fund 0.27 -- 0.04 0.31
American Century Ultra Fund 1.00 -- -- 1.00
Founders Growth Fund 0.67 0.25%(4) 0.16 1.08
Neuberger Berman Guardian Trust Fund(7) 0.84 -- 0.03 0.87
Putnam Global Growth Fund -- Class A
Shares 0.64 0.25(4) 0.29 1.18
Putnam New Opportunities Fund -- Class A
Shares 0.49 0.25(4) 0.24 0.98
Putnam OTC & Emerging Growth Fund --
Class A Shares 0.54 0.25(4) 0.21 1.00
Scudder Growth and Income Fund 0.44 -- 0.30 0.74
Templeton Foreign Fund -- Class A 0.61 0.25(4) 0.26 1.12
Vanguard Long-Term Corporate Fund 0.03 -- 0.27 0.30
Vanguard Long-Term Treasury Fund 0.01 -- 0.26 0.27
Vanguard Wellington Fund 0.28 -- 0.03 0.31
Vanguard Windsor II Fund 0.38 -- 0.03 0.41
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
(2) Reductions in the surrender charge and the account maintenance fee are
available if certain conditions are met. See "Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality and Expense Risk Fee or Administration
and Distribution Fee Charges" and "Exceptions to Surrender Charge" in this
prospectus.
(3) The mortality and expense risk fee and administration and distribution fee
reflected in the Fee Table is deducted during the Purchase Period. The
mortality and expense risk fee and administration and distribution fee
deducted
2
<PAGE> 403
- --------------------------------------------------------------------------------
during the Payout Period is computed at an annualized rate of 1.00% to
1.25%, depending upon the Variable Account Option selected.
(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 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 pay administrative, shareholder
service or distribution fees to the Company: American Century (0.21%),
Founders (0.25%), Neuberger Berman (0.25%), Putnam (0.25%), Scudder (0.25%)
and Templeton (0.25%). With respect to American 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 equal to or in excess of $75 million.
(5) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account 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 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 Inc. ("NB"). NB 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. For the Trust's 1998 fiscal year, NB did not bear any expenses.
(8) The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Ultra Fund. The Neuberger Berman Guardian Trust
was formerly known as the Neuberger&Berman Guardian Trust. The Templeton
Foreign Fund -- Class A was formerly known as the Templeton Foreign
Fund -- Class 1. VALIC Separate Account A purchases Shares of the Templeton
Foreign Fund -- Class A at net asset value and without sales charges
generally applicable to Class A shares. The Vanguard Long-Term Corporate
Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term Corporate Portfolio and the Vanguard Long-Term Treasury
Fund was formerly known as the Vanguard Fixed Income Securities
Fund -- Long-Term Treasury Portfolio. The Vanguard Wellington Fund was
formerly known as the Vanguard/Wellington Fund and the Vanguard Windsor II
Fund was formerly known as the Vanguard/Windsor II Fund.
3
<PAGE> 404
EXAMPLE #1 -- If you do not surrender Portfolio Director 2 at the period shown
or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director 2 Contract without a surrender charge
imposed, invested in a single Separate Account Division as listed below,
assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $15 $47 $ 81 $178
AGSPC International Government Bond Division 13 12 38 66 146
AGSPC Money Market Division 6 12 38 65 145
AGSPC Science & Technology Division 17 16 50 87 190
AGSPC Social Awareness Division 12 12 38 65 145
AGSPC Stock Index Division 10 10 31 53 118
American Century Ultra Division 31 17 53 92 200
Founders Growth Division 30 18 54 94 204
Neuberger Berman Guardian Trust
Division 29 15 48 83 182
Putnam Global Growth -- Class A Shares Division
28 19 58 99 215
Putnam New Opportunities -- Class A Shares
Division 26 17 51 89 194
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 17 52 90 196
Scudder Growth and Income Division 21 14 44 76 167
Templeton Foreign -- Class A Division 32 18 56 96 209
Vanguard Long-Term Corporate Division 22 10 31 53 118
Vanguard Long-Term Treasury Division 23 9 29 51 113
Vanguard Wellington Division 25 12 38 66 147
Vanguard Windsor II Division 24 13 41 72 158
</TABLE>
EXAMPLE #2 -- If you surrender Portfolio Director 2 at the end of the period
shown:
- --------------------------------------------------------------------------------
Total Expenses: You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director 2 Contract invested in a single Separate
Account Division as listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Growth Division 15 $62 $ 97 $131 $178
AGSPC International Government Bond Division 13 59 88 116 146
AGSPC Money Market Division 6 59 88 115 145
AGSPC Science & Technology Division 17 63 100 137 190
AGSPC Social Awareness Division 12 59 88 115 145
AGSPC Stock Index Division 10 57 81 103 118
American Century Ultra Division 31 64 103 142 200
Founders Growth Division 30 64 104 144 204
Neuberger Berman Guardian Trust
Division 29 62 98 133 182
Putnam Global Growth -- Class A Shares Division 28 65 107 149 215
Putnam New Opportunities -- Class A Shares Division
26 63 101 139 194
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 63 102 140 196
Scudder Growth and Income Division 21 61 94 126 167
Templeton Foreign -- Class A Division 32 64 105 146 209
Vanguard Long-Term Corporate Division 22 57 81 103 118
Vanguard Long-Term Treasury Division 23 56 79 101 113
Vanguard Wellington Division 25 59 88 116 147
Vanguard Windsor II Division 24 60 91 122 158
</TABLE>
- ------------
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.
4
<PAGE> 405
SUMMARY
- --------------------------------------------------------------------------------
Portfolio Director 2 is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director 2's major features is presented below. For a more detailed
discussion of Portfolio Director 2, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director 2 offers you a choice from among 18 Variable Account Options
and two Fixed Account Options. There may be certain limits on how many
investment options you may invest in at any one time.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FIXED ACCOUNT
OPTIONS
- -------------------------------------------------------------------------------------------------------------------------------
FIXED Fixed Guaranteed high current --
OPTIONS Account Plus interest income
-----------------------------------------------------------------------------------------------------------
Short-Term Guaranteed current --
Fixed Account interest income
- -------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS STRATEGY ADVISER
- -------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Growth through investments tracking VALIC
EQUITY Index the S&P 500(R) Index
FUND Fund
- -------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC
MANAGED Fund in service sector companies
-----------------------------------------------------------------------------------------------------------
EQUITY American Century Capital growth through American Century
FUNDS Ultra Fund investments in common Investment Management,
stock Inc.
-----------------------------------------------------------------------------------------------------------
Founders Long-term growth of capital through Founders Asset
Growth investment in common stocks of well Management
Fund established, high-quality growth companies
-----------------------------------------------------------------------------------------------------------
Neuberger Berman Capital appreciation, and secondarily Neuberger Berman
Guardian Trust current income by investing primarily Management Inc.
in common stocks of large-capitalization
companies
-----------------------------------------------------------------------------------------------------------
Putnam Global Capital appreciation through a globally diversified Putnam Investment
Growth Fund -- Class A portfolio of common stocks Management Inc.
Shares
-----------------------------------------------------------------------------------------------------------
Putnam New Opportunities Long-term capital appreciation through investment in common Putnam Investment
Fund -- Class A Shares stock Management Inc.
-----------------------------------------------------------------------------------------------------------
Putnam OTC & Capital appreciation through Putnam Investment
Emerging Growth investments in common stocks of Management Inc.
Fund -- Class A Shares small-to-medium companies
-----------------------------------------------------------------------------------------------------------
Scudder Growth Long-term growth of capital, current Scudder Kemper
and Income Fund income and growth of income Investments, Inc.
-----------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth; invests primarily Templeton Global
Foreign Fund -- Class A in securities of companies outside the U.S., Advisors Limited
including emerging markets
-----------------------------------------------------------------------------------------------------------
Vanguard Growth and income through Vanguard
Windsor II Fund investment in common stock
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard Income and growth through 30 to 40% Vanguard
FUND Wellington investment in high quality corporate bonds
Fund and 60 to 70% investment in common stocks
- -------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Income and possible growth through VALIC
FUNDS Government investments in high quality foreign
Bond Fund government debt securities
-----------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in long-term high quality Vanguard
Corporate Fund corporate bonds
-----------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in long-term U.S. Treasury bonds Vanguard
Treasury
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Growth through investments in stocks VALIC
FUNDS Technology of companies which benefit from
Fund development of science and technology
-----------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC
Awareness stocks of companies meeting social
Fund criteria of the Fund
- -------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC
MARKET Market short-term money market
FUND Fund securities
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------
FIXED --
OPTIONS
------------------------------------------------------------
--
- -----------------------------------------------------------------------------------------------------------------------
SUBADVISER
- -------------------------------------------------------------------------------------------------------------------------------
INDEX Bankers Trust
EQUITY Company(1)
FUND
- -------------------------------------------------------------------------------------------------------------------------------
ACTIVELY T. Rowe Price
MANAGED Associates, Inc.
-----------------------------------------------------------------------------------------------------------
EQUITY N/A
FUNDS
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
Neuberger
Berman, LLC
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED N/A
FUND
- -------------------------------------------------------------------------------------------------------------------------------
INCOME N/A
FUNDS
-----------------------------------------------------------------------------------------------------------
N/A
-----------------------------------------------------------------------------------------------------------
N/A
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY T. Rowe Price
FUNDS Associates, Inc.
-----------------------------------------------------------------------------------------------------------
N/A
- -------------------------------------------------------------------------------------------------------------------------------
MONEY N/A
MARKET
FUND
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of
Bankers Trust Corporation. On November 30, 1998, Bankers Trust Corporation
entered into an Agreement and Plan of Merger with Deutsche Bank AG under
which Bankers Trust Corporation and all of its subsidiaries would merge
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including retail and commercial banking, investment banking and
insurance. The merger is contingent upon various regulatory approvals. On
April 20, 1999, the Fund's Board of Directors approved a new investment
sub-advisory agreement with Bankers Trust Company, subject to shareholder
approval. If the merger is approved and completed, Deutsche Bank AG, as the
Sub-Adviser's new parent company, will control the operations of the
Sub-Adviser, Bankers Trust believes that, under this new arrangement, the
services provided to the Fund will be maintained at their current level.
5
<PAGE> 406
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual Fund can be
found in the section of the prospectus entitled "Variable Account Options," and
also in the current prospectus for each Fund mentioned.
INTEREST GUARANTEED DEATH
BENEFIT
Portfolio Director 2 offers a death benefit with an interest guarantee when
death occurs prior to your reaching age 70.
This contract provision is not available in some states.
LOANS
Portfolio Director 2 offers a tax-free loan provision for tax-qualified
contracts that gives you access to your money in either of the Fixed Account
Options, subject to a minimum loan amount of $1,000. The availability of loans
is subject to government regulations, as well as your employer's plan
provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans which
are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among Portfolio
Director 2's investment options. You may transfer your Account Values between
Variable Account Options at any time during the Purchase Period.
Your Account Value in the Short-Term Fixed Account must remain there for at
least 90 days before it can be transferred to other investment options. In Fixed
Account Plus, up to 20% of your Account Value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among Variable Account Options once each contract
year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Between Investment Options" section in the prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE
If any of your account is invested in Variable Account Options, a quarterly
account maintenance fee of $3.75 is charged to your account. If you invest only
in Fixed Account Options during a calendar quarter no account maintenance fee is
assessed. 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 generally include a tax penalty on
withdrawals made prior to age 59 1/2.
PREMIUM TAX CHARGE
Premium taxes ranging from zero to 3 1/2% 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 0.60% to 0.85% during the purchase period and 1.00%
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
Mutual Fund or its affiliate or distributor for providing the Mutual 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 2 can be
purchased with after-tax dollars, they are primarily used in connection with
retirement programs which receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
Purchase Payments may be made at any time and in any amount, subject to plan
limitations.
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.
6
<PAGE> 407
(This page intentionally left blank)
7
<PAGE> 408
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL AGSPC AGSPC AGSPC
AGSPC GOVERNMENT MONEY SCIENCE & SOCIAL AGSPC
GROWTH BOND MARKET TECHNOLOGY AWARENESS STOCK INDEX
DIVISION 15 DIVISION 13 DIVISION 6 DIVISION 17 DIVISION 12 DIVISION 10(1)
----------- ------------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 3,570 1,531 475 6,377 1,451 30,811
Purchase Unit Value $2.471473 $1.777571 $1.833793 $3.272354 $3.897214 $4.991135
January 2, 1998
Purchase Unit Value(2) $2.104727 $1.527262 $1.754106 $2.316348 $3.080009 $3.910065
<CAPTION>
NEUBERGER
AMERICAN BERMAN
CENTURY FOUNDERS GUARDIAN
ULTRA GROWTH TRUST
DIVISION 31 DIVISION 30 DIVISION 29
----------- ----------- -----------
<S> <C> <C> <C>
December 31, 1998
Purchase Units in Force 23,002 12,861 253
Purchase Unit Value $1.798208 $1.676366 $1.418252
January 2, 1998
Purchase Unit Value(2) $1.345142 $1.349043 $1.393834
</TABLE>
- ------------
(1) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(2) Purchase Unit Value At Date of Inception.
8
<PAGE> 409
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM OTC & SCUDDER
GLOBAL PUTNAM NEW EMERGING GROWTH TEMPLETON VANGUARD VANGUARD
GROWTH -- OPPORTUNITIES -- GROWTH -- AND FOREIGN -- LONG-TERM LONG-TERM VANGUARD VANGUARD
CLASS A CLASS A CLASS A INCOME CLASS A CORPORATE TREASURY WELLINGTON WINDSOR II
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 32 DIVISION 22 DIVISION 23 DIVISION 25 DIVISION 24
- ----------- ---------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5,760 10,797 3,073 3,163 2,604 883 7,820 9,214 29,953
$1.591007 $1.459115 $1.127653 $1.582856 $1.123840 $1.360696 $1.384079 $1.585688 $1.770257
$1.243031 $1.180356 $1.022171 $1.501484 $1.188439 $1.254327 $1.232803 $1.427280 $1.534466
</TABLE>
- ------------
Financial statements of VALIC Separate Account A are included in the Statement
of Additional Information, which is available upon request. Purchase units shown
are for a Purchase Unit outstanding throughout the year under a representative
Contract of the type invested in each column shown. The unit value of each
Division of VALIC Separate Account A will not be the same on any given day as
the net asset value per share of the underlying Fund of the Series Company and
the other mutual fund portfolios described in this prospectus in which that
Division invests. This is because each unit value consists of the underlying
share's net asset value minus the charges to VALIC Separate Account A. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in VALIC Separate Account A does not
change as a result of such distributions.
9
<PAGE> 410
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR 2
Portfolio Director 2 was developed to help you save money for your retirement.
It offers you a combination of fixed and variable investment options that you
can invest in to help you reach your retirement savings goals. Your
contributions to Portfolio Director 2 can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director 2 will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
2 called "Purchase Payments." The second, is when you receive your retirement
payouts. For more information, see "Purchase Period" and the "Payout Period" in
this prospectus.
You may choose, depending upon your retirement savings goals, your personal risk
tolerances, and your retirement plan, to invest in the Fixed Account Options
and/or the Variable Account Options described in this prospectus. When you
decide to retire, or otherwise withdraw your money, you can select from a wide
array of payout options including both fixed and variable payments. In addition,
this prospectus will describe for you all fees and charges that may apply to
your participation in Portfolio Director 2.
ABOUT VALIC
We were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director 2. Our principal offices are located
at 2929 Allen Parkway, Houston, Texas 77019. We have Regional Offices throughout
the United States. The addresses for these offices are given in the back of this
prospectus.
VALIC is a member of the American General Corporation group of companies.
Members of the American General Corporation group of companies operate in each
of the 50 states, the District of Columbia, and Canada and collectively provide
financial services with activities heavily weighted toward insurance.
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 affiliates.
ABOUT VALIC SEPARATE ACCOUNT A
When you direct money to Portfolio Director 2's Variable Account Options, you
will be sending that money through VALIC's Separate Account A. You do not invest
directly in the Mutual Funds made available in Portfolio Director 2. VALIC's
Separate Account A invests in the Mutual Funds on behalf of your account.
VALIC Separate Account A is made up of what we call "Divisions." Eighteen
Divisions are
available and represent the Variable Account Options in Portfolio Director 2.
Each of these Divisions invests in a different Mutual Fund made available
through Portfolio Director 2. For example, Division Ten represents and invests
in the Stock Index Fund. The earnings (or losses) of each Division are credited
to (or charged against) the assets of that Division, and do not affect the
performance of the other Divisions of VALIC Separate Account A.
VALIC established Separate Account A on July 25, 1979 under Texas insurance law
to allow you to be able to invest in a number of Variable Account Options
available in Portfolio Director 2. VALIC Separate Account A is registered with
the Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940 ("Act"). Units of interest in VALIC Separate
Account A are registered as securities under the Securities Act of 1933.
VALIC Separate Account A is administered and accounted for as part of VALIC's
business operations. However, the income, capital gains or capital losses,
whether or not realized of each Division of VALIC Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of Portfolio Director 2, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director 2, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director 2 be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director 2. When we discuss performance information in this prospectus, we mean
the performance of a VALIC Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of VALIC Separate Account A is represented by
units of interest issued by VALIC Separate Account A. On a daily basis, the
units of interest issued by VALIC Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable fees
and charges to VALIC Separate Account A.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
All inquiries regarding
PORTFOLIO DIRECTOR 2
may be directed to your
VALIC Regional Office at
the addresses shown in the
back of this prospectus.
MUTUAL FUND OR FUND --
the investment portfolio(s)
of a registered open-end
management investment
company, which serves as
the underlying investment
vehicle for each Division
represented in VALIC
Separate Account A.
For more information about
VALIC, see the Statement of
Additional Information
A.G. Distributors --
our address is
2929 Allen Parkway,
Houston, Texas 77019.
For more information
about A.G. DISTRIBUTORS
see the Statement of
Additional Information
10
<PAGE> 411
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director 2 enables you to participate in Divisions that represent
eighteen Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available to you through VALIC Separate Account A.
According to your retirement program, you may not be able to invest in all
eighteen 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 2 and include:
- - American General Series Portfolio
Company (AGSPC) -- offers 6 funds, for which VALIC serves as investment
adviser, for 2 of such funds, T. Rowe Price & Associates, Inc. serves as
investment sub-adviser and for 1 of such funds, Bankers Trust Company serves
as investment sub-adviser.
- - American Century Mutual Funds, Inc. -- offers 1 fund for which American
Century Investment Management, Inc. 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.
- - Templeton Funds Inc. -- offers 1 fund for which Templeton Global Advisors
Limited serves as investment adviser.
- - The Vanguard Group Inc. -- offers 4 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.
Twelve 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 Act. 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 as well as the Standard Average Annual Total Return for a 1, 3, 5 and 10
year period, if available. If Standard Average Annual Return for a Division is
not available for a stated period, we may show the Standard Average Annual
Return since Division inception. The performance information in the tables and
graphs 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. They 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 reflect in the graphs
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 Funds
actual historical performance of the related Separate Account Divisions. The
returns shown in the tables for the other 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. 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.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical periods shown below. The results shown are after all charges
and fees have been applied against the Division. This will include account
maintenance fees and surrender charges that would have been deducted if you
surrendered Portfolio Director 2 at the end of the specified period. Premium
taxes are not deducted. This information is calculated for each Division based
on how an initial investment of $1,000 performed at the end of the specified
periods shown.
For more information about how these returns were calculated including a
statement of the charges reflected and tables showing historical performance
information see "How to Review Investment Performance of Separate Account
Divisions" in this prospectus.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond
to Separate Account
Divisions offered by
Portfolio Director 2.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
11
<PAGE> 412
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
12/31/94 10,045
12/31/95 14,755
12/31/96 17,503
12/31/97 21,047
12/31/98 24,715
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
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
12/31/91 10,914
12/31/92 11,182
12/31/93 12,692
12/31/94 13,178
12/31/95 15,559
12/31/96 16,145
12/31/97 15,273
12/31/98 17,776
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 12.36%, 17.48% and
20.75%, respectively. The Division commenced operations on April 29, 1994.
** The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 11.32%, 2.92%, 6.11% and 8.17%, respectively. The Division
commenced operations on October 1, 1991.
12
<PAGE> 413
AGSPC
MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,834
12/31/90 11,620
12/31/91 12,189
12/31/92 12,509
12/31/93 12,768
12/31/94 13,173
12/31/95 13,821
12/31/96 14,427
12/31/97 15,082
12/31/98 15,767
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,506
12/31/95 20,083
12/31/96 22,716
12/31/97 23,163
12/31/98 32,724
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.22)%, 2.86%, 3.37% and
4.57%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 36.19%,
16.37% and 28.38%, respectively. The Division commenced operations on April
29, 1994.
13
<PAGE> 414
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
12/31/89 10,110
12/31/90 9,927
12/31/91 12,615
12/31/92 12,957
12/31/93 13,897
12/31/94 13,615
12/31/95 18,796
12/31/96 23,158
12/31/97 30,800
12/31/98 38,972
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,834
12/31/90 12,265
12/31/91 15,720
12/31/92 16,662
12/31/93 18,196
12/31/94 18,214
12/31/95 24,847
12/31/96 30,307
12/31/97 40,079
12/31/98 51,161
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception period was
21.46%, 26.39%, 22.37% and 15.75%, respectively. The Division commenced
operations on October 2, 1989.
** The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.58%, 26.09%, 22.43%
and 17.65%, respectively. The Division commenced operations on April 20,
1987.
*** "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability
of investing in this Fund.
14
<PAGE> 415
AMERICAN 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 13,597
12/31/90 14,772
12/31/91 27,335
12/31/92 27,500
12/31/93 33,271
12/31/94 31,861
12/31/95 43,557
12/31/96 49,158
12/31/97 60,068
12/31/98 80,300
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 14,083
12/31/90 12,519
12/31/91 18,333
12/31/92 18,997
12/31/93 23,701
12/31/94 22,776
12/31/95 32,947
12/31/96 38,149
12/31/97 47,957
12/31/98 59,593
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The American Century Ultra Fund was formerly known as the American
Century-Twentieth Century Ultra Fund. The Standard Average Annual Total
Return for the American Century Ultra Division 31 for the 1 year and since
inception was 28.61% and 22.15%, respectively. The Division commenced
operations on July 1, 1996.
** The Standard Average Annual Total Return for the Founders Growth Fund
Division 30 for the 1 year period and since inception was 19.19% and 19.43%,
respectively. The Division commenced operations on July 1, 1996.
15
<PAGE> 416
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
August 3, 1993 $ Value
- ------------------------- -------
<S> <C>
08/03/93 $10,000
12/31/93 10,708
12/31/94 10,807
12/31/95 14,175
12/31/96 16,581
12/31/97 19,415
12/31/98 19,756
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 3, 1993
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,378
12/31/90 11,175
12/31/91 13,103
12/31/92 13,057
12/31/93 17,107
12/31/94 16,863
12/31/95 19,243
12/31/96 22,283
12/31/97 25,098
12/31/98 32,124
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Neuberger Berman Guardian Trust was formerly known as Neuberger&Berman
Guardian Trust. The Standard Average Annual Total Return for the Neuberger
Berman Guardian Trust Division 29 for the 1 year period and since inception
was (2.88)% and 10.57%, respectively. The Division commenced operations on
July 1, 1996.
** The Standard Average Annual Total Return for the Putnam Global Growth
Fund -- Class A Division 28 for the 1 year period and since inception was
22.92% and 16.82%, respectively. The Division commenced operations on July 1,
1996.
16
<PAGE> 417
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
12/31/90 11,054
12/31/91 18,397
12/31/92 22,964
12/31/93 30,281
12/31/94 31,100
12/31/95 45,203
12/31/96 49,779
12/31/97 60,609
12/31/98 74,923
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,816
12/31/90 11,491
12/31/91 16,080
12/31/92 18,010
12/31/93 23,634
12/31/94 24,022
12/31/95 37,216
12/31/96 38,682
12/31/97 42,360
12/31/98 46,732
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Putnam New
Opportunities -- Class A Fund Division 26 for the 1 year period and since
inception was 18.55% and 13.64%, respectively. The Division commenced
operations on July 1, 1996.
** The Standard Average Annual Total Return for the Putnam OTC & Emerging Growth
Fund -- Class A Division 27 for the 1 year period and since inception was
5.30% and 1.31%, respectively. The Division commenced operations on July 1,
1996.
17
<PAGE> 418
SCUDDER GROWTH AND
INCOME FUND*
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,524
12/31/90 12,131
12/31/91 15,411
12/31/92 16,739
12/31/93 19,182
12/31/94 19,515
12/31/95 25,371
12/31/96 30,715
12/31/97 39,697
12/31/98 41,849
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON FOREIGN FUND**
Class A Shares
(Division 32)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund tries to achieve its investment goal by
a flexible policy of investing primarily the equity securities of companies
outside the United States, including emerging markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,971
12/31/90 12,508
12/31/91 14,703
12/31/92 14,630
12/31/93 19,889
12/31/94 19,842
12/31/95 21,924
12/31/96 25,690
12/31/97 27,226
12/31/98 25,746
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.62% and
16.64%, respectively. The Division commenced operations on July 1, 1996.
** The Templeton Foreign Fund Class A Shares was formerly known as the Templeton
Foreign Fund Class 1 Shares. The Standard Average Annual Total Return for the
Templeton Foreign Fund -- Class A Division 32 for the 1 year period and since
inception was (9.74)% and 1.19%, respectively. The Division commenced
operations on July 1, 1996. On January 1, 1993, the Templeton Foreign
Fund -- Class A implemented a Rule 12b-1 plan, which affects subsequent
performance.
18
<PAGE> 419
VANGUARD LONG-TERM
CORPORATE FUND*
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,418
12/31/90 12,024
12/31/91 14,411
12/31/92 15,685
12/31/93 17,803
12/31/94 16,722
12/31/95 20,950
12/31/96 20,882
12/31/97 23,543
12/31/98 25,539
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
TREASURY FUND**
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,691
12/31/90 12,263
12/31/91 14,275
12/31/92 15,201
12/31/93 17,600
12/31/94 16,227
12/31/95 20,926
12/31/96 20,364
12/31/97 22,984
12/31/98 25,805
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund -- Long-Term Corporate Fund. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.54% and 8.69%,
respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Fund. The Standard Average
Annual Total Return for the Vanguard Long-Term Treasury Fund Division 23 for
the 1 year period and since inception was 7.21% and 10.34%, respectively. The
Division commenced operations on July 1, 1996.
19
<PAGE> 420
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,054
12/31/90 11,619
12/31/91 14,241
12/31/92 15,238
12/31/93 17,149
12/31/94 16,923
12/31/95 22,294
12/31/96 25,664
12/31/97 31,335
12/31/98 34,812
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD WINDSOR II FUND **
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,670
12/31/90 11,312
12/31/91 14,430
12/31/92 16,020
12/31/93 18,043
12/31/94 17,684
12/31/95 24,331
12/31/96 29,927
12/31/97 39,252
12/31/98 45,284
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund. The Standard Average Annual Total Return for the Vanguard Wellington
Fund Division 25 for the 1 year period and since inception was 6.04% and
15.84%, respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund. The Standard Average Annual Total Return for Vanguard Windsor II Fund
Division 24 for the 1 year period and since inception was 10.30% and 22.06%,
respectively. The Division commenced operations on July 1, 1996.
20
<PAGE> 421
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director 2 account is surrendered before the Payout Period. The
amount, number, and frequency of your Purchase Payments is determined by the
retirement plan for which Portfolio Director 2 was purchased.
PURCHASE PAYMENTS
You may establish an account only through a VALIC representative. Initial
Purchase Payments must be received by VALIC either with, or after, a completed
application. Your employer is usually responsible for remitting Purchase
Payments to us. The employer is responsible for furnishing instructions to us (a
premium flow report) as to the amount being applied to your account.
Minimum initial and subsequent Purchase Payments are as follows:
<TABLE>
<CAPTION>
Initial Subsequent
Contract Type Payment Payment
- ----------------------- ------- ----------
<S> <C> <C>
Periodic Payment $ 30 $ 30
Single Payment $1,000 -0-
</TABLE>
Periodic Payment minimums apply to each Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided unless you otherwise so specify.
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 these circumstances, we will take one of the
following actions:
Return Purchase Payments. If we do not have your name, address or social
security number, we will return the Purchase Payment to your employer unless
this information is immediately provided to us.
Employer-Directed Account. If we have your name, address and social security
number and we have an Employer-Directed Account Agreement from your employer,
generally we will deposit your Purchase Payment
in an "Employer-Directed" account invested in our Money Market Division
Option. You may not transfer these amounts until VALIC has received a
completed application or enrollment form.
Starter Account. If we have your name, address and social security number, but
we do not have an Employer-Directed Account Agreement from your employer, we
will deposit your Purchase Payment in a "starter" account invested in the
Money Market Division. We will send you follow-up letters requesting the
information necessary to complete the application, including your allocation
instructions. Unless a completed application or enrollment form is received by
us within 105 days of establishment of your starter account, the account
balance, including earnings, will be returned to your employer. We are not
responsible for any adverse tax consequences to you that may result from the
return of your employer's contributions.
PURCHASE UNITS
A Purchase Unit is a unit of interest owned by you in your Variable Account
Option. Purchase Units apply only to the Variable Account Options selected for
your account. Purchase Unit values are calculated at the close of regular
trading of the New York Stock Exchange (the "Exchange"), currently 4:00 p.m. New
York time (see Calculation of Purchase Unit Value below for more information.)
Purchase Units will be credited the same business day if Purchase Payments are
received by our Home Office before the close of the Exchange. If not, they will
be calculated and credited the next business day. Purchase Unit values will vary
depending on the net investment results of each of the Variable Account Options.
This means the value of your Variable Account Option will fluctuate.
CALCULATION OF PURCHASE UNIT VALUE
The Purchase Unit value for a Division is calculated as shown below:
Step 1: Calculate the gross investment rate:
Gross Investment Rate
= (EQUALS)
The Division's investment income and capital gains and losses (whether
realized or unrealized) on that day from the assets attributable to the
Division.
/ (DIVIDED BY)
The value of the Division for the immediately preceding day on
which the values are calculated.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director 2.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
21
<PAGE> 422
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the Exchange is open.
Step 2: Calculate net investment rate for any day as follows:
Net Investment Rate
= (EQUALS)
Gross Investment Rate (calculated in Step 1)
- - (MINUS)
Separate Account charges and any income tax charges.
Step 3: Determine Purchase Unit Value for that day.
Purchase Unit Value for that day.
= (EQUALS)
Purchase Unit Value for immediate preceding day.
X (MULTIPLIED BY)
Net Investment Rate (as calculated in Step 2) plus 1.00.
CHOOSING INVESTMENT OPTIONS
There are 20 investment options offered in Portfolio Director 2. This includes 2
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 20 options. The Funds that underlie the
Variable Account Options are registered as investment companies under and are
subject to regulation of the 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 Summary 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 2 account has been surrendered. 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. Any
such account closure will be subject to applicable distribution restrictions
under the Contract and/or under your employer's plan.
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.
22
<PAGE> 423
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director 2 without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director 2's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ----------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer
was previously
made
into Short-Term
Fixed
Account.(2)
</TABLE>
- ---------------
(1) Your employer may further limit or expand the restrictions. We may charge
for those modified restrictions if specified in your employer's retirement
plan.
(2) VALIC may change this holding period at any time in the future, but it will
never be more than 180 days.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between Portfolio Director 2's
investment options subject to the following limitations:
<TABLE>
<CAPTION>
% OF ACCOUNT
---------------------------------- OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ------------------- ------------
<S> <C> <C> <C>
Variable: Up to 100% Once every 365 days None
Combination
Fixed
and Variable
Payout: Up to 100% Once every 365 days None
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 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.
23
<PAGE> 424
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director 2, you may be subject to six basic types of
fees and charges:
- - Account Maintenance Fee
- - Surrender 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 2 is issued to certain types of plans which are expected to result in
lower costs to VALIC. To learn more about how we determine if account
maintenance fees may be reduced or waived, see the "Reduction or Waiver of
Account Maintenance Fee, 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 that will be deducted from the amount withdrawn. 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.
24
<PAGE> 425
- --------------------------------------------------------------------------------
- - 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 2 is issued
to certain types of plans which are expected to result in lower costs to VALIC.
To learn more about how we determine if 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 1/2%.
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 0.60% to 0.85% during the Purchase Period and
1.00% 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. The mortality risk that
the Company assumes is the obligation to provide payments during the Payout
Period for your life no matter how long that might be. In addition, the Company
assumes the obligation to pay during the Purchase Period an interest guaranteed
death benefit. For more information about the interest guaranteed death benefit
see the "Death Benefit" section of this prospectus. The expense risk is our
obligation to cover the cost of issuing and administering Portfolio Director 2,
no matter how large the cost may be.
The Company may make a profit on the mortality and expense risk 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 on the
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.
25
<PAGE> 426
- --------------------------------------------------------------------------------
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 fee for Portfolio
Director 2 may be reduced or waived. We may reduce or waive these fees and
charges if we determine that your retirement program will allow us to reduce or
eliminate administrative or sales expenses that we usually incur for retirement
programs. There are a number of factors we will review in determining whether
your retirement program will allow us to reduce or eliminate these
administrative or sales expenses:
- 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 to 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 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 a voluntary. See the Fee Table in this
prospectus for an identification of those Funds for which a reimbursement
applies.
26
<PAGE> 427
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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
Up to seven Variable Account Options may be chosen, or up to six Variable
Account Options if the Fixed Payout is chosen.
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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- 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, in the form of an
excise tax, if you do not meet an exception under 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,
- 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, and
- 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, subject to any limitations under the
contract or plan.
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> 429
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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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 2. There will be no surrender charge for withdrawals using this method,
which provides for:
- Payments to be made to you;
- Payment over a stated period of time (but not less than five years);
- Payment of a stated yearly dollar amount or percentage (the amount or
percentage may not exceed 20% of your Account Value at the time election is
made).
We may require a minimum withdrawal amount under this method. The portion of
your account that has not been withdrawn will continue to receive the investment
return of the Variable Account Options which you selected. A systematic
withdrawal election may not be changed but can be revoked at no charge. Once
29
<PAGE> 430
- --------------------------------------------------------------------------------
revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW. There will be no surrender charge on
a minimum distribution required by federal tax law (known as No Charge Minimum
Distribution), if the withdrawal:
- Is made payable to you; and
- Does not exceed the amount required under federal tax law as determined by
the values in your Portfolio Director 2 Contract and VALIC.
This contract feature will not be available in any year that an amount has been
withdrawn under the no charge systematic withdrawal method. See "Federal Tax
Matters" in this prospectus and in the Statement of Additional Information for
more information about required distributions imposed by tax law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus and in the Statement of Additional
Information.
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<PAGE> 431
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director 2. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director 2. This exchange privilege will be available
only to other contracts 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. An exchange may require the issuance of a Contract or may be subject
to any other requirements that the Company may impose.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges.
- Partial exchanges are not permitted.
- Exchanges from Portfolio Director 2 to contract forms other than Portfolio
Director Plus 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 2. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director 2. For example, you
will be subject to the rules concerning transfers among investment options as
stated in the Transfers Between Investment Options section in this prospectus.
We may, at our option, waive any transfer restrictions for a stated period of
time. If we waive these transfer restrictions, you will be allowed to exchange
to any investment option available in Portfolio Director 2.
WE RESERVE THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THESE EXCHANGE PRIVILEGES
AT ANY TIME.
TAXES AND CONVERSION COSTS
We will impose no fee or charge for these exchanges. Please read the "Federal
Tax Matters" section in this prospectus for information about the federal income
tax treatment of Portfolio Director 2.
SURRENDER CHARGES
We will generally not impose nor waive existing surrender charges as a result of
your electing to exchange from one of the other contracts.
For purposes of determining surrender charges, we often consider time in the
contract. For SPQ181 and SPQ181-1 Contracts, the contract date for determining
surrender charges under Portfolio Director 2 will be the SPQ181 and SPQ181-1
contract date plus one year. For example, if you have an SPQ181 contract with a
contract date of January 1, 1993, upon exchange into Portfolio Director 2, the
contract date for surrender charges purposes becomes January 1, 1994.
For any other contract, the contract date for determining surrender charges
under Portfolio Director 2 will be the same date as the other contract, but no
earlier than January 1, 1982. (The effect of this is to potentially shorten the
charge period for Purchase Payments subsequently made to Portfolio Director 2.)
If there is no surrender charge on assets within another contract, we will not
impose charges on those assets as a result of an exchange. If surrender charges
are to be based on Purchase Payments within a contract, we will consider
purchase payments in the other contract to have been transferred to Portfolio
Director 2 for purposes of calculating the surrender charge. The effective dates
of these Purchase Payments will also be retained for surrender charge purposes.
The Portfolio Director 2 surrender charge is calculated assuming the most recent
Purchase Payments are removed first. This policy may cause exchanged funds to be
accessible only after charges are imposed.
EXCHANGE OFFERS FOR CONTRACTS OTHER THAN
PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
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<PAGE> 432
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Portfolio Director 2 will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
EXCHANGE OFFER FOR PORTFOLIO DIRECTOR AND PORTFOLIO DIRECTOR 2
Subject to the restrictions stated below and the general restrictions on
exchange privileges stated above you may exchange from Portfolio Director to
Portfolio Director 2. Additionally, you may also make exchanges among the series
of Portfolio Director 2. Once you have made any of the exchanges described in
this paragraph you must wait 120 days before making another exchange between
Portfolio Director and Portfolio Director 2.
Both Portfolio Director and Portfolio Director 2 are available to qualified
contracts and certain non-qualified contracts. Portfolio Director 2 is not
available to non-qualified contracts issued to individuals. Please read the
"Federal Tax Matters" in this prospectus for information about the federal
income tax treatment of Portfolio Director 2.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director 2. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director 2 is provided in the Statement of Additional Information.
Portfolio Director and Portfolio Director 2 contain the same provisions except
as to the level of fees and as to available Variable Account Options and certain
Separate Account Expense Reimbursements. See "Fees and Changes" in this
prospectus.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
Please refer to the prospectus and Statement of Additional Information for
Portfolio Director and the different series of Portfolio Director 2 for
information about the specific features and charges of such products.
FEATURES OF PORTFOLIO DIRECTOR 2
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director 2.
- Portfolio Director 2 has more investment options to select from.
- Portfolio Director 2 has 12 publicly available mutual funds as investment
options.
- The Portfolio Director 2 surrender charge is calculated assuming the most
recent Purchase Payments are removed first. This policy may cause exchanged
funds to be accessible only after charges are imposed.
- Portfolio Director 2 has an Interest Guaranteed Death Benefit.
- Portfolio Director 2's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Different series of Portfolio Director 2 may charge fees higher or lower
than other series of Portfolio Director 2.
- Portfolio Director 2's guaranteed annuity rates and guaranteed interest
rates may be less favorable than the other contracts.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the Company's Agents' and Managers' Retirement Plan ("Plan"). We
grant to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts, Independence Plus Contracts
and Portfolio Director for the equivalent units of interest in Portfolio
Director 2.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director 2 any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director 2 from SA-1,
Independence Plus or Portfolio Director Contracts may have surrender charges and
account maintenance fees imposed under Portfolio Director 2. All other
provisions with regard to exchange offers referenced in the section entitled
"Exchange Offers" will apply to the Agents' and Managers' Retirement Plan
Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will have
three options to choose from. As to the funding vehicle for
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<PAGE> 433
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their purchase payment plan, the participant may choose to:
- Remain in the SA-1 Contract, Independence Plus Contract or Portfolio
Director.
- Leave current assets in the SA-1 Contract, Independence Plus or Portfolio
Director and direct future Purchase Payments to Portfolio Director 2; or
- Transfer all current assets and future Purchase Payments to Portfolio
Director 2.
If the participant chooses to remain in either the SA-1 Contract, Independence
Plus Contract or Portfolio Director, future Purchase Payments and current assets
will be controlled by the provisions of the SA-1 Contract, Independence Plus
Contract or Portfolio Director, respectively. If the participant chooses to
leave current assets in the SA-1 Contract, the Independence Plus Contract or
Portfolio Director and direct future Purchase Payments to Portfolio Director 2,
the current assets will be controlled by the provisions of the SA-1 Contract,
the Independence Plus Contract or Portfolio Director, respectively. The future
Purchase Payments will be controlled by the terms of Portfolio Director 2
subject to the exception that surrender charges and account maintenance fees
will not be imposed under Portfolio Director 2. If the participant chooses to
transfer all current assets and future Purchase Payments to Portfolio Director
2, such current assets and future Purchase Payments will be controlled by the
provisions of Portfolio Director 2 subject to the exception that surrender
charges and account maintenance fees will not be imposed under Portfolio
Director 2.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director 2 the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. See "Exchange Offer for Portfolio
Director and Portfolio Director 2" in this prospectus. If a participant chooses
to transfer future Purchase Payments but not current assets to Portfolio
Director 2, the participant will be allowed at a later date to transfer the
current assets to Portfolio Director 2. For a complete analysis of the
differences between the SA-1 contract, the Independence Plus Contract or
Portfolio Director and Portfolio Director 2, you should refer to the Statement
of Additional Information and the form of the contract or certificate for its
terms and conditions.
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<PAGE> 434
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director 2 will pay death benefits during either the Purchase Period
or the Payout Period. How these death benefits will be paid are discussed below.
The death benefit provisions in Portfolio Director 2 may vary from state to
state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law and by the plan, if any.
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 not exceeding the Beneficiary's life
expectancy.
If the Annuitant dies before the Annuity Date, the Beneficiary as named by you
may receive the payout.
Payments certain or payments for a designated period cannot be for a greater
period of time than the Beneficiary's life expectancy. After choosing a payment
option, a Beneficiary may exercise many of the investment options and other
rights that the Participant or Contract Owner had under Portfolio Director 2.
SPECIAL INFORMATION FOR INDIVIDUAL
NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Tax
Qualified Contract are not the same person. If this is the case, and the
Contract Owner dies, there will be no death benefit payable since the death
benefit is only due in the event of the Annuitant's death. However, the Contract
will be transferred to the Contingent Owner,
if any, or to the Contract Owner's estate. Such transfers will be considered a
taxable event by the IRS.
DURING THE PURCHASE PERIOD
Two types of benefits are available if death occurs during the Purchase Period.
Interest Guaranteed Death Benefit and Standard Death Benefit.
INTEREST GUARANTEED DEATH BENEFIT
The interest guaranteed death benefit is payable when death occurs prior to your
reaching the age of 70. This contract provision is not available in some states.
The amount payable under the interest guaranteed death benefit will be at least
equal to the sum of your Account Value in the Fixed Account Option(s) and the
Variable Account Option(s) on the date VALIC receives proof of death.
Here is how to calculate the death benefit:
Step 1: Determine your Fixed Account Option Value by taking the greater of:
<TABLE>
<S> <C> <C>
Value of Fixed Account Option on date
proof of death Is received by VALIC
OR
100% of Purchase Payments placed
in Fixed Account Option
- - (minus)
Amount of all prior withdrawals, charges and
any portion of Account Value applied under
a Payout Option
</TABLE>
Step 2: Determine your Variable Account Option Value by taking the greater of:
<TABLE>
<S> <C> <C>
Value of Variable Account Option on date
proof of death is received by VALIC
OR
100% of Purchase Payments placed in
Variable Account Options
- - (minus)
Prior withdrawals (out of) or transfers
(out of) the Variable Account Option
+ (plus)
Interest at an annual rate of 3%
</TABLE>
Step 3: Add step 1 + 2 = Death Benefit
For purposes of this calculation amounts transferred into the Variable Account
Option will be treated as Purchase Payments.
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 is not required to be.
Also, a Contingent Contract Owner
may be designated.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase
Payments and Account Value
may be allocated to fixed
investment options. Currently,
the Fixed Account Options in
Portfolio Director 2 are Fixed
Account Plus and Short-Term
Fixed Account. Each option
of this type is guaranteed to
earn at least a minimum rate
of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond to
VALIC Separate Account A
Divisions offered by Portfolio
Director 2. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
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<PAGE> 435
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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 2 are described in the "Payout Period" section
of this prospectus.
- If the Life Only Option or Joint and Survivor Life Option were chosen, there
will be no death benefit.
- If the Life With Guaranteed Period Option, Joint and Survivor Life with
Guaranteed Periods Option, Life with Cash or Unit Refund Option or Payment
for a Designated Period Option were chosen, and the entire amount guaranteed
has not been paid, the Beneficiary may choose one of the following within 60
days after death benefits are payable:
- Receive the present value of any remaining payments in a lump sum; or
- Receive the remaining payments under the same terms of the guaranteed
period option chosen by the deceased Participant; or
- Receive the present value of any remaining payments applied under the
Payment for a Designated Period Option for a period equal to or shorter
than the period remaining. Spouse beneficiaries may be entitled to more
favorable treatment under federal tax law.
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<PAGE> 436
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts or to the general public
before Portfolio Director 2 was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
each case, we will use the charges and fees imposed by Portfolio Director 2 in
calculating the Division's investment performance for earlier time frames.
TYPES OF INVESTMENT PERFORMANCE
INFORMATION ADVERTISED
We may advertise the Division's Total Return Performance information and Yield
Performance information.
TOTAL RETURN PERFORMANCE
INFORMATION
Total Return Performance Information is based on the overall dollar or
percentage change in value of an assumed investment in a Division over a given
period of time.
There are seven ways Total Return Performance Information may be advertised:
- Standard Average Annual Total Return
- Nonstandard Average Annual Total Return
- Cumulative Total Return
- Annual Change in Purchase Unit Value
- Cumulative Change in Purchase Unit Value
- Total Return Based on Different Investment Amounts
- An Assumed Account Value of $10,000
Each of these is described below.
STANDARD AVERAGE ANNUAL TOTAL RETURN
Standard Average Annual Total Return shows the average percentage change in the
value of an investment in the Division from the beginning to the end of a given
historical period. The results shown are after all charges and fees have been
applied against the Division. This will include account maintenance fees and
surrender charges that would have been deducted if you surrendered Portfolio
Director 2 at the end of each period shown. Premium taxes are not deducted. This
information is calculated for each Division based on how an initial assumed
payment of $1,000 performed at the end of 1, 3, 5 and 10 year periods. If
Standard Average Annual Return for a Division is not available for a stated
period, we may show the Standard Average Annual Return since Division inception.
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. The SEC
staff takes the position that performance information of an underlying Fund
reduced by Account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director 2 will stay
in the Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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 or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or year.
Account maintenance fees, surrender charges and premium taxes are not deducted.
The effect of these charges, if deducted, would reduce the
DIVISIONS -- subaccounts of
VALIC Separate Account A
which represent the Variable
Account Options in Portfolio
Director 2. Each Division
invests in a different mutual
fund, each having its own
investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director 2.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
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<PAGE> 437
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Division's Annual Change in Purchase Unit Value.
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director 2 charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual 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 DIVISION
We may advertise the AGSPC Money Market Division's Current Yield and Effective
Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market Division over a given 7-day period. The Current Yield does not take
into account surrender charges, account maintenance fees or premium taxes. The
income produced over a 7 day period is then "annualized." This means we are
assuming the amount of income produced during the 7-day period will continue to
be produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The annualized 7-day Current Yield for the last 7
days ended December 31, 1998 was 4.04%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield. The annualized 7-day Effective Yield for the last 7 days ended December
31, 1998 was 4.12%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION:
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate Account A
Division is printed in the six tables below.
The information presented does not reflect the advantage under Portfolio
Director 2 of deferring federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments (see "Federal Tax Matters" in the
prospectus and in the Statement of Additional Information.) The information
presented also does not reflect the advantage under Qualified Contracts of
deferring federal income tax on Purchase Payments.
The performance 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 0.60% 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.
37
<PAGE> 438
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth Fund (Division 15)........................ 04/29/94 20.75% -- -- 17.48% 12.36%
AGSPC International Government Bond Fund (Division
13).................................................. 10/01/91 8.17 -- 6.11% 2.92 11.32
AGSPC Money Market Fund (Division 6)................... 01/16/86 -- 4.57% 3.37 2.86 (0.22)
AGSPC Science & Technology Fund (Division 17).......... 04/29/94 28.38 -- -- 16.37 36.19
AGSPC Social Awareness Fund (Division 12).............. 10/02/89 15.75 -- 22.37 26.39 21.46
AGSPC Stock Index Fund (Division 10)................... 04/20/87 -- 17.65 22.43 26.09 22.58
American Century Ultra (Division 31)................... 07/01/96 22.15 -- -- -- 28.61
Founders Growth (Division 30).......................... 07/01/96 19.43 -- -- -- 19.19
Neuberger Berman Guardian Trust (Division 29).......... 07/01/96 10.57 -- -- -- (2.88)
Putnam Global Growth -- Class A (Division 28).......... 07/01/96 16.82 -- -- -- 22.92
Putnam New Opportunities -- Class A (Division 26)...... 07/01/96 13.64 -- -- -- 18.55
Putnam OTC & Emerging Growth -- Class A (Division
27).................................................. 07/01/96 1.31 -- -- -- 5.30
Scudder Growth and Income (Division 21)(1)............. 07/01/96 16.64 -- -- -- 0.62
Templeton Foreign -- Class A (Division 32)............. 07/01/96 1.19 -- -- -- (9.74)
Vanguard Long-Term Corporate (Division 22)**........... 07/01/96 8.69 -- -- -- 3.54
Vanguard Long-Term Treasury (Division 23)**............ 07/01/96 10.34 -- -- -- 7.21
Vanguard Wellington (Division 25)...................... 07/01/96 15.84 -- -- -- 6.04
Vanguard Windsor II (Division 24)...................... 07/01/96 22.06 -- -- -- 10.30
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director 2 from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director 2.
** The performance figures 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) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)................... 11/02/81 -- 23.10% 18.68% 21.41% 28.61%
Founders Growth (Division 30).......................... 01/05/62 -- 19.47 19.68 20.62 19.19
Neuberger Berman Guardian Trust (Division 29).......... 08/03/93 13.32% -- 12.32 10.27 (2.88)
Putnam Global Growth -- Class A (Division 28).......... 09/01/67 -- 12.29 12.73 17.35 22.92
Putnam New Opportunities -- Class A (Division 26)...... 08/31/90 27.28 -- 19.28 17.06 18.55
Putnam OTC & Emerging Growth -- Class A (Division
27).................................................. 11/01/82 -- 16.60 13.93 6.36 5.30
Scudder Growth and Income (Division 21)................ 11/13/84 -- 15.31 16.25 16.86 0.62
Templeton Foreign -- Class A (Division 32)(1).......... 10/05/82 -- 9.84 4.39 3.91 (9.74)
Vanguard Long-Term Corporate (Division 22)**........... 07/09/73 -- 9.74 6.64 5.27 3.54
Vanguard Long-Term Treasury (Division 23)**............ 5/19/86 -- 9.86 7.12 5.69 7.21
Vanguard Wellington (Division 25)...................... 07/01/29 -- 13.20 14.55 14.68 6.04
Vanguard Windsor II (Division 24)...................... 06/24/85 -- 16.22 19.63 21.81 10.30
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects the 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A Shares.
38
<PAGE> 439
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION FUND INCEPTION TO DECEMBER 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 Growth Fund (Division 15)............................ 04/29/94 21.38% -- -- 18.76% 17.42%
AGSPC International Government Bond Fund
(Division 13)............................................ 10/01/91 8.26 -- 6.97% 4.54 16.39
AGSPC Money Market Fund (Division 6)....................... 01/16/86 -- 4.66% 4.31 4.49 4.54
AGSPC Science & Technology Fund (Division 17).............. 04/29/94 28.90 -- -- 17.67 41.27
AGSPC Social Awareness Fund (Division 12).................. 10/02/89 15.84 -- 22.90 27.51 26.53
AGSPC Stock Index Fund (Division 10)....................... 04/20/87 -- 17.73 22.97 27.22 27.65
American Century Ultra (Division 31)....................... 07/01/96 23.70 -- -- -- 33.68
Founders Growth (Division 30).............................. 07/01/96 21.03 -- -- -- 24.26
Neuberger Berman Guardian Trust (Division 29).............. 07/01/96 12.34 -- -- -- 1.75
Putnam Global Growth -- Class A (Division 28).............. 07/01/96 18.47 -- -- -- 27.99
Putnam New Opportunities -- Class A (Division 26).......... 07/01/96 15.36 -- -- -- 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 07/01/96 3.26 -- -- -- 10.32
Scudder Growth and Income (Division 21).................... 07/01/96 18.29 -- -- -- 5.42
Templeton Foreign -- Class A (Division 32)................. 07/01/96 3.14 -- -- -- (5.44)
Vanguard Long-Term Corporate Portfolio (Division 22)**..... 07/01/96 10.51 -- -- -- 8.48
Vanguard Long-Term Treasury Portfolio (Division 23)**...... 07/01/96 12.12 -- -- -- 12.27
Vanguard Wellington (Division 25).......................... 07/01/96 17.51 -- -- -- 11.10
Vanguard Windsor II (Division 24).......................... 07/01/96 23.62 -- -- -- 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director 2 from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director 2.
** The performance figures 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.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 -- Ultra (Division 31).................... 11/02/81 -- 23.16% 19.27% 22.62% 33.68%
Founders Growth (Division 30).............................. 01/05/62 -- 19.54 20.25 21.84 24.26
Neuberger Berman Guardian Trust (Division 29).............. 08/03/93 13.41% -- 13.03 11.70 1.75
Putnam Global Growth -- Class A (Division 28).............. 09/01/67 -- 12.38 13.43 18.63 27.99
Putnam New Opportunities -- Class A (Division 26).......... 08/31/90 27.35 -- 19.86 18.35 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)...... 11/01/82 -- 16.67 14.61 7.88 10.32
Scudder Growth and Income (Division 21).................... 11/13/84 -- 15.39 16.89 18.15 5.42
Templeton Foreign -- Class A (Division 32)(1).............. 10/05/82 -- 9.92 5.30 5.50 (5.44)
Vanguard Long-Term Corporate Portfolio (Division 22)**..... 07/09/73 -- 9.83 7.48 6.83 8.48
Vanguard Long-Term Treasury Portfolio (Division 23)**...... 05/19/86 -- 9.94 7.95 7.24 12.27
Vanguard Wellington (Division 25).......................... 07/01/29 -- 13.29 15.21 16.01 11.10
Vanguard Windsor II (Division 24).......................... 06/24/85 -- 16.30 20.21 23.01 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
39
<PAGE> 440
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 Growth Fund (Division 15)............................. 04/29/94 147.15% -- -- 67.50% 17.42%
AGSPC International Government Bond Fund (Division 13)...... 10/01/91 77.76 -- 40.05% 14.25 16.39
AGSPC Money Market Fund (Division 6)........................ 01/16/86 -- 57.67% 23.48 14.08 4.54
AGSPC Science & Technology Fund (Division 17)............... 04/29/94 227.24 -- -- 62.94 41.27
AGSPC Social Awareness Fund (Division 12)................... 10/02/89 289.72 -- 180.44 107.34 26.53
AGSPC Stock Index Fund (Division 10)........................ 04/20/87 -- 411.61 181.17 105.90 27.65
American Century Ultra (Division 31)........................ 07/01/96 70.19 -- -- -- 33.68
Founders Growth (Division 30)............................... 07/01/96 61.14 -- -- -- 24.26
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 33.78 -- -- -- 1.75
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 52.77 -- -- -- 27.99
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 42.92 -- -- -- 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 8.36 -- -- -- 10.32
Scudder Growth and Income (Division 21)..................... 07/01/96 52.18 -- -- -- 5.42
Templeton Foreign -- Class A (Division 32).................. 07/01/96 8.03 -- -- -- (5.44)
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 28.37 -- -- -- 8.48
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 33.11 -- -- -- 12.27
Vanguard Wellington (Division 25)........................... 07/01/96 49.69 -- -- -- 11.10
Vanguard Windsor II (Division 24)........................... 07/01/96 69.90 -- -- -- 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director 2 from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director 2.
** The performance figures 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.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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 Ultra (Division 31)........................ 11/02/81 -- 703.00% 141.35% 84.36% 33.68%
Founders Growth (Division 30)............................... 01/05/62 -- 495.93 151.44 80.88 24.26
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 97.56% -- 84.49 39.37 1.75
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 221.24 87.78 66.94 27.99
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 649.23 -- 147.43 65.75 23.62
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/07/82 -- 367.32 97.74 25.57 10.32
Scudder Growth and Income (Division 21)..................... 11/13/84 -- 318.49 118.17 64.95 5.42
Templeton Foreign -- Class A (Division 32)(1)............... 10/05/82 -- 157.46 29.45 17.43 (5.44)
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 155.39 43.45 21.91 8.48
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 158.05 46.62 23.31 12.27
Vanguard Wellington (Division 25)........................... 07/01/29 -- 248.12 103.00 56.15 11.10
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 352.84 150.98 86.11 15.37
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects 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.
** The performance figures 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) On January 1, 1993, the Templeton Foreign Fund -- Class A implemented a Rule
12b-1 plan, which affects subsequent performance. VALIC Separate Account A
purchases shares of this fund at net asset value and without sales charges
generally applicable to Class A shares.
40
<PAGE> 441
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director 2 may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the Act, if registration is no
longer required;
- Stop accepting new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
If the Contract is being offered as a retirement plan through your employer, you
should always refer to the terms and conditions in your employer's plan when
reviewing the description of Portfolio Director 2 in this prospectus.
Plan loans from the Fixed Account Options may be allowed by your employer's
plan. Refer to your plan for a description of charges and other information.
41
<PAGE> 442
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About VALIC Separate Account A" section of this prospectus,
VALIC Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Participant, you may be entitled to give voting instructions to us
as to how VALIC Separate Account A should vote its Fund shares on these matters.
Those persons entitled to give voting instructions will be determined before the
shareholders meeting is held. For more information about these shareholder
meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. This will be true even if your
employer is the Contract Owner. Contract Owners will instruct VALIC Separate
Account A in accordance with these instructions. You will receive proxy material
and a form on which voting instructions may be given before the shareholder
meeting is held.
You will not have the right to give voting instructions if Portfolio Director 2
was issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
DURING PURCHASE PERIOD
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
DURING PAYOUT PERIOD OR AFTER A DEATH
BENEFIT HAS BEEN PAID
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in Portfolio Director 2
may have a number of shareholders including VALIC Separate Account A, VALIC
other affiliated insurance company separate accounts and retirement plans within
the American General group of companies and public shareholders.
VALIC Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the
Participants invested in that Fund entitled to give instructions at that
shareholder meeting. VALIC Separate Account A will vote the shares of the Funds
it holds for which it receives no voting instruction in the same proportion as
the shares for which voting instructions have been received.
VALIC Separate Account A 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.
42
<PAGE> 443
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director 2 provides tax-deferred accumulation over time, but is
subject to federal income and excise taxes, mentioned briefly below. You should
refer to the Statement of Additional Information for further details. Section
references are to the Internal Revenue Code ("Code"). We do not attempt to
describe any potential estate or gift tax, or any applicable state, local or
foreign tax law other than possible premium taxes mentioned under "Premium Tax
Charge." Remember that future legislation could modify the rules discussed
below, and always consult your personal tax adviser regarding how the current
rules apply to your specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or 408(b) IRA, as a Section 408(b)
Individual Retirement Annuity ("IRA"), or is instead a nonqualified Contract.
Portfolio Director 2 is used under the following types of retirement
arrangements:
- Section 403(b) annuities for employees
of public schools and
Section 501(c)(3) tax-exempt
organizations;
- Section 401(a) and 403(a) qualified plans of for-profit employers and other
employers (including self-employed individuals);
- Section 408(b) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs.
- Section 408(p) SIMPLE retirement
accounts.
The foregoing Contracts are "Qualified Contracts." Certain series of Portfolio
Director 2 may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity ("Roth IRA").
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director 2 is also available through "Non-Qualified
Contracts" to the extent acquired by "Non-Natural Persons." Such Non-Qualified
Contracts generally include unfunded, nonqualified deferred compensation plans
of corporate employers as well as individual annuity contracts issued to
individuals outside of the context of any formal employer or employee retirement
plan or arrangement. Non-Qualified Contracts generally may invest only in mutual
funds which are not available to the general public outside of annuity contracts
or life insurance contracts.
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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
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 or penalty taxes, 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.
43
<PAGE> 444
- --------------------------------------------------------------------------------
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although VALIC can provide no assurance that the IRS will not 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 if
such a challenge were made.
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
how ownership of the Mutual Fund shares might be imputed for Federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons will be taxed currently to the owner and such contracts
will not be treated as annuities for federal income tax purposes.
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- Portfolio Director 2 Contract issued to a tax favored retirement program
purchased with pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- Conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[BAR GRAPH]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. The deduction of
fees and charges for both tax-deferred plans is reflected in the chart. Variable
options incur mortality and expense risk fee and administration and distribution
fee charges (0.60% - 0.85% during the purchase period and 1% - 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.
44
<PAGE> 445
- --------------------------------------------------------------------------------
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 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.
45
<PAGE> 446
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
46
<PAGE> 447
(This page intentionally left blank)
47
<PAGE> 448
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>
48
<PAGE> 449
(This page intentionally left blank)
49
<PAGE> 450
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director
2).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 451
(This page intentionally left blank)
51
<PAGE> 452
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............... 15
Exchanges From Independence Plus Contracts...... 15
Exchanges From V-Plan Contracts................. 16
Exchanges From SA-1 and SA-2 Contracts.......... 17
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 Division 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 Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 29
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 30
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 30
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 31
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 32
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 32
Founders Growth Division Thirty Compared to S&P
500 Index..................................... 33
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 33
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MCSI World Index and S&P 500
Index......................................... 34
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 35
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 35
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 36
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 36
Vanguard Long-Term Corporate Division Twenty-two
Compared to Merrill Lynch Corporate Master
Index......................................... 37
Vanguard Long-Term U.S. Treasury Division
Twenty-three Compared to Lehman Brothers
Treasury Long-Term Index...................... 37
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 38
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 39
Payout Payments..................................... 40
Assumed Investment Rate......................... 40
Amount of Payout Payments....................... 40
Payout Unit Value............................... 40
Illustration of Calculation of Payout Unit
Value......................................... 41
Illustration of Payout Payments................. 41
Distribution of Variable Annuity Contracts.......... 42
Experts............................................. 42
Comments on Financial Statements.................... 43
</TABLE>
52
<PAGE> 453
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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> 454
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875-40 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 455
[Momento Photo]
PORTFOLIO DIRECTOR T
SEPARATE ACCOUNT A
Prospectus
May 1, 1999
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 456
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR T
SEPARATE ACCOUNT A
May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers certain series of
Portfolio Director T that consist of group and individual variable annuity
contracts (the "Contracts") to Participants in certain employer sponsored
retirement plans. Portfolio Director T consists of group variable annuity
contracts that are offered by VALIC to Participants in certain employer
sponsored retirement plans. Portfolio Director T 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 T permits you to invest in and receive retirement benefits in
up to 2 Fixed Account Options and/or an array of up to 10 Variable Account
Options. Each of these investment options is explained more fully 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, life
insurance contracts, or certain employer-sponsored retirement plans will not be
available within your contract. Here is a list of these investment options:
TWO FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
TEN VARIABLE ACCOUNT OPTIONS*
<TABLE>
<S> <C> <C>
American General Series Portfolio Scudder Kemper Investments, Inc.: The Vanguard Group, Inc.:
Company (AGSPC): Scudder Growth and Income Fund Vanguard Long-Term
Asset Allocation Fund Corporate Fund
Growth Fund Vanguard Long-Term
Money Market Fund Treasury Fund
Science & Technology Fund
Small Cap Index Fund
Social Awareness Fund
Stock Index Fund
</TABLE>
* Each of these mutual funds is publicly available except for the seven AGSPC
Funds.
- --------------------------------------------------------------------------------
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 affiliates.
This prospectus provides you with information you should know before investing
in Portfolio Director T. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1999, contains additional
information about Portfolio Director T 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. The Statement of Additional Information has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 457
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS........................... 1
FEE TABLE...................................... 2
SUMMARY........................................ 4
SELECTED PURCHASE UNIT DATA.................... 6
GENERAL INFORMATION............................ 7
About Portfolio Director T................ 7
About VALIC............................... 7
About VALIC Separate Account A............ 7
Units of Interests........................ 7
Distribution of the Contracts............. 8
VARIABLE ACCOUNT OPTIONS....................... 9
Summary of Funds.......................... 9
PURCHASE PERIOD................................ 15
Purchase Payments......................... 15
Purchase Units............................ 15
Calculation of Purchase Unit Value........ 15
Choosing Investment Options............... 16
Fixed Account Options................ 16
Variable Account Options............. 16
Stopping Purchase Payments................ 16
TRANSFERS BETWEEN INVESTMENT OPTIONS........... 17
During the Purchase Period................ 17
During the Payout Period.................. 17
Communicating Transfer or Reallocation
Instructions............................ 17
Effective Date of Transfer................ 17
FEES AND CHARGES............................... 18
Account Maintenance Fee................... 18
Surrender Charge.......................... 18
Amount of Surrender Charge........... 18
10% Free Withdrawal.................. 18
Exceptions to Surrender Charge....... 18
Premium Tax Charge........................ 19
Separate Account Charges.................. 19
Fund Annual Expense Charges............... 19
Other Tax Charges......................... 19
Reduction or Waiver of Account Maintenance
Fee, Surrender, Mortality and Expense
Risk Fee or Administration and
Distribution Fee Charges................ 20
Separate Account Expense Reimbursement.... 20
PAYOUT PERIOD.................................. 21
Fixed Payout.............................. 21
Variable Payout........................... 21
Combination Fixed and Variable Payout..... 21
Payout Date............................... 21
Payout Options............................ 21
Enhancements to Payout Options............ 22
Payout Information........................ 22
SURRENDER OF ACCOUNT VALUE..................... 23
When Surrenders Are Allowed............... 23
Amount That May Be Surrendered............ 23
Surrender Restrictions.................... 23
Partial Surrenders........................ 23
Systematic Withdrawals.................... 23
Distributions Required by Federal Tax
Law..................................... 23
EXCHANGE PRIVILEGE............................. 25
Restrictions on Exchange Privilege........ 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Taxes and Conversion Costs................ 25
Surrender Charges......................... 25
Exchange Offers for Contracts Other Than
Portfolio Director, Portfolio Director 2
and Portfolio Director T................ 25
Exchange Offer for Portfolio Director,
Portfolio Director 2 and Portfolio
Director T.............................. 26
Comparison of Contracts................... 26
Features of Portfolio Director T.......... 26
DEATH BENEFITS................................. 27
Beneficiary Information................... 27
Special Information for Individual Non-Tax
Qualified Contracts..................... 27
During the Purchase Period................ 27
Interest Guaranteed Death Benefit.... 27
Standard Death Benefit............... 28
During the Payout Period.................. 28
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS................... 29
Types of Investment Performance
Information Advertised.................. 29
Total Return Performance Information.... 29
Standard Average Annual Total Return.... 29
Nonstandard Average Annual Total
Return.................................. 29
Cumulative Total Return................. 29
Annual Change in Purchase Unit Value.... 29
Cumulative Change in Purchase Unit
Value................................ 30
Total Return Based on Different
Investment Amounts................... 30
An Assumed Account Value of $10,000..... 30
Yield Performance Information............. 30
AGSPC Money Market Division............. 30
Divisions Other Than The AGSPC Money
Market Division...................... 30
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in Purchase
Unit Value Tables....................... 30
OTHER CONTRACT FEATURES........................ 34
Changes That May Not Be Made.............. 34
Change of Beneficiary..................... 34
Contingent Owner.......................... 34
Cancellation -- The 20 Day "Free Look".... 34
We Reserve Certain Rights................. 34
Relationship to Employer's Plan........... 34
VOTING RIGHTS.................................. 35
Who May Give Voting Instructions.......... 35
Determination of Fund Shares Attributable
to Your Account......................... 35
During Purchase Period.................. 35
During Payout Period or after a Death
Benefit Has Been Paid................ 35
How Fund Shares Are Voted................. 35
FEDERAL TAX MATTERS............................ 36
Type of Plans............................. 36
Tax Consequences in General............... 36
Effect of Tax-Deferred Accumulations...... 37
YEAR 2000...................................... 39
Year 2000 Risks........................... 39
</TABLE>
(i)
<PAGE> 458
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 17
Annuitant 27
Assumed Investment Rate 21
Beneficiary 27
Contract Owner 27
Divisions 29
Fixed Account Options 27
Home Office 17
Mutual Fund or Fund 07
Participant 01
Participant Year 18
Payout Period 17
Payout Unit 21
Purchase Payments 15,29
Purchase Period 17
Purchase Unit 15,16
VALIC Separate Account A 35
Variable Account Options 09,27
</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 T,
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 T 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 T 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 T. 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> 459
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $ 15
</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 Fund(7) 0.25% 0.55% -- 0.80%
AGSPC Growth Fund 0.25 0.55 -- 0.80
AGSPC Money Market Fund 0.25 0.55 -- 0.80
AGSPC Science & Technology Fund 0.25 0.55 -- 0.80
AGSPC Small Cap Index Fund 0.25 0.55 -- 0.80
AGSPC Social Awareness Fund 0.25 0.55 -- 0.80
AGSPC Stock Index Fund 0.25 0.55 -- 0.80
Scudder Growth and Income
Fund(4) 0.25 0.80 (0.25%) 0.80
Vanguard Long-Term Corporate
Fund(5)(7) 0.25 0.80 (0.25) 0.80
Vanguard Long-Term Treasury
Fund(5)(7) 0.25 0.80 (0.25) 0.80
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
FUND FEES EXPENSES(6) EXPENSES
---- ---------- ----------- ----------
<S> <C> <C> <C>
AGSPC Asset Allocation Fund 0.50% 0.04% 0.54%
AGSPC Growth Fund 0.80 0.04 0.84
AGSPC Money Market Fund 0.50 0.04 0.54
AGSPC Science & Technology Fund 0.90 0.05 0.95
AGSPC Small Cap Index Fund 0.35 0.04 0.39
AGSPC Social Awareness Fund 0.50 0.04 0.54
AGSPC Stock Index Fund 0.27 0.04 0.31
Scudder Growth and Income Fund 0.44 0.30 0.74
Vanguard Long-Term Corporate Fund 0.03 0.27 0.30
Vanguard Long-Term Treasury Fund 0.01 0.26 0.27
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
(2) Reductions in the surrender charge and the account maintenance fee are
available if certain conditions are met. See "Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality and Expense Risk Fee or Administration
and Distribution Fee Charges" and "Exceptions to Surrender Charge" in this
prospectus.
(3) The mortality and expense risk fee and administration and distribution fee
reflected in the Fee Table is deducted during the Purchase Period. The
mortality and expense risk fee and administration and distribution fee
deducted during the Payout Period is computed at an annualized rate of
1.00%, depending upon the Variable Account Option selected.
(4) For Scudder Growth and Income Fund 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 this Division are reduced by an amount equal to
payments (0.25%) from the underlying Fund and/or its affiliate for
administrative and shareholder services provided by the Company. See "Fees
and Charges -- Separate Account Expense Reimbursement" in this prospectus
for more information.
(5) For these Funds the Total Separate Account Fee equals the VALIC Separate
Account 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 and other miscellaneous expenses. See each Fund's prospectus for a
detailed explanation of these fees.
(7) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund. The Vanguard Long-Term Corporate Fund was formerly known as the
Vanguard Fixed Income Securities Fund -- Long-Term Corporate Portfolio
Division. The Vanguard Long-Term Treasury Fund was formerly known as the
Vanguard Fixed Income Securities Fund -- Long-Term U.S. Treasury Portfolio.
2
<PAGE> 460
EXAMPLE #1 -- If you do not surrender Portfolio Director T at the end of the
period shown or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director T 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 $14 $ 44 $ 76 $167
AGSPC Growth Division 15 17 53 92 200
AGSPC Money Market Division 6 14 44 76 167
AGSPC Science & Technology Division 17 18 57 97 212
AGSPC Small Cap Index Division 14 13 39 68 150
AGSPC Social Awareness Division 12 14 44 76 167
AGSPC Stock Index Division 10 12 37 64 141
Scudder Growth and Income Division 21 16 50 87 189
Vanguard Long-Term Corporate Division 22 12 36 63 140
Vanguard Long-Term Treasury Division 23 11 36 62 137
</TABLE>
EXAMPLE #2 -- If you surrender Portfolio Director T 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 T 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 $ 94 $126 $167
AGSPC Growth Division 15 64 103 142 200
AGSPC Money Market Division 6 61 94 126 167
AGSPC Science & Technology Division 17 65 106 147 212
AGSPC Small Cap Index Division 14 59 89 118 150
AGSPC Social Awareness Division 12 61 94 126 167
AGSPC Stock Index Division 10 59 89 114 141
Scudder Growth and Income Division 21 63 100 137 189
Vanguard Long-Term Corporate Division 22 58 86 113 140
Vanguard Long-Term Treasury Division 23 58 86 112 137
</TABLE>
- ------------
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.
3
<PAGE> 461
SUMMARY
- --------------------------------------------------------------------------------
Portfolio Director T is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director T's major features is presented below. For a more detailed
discussion of Portfolio Director T, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director T offers you a choice from among 10 Variable Account Options
and two Fixed Account Options. There may be certain limitations on how many
investment options you may invest in at any one time.
- --------------------------------------------------------------------------------
<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 SUBADVISER
- --------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Small Cap Index Growth through investments tracking the VALIC Bankers Trust
EQUITY Fund Russell 2000(R) Index Company(1)
FUNDS
------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments tracking VALIC Bankers Trust
Index the S&P 500(R) Index Company(1)
Fund
- --------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
------------------------------------------------------------------------------------------------------------
EQUITY Scudder Growth Long-term growth of capital, current Scudder Kemper N/A
FUNDS and Income Fund income and growth of income Investments, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
INCOME Vanguard Long-Term Income through investment Vanguard N/A
FUNDS Corporate Fund in long-term high quality corporate
bonds
------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Income through investment in Vanguard N/A
Treasury Fund long-term U.S. Treasury bonds
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUND Fund securities
- --------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Maximum return through investments in VALIC N/A
ALLOCATION Allocation a mix of stocks, bonds and money market
FUND Fund securities
- --------------------------------------------------------------------------------------------------------------------------------
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998,
Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. The merger is contingent upon various regulatory approvals. On April 20, 1999,
the Fund's Board of Directors approved a new investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval. If the merger is approved and completed, Deutsche Bank AG, as the Sub-Adviser's new parent company,
will control the operations of the Sub-Adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
</TABLE>
4
<PAGE> 462
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual 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 T 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 T 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 T'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 1/2% 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 0.80% during the purchase period and 1.00% 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
Mutual Fund or its affiliate or distributor for providing the Mutual 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 T 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> 463
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC AGSPC
ASSET AGSPC MONEY SCIENCE & SMALL CAP SOCIAL AGSPC
ALLOCATION GROWTH MARKET TECHNOLOGY INDEX AWARENESS STOCK INDEX
DIVISION 5 DIVISION 15 DIVISION 6 DIVISION 17 DIVISION 14 DIVISION 12 DIVISION 10(1)
---------- ----------- ---------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 31,350 4,324,799 5,325,479 3,228,389 58,825 1,218,871 6,859,835
Purchase Unit Value $3.882024 $ 2.448443 $1.786658 $ 3.241847 $2.125983 $ 3.825649 $ 4.875028
May 1, 1998
Purchase Unit Value(2) $3.617652 $ 2.380634 $1.737005 $ 2.754330 $2.409322 $ 3.461873 $ 4.386532
<CAPTION>
SCUDDER VANGUARD VANGUARD
GROWTH LONG-TERM LONG-TERM
AND INCOME CORPORATE TREASURY
DIVISION 21 DIVISION 22 DIVISION 23
----------- ----------- -----------
<S> <C> <C> <C>
December 31, 1998
Purchase Units in Force 4,494,004 2,949,044 3,682,809
Purchase Unit Value $ 1.542160 $ 1.312731 $ 1.349397
May 1, 1998
Purchase Unit Value(2) $ 1.633700 $ 1.231780 $ 1.220354
</TABLE>
- ------------
(1) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(2) Purchase Unit Value At Date Of Inception.
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.
6
<PAGE> 464
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR T
Portfolio Director T 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 T can come from different sources, like
payroll deductions or money transfers. Your retirement savings process with
Portfolio Director T will involve two stages: the Purchase Period; and the
Payout Period. The first is when you make contributions into Portfolio Director
T 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 T.
ABOUT VALIC
We were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director T. 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 T'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 T. 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." Ten Divisions
are available and represent the Variable Account Options in Portfolio Director
T. Each of these Divisions invests in a different Mutual Fund made available
through Portfolio Director T. For example, Division Ten represents and invests
in the Stock Index Fund. The earnings (or losses) of each Division are credited
to (or charged against) the assets of that Division, and do not affect the
performance of the other Divisions of VALIC Separate Account A.
VALIC established Separate Account A on July 25, 1979 under Texas insurance law
to allow you to be able to invest in a number of Variable Account Options
available in Portfolio Director T. 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 ("Act"). 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 T, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director T, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director T be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director T. 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
All inquiries regarding
PORTFOLIO DIRECTOR T
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
7
<PAGE> 465
- --------------------------------------------------------------------------------
mutual fund minus any applicable fees and charges to VALIC Separate Account A.
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors -- our address
is 2929 Allen Parkway,
Houston, Texas 77019.
For more information about
A.G. DISTRIBUTORS, see the
Statement of Additional
Information
8
<PAGE> 466
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director T enables you to participate in Divisions that represent ten
Variable Account Options. These Divisions comprise all of the Variable Account
Options that are made available to you through VALIC Separate Account A.
According to your retirement program, you may not be able to invest in all ten
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. Three of the Mutual Funds are also
available to the general public. These mutual funds serve as the investment
vehicles for Portfolio Director T and include:
- - American General Series Portfolio
Company (AGSPC) -- offers 7 funds, for which VALIC serves as investment
adviser, for 2 of such funds, Banker Trust Company serves as investment
sub-adviser and for 2 of such funds, T. Rowe Price & Associates, Inc. serves
as investment sub-adviser.
- - Scudder Kemper Investments, Inc. -- offers 1 fund for which Scudder Kemper
Investments, Inc. serves as investment adviser.
- - The Vanguard Group Inc. -- offers 2 funds for which Vanguard Fixed Income
Group serves as investment adviser.
Three of the Mutual Funds are also available to the general public.
Each of these Funds 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 as well as the Standard Average Annual Total Return for a 1, 3, 5 and 10
year period, if available. If Standard Average Annual Return for a Division is
not available for a stated period, we may show the Standard Average Annual
Return since Division inception. The performance information in the tables and
graphs 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. They will not reflect any deduction
for account maintenance fees, surrender charges and premium taxes. These charges
would further reduce your return. The Account Values in the graphs shown 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 Funds
actual historical performance of the related Separate Account Divisions. The
returns shown in the tables for certain Funds (Divisions 21-23) 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. 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.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical periods shown below. 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 T at the end of the specified period. Premium
taxes are not deducted. This information is calculated for each Division based
on how an initial investment of $1,000 performed at the end of the specified
periods shown.
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 T.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
9
<PAGE> 467
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
January 1, 1989 $ Value
- ------------------------- --------
<S> <C>
01/01/89 $10,000
12/31/89 11,601
12/31/90 11,232
12/31/91 13,516
12/31/92 13,311
12/31/93 14,428
12/31/94 14,127
12/31/95 17,481
12/31/96 19,263
12/31/97 23,424
12/31/98 27,504
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[GRAPH]
PERIOD ENDED DECEMBER 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
12/31/94 10,032
12/31/95 14,706
12/31/96 17,410
12/31/97 20,893
12/31/98 24,484
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund. The Standard Average Annual Total Return for the AGSPC Asset
Allocation Fund Division 5 for the 1, 3, 5, and 10 year period was 12.35%,
14.98%, 13.08%, and 10.56%, respectively. The Division commenced operations
on September 6, 1983.
** The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 12.12%, 17.24% and
20.51%, respectively. The Division commenced operations on April 29, 1994.
10
<PAGE> 468
AGSPC
MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,812
12/31/90 11,573
12/31/91 12,116
12/31/92 12,409
12/31/93 12,641
12/31/94 13,016
12/31/95 13,629
12/31/96 14,198
12/31/97 14,812
12/31/98 15,454
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,489
12/31/95 20,016
12/31/96 22,596
12/31/97 22,994
12/31/98 32,418
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.42)%, 2.65%, 3.15% and
4.37%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 35.91%,
16.13% and 28.12%, respectively. The Division commenced operations on April
29, 1994.
11
<PAGE> 469
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
12/31/92 11,141
12/31/93 12,809
12/31/94 12,284
12/31/95 15,551
12/31/96 18,004
12/31/97 21,855
12/31/98 21,260
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,105
12/31/90 9,902
12/31/91 12,558
12/31/92 12,873
12/31/93 13,779
12/31/94 13,473
12/31/95 18,563
12/31/96 22,824
12/31/97 30,296
12/31/98 38,256
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Small Cap Index Fund
Division 14 for the 1, 3 and 5 year period and since inception was (7.15)%,
9.54%, 9.90% and 11.88%, respectively. The Division commenced operations on
May 1, 1992.
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. Russell(TM) is a trademark of the Frank Russell Company.
*** The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception was 21.21%,
26.13%, 22.12% and 15.52%, respectively. The Division commenced operations
on October 2, 1989.
12
<PAGE> 470
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,809
12/31/90 12,216
12/31/91 15,626
12/31/92 16,530
12/31/93 18,015
12/31/94 17,996
12/31/95 24,502
12/31/96 29,826
12/31/97 39,364
12/31/98 50,146
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
SCUDDER GROWTH AND
INCOME FUND***
(Division 21)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, current income and growth of income. The Fund
invests primarily in common stocks, preferred stocks, and securities convertible
into common stocks of companies which offer the prospect for growth of earnings
while paying current dividends.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,499
12/31/90 12,083
12/31/91 15,319
12/31/92 16,605
12/31/93 18,991
12/31/94 19,282
12/31/95 25,018
12/31/96 30,227
12/31/97 38,989
12/31/98 41,018
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.32%, 25.83%, 22.18%
and 17.41%, respectively. The Division commenced operations on April 20,
1987.
** "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability
of investing in this Fund.
*** The Standard Average Annual Total Return for the Scudder Growth and Income
Fund Division 21 for the 1 year period and since inception was 0.42% and
16.40%, respectively. The Division commenced operations on July 1, 1996.
13
<PAGE> 471
VANGUARD LONG-TERM
CORPORATE FUND*
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,395
12/31/90 11,976
12/31/91 14,325
12/31/92 15,560
12/31/93 17,626
12/31/94 16,522
12/31/95 20,658
12/31/96 20,550
12/31/97 23,122
12/31/98 25,033
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
VANGUARD LONG-TERM
TREASURY FUND**
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,668
12/31/90 12,214
12/31/91 14,190
12/31/92 15,080
12/31/93 17,425
12/31/94 16,034
12/31/95 20,635
12/31/96 20,040
12/31/97 22,574
12/31/98 25,293
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund-Long-Term Corporate Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Corporate Fund
Division 22 for the 1 year period and since inception was 3.33% and 8.46%,
respectively. The Division commenced operations on July 1, 1996.
** The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund-Long-Term U.S. Treasury Portfolio. The Standard
Average Annual Total Return for the Vanguard Long-Term Treasury Fund Division
23 for the 1 year period and since inception was 6.98% and 10.11%,
respectively. The Division commenced operations on July 1, 1996.
14
<PAGE> 472
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 T 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 T 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 Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided, unless you otherwise so specify.
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 these circumstances, we will take one of the
following actions:
Return Purchase Payments. If we do not have your name, address or social
security number, we will return the Purchase Payment to your employer unless
this information is immediately provided to us.
Employer-Directed Account. If we have your name, address and social security
number and we have an Employer-Directed Account Agreement from your employer,
generally we will deposit your Purchase Payment
in an "Employer-Directed" account invested in our Money Market Division
Option. You may not transfer these amounts until VALIC has received a
completed application or enrollment form.
Starter Account. If we have your name, address and social security number, but
we do not have an Employer-Directed Account Agreement from your employer, we
will deposit your Purchase Payment in a "starter" account invested in the
Money Market Division. We will send you follow-up letters requesting the
information necessary to complete the application, including your allocation
instructions. Unless a completed application or enrollment form is received by
us within 105 days of establishment of your starter account, the account
balance, including earnings, will be returned to your employer. We are not
responsible for any adverse tax consequences to you that may result from the
return of your employer's contributions.
PURCHASE UNITS
A Purchase Unit is a unit of interest owned by you in your Variable Account
Option. Purchase Units apply only to the Variable Account Options selected for
your account. Purchase Unit values are calculated at the close of regular
trading of the New York Stock Exchange (the "Exchange"), currently 4:00 p.m. New
York time (see Calculation of Purchase Unit Value below for more information.)
Purchase Units will be credited the same business day if Purchase Payments are
received by our Home Office before the close of the Exchange. If not, they will
be calculated and credited the next business day. Purchase Unit values will vary
depending on the net investment results of each of the Variable Account Options.
This means the value of your Variable Account Option will fluctuate.
CALCULATION OF PURCHASE UNIT VALUE
The Purchase Unit value for a Division is calculated as shown below:
Step 1: Calculate the gross investment rate:
Gross Investment Rate
= (EQUALS)
The Division's investment income and capital gains and losses (whether
realized or unrealized) on that day from the assets attributable to the
Division.
/ (DIVIDED BY)
The value of the Division for the immediately preceding day on which the
values are calculated.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director T.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
15
<PAGE> 473
- --------------------------------------------------------------------------------
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 12 investment options offered in Portfolio Director T. This includes 2
Fixed Account Options and 10 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 10 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 "Summary" 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 T account has been surrendered. 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. Any
such account closure will be subject to applicable distribution restrictions
under the Contract and/or under your employer's plan.
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.
16
<PAGE> 474
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 T 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 T'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 T'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 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.
17
<PAGE> 475
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director T, 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 T 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 that will be deducted from the amount withdrawn. 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.
18
<PAGE> 476
- --------------------------------------------------------------------------------
- - 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 T 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 1/2%.
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 0.80% during the Purchase Period and 1.00%
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. 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 T, 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.
19
<PAGE> 477
- --------------------------------------------------------------------------------
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 T 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 to 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 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.
20
<PAGE> 478
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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
Up to seven Variable Account Options may be chosen, or up to six Variable
Account Options if the Fixed Payout is chosen.
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).
21
<PAGE> 479
- --------------------------------------------------------------------------------
- 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, in the form of an
excise tax, if you do not meet an exception under 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, subject to any limitations under the
contract or plan.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
22
<PAGE> 480
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.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. 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 T. There will be no surrender charge for withdrawals using this method,
which provides for:
- Payments to be made to you;
- Payment over a stated period of time (but not less than five years);
- Payment of a stated yearly dollar amount or percentage (the amount or
percentage may not exceed 20% of your Account Value at the time election is
made).
We may require a minimum withdrawal amount under this method. The portion of
your account that has not been withdrawn will continue to receive the investment
return of the Variable Account Options which you selected. A systematic
withdrawal election may not be changed but can be revoked at no charge. Once
revoked, a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. We reserve the
right to discontinue any or all systematic withdrawals or to change its terms,
at any time.
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 T Contract and VALIC.
23
<PAGE> 481
- --------------------------------------------------------------------------------
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.
24
<PAGE> 482
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director T. These other contracts are listed below. We
will allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director T. 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. An exchange may require the issuance of a Contract or may be subject
to any other requirements that the Company may impose.
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 T to contract forms other than Portfolio
Director 2 and Portfolio Director Plus 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 T. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director T. 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 T.
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 T.
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 T 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 T, 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 T 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 T.)
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 T 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 T 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, PORTFOLIO
DIRECTOR 2 AND PORTFOLIO DIRECTOR T
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
25
<PAGE> 483
- --------------------------------------------------------------------------------
Portfolio Director T will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
EXCHANGE OFFER FOR PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2 AND PORTFOLIO
DIRECTOR T
Subject to the restrictions stated below and the general restrictions on
exchange privileges stated above you may exchange from Portfolio Director and
Portfolio Director 2 to Portfolio Director T. You may also exchange from
Portfolio Director T to Portfolio Director 2. Once you have made any of the
exchanges described in this paragraph you must wait 120 days before making
another exchange between Portfolio Director T, Portfolio Director and Portfolio
Director 2.
Portfolio Director, Portfolio Director 2 and Portfolio Director T are available
to qualified contracts and certain non-qualified contracts. Portfolio Director T
is not available to non-qualified contracts issued to individuals. Please read
the "Federal Tax Matters" in this prospectus for information about the federal
income tax treatment of Portfolio Director T.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director T. A more detailed comparison of the
features, charges, and restrictions between each above listed other contract and
Portfolio Director T is provided in the Statement of Additional Information.
Portfolio Director, Portfolio Director 2 and Portfolio Director T contain the
same provisions except as to the level of fees and as to available Variable
Account Options and certain Separate Account Expense Reimbursements. See "Fees
and Changes" in this prospectus.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
Please refer to the prospectus and Statement of Additional Information for
Portfolio Director and the different series of Portfolio Director 2 for
information about the specific features and charges of such products.
Features of Portfolio Director T
In deciding whether you want to exercise these exchange privileges, you should
consider the following factors of Portfolio Director T.
- Portfolio Director T has 3 publicly available mutual funds as investment
options.
- The Portfolio Director T 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 T has an Interest Guaranteed Death Benefit.
- Portfolio Director T's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Portfolio Director T's guaranteed annuity rates and guaranteed interest
rates may be less favorable than the other contracts.
26
<PAGE> 484
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director T 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 T 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 and by the plan, if any.
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 not exceeding the Beneficiary's life
expectancy.
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 T.
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 is not required to be. Also,
a Contingent Contract Owner
may be designated.
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 T 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 T. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
27
<PAGE> 485
- --------------------------------------------------------------------------------
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 T 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.
28
<PAGE> 486
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 T was first available to you. We may therefore,
advertise investment performance since the inception of the underlying Funds. In
each case, we will use the charges and fees imposed by Portfolio Director T in
calculating the Division's investment performance for earlier time frames.
TYPES OF INVESTMENT PERFORMANCE INFORMATION ADVERTISED
We may advertise the Division's Total Return Performance information and Yield
Performance information.
TOTAL RETURN PERFORMANCE INFORMATION
Total Return Performance Information is based on the overall dollar or
percentage change in value of an assumed investment in a Division over a given
period of time.
There are seven ways Total Return Performance Information may be advertised:
- Standard Average Annual Total Return
- Nonstandard Average Annual Total Return
- Cumulative Total Return
- Annual Change in Purchase Unit Value
- Cumulative Change in Purchase Unit Value
- Total Return Based on Different Investment Amounts
- An Assumed Account Value of $10,000
Each of these is described below.
STANDARD AVERAGE ANNUAL TOTAL RETURN
Standard Average Annual Total Return shows the average percentage change in the
value of an investment in the Division from the beginning to the end of a given
historical period. The results shown are after all charges and fees have been
applied against the Division. This will include
account maintenance fees and surrender charges that would have been deducted if
you surrendered Portfolio Director T 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. If Standard Average Annual Return for a Division is not
available for a stated period, we may show the Standard Average Annual Return
since Division inception.
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. The SEC
staff takes the position that performance information of an underlying Fund
reduced by Account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director T 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. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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 or since inception. 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 period or year;
DIVISIONS -- subaccounts of
VALIC Separate Account A
which represent the Variable
Account Options in Portfolio
Director T. 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 T.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
29
<PAGE> 487
- --------------------------------------------------------------------------------
- The difference is divided by the Purchase Unit Value at the start of the
period or 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.
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 T 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 DIVISION
We may advertise the AGSPC Money Market Division's Current Yield and Effective
Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market Division over a given 7-day period. The Current Yield does not take
into account surrender charges, account maintenance fees or premium taxes. The
income produced over a 7 day period is then "annualized." This means we are
assuming the amount of income produced during the 7-day period will continue to
be produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The annualized 7-day Current Yield for the last 7
days ended December 31, 1998 was 3.84%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield. The annualized 7-day Effective Yield for the last 7 days ended December
31, 1998 was 3.91%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION:
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate Account A
Division is printed in the six tables below.
The information presented does not reflect the advantage under Portfolio
Director T 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 0.80% 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.
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.
30
<PAGE> 488
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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)(1)........... 09/06/83 -- 10.56% 13.08% 14.98% 12.35%
AGSPC Growth Fund (Division 15)....................... 04/29/94 20.51% -- -- 17.24 12.12
AGSPC Money Market Fund (Division 6).................. 01/16/86 -- 4.37 3.15 2.65 (0.42)
AGSPC Science & Technology Fund (Division 17)......... 04/29/94 28.12 -- -- 16.13 35.91
AGSPC Small Cap Index Fund (Division 14).............. 05/01/92 11.88 -- 9.90 9.54 (7.15)
AGSPC Social Awareness Fund (Division 12)............. 10/02/89 15.52 -- 22.12 26.13 21.21
AGSPC Stock Index Fund (Division 10).................. 04/20/87 -- 17.41 22.18 25.83 22.32
Scudder Growth and Income (Division 21)(2)............ 07/01/96 16.40 -- -- -- 0.42
Vanguard Long-Term Corporate (Division 22)**.......... 07/01/96 8.46 -- -- -- 3.33
Vanguard Long-Term Treasury (Division 23)**........... 07/01/96 10.11 -- -- -- 6.98
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director.
** The performance figures 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) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
(2) The Fund adopted its current name and objective on November 13, 1984. Its
predecessor commenced operations on May 31, 1929.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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>
Scudder Growth and Income (Division 21)................ 11/13/84 -- 15.08% 16.02% 16.62% 0.42%
Vanguard Long-Term Corporate (Division 22)**........... 07/09/73 -- 9.52 6.42 5.05 3.33
Vanguard Long-Term Treasury (Division 23)**............ 05/19/86 -- 9.64 6.90 5.47 6.98
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects the 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.
** The performance figures 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.
31
<PAGE> 489
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 -- 10.65% 13.77% 16.31% 17.42%
AGSPC Growth Fund (Division 15)........................ 04/29/94 21.14% -- -- 18.52 17.19
AGSPC Money Market Fund (Division 6)................... 01/16/86 -- 4.45 4.10 4.28 4.33
AGSPC Science & Technology Fund (Division 17).......... 04/29/94 28.64 -- -- 17.44 40.99
AGSPC Small Cap Index Fund (Division 14)............... 05/01/92 11.97 -- 10.66 10.99 (2.72)
AGSPC Social Awareness Fund (Division 12).............. 10/02/89 15.61 -- 22.66 27.26 26.28
AGSPC Stock Index Fund (Division 10)................... 04/20/87 -- 17.50 22.72 26.96 27.39
Scudder Growth and Income (Division 21)................ 07/01/96 18.05 -- -- -- 5.21
Vanguard Long-Term Corporate (Division 22)**........... 07/01/96 10.28 -- -- -- 8.26
Vanguard Long-Term Treasury (Division 23)**............ 07/01/96 11.90 -- -- -- 12.04
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director.
** The performance figures 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.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 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>
Scudder Growth and Income (Division 21)................ 11/13/84 -- 15.16% 16.65% 17.92% 5.21%
Vanguard Long-Term Corporate (Division 22)**........... 07/09/73 -- 9.61 7.27 6.61 8.26
Vanguard Long-Term Treasury (Division 23)**............ 05/19/86 -- 9.72 7.74 7.02 12.04
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects the 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.
** The performance figures 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.
32
<PAGE> 490
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 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 (Division 5).................. 09/06/83 -- 175.04% 90.63% 57.34% 17.42%
AGSPC Growth (Division 15)........................... 04/29/94 144.84% -- -- 66.49 17.19
AGSPC Money Market (Division 6)...................... 01/16/86 -- 54.54 22.25 13.39 4.33
AGSPC Science & Technology (Division 17)............. 04/29/94 224.18 -- -- 61.96 40.99
AGSPC Small Cap Index (Division 14).................. 05/01/92 112.60 -- 65.97 36.71 (2.72)
AGSPC Social Awareness (Division 12)................. 10/02/89 282.56 -- 177.64 106.09 26.28
AGSPC Stock Index (Division 10)...................... 04/20/87 -- 401.46 178.36 104.66 27.39
Scudder Growth & Income (Division 21)................ 07/01/96 51.42 -- -- -- 5.21
Vanguard Long-Term Corporate (Division 22)**......... 07/01/96 27.73 -- -- -- 8.26
Vanguard Long-Term Treasury (Division 23)**.......... 07/01/96 32.45 -- -- -- 12.04
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different series of Portfolio
Director from the beginning to the end of the historical periods shown and
have been restated to take into account the fees and charges under this
series of Portfolio Director.
** The performance figures 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.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
INCEPTION SINCE
FUND AND DIVISION DATE DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Scudder Growth & Income (Division 21)................ 11/13/84 -- 310.18% 115.99% 63.95% 5.21%
Vanguard Long-Term Corporate (Division 22)**......... 07/09/73 -- 150.33 42.02 21.18 8.26
Vanguard Long-Term Treasury (Division 23)**.......... 05/19/86 -- 152.93 45.16 22.57 12.04
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects the 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. The Contracts offered by this
prospectus became available for purchase on May 1, 1998.
** The performance figures 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.
33
<PAGE> 491
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director T 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 Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the 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 T 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.
34
<PAGE> 492
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 T
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 T
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 Separate Account A 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.
35
<PAGE> 493
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director T 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, as a Section 408(b)
Individual Retirement Annuity ("IRA"), or is instead a nonqualified Contract.
Portfolio Director T 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) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs;
- Section 408(p) SIMPLE retirement
accounts.
The foregoing Contracts are "Qualified Contracts." Portfolio Director T may also
be available through a nondeductible Section 408A "Roth" individual retirement
annuity ("Roth IRA").
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director T 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, as well as individual annuity contracts issued to
individuals outside of the context of any formal employer or employee retirement
plan or arrangement. Non-Qualified Contracts generally may invest only in mutual
funds which are not available to the general public outside of annuity contracts
or life insurance contracts..
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 T 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.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
Distributions are taxed differently depending on the program through which
Portfolio Director T 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 or penalty taxes under
the circumstances described in the Statement of Additional Information.
Generally, they would
36
<PAGE> 494
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also be subject to some form of federal income tax withholding unless rolled
into another tax-deferred vehicle. Required withholding will vary according to
type of program, type of payment and your tax status. In addition, amounts
received under all Contracts may be subject to state income tax withholding
requirements.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if purchase payments under the contract are invested in
publicly available mutual funds. In a ruling published in 1981, the Internal
Revenue Service ("IRS") had taken the position that, where purchase payments
under a variable annuity contract are invested in publicly available mutual
funds, the contract owner should be treated as the owner of the mutual fund
shares, and deferred tax treatment under the contract should not be available.
In the opinion of VALIC and its tax counsel, the 1981 ruling has been superseded
by subsequent legislation (Code Section 817(h)) which specifically exempts these
Qualified Contracts, and the IRS has no viable legal basis or reason to apply
the theory of the 1981 ruling to these Qualified Contracts under current law.
Although VALIC can provide no assurance the IRS will not 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, if such a
challenge were made.
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
how ownership of the Mutual Fund shares might be computed for federal income tax
purposes.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons 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 T 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 (0.80% during the purchase period and 1% 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.
37
<PAGE> 495
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By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
federal taxes......... $2,500 $2,500
Current federal income
tax due on Purchase
Payments.............. 0 (700)
Net retirement plan
Purchase Payments..... $2,500 $1,800
</TABLE>
This chart assumes a 28% federal income tax rate. The $700 which is paid toward
current federal income taxes 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.
38
<PAGE> 496
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
39
<PAGE> 497
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> 498
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio
Director 2).
(Please Print or Type)
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Name: ______________________________________________ G.A. # _________________________________________
Address: ___________________________________________ Policy # _______________________________________
Social Security Number: ____________________________
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 499
(This page intentionally left blank)
<PAGE> 500
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............... 15
Exchanges From Independence Plus Contracts...... 15
Exchanges From V-Plan Contracts................. 16
Exchanges From SA-1 and SA-2 Contracts.......... 17
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 Division 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 Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 29
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 30
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 30
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 31
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 32
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 32
Founders Growth Division Thirty Compared to S&P
500 Index..................................... 33
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 33
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MCSI World Index and S&P 500
Index......................................... 34
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 35
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 35
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 36
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 36
Vanguard Long-Term Corporate Division Twenty-two
Compared to Merrill Lynch Corporate Master
Index......................................... 37
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 37
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 38
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 39
Payout Payments..................................... 40
Assumed Investment Rate......................... 40
Amount of Payout Payments....................... 40
Payout Unit Value............................... 40
Illustration of Calculation of Payout Unit
Value......................................... 41
Illustration of Payout Payments................. 41
Distribution of Variable Annuity Contracts.......... 42
Experts............................................. 42
Comments on Financial Statements.................... 43
</TABLE>
<PAGE> 501
(This page intentionally left blank)
<PAGE> 502
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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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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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<PAGE> 503
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. 10789 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 504
[Momento Photo}
PORTFOLIO DIRECTOR
SEPARATE ACCOUNT A
PROSPECTUS MAY 1, 1999
Units of Interest
Under Group and
Individual
Variable Annuity
Contracts
Portfolio Director
[Logo] Portfolio
Director
<PAGE> 505
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR
SEPARATE ACCOUNT A May 1, 1999
PROSPECTUS
The Variable Annuity Life Insurance Company ("VALIC") offers the Portfolio
Director Contract that consists of group and individual variable annuity
contracts (the "Contracts") to Participants in certain employer sponsored
retirement plans. Portfolio Director may be available to you when you
participate in a retirement program that qualifies for deferral of federal
income taxes. Non-qualified contracts are also available for certain employer
plans as well as for certain after-tax arrangements that are not part of an
employer's plan.
Portfolio Director permits you to invest in and receive retirement benefits in
up to 2 Fixed Account Options and/or an array of up to 16 Variable Account
Options. If your contract is part of your employer's retirement program, that
program will describe which Variable Account Options are available to you. Each
of these investment options is explained more fully in this prospectus. Here is
a list of these investment options:
TWO FIXED ACCOUNT OPTIONS:
Fixed Account Plus
Short-Term Fixed Account
SIXTEEN VARIABLE ACCOUNT OPTIONS
American General Series Portfolio Company (AGSPC):
<TABLE>
<S> <C> <C>
Asset Allocation Fund MidCap Index Fund Dreyfus Variable Investment Fund:
Capital Conservation Fund Money Market Fund Dreyfus Small Cap Portfolio
Government Securities Fund Science & Technology Fund
Growth Fund Small Cap Index Fund Templeton Variable Products
Growth & Income Fund Social Awareness Fund Series Fund:
International Equities Fund Stock Index Fund Templeton Asset Allocation Fund -- Class 1
International Government Bond Fund Templeton International Fund -- Class 1
</TABLE>
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 affiliates.
This prospectus provides you with information you should know before investing
in Portfolio Director. This prospectus is accompanied by the current
prospectuses for the mutual fund options listed above. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated May 1, 1999, contains additional
information about Portfolio Director and is part of this prospectus. For a free
copy, complete and return the form contained in the back of this prospectus or
call 1-800-44-VALIC. The Statement of Additional Information has been filed with
the Securities and Exchange Commission ("SEC") and is available along with other
related materials at the SEC's internet web site (http://www.sec.gov).
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 506
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 4
SELECTED PURCHASE UNIT DATA................... 6
GENERAL INFORMATION...........................
ABOUT PORTFOLIO DIRECTOR................. 8
ABOUT VALIC.............................. 8
ABOUT VALIC SEPARATE ACCOUNT A........... 8
UNITS OF INTERESTS....................... 8
DISTRIBUTION OF CONTRACTS................ 9
VARIABLE ACCOUNT OPTIONS...................... 10
Summary of Funds......................... 10
PURCHASE PERIOD............................... 19
Purchase Payments........................ 19
Purchase Units........................... 19
Calculation of Purchase Unit Value....... 19
Choosing Investment Options.............. 20
Fixed Account Options............... 20
Variable Account Options............ 20
Stopping Purchase Payments............... 20
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 21
During the Purchase Period............... 21
During the Payout Period................. 21
Communicating Transfer or Reallocation
Instructions........................... 21
Effective Date of Transfer............... 21
FEES AND CHARGES.............................. 22
Account Maintenance Fee.................. 22
Surrender Charge......................... 22
Amount of Surrender Charge.......... 22
10% Free Withdrawal................. 22
Exceptions to Surrender Charge...... 22
Premium Tax Charge....................... 23
Separate Account Charges................. 23
Fund Annual Expense Charges.............. 23
Other Tax Charges........................ 23
Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration
and Distribution Fee Charges........... 24
Separate Account Expense Reimbursement... 24
PAYOUT PERIOD................................. 25
Fixed Payout............................. 25
Variable Payout.......................... 25
Combination Fixed and Variable Payout.... 25
Payout Date.............................. 25
Payout Options........................... 25
Enhancements to Payout Options........... 26
Payout Information....................... 26
SURRENDER OF ACCOUNT VALUE.................... 27
When Surrenders Are Allowed.............. 27
Amount That May Be Surrendered........... 27
Surrender Restrictions................... 27
Partial Surrenders....................... 27
Systematic Withdrawals................... 27
Distributions Required by Federal Tax
Law.................................... 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXCHANGE PRIVILEGE............................ 29
Restrictions on Exchange Privilege....... 29
Taxes and Conversion Costs............... 29
Surrender Charges........................ 29
Exchange Offers.......................... 29
Comparison of Contracts.................. 30
Features of Portfolio Director........... 30
Agents' and Managers' Retirement Plan
Exchange Offer......................... 30
DEATH BENEFITS................................ 31
Beneficiary Information.................. 31
Special Information for Individual
Non-Tax Qualified Contracts............ 31
During the Purchase Period............... 31
Interest Guaranteed Death Benefit... 31
Standard Death Benefit.............. 32
During the Payout Period................. 32
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 33
Types of Investment Performance
Information Advertised................. 33
Total Return Performance Information... 33
Standard Average Annual Total Return... 33
Nonstandard Average Annual Total
Return.............................. 33
Cumulative Total Return................ 33
Annual Change in Purchase Unit Value... 33
Cumulative Change in Purchase Unit
Value............................... 34
Total Return Based on Different
Investment Amounts.................. 34
An Assumed Account Value of $10,000.... 34
Yield Performance Information............ 34
AGSPC Money Market Division............ 34
Divisions Other Than The AGSPC Money
Market Division..................... 34
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 34
OTHER CONTRACT FEATURES....................... 40
Changes That May Not Be Made............. 40
Change of Beneficiary.................... 40
Contingent Owner......................... 40
Cancellation -- The 20 Day "Free Look"... 40
We Reserve Certain Rights................ 40
Relationship to Employer's Plan.......... 40
VOTING RIGHTS................................. 41
Who May Give Voting Instructions......... 41
Determination of Fund Shares Attributable
to Your Account........................ 41
During Purchase Period................... 41
During Payout Period or after a Death
Benefit Has Been Paid.................. 41
How Fund Shares Are Voted................ 41
FEDERAL TAX MATTERS........................... 42
Type of Plans............................ 42
Tax Consequences in General.............. 42
Effect of Tax-Deferred Accumulations..... 44
YEAR 2000..................................... 45
Year 2000 Risks.......................... 45
</TABLE>
(i)
<PAGE> 507
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 21
Annuitant 31
Assumed Investment Rate 25
Beneficiary 31
Contract Owner 31
Division 33
Fixed Account Options 31
Home Office 21
Mutual Fund or Fund 08
Participant 01
Participant Year 22
Payout Period 21
Payout Unit 25
Purchase Payments 19, 33
Purchase Period 21
Purchase Unit 20
VALIC Separate Account A 41
Variable Account Options 10, 31
</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, and
saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in VALIC's
Separate Account A are offered. Portfolio Director will allow you to accumulate
retirement dollars in Fixed Account Options and/or Variable Account Options.
This prospectus describes only the variable aspects of Portfolio Director except
where the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
Portfolio Director. 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> 508
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER/PARTICIPANT EXPENSES(1)
<TABLE>
<S> <C>
Maximum Surrender Charge(2) 5.00%
</TABLE>
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2) $15
SEPARATE ACCOUNT EXPENSES
(as a percentage of Separate Account net assets):
<TABLE>
<CAPTION>
MORTALITY ADMINISTRATION SEPARATE TOTAL
AND AND ACCOUNT SEPARATE
EXPENSE DISTRIBUTION EXPENSE ACCOUNT
FUND RISK FEE(3) FEE(3) REIMBURSEMENT FEE
---- ----------- -------------- ------------- --------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation 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
Dreyfus Variable Investment
Fund -- Small Cap
Portfolio(4) 0.25 1.00 (0.15%) 1.10
Templeton Variable Product
Series Fund
Templeton Asset Allocation --
Class 1 0.25 1.00 -- 1.25
Templeton International --
Class 1 0.25 1.00 -- 1.25
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund net assets):
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
FUND FEES EXPENSES(5) EXPENSES
---- ---------- ----------- ----------
<S> <C> <C> <C>
AGSPC Asset Allocation(6) 0.50% 0.04% 0.54%
AGSPC Capital Conservation 0.50% 0.04% 0.54%
AGSPC Government Securities 0.50% 0.04% 0.54%
AGSPC Growth 0.80% 0.04% 0.84%
AGSPC Growth & Income 0.75% 0.05% 0.80%
AGSPC International Equities 0.35% 0.05% 0.40%
AGSPC International
Government Bond 0.50% 0.05% 0.55%
AGSPC MidCap Index 0.32% 0.04% 0.36%
AGSPC Money Market 0.50% 0.04% 0.54%
AGSPC Science & Technology 0.90% 0.05% 0.95%
AGSPC Small Cap Index 0.35% 0.04% 0.39%
AGSPC Social Awareness 0.50% 0.04% 0.54%
AGSPC Stock Index 0.27% 0.04% 0.31%
Dreyfus Variable Investment Fund -- Small Cap
Portfolio 0.75% 0.02% 0.77%
Templeton Variable Product Series Fund
Templeton Asset Allocation --
Class 1 0.60% 0.18% 0.78%
Templeton International --
Class 1 0.69% 0.17% 0.86%
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
(2) Reductions in the surrender charge and the account maintenance fee are
available if certain conditions are met. See "Reduction or Waiver of Account
Maintenance Fee, 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 and Distribution Fee Charges" in this
prospectus.
(4) For this Fund 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 this Division are reduced by an amount equal to payments from the
underlying Fund or its affiliate for administrative and shareholder services
provided by the Company. The Fund and/or its affiliate pays a monthly
administrative or shareholder service fee to the Company of 0.15%. See "Fees
and Charges -- Separate Account Expense Reimbursement" in this prospectus
for more information.
(5) OTHER EXPENSES includes custody, accounting, reports to shareholders, audit,
legal and other miscellaneous expenses.
(6) The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
2
<PAGE> 509
EXAMPLE #1 -- If you do not surrender Portfolio Director at the end of the
period shown or you receive Payout Payments under a Payout Option:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director Contract without a surrender charge imposed,
invested in a single Separate Account Division as listed below, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation Division 5 $16 $ 50 $ 87 $189
AGSPC Capital Conservation Division 7 $16 $ 50 $ 87 $189
AGSPC Government Securities Division 8 $16 $ 50 $ 87 $189
AGSPC Growth Division 15 $19 $ 59 $102 $221
AGSPC Growth & Income Division 16 $19 $ 58 $100 $217
AGSPC International Equities Division 11 $15 $ 46 $ 79 $174
AGSPC International Government Bond Division 13 $16 $ 50 $ 87 $190
AGSPC MidCap Index Division 4 $14 $ 45 $ 77 $169
AGSPC Money Market Division 6 $16 $ 50 $ 87 $189
AGSPC Science & Technology Division 17 $20 $ 63 $108 $233
AGSPC Small Cap Index Division 14 $15 $ 46 $ 79 $173
AGSPC Social Awareness Division 12 $16 $ 50 $ 87 $189
AGSPC Stock Index Division 10 $14 $ 43 $ 74 $164
Dreyfus Variable Investment Fund -- Small Cap
Division 18 $19 $ 60 $104 $225
Templeton Variable Product Series Fund
Templeton Asset Allocation -- Class 1 Division 19 $21 $ 65 $112 $241
Templeton International -- Class 1 Division 20 $22 $ 68 $116 $250
</TABLE>
EXAMPLE #2 -- If you surrender Portfolio Director at the end of the period
shown:
- --------------------------------------------------------------------------------
Total Expenses: You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director Contract invested in a single Separate
Account Division as listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AGSPC Asset Allocation Division 5 $63 $100 $137 $189
AGSPC Capital Conservation Division 7 $63 $100 $137 $189
AGSPC Government Securities Division 8 $63 $100 $137 $189
AGSPC Growth Division 15 $66 $109 $152 $221
AGSPC Growth & Income Division 16 $65 $108 $150 $217
AGSPC International Equities Division 11 $61 $ 96 $129 $174
AGSPC International Government Bond Division 13 $63 $100 $137 $190
AGSPC MidCap Index Division 4 $61 $ 95 $127 $169
AGSPC Money Market Division 6 $63 $100 $137 $189
AGSPC Science & Technology Division 17 $67 $112 $158 $233
AGSPC Small Cap Index Division 14 $61 $ 96 $129 $173
AGSPC Social Awareness Division 12 $63 $100 $137 $189
AGSPC Stock Index Division 10 $60 $ 93 $124 $164
Dreyfus Variable Investment Fund -- Small Cap
Division 18 $66 $110 $154 $225
Templeton Variable Product Series Fund
Templeton Asset Allocation -- Class 1 Division 19 $67 $114 $162 $241
Templeton International -- Class 1 Division 20 $68 $117 $166 $250
</TABLE>
Note: These examples should not be considered representations of past or future
expenses for VALIC Separate Account A or for any Fund. Actual expenses may be
greater or less than those shown above. Similarly, the 5% annual rate of return
assumed in the examples is not an estimate or guarantee of future investment
performance. The purpose of the Fee Table above is to help Contract Owners and
Participants understand the various expenses of VALIC Separate Account A and the
Funds which are, in effect, passed on to the Contract Owners and Participants.
This Fee Table, shows all charges and expenses which may be deducted from the
assets of VALIC Separate Account A and from the Funds in which VALIC Separate
Account A invests. For a further description of these charges and expenses, see
"Fees and Charges" in this prospectus and "Investment Adviser" in the Series
Company Prospectus and "Management of the Fund" in the Dreyfus Small Cap
Portfolio Prospectus and "Management of the Trust" in the Templeton Variable
Products Series Fund Prospectus. Any and all limitations on total charges and
expenses are reflected in this Fee Table.
3
<PAGE> 510
SUMMARY
- --------------------------------------------------------------------------------
Portfolio Director is VALIC's combination fixed and variable annuity that offers
you a wide choice of investment options and flexibility. A summary of Portfolio
Director's major features is presented below. For a more detailed discussion of
the Portfolio Director Contract, please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director offers you a choice from among 16 Variable Account Options
and two Fixed Account Options. There may be certain limitations on how many
investment options you may invest in.
- --------------------------------------------------------------------------------
<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 SUBADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Growth through investments VALIC N/A
EQUITY Equities Fund tracking
FUNDS the EAFE Index
--------------------------------------------------------------------------------------------------------------
AGSPC MidCap Growth through investments VALIC Bankers Trust
Index Fund tracking the S&P MidCap Company(1)
400(R) Index
--------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Growth through investments VALIC Bankers Trust
Index Fund tracking the Russell Company(1)
2000(R) Index
--------------------------------------------------------------------------------------------------------------
AGSPC Stock Growth through investments VALIC Bankers Trust
Index Fund tracking the S&P 500(R) Company(1)
Index
- ----------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Growth through investments VALIC T. Rowe Price
MANAGED Fund in service sector companies Associates, Inc.
EQUITY --------------------------------------------------------------------------------------------------------------
FUNDS AGSPC Growth Growth and income through VALIC N/A
& Income investments in stocks or
Fund securities convertible into
stocks
--------------------------------------------------------------------------------------------------------------
Dreyfus Variable Growth through investments The Dreyfus N/A
Investment Fund -- in smaller companies Corporation
Small Cap Portfolio
--------------------------------------------------------------------------------------------------------------
Templeton Long-term capital growth; invest Templeton N/A
International primarily in stocks and debt Investment Counsel
Fund -- Class 1 obligations of companies outside Inc.
the U.S., including emerging
markets
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Income and possible growth VALIC N/A
FUNDS Conservation through investments in high
Fund quality debt securities
--------------------------------------------------------------------------------------------------------------
AGSPC Government Income and possible growth VALIC N/A
Securities through investments in
Fund intermediate & long-term
government debt securities
--------------------------------------------------------------------------------------------------------------
AGSPC International Income and possible growth VALIC N/A
Government through investments in high
Bond Fund quality foreign government
debt securities
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science Growth through investments in VALIC T. Rowe Price
FUNDS & Technology stocks of companies which Associates, Inc.
Fund benefits from development of
science and technology
--------------------------------------------------------------------------------------------------------------
AGSPC Social Growth through investments in VALIC N/A
Awareness stocks of companies meeting
Fund social criteria of the Fund
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Income through investments in VALIC N/A
MARKET Market short-term money market
FUND Fund securities
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Maximum return through VALIC N/A
ALLOCATION Allocation investments in a mix of stocks,
FUNDS Fund bonds and money market
securities
--------------------------------------------------------------------------------------------------------------
Templeton High level of total return; Templeton N/A
Asset through a flexible policy of Investment Counsel
Allocation investing in stocks and debt Inc.
Fund -- Class 1 obligations of any nation,
including emerging markets,
and money market investments
</TABLE>
- --------------------------------------------------------------------------------
(1) Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of
Bankers Trust Corporation. On November 30, 1998, Bankers Trust Corporation
entered into an Agreement and Plan of Merger with Deutsche Bank AG under
which Bankers Trust Corporation and all of its subsidiaries would merge with
and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including retail and commercial banking, investment banking and
insurance. The merger is contingent upon various regulatory approvals. On
April 20, 1999, the AGSPC Fund's Board of Directors approved a new
investment sub-advisory agreement with Bankers Trust Company, subject to
shareholder approval. If the merger is approved and completed, Deutsche Bank
AG, as the Sub-Adviser's new parent company, will control the operations of
the Sub-Adviser. Bankers Trust believes that, under this new arrangement,
the services provided to the Fund will be maintained at their current level.
4
<PAGE> 511
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual Fund can be
found in the section of the prospectus entitled "Variable Account Options," and
also in the current prospectus for each Fund mentioned.
INTEREST GUARANTEED DEATH BENEFIT
Portfolio Director offers a death benefit with an interest guarantee when death
occurs prior to your reaching age 70.
This contract provision is not available in some states.
LOANS
Portfolio Director offers a tax-free loan provision for tax-qualified contracts
that gives you access to your money in either of the Fixed Account Options,
subject to a minimum loan amount of $1,000. The availability of loans is subject
to government regulations, as well as your employer's plan provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans which
are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among Portfolio
Director's investment options. You may transfer your Account Values between
Variable Account Options at any time during the Purchase Period.
Your Account Value in the Short-Term Fixed Account must remain there for at
least 90 days before it can be transferred to other investment options. In Fixed
Account Plus, up to 20% of your Account Value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among Variable Account Options once each contract
year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Between Investment Options" section in the prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE
If any of your account is invested in Variable Account Options, a quarterly
account maintenance fee of $3.75 is charged to your account. If you invest only
in Fixed Account Options during a calendar quarter no account maintenance fee is
assessed. 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 1/2% 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
annualized rate of 1.00% 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
Mutual Fund or its affiliate or distributor for providing the Mutual 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 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> 512
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC
AGSPC AGSPC AGSPC AGSPC GROWTH & AGSPC INTERNATIONAL
ASSET CAPITAL GOVERNMENT GROWTH INCOME INTERNATIONAL GOVERNMENT
ALLOCATION CONSERVATION SECURITIES DIVISION DIVISION EQUITIES BOND
DIVISION 5 DIVISION 7 DIVISION 8 15 16 DIVISION 11 DIVISION 13
---------- ------------ ----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1998
Purchase Units in Force 60,237,818 28,751,662 53,729,671 494,997,997 129,550,695 101,811,751 97,473,851
Purchase Units Value $3.772519 $2.085846 $2.111727 $2.428587 $2.201234 $1.454644 $1.728006
December 31, 1997
Accumulation Units in Force 53,307,351 28,242,598 45,034,894 453,172,490 132,434,555 122,716,744 111,480,591
Accumulation Unit Value $3.219282 $1.962239 $1.957755 $2.076503 $1.940905 $1.237299 $1.490645
December 31, 1996
Purchase Units in Force 65,292,617 30,286,494 47,130,169 366,272,509 108,341,635 156,226,314 112,601,593
Purchase Unit Value $2.651899 $1.825549 $1.815651 $1.733324 $1.583056 $1.222906 $1.582230
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 73,369,250
Purchase Unit Value $2.411022 $1.812011 $1.799475 $1.466652 $1.296577 $1.156454 $1.530780
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 25,691,713
Purchase Unit Value $1.951533 $1.515278 $1.547150 $1.001834 $0.993168 $1.054460 $1.301357
July 11, 1994
Purchase Unit Value(1) $1.916765 $1.506490 $1.532417 $.959407 $.959637 $1.085960 $1.316282
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
6
<PAGE> 513
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS
VARIABLE
INVESTMENT
AGSPC AGSPC AGSPC AGSPC AGSPC FUND
MIDCAP MONEY SCIENCE & SMALL CAP SOCIAL AGSPC ----------
INDEX MARKET TECHNOLOGY INDEX AWARENESS STOCK INDEX SMALL CAP
DIVISION 4(2) DIVISION 6 DIVISION 17 DIVISION 14 DIVISION 12 DIVISION 10(3) DIVISION 18
- ------------- ---------- ----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
169,039,887 147,547,688 418,601,069 107,321,015 114,382,494 691,680,049 474,215,229
$5.029093 $1.742617 $3.216190 $2.100506 $3.762308 $4.772052 $1.690786
171,065,657 84,182,521 397,842,959 106,279,077 81,577,104 615,053,124 479,851,525
$4.269122 $1.673590 $2.285739 $2.163595 $2.985333 $3.753436 $1.770622
172,816,978 75,124,095 315,809,646 103,320,842 46,574,016 536,806,965 428,883,250
$3.272588 $1.607212 $2.250471 $1.785442 $2.252673 $2.848437 $1.534694
172,613,690 51,907,757 187,862,232 98,335,995 32,750,120 455,255,243 267,735,219
$2.782677 $1.545802 $1.997175 $1.544896 $1.835102 $2.343900 $1.332904
171,442,018 75,765,781 42,726,137 100,383,839 29,015,764 416,234,288 85,169,871
$2.153183 $1.479129 $1.247713 $1.222329 $1.333899 $1.724134 $1.043156
$2.110512 $1.455537 $.950431 $1.180915 $1.328889 $1.668065 $1.000000
<CAPTION>
TEMPLETON VARIABLE
PRODUCTS SERIES
FUND
----------------------------
TEMPLETON
AGSPC ASSET TEMPLETON
MIDCAP ALLOCATION INTERNATIONAL
INDEX CLASS 1 CLASS 1
DIVISION 4(2) DIVISION 19 DIVISION 20
- ------------- ----------- -------------
<S> <C> <C>
169,039,887 190,963,707 452,419,089
$5.029093 $1.695764 $1.700398
171,065,657 196,150,946 463,174,350
$4.269122 $1.613943 $1.575168
172,816,978 137,384,670 378,581,949
$3.272588 $1.414844 $1.399702
172,613,690 78,494,505 219,124,926
$2.782677 $1.205181 $1.142586
171,442,018 32,807,602 71,716,511
$2.153183 $0.995860 $0.999282
$2.110512 $1.000000 $1.000000
</TABLE>
(2) Effective October 1, 1991, the Fund underlying this Division changed its
name from the Capital Accumulation Fund to the MidCap Index Fund and amended
its investment objective, investment program and investment restrictions
accordingly. Historical purchase unit values prior to October 1, 1991
reflect investment experience before these changes.
(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.
7
<PAGE> 514
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT PORTFOLIO DIRECTOR
Portfolio Director was developed to help you save money for your retirement. It
offers you a combination of fixed and variable investment options that you can
invest in to help you reach your retirement savings goals. Your contributions to
Portfolio Director can come from different sources, like payroll deductions or
money transfers. Your retirement savings process with Portfolio Director will
involve two stages: the Purchase Period; and the Payout Period. The first is
when you make contributions into Portfolio Director called "Purchase Payments."
The second, is when you receive your retirement payouts. For more information,
see "Purchase Period" and the "Payout Period" in this prospectus.
You may choose, depending upon your retirement savings goals, your personal risk
tolerances, and your retirement plan, to invest in the Fixed Account Options
and/or the Variable Account Options described in this prospectus. When you
decide to retire, or otherwise withdraw your money, you can select from a wide
array of payout options including both fixed and variable payments. In addition,
this prospectus will describe for you all fees and charges that may apply to
your participation in Portfolio Director.
ABOUT VALIC
We were originally organized on December 21, 1955 as The Variable Annuity Life
Insurance Company of America, located in Washington, D.C. We re-organized in the
State of Texas on August 20, 1968, as The Variable Annuity Life Insurance
Company. Our main business is issuing and offering fixed and variable retirement
annuity contracts, like Portfolio Director. Our principal offices are located at
2929 Allen Parkway, Houston, Texas 77019. We have Regional Offices throughout
the United States. The addresses for these offices are given in the back of this
prospectus.
VALIC is a member of the American General Corporation group of companies.
Members of the American General Corporation group of companies operate in each
of the 50 states, the District of Columbia, and Canada and collectively provide
financial services with activities heavily weighted toward insurance.
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's Variable Account Options, you will
be sending that money through VALIC's Separate Account A. You do not invest
directly in the Mutual Funds made available in Portfolio Director. VALIC's
Separate Account A invests in the Mutual Funds on behalf of your account.
VALIC Separate Account A is made up of what we call "Divisions." Sixteen
Divisions are available and represent the Variable Account Options in Portfolio
Director. Each of these Divisions invests in a different Mutual Fund made
available through Portfolio Director. For example, Division Ten represents and
invests in the 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 on July 25, 1979 under Texas insurance law
to allow you to be able to invest in a number of Variable Account Options
available in Portfolio Director. VALIC Separate Account A is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940 ("Act"). Units of interest in VALIC Separate
Account A are registered as securities under the Securities Act of 1933.
VALIC Separate Account A is administered and accounted for as part of VALIC's
business operations. However, the income, capital gains or capital losses,
whether or not realized of each Division of VALIC Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of Portfolio Director, VALIC Separate Account A may not be charged with the
liabilities of any other VALIC operation. As stated in Portfolio Director, the
Texas Insurance Code requires that the assets of VALIC Separate Account A
attributable to Portfolio Director be held exclusively for the benefit of the
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director. When we discuss performance information in this prospectus, we mean
the performance of a VALIC Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of VALIC Separate Account A is represented by
units of interest issued by VALIC Separate Account A. On a daily basis, the
units of interest issued by VALIC Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable fees
and charges to VALIC Separate Account A.
ALL INQUIRIES REGARDING
PORTFOLIO DIRECTOR
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
8
<PAGE> 515
GENERAL INFORMATION -- (CONTINUED)
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
A.G. Distributors, Inc. ("A.G. Distributors"), an affiliate of VALIC, acts as
VALIC's Separate Account A distributor.
VALIC will pay the licensed agents who sell the Contracts a commission.
Currently, the commission paid by VALIC will range up to 6.0% of each Purchase
Payment. In addition, VALIC will pay managers who supervise the agents
overriding commissions ranging up to 1% of each Purchase Payment. These various
commissions are paid by VALIC and do not result in any charge to Contract Owners
or to the Separate Account.
A.G. Distributors -- our
address is 2929 Allen
Parkway, Houston,
Texas 77019.
For more information
about A.G. DISTRIBUTORS,
see the Statement of
Additional Information
9
<PAGE> 516
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Portfolio Director enables you to participate in Divisions that represent
sixteen Variable Account Options. These Divisions comprise all of the Variable
Account Options that are made available to you through VALIC Separate Account A.
According to your retirement program, you may not be able to invest in all
sixteen 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 and include:
- - American General Series Portfolio
Company (AGSPC) -- offers 13 funds, for which VALIC serves as investment
adviser, for 2 of such funds, T. Rowe Price & Associates, Inc. serves as
investment sub-adviser and for 3 of such funds, Bankers Trust Company serves
as investment sub-adviser.
- - Dreyfus Variable Investment Fund -- offers 1 fund, for which The Dreyfus
Corporation serves as investment adviser.
- - Templeton Variable Products Series -- offers 2 funds, for which Templeton
Investment Counsel, Inc. serves as investment adviser.
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.
Shares of the Dreyfus Small Cap Portfolio, the Templeton Asset Allocation Fund,
and the Templeton International Fund are also sold to separate accounts of other
insurance companies that may or may not be affiliated with us. This is known as
"shared funding." These funds may also be sold to separate accounts that act as
the underlying investments for both variable annuity contracts and variable life
insurance policies. This is known as "mixed funding." There are certain risks
associated with mixed and shared funding. These risks are discussed in each
Fund's prospectus.
SUMMARY OF FUNDS
A brief summary of the investment objectives of each mutual fund is shown below.
In addition to the investment objectives, the Account Value of an assumed
$10,000 investment in each of the Divisions is shown in both table and graph
form as well as the Standard Average Annual Total Return for a 1, 3, 5 and 10
year period, if available. If Standard Average Annual Return for a Division is
not available for a stated period, we may show the Standard Average Annual
Return since Division inception. The performance information in the tables and
graphs 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 Funds
actual historical performance of the related Separate Account Divisions. The
returns shown in the tables for the other 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 is based on the
actual performance for periods prior to July 11, 1994. 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.
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.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical periods shown below. The results shown are after all charges
and fees have been applied against the Division. This will include account
maintenance fees and surrender charges that would have been deducted if you
surrendered Portfolio Director at the end of the specified period. Premium taxes
are not deducted. This information is calculated for each Division based on how
an initial investment of $1,000 performed at the end of the specified periods
shown.
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.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
10
<PAGE> 517
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
January 1, 1989 $ Value
- ------------------------- --------
<S> <C>
01/01/89 $10,000
12/31/89 11,581
12/31/90 11,189
12/31/91 13,442
12/31/92 13,212
12/31/93 14,294
12/31/94 13,967
12/31/95 17,255
12/31/96 18,979
12/31/97 23,040
12/31/98 26,999
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
January 1, 1989 $ Value
- ------------------------- --------
<S> <C>
01/01/89 $10,000
12/31/89 11,063
12/31/90 10,922
12/31/91 12,669
12/31/92 13,626
12/31/93 15,108
12/31/94 14,044
12/31/95 16,795
12/31/96 16,920
12/31/97 18,187
12/31/98 19,333
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund. The Standard Average Annual Total Return for the Division for the 1, 3,
5 and 10 year period was 12.12%, 14.76%, 12.85% and 10.33%, respectively. The
Division commenced operations on September 6, 1983.
** The Standard Average Annual Total Return for the AGSPC Capital Conservation
Fund Division 7 for the 1, 3, 5 and 10 year period was 1.46%, 3.19%, 4.12%
and 6.71%, respectively. The Division commenced operations on January 16,
1986.
11
<PAGE> 518
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,103
12/31/90 11,648
12/31/91 13,231
12/31/92 14,044
12/31/93 15,406
12/31/94 14,567
12/31/95 16,943
12/31/96 17,095
12/31/97 18,433
12/31/98 19,883
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 10,018
12/31/95 14,667
12/31/96 17,333
12/31/97 20,765
12/31/98 24,286
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Government Securities
Fund Division 8 for the 1, 3, 5 and 10 year period was 2.95%, 3.88%, 4.30%
and 7.01%, respectively. The Division commenced operations on January 16,
1986.
** The Standard Average Annual Total Return for the AGSPC Growth Fund Division
15 for the 1 and 3 year period and since inception was 11.89%, 17.02% and
20.28%, respectively. The Division commenced operations on April 29, 1994.
12
<PAGE> 519
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
12/31/94 9,932
12/31/95 12,966
12/31/96 15,831
12/31/97 19,409
12/31/98 22,012
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,284
12/31/90 8,134
12/31/91 8,952
12/31/92 7,671
12/31/93 9,864
12/31/94 10,545
12/31/95 11,565
12/31/96 12,229
12/31/97 12,373
12/31/98 14,546
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Growth & Income Fund
Division 16 for the 1 and 3 year period and since inception was 8.35%, 18.03%
and 17.71%, respectively. The Division commenced operations on April 29,
1994.
** The Standard Average Annual Total Return for the AGSPC International Equities
Fund Division 11 for the 1, 3 and 5 year period and since inception was
12.50%, 6.42%, 7.23% and 4.02%, respectively. The Division commenced
operations on October 2, 1989.
13
<PAGE> 520
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
12/31/91 10,905
12/31/92 11,128
12/31/93 12,583
12/31/94 13,014
12/31/95 15,308
12/31/96 15,822
12/31/97 14,906
12/31/98 17,280
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
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***.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 1, 1991 $ Value
- ------------------------- -------
<S> <C>
10/01/91 $10,000
12/31/91 11,163
12/31/92 12,143
12/31/93 13,574
12/31/94 12,936
12/31/95 16,718
12/31/96 19,661
12/31/97 25,648
12/31/98 30,214
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 1, 1991
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC International
Government Bond Fund Division 13 for the 1, 3 and 5 year period and since
inception was 10.86%, 2.49%, 5.66% and 7.73%, respectively. The Division
commenced operations on October 1, 1991.
** The Standard Average Annual Total Return for the AGSPC MidCap Index Fund
Division 4 for the 1, 3, and 5 year period and since inception was 12.74%,
20.59%, 16.71% and 16.36%, respectively. The Division commenced operations
on October 13, 1982 as the Capital Accumulation Fund. On October 1, 1991,
the Fund underlying the AGSPC MidCap Index Fund 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. The performance figures for the AGSPC MidCap Index Division
reflect the performance of the MidCap Index Fund since October 1, 1991.
*** "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400(R)" are
trademarks of Standard and Poor's ("S&P"). Neither the AGSPC MidCap Index
Fund nor the AGSPC Stock Index Fund is sponsored, endorsed, sold or promoted
by S&P and S&P makes no representation regarding the advisability of
investing in these Funds.
14
<PAGE> 521
AGSPC
MONEY MARKET FUND*
(Division 6)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 10,792
12/31/90 11,530
12/31/91 12,048
12/31/92 12,316
12/31/93 12,521
12/31/94 12,867
12/31/95 13,447
12/31/96 13,982
12/31/97 14,559
12/31/98 15,160
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 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
12/31/94 12,477
12/31/95 19,972
12/31/96 22,505
12/31/97 22,857
12/31/98 32,162
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE APRIL 29, 1994
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Money Market Fund
Division 6 for the 1, 3, 5 and 10 year period was (0.62%), 2.44%, 2.92% and
4.14%, respectively. The Division commenced operations on January 16, 1986.
** The Standard Average Annual Total Return for the AGSPC Science & Technology
Fund Division 17 for the 1 and 3 year period and since inception was 35.63%,
15.90% and 27.89%, respectively. The Division commenced operations on April
29, 1994.
15
<PAGE> 522
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
12/31/92 11,128
12/31/93 12,772
12/31/94 12,223
12/31/95 15,449
12/31/96 17,854
12/31/97 21,636
12/31/98 21,005
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 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
12/31/89 10,100
12/31/90 9,877
12/31/91 12,506
12/31/92 12,795
12/31/93 13,670
12/31/94 13,339
12/31/95 18,351
12/31/96 22,527
12/31/97 29,853
12/31/98 37,623
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 2, 1989
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Small Cap Index Fund
Division 14 for the 1, 3 and 5 year period and since inception was (7.34)%,
9.33%, 9.68% and 11.66%, respectively. The Division commenced operations on
May 1, 1992.
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. Russell(TM) is a trademark of the Frank Russell Company.
*** The Standard Average Annual Total Return for the AGSPC Social Awareness Fund
Division 12 for the 1, 3 and 5 year period and since inception was 20.96%,
25.91%, 21.88% and 15.29%, respectively. The Division commenced operations
on October 2, 1989.
16
<PAGE> 523
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
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 12,788
12/31/90 12,171
12/31/91 15,543
12/31/92 16,411
12/31/93 17,853
12/31/94 17,799
12/31/95 24,197
12/31/96 29,406
12/31/97 38,748
12/31/98 49,264
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
DREYFUS VARIABLE INVESTMENT FUND -- SMALL CAP PORTFOLIO***
(Division 18)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to maximize capital appreciation and invests principally in common stocks.
This Fund will be particularly alert to companies which The Dreyfus Corporation
considers to be emerging smaller-size companies which are believed to be
characterized by new or innovative products, services, or processes which should
enhance prospects for growth in future earnings.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
August 31, 1990 $ Value
- ------------------------- --------
<S> <C>
08/31/90 $ 10,000
12/31/90 10,168
12/31/91 26,105
12/31/92 44,181
12/31/93 73,477
12/31/94 78,125
12/31/95 99,825
12/31/96 114,938
12/31/97 132,607
12/31/98 126,628
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE AUGUST 31, 1990
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the AGSPC Stock Index Fund
Division 10 for the 1, 3, 5 and 10 year period was 22.07%, 25.61%, 21.95%
and 17.19%, respectively. The Division commenced operations on April 20,
1987.
** "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 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.
*** The Standard Average Annual Total Return for the Dreyfus Variable Investment
Fund-Small Cap Portfolio Division 18 for the 1 and 3 year period and since
inception was (8.86)%, 6.73% and 11.61%, respectively. The Division
commenced operations on July 11, 1994.
17
<PAGE> 524
TEMPLETON ASSET
ALLOCATION FUND*
Class 1 Shares
(Division 19)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of total return. The Fund tries to achieve its investment
goal through a flexible policy of investing in the following market segments:
stocks and debt securities of any nation, including emerging markets, and money
market instruments.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
01/01/89 $10,000
12/31/89 11,186
12/31/90 10,164
12/31/91 12,821
12/31/92 13,685
12/31/93 17,050
12/31/94 16,328
12/31/95 19,759
12/31/96 23,197
12/31/97 26,461
12/31/98 27,803
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1989
[CHART]
PERIOD ENDED DECEMBER 31
TEMPLETON INTERNATIONAL FUND**
Class 1 Shares
(Division 20)
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve long-term capital growth. The Fund invests primarily in stocks
and debt obligations of companies outside the United States, including emerging
markets. Any income realized will be incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1992 $ Value
- ------------------------- -------
<S> <C>
05/01/92 $10,000
12/31/92 9,311
12/31/93 13,549
12/31/94 13,077
12/31/95 14,952
12/31/96 18,317
12/31/97 20,613
12/31/98 22,251
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE MAY 1, 1992
[CHART]
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Templeton Asset Allocation
Fund -- Class 1 Division 19 for the 1 and 3 year period and since inception
was 0.29%, 10.63% and 11.69%, respectively. The Division commenced operations
on July 11, 1994.
** The Standard Average Annual Total Return for the Templeton International
Fund -- Class 1 Division 20 for the 1 and 3 year period and since inception
was 3.04%, 12.80% and 11.76%, respectively. The Division commenced operations
on July 11, 1994.
18
<PAGE> 525
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when a Portfolio Director account is surrendered before the Payout Period. The
amount, number, and frequency of your Purchase Payments is determined by the
retirement plan for which Portfolio Director was purchased.
PURCHASE PAYMENTS
You may establish an account only through a VALIC representative. Initial
Purchase Payments must be received by VALIC either with, or after, a completed
application. Your employer is usually responsible for remitting Purchase
Payments to us. The employer is responsible for furnishing instructions to us (a
premium flow report) as to the amount being applied to your account. Purchase
Payments can also be made by you for IRAs and certain non-qualified contracts
("individual contracts.")
Minimum initial and subsequent Purchase Payments are as follows:
<TABLE>
<CAPTION>
Initial Subsequent
Contract Type Payment Payment
------------- ------- ----------
<S> <C> <C>
Periodic Payment $ 30 $ 30
Single Payment $1,000 -0-
</TABLE>
Periodic Payment minimums apply to each Periodic Payment made. 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. In
the case of an individual variable annuity contract, we will return the
Purchase Payments within 5 business days if the requested information is not
provided, unless you otherwise so specify.
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 these circumstances, we will take one of the
following actions:
Return Purchase Payments. If we do not have your name, address or social
security number, we will return the Purchase Payment to your employer unless
this information is immediately provided to us.
Employer-Directed Account. If we have your name, address and social security
number and we have an Employer-Directed Account Agreement from your employer,
generally we will deposit your Purchase Payment in an "Employer-Directed"
account invested in the AGSPC 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
AGSPC 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 2.
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
19
<PAGE> 526
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the 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 18 investment options offered in Portfolio Director. This includes 2
Fixed Account Options and 16 Variable Account Options. Unless provided
otherwise, you may select and combine up to 7 of the 18 options. The Funds that
underlie the Variable Account Options are registered as investment companies
under and are subject to regulation of the 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 "Summary" 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 account has been surrendered. 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. Any
such account closure will be subject to applicable distribution restrictions
under the Contract and/or under your employer's plan.
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.
20
<PAGE> 527
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer was
previously made
into
Short-Term Fixed
Account.(2)
</TABLE>
- ---------------
(1) Your employer may further limit or expand the restrictions. We may charge
for those modified restrictions if specified in your employer's retirement
plan.
(2) VALIC may change this holding period at any time in the future, but it will
never be more than 180 days.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between Portfolio Director's
investment options subject to the following limitations:
<TABLE>
<CAPTION>
% OF ACCOUNT
---------------------------------- OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ------------------- ------------
<S> <C> <C> <C>
Variable: Up to 100% Once every 365 days None
Combination
Fixed
and Variable
Payout: Up to 100% Once every 365 days None
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 Exchange on a day values are calculated; (Normally,
this will be 4:00 P.M. New York time); otherwise
- - The next date values are calculated.
ACCOUNT VALUE -- the total
sum of your Fixed Account
and/or Variable Account
Options that have not yet
been applied to your Payout
Payments.
PURCHASE PERIOD -- the time
between your first Purchase
Payment and your Payout
Period (or surrender).
HOME OFFICE -- Our
principal office at 2929 Allen
Parkway, Houston, Texas
77019.
PAYOUT PERIOD -- the time
that starts when you begin to
withdraw your money in a
steady stream of payments.
21
<PAGE> 528
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in Portfolio Director, 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 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 that will be deducted from the amount withdrawn. 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.
22
<PAGE> 529
- --------------------------------------------------------------------------------
- - 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 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 1/2%.
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 1.00% 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. The mortality risk that
the Company assumes is the obligation to provide payments during the Payout
Period for your life no matter how long that might be. In addition, the Company
assumes the obligation to pay during the Purchase Period an interest guaranteed
death benefit. For more information about the interest guaranteed death benefit
see the "Death Benefit" section of this prospectus. The expense risk is our
obligation to cover the cost of issuing and administering Portfolio Director, no
matter how large the cost may be.
The Company may make a profit on the mortality and expense risk 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 CHARGE
Investment management charges based on a percentage of each Fund's average daily
net assets are payable by each Fund. Depending on the Variable Account Option
selected, the charges will be paid by each Fund to the Company, or to Dreyfus or
to Templeton. These charges and other Fund charges and expenses are fully
described in the prospectuses for the Funds. These charges indirectly cost you
because they lower your return.
OTHER TAX CHARGES
We reserve the right to charge for certain taxes (other than premium taxes) that
we may have to pay. This could include federal income taxes. Currently, no such
charges are being made.
23
<PAGE> 530
- --------------------------------------------------------------------------------
REDUCTION OR WAIVER OF ACCOUNT
MAINTENANCE FEE, SURRENDER,
MORTALITY AND EXPENSE RISK 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 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 be
permitted where the reduction or waiver will unfairly discriminate against any
person.
SEPARATE ACCOUNT EXPENSE
REIMBURSEMENT
Dreyfus Small Cap or its affiliate has an agreement with the Company to pay the
Company for certain administrative and shareholder services it provides to the
Fund. The Company will reduce its charges to the Division investing in the Fund
by the full amount of any of these payments it receives.
24
<PAGE> 531
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 as allowed by state law.) 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 a
- Fixed Payout (payment is fixed and guaranteed).
Up to seven Variable Account Options may be chosen, or up to six Variable
Account Options if the Fixed Payout is chosen.
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).
25
<PAGE> 532
- --------------------------------------------------------------------------------
- LIFE WITH CASH OR UNIT REFUND -- payments are made to you during your
lifetime. Upon your death, your beneficiary will receive a lump sum payment
equal to the remaining Annuity Value.
- JOINT AND SURVIVOR LIFE -- payments are made to you during the joint
lifetime of you and your beneficiary. Upon the death of one, payments
continue during the lifetime of the survivor. This option is designed
primarily for couples who require maximum possible variable payouts during
their joint lives and are not concerned with providing for beneficiaries at
death of the last survivor. For example, it would be possible under this
option for the Joint Annuitants to receive only one payment if both
Annuitants died prior to the date of the second payment, or for the Joint
Annuitants to receive only one payment and the surviving Annuitant to
receive only one payment if one Annuitant died prior to the date of the
second payment and the surviving Annuitant dies prior to the date of the
third payment.
- PAYMENT FOR A DESIGNATED PERIOD -- payments are made to you for a select
number of years between five and thirty. Upon your death, payments will
continue to your beneficiary until the designated period is completed.
ENHANCEMENTS TO PAYOUT OPTIONS
You may be able to select enhancements to the Payout Options described above.
These enhancements include partial annuitization, flexible payments of varying
amounts and inflation protection payments. Additionally, certain options may be
available with a one to twenty year guaranteed period. Additionally, certain
options may be available with a one to twenty year guaranteed period. The Joint
and Survivor Life Option may be available with a one to twenty year guaranteed
period option. Not all of the enhancements are available under each option.
PAYOUT INFORMATION
Once your Payout Payments have begun, the option you have chosen may not be
stopped or changed. Any one of the Variable Account Options may result in your
receiving unequal payments during your life expectancy. If payments begin before
age 59 1/2, you may suffer unfavorable tax consequences, in the form of an
excise tax, if you do not meet an exception under 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,
- 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, and
- 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, subject to any limitations under the
contract or plan.
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
26
<PAGE> 533
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 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.
Under the LOUISIANA OPTIONAL RETIREMENT PLAN retirement benefits must be paid in
the form of a lifetime income, and except for death benefits, single sum
surrenders and partial surrenders out of the plan are not permitted.
Other employer-sponsored plans may also impose restrictions on the timing and
form of surrenders from the contract.
PARTIAL SURRENDERS
You may request a partial surrender of your Account Value at any time, subject
to any applicable surrender restrictions. A partial surrender plus any surrender
charge will reduce your Account Value. Partial surrenders will be paid from the
Fixed Account Option first unless otherwise specified by you.
The reduction in the number of Purchase Units credited to your Variable Account
Option Account Value will equal:
<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. 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
27
<PAGE> 534
- --------------------------------------------------------------------------------
elected again. No more than one systematic withdrawal election may be in effect
at any one time. We reserve the right to discontinue any or all systematic
withdrawals or to change its terms, at any time.
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW. There will be no surrender charge on
a minimum distribution required by federal tax law (known as No Charge Minimum
Distribution), if the withdrawal:
- Is made payable to you; and
- Does not exceed the amount required under federal tax law as determined by
the values in your Portfolio Director Contract and VALIC.
This contract feature will not be available in any year that an amount has been
withdrawn under the no charge systematic withdrawal method. See "Federal Tax
Matters" in this prospectus and in the Statement of Additional Information for
more information about required distributions imposed by tax law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus and in the Statement of Additional
Information.
28
<PAGE> 535
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to Portfolio Director. These other contracts are listed below. We will
allow you, under certain conditions, to exchange from one of these other
contracts to Portfolio Director. This exchange privilege will be available only
to other contracts 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. An
exchange may require the issuance of a Contract or may be subject to any other
requirements that the Company may impose.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges.
- Partial exchanges are not permitted.
- Exchanges from Portfolio Director to contract forms other than Portfolio
Director 2 and Portfolio Director Plus are not permitted.
- This exchange privilege is only available for those other contracts listed
below.
Additionally, if you have your money in a fixed account of one of the below
listed other contracts, you must exchange directly into the Fixed Account
Options of Portfolio Director. You will be subject to all of the rules that
apply to the Fixed Account Options in Portfolio Director. For example, you will
be subject to the rules concerning transfers among investment options as stated
in the Transfers Between Investment Options section in this prospectus. We may,
at our option, waive any transfer restrictions for a stated period of time. If
we waive these transfer restrictions, you will be allowed to exchange to any
investment option available in Portfolio Director.
WE RESERVE THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THESE EXCHANGE PRIVILEGES
AT ANY TIME.
TAXES AND CONVERSION COSTS
We will impose no fee or charge for these exchanges. Please read the "Federal
Tax Matters" section in this prospectus for information about the federal income
tax treatment of Portfolio Director.
SURRENDER CHARGE
We will generally not impose nor waive existing surrender charges as a result of
your electing to exchange from one of the other contracts.
For purposes of determining surrender charges, we often consider time in the
contract. For SPQ181 and SPQ181-1 Contracts, the contract date for determining
surrender charges under Portfolio Director will be the SPQ181 and SPQ181-1
contract date plus one year. For example, if you have an SPQ181 contract with a
contract date of January 1, 1993, upon exchange into Portfolio Director, the
contract date for surrender charges purposes becomes January 1, 1994.
For any other contract, the contract date for determining surrender charges
under Portfolio Director will be the same date as the other contract, but no
earlier than January 1, 1982. (The effect of this is to potentially shorten the
charge period for Purchase Payments subsequently made to Portfolio Director.)
If there is no surrender charge on assets within another contract, we will not
impose charges on those assets as a result of an exchange. If surrender charges
are to be based on Purchase Payments within a contract, we will consider
purchase payments in the other contract to have been transferred to Portfolio
Director for purposes of calculating the surrender charge. The effective dates
of these Purchase Payments will also be retained for surrender charge purposes.
The Portfolio Director surrender charge is calculated assuming the most recent
Purchase Payments are removed first. This policy may cause exchanged funds to be
accessible only after charges are imposed.
EXCHANGE OFFERS FOR CONTRACTS OTHER THAN PORTFOLIO DIRECTOR AND PORTFOLIO
DIRECTOR 2
The following other contracts may be exchanged.
- V-Plan Contracts (IFA-582 and GFA-582 Contracts)
- Compounder Contracts (C-1-75 and IFA-78 Contracts)
- Independence Plus Contracts (UIT-585 and UITG-585 Contracts)
- Impact Contracts (UIT-981 Contracts)
- SA-1 or SA-2 (GUP-64, GUP-74 and GTS-VA Contracts)
- FSPA-75, FSPA-73-3, FSPA-779 Contracts
- SPQ181, SPQ181-1 Contracts
- CTA 978 Contract
- TFA-379 Contract
- SDA-578, SDA-773-T Contract
- IRA-579 Contracts
Portfolio Director will have the same Account Value (called Accumulation Value
in the other contracts) as the other contracts.
COMPARISON OF CONTRACTS
You should carefully compare the features, charges and restrictions of the other
contracts to those of Portfolio Director. A more detailed
29
<PAGE> 536
- --------------------------------------------------------------------------------
comparison of the features, charges, and restriction between each above listed
other
contract and Portfolio Director is provided in the Statement of Additional
Information.
For the V-Plan and Compounder Contract you should refer to the terms of the
contract or certificate. For the other contracts please refer to its most
recently dated prospectus for a complete description of the contract terms and
conditions. Those prospectuses are incorporated herein by reference. If you want
an additional copy of any of these prospectuses or Statements of Additional
Information, please contact us at the address shown in the introduction of the
prospectus.
FEATURES OF PORTFOLIO DIRECTOR
In deciding whether you want to exercise this exchange privilege, you should
consider the following features of Portfolio Director.
- Portfolio Director has more investment options to select from.
- The Portfolio Director surrender charge is calculated assuming the most
recent Purchase Payments are removed first. This policy may cause exchanged
funds to be accessible only after charges are imposed.
- Portfolio Director has an Interest Guaranteed Death Benefit.
- Portfolio Director's Fund fees and charges are different than the other
contracts and in some cases may be higher.
- Portfolio Director's guaranteed annuity rates and guaranteed interest rates
may be less favorable than the other contracts.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the Company's Agents' and Managers' Retirement Plan ("Plan"). We
grant to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts or Independence Plus Contracts
for the equivalent units of interest in Portfolio Director.
Agents and managers of VALIC who enter into the voluntary exchange will not
incur under Portfolio Director any surrender charges or account maintenance
fees. Other individuals who may exchange to Portfolio Director from SA-1 or
Independence Plus Contracts may have surrender charges and account maintenance
fees imposed under Portfolio Director. All other provisions with regard to
exchange offers referenced in the section entitled "Exchange Offers" will apply
to the Agents' and Managers' Retirement Plan Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will have
three options to choose from. As to the funding vehicle for their purchase
payment plan, the participant may choose to:
- Remain in the SA-1 Contract or Independence Plus Contract.
- Leave current assets in the SA-1 Contract or Independence Plus Contract and
direct future Purchase Payments to the Portfolio Director; or
- Transfer all current assets and future Purchase Payments to the Portfolio
Director.
If the participant chooses to remain in either the SA-1 Contract or Independence
Plus Contract, future Purchase Payments and current assets will be controlled by
the provisions of the SA-1 Contract or Independence Plus Contract, respectively.
If the participant chooses to leave current assets in the SA-1 Contract or the
Independence Plus Contract and direct future Purchase Payments to Portfolio
Director, the current assets will be controlled by the provisions of the SA-1
Contract or the Independence Plus Contract, respectively. The future Purchase
Payments will be controlled by the terms of Portfolio Director subject to the
exception that surrender charges and account maintenance fees will not be
imposed under Portfolio Director. If the participant chooses to transfer all
current assets and future Purchase Payments to Portfolio Director, such current
assets and future Purchase Payments will be controlled by the provisions of
Portfolio Director subject to the exception that surrender charges and account
maintenance fees will not be imposed under Portfolio Director.
Once a participant transfers assets and future Purchase Payments to Portfolio
Director the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. If a participant chooses to transfer
future Purchase Payments but not current assets to Portfolio Director, the
participant will be allowed at a later date to transfer the current assets to
Portfolio Director. For a complete analysis of the differences between the SA-1
contract or the Independence Plus Contract and Portfolio Director, you should
refer to the Statement of Additional Information and the form of the contract or
certificate for its terms and conditions.
30
<PAGE> 537
DEATH BENEFITS
- --------------------------------------------------------------------------------
Portfolio Director will pay death benefits during either the Purchase Period or
the Payout Period. How these death benefits will be paid are discussed below.
The death benefit provisions in Portfolio Director may vary from state to state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law and by the plan, if any.
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 not exceeding the Beneficiary life
expectancy.
If the Annuitant dies before the Annuity Date, the Beneficiary as named by you
may receive the payout.
Payments certain or payments for a designated period cannot be for a greater
period of time than the Beneficiary's life expectancy. After choosing a payment
option, a Beneficiary may exercise many of the investment options and other
rights that the Participant or Contract Owner had under Portfolio Director.
SPECIAL INFORMATION FOR INDIVIDUAL
NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Tax
Qualified Contract are not the same person. If this is the case, and the
Contract Owner dies, there will be no death benefit payable since the death
benefit is only due in the event of the Annuitant's death. However, the Contract
will be transferred to the Contingent Owner, if any, or to the Contract Owner's
estate. Such transfers will be considered a taxable event by the IRS.
DURING THE PURCHASE PERIOD
Two types of benefits are available if death occurs during the Purchase Period.
Interest Guaranteed Death Benefit and Standard Death Benefit.
INTEREST GUARANTEED DEATH BENEFIT
The interest guaranteed death benefit is payable when death occurs prior to your
reaching the age of 70. This contract provision is not available in some states.
The amount payable under the interest guaranteed death benefit will be at least
equal to the sum of your Account Value in the Fixed Account Option(s) and the
Variable Account Option(s) on the date VALIC receives proof of death.
Here is how to calculate the death benefit:
Step 1: Determine your Fixed Account Option Value by taking the greater of:
<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 is not required to be.
Also, a Contingent Contract
Owner may be designated.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase
Payments and Account Value
may be allocated to fixed
investment options. Currently,
the Fixed Account Options in
Portfolio Director 2 are Fixed
Account Plus and Short-Term
Fixed Account. Each option
of this type is guaranteed to
earn at least a minimum rate
of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond to
VALIC Separate Account A
Divisions offered by Portfolio
Director 2. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
31
<PAGE> 538
- --------------------------------------------------------------------------------
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 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.
32
<PAGE> 539
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity contracts before Portfolio Director
was first available to you. We may therefore, advertise investment performance
since the inception of the underlying Funds. In each case, we will use the
charges and fees imposed by Portfolio Director 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 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. If
Standard Average Annual Return for a Division is not available for a stated
period, we may show the Standard Average Annual Return since Division inception.
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. The SEC
staff takes the position that performance information of an underlying Fund
reduced by account fees for a period prior to the inception of the corresponding
Division is nonstandard performance information regardless of whether all
account fees and charges are deducted.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in Portfolio Director will stay
in the Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. 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 or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or year.
Account maintenance fees, surrender charges and premium taxes are not deducted.
The effect of these charges, if deducted, would reduce the Division's Annual
Change in Purchase Unit Value.
DIVISIONS -- subaccounts of
VALIC Separate Account A
which represent the Variable
Account Options in Portfolio
Director. Each Division
invests in a different mutual
fund, each having its own
investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated
and tables showing historical
performance information, see
the Statement of Additional
Information.
33
<PAGE> 540
- --------------------------------------------------------------------------------
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Portfolio Director charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual 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 DIVISION
We may advertise the AGSPC Money Market Division's Current Yield and Effective
Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market Division over a given 7-day period. The Current Yield does not take
into account surrender charges, account maintenance fees or premium taxes. The
income produced over a 7 day period is then "annualized." This means we are
assuming the amount of income produced during the 7-day period will continue to
be produced each week for an entire year. The annualized amount is shown as a
percentage of the investment. The annualized 7-day Current Yield for the last 7
days ended December 31, 1998 was 3.64%.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield. The annualized 7-day Effective Yield for the last 7 days ended December
31, 1998 was 3.71%.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market Division. The yield for each of these Divisions will be
determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of VALIC Separate Account A
Divisions. Certain performance information for each VALIC Separate A Account
Division is printed in the eight tables below.
The information presented does not reflect the advantage under Portfolio
Director of deferring federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments (see "Federal Tax Matters" in the
prospectus and in the Statement of Additional Information.) The information
presented also does not reflect the advantage under Qualified Contracts of
deferring federal income tax on Purchase Payments.
The performance results shown in the following tables are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
34
<PAGE> 541
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)(1).......... 09/06/83 8.95% 10.33% 12.85% 14.76% 12.12%
AGSPC Capital Conservation Fund (Division 7)......... 01/16/86 5.72 6.71 4.12 3.19 1.46
AGSPC Government Securities Fund (Division 8)........ 01/16/86 5.83 7.01 4.30 3.88 2.95
AGSPC Growth Fund (Division 15)...................... 04/29/94 20.28 -- -- 17.02 11.89
AGSPC Growth & Income Fund (Division 16)............. 04/29/94 17.71 -- -- 18.03 8.35
AGSPC International Equities Fund (Division 11)...... 10/02/89 4.02 -- 7.23 6.42 12.50
AGSPC International Government Bond Fund (Division
13)................................................ 10/01/91 7.73 -- 5.66 2.49 10.86
AGSPC MidCap Index Fund (Division 4)**............... 10/13/82** 16.36 -- 16.71 20.59 12.74
AGSPC Money Market Fund (Division 6)................. 01/16/86 4.27 4.14 2.92 2.44 (0.62)
AGSPC Science & Technology Fund (Division 17)........ 04/29/94 27.89 -- -- 15.90 35.63
AGSPC Small Cap Index Fund (Division 14)............. 05/01/92 11.66 -- 9.68 9.33 (7.34)
AGSPC Social Awareness Fund (Division 12)............ 10/02/89 15.29 -- 21.88 25.91 20.96
AGSPC Stock Index Fund (Division 10)................. 04/20/87 14.18 17.19 21.95 25.61 22.07
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)............................ 07/11/94 11.61 -- -- 6.73 (8.86)
Templeton Variable Products Series Fund..............
Templeton Asset Allocation Fund -- Class 1
(Division 19)................................... 07/11/94 11.69 -- -- 10.63 0.29
Templeton International Fund -- Class 1 (Division
20)............................................. 07/11/94 11.76 -- -- 12.80 3.04
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The Division commenced operations on October 13, 1982 as the Capital
Accumulation Fund. 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund
since October 1, 1991
(1) The AGSPC Asset Allocation Fund was formerly known as the Times Opportunity
Fund.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)........................................ 08/31/90 35.58% -- 10.74% 6.73% (8.86)%
Templeton Variable Products Series Fund................
Templeton Asset Allocation Fund -- Class 1
(Division 19)..................................... 08/24/88 10.53 10.66% 9.48 10.63 0.29
Templeton International Fund -- Class 1 (Division
20)............................................... 05/01/92 12.63 -- 9.64 12.80 3.04
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects actual historical
performance of the related Separate Account Divisions since inception of each
Division (July 11, 1994) and historical performance for periods prior to July
11, 1994. 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.
35
<PAGE> 542
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION 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 9.05% 10.44% 13.56% 16.09% 17.19%
AGSPC Capital Conservation Fund (Division 7).......... 01/16/86 5.84 6.81 5.05 4.80 6.30
AGSPC Government Securities Fund (Division 8)......... 01/16/86 5.94 7.11 5.23 5.48 7.86
AGSPC Growth Fund (Division 15)....................... 04/29/94 20.93 -- -- 18.31 16.96
AGSPC Growth & Income Fund (Division 16).............. 04/29/94 18.41 -- -- 19.30 13.41
AGSPC International Equities Fund (Division 11)....... 10/02/89 4.13 -- 8.08 7.95 17.57
AGSPC International Government Bond Fund (Division
13)................................................. 10/01/91 7.84 -- 6.55 4.12 15.92
AGSPC MidCap Index Fund (Division 4)**................ 10/13/82** 16.48 -- 17.35 21.81 17.80
AGSPC Money Market Fund (Division 6).................. 01/16/86 4.38 4.25 3.90 4.08 4.12
AGSPC Science & Technology Fund (Division 17)......... 04/29/94 28.42 -- -- 17.21 40.71
AGSPC Small Cap Index Fund (Division 14).............. 05/01/92 11.77 -- 10.46 10.78 (2.92)
AGSPC Social Awareness Fund (Division 12)............. 10/02/89 15.40 -- 22.44 27.04 26.03
AGSPC Stock Index Fund (Division 10).................. 04/20/87 14.29 17.29 22.51 26.74 27.14
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)............................. 07/11/94 12.47 -- -- 8.25 (4.51)
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1
(Division 19).................................... 07/11/94 12.54 -- -- 12.06 5.07
Templeton International Fund -- Class 1 (Division
20).............................................. 07/11/94 12.61 -- -- 14.17 7.95
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The Division commenced operations on October 13, 1982 as the Capital
Accumulation Fund. 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund since
October 1, 1991.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)............................. 08/31/90 35.63% -- 11.50% 8.25% (4.51)%
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1 (Division
19).............................................. 08/24/88 10.63 10.77 10.27 12.06 5.07
Templeton International Fund -- Class 1 (Division
20).............................................. 05/01/92 12.74 -- 10.43 14.17 7.95
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects actual historical
performance of the related Separate Account Divisions since inception of each
Division (July 11, 1994) and historical performance for periods prior to July
11, 1994. 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.
36
<PAGE> 543
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund (Division 5)............ 09/06/83 277.25% 169.99% 88.88% 56.47% 17.19%
AGSPC Capital Conservation Fund (Division 7)........ 01/16/86 108.58 93.33 27.96 15.11 6.30
AGSPC Government Securities Fund (Division 8)....... 01/16/86 111.17 98.83 29.06 17.35 7.86
AGSPC Growth Fund (Division 15)..................... 04/29/94 142.86 -- -- 65.59 16.96
AGSPC Growth & Income Fund (Division 16)............ 04/29/94 120.12 -- -- 69.77 13.41
AGSPC International Equities Fund (Division 11)..... 10/02/89 45.46 -- 47.47 25.78 17.57
AGSPC International Government Bond Fund (Division
13)............................................... 10/01/91 72.80 -- 37.32 12.88 15.92
AGSPC MidCap Index Fund (Division 4)**.............. 10/13/82** 202.14 -- 122.59 80.73 17.80
AGSPC Money Market Fund (Division 6)................ 01/16/86 74.26 51.60 21.07 12.73 4.12
AGSPC Science & Technology Fund (Division 17)....... 04/29/94 221.62 -- -- 61.04 40.71
AGSPC Small Cap Index Fund (Division 14)............ 05/01/92 110.05 -- 64.46 35.96 (2.92)
AGSPC Social Awareness Fund (Division 12)........... 10/02/89 276.23 -- 175.23 105.02 26.03
AGSPC Stock Index Fund (Division 10)................ 04/20/87 377.21 392.64 175.95 103.59 27.14
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)........................... 07/11/94 69.08 -- -- 26.85 (4.51)
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1
(Division 19).................................. 07/11/94 69.58 -- -- 40.71 5.07
Templeton International Fund -- Class 1 (Division
20)............................................ 07/11/94 70.04 -- -- 48.82 7.95
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** The Division commenced operations on October 13, 1982 as the Capital
Accumulation Fund. 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. The performance figures for the AGSPC
MidCap Index Division reflect the performance of the MidCap Index Fund since
October 1, 1991.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Variable Investment Fund -- Small Cap
Portfolio (Division 18)........................... 08/31/90 1,166.28% -- 72.34% 26.85% (4.51)%
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund -- Class 1
(Division 19).................................. 08/24/88 184.60 178.03% 63.07 40.71 5.07
Templeton International Fund -- Class 1 (Division
20)............................................ 05/01/92 122.51 -- 64.23 48.82 7.95
</TABLE>
- ---------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Table reflects actual historical
performance of the related Separate Account Divisions since inception of each
Division (July 11, 1994) and historical performance for periods prior to July
11, 1994. 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.
37
<PAGE> 544
TABLE VII
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 DECEMBER 31*
--------------------------------------------------------
FUND AND DIVISION 1998 1997 1996 1995 1994
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)(2)................... 17.19% 21.40% 9.99% 23.55% (2.29)%
AGSPC Capital Conservation Fund
(Division 7)(2)................... 6.30 7.49 0.75 19.58 (7.04)
AGSPC Government Securities Fund
(Division 8)(2)................... 7.86 7.83 0.90 16.31 (5.44)
AGSPC Growth Fund (Division 15).... 16.96 19.80 18.18 46.40 0.18
AGSPC Growth & Income Fund
(Division 16)..................... 13.41 22.60 22.10 30.55 (0.68)
AGSPC International Equities Fund
(Division 11)(2).................. 17.57 1.18 5.75 9.67 6.90
AGSPC International Government Bond
Fund (Division 13)(2)............. 15.92 (5.79) 3.36 17.63 3.42
AGSPC MidCap Index Fund (Division
4)(1)(2).......................... 17.80 30.45 17.61 29.24 (4.70)
AGSPC Money Market Fund (Division
6)(2)............................. 4.12 4.13 3.97 4.51 2.77
AGSPC Science & Technology Fund
(Division 17)..................... 40.71 1.57 12.68 60.07 24.77
AGSPC Small Cap Index Fund
(Division 14)(2).................. (2.92) 21.18 15.57 26.39 (4.30)
AGSPC Social Awareness Fund
(Division 12)(2).................. 26.03 32.52 22.75 37.57 (2.42)
AGSPC Stock Index Fund (Division
10)(2)............................ 27.14 31.77 21.53 35.95 (0.30)
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... (4.51) 15.37 15.14 27.78 4.32
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... 5.07 14.07 17.40 21.02 (0.41)
Templeton International
Fund -- Class 1 (Division 20)... 7.95 12.54 22.50 14.34 (0.07)
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31*
------------------------------------------------------
FUND AND DIVISION 1993 1992 1991 1990 1989
----------------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)(2)................... 8.19% (1.71)% 20.13% (3.38)% 15.81%
AGSPC Capital Conservation Fund
(Division 7)(2)................... 10.88 7.55 16.00 (1.28) 10.63
AGSPC Government Securities Fund
(Division 8)(2)................... 9.70 6.14 13.59 4.91 11.03
AGSPC Growth Fund (Division 15).... -- -- -- -- --
AGSPC Growth & Income Fund
(Division 16)..................... -- -- -- -- --
AGSPC International Equities Fund
(Division 11)(2).................. 28.58 (14.31) 10.06 (20.90) 2.84
AGSPC International Government Bond
Fund (Division 13)(2)............. 13.08 2.05 9.05 -- --
AGSPC MidCap Index Fund (Division
4)(1)(2).......................... 11.78 8.79 11.63
AGSPC Money Market Fund (Division
6)(2)............................. 1.67 2.22 4.49 6.83 7.92
AGSPC Science & Technology Fund
(Division 17)..................... -- -- -- -- --
AGSPC Small Cap Index Fund
(Division 14)(2).................. 14.77 11.28 -- -- --
AGSPC Social Awareness Fund
(Division 12)(2).................. 6.84 2.31 26.63 (2.21) 1.00
AGSPC Stock Index Fund (Division
10)(2)............................ 8.78 5.58 27.70 (4.83) 27.88
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... -- -- -- -- --
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... -- -- -- -- --
Templeton International
Fund -- Class 1 (Division 20)... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION 1998 1997 1996 1995 1994
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)(2)................... 169.99% 130.40% 89.79% 72.55% 39.67%
AGSPC Capital Conservation Fund
(Division 7)(2)................... 93.33 81.87 69.20 67.95 40.44
AGSPC Government Securities Fund
(Division 8)(2)................... 98.83 84.33 70.95 69.43 45.67
AGSPC Growth Fund (Division 15).... 142.86 107.65 73.33 46.67 0.18
AGSPC Growth & Income Fund
(Division 16)..................... 120.12 94.09 58.31 29.66 (0.68)
AGSPC International Equities Fund
(Division 11)(2).................. 45.46 23.73 22.29 15.65 5.45
AGSPC International Government Bond
Fund (Division 13)(2)............. 72.80 49.06 58.22 53.08 30.14
AGSPC MidCap Index Fund (Division
4)(1)(2).......................... 202.14 156.48 96.61 67.18 29.36
AGSPC Money Market Fund (Division
6)(2)............................. 51.60 45.59 39.82 34.47 28.67
AGSPC Science & Technology Fund
(Division 17)..................... 221.62 128.57 125.05 99.72 24.77
AGSPC Small Cap Index Fund
(Division 14)(2).................. 110.05 116.36 78.54 54.49 22.23
AGSPC Social Awareness Fund
(Division 12)(2).................. 276.23 198.53 125.27 83.51 33.39
AGSPC Stock Index Fund (Division
10)(2)............................ 392.64 287.48 194.06 141.97 77.99
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 69.08 77.06 53.47 33.29 4.32
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... 69.58 61.39 41.48 20.52 (0.41)
Templeton International
Fund -- Class 1 (Division 20)... 70.04 57.52 39.97 14.26 (0.07)
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION 1993 1992 1991 1990 1989
----------------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Fund
(Division 5)(2)................... 42.94% 32.12% 34.42% 11.89% 15.81%
AGSPC Capital Conservation Fund
(Division 7)(2)................... 51.08 36.26 26.69 9.22 10.63
AGSPC Government Securities Fund
(Division 8)(2)................... 54.06 40.44 32.31 16.48 11.03
AGSPC Growth Fund (Division 15).... -- -- -- -- --
AGSPC Growth & Income Fund
(Division 16)..................... -- -- -- -- --
AGSPC International Equities Fund
(Division 11)(2).................. (1.36) (23.29) (10.48) (18.66) 2.84
AGSPC International Government Bond
Fund (Division 13)(2)............. 25.83 11.28 9.05 -- --
AGSPC MidCap Index Fund (Division
4)(1)(2).......................... 35.74 21.43 11.63 -- --
AGSPC Money Market Fund (Division
6)(2)............................. 25.21 23.16 20.48 15.30 7.92
AGSPC Science & Technology Fund
(Division 17)..................... -- -- -- -- --
AGSPC Small Cap Index Fund
(Division 14)(2).................. 27.72 11.28 -- -- --
AGSPC Social Awareness Fund
(Division 12)(2).................. 36.70 27.95 26.06 (1.23) 1.00
AGSPC Stock Index Fund (Division
10)(2)............................ 78.53 64.11 55.43 21.71 27.88
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... -- -- -- -- --
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... -- -- -- -- --
Templeton International
Fund -- Class 1 (Division 20)... -- -- -- -- --
</TABLE>
- ------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** For the year in which the underlying Fund commenced operations, less than a
full year's performance has been reflected, which is not annualized.
(1) The Division commenced operations on October 13, 1982 as the Capital
Accumulation Fund. 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. The performance figures for
the AGSPC MidCap Index Division reflect the performance of the MidCap Index
Fund since October 1, 1991.
(2) For periods prior to 1994, the Annual and Cumulative Change in Purchase Unit
Value figures are based on the average and cumulative changes in Purchase
Unit Value for a stated period in a corresponding Division of Separate
Account A for a different Contract offered by the Company and have been
restated to take into account the fees and charges under Portfolio Director
other than the surrender charge and account maintenance fee. The Contracts
offered by this prospectus became available for purchase on July 11, 1994.
38
<PAGE> 545
TABLE VIII
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 DECEMBER 31**
--------------------------------------------------------------------------------
FUND AND DIVISION*** 1998 1997 1996 1995 1994 1993 1992
-------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... (4.51)% 15.37% 15.14% 27.78% 6.33% 66.31% 69.24%
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... 5.07 14.07 17.40 21.02 (4.24) 24.59 6.74
Templeton International
Fund -- Class 1 (Division 20)... 7.95 12.54 22.50 14.34 (3.49) 45.51 (6.89)
</TABLE>
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
--------------------------------
FUND AND DIVISION*** 1991 1990 1989
-------------------- -------- -------- --------
<S> <C> <C> <C>
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 156.75% 1.68% --
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... 26.13 (9.13) 11.86%
Templeton International
Fund -- Class 1 (Division 20)... -- -- --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------------------------------------------
FUND AND DIVISION*** 1998 1997 1996 1995 1994 1993 1992 1991
-------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 1,166.28% 1,226.07% 1,049.38% 898.25% 681.25% 634.77% 341.81% 161.05%
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... 178.03 164.61 131.97 97.59 63.28 70.50 36.85 28.21
Templeton International
Fund -- Class 1 (Division 20)... 122.51 106.13 83.17 49.52 30.77 35.49 (6.89) --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------
FUND AND DIVISION*** 1990 1989
-------------------- -------- --------
<S> <C> <C>
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 1.68% --
Templeton Variable Products Series
Fund
Templeton Asset Allocation
Fund -- Class 1 (Division 19)... 1.64 11.86%
Templeton International
Fund -- Class 1 (Division 20)... -- --
</TABLE>
- ------------
* The performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same.
** 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 Table reflects actual historical performance of the related Separate
Account Divisions since inception of each Division (July 11, 1994) and
historical performance for periods prior to July 11, 1994. 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.
39
<PAGE> 546
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the Act, in consideration of an investment management fee or in any other
form permitted by law;
- Deregister VALIC Separate Account A under the Act, if registration is no
longer required;
- Stop accepting new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
If the Contract is being offered as a retirement plan through your employer, you
should always refer to the terms and conditions in your employer's plan when
reviewing the description of Portfolio Director in this prospectus.
Plan loans from the Fixed Account Options may be allowed by your employer's
plan. Refer to your plan for a description of charges and other information.
40
<PAGE> 547
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About VALIC Separate Account A" section of this prospectus,
VALIC Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Participant, you may be entitled to give voting instructions to us
as to how VALIC Separate Account A should vote its Fund shares on these matters.
Those persons entitled to give voting instructions will be determined before the
shareholders meeting is held. For more information about these shareholder
meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. This will be true even if your
employer is the Contract Owner. Contract Owners will instruct VALIC Separate
Account A in accordance with these instructions. You will receive proxy material
and a form on which voting instructions may be given before the shareholder
meeting is held.
You will not have the right to give voting instructions if Portfolio Director
was issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
DURING PURCHASE PERIOD
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
DURING PAYOUT PERIOD OR AFTER A DEATH
BENEFIT HAS BEEN PAID
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in Portfolio Director may
have a number of shareholders including VALIC Separate Account A, VALIC and
other affiliated insurance company separate accounts and retirement plans within
the American General group of companies.
VALIC Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the
Participants invested in that Fund entitled to give instructions at that
shareholder meeting. VALIC Separate Account A will vote the shares of the Funds
it holds for which it receives no voting instruction in the same proportion as
the shares for which voting instructions have been received.
VALIC will vote the shares of the Funds it holds based on, and in the same
proportion as, the voting instructions received from participants in VALIC
Separate Account A.
In the future, we may decide how to vote the shares of VALIC or VALIC Separate
Account A in a different manner if permitted at that time under federal
securities law.
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.
41
<PAGE> 548
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
Portfolio Director Contracts provide tax-deferred accumulation over time, but
are subject to federal income and excise taxes, mentioned briefly below. You
should refer to the Statement of Additional Information for further details.
Section references are to the Internal Revenue Code ("Code"). We do not attempt
to describe any potential estate or gift tax, or any applicable state, local or
foreign tax law other than possible premium taxes mentioned under "Premium Tax
Charge." Remember that future legislation could modify the rules discussed
below, and always consult your personal tax adviser regarding how the current
rules apply to your specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or 408(b) IRA, as a Section 408(b)
Individual Retirement Annuity ("IRA"), or is instead a nonqualified Contract.
Portfolio Director is used under the following types of retirement arrangements:
- Section 403(b) annuities for employees of public schools and Section
501(c)(3) tax-exempt organizations;
- Section 401(a) and 403(a) qualified plans of employers (including
self-employed individuals);
- Section 408(b) IRAs;
- Section 457 deferred compensation plans of governmental and tax-exempt
employers;
- Section 408(k) SEPs;
- Unfunded, non-qualified deferred compensation plans of private employers.
- Section 408(p) SIMPLE Retirement Accounts
Portfolio Director may also be available through a nondeductible Section 408A
"Roth" individual retirement annuity ("Roth IRA").
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, Portfolio Director is also available through "Non-Qualified
Contracts." Separate Account investment must be "adequately diversified" in
order for the increase in the value of Non-Qualified Contracts to receive
tax-deferred treatment. Each Fund must, as of the end of each calendar quarter
or within 30 days thereafter, have no more than 55% of its assets invested in
any one investment, 70% in any two investments, 80% in any three investments and
90% in any four investments. A Fund's failure to meet these diversification
requirements could result in tax liability to Non-Qualified Contract Owners.
Since each Fund expects to satisfy diversification, and assure tax deferred
treatment to Non-Qualified Contract holders, investment opportunities of a Fund
may consequently be limited. This would affect all Contract Owners, including
owners of Contracts other than Non-Qualified Contracts for whom diversification
is not a requirement for tax-deferred treatment.
TAX CONSEQUENCES IN GENERAL
Purchase Payments, distributions, withdrawals, transfers and surrender of a
Contract can each have a tax effect, which varies with the governing retirement
arrangement. Please refer to the detailed explanation in the Statement of
Additional Information, the documents (if any) controlling the retirement
arrangement through which the contract is offered, and your personal tax
adviser.
Purchase Payments under Portfolio Director can be made as contributions by
employers, or as pre-tax or after-tax contributions by employees, depending on
the type of retirement program. After-tax employee contributions constitute
"investment in the Contract." All Contracts receive deferral of tax on the
inside build-up of earnings on invested Purchase Payments, until a distribution
occurs. See the Statement of Additional Information for special rules, including
those applicable to taxable, non-natural owners of Non-Qualified Contracts.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and VALIC can provide no assurance that such limitations
would not be imposed on a retroactive basis to contracts issued under this
prospectus. However, VALIC has no present indications that the IRS intends to
impose such limitations, or what the terms or scope of those limitations might
be.
Distributions are taxed differently depending on the program through which
Portfolio Director is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the 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 or penalty taxes, under the
circumstances
42
<PAGE> 549
- --------------------------------------------------------------------------------
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.
43
<PAGE> 550
- --------------------------------------------------------------------------------
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- Portfolio Director Contract issued to a tax favored retirement program
purchased with pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- Conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[CHART]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. Variable options
incur mortality and expense risk fee and administration and distribution fee
charges (1% - 1.25%) and may also incur administrative fees ($3.75 per quarter)
and surrender charges (5% of the lesser of all contributions received during the
last 60 months or the amount withdrawn). The dotted lines represent the amounts
remaining after withdrawal and payment of taxes and any surrender charge. An
additional 10% tax penalty may apply to withdrawals before age 59 1/2. This
information is for illustrative purposes only and is not a guarantee of future
return.
Unlike savings accounts, Premium Payments made to tax-favored retirement
programs and Non-Qualified Contracts generally provide tax deferred treatment on
earnings. In addition, Premium Payments made to tax-favored retirement programs
ordinarily are not subject to income tax until withdrawn. As shown above,
investing in a tax-favored program increases the accumulation power of savings
over time. The more taxes saved and reinvested in the program, the more the
accumulation power effectively grows over the years.
To further illustrate the advantages of tax deferred savings using a 28% Federal
tax bracket, an annual fixed yield (BEFORE THE DEDUCTION OF ANY FEES OR CHARGES)
of 8% under a tax-favored retirement program in which tax savings were
reinvested has an equivalent 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 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-favored program, subject to being taxed upon withdrawal. Stated otherwise,
to reach an annual retirement savings goal of $2,500, the contribution to a
tax-favored retirement program results in a current out-of-pocket expense of
$1,800 while the contribution to a conventional savings account requires the
full $2,500 out-of-pocket expense. The tax-favored retirement program
represented in this chart is a plan type, such as one under Section 403(b) of
the Code, which allows participants to exclude contributions within limits, from
gross income.
44
<PAGE> 551
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, VALIC could be
adversely affected if the computer systems used by VALIC, as well as by other
service providers over which VALIC may have no control, do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly referred to as the "Year 2000 Problem." VALIC is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to the computer systems VALIC uses. The following are some of the
initiatives being taken by VALIC to deal with the Year 2000 Problem.
- INTERNAL SYSTEMS. VALIC has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes the following activities: (1) perform
an inventory of VALIC's information technology and non-information
technology systems; (2) assess which items in the inventory may expose VALIC
to business interruptions caused by the Year 2000 Problem; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will work correctly into the Year 2000; and (5) return the systems to
operations. As of December 31, 1998, we have substantially completed all
steps with respect to our critical systems.
- EXTERNAL SYSTEMS. VALIC has relationships with various third parties that
must also be Year 2000 ready. Third parties are companies that provide
certain services to VALIC. Third parties are different from internal systems
in that VALIC has less, or no, control over their Year 2000 readiness. VALIC
has developed a plan to review and try to lessen the Year 2000 risks of
third parties. As of December 31, 1998, VALIC has substantially completed
its review of third party Year 2000 risks. VALIC intends to test third party
Year 2000 readiness throughout 1999.
- CONTINGENCY PLANS. VALIC has begun contingency planning to reduce the risk
associated with the Year 2000 Problem. The contingency plans for third party
relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure for systems that have a
high chance of failing; (3) develop an action plan to complete contingency
plans for those systems that rank high in both impact of failure and chance
of failure; and (4) complete any action plans.
VALIC expects to substantially complete all contingency planning activities by
April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, VALIC believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on VALIC's operations or financial condition. However, it is impossible
to know exactly how the Year 2000 Problem will affect VALIC. In addition, third
party Year 2000 Problems may have a significant impact on VALIC.
Through December 1998, VALIC has incurred and expensed $26.7 million (pretax)
related to Year 2000 readiness, including $20.2 million incurred during 1998.
VALIC currently anticipates that it will incur future costs of $2.1 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
45
<PAGE> 552
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 7
Types of Variable Annuity Contracts................. 8
Federal Tax Matters................................. 8
Tax Consequences of Purchase Payments........... 8
Tax Consequences of Distributions............... 10
Special Tax Consequences -- Early
Distribution.................................. 11
Special Tax Consequences -- Required
Distributions................................. 12
Tax Free Rollovers, Transfers and Exchanges..... 13
Exchange Privilege.................................. 14
Exchanges From Independence Plus Contracts...... 14
Exchanges From V-Plan Contracts................. 15
Exchanges From SA-1 and SA-2 Contracts.......... 16
Exchanges From Impact Contracts................. 17
Exchanges From Compounder Contracts............. 18
Information Which May Be Applicable To Any
Exchange...................................... 19
Calculation of Surrender Charge..................... 20
Illustration of Surrender Charge on Total
Surrender..................................... 20
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 20
Purchase Unit Value................................. 21
Illustration of Calculation of Purchase Unit
Value......................................... 21
Illustration of Purchase of Purchase Units...... 21
Performance Calculations............................ 21
AGSPC Money Market Division Yields.............. 21
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 21
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 21
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 21
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 21
Standardized Yield for Divisions Seven, Eight and
Thirteen.......................................... 22
Calculation of Standardized Yield for Divisions
Seven, Eight and Thirteen..................... 22
Illustration of Calculation of Standardized
Yield for Divisions Seven, Eight and
Thirteen...................................... 22
Calculation of Average Annual Total Return...... 23
Performance Information............................. 23
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 23
Performance Compared to Market Indices.......... 24
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................. 27
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Capital Conservation Division Seven
Performance Compared to Merrill Lynch
Corporate Master Index........................ 28
AGSPC Government Securities Division Eight
Performance Compared to Lehman Brothers U.S.
Treasury Composite Index...................... 29
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 29
AGSPC Growth & Income Division Sixteen
Performance Compared to S&P 500 Index......... 30
AGSPC International Equities Division Eleven
Performance Compared to EAFE Index............ 30
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 31
AGSPC MidCap Index Division Four Performance
Compared to S&P 500 Index and S&P MidCap 400
Index......................................... 32
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 33
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 33
AGSPC Small Cap Index Division Fourteen
Performance Compared to Russell 2000 Index.... 34
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 34
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 35
Dreyfus Small Cap Division Eighteen Performance
Compared to Russell 2000...................... 35
Templeton Asset Allocation Division Nineteen
Performance Compared to MSCI World Index,
Salomon Brothers Non-US Dollar World
Government Bond Index, and Certificate of
Deposit Primary Offering by New York City
Banks, 30 Day Index........................... 36
Templeton International Division Twenty
Performance Compared to MSCI World Index...... 37
Payout Payments..................................... 37
Assumed Investment Rate......................... 37
Amount of Payout Payments....................... 37
Payout Unit Value............................... 38
Illustration of Calculation of Payout Unit
Value......................................... 38
Illustration of Payout Payments................. 39
Distribution of Variable Annuity Contracts.......... 39
Experts............................................. 39
Comments on Financial Statements.................... 40
</TABLE>
<PAGE> 553
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> 554
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
Address: Policy #
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 555
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) 817-8100
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
(916) 614-1700
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 358-2900
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
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
(407) 482-8825
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1900
Chicago, IL 60606
(312) 214-8870
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
(317) 818-5900
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) 889-1313
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(732) 596-1600
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) 643-6340
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) 619-2270
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) 463-3800
7400 Beaufont Springs Drive
Suite 310
Richmond, VA 23225
(804) 272-0344
There are also more than thirty-three 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> 556
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10789 VER 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 557
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR(R) 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
MAY 1, 1999
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 May 1, 1999 ("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 A.G. Distributors, Inc. ("A.G.
Distributors") at 2929 Allen Parkway, Houston, Texas 77019; 1-800-44-VALIC.
Prospectuses are also available from regional sales offices of A.G. Distributors
or from its registered sales representatives.
1
<PAGE> 558
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 9
Types of Variable Annuity Contracts......................... 10
Federal Tax Matters......................................... 10
Tax Consequences of Purchase Payments..................... 10
Tax Consequences of Distributions......................... 12
Special Tax Consequences -- Early Distribution............ 13
Special Tax Consequences -- Required Distributions........ 14
Tax Free Rollovers, Transfers and Exchanges............... 15
Exchange Privilege.......................................... 15
Exchanges From Portfolio Director......................... 16
Exchanges From Portfolio Director 2....................... 16
Exchanges From Independence Plus Contracts................ 17
Exchanges From V-Plan Contracts........................... 18
Exchanges From SA-1 and SA-2 Contracts.................... 19
Exchanges From Impact Contracts........................... 20
Exchanges From Compounder Contracts....................... 21
Information Which May Be Applicable To Any Exchange....... 22
Calculation of Surrender Charge............................. 23
Illustration of Surrender Charge on Total Surrender....... 23
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 23
Purchase Unit Value......................................... 24
Illustration of Calculation of Purchase Unit Value........ 24
Illustration of Purchase of Purchase Units................ 24
Performance Calculations.................................... 24
AGSPC Money Market and American General Money Market
Divisions Yields....................................... 24
Calculation of Current Yield for AGSPC Money Market
Division Six........................................... 24
Calculation of Current Yield for American General Money
Market Division 44..................................... 24
Illustration of Calculation of Current Yield for AGSPC
Money Market Division Six and American General Money
Market Division 44..................................... 24
Calculation of Effective Yield for AGSPC Money Market
Division Six........................................... 25
Calculation of Effective Yield for American General Money
Market Division 44..................................... 25
Illustration of Calculation of Effective Yield for AGSPC
Money Market Division Six and American General Money
Market Division 44..................................... 25
Standardized Yield for Bond Fund Divisions.................. 25
Calculation of Standardized Yield for Bond Fund
Divisions.............................................. 25
Illustration of Calculation of Standardized Yield for Bond
Fund Divisions......................................... 25
Calculation of Average Annual Total Return................ 25
Performance Information..................................... 27
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to Benchmark Tables........................ 27
Performance Compared to Market Indices.................... 27
AGSPC Asset Allocation Division Five...................... 32
AGSPC Capital Conservation Division Seven................. 33
AGSPC Government Securities Division Eight................ 33
AGSPC Growth Division Fifteen............................. 34
AGSPC Growth & Income Division Sixteen.................... 34
AGSPC International Equities Division Eleven.............. 35
AGSPC International Government Bond Division Thirteen..... 36
AGSPC MidCap Index Division Four.......................... 36
AGSPC Money Market Division Six........................... 37
AGSPC Science & Technology Division Seventeen............. 38
AGSPC Small Cap Index Division Fourteen................... 38
AGSPC Social Awareness Division Twelve.................... 39
</TABLE>
2
<PAGE> 559
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Stock Index Division Ten............................ 40
American Century Ultra Division Thirty-One................ 40
American General Balanced Division Forty-Two.............. 41
American General Conservative Growth Lifestyle Division
Fifty.................................................. 41
American General Core Bond Division Fifty-Eight........... 41
American General Domestic Bond Division Forty-Three....... 41
American General Growth Lifestyle Division Forty-Eight.... 41
American General High Yield Bond Division Sixty........... 41
American General International Growth Division
Thirty-Three........................................... 41
American General International Value Division
Thirty-Four............................................ 41
American General Large Cap Growth Division Thirty-Nine.... 41
American General Large Cap Value Division Forty........... 42
American General Mid Cap Growth Division Thirty-Seven..... 42
American General Mid Cap Value Division Thirty-Eight...... 42
American General Moderate Growth Lifestyle Division
Forty-Nine............................................. 42
American General Money Market Division Forty-Four......... 42
American General Small Cap Growth Division Thirty-Five.... 42
American General Small Cap Value Division Thirty-Six...... 42
American General Socially Responsible Division
Forty-One.............................................. 42
American General Strategic Bond Division Fifty-Nine....... 42
Dreyfus Variable Investment Fund -- Small Cap Portfolio
Division Eighteen...................................... 43
Evergreen Growth and Income Division Fifty-Six............ 43
Evergreen Small Cap Value Division Fifty-Five............. 44
Evergreen Value Division Fifty-Seven...................... 45
Founders Growth Division Thirty........................... 45
Neuberger Berman Guardian Trust Division Twenty-Nine...... 46
Putnam Global Growth -- Class A Division Twenty-Eight..... 47
Putnam New Opportunities -- Class A Division Twenty-Six... 47
Putnam OTC & Emerging Growth -- Class A Division
Twenty-Seven........................................... 48
Scudder Growth and Income Division Twenty-One............. 49
T. Rowe Price Small-Cap Stock Division Fifty-One.......... 49
Templeton Asset Allocation Division Nineteen.............. 50
Templeton Foreign Division Thirty-Two..................... 51
Templeton International Division Twenty................... 51
Vanguard LifeStrategy Conservative Growth Division
Fifty-Four............................................. 52
Vanguard Long-Term Corporate Division Twenty-Two.......... 53
Vanguard Long-Term Treasury Division Twenty-Three......... 54
Vanguard LifeStrategy Growth Division Fifty-Two........... 54
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three............................................ 55
Vanguard Wellington Division Twenty-Five.................. 56
Vanguard Windsor II Division Twenty-Four.................. 57
Payout Payments............................................. 58
Assumed Investment Rate................................... 58
Amount of Payout Payments................................. 58
Payout Unit Value......................................... 58
Illustration of Calculation of Payout Unit Value.......... 59
Illustration of Payout Payments........................... 59
Distribution of Variable Annuity Contracts.................. 60
Experts..................................................... 60
Comments on Financial Statements............................ 61
</TABLE>
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GENERAL INFORMATION
The Variable Annuity Life Insurance Company (the "Company") is a stock life
insurance company organized under the laws of the State of Texas and is engaged
primarily in the offering and issuance of fixed and variable retirement annuity
contracts and combinations thereof. The Company also is licensed to write life
insurance in all states (other than Connecticut) and the District of Columbia,
and annuities in all fifty states and the District of Columbia. The Company is
an indirectly wholly owned subsidiary of American General Corporation.
On July 25, 1979, the Company established Separate Account A (the Separate
Account) in accordance with the Texas Insurance Code. The Separate Account is
registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "Act").
Each Division of the Separate Account (except for AGSPC's International
Government Bond Fund, the American General Lifestyle Funds and the Vanguard
LifeStrategy Funds, each of which is a non-diversified Fund) invests in the
shares of a diversified, open-end, management-type investment company registered
under the Act, or a portfolio of a diversified, open-end, management investment
company registered under the Act. The Separate Account currently is made up of
53 Divisions.
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
$3.7 billion as of December 31, 1998. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,954,190
accounts as of December 31, 1998. The number of employer groups which have
purchased Contracts has increased by 178 percent in the past ten years to more
than 26,392 as of December 31, 1998. As of December 31, 1998, 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, 1998 the Company's assets totaled more than $39
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
As of December 31, 1998, the Company was marketing Contracts in more than
10,218 public and private, primary and secondary schools with more than 494,584
participant accounts for employees in public and private schools nationwide.
From December 31, 1988 to December 31, 1998, the cash value of investments in
these Contracts has increased by 269 percent while the number of public and
private school groups in these Contracts increased 97 percent and the number of
participant accounts in these Contracts increased by 111 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1988 to December 31, 1998, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 166 percent and for the same period the
number of participant accounts has increased 131 percent. For the same time
period cash values for participants have increased 306 percent. As of December
31, 1998, 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, 1988 to December 31, 1998 Contract cash values have increased 802
percent. During the same period the number of healthcare groups that have
purchased these Contracts increased 274 percent and
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the number of participant accounts increased 727 percent.
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1988 to December 31, 1998, Contract
cash values for participants in these groups have increased 310 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 229 percent and the number of employer groups has
increased 303 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 that sponsor ORPs as an alternative to a stated defined, benefit plan and
offers multiple carriers, as of December 31, 1998. From December 31, 1993 to
December 31, 1998, in these ORPs the number of participant accounts increased 81
percent and cash values increased 153 percent to nearly $2.7 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
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(SM). 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.
The Company may, from time to time, 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., The Variable Annuity Research &
Data Services ("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
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<PAGE> 562
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 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 more than 70 no-
load funds and manages assets for more than 2 million investors. American
Century, as of Dec. 31, 1998, had more than $70 billion in 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 December 31,
1998, the firm had approximately $117 billion in assets under management.
The Company may, from time-to-time, refer to Evergreen Asset Management
Corp. (Evergreen Asset) as investment adviser to Evergreen Growth and Income
Fund (underlying Division 56) and Evergreen Small Cap Value Fund (underlying
Division 55). Evergreen Asset is a wholly-owned subsidiary of First Union
Corporation (First Union). Evergreen Asset, with its predecessors, has served as
investment adviser to certain Evergreen mutual funds since 1971 and currently
manages over $10 billion in assets.
The Company may, from time-to-time, refer to the Capital Management Group
of First Union National Bank (FUNB) as investment adviser to Evergreen Value
Fund (underlying Division 57). FUNB is a subsidiary of First Union and has been
managing mutual funds and private accounts since 1932. It currently manages over
[$33] billion in assets for 43 of the Evergreen Funds. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
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. FAM has
established a growth-style investment management process which is consistent
throughout all portfolios. FAM, as of December 31, 1998, had over $7.5 billion
of assets under management. In 1998, FAM became part of the Mellon/Dreyfus
family of investment management companies.
The Company may, from time to time, refer to Neuberger Berman Management
Inc. (NB 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. NB Management, an
affiliate of Neuberger Berman, LLC, was later established and now manages a
family of mutual funds. NB 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. As of December
31, 1998, NB Management and its affiliates managed approximately 55 billion in
aggregate net assets.
The Company may, from time to time, refer to Putnam Investment Management
Inc. (PIM) as investment adviser to the Putnam New Opportunities Fund -- Class A
Shares (underlying Division Twenty-Six), Putnam OTC & Emerging Growth
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<PAGE> 563
Fund -- Class A Shares (underlying Division Twenty-Seven) and Putnam Global
Growth Fund -- Class A Shares (underlying Division Twenty-Eight). PIM is one of
the nation's oldest and largest investment complexes, managing more than 111
different funds and serving more than 10 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, 1998, had approximately $303 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 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 December 31,
1998, had more than $280 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 managed approximately $148 billion of assets as of December 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 approximately 7 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, 1998, had more than $90 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
Division Twenty). 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.
The Company may, from time to time, refer to Vanguard as the investment
adviser to the Vanguard Funds underlying Vanguard LifeStrategy Conservative
Growth Fund (underlying Division Fifty-Four), Vanguard LifeStrategy Moderate
Growth Fund (underlying Division Fifty-Three) and Vanguard LifeStrategy Growth
Fund (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, 1998, had more than $461 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 Long-Term Corporate Fund
(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 invest-
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<PAGE> 564
ment adviser to the Vanguard Long-Term Treasury Fund (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 Fund (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 Fund. 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 Fund.
The Company may, from time to time, refer to the following investment
subadvisers: Bankers Trust Company investment subadviser to American General
Series Portfolio Company ("AGSPC") Stock Index Fund (underlying Division 10),
AGSPC MidCap Index Fund (underlying Division 4), AGSPC Small Cap Index Fund
(underlying Division 14), and co-adviser to 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
sub-adviser to Neuberger Berman Guardian Trust (underlying Division 29);
American General Investment Management, L.P. investment subadviser to American
General High Yield Bond Fund (underlying Division 60), American General
Strategic Bond Fund (underlying Division 59) and American General Core Bond Fund
(underlying Division 58); 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 subadviser
(co-adviser) to American General Small Cap Value Fund (underlying Division 36).
Bankers Trust Company, sub-adviser to Divisions 4, 10 and 14, and one of
two sub-advisers to Division 36, is a wholly owned subsidiary of Bankers Trust
Corporation. On November 30, 1998, Bankers Trust Corporation entered into an
Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary
of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that
is engaged in a wide range of financial services, including retail and
commercial banking, investment banking and insurance. The merger is contingent
upon various regulatory approvals. On April 20, 1999, the AGSPC Fund's Board of
Directors approved a new investment sub-advisory agreement with Bankers Trust
Company, subject to shareholder approval and the Trustees of AGSPC 3 also
approved a new investment sub-advisory agreement with Bankers Trust Company,
which is not subject to shareholder approval. If the merger is approved and
completed, Deutsche Bank AG, as the Sub-Adviser's new parent company, will
control the operations of the Sub-Adviser. Bankers Trust believes that, under
this new arrangement, the services provided to the Fund will be maintained at
their current level.
On March 11, 1999, Bankers Trust announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related recordkeeping problems that occurred between 1994 and early 1996.
Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
$60 million fine to federal authorities. Separately, Bankers Trust agreed to pay
a $3.5 million fine to the State of New York. The events leading up to the
guilty pleas did not arise out of the investment
8
<PAGE> 565
advisory or mutual fund management activities of Bankers Trust or its
affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would
not be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
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.
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<PAGE> 566
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. Morningstar has not, however,
ranked the Neuberger Berman Guardian Trust. The published categories which may
be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to the 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
Flexible payment deferred annuity Contracts are offered in connection with
the prospectus to which this Statement of Additional Information relates.
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.
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 general 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 law limitations
on contributions. This gross income exclusion applies both to employer
contributions and to your voluntary and nonelective salary reduction
contributions.
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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
contributions 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 fully deductible 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 $31,000 or less ($30,000 for 1998, $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 $51,000 or less ($50,000 for 1998, $40,000 or
less prior to 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.
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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 1999 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 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.
Simplified Employee Pension Plan ("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. In 1998 and 1999,
these salary reductions may not exceed $10,000 per year. This limit is indexed
and may be increased in future years. Such plans if established by December 31,
1996, may still allow employees to make these contributions.
SIMPLE IRA. Employer and employee 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.
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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 or 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.
408A "Roth" IRAs. "Qualified" distributions upon attainment of age 59 1/2,
upon death or 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. 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 they 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 25% penalty,
rather than a 10% penalty.
Currently, 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
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<PAGE> 570
(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 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 require-
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<PAGE> 571
ments, 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 inherited from
the same decedent 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.
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 in
a tax-free rollover, 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, avoidance of 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.
408(p) SIMPLE IRAs. Funds may generally be rolled over tax free from a
SIMPLE IRA to a 408(b) IRA. However, during the two-year period beginning on the
date you first participate in any SIMPLE IRA plan of your employer, SIMPLE IRA
funds may only be rolled to another SIMPLE 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
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<PAGE> 572
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 is 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.
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-three divisions of VALIC Separate
Account A are available, thirteen of which invest in different investment
portfolios of AGSPC, eighteen of which invest in different investment portfolios
of American General Series Portfolio Company 3 ("AGSPC 3") and twenty-two 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.
EXCHANGES 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.
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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-three divisions of VALIC Separate
Account A are available, thirteen of which invest in different investment
portfolios of AGSPC, eighteen of which invest in different investment portfolios
of AGSPC 3 and twenty-two 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, 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
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<PAGE> 574
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-three divisions of VALIC Separate Account A are available,
thirteen of which invest in different investment portfolios of AGSPC, eighteen
of which invest in different portfolios of AGSPC 3 and twenty-two 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.
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. Portfolio Director Plus permits annuity payments for a
designated period between of 5 and 30 years. 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
18
<PAGE> 575
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 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,
19
<PAGE> 576
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-three
divisions of VALIC Separate Account A are available, thirteen of which invest in
different investment portfolios of AGSPC, eighteen of which invest in different
portfolios of AGSPC 3 and twenty-two 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 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. 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 re-
20
<PAGE> 577
quirements, 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-three divisions of VALIC Separate Account A are available,
thirteen of which invest in different investment portfolios of AGSPC, eighteen
of which invest in different portfolios of AGSPC 3 and twenty-two 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.
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. 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
21
<PAGE> 578
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. Unlike Portfolio Director 2, the Compounder
Contracts contain no "betterment of rates" provision.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the other contracts. Therefore, the annuity rates guaranteed
in Portfolio Director 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.
22
<PAGE> 579
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>
2/1/93.......................... Purchase Payment $10,000
2/1/94.......................... Purchase Payment 5,000
2/1/95.......................... Purchase Payment 15,000
2/1/96.......................... Purchase Payment 2,000
2/1/97.......................... Purchase Payment 3,000
2/1/98.......................... Purchase Payment 4,000
7/1/98.......................... 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> <C>
a. Surrender Charge calculated on 60 months of Purchase Payments
1. Surrender Charge against Purchase Payment of 2/1/93.................................... $ 0
2. Surrender Charge against Purchase Payment of 2/1/94.................................... $ 250
3. Surrender Charge against Purchase Payment of 2/1/95.................................... $ 750
4. Surrender Charge against Purchase Payment of 2/1/96.................................... $ 100
5. Surrender Charge against Purchase Payment of 2/1/97.................................... $ 150
6. Surrender Charge against Purchase Payment of 2/1/98.................................... $ 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>
2/1/93.......................... Purchase Payment $10,000
2/1/94.......................... Purchase Payment 5,000
2/1/95.......................... Purchase Payment 15,000
2/1/96.......................... Purchase Payment 2,000
2/1/97.......................... Purchase Payment 3,000
2/1/98.......................... Purchase Payment 4,000
7/1/98.......................... 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
8/1/98.......................... 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.
23
<PAGE> 580
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: 3.64%
CALCULATION OF CURRENT YIELD FOR AMERICAN GENERAL MONEY MARKET DIVISION 44
7-Day Current Yield: 3.90%
ILLUSTRATION OF CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION SIX
AND AMERICAN GENERAL MONEY MARKET DIVISION 44
Example 5.
The current yield quotation above is based on the seven days ended December
31, 1998 ("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.
24
<PAGE> 581
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 3.71%
CALCULATION OF EFFECTIVE YIELD FOR AMERICAN GENERAL MONEY MARKET DIVISION 44
7-Day Effective Yield: 3.97%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION
SIX AND
AMERICAN GENERAL MONEY MARKET DIVISION 44
Example 6.
The effective yield quotation above is based on the seven days ended
December 31, 1998 ("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 DIV. 58 DIV. 59 DIV. 60
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standardized Yield........... 5.24% 4.82% 3.28% 4.96% 4.18% 6.03% 5.23% 7.34% 9.17%
</TABLE>
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR BOND FUND DIVISIONS
Example 7.
The standardized yield quotation based on a 30-day period ended December
31, 1998 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.
25
<PAGE> 582
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1998, 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.
26
<PAGE> 583
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 for certain Divisions 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 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
27
<PAGE> 584
approximately 3,600 corporate bond holdings of which assets are rated BBB- to
AAA. The average years to maturity of these corporate bond holdings are
approximately 12 years.
The performance of 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
Socially Responsible Division Forty-One, Evergreen Value Division Fifty-Seven,
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 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's 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 Growth Division
Thirty-Seven and Evergreen Growth and Income Division Fifty-Six 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 and
AGSPC Stock 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.
28
<PAGE> 585
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 Growth Division Thirty-Five, American General Small Cap Value
Division Thirty-Six, Dreyfus Small Cap Division Eighteen, Evergreen Small Cap
Equity Income Division Fifty-Five, 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 Growth 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 the American General Large Cap Value Division Forty and
Evergreen Value Fund 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 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 -- Class A 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
- ---------------
** 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.
29
<PAGE> 586
using two methods. The first method includes gross income (income earned without
subtracting foreign income taxes which may be withheld from foreign investors).
The second method includes net income (income earned after subtracting estimated
foreign taxes. The Division currently compares its performance with the index
using the second method. The MSCI World Index is an unmanaged capitalization
weighed index consisting of more than 1,500 issues from 22 countries as well as
certain South African gold mining issues. The countries include Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States.
The performance of the 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 Long-Term Corporate Division Twenty-Two may
be compared to the Lehman Long-Term Corporate AA or Better Bond Index. This
index consists of all publicly issued, fixed rate, non-convertible investment
grade, dollar-denominated, SEC-registered corporate debt rated AA or AAA.
The performance of the Vanguard Long-Term Treasury 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 Lehman Long Corporate AA or Better Bond Index (35%). The Lehman Long
Corporate AA or Better Bond Index consists of all publicly issued, fixed rate,
non-convertible investment grade dollar-denominated, SEC-registered corporate
debt rated AA or AAA.
The performance of the Vanguard LifeStrategy Growth Division Fifty-Two may
be compared to a Blended Index, a measure of the investment performance of a
balanced portfolio of stocks, bonds and cash reserves comprised of the Wilshire
5000 Index (65%), the Lehman Brothers Aggregate Bond Index (20%) and the Total
International Composite Index (15%). The Lehman Brothers Aggregate Bond Index is
a market weighted index that contains individually priced U.S. Treasury, agency,
corporate, and mortgage pass-through securities rated BBB- or better. The
Wilshire 5000 Index consists of common equity securities, covering all stocks in
the U.S. for which daily pricing is available.
The performance of the Vanguard LifeStrategy Moderate Growth Division
Fifty-Three may be compared to a Blended Index, a measure of the investment
performance of a balanced portfolio of stocks, bonds, and cash reserves
comprised of the Wilshire 5000 Index (50%), the Lehman Brothers Aggregate Bond
Index (40%) and the Total International Composite Index (10%).
30
<PAGE> 587
The performance of the Vanguard LifeStrategy Conservative Growth Division
Fifty-Four may be compared to a Blended Index, a measure of the investment
performance of a balanced portfolio of stocks, bonds, and cash reserves
comprised of the Lehman Brothers Aggregate Bond Index (40%), the Wilshire 5000
Index (35%), the Salomon Smith Barney 3-Month Treasury Index (20%) and the Total
International Composite Index (5%).
31
<PAGE> 588
The Account Value of an assumed $10,000 investment in each of the Divisions
is shown in table form below. 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. See "How to
Review Investment Performance of Separate Account Divisions" in the prospectus
for information about how these returns were calculated as well as Standard
Average Annual Total Return information that reflects the deduction of all
separate account fees and charges.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 BLENDED
DIVISION FIVE INDEX INDEX***
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/89.................................. $10,000 $10,000 $10,000
12/31/89.................................. 11,581 13,169 12,311
12/31/90.................................. 11,189 12,760 12,583
12/31/91.................................. 13,442 16,647 15,458
12/31/92.................................. 13,212 17,915 16,579
12/31/93.................................. 14,294 19,721 18,186
12/31/94.................................. 13,967 19,982 18,186
12/31/95.................................. 17,255 27,490 23,167
12/31/96.................................. 18,979 33,804 26,372
12/31/97.................................. 23,040 45,081 32,159
12/31/98.................................. 26,999 57,966 38,548
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
AGSPC Asset Allocation Division Five............ 169.99% 88.88% 56.47% 17.19%
Benchmark Comparison
S&P 500 Index................................... 479.66% 193.93% 110.86% 28.58%
Blended Index***................................ 285.48% 111.96% 66.39% 19.87%
</TABLE>
- ---------------
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
** This Division was initiated on September 6, 1983.
*** 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.
32
<PAGE> 589
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- --------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/89............................................. $10,000 $10,000
12/31/89............................................. 11,063 11,411
12/31/90............................................. 10,922 12,253
12/31/91............................................. 12,669 14,487
12/31/92............................................. 13,626 15,808
12/31/93............................................. 15,108 17,773
12/31/94............................................. 14,044 17,176
12/31/95............................................. 16,795 20,882
12/31/96............................................. 16,920 21,590
12/31/97............................................. 18,187 23,832
12/31/98............................................. 19,333 25,910
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Capital Conservation Division Seven........... 93.33% 27.96% 15.11% 6.30%
Benchmark Comparison
Merrill Lynch Corporate Master Index................ 159.10% 45.78% 24.08% 8.72%
</TABLE>
- ---------------
* The Division was initiated on January 16, 1986.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
LEHMAN BROS.
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- ---------------------------------------------------------------- ---------------
<S> <C> <C>
01/01/89.............................................. $10,000 $10,000
12/31/89.............................................. 11,103 11,435
12/31/90.............................................. 11,648 12,419
12/31/91.............................................. 13,231 14,327
12/31/92.............................................. 14,044 15,363
12/31/93.............................................. 15,406 17,013
12/31/94.............................................. 14,567 16,430
12/31/95.............................................. 16,943 19,445
12/31/96.............................................. 17,095 19,984
12/31/97.............................................. 18,433 21,876
12/31/98.............................................. 19,883 24,081
</TABLE>
33
<PAGE> 590
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Government Securities Division Eight...... 98.83% 29.06% 17.35% 7.86%
Benchmark Comparison
Lehman Bros. U.S. Treasury Composite Index...... 140.81% 41.55% 23.84% 10.08%
</TABLE>
- ---------------
* The Division was initiated on January 16, 1986.
AGSPC GROWTH DIVISION FIFTEEN PERFORMANCE COMPARED TO S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
GROWTH S&P 500
DIVISION FIFTEEN INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
12/31/94................................................... 10,018 10,407
12/31/95................................................... 14,667 14,318
12/31/96................................................... 17,333 17,606
12/31/97................................................... 20,765 23,480
12/31/98................................................... 24,286 30,191
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Growth Division Fifteen............. 142.86% -- 65.59% 16.96%
Benchmark Comparison
S&P 500 Index............................. 201.91% -- 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
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
12/31/94................................................... 9,932 10,407
12/31/95................................................... 12,966 14,318
12/31/96................................................... 15,831 17,606
12/31/97................................................... 19,409 23,480
12/31/98................................................... 22,012 30,191
</TABLE>
34
<PAGE> 591
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Growth & Income Division Sixteen... 120.12% -- 69.77% 13.41%
Benchmark Comparison
S&P 500 Index............................ 201.91% -- 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
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
12/31/89................................................... 10,284 10,467
12/31/90................................................... 8,134 8,013
12/31/91................................................... 8,952 8,984
12/31/92................................................... 7,671 7,891
12/31/93................................................... 9,864 10,460
12/31/94................................................... 10,545 11,274
12/31/95................................................... 11,565 12,537
12/31/96................................................... 12,229 13,295
12/31/97................................................... 12,373 13,532
12/31/98................................................... 14,546 16,237
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC International Equities Division
Eleven..................................... 45.46% 47.47% 25.78% 17.57%
Benchmark Comparison
EAFE Index................................... 62.37% 55.23% 29.52% 20.00%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
35
<PAGE> 592
AGSPC INTERNATIONAL GOVERNMENT BOND DIVISION THIRTEEN PERFORMANCE COMPARED TO
SALOMON BROTHERS NON-U.S. DOLLAR WORLD GOVERNMENT BOND INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
SALOMON BROS.
NON-U.S. DOLLAR
WORLD
INTERNATIONAL GOVERNMENT BOND GOVERNMENT
DIVISION THIRTEEN BOND INDEX
- --------------------------------------------------------------------- ---------------
<S> <C> <C>
10/01/91................................................... $10,000 $10,000
12/31/91................................................... 10,905 11,042
12/31/92................................................... 11,128 11,540
12/31/93................................................... 12,583 13,246
12/31/94................................................... 13,014 13,999
12/31/95................................................... 15,308 16,692
12/31/96................................................... 15,822 17,331
12/31/97................................................... 14,906 16,568
12/31/98................................................... 17,280 19,497
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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.................................... 72.80% 37.32% 12.88% 15.92%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World Government
Bond Index.................................. 94.97% 47.19% 16.80% 17.68%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
AGSPC MIDCAP INDEX DIVISION FOUR PERFORMANCE COMPARED TO S&P MIDCAP 400 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
S&P
MIDCAP INDEX MIDCAP 400
DIVISION FOUR INDEX
- ------------------------------------------------------------------- ----------
<S> <C> <C>
10/01/91................................................. $10,000 $10,000
12/31/91................................................. 11,163 11,229
12/31/92................................................. 12,143 12,566
12/31/93................................................. 13,574 14,320
12/31/94................................................. 12,936 13,806
12/31/95................................................. 16,718 18,078
12/31/96................................................. 19,661 21,557
12/31/97................................................. 25,648 28,506
12/31/98................................................. 30,214 33,947
</TABLE>
36
<PAGE> 593
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC MidCap Index Division Four........ 202.14% 122.59% 80.73% 17.80%
Benchmark Comparison
S&P MidCap 400 Index.................... 239.47% 137.07% 87.79% 19.09%
</TABLE>
- ---------------
* The Division was initiated on October 13, 1982. 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.
AGSPC MONEY MARKET DIVISION SIX PERFORMANCE COMPARED TO CERTIFICATE OF DEPOSIT
PRIMARY OFFERING BY NEW YORK CITY BANKS, 30 DAY INDEX (PRIMARY CD INDEX)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- -------------------------------------------------- --------
<S> <C> <C>
01/01/89................................ $10,000 $10,000
12/31/89................................ 10,792 10,867
12/31/90................................ 11,530 11,736
12/31/91................................ 12,048 12,377
12/31/92................................ 12,316 12,767
12/31/93................................ 12,521 13,098
12/31/94................................ 12,867 13,565
12/31/95................................ 13,447 14,235
12/31/96................................ 13,982 14,881
12/31/97................................ 14,559 15,592
12/31/98................................ 15,160 16,325
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Money Market Division Six................ 51.60% 21.07% 12.73% 4.12%
Benchmark Comparison
Primary CD Index............................... 63.25% 24.64% 14.68% 4.70%
</TABLE>
- ---------------
* The Division was initiated on January 16, 1986.
37
<PAGE> 594
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>
SCIENCE & TECHNOLOGY S&P 500
DIVISION SEVENTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
12/31/94................................................... 12,477 10,407
12/31/95................................................... 19,972 14,318
12/31/96................................................... 22,505 17,606
12/31/97................................................... 22,857 23,480
12/31/98................................................... 32,162 30,191
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Science & Technology Division
Seventeen............................... 221.62% -- 61.04% 40.71%
Benchmark Comparison
S&P 500 Index............................. 201.91% -- 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
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
12/31/92................................................ 11,128 11,416
12/31/93................................................ 12,772 13,571
12/31/94................................................ 12,223 13,324
12/31/95................................................ 15,449 17,114
12/31/96................................................ 17,854 19,937
12/31/97................................................ 21,636 24,396
12/31/98................................................ 21,005 23,775
</TABLE>
38
<PAGE> 595
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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...... 110.05% 64.46% 35.96% (2.92)%
Benchmark Comparison
Russell 2000 Index........................... 137.75% 75.19% 38.92% (2.55)%
</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
12/31/89................................................... 10,100 10,214
12/31/90................................................... 9,877 9,897
12/31/91................................................... 12,506 12,912
12/31/92................................................... 12,795 13,896
12/31/93................................................... 13,670 15,297
12/31/94................................................... 13,339 15,499
12/31/95................................................... 18,351 21,323
12/31/96................................................... 22,527 26,220
12/31/97................................................... 29,853 34,967
12/31/98................................................... 37,623 44,961
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Social Awareness Division Twelve...... 276.23% 175.23% 105.02% 26.03%
Benchmark Comparison
S&P 500 Index............................... 349.61% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
39
<PAGE> 596
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/89................................................. $ 10,000 $ 10,000
12/31/89................................................. 12,788 13,169
12/31/90................................................. 12,171 12,760
12/31/91................................................. 15,543 16,647
12/31/92................................................. 16,411 17,915
12/31/93................................................. 17,853 19,721
12/31/94................................................. 17,799 19,982
12/31/95................................................. 24,197 27,490
12/31/96................................................. 29,406 33,804
12/31/97................................................. 38,748 45,081
12/31/98................................................. 49,264 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Stock Index Division Ten............. 392.64% 175.95% 103.59% 27.14%
Benchmark Comparison
S&P 500 Index.............................. 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 20, 1987.
AMERICAN CENTURY ULTRA* DIVISION THIRTY-ONE PERFORMANCE COMPARED TO S&P 500
INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
ULTRA S&P 500
DIVISION THIRTY-ONE INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 13,550 13,169
12/31/90................................................... 14,663 12,760
12/31/91................................................... 27,052 16,647
12/31/92................................................... 27,107 17,915
12/31/93................................................... 32,674 19,721
12/31/94................................................... 31,162 19,982
12/31/95................................................... 42,454 27,490
12/31/96................................................... 47,731 33,804
12/31/97................................................... 58,109 45,081
12/31/98................................................... 77,368 57,966
</TABLE>
40
<PAGE> 597
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
American Century Ultra Division
Thirty-One............................. 673.68% 136.79% 82.24% 33.14%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Fund.
** This Division was initiated on July 1, 1996.
AMERICAN GENERAL BALANCED DIVISION FORTY-TWO PERFORMANCE COMPARED TO S&P 500
INDEX AND LEHMAN BROTHERS GOVERNMENT AND CORPORATE INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL CONSERVATIVE GROWTH LIFESTYLE DIVISION FIFTY
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL CORE BOND DIVISION FIFTY-EIGHT PERFORMANCE COMPARED TO
LEHMAN BROTHERS AGGREGATE INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL DOMESTIC BOND DIVISION FORTY-THREE PERFORMANCE COMPARED TO
LEHMAN BROTHERS GOVERNMENT AND CORPORATE INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL GROWTH LIFESTYLE DIVISION FORTY-EIGHT
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL HIGH YIELD BOND DIVISION SIXTY PERFORMANCE COMPARED TO
SALOMON BROTHERS HIGH YIELD MARKET INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL INTERNATIONAL GROWTH DIVISION THIRTY-THREE PERFORMANCE COMPARED
TO SALOMON PRIMARY MARKET INDEX WORLD
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL INTERNATIONAL VALUE DIVISION THIRTY-FOUR
PERFORMANCE COMPARED TO SALOMON PRIMARY MARKET INDEX WORLD
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL LARGE CAP GROWTH DIVISION THIRTY-NINE PERFORMANCE COMPARED TO
RUSSELL 1000 INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
41
<PAGE> 598
AMERICAN GENERAL LARGE CAP VALUE DIVISION FORTY PERFORMANCE COMPARED TO
RUSSELL 1000 INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL MID CAP GROWTH DIVISION THIRTY-SEVEN PERFORMANCE COMPARED TO
S&P MIDCAP 400 INDEX
Since the Fund recently commenced operations, no actual performance history
exists for the Division.
AMERICAN GENERAL MID CAP VALUE DIVISION THIRTY-EIGHT PERFORMANCE COMPARED TO
S&P MIDCAP 400 INDEX
Since the Fund recently commenced operations no actual performance history
exists for the Division.
AMERICAN GENERAL MODERATE GROWTH LIFESTYLE DIVISION FORTY-NINE
Since the Fund recently commenced operations no actual performance history
exists for the Division.
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)
Since the Fund recently commenced operations no actual performance history
exists for the Division.
AMERICAN GENERAL SMALL CAP GROWTH DIVISION THIRTY-FIVE PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX
Since the Fund recently commenced operations no actual performance history
exists for the Division.
AMERICAN GENERAL SMALL CAP VALUE DIVISION THIRTY-SIX PERFORMANCE COMPARED TO
RUSSELL 2000 INDEX
Since the Fund recently commenced operations no actual performance history
exists for the Division.
AMERICAN GENERAL SOCIALLY RESPONSIBLE DIVISION FORTY-ONE PERFORMANCE COMPARED TO
S&P 500 INDEX
Since the Fund recently commenced operations no actual performance history
exists for the Division.
AMERICAN GENERAL STRATEGIC BOND DIVISION FIFTY-NINE PERFORMANCE COMPARED TO
LEHMAN BROTHERS AGGREGATE INDEX
Since the Fund recently commenced operations no actual performance history
exists for the Division.
42
<PAGE> 599
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
12/31/90............................................... 10,168 9,577
12/31/91............................................... 26,105 13,996
12/31/92............................................... 44,181 16,572
12/31/93............................................... 73,477 19,701
12/31/94............................................... 78,125 19,341
12/31/95............................................... 99,825 24,844
12/31/96............................................... 114,938 28,942
12/31/97............................................... 132,607 35,414
12/31/98............................................... 126,628 34,513
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Dreyfus Small Cap Division Eighteen..... 1,166.28% 72.34% 26.85% (4.51)%
Benchmark Comparison
Russell 2000 Index...................... 245.13% 75.19% 38.92% (2.55)%
</TABLE>
- ---------------
* This Division was initiated on July 11, 1994.
EVERGREEN GROWTH AND INCOME DIVISION FIFTY-SIX COMPARED TO S&P MIDCAP 400 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 3, 1995
<TABLE>
<CAPTION>
S&P
EVERGREEN GROWTH AND INCOME MIDCAP 400
DIVISION FIFTY-SIX INDEX
- ------------------------------------------------------------------- ----------
<S> <C> <C>
01/03/95................................................. $10,000 $10,000
12/31/95................................................. 13,142 13,085
12/31/96................................................. 16,074 15,604
12/31/97................................................. 20,842 20,634
12/31/98................................................. 21,655 24,573
</TABLE>
43
<PAGE> 600
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Evergreen Growth and Income
Division Fifty-Six................................... 116.55% 64.78% 3.90%
Benchmark Comparison
S&P MidCap 400 Index................................... 145.73% 87.79% 19.09%
</TABLE>
- ---------------
* Evergreen Growth and Income Division 56 was first offered through Portfolio
Director Plus on January 4, 1999. Accordingly, the Standard Average Annual
Total Return for the Division will be shown when it becomes available.
EVERGREEN SMALL CAP VALUE DIVISION FIFTY-FIVE COMPARED TO RUSSELL 2000 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 3, 1995
<TABLE>
<CAPTION>
EVERGREEN SMALL CAP VALUE RUSSELL 2000
DIVISION FIFTY-FIVE INDEX
- ------------------------------------------------------------------ ------------
<S> <C> <C>
01/03/95................................................ $10,000 $10,000
12/31/95................................................ 12,764 12,856
12/31/96................................................ 15,422 14,976
12/31/97................................................ 20,367 18,325
12/31/98................................................ 18,237 17,859
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Evergreen Small Cap Value**
Division Fifty-Five.................................. 82.37% 42.89% (10.46)%
Benchmark Comparison
Russell 2000 Index..................................... 78.59% 38.92% (2.55)%
</TABLE>
- ---------------
* Evergreen Small Cap Value Division 55 was first offered through Portfolio
Director Plus on January 4, 1999. Accordingly, the Standard Average Annual
Total Return for the Division will be shown when it becomes available.
** The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund.
44
<PAGE> 601
EVERGREEN VALUE DIVISION FIFTY-SEVEN COMPARED TO S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
EVERGREEN VALUE S&P 500
DIVISION FIFTY-SEVEN INDEX
- ------------------------------------------------------------------ -------
<S> <C> <C>
01/01/89................................................ $10,000 $10,000
12/31/89................................................ 12,566 13,169
12/31/90................................................ 12,014 12,760
12/31/91................................................ 14,886 16,647
12/31/92................................................ 15,907 17,915
12/31/93................................................ 17,218 19,721
12/31/94................................................ 17,367 19,982
12/31/95................................................ 22,671 27,490
12/31/96................................................ 26,698 33,804
12/31/97................................................ 33,244 45,081
12/31/98................................................ 36,049 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Evergreen Value Division Fifty-Seven........ 260.49% 109.37% 59.01% 8.44%
Benchmark Comparison
S&P 500 Index............................... 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* Evergreen Value Division 57 was first offered through Portfolio Director Plus
on January 4, 1999. Accordingly, the Standard Average Annual Total Return for
the Division will be shown when it becomes available.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
FOUNDERS GROWTH S&P 500
DIVISION THIRTY INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 14,034 13,169
12/31/90................................................... 12,424 12,760
12/31/91................................................... 18,131 16,647
12/31/92................................................... 18,714 17,915
12/31/93................................................... 23,263 19,721
12/31/94................................................... 22,264 19,982
12/31/95................................................... 32,098 27,490
12/31/96................................................... 37,025 33,804
12/31/97................................................... 46,376 45,081
12/31/98................................................... 57,395 57,966
</TABLE>
45
<PAGE> 602
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Founders Growth Division Thirty.......... 473.95% 146.72% 78.81% 23.76%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
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 AUGUST 3, 1993
<TABLE>
<CAPTION>
GUARDIAN TRUST S&P 500
DIVISION TWENTY-NINE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
08/03/93................................................... $10,000 $10,000
12/31/93................................................... 10,692 10,514
12/31/94................................................... 10,748 10,653
12/31/95................................................... 14,047 14,656
12/31/96................................................... 16,370 18,022
12/31/97................................................... 19,097 24,034
12/31/98................................................... 19,353 30,903
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
Neuberger Berman Guardian Trust Division
Twenty-Nine....................................... 93.53% 81.00% 37.77% 1.34%
Benchmark Comparison
S&P 500 Index....................................... 209.03% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* The Neuberger Berman Guardian Trust ("Trust") was formerly known as the
Neuberger&Berman Guardian Trust. The Trust started operating on August 3,
1993. Neuberger Berman Management Incorporated, the manager for the Trust,
voluntarily bears certain expenses of the Trust. This arrangement can be
terminated on sixty days' notice. Please see the prospectus for further
details.
** This Division was initiated on July 1, 1996.
46
<PAGE> 603
PUTNAM GLOBAL GROWTH -- CLASS A SHARES 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MSCI
GLOBAL GROWTH -- CLASS A SHARES WORLD S&P 500
DIVISION TWENTY-EIGHT INDEX INDEX
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/89.................................. $10,000 $10,000 $10,000
12/31/89.................................. 12,333 11,661 13,169
12/31/90.................................. 11,088 9,676 12,760
12/31/91.................................. 12,952 11,446 16,647
12/31/92.................................. 12,855 10,847 17,915
12/31/93.................................. 16,783 13,288 19,721
12/31/94.................................. 16,476 13,963 19,982
12/31/95.................................. 18,731 16,856 27,490
12/31/96.................................. 21,609 19,128 33,804
12/31/97.................................. 24,246 22,143 45,081
12/31/98.................................. 30,909 27,533 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Putnam Global Growth -- Class A Shares Division
Twenty-Eight................................. 209.09% 84.17% 65.01% 27.48%
Benchmark Comparison
MSCI World Index............................... 175.33% 107.19% 63.34% 23.34%
S&P 500 Index.................................. 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
PUTNAM NEW OPPORTUNITIES -- CLASS A SHARES 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 -- CLASS A SHARES S&P 500
DIVISION TWENTY-SIX INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
08/31/90................................................... $10,000 $10,000
12/31/90................................................... 11,041 10,366
12/31/91................................................... 18,317 13,524
12/31/92................................................... 22,780 14,555
12/31/93................................................... 29,932 16,022
12/31/94................................................... 30,620 16,233
12/31/95................................................... 44,354 22,333
12/31/96................................................... 48,656 27,463
12/31/97................................................... 59,023 36,625
12/31/98................................................... 72,667 47,092
</TABLE>
47
<PAGE> 604
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Putnam New Opportunities -- Class A Shares
Division Twenty-Six.......................... 626.67% 142.78% 63.83% 23.12%
Benchmark Comparison
S&P 500 Index.................................. 370.92% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
PUTNAM OTC & EMERGING GROWTH -- CLASS A SHARES 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
OTC & EMERGING GROWTH -- CLASS A SHARES RUSSELL S&P 500
DIVISION TWENTY-SEVEN 2000 INDEX
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/89.................................. $10,000 $10,000 $10,000
12/31/89.................................. 12,770 11,626 13,169
12/31/90.................................. 11,401 9,356 12,760
12/31/91.................................. 15,899 13,672 16,647
12/31/92.................................. 17,739 16,189 17,915
12/31/93.................................. 23,196 19,246 19,721
12/31/94.................................. 23,483 18,895 19,982
12/31/95.................................. 36,262 24,271 27,490
12/31/96.................................. 37,540 28,274 33,804
12/31/97.................................. 40,949 34,597 45,081
12/31/98.................................. 44,993 33,716 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Putnam OTC & Emerging Growth -- Class A
Shares Division Twenty-Seven........... 349.93% 93.97% 24.08% 9.87%
Benchmark Comparison
Russell 2000 Index....................... 237.16% 75.19% 38.92% (2.55)%
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
48
<PAGE> 605
SCUDDER GROWTH AND INCOME DIVISION TWENTY-ONE PERFORMANCE COMPARED TO S&P 500
INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
SCUDDER GROWTH AND INCOME S&P 500
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 12,480 13,169
12/31/90................................................... 12,040 12,760
12/31/91................................................... 15,241 16,647
12/31/92................................................... 16,491 17,915
12/31/93................................................... 18,828 19,721
12/31/94................................................... 19,079 19,982
12/31/95................................................... 24,719 27,490
12/31/96................................................... 29,818 33,804
12/31/97................................................... 38,404 45,081
12/31/98................................................... 40,322 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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.................... 303.22% 114.16% 63.12% 4.99%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
SMALL-CAP STOCK RUSSELL 2000
DIVISION FIFTY-ONE INDEX
- --------------------------------------------------------------------- ------------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 11,768 11,626
12/31/90................................................... 9,241 9,356
12/31/91................................................... 12,654 13,672
12/31/92................................................... 14,238 16,189
12/31/93................................................... 16,652 19,246
12/31/94................................................... 16,461 18,895
12/31/95................................................... 21,767 24,271
12/31/96................................................... 26,028 28,274
12/31/97................................................... 33,122 34,597
12/31/98................................................... 31,551 33,716
</TABLE>
49
<PAGE> 606
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
T. Rowe Price Small-Cap Stock
Division Fifty-One....................... 215.51% 89.47% 44.95% (4.74)%
Benchmark Comparison
Russell 2000 Index......................... 237.16% 75.19% 38.92% (2.55)%
</TABLE>
- ---------------
* T. Rowe Price Small-Cap Stock Division 51 was first offered through Portfolio
Director Plus on September 22, 1998. Accordingly, the Standard Average Annual
Total Return for the Division will be shown when it becomes available.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MSCI
TEMPLETON ASSET ALLOCATION WORLD BLENDED
DIVISION NINETEEN INDEX INDEX**
- -------------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/89...................................... $10,000 $10,000 $10,000
12/31/89...................................... 11,186 11,661 11,149
12/31/90...................................... 10,164 9,676 10,599
12/31/91...................................... 12,821 11,446 12,325
12/31/92...................................... 13,685 10,847 12,239
12/31/93...................................... 17,050 13,288 14,342
12/31/94...................................... 16,328 13,963 14,920
12/31/95...................................... 19,759 16,856 17,679
12/31/96...................................... 23,197 19,128 19,284
12/31/97...................................... 26,461 22,143 21,066
12/31/98...................................... 27,803 27,533 25,210
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Templeton Asset Allocation
Division Nineteen...................... 178.03% 63.07% 40.71% 5.07%
Benchmark Comparison
MSCI World Index......................... 175.33% 107.19% 63.34% 24.34%
Blended Index**.......................... 152.10% 75.78% 42.60% 19.67%
</TABLE>
- ---------------
* The Division was initiated on July 11, 1994.
** 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.
50
<PAGE> 607
TEMPLETON FOREIGN DIVISION THIRTY-TWO PERFORMANCE COMPARED TO EAFE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
FOREIGN EAFE
DIVISION THIRTY-TWO INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/89................................................. $ 10,000 $ 10,000
12/31/89................................................. 12,924 11,054
12/31/90................................................. 12,413 8,462
12/31/91................................................. 14,537 9,488
12/31/92................................................. 14,407 8,333
12/31/93................................................. 19,517 11,046
12/31/94................................................. 19,393 11,906
12/31/95................................................. 21,346 13,240
12/31/96................................................. 24,920 14,041
12/31/97................................................. 26,307 14,290
12/31/98................................................. 24,777 17,148
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Templeton Foreign Division Thirty-Two...... 147.77% 26.95% 16.07% (5.82)%
Benchmark Comparison
EAFE Index................................. 71.48% 55.23% 29.52% 20.00%
</TABLE>
- ---------------
* The Division was initiated on July 1, 1996.
TEMPLETON INTERNATIONAL DIVISION TWENTY PERFORMANCE COMPARED TO MSCI WORLD INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
MSCI
TEMPLETON INTERNATIONAL WORLD
DIVISION TWENTY INDEX
- ---------------------------------------------------------------------- --------
<S> <C> <C>
05/01/92.................................................... $10,000 $10,000
12/31/92.................................................... 9,311 10,182
12/31/93.................................................... 13,549 12,474
12/31/94.................................................... 13,077 13,107
12/31/95.................................................... 14,952 15,823
12/31/96.................................................... 18,317 17,955
12/31/97.................................................... 20,613 20,786
12/31/98.................................................... 22,251 25,844
</TABLE>
51
<PAGE> 608
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Templeton International Division
Twenty................................. 122.51% 64.23% 48.82% 7.95%
Benchmark Comparison
MSCI World Index......................... 158.44% 107.19% 63.34% 24.34%
</TABLE>
- ---------------
* This Division was initiated on July 11, 1994.
VANGUARD LIFESTRATEGY CONSERVATIVE GROWTH DIVISION FIFTY-FOUR COMPARED TO LEHMAN
BROTHERS AGGREGATE BOND INDEX, WILSHIRE 5000 INDEX, SALOMON SMITH BARNEY 3-MONTH
TREASURY INDEX AND TOTAL INTERNATIONAL COMPOSITE INDEX.
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LIFESTRATEGY CONSERVATIVE GROWTH BLENDED
DIVISION FIFTY-FOUR INDEX*
- ---------------------------------------------------------------------- -------
<S> <C> <C>
09/30/94.................................................... $10,000 $10,000
12/31/94.................................................... 9,979 10,011
12/31/95.................................................... 12,258 12,158
12/31/96.................................................... 13,361 13,389
12/31/97.................................................... 15,416 15,498
12/31/98.................................................... 17,628 17,698
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard LifeStrategy Conservative Growth Fund
Division Fifty-Four.............................. 76.28% 43.82% 14.35%
Benchmark Comparison
Blended Index*..................................... 76.98% 45.57% 14.20%
</TABLE>
- ---------------
* The Blended Index reflects an allocation of investments in the following
Indexes: 40% of investments included in the Lehman Brothers Aggregate Bond
Index, 35% of investments included in the Wilshire 5000 Index, 20% of
investments included in the Salomon Smith Barney 3-Month Treasury Index, and
5% of investments included in the Total International Composite Index.
** This Division was initiated on September 22, 1998.
52
<PAGE> 609
VANGUARD LONG-TERM CORPORATE 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MERRILL LYNCH
LONG-TERM CORPORATE CORPORATE MASTER
DIVISION TWENTY-TWO INDEX
- ----------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/89............................................... $10,000 $10,000
12/31/89............................................... 11,376 11,411
12/31/90............................................... 11,933 12,253
12/31/91............................................... 14,251 14,487
12/31/92............................................... 15,451 15,808
12/31/93............................................... 17,472 17,773
12/31/94............................................... 16,344 17,176
12/31/95............................................... 20,404 20,882
12/31/96............................................... 20,256 21,590
12/31/97............................................... 22,752 23,832
12/31/98............................................... 24,582 25,910
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
Vanguard Long-Term Corporate Fund Division
Twenty-Two..................................... 145.82% 40.69% 20.48% 8.04%
Benchmark Comparison
Merrill Lynch Corporate Master Index............. 159.10% 45.78% 24.08% 8.72%
</TABLE>
- ---------------
* The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund -- Long-Term Corporate Portfolio.
** This Division was initiated on July 1, 1996.
53
<PAGE> 610
VANGUARD LONG-TERM TREASURY* 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
LEHMAN BROS.
U.S. TREASURY
LONG-TERM TREASURY LONG-TERM
DIVISION TWENTY-THREE INDEX
- ----------------------------------------------------------------- -------------
<S> <C> <C>
01/01/89............................................... $10,000 $10,000
12/31/89............................................... 11,649 11,892
12/31/90............................................... 12,170 12,643
12/31/91............................................... 14,116 14,982
12/31/92............................................... 14,974 16,176
12/31/93............................................... 17,272 18,967
12/31/94............................................... 15,859 17,517
12/31/95............................................... 20,380 22,892
12/31/96............................................... 19,753 22,693
12/31/97............................................... 22,211 26,114
12/31/98............................................... 24,835 29,642
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
Vanguard Long-Term Treasury Fund Division
Twenty-Three................................... 148.35% 43.79% 21.86% 11.82%
Benchmark Comparison
Lehman Brothers U.S. Treasury
Long-Term Index................................ 196.42% 56.29% 29.48% 13.51%
</TABLE>
- ---------------
* The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio.
** This Division was initiated on July 1, 1996.
VANGUARD LIFESTRATEGY GROWTH DIVISION FIFTY-TWO COMPARED TO WILSHIRE 5000 INDEX,
LEHMAN BROTHERS AGGREGATE BOND INDEX AND TOTAL INTERNATIONAL COMPOSITE INDEX.
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LIFESTRATEGY GROWTH BLENDED
DIVISION FIFTY-TWO INDEX*
- ---------------------------------------------------------------------- -------
<S> <C> <C>
09/30/94.................................................... $10,000 $10,000
12/31/94.................................................... 9,959 9,944
12/31/95.................................................... 12,715 12,814
12/31/96.................................................... 14,495 14,782
12/31/97.................................................... 17,507 18,077
12/31/98.................................................... 20,969 21,780
</TABLE>
54
<PAGE> 611
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard LifeStrategy Growth Fund Division
Fifty-Two........................................ 109.69% 64.91% 19.77%
Benchmark Comparison
Blended Index*..................................... 117.80% 69.97% 20.48%
</TABLE>
- ---------------
* The Blended Index reflects an allocation of investments in the following
Indexes: 65% of investments included in the Wilshire 5000 Index, 20% of
investments included in the Lehman Brothers Aggregate Bond Index, and 15% of
investments included in the Total International Composite Index.
** This Division was initiated on September 22, 1998.
VANGUARD LIFESTRATEGY MODERATE GROWTH DIVISION FIFTY-THREE COMPARED TO WILSHIRE
5000 INDEX, LEHMAN BROTHERS AGGREGATE BOND INDEX AND TOTAL INTERNATIONAL
COMPOSITE INDEX.
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LIFESTRATEGY MODERATE GROWTH BLENDED
DIVISION FIFTY-THREE INDEX*
- ---------------------------------------------------------------------- -------
<S> <C> <C>
09/30/94.................................................... $10,000 $10,000
12/31/94.................................................... 9,899 9,969
12/31/95.................................................... 12,512 12,614
12/31/96.................................................... 13,929 14,197
12/31/97.................................................... 16,480 16,964
12/31/98.................................................... 19,353 19,988
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three...................................... 93.53% 54.68% 17.43%
Benchmark Comparison
Blended Index*..................................... 99.88% 58.46% 17.83%
</TABLE>
- ---------------
* The Blended Index reflects an allocation of investments in the following
Indexes: 50% of investments included in the Wilshire 5000 Index, 40% of
investments included in the Lehman Brothers Aggregate Bond Index, and 10% of
investments included in the Total International Composite Index.
** This Division was initiated on September 22, 1998.
55
<PAGE> 612
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
VANGUARD WELLINGTON BLENDED
DIVISION TWENTY-FIVE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 12,011 12,546
12/31/90................................................... 11,530 12,629
12/31/91................................................... 14,082 15,952
12/31/92................................................... 15,009 17,260
12/31/93................................................... 16,828 19,148
12/31/94................................................... 16,540 19,094
12/31/95................................................... 21,716 25,170
12/31/96................................................... 24,906 29,162
12/31/97................................................... 30,299 36,475
12/31/98................................................... 33,526 44,465
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
Vanguard/Wellington Division
Twenty-Five............................. 235.26% 99.22% 54.38% 10.65%
Benchmark Comparison
Blended Index***.......................... 344.65% 132.22% 76.66% 21.90%
</TABLE>
- ---------------
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund.
** This Division was initiated on July 1, 1996.
*** 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.
56
<PAGE> 613
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
VANGUARD/WINDSOR II S&P 500
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 12,625 13,169
12/31/90................................................... 11,225 12,760
12/31/91................................................... 14,268 16,647
12/31/92................................................... 15,781 17,915
12/31/93................................................... 17,707 19,721
12/31/94................................................... 17,285 19,982
12/31/95................................................... 23,703 27,490
12/31/96................................................... 29,051 33,804
12/31/97................................................... 37,970 45,081
12/31/98................................................... 43,627 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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............................ 336.27% 146.38% 84.06% 14.90%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund.
** This Division was initiated on July 1, 1996.
57
<PAGE> 614
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 Annuity 2000 Table (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
58
<PAGE> 615
shares and other assets and liabilities. (See "Purchase Period" in the
prospectus.) The calculation of Payout Unit value is discussed in the prospectus
under "Payout Period."
The following illustrations show, by use of hypothetical examples, the
method of determining the Payout Unit value and the amount of variable annuity
payments.
ILLUSTRATION OF CALCULATION OF PAYOUT UNIT VALUE
Example 8.
<TABLE>
<S> <C>
1. Payout Unit value, beginning of period.................. $ .980000
2. Net investment factor for Period (see Example 3)........ 1.023558
3. Daily adjustment for 3 1/2% Assumed Investment Rate..... .999906
4. (2)X(3)................................................. 1.023462
5. Payout Unit value, end of period (1)X(4)................ $1.002993
</TABLE>
ILLUSTRATION OF PAYOUT PAYMENTS
Example 9. Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <C>
1. Number of Purchase Units at Payout Date................. 10,000.00
2. Purchase Unit value (see Example 3)..................... $ 1.800000
3. Account Value of Contract (1)X(2)....................... $18,000.00
4. First monthly Payout Payment per $1,000 of Account
Value................................................... $ 5.63
5. First monthly Payout Payment (3)X(4)/1,000.............. $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5)/(6).......................... 103.408
8. Assume Payout Unit value for second month equal to...... $ .997000
9. Second monthly Payout Payment (7)X(8)................... $ 103.10
10. Assume Payout Unit value for third month equal to....... $ .953000
11. Third monthly Payout Payment (7)X(10)................... $ 98.55
</TABLE>
59
<PAGE> 616
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 A.G. Distributors, an affiliate of
VALIC. A.G. Distributors' address is 2929 Allen Parkway, Houston, Texas 77019.
A.G. Distributors is a Delaware corporation organized in 1994 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 6.0% 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 A.G. Distributors and VALIC
Separate Account A, the Company reimburses A.G. Distributors for reasonable
sales expenses, including overhead expenses. Prior to May 1, 1999, The Variable
Annuity Marketing Company (VAMCO) was the principal underwriter for VALIC
Separate Account A. The sales commission paid for the year 1998 was $5,403.
VAMCO retained $0 commission for the year 1998.
EXPERTS
The consolidated financial statements of the Company at December 31, 1998
and 1997, and for each of the three years in the period ended December 31, 1998,
and the financial statements of the Company's Separate Account A at December 31,
1998 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 and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
60
<PAGE> 617
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, 1998.
61
<PAGE> 618
[THIS PAGE INTENTIONALLY LEFT BLANK]
62
<PAGE> 619
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, 1998
and 1997, and the related consolidated statements of income, changes in
stockholder's equity, comprehensive income, and cash flows for each of the three
years in the period ended December 31, 1998. 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, 1998
and 1997, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 16, 1999
<PAGE> 620
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Balance Sheet
At December 31
In Thousands
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS Investments - Notes 2, 7, 8, 9:
Fixed maturity securities
(amortized cost: $21,733,209 in 1998 and $20,651,381 in 1997) $22,878,049 $21,641,084
Equity securities (cost: $176,799 in 1998 and $5,581 in 1997) 194,629 5,456
Mortgage loans on real estate 1,212,527 1,259,029
Real estate, net of accumulated depreciation
of $69 in 1998 and 1997 20,679 28,569
Policy loans 788,547 719,127
Other long-term invested assets 59,543 45,474
Short-term investments 164,484 60,904
----------- -----------
Total investments 25,318,458 23,759,643
----------- -----------
Investment income receivable 369,777 347,358
Cash 104,718 32,181
Receivable for securities sold 22,157 32,825
Deferred policy acquisition costs - Note 3 665,127 392,346
Cost of insurance purchased - Note 4 22,113 --
Due from reinsurer, net 13,343 14,545
Other assets 119,310 52,104
Assets held in Separate Accounts 14,712,465 10,564,220
----------- -----------
Total assets $41,347,468 $35,195,222
----------- -----------
LIABILITIES Policy reserves for fixed annuity investment contracts $23,218,626 $21,994,804
Payable for securities purchased 40,757 19,027
Remittances not allocated 95,797 79,392
Commissions, general expenses and taxes (other than income taxes) 37,613 39,546
Other liabilities 193,933 61,756
Income tax liabilities - Note 5 541,676 377,072
Liabilities related to Separate Accounts 14,712,465 10,564,220
----------- -----------
Total liabilities 38,840,867 33,135,817
----------- -----------
Common stock (voting) par value $1 per share, 5,000 shares authorized
STOCKHOLDER'S and 3,575 issued and outstanding in 1998 and 1997 - Note 6 3,575 3,575
EQUITY Additional paid-in capital 833,372 710,624
Retained earnings 1,142,194 1,038,731
Accumulated other comprehensive income - Note 2 527,460 306,475
----------- -----------
Total stockholder's equity 2,506,601 2,059,405
=========== ===========
Total liabilities and stockholder's equity $41,347,468 $35,195,222
=========== ===========
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 621
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Income
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES Surrender charges $ 14,512 $ 12,405 $ 12,348
Mortality charges 135,304 94,162 59,955
Expense charges 6,784 6,102 5,654
Net investment income - Note 2 1,810,624 1,729,541 1,654,496
Net reinsurance income 1,236 1,303 1,528
Realized investment gains (losses) - Note 2 (28,271) 20,235 21,551
Other income 18,593 15,320 10,920
----------- ----------- -----------
Total revenues 1,958,782 1,879,068 1,766,452
----------- ----------- -----------
COSTS AND Policy costs:
EXPENSES Increase in policy reserves for fixed annuity contracts 1,296,120 1,286,010 1,243,993
----------- ----------- -----------
Total costs 1,296,120 1,286,010 1,243,993
----------- ----------- -----------
Expenses:
Commissions 123,983 110,960 97,630
Salaries 70,904 58,873 54,016
Data processing 28,616 14,876 12,088
Postage and telephone 15,473 12,253 11,308
Sales promotion 10,250 10,161 10,394
Depreciation expense on furniture and equipment 10,292 8,964 8,920
Rent 9,315 7,931 7,524
Taxes, licenses and fees 8,302 6,874 6,208
Printing and supplies 6,393 4,496 5,290
Guaranty association assessments - Note 10 37 30 2,678
Other expenses 60,682 35,172 27,223
Amortization of deferred policy acquisition costs - Note 3 55,074 42,101 31,201
Amortization of cost of insurance purchased - Note 4 1,802 -- --
Policy acquisition costs deferred - Note 3 (159,778) (137,655) (116,818)
----------- ----------- -----------
Total expenses 241,345 175,036 157,662
----------- ----------- -----------
EARNINGS Total costs and expenses 1,537,465 1,461,046 1,401,655
----------- ----------- -----------
Income before income tax expense 421,317 418,022 364,797
Income tax expense - Note 5 136,854 144,238 124,370
----------- ----------- -----------
Net income $ 284,463 $ 273,784 $ 240,427
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 622
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Changes in Stockholder's Equity
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<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 710,624 459,281 384,126
PAID-IN-CAPITAL Capital contribution from stockholder 122,748 251,343 75,155
----------- ----------- -----------
Balance at end of year 833,372 710,624 459,281
----------- ----------- -----------
RETAINED Balance at beginning of year 1,038,731 1,143,947 1,014,520
EARNINGS Net income 284,463 273,784 240,427
Dividends paid to stockholder (181,000) (379,000) (111,000)
----------- ----------- -----------
Balance at end of year 1,142,194 1,038,731 1,143,947
----------- ----------- -----------
ACCUMULATED OTHER Balance at beginning of year 306,475 166,852 396,620
COMPREHENSIVE Change in net unrealized gains (losses) on securities 220,985 139,623 (229,768)
----------- ----------- -----------
INCOME Balance at end of year 527,460 306,475 166,852
----------- ----------- -----------
STOCKHOLDER'S
EQUITY Balance at end of year $ 2,506,601 $ 2,059,405 $ 1,773,655
----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
COMPREHENSIVE Net income $ 284,463 $ 273,784 $ 240,427
INCOME Other comprehensive income
Gross change in unrealized gains (losses) on securities
(pretax: $311,706; $235,040; ($331,938)) 202,609 152,776 (215,760)
Less: gains (losses) realized in net income - Note 2 (18,376) 13,153 14,008
--------- --------- ---------
Change in net unrealized gains (losses) on
securities (pretax: $339,977; $214,805; ($353,489)) 220,985 139,623 (229,768)
--------- --------- ---------
Comprehensive income $ 505,448 $ 413,407 $ 10,659
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 623
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Cash Flows
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING Net income $ 284,463 $ 273,784 $ 240,427
ACTIVITIES Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,296,120 1,286,010 1,243,993
Deferred policy acquisition costs (104,704) (95,554) (85,617)
Other, net (37,021) (51,241) (50,233)
------------ ------------ ------------
Net cash provided by operating activities 1,438,858 1,412,999 1,348,570
------------ ------------ ------------
INVESTING Investment purchases (15,180,407) (18,403,013) (14,883,271)
ACTIVITIES Investment calls, maturities and sales 14,731,932 17,500,312 13,897,479
Net increase in short-term investments (103,580) (7,904) (13,722)
------------ ------------ ------------
Net cash used for investing activities (552,055) (910,605) (999,514)
------------ ------------ ------------
FINANCING Policyholder account deposits 3,755,481 3,385,303 2,896,090
ACTIVITIES Policyholder account withdrawals (1,777,580) (1,427,005) (1,276,008)
Transfers to Separate Accounts (2,728,063) (2,325,214) (1,936,727)
Capital contribution from stockholder 116,896 251,343 75,155
Dividends paid (181,000) (379,000) (111,000)
------------ ------------ ------------
Net cash used for financing activities (814,266) (494,573) (352,490)
------------ ------------ ------------
NET CHANGE Net increase (decrease) in cash 72,537 7,821 (3,434)
IN CASH Cash at beginning of year 32,181 24,360 27,794
------------ ------------ ------------
Cash at end of year $ 104,718 $ 32,181 $ 24,360
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 624
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
December 31, 1998
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.
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
COMPREHENSIVE INCOME. During 1998, VALIC adopted Statement of Financial
Accounting Standards (SFAS) 130, "Reporting Comprehensive Income," which
establishes standards for reporting and displaying comprehensive income and its
components in the financial statements. VALIC elected to report comprehensive
income and its components in a separate statement of comprehensive income.
Adoption of this statement did not change recognition or measurement of net
income and, therefore, did not impact VALIC's consolidated results of operations
or financial position.
DERIVATIVES. In June 1998, the Financial Accounting Standards Board issued
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which
requires all derivative instruments to be recognized at fair value as either
assets or liabilities in the balance sheet. Changes in the fair value of a
derivative instrument are to be reported as earnings or other comprehensive
income, depending upon the intended use of the derivative instrument. This
statement is effective for years beginning after June 15, 1999. Adoption of SFAS
133 is not expected to have a material impact on VALIC's consolidated results of
operations or financial position.
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. At year end, 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 accumulated other
comprehensive income 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.
During 1998, VALIC maintained a trading portfolio of certain fixed maturity
securities. Trading securities are recorded at fair value. Unrealized gains
(losses), as well as realized gains (losses), are included in net investment
income. VALIC held no trading securities at December 31, 1998, and trading
securities did not have a material effect on net investment income.
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
are used to convert specific investment securities from a floating-rate 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.
- --------------------------------------------------------------------------------
6
<PAGE> 625
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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 accumulated other comprehensive income
included in stockholder's equity, consistent with the treatment of the related
investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into income
over the remaining term of the related investment. If the underlying investment
is extinguished or sold, any related gain or loss on swap agreements is
recognized in income.
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 prolonged periods of decreasing interest rates, the spread between
investment yields and interest crediting rates may be reduced as a result of
minimum rate guarantees on certain insurance and annuity contracts, which limit
VALIC's ability to reduce interest crediting rates. Call swaptions, which allow
VALIC to enter into interest rate swap agreements to receive fixed rates and pay
lower floating rates, effectively maintain the spread between investment yields
and interest crediting rates during such periods.
During prolonged periods of increasing interest rates, the spread between
investment yields and interest crediting rates may be reduced as a result of
VALIC's decision to increase interest crediting rates to limit surrenders. Put
swaptions, which allow VALIC to enter into interest rate swap agreements to pay
fixed rates and receive higher floating rates, effectively maintain the spread
between investment yields and interest crediting rates during such periods.
Premiums paid to purchase swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a 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 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) on securities had been realized at the balance sheet
date. The impact of this adjustment is included in accumulated other
comprehensive income 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 VALIC. Consequently, VALIC'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 credited 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.
- --------------------------------------------------------------------------------
7
<PAGE> 626
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
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 accumulated other
comprehensive income in stockholder's equity.
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>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 169,855 $ 237,719 $ 213,686
---------- ---------- ----------
Stockholder's equity $1,236,522 $1,189,278 $1,077,366
---------- ---------- ----------
</TABLE>
1.12 COINSURANCE TRANSACTION
On May 21, 1998, VALIC completed the acquisition of a block of individual
annuity business in a coinsurance transaction. This transaction increased assets
and insurance and annuity liabilities by $688,221.
2
INVESTMENTS
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,664,325 $1,562,802 $1,471,879
Affiliated fixed
maturity securities 2,761 2,588 2,851
Equity securities 245 483 782
Mortgage loans on
real estate 112,781 123,591 140,492
Other 62,680 53,543 51,040
---------- ---------- ----------
Gross investment income 1,842,792 1,743,007 1,667,044
Investment expense 32,168 13,466 12,548
---------- ---------- ----------
Net investment income $1,810,624 $1,729,541 $1,654,496
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income during
1998 totaled $313 or 0.001% 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, 1998.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities
Gross gains $ 14,472 $ 35,087 $ 38,222
Gross losses (49,745) (29,012) (36,805)
-------- -------- --------
Total fixed maturity
securities (35,273) 6,075 1,417
-------- -------- --------
Equity securities
Gross gains 158 31 15,867
Gross losses (30) (10) (72)
-------- -------- --------
Total equity securities 128 21 15,795
-------- -------- --------
Mortgage loans on real estate 8,811 21,647 4,635
Real estate 6,673 3,802 389
Other long-term investments (601) (28) (9)
DPAC amortization and
investment expense (8,009) (11,282) (676)
-------- -------- --------
Realized investment gains
(losses) before taxes (28,271) 20,235 21,551
Income tax expense (benefit) (9,895) 7,082 7,543
-------- -------- --------
Net realized investment
gains (losses) $(18,376) $ 13,153 $ 14,008
-------- -------- --------
</TABLE>
2.3 CASH FLOWS FROM INVESTING ACTIVITIES
Uses of cash for investment purchases were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 5,469,258 $ 5,174,707 $ 5,299,390
Other 9,711,149 13,228,306 9,583,881
----------- ----------- -----------
Total $15,180,407 $18,403,013 $14,883,271
----------- ----------- -----------
</TABLE>
Sources of cash from investment dispositions and repayments were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 4,444,092 $ 4,223,740 $ 4,235,560
Mortgage loans on
real estate 240,954 298,670 280,389
Equity securities 8,319 3,296 67,713
Real estate 17,086 22,525 1,627
Other 10,021,481 12,952,081 9,312,190
----------- ----------- -----------
Total $14,731,932 $17,500,312 $13,897,479
----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 627
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
2.4 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
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 299,377 $ 175,771 $ 38,019 $ 25,101
Obligations of states and
political subdivisions 55,694 32,264 3,320 1,193
Debt securities issued by
foreign governments 232,406 248,838 16,911 14,018
Corporate securities 16,153,147 15,207,118 933,904 755,877
Mortgage-backed securities 4,947,963 4,959,198 227,160 214,418
Affiliated fixed maturity securities 25,159 28,192 -- 67
Redeemable preferred stock 19,463 -- -- --
------------ ------------ ------------ ------------
Total fixed maturity securities $ 21,733,209 $ 20,651,381 $ 1,219,314 $ 1,010,674
------------ ------------ ------------ ------------
Equity securities $ 176,799 $ 5,581 $ 17,932 $ 114
------------ ------------ ------------ ------------
<CAPTION>
Gross Unrealized Losses Fair Value
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (136) $ (3) $ 337,260 $ 200,869
Obligations of states and
political subdivisions -- -- 59,014 33,457
Debt securities issued by
foreign governments (210) (1,988) 249,107 260,868
Corporate securities (73,396) (16,179) 17,013,655 15,946,816
Mortgage-backed securities (732) (2,801) 5,174,391 5,170,815
Affiliated fixed maturity securities -- -- 25,159 28,259
Redeemable preferred stock -- -- 19,463 --
------------ ------------ ------------ ------------
Total fixed maturity securities $ (74,474) $ (20,971) $ 22,878,049 $ 21,641,084
------------ ------------ ------------ ------------
Equity securities $ (102) $ (239) $ 194,629 $ 5,456
------------ ------------ ------------ ------------
</TABLE>
2.4 FIXED MATURITY AND EQUITY SECURITIES- (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1998 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 $ 387,495 $ 391,791
In years two through five 4,571,241 4,793,727
In years six through ten 7,580,048 8,010,517
After ten years 4,246,462 4,507,623
Mortgage-backed securities 4,947,963 5,174,391
----------- -----------
Total fixed maturity securities $21,733,209 $22,878,049
----------- -----------
</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.
2.5 NET UNREALIZED GAINS (LOSSES) ON SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in accumulated other comprehensive income at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 1,237,246 $ 1,010,788
Gross unrealized losses (74,576) (21,210)
DPAC adjustments (339,163) (511,037)
Deferred federal income taxes (296,047) (172,066)
----------- -----------
Net unrealized gains on securities $ 527,460 $ 306,475
----------- -----------
</TABLE>
2.6 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.
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 644,594 $ 614,627
Pacific and Mountain 327,969 355,006
Central 252,289 310,535
Allowance for losses (12,325) (21,139)
----------- -----------
Total mortgage loans $ 1,212,527 $ 1,259,029
----------- -----------
Property type:
Office $ 467,219 $ 467,326
Retail 359,368 396,934
Industrial 249,459 246,241
Apartments 93,476 145,272
Residential and other 55,330 24,395
Allowance for losses (12,325) (21,139)
----------- -----------
Total mortgage loans $ 1,212,527 $ 1,259,029
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 628
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
2.6 MORTGAGE LOANS ON REAL ESTATE - (CONTINUED)
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1 $ 21,139 $ 44,577 $ 54,213
Recovery of mortgage
loan losses (6,541) (18,178) (2,967)
Deductions (2,273) (5,260) (6,669)
-------- -------- --------
Balance at December 31 $ 12,325 $ 21,139 $ 44,577
-------- -------- --------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans on real estate and related interest
income were as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Impaired loans:
With allowance* $13,470 $28,317
------- -------
Total impaired loans $13,470 $28,317
------- -------
Average investment $20,893 $37,449
Interest income earned -- 2,887
Interest income - cash basis -- --
------- -------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$1,803 and $9,317, respectively.
3
DEFERRED POLICY ACQUISITION COSTS (DPAC)
Activity in DPAC was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 392,346 $ 557,748 $ 182,546
Deferrals:
Commissions 83,359 76,327 62,760
Other acquisition costs 76,419 61,328 54,058
Amortization:
Accretion of interest 72,536 65,388 59,810
Operating earnings (127,610) (107,489) (91,011)
Offset to realized gains (3,797) (11,282) (676)
Effect of net unrealized
(gains) losses on securities 171,874 (249,674) 290,261
--------- --------- ---------
Balance at December 31 $ 665,127 $ 392,346 $ 557,748
--------- --------- ---------
</TABLE>
4
COST OF INSURANCE PURCHASED (CIP)
Activity in CIP was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ---------- ---------
<S> <C> <C> <C>
Balance at January 1 $ -- $ -- $ --
Additions from acquisitions 23,915 -- --
Accretion of interest 733 -- --
Amortization (2,535) -- --
-------- ---------- ---------
Balance at December 31 $ 22,113 $ -- $ --
-------- ---------- ---------
</TABLE>
CIP amortization, net of accretion, expected to be recorded in each of the
next five years is $3,099, $2,644, $2,266, $1,920, and $1,763.
5
INCOME TAXES
5.1 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.
5.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (14,560) $ 2,027
--------- ---------
Deferred tax liabilities, applicable to:
Basis differential of investments 438,190 368,591
DPAC 229,803 134,541
Other 31,996 18,576
--------- ---------
Total deferred tax liabilities 699,989 521,708
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (134,409) (138,555)
Basis differential of investments (1,920) (1,545)
Other (7,424) (6,563)
--------- ---------
Total deferred tax assets (143,753) (146,663)
--------- ---------
Net deferred tax liabilities 556,236 375,045
--------- ---------
Total income tax liabilities $ 541,676 $ 377,072
--------- ---------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 629
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
5.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 77,492 $ 114,138 $ 99,560
State 2,154 3,099 2,842
--------- --------- ---------
Total current income
tax expense 79,646 117,237 102,402
--------- --------- ---------
Deferred, applicable to:
DPAC 35,105 29,113 29,308
Policy reserves 4,148 (14,920) (18,581)
Basis differential of
investments 12,484 3,569 2,754
Other, net 5,471 9,239 8,487
--------- --------- ---------
Total deferred income
tax expense 57,208 27,001 21,968
--------- --------- ---------
Income tax expense $ 136,854 $ 144,238 $ 124,370
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 147,461 $ 146,308 $ 127,679
Dividends received
deduction (7,851) (5,212) (4,935)
Tax-exempt interest (ESOP) (2,730) (3,326) (3,865)
State income taxes 3,811 3,695 3,311
Other items (3,837) 2,773 2,180
--------- --------- ---------
Income tax expense $ 136,854 $ 144,238 $ 124,370
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1998, 1997, and 1996 were $92,613, $106,338,
and $114,478, respectively. State income taxes paid in 1998, 1997, and 1996 were
$2,841, $2,978, and $3,060, respectively.
6
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 1999 is
$176,753.
7
DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate and currency swap agreements related to investment securities
at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Interest rate swap agreements
to pay fixed rate
Notional amount $ 332,000 $ 107,000
Average receive rate 5.97% 6.92%
Average pay rate 5.37 6.25
----------- -----------
Currency swap agreements
(receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $ 108,180 $ 123,326
Average exchange rate 1.50 1.49
----------- -----------
</TABLE>
During 1998, VALIC purchased call swaptions and put swaptions that expire
by 2000. The call swaptions had a notional amount of $950,000 and strike rates
ranging from 3.5% to 4.5% at December 31, 1998. The put swaptions had a notional
amount of $690,000 strike rates ranging from 8.0% to 8.5% at December 31, 1998.
Should the strike rates remain below market rates for call swaptions and above
market rates for put swaptions, the swaptions will expire, and VALIC's exposure
would be limited to the premiums paid. These premiums were immaterial.
CREDIT AND MARKET RISK. Derivative financial instruments expose VALIC to
credit risk in the event of nonperformance by counterparties. VALIC limits this
exposure by entering into agreements with counterparties having high credit
ratings and by regularly monitoring the ratings. VALIC does not expect any
counterparty to fail to meet its obligation; however, nonperformance would not
have a material impact on VALIC's consolidated results of operations and
financial position.
VALIC's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.
- --------------------------------------------------------------------------------
11
<PAGE> 630
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
8
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>
1998 1997
------------------------------ ------------------------------
Fair Value Carrying Amount Fair Value Carrying Amount
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $23,072,678* $ 23,072,678* $21,646,540* $21,646,540*
Mortgage loans on real estate 1,251,515 1,212,527 1,288,702 1,259,029
Policy loans 801,322 788,547 721,089 719,127
Liabilities
Insurance investment contracts $23,314,345 $23,218,626 $21,536,809 $21,994,804
----------- ----------- ----------- -----------
</TABLE>
- ------------
* Includes derivative financial instruments with a fair value of $19,342 in
1998 and $2,967 in 1997.
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.
9
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, 1998 were as follows:
Operating expenses include $46,556 in 1998, $22,061 in 1997, and $17,533 in
1996, 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 $152 in 1998, $501 in 1997, and $455 in 1996.
On November 4, 1982, VALIC invested $11,853 in 13 1U2% Restricted
Subordinated Note 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, 1998, 1997, and 1996. VALIC recognized $1,212 in interest income
during 1998, $1,292 for 1997, and $1,372 for 1996.
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, 1998, 1997, and 1996. VALIC
recognized $1,048, $1,296, and $1,479 of interest income on the note during
1998, 1997, and 1996, respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds from
the sale totaled $13,033 with a profit of $33 recognized on the transaction.
VALIC paid common stock dividends of $181,000, $50.63 per share; $379,000,
$106.01 per share; and $111,000, $31.05 per share, in 1998, 1997, and 1996,
respectively.
VALIC received capital contributions of $55,200, $67,000, $250,000, and
$75,000 from AGL on June 30, 1998, December 31, 1998, March 31, 1997, and
December 30, 1996, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 631
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
9. TRANSACTIONS WITH AFFILIATED COMPANIES - (CONTINUED)
VALIC acquired bonds of various issuers from American General Life and
Accident Insurance Company at a cost of $22,154 and $25,892 on January 30, 1997,
and April 8, 1997, respectively.
On December 5, 1997, VALIC acquired bonds of various issuers from Western
National Life Insurance Company at a cost of $129,715.
10
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 $37, $30, and $2,678, for the years
ended December 31, 1998, 1997, and 1996, respectively. The accrued liability for
anticipated assessments was $4,782, $7,402, and $13,661, at December 31, 1998,
1997, and 1996, respectively. The 1998 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.
11
EMPLOYEE BENEFIT PLANS
11.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
11.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1,342 $ 1,091 $ 917
Interest cost on projected
benefit obligation 1,346 1,145 843
Expected return on plan assets (1,102) (801) (575)
Amortization of unrecognized
net asset existing at date of
initial application -- -- (23)
Amortization of unrecognized
prior service cost 66 54 44
Actuarial gain (33) -- --
------- ------- -------
Total pension expense $ 1,619 $ 1,489 $ 1,206
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.00% 7.25% 7.50%
Rate of increase in
compensation levels 4.25 4.00 4.00
Expected long-term rate of
return on plan assets 10.25 10.00 10.00
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1998 and 1997 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Projected benefit obligation $ 21,125 $ 17,394
Plan assets at fair value 14,921 11,759
-------- --------
Projected benefit obligation in excess of
plan assets (6,204) (5,635)
Unrecognized net gain 738 2,162
Unrecognized prior service cost 487 26
-------- --------
Net pension liability $ (4,979) $ (3,447)
-------- --------
</TABLE>
Equity and fixed maturity securities were 66% and 32%, 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.
11.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through AGC, 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.
- --------------------------------------------------------------------------------
13
<PAGE> 632
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
11.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - (CONTINUED)
The life plans are fully insured; the retiree medical and dental plans are
unfunded and self-insured. The accrued liability for postretirement benefits was
$2,388 and $1,784 at year-end 1998 and 1997, respectively. These liabilities
were discounted at the same rates used for the pension plans. Postretirement
benefit expense in 1998, 1997, and 1996 was $275, $295, and $282, respectively.
12
IMPACT OF YEAR 2000 (UNAUDITED)
INTERNAL SYSTEMS. VALIC has numerous technology systems that are managed on
a decentralized basis. Year 2000 readiness efforts are therefore being
undertaken by its key business units with centralized oversight. Each business
unit has developed and is implementing a plan to minimize the risk of a
significant negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of VALIC's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose VALIC to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready, (4) test systems to prove that
they will function into the next century as they do currently, and (5) return
the system to operations. As of December 31, 1998, these activities have been
completed for substantially all of VALIC's critical systems, making them Year
2000 ready. Vendor upgrades for a small number of systems are expected in the
first half of 1999; therefore, activities (3) through (5) are ongoing for these
systems. VALIC will continue to test its systems throughout 1999 to maintain
Year 2000 readiness.
THIRD PARTY RELATIONSHIPS. VALIC has relationships with various third
parties who also must be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) VALIC and include organizations
with which VALIC exchanges information. Third parties include vendors of
hardware, software, and information services; providers of infrastructure
services such as voice and data communications and utilities for office
facilities; investors; customers; distribution channels; and joint venture
partners. Third parties differ from internal systems in that VALIC exercises
less, or no, control over their Year 2000 readiness. VALIC has developed a plan
to assess and attempt to mitigate the risks associated with the potential
failure of third parties to achieve Year 2000 readiness. The plan includes the
following activities: (1) identify and classify third party dependencies; (2)
research, analyze, and document Year 2000 readiness for critical third parties;
and (3) test critical hardware and software products and electronic interfaces.
A more detailed evaluation will be completed during first quarter 1999 as part
of VALIC's contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, VALIC's testing activities will extend throughout
1999.
CONTINGENCY PLANS. VALIC has commenced contingency planning to reduce the
risk of Year 2000 related business failures. The contingency plans, which
address both internal systems and third party relationships, include the
following activities: (1) evaluate the consequences of failure of business
processes with significant exposure to Year 2000 risk, (2) determine the
probability of a Year 2000-related failure for those processes that have a high
consequence of failure; (3) develop an action plan to complete contingency plans
for those processes that rank high in consequence and probability of failure;
and (4) complete the applicable action plans. VALIC is currently developing
contingency plans and expects to substantially complete all contingency-planning
activities by April 30, 1999.
RISKS AND UNCERTAINTIES. Based on its plans to make internal systems ready
for Year 2000, to deal with third party relationships, and to develop
contingency actions, VALIC believes that it will experience, at most, isolated
and minor disruptions of business processes following the turn of the century.
Such disruptions are not expected to have a material effect on VALIC's future
results of operations, liquidity, or financial condition. However, due to the
magnitude and complexity of this project, risks and uncertainties exist and
VALIC is not able to predict a most reasonably likely worst case scenario. If
Year 2000 readiness is not achieved due to nonperformance by significant third
party vendors, VALIC's failure to maintain critical systems as Year 2000 ready,
failure of critical third parties to achieve Year 2000 readiness on a timely
basis, or other unforeseen circumstances in completing VALIC's plans, the Year
2000 issues could have a material adverse impact on VALIC's operations following
the turn of the century.
COSTS. Through December 31, 1998, VALIC has incurred and expensed $27
million (pretax) related to Year 2000 readiness, including $20 million incurred
during 1998. VALIC currently anticipates that it will incur future costs of
approximately $2 million (pretax) to maintain Year 2000 readiness, complete Year
2000 work on noncritical systems and third party relationships, and complete
contingency planning activities. In addition, VALIC accelerated the planned
replacement of certain systems as part of the Year 2000 plans.
- --------------------------------------------------------------------------------
14
<PAGE> 633
================================================================================
CHAIRMAN'S LETTER 1
================================================================================
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1998, 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, Portfolio Director Plus,
Independence Plus, Group Unit Purchase and Impact) appears on pages two and
three.
1998 was a volatile year for investors around the world. Problems that began in
Asia in late 1997 circled the globe throughout 1998. Central banks, fearing the
worst lowered interest rates in the fourth quarter of 1998. The result was an
unexpected and dramatic rise in stock and bond prices worldwide.
The year was marked by extreme flight to quality. Investors general preference
was for larger cap growth in stocks over small cap value stocks, and U.S.
Treasury Securities.
The Standard & Poor's 500 Index, dominated by large cap, high-growth technology
and global consumer product companies, had a total return of 28.58%. The top 15
stocks alone accounted for half of the performance. It was a difficult year for
active equity fund managers, as almost 90% of the active managers lagged the S&P
500 Index returns. Also, the S&P 500 Index returns for the year outperformed
over 71% of all U.S.-traded common stocks. The medium to small-cap companies
lagged, with the large companies S&P MidCap 400 Index returning 6.27% and the
S&P SmallCap 600 Index, producing a negative 1.31%.
There was a greater variability in returns between growth and value components
of the equity indices. In the large capitalization arena, S&P 500/BARRA Growth
Index returned an outstanding 42.16%, while the S&P 500/BARRA Value Index
returned 14.67%. In the mid-cap sector, the S&P 400/BARRA Growth Index returned
34.86% compared to the S&P 400/BARRA Value Index return of 4.67%. However, the
small cap equity returns experienced wide variability, with the S&P SmallCap
600/BARRA Growth Index returning 2.29%, and the S&P SmallCap 600/BARRA Value
returning a negative 5.06%.
Globally, the pattern of investment results was very similar to the U.S. equity
returns. The MSCI world Index returned 22%. The top quintile of growth stocks
outperformed the bottom quintile of value stocks by over two times with returns
of 48% and 17%, respectively.
The yield on the 30 year Treasury bond opened the year at 5.92% and declined to
5.10% by the end of 1998, as the Federal Reserve lowered the federal fund rate
three times between September 29 and November 17, leaving the target rate at
4.75%.
For the year, the bond market return, reflected in the Lehman Aggregate Bond
Index, was 8.69% with the long U.S. Treasury Index showing the highest return of
13.52%, followed by the Long Corporate AA/Better Index 10.52%, and the High
Yield Index with 1.60%. Throughout the developed world international bond prices
appreciated as yields declined.
While international markets outside of North America and Europe remain
unsettled, the U.S. economy is experiencing unprecedented prosperity and growth.
Furthermore, with worldwide inflation rates low, and the Federal Reserve weary
of weakness in Asia and emerging markets, it appears that we can expect a
continuation of the current stable rate environment.
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., Chairman
The Variable Annuity Life Insurance Company
February 18, 1999
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> 634
================================================================================
2 CHAIRMAN'S LETTER
================================================================================
<TABLE>
<CAPTION>
GROUP PORTFOLIO
UNIT INDEPENDENCE DIRECTOR
PURCHASE IMPACT PLUS 1
DIVISION DIVISION DIVISION DIVISION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund ..................................... -- -- 11 11
Putnam Global Growth Fund ............................................. -- -- -- --
Templeton Foreign Fund ................................................ -- -- -- --
Templeton International Fund .......................................... -- -- -- 20
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund ....................................... -- -- -- 17
AGSPC Small Cap Index Fund ............................................ -- -- 14 14
Dreyfus Variable Investment Fund - Small Cap Portfolio ................ -- -- 18
Putnam New Opportunities Fund ......................................... -- -- -- --
Putnam OTC & Emerging Growth Fund ..................................... -- -- -- --
GROWTH
AGSPC Growth Fund ..................................................... -- -- -- 15
AGSPC MidCap Index Fund ............................................... -- 4 4 4
American Century - Twentieth Century Ultra Fund ....................... -- -- -- --
Founders Growth Fund .................................................. -- -- -- --
GROWTH & INCOME
AGSPC Growth & Income Fund ............................................ -- -- -- 16
AGSPC Social Awareness Fund ........................................... -- -- 12 12
AGSPC Stock Index Fund ................................................ 10A,10B 10D 10C 10C
Neuberger Berman Guardian Trust ....................................... -- -- -- --
Scudder Growth and Income Fund ........................................ -- -- -- --
Vanguard Windsor II Fund .............................................. -- -- -- --
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund ....................................... -- -- -- 19
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund ........................................... -- 5 5 5
Vanguard Wellington Fund .............................................. -- -- -- --
CURRENT INCOME
AGSPC International Government Bond Fund .............................. -- -- 13 13
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund ....................................... -- 1 7 7
AGSPC Government Securities Fund ...................................... -- -- 8 8
Vanguard Fixed Income Securities Fund - Long-Term Corporate Fund ...... -- -- -- --
Vanguard Fixed Income Securities Fund - Long-Term Treasury Fund ....... -- -- -- --
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund ............................................... -- 2 6 6
<CAPTION>
YEAR TO DATE
TOTAL RETURNS
PORTFOLIO PORTFOLIO FOR YEAR ENDING
DIRECTOR DIRECTOR DECEMBER 31,
2 PLUS ----------------------
DIVISION DIVISION 1998 1997
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund ..................................... -- 11 17.57% 1.18%
Putnam Global Growth Fund ............................................. 28 28 27.48 12.20
Templeton Foreign Fund ................................................ 32 32 (5.82) 5.57
Templeton International Fund .......................................... -- 20 7.95 12.54
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund ....................................... 17 17 40.71 1.57
AGSPC Small Cap Index Fund ............................................ -- 14 (2.92) 21.18
Dreyfus Variable Investment Fund - Small Cap Portfolio ................ -- 18 (4.51) 15.37
Putnam New Opportunities Fund ......................................... 26 26 23.12 21.31
Putnam OTC & Emerging Growth Fund ..................................... 27 27 9.87 9.08
GROWTH
AGSPC Growth Fund ..................................................... 15 15 16.96 19.80
AGSPC MidCap Index Fund ............................................... -- 4 17.80 30.45
American Century - Twentieth Century Ultra Fund ....................... 31 31 33.14 21.74
Founders Growth Fund .................................................. 30 30 23.76 25.25
GROWTH & INCOME
AGSPC Growth & Income Fund ............................................ -- 16 13.41 22.60
AGSPC Social Awareness Fund ........................................... 12 12 26.03 32.52
AGSPC Stock Index Fund ................................................ 10C 10C 27.14 31.77
Neuberger Berman Guardian Trust ....................................... 29 29 1.34 16.66
Scudder Growth and Income Fund ........................................ 21 21 4.99 28.80
Vanguard Windsor II Fund .............................................. 24 24 14.90 30.70
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund ....................................... -- 19 5.07 14.07
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund ........................................... -- 5 17.19 21.40
Vanguard Wellington Fund .............................................. 25 25 10.65 21.65
CURRENT INCOME
AGSPC International Government Bond Fund .............................. 13 13 15.92 (5.79)
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund ....................................... -- 7 6.30 7.49
AGSPC Government Securities Fund ...................................... -- 8 7.86 7.83
Vanguard Fixed Income Securities Fund - Long-Term Corporate Fund ...... 22 22 8.04 12.32
Vanguard Fixed Income Securities Fund - Long-Term Treasury Fund ....... 23 23 11.82 12.44
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund ............................................... 6 6 4.12 4.13
</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> 635
================================================================================
CHAIRMAN'S LETTER 3
================================================================================
<TABLE>
<CAPTION>
Group Portfolio Portfolio
Unit Independence Director Director
Purchase Impact Plus 1 2
- ------------------------------------------------------------------------------------------------------------------------------------
Division Division Division Division Division
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ACTIVELY MANAGED EQUITY FUNDS
American General International Growth Fund .............. -- -- -- -- --
American General Large Cap Growth Fund .................. -- -- -- -- --
American General Mid Cap Growth Fund .................... -- -- -- -- --
American General Small Cap Growth Fund .................. -- -- -- -- --
American General INternational Value Fund ............... -- -- -- -- --
American General Large Cap Value Fund ................... -- -- -- -- --
American General Mid Cap Value Fund ..................... -- -- -- -- --
American General Small Cap Value Fund ................... -- -- -- -- --
T. Rowe Price Small-Cap Stock Fund ...................... -- -- -- -- --
SPECIALTY EQUITY FUND
American General Socially Responsible Fund .............. -- -- -- -- --
BALANCED FUNDS
American General Balanced Fund .......................... -- -- -- -- --
INCOME FUNDS
American General High Yield Bond Fund ................... -- -- -- -- --
American General Strategic Bond Fund .................... -- -- -- -- --
American General Domestic Bond Fund ..................... -- -- -- -- --
American General Core Bond Fund ......................... -- -- -- -- --
MONEY MARKET FUND
American General Money Market Fund ...................... -- -- -- -- --
LIFESTYLE FUNDS
American General Growth Lifestyle Fund .................. -- -- -- -- --
American General Moderate Growth Lifestyle Fund ......... -- -- -- -- --
American General Conservative Growth Lifestyle Fund ..... -- -- -- -- --
Vanguard LifeStrategy Growth ............................ -- -- -- -- --
Vanguard LifeStrategy Moderate Growth ................... -- -- -- -- --
Vanguard LifeStrategy Conservative Growth ............... -- -- -- -- --
<CAPTION>
Year To Date
Total Returns
Portfolio For Year Ending
Director December 31,
Plus ------------------------
Division 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
ACTIVELY MANAGED EQUITY FUNDS
American General International Growth Fund .............. 33 5.17(a) N/A
American General Large Cap Growth Fund .................. 39 24.08(a) N/A
American General Mid Cap Growth Fund .................... 37 34.77(a) N/A
American General Small Cap Growth Fund .................. 35 34.94(a) N/A
American General International Value Fund ............... 34 14.99(a) N/A
American General Large Cap Value Fund ................... 40 24.66(a) N/A
American General Mid Cap Value Fund ..................... 38 25.47(a) N/A
American General Small Cap Value Fund ................... 36 16.53(a) N/A
T. Rowe Price Small-Cap Stock Fund ...................... 51 14.10(b) N/A
SPECIALTY EQUITY FUND
American General Socially Responsible Fund .............. 41 27.78(a) N/A
BALANCED FUNDS
American General Balanced Fund .......................... 42 17.01(a) N/A
INCOME FUNDS
American General High Yield Bond Fund ................... 60 5.31(a) N/A
American General Strategic Bond Fund .................... 59 4.99(a) N/A
American General Domestic Bond Fund ..................... 43 4.44(a) N/A
American General Core Bond Fund ......................... 58 2.92(a) N/A
MONEY MARKET FUND
American General Money Market Fund ...................... 44 1.33(a) N/A
LIFESTYLE FUNDS
American General Growth Lifestyle Fund .................. 48 19.25(a) N/A
American General Moderate Growth Lifestyle Fund ......... 49 18.54(a) N/A
American General Conservative Growth Lifestyle Fund ..... 50 16.20(a) N/A
Vanguard LifeStrategy Growth ............................ 52 16.81(b) N/A
Vanguard LifeStrategy Moderate Growth ................... 53 12.59(b) N/A
Vanguard LifeStrategy Conservative Growth ............... 54 8.40(b) N/A
</TABLE>
(a) Since August 26, 1998, initial capitalizations of Fund. See Note C.
(b) Since September 22, 1998, inception of the Division.
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> 636
[Intentionally Left Blank]
<PAGE> 637
================================================================================
FINANCIAL STATEMENTS 5
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1998
ASSETS: ALL DIVISIONS
----------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $11,178,484,452) .................. $ 14,587,138,409
Balance due from VALIC general account ........................................................ 4,821,209
----------------
NET ASSETS .................................................................................... 14,591,959,618
================
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts
(Net of applicable contract loans -- partial withdrawals with right of reinvestment) ....... $ 14,481,888,528
Reserves for annuity contracts on benefit ..................................................... 22,530,083
Capital surplus (Note C) ...................................................................... 87,541,007
----------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ............................................. $ 14,591,959,618
================
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
INVESTMENT INCOME: ALL DIVISIONS
----------------
<S> <C>
Dividends from mutual funds ................................................................... $ 161,161,461
----------------
EXPENSES:
Mortality and expense risk charge ............................................................. 133,464,532
Reimbursement of expenses (Note C) ............................................................ (5,204,060)
----------------
Total expenses ................................................................................ 128,260,472
----------------
NET INVESTMENT INCOME ......................................................................... 32,900,989
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 256,062,773
Capital gains distributions from mutual funds ................................................. 599,950,475
Net unrealized appreciation of investments during the period .................................. 1,171,591,133
----------------
Net realized and unrealized gain on investments ............................................... 2,027,604,381
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 2,060,505,370
================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS ALL DIVISIONS
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................. $ 32,900,989 $ 30,758,096
Net realized gain on investments ...................................................... 256,062,773 161,505,567
Capital gains distributions from mutual funds ......................................... 599,950,475 289,703,358
Net unrealized appreciation of investments during the period .......................... 1,171,591,133 1,001,756,337
---------------- ----------------
Increase in net assets resulting from operations ................................... 2,060,505,370 1,483,723,358
---------------- ----------------
PRINCIPAL TRANSACTIONS:
Purchase payments ..................................................................... 2,363,611,528 1,798,552,034
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ... (576,063,916) (328,105,329)
Annuity benefit payments .............................................................. (2,688,910) (2,273,125)
Amounts transferred from VALIC general account ........................................ 419,281,138 518,857,110
---------------- ----------------
Increase in net assets resulting from principal transactions ....................... 2,204,139,840 1,987,030,690
---------------- ----------------
Total increase in net assets .......................................................... 4,264,645,210 3,470,754,048
NET ASSETS:
Beginning of period ................................................................... 10,327,314,408 6,856,560,360
---------------- ----------------
End of period ......................................................................... $ 14,591,959,618 $ 10,327,314,408
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 638
================================================================================
6 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AGSPC PUTNAM
INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
EQUITIES GROWTH FOREIGN INTERNATIONAL
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 ....................... $ 148,718,766 $ 162,850,092 $ 218,291,648 $ 769,418,093
Balance due (to) from VALIC general account ........................... (444,384) 244,949 176,625 78,110
------------- ------------- ------------- -------------
NET ASSETS ............................................................ $ 148,274,382 $ 163,095,041 $ 218,468,273 $ 769,496,203
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment) ... $ 148,099,853 $ 163,052,748 $ 218,427,558 $ 769,292,514
Reserves for annuity contracts on benefit ............................. 174,529 42,293 40,715 203,689
Capital Surplus (Note C) .............................................. -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ..................... $ 148,274,382 $ 163,095,041 $ 218,468,273 $ 769,496,203
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN CENTURY -
TWENTIETH FOUNDERS AGSPC AGSPC
CENTURY GROWTH GROWTH & SOCIAL
ULTRA FUND - FUND - INCOME FUND - AWARENESS FUND -
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ..................... $ 366,344,764 $ 412,424,559 $ 285,113,626 $ 434,890,057
Balance due (to) from VALIC general account ......................... 495,565 496,361 114,285 251,402
------------- ------------- ------------- -------------
NET ASSETS .......................................................... $ 366,840,329 $ 412,920,920 $ 285,227,911 $ 435,141,459
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment).. $ 366,789,363 $ 412,850,610 $ 285,171,395 $ 435,010,800
Reserves for annuity contracts on benefit ........................... 50,966 70,310 56,516 130,659
Capital Surplus (Note C) ............................................ -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ................... $ 366,840,329 $ 412,920,920 $ 285,227,911 $ 435,141,459
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AGSPC AGSPC
TEMPLETON ASSET VANGUARD INTERNATIONAL
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 ...................... $ 324,138,930 $ 227,493,681 $ 406,576,731 $ 169,141,402
Balance due (to) from VALIC general account .......................... (10,923) 41,476 (66,066) 66,807
------------- ------------- ------------- -------------
NET ASSETS ........................................................... $ 324,128,007 $ 227,535,157 $ 406,510,665 $ 169,208,209
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment) .. $ 323,829,380 $ 227,370,013 $ 406,457,643 $ 169,153,179
Reserves for annuity contracts on benefit ............................ 298,627 165,144 53,022 55,030
Capital Surplus (Note C) ............................................. -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 324,128,007 $ 227,535,157 $ 406,510,665 $ 169,208,209
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 639
================================================================================
SEPARATE ACCOUNT A 7
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC DREYFUS VARIABLE PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP INVESTMENT NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX FUND - 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>
$1,357,008,368 $ 225,671,866 $ 801,729,449 $ 411,790,940 $ 142,153,064 $1,213,041,349 $ 850,345,675
233,960 (1,195) 277,466 622,014 158,931 219,257 159,959
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,357,242,328 $ 225,670,671 $ 802,006,915 $ 412,412,954 $ 142,311,995 $1,213,260,606 $ 850,505,634
============== ============== ============== ============== ============== ============== ==============
$1,356,787,386 $ 225,553,498 $ 801,796,471 $ 412,396,437 $ 142,270,946 $1,212,743,548 $ 850,117,314
454,942 117,173 210,444 16,517 41,049 517,058 388,320
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,357,242,328 $ 225,670,671 $ 802,006,915 $ 412,412,954 $ 142,311,995 $1,213,260,606 $ 850,505,634
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER
BERMAN SCUDDER VANGUARD
AGSPC STOCK INDEX FUND GUARDIAN GROWTH AND WINDSOR II
- ------------------------------------------------------------------ TRUST - INCOME FUND - FUND -
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 548,095,924 $ 42,538,426 $3,335,722,002 $ 56,510,591 $ 61,347,128 $ 247,754,620 $ 651,075,950
(342,049) 10,450 1,070,137 2,453 22,721 213,888 339,032
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 547,753,875 $ 42,548,876 $3,336,792,139 $ 56,513,044 $ 61,369,849 $ 247,968,508 $ 651,414,982
============== ============== ============== ============== ============== ============== ==============
$ 533,364,910 $ 40,484,822 $3,334,328,831 $ 56,292,876 $ 61,355,625 $ 247,893,617 $ 651,232,580
14,388,965 2,064,054 2,463,308 220,168 14,224 74,891 182,402
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 547,753,875 $ 42,548,876 $3,336,792,139 $ 56,513,044 $ 61,369,849 $ 247,968,508 $ 651,414,982
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT VANGUARD VANGUARD
AGSPC CAPITAL CONSERVATION FUND SECURITIES LONG-TERM LONG-TERM AGSPC MONEY MARKET FUND
- ------------------------------- FUND - CORPORATE FUND - TREASURY FUND - -------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,286,289 $ 60,017,936 $ 113,502,848 $ 59,843,445 $ 119,293,240 $ 4,184,151 $ 266,261,605
13,504 (46,396) (40,451) 121,207 (41,034) 13,336 389,999
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,299,793 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,252,206 $ 4,197,487 $ 266,651,604
============== ============== ============== ============== ============== ============== ==============
$ 6,295,147 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,238,598 $ 4,197,487 $ 266,634,790
4,646 -- -- -- 13,608 -- 16,814
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,299,793 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,252,206 $ 4,197,487 $ 266,651,604
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 640
================================================================================
8 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL INTERNATIONAL SMALL CAP SMALL CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 33 DIVISION 34 DIVISION 35 DIVISION 36
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ....................... $ 3,853,567 $ 4,153,036 $ 5,279,473 $ 4,500,106
Balance due to VALIC general account .................................. (2,817) -- -- --
------------ ------------ ------------ ------------
NET ASSETS ............................................................ $ 3,850,750 $ 4,153,036 $ 5,279,473 $ 4,500,106
============ ============ ============ ============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) .... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................. -- -- -- --
Capital surplus (Note C) .............................................. 3,850,750 4,153,036 5,279,473 4,500,106
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus ..................... $ 3,850,750 $ 4,153,036 $ 5,279,473 $ 4,500,106
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
MID CAP MID CAP LARGE CAP LARGE CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 37 DIVISION 38 DIVISION 39 DIVISION 40
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,475,870 $ 4,972,209 $ 3,549,043 $ 3,626,750
Balance due to VALIC general account ................................. (270) -- (1,410) --
----------- ----------- ----------- -----------
NET ASSETS ........................................................... $ 5,475,600 $ 4,972,209 $ 3,547,633 $ 3,626,750
=========== =========== =========== ===========
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................ -- -- -- --
Capital surplus (Note C) ............................................. 5,475,600 4,972,209 3,547,633 3,626,750
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus .................... $ 5,475,600 $ 4,972,209 $ 3,547,633 $ 3,626,750
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL SOCIALLY GENERAL GENERAL GENERAL
RESPONSIBLE BALANCED DOMESTIC MONEY MARKET
FUND - FUND - BOND FUND - FUND -
DIVISION 41 DIVISION 42 DIVISION 43 DIVISION 44
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
Balance due to VALIC general account ................................. -- -- -- --
------------ ------------ ------------ ------------
NET ASSETS ........................................................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
============ ============ ============ ============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................ -- -- -- --
Capital surplus (Note C) ............................................. 6,409,166 5,868,671 1,309,568 5,082,478
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus .................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 641
================================================================================
SEPARATE ACCOUNT A 9
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL GENERAL GENERAL T. ROWE PRICE
GROWTH MODERATE GROWTH CONSERVATIVE GROWTH CORE STRATEGIC HIGH YIELD SMALL-CAP STOCK
LIFESTYLE FUND - LIFESTYLE FUND - LIFESTYLE FUND - BOND FUND - BOND FUND - BOND FUND FUND -
DIVISION 48 DIVISION 49 DIVISION 50 DIVISION 58 DIVISION 59 DIVISION 60 DIVISION 51
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,991,538 $ 5,950,028 $ 5,829,911 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
(9,933) (4,420) (1,198) -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 5,981,605 $ 5,945,608 $ 5,828,713 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
============== ============== ============== ============== ============== ============== ==============
$ -- $ -- $ -- $ -- $ -- $ -- $ 139
-- -- -- -- -- -- --
5,981,605 5,945,608 5,828,713 5,161,936 5,265,532 5,282,173 --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 5,981,605 $ 5,945,608 $ 5,828,713 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
============== ============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 642
===============================================================================
10 FINANCIAL STATEMENTS
===============================================================================
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AGSPC PUTNAM
For the year ended December 31, 1998 INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
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 .......................... $ 3,115,042 $ 607,762 $ 5,873,157 $ 17,844,520
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge .................... 1,507,006 1,281,924 2,636,652 9,900,147
Reimbursement of expenses (Note C) ................... -- (256,355) (526,963) --
------------ ------------ ------------ ------------
Total expenses .................................... 1,507,006 1,025,569 2,109,689 9,900,147
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... 1,608,036 (417,807) 3,763,468 7,944,373
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .............. 4,716,155 107,190 (1,076,896) 52,533,310
Capital gains distributions from mutual funds ........ 11,021,627 4,089,731 17,280,633 31,903,839
Net unrealized appreciation (depreciation)
of investments during the year ..................... 7,346,991 21,600,190 (34,315,820) (37,039,574)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 23,084,773 25,797,111 (18,112,083) 47,397,575
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 24,692,809 $ 25,379,304 $(14,348,615) $ 55,341,948
============ ============ ============ ============
AGSPC
STATEMENTS OF OPERATIONS AMERICAN CENTURY- FOUNDERS AGSPC SOCIAL
For the year ended December 31, 1998 TWENTIETH GROWTH GROWTH & AWARENESS
CENTURY ULTRA FUND - INCOME FUND - FUND -
FUND - DIVISION 30 DIVISION 16 DIVISION 12
------------ ------------ ------------ ------------
INVESTMENT INCOME:
Dividends from mutual funds .......................... $ -- $ 202,602 $ 1,219,255 $ 3,599,599
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge .................... 2,804,758 3,631,491 2,643,321 3,409,326
Reimbursement of expenses (Note C) ................... (521,841) (726,411) -- --
------------ ------------ ------------ ------------
Total expenses .................................... 2,282,917 2,905,080 2,643,321 3,409,326
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... (2,282,917) (2,702,478) (1,424,066) 190,273
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ..................... 473,963 669,679 10,494,295 2,220,138
Capital gains distributions from mutual funds ........ 30,532,354 21,151,616 20,275,426 37,003,617
Net unrealized appreciation (depreciation)
of investments during the year .................... 39,033,600 42,627,883 3,996,252 38,477,902
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 70,039,917 64,449,178 34,765,973 77,701,657
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ......................... $ 67,757,000 $ 61,746,700 $ 33,341,907 $ 77,891,930
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 643
================================================================================
SEPARATE ACCOUNT A 11
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC DREYFUS VARIABLE PUTNAM PUTNAM OTC &
SCIENCE & SMALL CAP INVESTMENT FUND NEW EMERGING AGSPC AGSPC
TECHNOLOGY INDEX - SMALL CAP OPPORTUNITIES GROWTH GROWTH MIDCAP
FUND - FUND - PORTFOLIO - FUND - FUND - FUND - INDEX FUND -
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ 2,611,782 $ 2,936 $ -- $ 4,436,796 $ -- $ 7,011,168
------------- ------------- ------------- -------------- ------------- ------------- -------------
10,381,062 2,289,688 10,348,098 3,363,729 1,438,779 10,623,737 7,700,596
-- -- (1,244,807) (672,401) (288,124) -- --
------------- ------------- ------------- -------------- ------------- ------------- -------------
10,381,062 2,289,688 9,103,291 2,691,328 1,150,655 10,623,737 7,700,596
------------- ------------- ------------- -------------- ------------- ------------- -------------
(10,381,062) 322,094 (9,100,355) (2,691,328) 3,286,141 (10,623,737) (689,428)
------------- ------------- ------------- -------------- ------------- ------------- -------------
34,745,563 8,661,321 19,673,784 872,455 (332,944) 11,720,556 26,826,443
113,616,462 18,436,501 15,549,964 12,546,729 -- 51,517,534 69,472,796
250,423,659 (34,899,835) (67,338,458) 53,605,222 9,278,020 114,925,718 30,964,965
------------- ------------- ------------- -------------- ------------- ------------- -------------
398,785,684 (7,802,013) (32,114,710) 67,024,406 8,945,076 178,163,808 127,264,204
------------- ------------- ------------- -------------- ------------- ------------- -------------
$ 388,404,622 $ (7,479,919) $ (41,215,065) $ 64,333,078 $ 12,231,217 $ 167,540,071 $ 126,574,776
============= ============= ============= ============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
NEUBERGER GROWTH AND VANGUARD
AGSPC STOCK INDEX FUND BERMAN INCOME WINDSOR II
------------------------------------------------------------------- GUARDIAN TRUST - FUND - FUND -
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
------------- ------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,134,933 $ 482,467 $ 33,994,984 $ 635,074 $ 266,705 $ 4,796,472 $ 11,495,781
------------- ------------- ------------- ------------- -------------- ------------- -------------
5,099,302 206,480 28,029,502 529,334 728,024 2,644,262 5,873,266
-- (82,027) -- -- (145,133) (528,762) --
------------- ------------- ------------- ------------- -------------- ------------- -------------
5,099,302 124,453 28,029,502 529,334 582,891 2,115,500 5,873,266
------------- ------------- ------------- ------------- -------------- ------------- -------------
1,035,631 358,014 5,965,482 105,740 (316,186) 2,680,972 5,622,515
------------- ------------- ------------- ------------- -------------- ------------- -------------
36,292,713 2,895,173 21,789,375 4,368,980 447,267 1,067,960 1,366,076
2,140,138 166,018 13,033,369 219,975 5,112,104 17,737,903 51,898,120
82,035,996 6,394,969 631,036,013 7,900,957 (5,621,588) (15,926,329) 278,987
------------- ------------- ------------- ------------- -------------- ------------- -------------
120,468,847 9,456,160 665,858,757 12,489,912 (62,217) 2,879,534 53,543,183
------------- ------------- ------------- ------------- -------------- ------------- -------------
$ 121,504,478 $ 9,814,174 $ 671,824,239 $ 12,595,652 $ (378,403) $ 5,560,506 $ 59,165,698
============= ============= ============= ============= ============== ============= -------------
</TABLE>
<PAGE> 644
================================================================================
12 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
TEMPLETON ASSET VANGUARD INTERNATIONAL
STATEMENTS OF OPERATIONS ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
For the year ended December 31, 1998 FUND - FUND - FUND - BOND FUND -
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ 9,488,692 $ 5,918,741 $ 11,720,002 $ 3,619,997
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ............. 4,189,971 2,045,234 3,573,103 1,622,993
Reimbursement of expenses (Note C) ............ -- -- -- --
------------ ------------ ------------ ------------
Total expenses ............................. 4,189,971 2,045,234 3,573,103 1,622,993
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ......................... 5,298,721 3,873,507 8,146,899 1,997,004
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ....... 10,513,951 2,520,862 453,710 (1,068,211)
Capital gains distributions from mutual funds . 9,560,576 12,936,405 30,281,535 872,765
Net unrealized appreciation (depreciation)
of investments during the year .............. (10,693,322) 13,072,376 (13,016,167) 21,926,900
------------ ------------ ------------ ------------
Net realized and unrealized gain on investments 9,381,205 28,529,643 17,719,078 21,731,454
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 14,679,926 $ 32,403,150 $ 25,865,977 $ 23,728,458
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 645
================================================================================
FINANCIAL STATEMENTS 13
================================================================================
<TABLE>
<CAPTION>
AGSPC VANGUARD VANGUARD
GOVERNMENT LONG-TERM LONG-TERM
AGSPC CAPITAL CONSERVATION FUND SECURITIES CORPORATE TREASURY AGSPC MONEY MARKET FUND
- ------------------------------- FUND - FUND - FUND - ----------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 402,079 $ 3,710,371 $ 5,462,111 $ 2,478,178 $ 3,523,260 $ 230,073 $ 9,814,968
----------- ----------- ----------- ----------- ----------- ----------- -----------
63,904 585,563 993,952 504,256 798,645 46,056 1,965,005
-- -- -- (78,692) (132,544) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
63,904 585,563 993,952 425,564 666,101 46,056 1,965,005
----------- ----------- ----------- ----------- ----------- ----------- -----------
338,175 3,124,808 4,468,159 2,052,614 2,857,159 184,017 7,849,963
----------- ----------- ----------- ----------- ----------- ----------- -----------
12,194 413,199 1,352,903 136,212 1,195,397 -- --
-- -- -- 1,044,043 -- -- --
35,832 (35,856) 1,437,930 (64,200) 2,611,560 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
48,026 377,343 2,790,833 1,116,055 3,806,957 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 386,201 $ 3,502,151 $ 7,258,992 $ 3,168,669 $ 6,664,116 $ 184,017 $ 7,849,963
============ =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 646
================================================================================
14 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN AMERICAN AMERICAN AMERICAN
For the year ended December 31, 1998 GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL INTERNATIONAL SMALL CAP SMALL CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 33* DIVISION 34* DIVISION 35* DIVISION 36*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ -- $ 5,760 $ -- $ 13,079
---------- ---------- ---------- ----------
EXPENSES:
Mortality and expense risk charge ............. -- -- -- --
Reimbursement of expenses (Note C) ............ -- -- -- --
---------- ---------- ---------- ----------
Total expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
NET INVESTMENT INCOME ......................... -- 5,760 -- 13,079
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .............. -- -- -- --
Capital gains distributions from mutual funds . -- -- 18,373 51,644
Net unrealized appreciation
of investments during the year ............. 200,750 547,276 1,361,100 585,384
---------- ---------- ---------- ----------
Net realized and unrealized gain on investments 200,750 547,276 1,379,473 637,028
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 200,750 $ 553,036 $1,379,473 $ 650,107
========== ========== ========== ==========
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN AMERICAN AMERICAN AMERICAN
For the year ended December 31, 1998 GENERAL GENERAL GENERAL GENERAL
MID CAP MID CAP LARGE CAP LARGE CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 37* DIVISION 38* DIVISION 39* DIVISION 40*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ -- $ 10,079 $ 2,093 $ 10,224
---------- ---------- ---------- ----------
EXPENSES:
Mortality and expense risk charge ............. -- -- -- --
Reimbursement of expenses (Note C) ............ -- -- -- --
---------- ---------- ---------- ----------
Total expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
NET INVESTMENT INCOME ......................... -- 10,079 2,093 10,224
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .............. -- -- -- --
Capital gains distributions from mutual funds . -- 115,562 -- --
Net unrealized appreciation
of investments during the year .............. 1,425,600 896,569 695,540 716,526
---------- ---------- ---------- ----------
Net realized and unrealized gain on investments 1,425,600 1,012,131 695,540 716,526
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $1,425,600 $1,022,210 $ 697,633 $ 726,750
========== ========== ========== ==========
</TABLE>
* For the period from August 26, 1998 (initial capital contribution date)
through December 31, 1998.
See Note C.
** For the period from September 22, 1998 through December 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 647
================================================================================
SEPARATE ACCOUNT A 15
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
GENERAL AMERICAN AMERICAN AMERICAN GENERAL GENERAL
SOCIALLY AMERICAN GENERAL GENERAL GENERAL MODERATE CONSERVATIVE
RESPONSIBLE GENERAL DOMESTIC MONEY GROWTH GROWTH GROWTH
FUND - BALANCED FUND - BOND FUND - MARKET FUND - LIFESTYLE FUND - LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 41* DIVISION 42* DIVISION 43* DIVISION 44* DIVISION 48* DIVISION 49* DIVISION 50*
- ------------ --------------- ------------ ------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 23,760 $ 29,084 $ 14,978 $ 82,478 $ 11,226 $ 19,912 $ 27,772
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
23,760 29,084 14,978 82,478 11,226 19,912 27,772
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
285,733 34,051 15,898 -- -- -- --
1,099,673 805,536 28,692 -- 970,379 925,696 800,941
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1,385,406 839,587 44,590 -- 970,379 925,696 800,941
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$1,409,166 $ 868,671 $ 59,568 $ 82,478 $ 981,605 $ 945,608 $ 828,713
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL T. ROWE PRICE
CORE STRATEGIC HIGH YIELD SMALL-CAP STOCK
BOND FUND - BOND FUND - BOND FUND - FUND -
DIVISION 58* DIVISION 59* DIVISION 60* DIVISION 51**
- ------------ ------------ ------------ ----------------
<S> <C> <C> <C>
$ 50,247 $ 69,000 $ 92,262 $ --
- ---------- ---------- ---------- ----------
-- -- -- --
-- -- -- --
- ---------- ---------- ---------- ----------
-- -- -- --
- ---------- ---------- ---------- ----------
50,247 69,000 92,262 --
- ---------- ---------- ---------- ----------
-- -- -- --
16,291 11,064 -- --
95,397 185,469 189,911 --
- ---------- ---------- ---------- ----------
111,688 196,533 189,911 --
- ---------- ---------- ---------- ----------
$ 161,935 $ 265,533 $ 282,173 $ --
========== ========== ========== ==========
</TABLE>
<PAGE> 648
================================================================================
16 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES
FUND - DIVISION 11
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ 1,608,036 $ 1,546,185
Net realized gain (loss) on investments .............................. 4,716,155 8,844,811
Capital gains distributions from mutual funds ........................ 11,021,627 4,593,062
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 7,346,991 (11,693,489)
------------- -------------
Increase (decrease) in net assets resulting from operations ..... 24,692,809 3,290,569
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 14,604,832 21,604,936
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (9,033,065) (8,085,959)
Annuity benefit payments ............................................. (17,602) (10,712)
Amounts transferred interdivision, and (to) from VALIC general account (33,973,374) (56,024,580)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... (28,419,209) (42,516,315)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (3,726,400) (39,225,746)
NET ASSETS:
Beginning of year .................................................... 152,000,782 191,226,528
------------- -------------
End of year .......................................................... $ 148,274,382 $ 152,000,782
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 122,716,744 156,226,314
Purchase payments .................................................... 10,549,627 17,325,859
Surrenders ........................................................... (6,694,955) (6,456,410)
Transfers -- interdivision and (to) from VALIC general account ....... (24,759,665) (44,379,019)
------------- -------------
Total units outstanding, end of year ................................. 101,811,751 122,716,744
============= =============
Units outstanding, by class:
Standard units .................................................... 101,811,751 122,716,744
Enhanced units:
20 bp reduced ................................................... -- --
40 bp reduced ................................................... -- --
------------- -------------
Accumulation units end of year ....................................... 101,811,751 122,716,744
============= =============
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.454644 $ 1.237299
Enhanced unit:
20 bp reduced.................................................... -- --
40 bp reduced.................................................... -- --
</TABLE>
<TABLE>
<CAPTION>
PUTNAM GLOBAL GROWTH
FUND - DIVISION 28
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (417,807) $ 825,963
Net realized gain (loss) on investments .............................. 107,190 172,968
Capital gains distributions from mutual funds ........................ 4,089,731 9,300,593
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 21,600,190 (7,591,166)
------------- -------------
Increase (decrease) in net assets resulting from operations ..... 25,379,304 2,708,358
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 45,226,423 18,196,466
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (3,310,436) (812,004)
Annuity benefit payments ............................................. (2,617) (1,799)
Amounts transferred interdivision, and (to) from VALIC general account 36,967,959 21,134,329
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... 78,881,329 38,516,992
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 104,260,633 41,225,350
NET ASSETS:
Beginning of year .................................................... 58,834,408 17,609,058
------------- -------------
End of year .......................................................... $ 163,095,041 $ 58,834,408
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 49,548,732 16,648,600
Purchase payments .................................................... 32,447,084 15,748,353
Surrenders ........................................................... (2,408,897) (675,628)
Transfers -- interdivision and (to) from VALIC general account ....... 28,040,873 17,827,407
------------- -------------
Total units outstanding, end of year ................................. 107,627,792 49,548,732
============= =============
Units outstanding, by class:
Standard units .................................................... 101,468,260 49,548,732
Enhanced units:
20 bp reduced ................................................... 6,153,771 --
40 bp reduced ................................................... 5,760 --
------------- -------------
Accumulation units end of year ....................................... 107,627,792 49,548,732
============= =============
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.512865 $ 1.186775
Enhanced unit:
20 bp reduced.................................................... 1.549587 --
40 bp reduced.................................................... 1.591007 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 649
================================================================================
SEPARATE ACCOUNT A 17
================================================================================
<TABLE>
<CAPTION>
TEMPLETON FOREIGN TEMPLETON INTERNATIONAL AGSPC SCIENCE & TECHNOLOGY AGSPC SMALL CAP
FUND - DIVISION 32 FUND - DIVISION 20 FUND - DIVISION 17 INDEX FUND - DIVISION 14
- ---------------------------- ---------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,763,468 $ 3,566,211 $ 7,944,373 $ 7,044,706 $ (10,381,062) $ (8,359,405) $ 322,094 $ 321,469
(1,076,896) 180,290 52,533,310 24,143,886 34,745,563 27,202,326 8,661,321 7,403,801
17,280,633 12,359,374 31,903,839 6,157,699 113,616,462 -- 18,436,501 17,477,318
(34,315,820) (16,286,999) (37,039,574) 33,826,345 250,423,659 (11,571,856) (34,899,835) 13,195,192
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
(14,348,615) (181,124) 55,341,948 71,172,636 388,404,622 7,271,065 (7,479,919) 38,397,780
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
72,575,285 63,929,059 114,632,129 127,443,761 195,575,628 203,196,325 28,153,952 26,031,893
(7,939,318) (2,231,179) (35,093,007) (21,498,080) (44,292,549) (27,661,660) (11,145,100) (8,101,115)
(1,991) (1,149) (9,179) (6,675) (17,543) (17,353) (7,293) (6,381)
(12,669,089) 79,881,321 (95,114,875) 22,603,734 (92,089,284) 15,908,913 (13,919,719) (10,731,749)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
51,964,887 141,578,052 (15,584,932) 128,542,740 59,176,252 191,426,225 3,081,840 7,192,648
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
37,616,272 141,396,928 39,757,016 199,715,376 447,580,874 198,697,290 (4,398,079) 45,590,428
180,852,001 39,455,073 729,739,187 530,023,811 909,661,454 710,964,164 230,068,750 184,478,322
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
$ 218,468,273 $ 180,852,001 $ 769,496,203 $ 729,739,187 $1,357,242,328 $909,661,454 $ 225,670,671 $ 230,068,750
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
159,201,107 36,671,828 463,174,350 378,581,949 397,842,959 315,809,646 106,279,077 103,320,842
63,265,244 55,441,897 65,837,726 81,609,273 77,332,989 88,179,109 13,084,095 13,258,805
(7,600,467) (1,875,284) (21,321,029) (13,712,830) (17,946,718) (11,448,429) (5,229,338) (4,191,154)
(10,799,968) 68,962,666 (55,271,958) 16,695,958 (35,393,395) 5,302,633 (6,753,994) (6,109,416)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
204,065,916 159,201,107 452,419,089 463,174,350 421,835,835 397,842,959 107,379,840 106,279,077
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
198,626,024 159,201,107 452,419,089 463,174,350 418,601,069 397,842,959 107,321,015 106,279,077
5,437,288 -- -- -- 3,228,389 -- 58,825 --
2,604 -- -- -- 6,377 -- -- --
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
204,065,916 159,201,107 452,419,089 463,174,350 421,835,835 397,842,959 107,379,840 106,279,077
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ---------------------------- ---------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.069704 $ 1.135778 $ 1.700398 $ 1.575168 $ 3.216190 $ 2.285739 $ 2.100506 $ 2.163595
1.094954 -- -- -- 3.241847 -- 2.125983 --
1.123840 -- -- -- 3.272354 -- -- --
</TABLE>
<PAGE> 650
================================================================================
18 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS SMALL CAP
PORTFOLIO - DIVISION 18
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (9,100,355) $ (7,877,254)
Net realized gain (loss) on investments .............................. 19,673,784 10,514,976
Capital gains distributions from mutual funds ........................ 15,549,964 47,781,324
Net unrealized appreciation (depreciation)
of investments during the year ..................................... (67,338,458) 56,534,602
------------- -------------
Increase (decrease) in net assets resulting from operations .......... (41,215,065) 106,953,648
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 136,010,701 152,268,343
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (37,151,392) (25,995,894)
Annuity benefit payments ............................................. (12,769) (13,079)
Amounts transferred interdivision, and (to) from VALIC general account (105,448,868) (41,774,769)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (6,602,328) 84,484,601
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (47,817,393) 191,438,249
Net Assets:
Beginning of year .................................................... 849,824,308 658,386,059
------------- -------------
End of year .......................................................... $ 802,006,915 $ 849,824,308
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 479,851,525 428,883,250
Purchase payments .................................................... 78,837,263 92,300,416
Surrenders ........................................................... (22,827,377) (15,764,818)
Transfers -- interdivision and (to) from VALIC general account ....... (61,646,182) (25,567,323)
------------- -------------
Total units outstanding, end of year ................................. 474,215,229 479,851,525
============= =============
Units outstanding, by class:
Standard units .................................................... 474,215,229 479,851,525
Enhanced units:
20 bp reduced ................................................... -- --
40 bp reduced ................................................... -- --
------------- -------------
Accumulation units end of year ....................................... 474,215,229 479,851,525
============= =============
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.690786 $ 1.770622
Enhanced unit:
20 bp reduced.................................................... -- --
40 bp reduced.................................................... -- -
</TABLE>
<TABLE>
<CAPTION>
PUTNAM NEW OPPORTUNITIES
FUND - DIVISION 26
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (2,691,328) $ (1,052,294)
Net realized gain (loss) on investments .............................. 872,455 242,887
Capital gains distributions from mutual funds ........................ 12,546,729 3,494,327
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 53,605,222 18,445,868
------------- -------------
Increase (decrease) in net assets resulting from operations .......... 64,333,078 21,130,788
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 108,017,017 51,769,269
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (8,784,234) (2,540,805)
Annuity benefit payments ............................................. (575) (61)
Amounts transferred interdivision, and (to) from VALIC general account 84,011,090 44,254,408
Increase (decrease) in net assets
------------- -------------
resulting from principal transactions ........................ 183,243,298 93,482,811
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 247,576,376 114,613,599
Net Assets:
Beginning of year .................................................... 164,836,578 50,222,979
------------- -------------
End of year .......................................................... $ 412,412,954 $ 164,836,578
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 143,395,066 53,001,699
Purchase payments .................................................... 85,839,361 49,995,408
Surrenders ........................................................... (6,337,162) (2,517,125)
Transfers -- interdivision and (to) from VALIC general account ....... 68,362,756 42,915,084
------------- -------------
Total units outstanding, end of year ................................. 291,260,021 143,395,066
============= =============
Units outstanding, by class:
Standard units .................................................... 280,523,297 143,395,066
Enhanced units:
20 bp reduced ................................................... 10,725,927 --
40 bp reduced ................................................... 10,797 --
------------- -------------
Accumulation units end of year ....................................... 291,260,021 143,395,066
============= =============
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
------------- -------------
Accumulation value per unit:
<S> <C> <C>
Standard unit...................................................... $ 1.415175 $ 1.149453
Enhanced unit:
20 bp reduced.................................................... 1.434946 --
40 bp reduced.................................................... 1.459115 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 651
================================================================================
Separate Account A 19
================================================================================
<TABLE>
<CAPTION>
AMERICAN CENTURY -
PUTNAM OTC & EMERGING AGSPC GROWTH AGSPC MIDCAP INDEX TWENTIETH CENTURY ULTRA
GROWTH FUND - DIVISION 27 FUND - DIVISION 15 FUND - DIVISION 4 FUND - DIVISION 31
- ---------------------------- ----------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,286,141 $ (720,013) $ (10,623,737) $ (7,550,418) $ (689,428) $ 535,199 $ (2,282,917) $ (633,243)
(332,944) (47,363) 11,720,556 6,207,654 26,826,443 19,471,600 473,963 316,651
-- -- 51,517,534 15,041,175 69,472,796 39,891,431 30,532,354 24,559,704
9,278,020 8,912,297 114,925,718 132,575,644 30,964,965 109,426,279 39,033,600 (16,326,801)
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
12,231,217 8,144,921 167,540,071 146,274,055 126,574,776 169,324,509 67,757,000 7,916,311
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
36,165,527 32,976,492 183,983,180 185,814,571 71,049,146 66,141,090 95,865,928 43,175,072
(4,499,407) (1,887,137) (45,145,966) (24,997,689) (37,639,412) (24,993,718) (6,987,387) (1,444,132)
(2,072) (1,777) (23,099) (18,116) (23,570) (20,499) (1,933) (950)
960,600 14,456,676 (34,517,049) (764,959) (40,068,991) (45,549,090) 86,438,332 56,804,430
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
32,624,648 45,544,254 104,297,066 160,033,807 (6,682,827) (4,422,217) 175,314,940 98,534,420
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
44,855,865 53,689,175 271,837,137 306,307,862 119,891,949 164,902,292 243,071,940 106,450,731
97,456,130 43,766,955 941,423,469 635,115,607 730,613,685 565,711,393 123,768,389 17,317,658
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
$ 142,311,995 $ 97,456,130 $1,213,260,606 $ 941,423,469 $ 850,505,634 $730,613,685 $ 366,840,329 $123,768,389
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
99,785,041 48,902,828 453,172,490 366,272,509 171,065,657 172,816,978 97,745,282 16,654,076
36,257,228 36,775,163 82,864,073 99,349,760 16,010,438 17,600,471 63,913,168 36,243,458
(4,704,400) (2,370,530) (20,670,419) (12,033,793) (8,724,789) (6,688,206) (4,133,151) (1,152,164)
1,221,835 16,477,580 (16,039,778) (415,986) (9,311,419) (12,663,586) 59,835,828 45,999,912
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
132,559,704 99,785,041 499,326,366 453,172,490 169,039,887 171,065,657 217,361,127 97,745,282
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
129,463,792 99,785,041 494,997,997 453,172,490 169,039,887 171,065,657 209,221,513 97,745,282
3,092,839 -- 4,324,799 -- -- -- 8,116,612 --
3,073 -- 3,570 -- -- -- 23,002 --
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
132,559,704 99,785,041 499,326,366 453,172,490 169,039,887 171,065,657 217,361,127 97,745,282
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ---------------------------- ----------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.072660 $ 0.976262 $ 2.428587 $ 2.076503 $ 5.029093 $ 4.269122 $ 1.685503 $ 1.265937
1.098295 -- 2.448443 -- -- -- 1.737734 --
1.127653 -- 2.471473 -- -- -- 1.798208 --
</TABLE>
<PAGE> 652
================================================================================
20 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOUNDERS GROWTH AGSPC GROWTH & INCOME
FUND - DIVISION 30 FUND - DIVISION 16
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (2,702,478) $ (229,837) $ (1,424,066) $ (1,206,116)
Net realized gain on investments ................................ 669,679 270,661 10,494,295 3,270,580
Capital gains distributions from mutual funds ................... 21,151,616 21,678,474 20,275,426 2,863,622
Net unrealized appreciation (depreciation)
of investments during the year ................................ 42,627,883 (6,466,051) 3,996,252 38,217,716
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 61,746,700 15,253,247 33,341,907 43,145,802
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 117,393,497 54,770,398 39,532,854 44,825,180
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (9,478,330) (1,863,811) (11,951,930) (8,344,519)
Annuity benefit payments ........................................ (1,096) (66) (3,597) (2,954)
Amounts transferred interdivision, and (to) from
VALIC general account ......................................... 72,791,918 70,189,987 (32,787,298) 5,944,261
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................... 180,705,989 123,096,508 (5,209,971) 42,421,968
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 242,452,689 138,349,755 28,131,936 85,567,770
NET ASSETS:
Beginning of year ............................................... $ 170,468,231 32,118,476 257,095,975 171,528,205
------------- ------------- ------------- -------------
End of year ..................................................... 412,920,920 $ 170,468,231 $ 285,227,911 $ 257,095,975
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 132,167,162 31,197,464 132,434,555 108,341,635
Purchase payments ............................................... 80,460,723 45,575,203 19,715,398 24,988,066
Surrenders ...................................................... (6,588,832) (1,491,261) (6,142,924) (4,697,640)
Transfers -- interdivision and (to) from VALIC general account .. 52,471,956 56,885,756 (16,456,334) 3,802,494
------------- ------------- ------------- -------------
Total units outstanding, end of year ............................ 258,511,009 132,167,162 129,550,695 132,434,555
============= ============= ============= =============
Units outstanding, by class:
Standard units ............................................... 250,777,959 132,167,162 129,550,695 132,434,555
Enhanced units:
20 bp reduced .............................................. 7,720,189 -- -- --
40 bp reduced .............................................. 12,861 -- -- --
------------- ------------- ------------- -------------
Accumulation units end of year .................................. 258,511,009 132,167,162 129,550,695 132,434,555
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 1.595913 $ 1.289513 $ 2.201234 $ 19981997
Enhanced unit:
20 bp reduced .............................................. 1.633282 -- -- --
40 bp reduced .............................................. 1.676366 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 653
================================================================================
SEPARATE ACCOUNT A 21
================================================================================
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
AGSPC SOCIAL AWARENESS ----------------------------------------------------------------
FUND - DIVISION 12 DIVISION 10A DIVISION 10B
- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 190,273 $ 281,520 $ 1,035,631 $ 2,030,016 $ 358,014 $ 399,877
2,220,138 1,158,707 36,292,713 23,392,823 2,895,173 2,137,197
37,003,617 9,560,562 2,140,138 2,365,369 166,018 185,844
38,477,902 33,369,211 82,035,996 89,338,679 6,394,969 6,910,324
- ------------- ------------- ------------- ------------- ------------- -------------
77,891,930 44,370,000 121,504,478 117,126,887 9,814,174 9,633,242
- ------------- ------------- ------------- ------------- ------------- -------------
72,710,322 44,746,508 4,116,842 3,670,819 204,507 231,218
(13,355,087) (5,475,293) (30,874,894) (24,373,318) (2,153,577) (2,331,031)
(9,481) -- (1,996,857) (1,717,390) (327,696) (285,785)
54,323,803 55,022,728 (14,779,077) (3,572,644) (1,934,563) (1,027,537)
- ------------- ------------- ------------- ------------- ------------- -------------
113,669,557 94,293,943 (43,533,986) (25,992,533) (4,211,329) (3,413,135)
- ------------- ------------- ------------- ------------- ------------- -------------
191,561,487 138,663,943 77,970,492 91,134,354 5,602,845 6,220,107
243,579,972 104,916,029 469,783,383 378,649,029 36,946,031 30,725,924
- ------------- ------------- ------------- ------------- ------------- -------------
$ 435,141,459 $ 243,579,972 $ 547,753,875 $ 469,783,383 $ 42,548,876 $ 36,946,031
============= ============= ============= ============= ============= =============
81,577,104 46,574,016 25,835,933 27,379,389 1,256,974 1,380,401
21,359,028 16,505,152 206,729 226,321 6,328 9,647
(3,889,138) (1,970,414) (1,549,859) (1,529,579) (68,344) (92,576)
16,555,822 20,468,350 (766,299) (240,198) (63,845) (40,498)
- ------------- ------------- ------------- ------------- ------------- -------------
115,602,816 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
============= ============= ============= ============= ============= =============
114,382,494 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
1,218,871 -- -- -- -- --
1,451 -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- -------------
115,602,816 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31
- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.762308 $ 2.985333 $ 22.479709 $ 17.679054 $ 35.792019 $ 27956641
3.825649 -- -- --
3.897214 -- -- --
</TABLE>
<PAGE> 654
================================================================================
22 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
-----------------------------------
DIVISION 10C
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ 5,965,482 $ 9,342,792
Net realized gain on investments .................................. 21,789,375 19,691,626
Capital gains distributions from mutual funds ..................... 13,033,369 11,611,427
Net unrealized appreciation (depreciation)
of investments during the year .................................. 631,036,013 475,943,738
--------------- ---------------
Increase (decrease) in net assets resulting from operations ... 671,824,239 516,589,583
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 372,858,039 264,734,800
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (130,840,043) (73,944,144)
Annuity benefit payments .......................................... (164,035) (120,896)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 112,786,439 72,721,787
--------------- ---------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 354,640,400 263,391,547
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ...................................... 1,026,464,639 779,981,130
NET ASSETS:
Beginning of year ................................................. 2,310,327,500 1,530,346,370
--------------- ---------------
End of year ....................................................... $ 3,336,792,139 $ 2,310,327,500
=============== ===============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 615,053,124 536,806,965
Purchase payments ................................................. 85,764,962 77,757,636
Surrenders ........................................................ (29,978,801) (20,920,257)
Transfers -- interdivision and (to) from VALIC general account .... 27,731,410 21,408,780
--------------- ---------------
Total units outstanding, end of year .............................. 698,570,695 615,053,124
=============== ===============
Units outstanding, by class:
Standard units .................................................. 691,680,049 615,053,124
Enhanced units:
20 bp reduced ................................................ 6,859,835 --
40 bp reduced ................................................ 30,811 --
--------------- ---------------
Accumulation units end of year .................................... 698,570,695 615,053,124
=============== ===============
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------
DIVISION 10D
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ 105,740 $ 222,212
Net realized gain on investments .................................. 4,368,980 3,421,747
Capital gains distributions from mutual funds ..................... 219,975 249,976
Net unrealized appreciation (depreciation)
of investments during the year .................................. 7,900,957 9,003,055
--------------- ---------------
Increase (decrease) in net assets resulting from operations ... 12,595,652 12,896,990
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 654,342 789,193
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (3,879,247) (2,598,402)
Annuity benefit payments .......................................... (15,905) (13,201)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... (2,514,825) (3,872,680)
--------------- ---------------
Increase (decrease) in net assets
resulting from principal transactions ...................... (5,755,635) (5,695,090)
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ...................................... 6,840,017 7,201,900
NET ASSETS:
Beginning of year ................................................. 49,673,027 42,471,127
--------------- ---------------
End of year ....................................................... $ 56,513,044 $ 49,673,027
=============== ===============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 7,438,537 8,381,704
Purchase payments ................................................. 88,428 132,628
Surrenders ........................................................ (521,941) (430,026)
Transfers -- interdivision and (to) from VALIC general account .... (349,228) (645,769)
--------------- ---------------
Total units outstanding, end of year .............................. 6,655,796 7,438,537
=============== ===============
Units outstanding, by class:
Standard units .................................................. 6,655,796 7,438,537
Enhanced units:
20 bp reduced ................................................ -- --
40 bp reduced ................................................ -- --
--------------- ---------------
Accumulation units end of year .................................... 6,655,796 7,438,537
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit........................... $ 4.772052 $ 3.753436 $ 8.457722 $ 6.652806
Enhanced unit:
20 bp reduced........................ 4.875028 -- -- --
40 bp reduced........................ 4.991135 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 655
================================================================================
SEPARATE ACCOUNT A 23
================================================================================
<TABLE>
<CAPTION>
NEUBERGER BERMAN SCUDDER GROWTH AND VANGUARD WINDSOR II TEMPLETON ASSET
GUARDIAN TRUST - DIVISION 29 INCOME FUND - DIVISION 21 FUND - DIVISION 24 ALLOCATION FUND - DIVISION 19
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (316,186) $ (99,741) $ 2,680,972 $ 1,085,048 $ 5,622,515 $ 3,037,913 $ 5,298,721 $ 2,826,899
447,267 406,993 1,067,960 269,953 1,366,076 741,743 10,513,951 982,063
5,112,104 3,161,542 17,737,903 8,952,194 51,898,120 18,541,072 9,560,576 11,661,872
(5,621,588) (1,574,737) (15,926,329) 4,003,711 278,987 16,110,878 (10,693,322) 13,366,704
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(378,403) 1,894,057 5,560,506 14,310,906 59,165,698 38,431,606 14,679,926 28,837,538
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,727,026 14,861,097 79,800,185 37,754,331 172,075,011 82,698,118 55,452,646 61,278,823
(1,971,281) (661,852) (7,670,739) (1,502,937) (18,029,126) (3,075,223) (15,786,958) (9,457,167)
-- -- (3,718) (2,106) (6,802) (1,497) (22,337) (19,742)
(1,314,316) 21,010,215 34,897,873 66,400,722 162,813,002 115,544,417 (47,069,555) 41,633,946
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,441,429 35,209,460 107,023,601 102,650,010 316,852,085 195,165,815 (7,426,204) 93,435,860
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,063,026 37,103,517 112,584,107 116,960,916 376,017,783 233,597,421 7,253,722 122,273,398
46,306,823 9,203,306 135,384,401 18,423,485 275,397,199 41,799,778 316,874,285 194,600,887
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 61,369,849 $ 46,306,823 $ 247,968,508 $ 135,384,401 $ 651,414,982 $ 275,397,199 $ 324,128,007 $ 316,874,285
============= ============= ============= ============= ============= ============= ============= =============
35,406,663 8,211,592 94,225,984 16,524,046 187,929,868 37,292,761 196,150,946 137,384,670
13,737,161 11,711,541 51,892,138 28,874,922 105,145,249 63,199,633 32,881,580 38,574,901
(1,683,029) (501,980) (5,008,156) (1,088,301) (10,145,505) (2,242,658) (10,222,721) (5,822,716)
(1,186,725) 15,985,510 23,203,013 49,915,317 103,638,092 89,680,132 (27,846,098) 26,014,091
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
46,274,070 35,406,663 164,312,979 94,225,984 386,567,704 187,929,868 190,963,707 196,150,946
============= ============= ============= ============= ============= ============= ============= =============
45,261,146 35,406,663 159,815,811 94,225,984 372,737,595 187,929,868 190,963,707 196,150,946
1,012,671 -- 4,494,004 -- 13,800,156 -- -- --
253 -- 3,163 -- 29,953 -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
46,274,070 35,406,663 164,312,979 94,225,984 386,567,704 187,929,868 190,963,707 196,150,946
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.324970 $ 1.307438 $ 1.507724 $ 1.436011 $ 1.683226 $ 1.464949 $ 1.695764 $ 1.613943
1.368269 -- 1.542160 -- 1.723020 -- -- --
1.418252 -- 1.582856 -- 1.770257 -- -- --
</TABLE>
<PAGE> 656
================================================================================
24 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC ASSET ALLOCATION VANGUARD WELLINGTON
FUND - DIVISION 5 FUND - DIVISION 25
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 3,873,507 $ 3,768,356 $ 8,146,899 $ 3,011,918
Net realized gain (loss) on investments ........................... 2,520,862 5,941,975 453,710 713,048
Capital gains distributions from mutual funds ..................... 12,936,405 10,546,782 30,281,535 7,375,024
Net unrealized appreciation (depreciation)
of investments during the year .................................. 13,072,376 14,486,554 (13,016,167) 3,998,391
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations ... 32,403,150 34,743,667 25,865,977 15,098,381
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 16,199,430 11,497,764 128,896,516 51,882,204
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (12,309,318) (10,611,952) (11,075,983) (2,456,686)
Annuity benefit payments .......................................... (9,811) (8,301) (1,770) (68)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 6,673,714 (24,272,661) 106,781,378 66,331,198
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 10,554,015 (23,395,150) 224,600,141 115,756,648
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 42,957,165 11,348,517 250,466,118 130,855,029
NET ASSETS:
Beginning of year ................................................. 184,577,992 173,229,475 156,044,547 25,189,518
------------- ------------- ------------- -------------
End of year ....................................................... $ 227,535,157 $ 184,577,992 $ 406,510,665 $ 156,044,547
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 57,307,351 65,292,617 116,429,781 22,866,634
Purchase payments ................................................. 4,579,044 3,898,053 87,356,196 42,072,769
Surrenders ........................................................ (3,567,970) (3,591,047) (6,659,976) (1,913,812)
Transfers -- interdivision and (to) from VALIC general account .... 1,950,743 (8,292,272) 76,359,783 53,404,190
------------- ------------- ------------- -------------
Total units outstanding, end of year .............................. 60,269,168 57,307,351 273,485,784 116,429,781
============= ============= ============= =============
Units outstanding, by class:
Standard units .................................................... 60,237,818 57,307,351 253,840,498 116,429,781
Enhanced units:
20 bp reduced ................................................. 31,350 -- 19,636,072 --
40 bp reduced ................................................. -- -- 9,214 --
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 60,269,168 57,307,351 273,485,784 116,429,781
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Standard unit............................................... $ 3.772519 $ 3.219282 $ 1.482836 $ 1.340109
Enhanced unit:
20 bp reduced............................................. 3.882024 -- 1.529797 --
40 bp reduced............................................. -- -- 1.585688 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 657
================================================================================
SEPARATE ACCOUNT A 25
================================================================================
<TABLE>
<CAPTION>
AGSPC
AGSPC INTERNATIONAL CAPITAL CONSERVATION FUND
GOVERNMENT BOND ------------------------------------------------------------- AGSPC GOVERNMENT SECURITIES
FUND - DIVISION 13 DIVISION 1 DIVISION 7 FUND - DIVISION 8
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,997,004 $ 4,595,764 $ 338,175 $ 344,608 $ 3,124,808 $ 2,913,560 $ 4,468,159 $ 4,230,305
(1,068,211) (3,911,328) 12,194 23,005 413,199 (805,486) 1,352,903 (985,278)
872,765 136,607 -- -- -- -- -- --
21,926,900 (11,068,351) 35,832 90,579 (35,856) 1,739,391 1,437,930 3,130,717
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,728,458 (10,247,308) 386,201 458,192 3,502,151 3,847,465 7,258,992 6,375,744
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
25,413,792 40,582,861 146,532 366,816 7,027,648 7,324,860 12,902,909 12,424,460
(7,785,118) (6,757,210) (562,370) (389,473) (3,833,561) (3,026,469) (5,395,424) (3,958,609)
(2,691) (274) (455) (526) -- -- -- --
(38,345,989) (35,550,483) (97,641) (509,353) (2,143,426) (8,016,607) 10,528,632 (12,246,246)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(20,720,006) (1,725,106) (513,934) (532,536) 1,050,661 (3,718,216) 18,036,117 (3,780,395)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,008,452 (11,972,414) (127,733) (74,344) 4,552,812 129,249 25,295,109 2,595,349
166,199,757 178,172,171 6,427,526 6,501,870 55,418,728 55,289,479 88,167,288 85,571,939
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 169,208,209 $ 166,199,757 $ 6,299,793 $ 6,427,526 $ 59,971,540 $ 55,418,728 $ 113,462,397 $ 88,167,288
============= ============= ============= ============= ============= ============= ============= =============
111,480,591 112,601,593 1,831,961 1,991,536 28,242,598 30,286,494 45,034,894 47,130,169
16,433,799 27,009,353 40,472 109,285 3,402,874 3,840,755 6,558,071 6,646,726
(5,105,973) (4,696,042) (155,629) (116,952) (1,879,505) (1,555,673) (2,679,928) (2,143,349)
(24,924,879) (23,434,313) (27,361) (151,908) (1,014,305) (4,328,978) 4,816,634 (6,598,652)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,883,538 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
============= ============= ============= ============= ============= ============= ============= =============
97,473,851 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
408,156 -- -- -- -- -- -- --
1,531 -- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,883,538 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.728006 $ 1.490645 $ 3.726168 $ 3.505970 $ 2.085846 $ 1.962239 $ 2.111727 $ 1.957755
1.751922 -- -- -- -- -- -- --
1.777571 -- -- -- -- -- -- --
</TABLE>
<PAGE> 658
================================================================================
26 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VANGUARD LONG-TERM VANGUARD LONG-TERM
CORPORATE FUND - DIVISION 22 TREASURY FUND - DIVISION 23
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 2,052,614 $ 506,655 $ 2,857,159 $ 567,564
Net realized gain on investments .................................. 136,212 36,716 1,195,397 94,335
Capital gains distributions from mutual funds ..................... 1,044,043 156,984 -- --
Net unrealized appreciation (depreciation)
of investments during the year .................................. (64,200) 643,127 2,611,560 1,066,785
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .............. 3,168,669 1,343,482 6,664,116 1,728,684
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 18,953,737 6,013,744 30,970,739 6,985,216
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (1,608,861) (167,812) (2,748,295) (265,787)
Annuity benefit payments .......................................... -- -- (813) (176)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 19,011,058 9,719,778 60,728,245 10,813,576
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ....................... 36,355,934 15,565,710 88,949,876 17,532,829
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 39,524,603 16,909,192 95,613,992 19,261,513
NET ASSETS:
Beginning of year ................................................. 20,440,049 3,530,857 23,638,214 4,376,701
------------- ------------- ------------- -------------
End of year ....................................................... $ 59,964,652 $ 20,440,049 $ 119,252,206 $ 23,638,214
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 17,371,407 3,370,441 20,041,920 4,174,369
Purchase payments ................................................. 15,098,601 5,633,849 23,916,542 6,619,458
Surrenders ........................................................ (1,333,865) (151,626) (1,937,227) (227,789)
Transfers -- interdivision and (to) from VALIC general account .... 15,936,430 8,518,743 48,342,694 9,475,882
------------- ------------- ------------- -------------
Total units outstanding, end of year .............................. 47,072,573 17,371,407 90,363,929 20,041,920
============= ============= ============= =============
Units outstanding, by class:
Standard units .................................................... 44,122,646 17,371,407 86,673,300 20,041,920
Enhanced units:
20 bp reduced ................................................. 2,949,044 -- 3,682,809 --
40 bp reduced ................................................. 883 -- 7,820 --
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 47,072,573 17,371,407 90,363,929 20,041,920
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit............................................... $ 1.271278 $ 1.176649 $ 1.318263 $ 1.178938
Enhanced unit:
20 bp reduced............................................. 1.312731 -- 1.349397 --
40 bp reduced............................................. 1.360696 -- 1.384079 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 659
================================================================================
SEPARATE ACCOUNT A 27
================================================================================
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND
- ----------------------------------------------------------------
DIVISION 2 DIVISION 6
- ------------------------------ ------------------------------
1998 1997 1998 1997
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 184,017 $ 188,513 $ 7,849,963 $ 5,293,164
-- -- -- --
-- -- -- --
-- -- -- --
- ------------- ------------- ------------- -------------
184,017 188,513 7,849,963 5,293,164
- ------------- ------------- ------------- -------------
90,884 123,738 87,624,322 58,442,609
(292,611) (277,223) (33,439,890) (16,317,039)
-- -- (1,603) (1,592)
(364,560) (334,772) 63,714,230 (27,271,186)
- ------------- ------------- ------------- -------------
(566,287) (488,257) 117,897,059 14,852,792
- ------------- ------------- ------------- -------------
(382,270) (299,744) 125,747,022 20,145,956
4,579,757 4,879,501 140,904,582 120,758,626
- ------------- ------------- ------------- -------------
$ 4,197,487 $ 4,579,757 $ 266,651,604 $ 140,904,582
============= ============= ============= =============
1,931,439 2,142,534 84,182,521 75,124,095
37,542 53,405 56,361,872 35,256,772
(120,614) (119,264) (17,562,213) (10,205,685)
(148,034) (145,236) 29,891,462 (15,992,661)
- ------------- ------------- ------------- -------------
1,700,333 1,931,439 152,873,642 84,182,521
============= ============= ============= =============
1,700,333 1,931,439 147,547,688 84,182,521
-- -- 5,325,479 --
-- -- 475 --
- ------------- ------------- ------------- -------------
1,700,333 1,931,439 152,873,642 84,182,521
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
- ----------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
$ 2.468627 $ 2.371163 $ 1.742617 $ 1.673590
-- -- 1.786658 --
-- -- 1.833793 --
</TABLE>
<PAGE> 660
===============================================================================
28 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL INTERNATIONAL AMERICAN GENERAL INTERNATIONAL
GROWTH FUND - DIVISION 33 VALUE FUND - DIVISION 33
------------------------------ ------------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATIONS: $ -- $ -- $ 5,760 $ --
Net investment income ................................. -- -- -- --
Net realized gain on investments
Capital gains distributions from
mutual funds ........................................ -- -- -- --
Net unrealized appreciation
of investments during the year ...................... 200,750 -- 547,276 --
---------- --------- ---------- ---------
Increase in net assets resulting
from operations ................................ 200,750 -- 553,036 --
---------- --------- ---------- ---------
PRINCIPAL TRANSACTIONS:
Purchase payments ..................................... -- -- -- --
Surrenders of accumulation units by
terminations, withdrawals, and maintenance
fees ................................................ -- -- -- --
Annuity benefit payments .............................. -- -- -- --
Amounts transferred interdivision, and from
VALIC general account ............................... 3,650,000 -- 3,600,000 --
---------- --------- ---------- ---------
Increase in net assets
resulting from principal transactions ............ 3,650,000 -- 3,600,000 --
---------- --------- ---------- ---------
TOTAL INCREASE IN NET ASSETS .......................... 3,850,750 -- 4,153,036 --
NET ASSETS:
Beginning of year ..................................... -- -- -- --
End of year ........................................... $3,850,750 $ -- $4,153,036 $ --
========== ========= ========== =========
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .................. -- -- -- --
Purchase payments ..................................... -- -- -- --
Surrenders ............................................ -- -- -- --
Transfers -- interdivision and from VALIC
general account ..................................... -- -- -- --
---------- --------- ---------- ---------
Total units outstanding, end of year .................. -- -- -- --
========== ========= ========== =========
Units outstanding, by class:
Standard units ...................................... -- -- -- --
Enhanced units:
20 bp reduced .................................... -- -- -- --
40 bp reduced .................................... -- -- -- --
---------- --------- ---------- ---------
Accumulation units end of year ........................ -- -- -- --
========== ========= ========== =========
DECEMBER 31 DECEMBER 31
------------------------- -------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
Accumulation value per unit:
Standard unit ....................................... -- -- -- --
Enhanced unit:
20 bp reduced .................................... -- -- -- --
40 bp reduced .................................... -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 661
===============================================================================
SEPARATE ACCOUNT A 29
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL SMALL CAP AMERICAN GENERAL SMALL CAP AMERICAN GENERAL MID CAP AMERICAN GENERAL MID CAP
GROWTH FUND - DIVISION 35 VALUE FUND - DIVISION 36 GROWTH FUND - DIVISION 37 VALUE FUND - DIVISION 38
- ----------------------------- ------------------------------ ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ 13,079 $ -- $ -- $ -- $ 10,079 $ --
-- -- -- -- -- -- -- --
18,373 -- 51,644 -- -- -- 115,562 --
1,361,100 -- 585,384 -- 1,425,600 -- 896,569 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
1,379,473 -- 650,107 -- 1,425,600 -- 1,022,210 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
3,900,000 -- 3,849,999 -- 4,050,000 -- 3,949,999 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
3,900,000 -- 4,500,106 -- 5,475,600 -- 4,972,209 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
5,279,473 -- 4,500,106 -- 5,475,600 -- 4,972,209 --
-- -- -- -- -- -- -- --
$ 5,279,473 $ -- $ 4,500,106 $ -- $ 5,475,600 $ -- $ 4,972,209 $ --
============= =========== ============= =========== ============= =========== ============= ===========
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
============= =========== ============= =========== ============= =========== ============= ===========
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
============= =========== ============= =========== ============= =========== ============= ===========
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ------------------------------ ----------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- --
</TABLE>
<PAGE> 662
===============================================================================
30 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL LARGE CAP AMERICAN GENERAL LARGE CAP
GROWTH FUND - DIVISION 39 VALUE FUND - DIVISION 40
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ........................................... $ 2,093 $ -- $ 10,224 $ --
Net realized gain on investments ................................ -- -- -- --
Capital gains distributions from mutual funds ................... -- -- -- --
Net unrealized appreciation
of investments during the year ................................ 695,540 -- 716,526 --
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 697,633 -- 726,750 --
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... -- -- -- --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from VALIC general account 2,850,000 -- 2,900,000 --
------------- ------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 2,850,000 -- 2,900,000 --
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 3,547,633 -- 3,626,750 --
------------- ------------- ------------- -------------
Net Assets:
Beginning of year ............................................... -- -- -- --
End of year ..................................................... $ 3,547,633 $ -- $ 3,626,750 $ --
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- -- -- --
Purchase payments ............................................... - -- -- --
Surrenders ...................................................... -- -- -- --
Transfers -- interdivision and from VALIC general account ....... -- -- -- --
------------- ------------- ------------- -------------
Total units outstanding, end of year............................. -- -- -- --
============= ============= ============= =============
Units outstanding, by class:
Standard units ................................................ -- -- -- --
Enhanced units:
20 bp reduced ............................................... -- -- -- --
40 bp reduced ............................................... -- -- -- --
------------- ------------- ------------- -------------
Accumulation units end of year .................................. -- -- -- --
============= ============= ============= =============
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
Accumulation value per unit: ------------- -------------- ------------- --------------
Standard unit $ -- $ -- $ -- $ --
Enhanced unit:
20 bp reduced -- -- -- --
40 bp reduced -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 663
===============================================================================
SEPARATE ACCOUNT A 31
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL SOCIALLY AMERICAN GENERAL BALANCED AMERICAN GENERAL DOMESTIC AMERICAN GENERAL MONEY
RESPONSIBLE FUND - DIVISION 41 FUND - DIVISION 42 BOND FUND - DIVISION 43 MARKET FUND - DIVISION 44
- ------------------------------ -------------------------- -------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 23,760 $ -- $ 29,084 $ -- $ 14,978 $ -- $ 82,478 $ --
-- -- -- -- -- -- -- --
285,733 -- 34,051 -- 15,898 -- -- --
1,099,673 -- 805,536 -- 28,692 -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,409,166 -- 868,671 -- 59,568 -- 82,478 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
5,000,000 -- 5,000,000 -- 1,250,000 -- 5,000,000 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,000,000 -- 5,000,000 -- 1,250,000 -- 5,000,000 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,409,166 -- 5,868,671 -- 1,309,568 -- 5,082,478 --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 6,409,166 $ -- $ 5,868,671 $ -- $ 1,309,568 $ -- $ 5,082,478 $ --
============ ============ ============ ============ ============ ============ ============ ============
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
============ ============ ============ ============ ============ ============ ============ ============
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
============ ============ ============ ============ ============ ============ ============ ============
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- -------------------------- -------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
</TABLE>
<PAGE> 664
===============================================================================
32 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
AMERICAN GENERAL MODERATE GROWTH LIFESTYLE
FUND - DIVISION 49 FUND - DIVISION 49
------------------------ ------------------------
1998 1997 1998 1997
------------ ---------- ------------ ----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ........................................... $ 11,226 $ -- $ 19,912 $ --
Net realized gain on investments ................................ -- -- -- --
Capital gains distributions from mutual funds ................... -- -- -- --
Net unrealized appreciation
of investments during the year ................................. 970,379 -- 925,696 --
------------ ---------- ------------ ----------
Increase in net assets resulting from operations ........... 981,605 -- 945,608 --
------------ ---------- ------------ ----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... -- -- -- --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from VALIC
general account ............................................... 5,000,000 -- 5,000,000 --
------------ ---------- ------------ ----------
Increase in net assets
resulting from principal transactions .................... 5,000,000 -- 5,000,000 --
------------ ---------- ------------ ----------
TOTAL INCREASE IN NET ASSETS .................................... 5,981,605 -- 5,945,608 --
------------ ---------- ------------ ----------
NET ASSETS:
Beginning of year ............................................... -- -- -- --
------------ ---------- ------------ ----------
End of year ..................................................... $ 5,981,605 $ -- $ 5,945,608 $ --
============ ========== ============ ==========
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- -- -- --
Purchase payments ............................................... -- -- -- --
Surrenders ...................................................... -- -- -- --
Transfers - interdivision and from VALIC general account ........ -- -- -- --
------------ ---------- ------------ ----------
Total units outstanding, end of year ............................ -- -- -- --
============ ========== ============ ==========
Units outstanding, by class:
Standard units ................................................ -- -- -- --
Enhanced units:
20 bp reduced .............................................. -- -- -- --
40 bp reduced .............................................. -- -- -- --
------------ ---------- ------------ ----------
Accumulation units end of year .................................. -- -- -- --
============ ========== ============ ==========
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1998 1997 1998 1997
------------ ---------- ------------ ----------
Accumulation value per unit:
Standard unit ................................................. $ -- $ -- $ -- $ --
Enhanced unit:
20 bp reduced .............................................. -- -- -- --
40 bp reduced .............................................. -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 665
===============================================================================
SEPARATE ACCOUNT A 33
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL
CONSERVATIVE GROWTH LIFESTYLE AMERICAN GENERAL CORE BOND AMERICAN GENERAL STRATEGIC
FUND - DIVISION 50 FUND - DIVISION 58 BOND FUND - DIVISION 59
- --------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ----------- -------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 27,772 $ -- $ 50,247 $ -- $ 69,000 $ --
-- -- -- -- -- --
-- -- 16,291 -- 11,064 --
800,941 -- 95,397 -- 185,469 --
- ----------- -------- -------------- ---------- ------------- -------------
828,713 -- 161,935 -- 265,533 --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
5,000,000 -- 5,000,001 -- 4,999,999 --
- ----------- -------- -------------- ---------- ------------- -------------
5,000,000 -- 5,000,001 -- 4,999,999 --
- ----------- -------- -------------- ---------- ------------- -------------
5,828,713 -- 5,161,936 -- 5,265,532 --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
$ 5,828,713 $ -- $ 5,161,936 $ -- $ 5,265,532 $ --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
DECEMBER 31 DECEMBER 31 DECEMBER 31
- --------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ----------- -------- -------------- ---------- ------------- -------------
$ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- --
-- -- -- -- -- --
</TABLE>
<PAGE> 666
===============================================================================
34 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
HIGH YIELD BOND T. ROWE PRICE SMALL-CAP
FUND - DIVISION 60 STOCK FUND - DIVISION 51
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 92,262 $ -- $ -- $ --
Net realized gain on investments ................................... -- -- -- --
Capital gains distributions from mutual funds ...................... -- -- -- --
Net unrealized appreciation
of investments during the year .................................. 189,911 -- -- --
---------- ------------ ---------- ------------
Increase in net assets resulting from operations .............. 282,173 -- -- --
---------- ------------ ---------- ------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. -- -- 139 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ -- -- -- --
Annuity benefit payments ........................................... -- -- -- --
Amounts transferred interdivision, and from VALIC general account .. 5,000,000 -- -- --
---------- ------------ ---------- ------------
Increase in net assets
resulting from principal transactions ....................... 5,000,000 -- 139 --
---------- ------------ ---------- ------------
TOTAL INCREASE IN NET ASSETS ....................................... 5,282,173 -- 139 --
NET ASSETS:
Beginning of year .................................................. -- -- -- --
---------- ------------ ---------- ------------
End of year ........................................................ $5,282,173 $ -- $ 139 $ --
---------- ------------ ---------- ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................... -- -- -- --
Purchase payments .................................................. -- -- 122 --
Surrenders ......................................................... -- -- -- --
Transfers -- interdivision and from VALIC general account .......... -- -- -- --
---------- ------------ ---------- ------------
Total units outstanding, end of year ............................... -- -- 122 --
---------- ------------ ---------- ------------
Units outstanding, by class:
Standard units ................................................... -- -- 122 --
Enhanced units:
20 bp reduced ................................................. -- -- -- --
40 bp reduced ................................................. -- -- -- --
---------- ------------ ---------- ------------
Accumulation units end of year ..................................... -- -- 122 --
---------- ------------ ---------- ------------
DECEMBER 31 DECEMBER 31
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ---------- ------------
Accumulation value per unit:
Standard unit..................................................... $ -- $ -- $1.141049 $ --
Enhanced unit:
20 bp reduced.................................................. -- -- -- --
40 bp reduced.................................................. -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 667
===============================================================================
SEPARATE ACCOUNT A 35
===============================================================================
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 fifty-five 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 (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)
American General Series Portfolio Company 3 ("AGSPC 3"):
American General International Growth Fund (Division 33)
American General Large Cap Growth Fund (Division 39)
American General Mid Cap Growth Fund (Division 37)
American General Small Cap Growth Fund(Division 35)
American General International Value Fund (Division 34)
American General Large Cap Value Fund (Division 40)
American General Mid Cap Value Fund (Division 38)
American General Small Cap Value Fund (Division 36)
American General Socially Responsible Fund (Division 41)
American General Balanced Fund (Division 42)
American General High Yield Bond Fund (Division 60)
American General Strategic Bond Fund (Division 59)
American General Domestic Bond Fund (Division 43)
American General Core Bond Fund (Division 58)
American General Money Market Fund (Division 44)
American General Growth Lifestyle Fund (Division 48)
American General Moderate Growth
Lifestyle Fund (Division 49)
American General Conservative Growth
Lifestyle Fund (Division 50)
Dreyfus Variable Investment Fund -
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 Long-Term Corporate Fund (Division 22)
Vanguard Long-Term Treasury Fund (Division 23)
Vanguard Wellington Fund (Division 25)
Vanguard Windsor II Fund (Division 24)
Vanguard Lifestrategy Growth Fund (Division 52)
Vanguard Lifestrategy Moderate Growth Fund (Division 53)
Vanguard Lifestrategy Conservative Growth Fund (Division 54)
T. Rowe Price Small-Cap Stock Fund (Division 51)
Divisions 33 through 54 and 58 through 60 became available to contract holders
of the Separate Account effective September 22,1998.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets 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.
USE OF ESTIMATES. The financial statements have been prepared in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and disclosure of contingent
assets and liabilities. Ultimate results could differ from these estimates.
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 each 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 purchase 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, the Annuity 2000 Mortality Table, and the 1994 Group Annuity
Reserve Mortality Table have 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.
ACCUMULATION UNITS. VALIC offers both standard and enhanced contracts.
These contracts may have different Separate Account charges.
<PAGE> 668
===============================================================================
36 NOTES TO FINANCIAL STATEMENTS
===============================================================================
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment advisor ("the Advisor"), transfer agent, and
accounting services agent to AGSPC and AGSPC 3. American General Investment
Management, LLP, an affiliate of the Advisor, serves as investment sub-advisor
to certain AGSPC 3 mutual funds.
The Separate Account is charged for mortality and expense risks
assumed by VALIC and for distribution and administrative services provided by
VALIC. The standard 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 through 8, 10A, 10C and 10D, 11 through
17, 33 through 44, 48 through 50, and 58 through 60, 1.00%; and for Divisions
18 through 32, and 51 through 54, 1.25%. Certain 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 through 23, 26 through 30, 32 through 44, 48
through 50, and 58 through 60, 0.25%; for Division 31, 0.24% (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); and for Division
18, 0.15% (commencing July 1, 1997). Separate Account charges may be reduced if
contracts are issued to certain types of plans that are expected to result in
lower costs to VALIC. Consequently, each division may offer separate "classes"
of units of beneficial interest reflecting reductions in separate account
charges.
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, 1998 and 1997, VALIC reduced expenses of Division 10B
by $82,027 and $85,996, respectively.
A portion of the annual contract maintenance charge is assessed on
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 $5,575,601 and $4,510,903 for the
years ended December 31, 1998 and 1997, respectively.
VALIC received surrender charges of $4,581,641 and $2,769,370 for the
years ended December 31, 1998 and 1997, respectively. In addition, VALIC
received $53,171 and $6,156 for the year ended December 31, 1998, in sales load
on variable annuity purchase payments for Divisions 10A and 10B, respectively.
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 contributed to the Separate Account, $100,000 and $74,900,000 on
August 26, 1998 and September 1, 1998, respectively, in order to provide
initial funding for the AGSPC 3 mutual funds. Capital surplus amounts reflected
in the Statements of Net Assets for Divisions 33 through 44, 48 through 50 and
58 through 60 are not subject to contract holder charges since they do not
represent reserves for annuity contracts issued.
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, 1998:
<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 13,079,920 $11.37 $ 148,718,766 $ 148,478,416 $ 240,350
Putnam Global Growth Fund ................. 28 13,080,357 12.45 162,850,092 149,345,622 13,504,470
Templeton Foreign Fund .................... 32 26,018,073 8.39 218,291,648 267,772,677 (49,481,029)
Templeton International Fund .............. 20 37,187,918 20.69 769,418,093 672,572,557 96,845,536
AGSPC Science & Technology Fund ........... 17 52,052,496 26.07 1,357,008,368 1,058,583,311 298,425,057
AGSPC Small Cap Index Fund ................ 14 14,788,462 15.26 225,671,866 216,780,123 8,891,743
Dreyfus Variable Investment Fund -
Small Cap Portfolio ..................... 18 14,871,620 53.91 801,729,449 709,332,114 92,397,335
Putnam New Opportunities Fund ............. 26 7,047,598 58.43 411,790,940 341,359,629 70,431,311
Putnam OTC & Emerging Growth Fund ......... 27 8,240,758 17.25 142,153,064 128,583,339 13,569,725
AGSPC Growth Fund ......................... 15 53,087,130 22.85 1,213,041,349 867,944,168 345,097,181
AGSPC MidCap Index Fund ................... 4 33,517,770 25.37 850,345,675 593,845,989 256,499,686
American Century - Twentieth Century
Ultra Fund .............................. 31 10,965,109 33.41 366,344,764 344,297,873 22,046,891
Founders Growth Fund ...................... 30 20,206,988 20.41 412,424,559 377,960,267 34,464,292
AGSPC Growth & Income Fund ................ 16 14,227,222 20.04 285,113,626 214,814,089 70,299,537
AGSPC Social Awareness Fund ............... 12 19,099,259 22.77 434,890,057 350,790,377 84,099,680
AGSPC Stock Index Fund .................... 10A,B,C,D 106,096,626 37.54 3,982,866,943 2,020,245,208 1,962,621,735
Neuberger Berman Guardian Trust ........... 29 3,796,199 16.16 61,347,128 68,195,002 (6,847,874)
Scudder Growth and Income Fund ............ 21 9,416,745 26.31 247,754,620 259,592,520 (11,837,900)
Vanguard Windsor II Fund .................. 24 21,811,605 29.85 651,075,950 634,903,452 16,172,498
Templeton Asset Allocation Fund ........... 19 14,431,830 22.46 324,138,930 290,415,546 33,723,384
AGSPC Asset Allocation Fund ............... 5 16,111,443 14.12 227,493,681 191,458,464 36,035,217
</TABLE>
<PAGE> 669
===============================================================================
SEPARATE ACCOUNT A 37
===============================================================================
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
-------- ------ ----- ------ ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Vanguard Wellington Fund ................. 25 13,852,716 29.35 $ 406,576,731 $ 416,038,579 $ (9,461,848)
AGSPC International Government
Bond Fund .............................. 13 13,339,220 12.68 169,141,402 158,031,435 11,109,967
AGSPC Capital Conservation Fund .......... 1 & 7 6,849,612 9.68 66,304,225 65,365,302 938,923
AGSPC Government Securities Fund ......... 8 10,966,460 10.35 113,502,848 110,444,717 3,058,131
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Fund ............... 22 6,441,710 9.29 59,843,445 59,275,925 567,520
Long-Term Treasury Fund ................ 23 10,501,171 11.36 119,293,240 115,581,241 3,711,999
AGSPC Money Market Fund .................. 2 & 6 270,445,756 1.00 270,445,756 270,445,756 --
American General International
Growth Fund ............................ 33 365,269 10.55 3,853,567 3,652,817 200,750
American General Large Cap Growth Fund ... 39 285,293 12.44 3,549,043 2,853,503 695,540
American General Mid Cap Growth Fund ..... 37 405,021 13.52 5,475,870 4,050,270 1,425,600
American General Small Cap Growth Fund ... 35 391,362 13.49 5,279,473 3,918,373 1,361,100
American General International
Value Fund ............................. 34 360,507 11.52 4,153,036 3,605,760 547,276
American General Large Cap Value Fund .... 40 290,838 12.47 3,626,750 2,910,224 716,526
American General Mid Cap Value Fund ...... 38 405,233 12.27 4,972,209 4,075,640 896,569
American General Small Cap Value Fund .... 36 390,634 11.52 4,500,106 3,914,722 585,384
American General Socially
Responsible Fund ....................... 41 525,342 12.20 6,409,166 5,309,493 1,099,673
American General Balanced Fund ........... 42 505,484 11.61 5,868,671 5,063,135 805,536
American General High Yield Bond Fund .... 60 508,880 10.38 5,282,173 5,092,262 189,911
American General Strategic Bond Fund ..... 59 507,766 10.37 5,265,532 5,080,063 185,469
American General Domestic Bond Fund ...... 43 128,012 10.23 1,309,568 1,280,876 28,692
American General Core Bond Fund .......... 58 506,569 10.19 5,161,936 5,066,538 95,398
American General Money Market Fund ....... 44 5,082,478 1.00 5,082,478 5,082,478 --
American General Growth Lifestyle Fund ... 48 501,813 11.94 5,991,538 5,021,159 970,379
American General Moderate Growth
Lifestyle Fund ......................... 49 502,116 11.85 5,950,028 5,024,332 925,696
American General Conservative Growth
Lifestyle Fund ......................... 50 502,580 11.60 5,829,911 5,028,970 800,941
T. Rowe Price Small-Cap Stock Fund ....... 51 7 20.79 139 139 --
Total .................................. 853,696,997 $14,587,138,409 $11,178,484,452 $ 3,408,653,957
</TABLE>
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 sales 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, 1998, 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 ................... $ 70,340,669 $ 86,195,191
Putnam Global Growth Fund Division 28 ........................... 84,411,341 2,105,181
Templeton Foreign Fund Division 32 .............................. 82,320,483 9,313,676
Templeton International Fund Division 20 ........................ 176,311,032 153,728,857
AGSPC Science & Technology Fund Division 17 ..................... 262,237,519 101,549,488
AGSPC Small Cap Index Fund Division 14 .......................... 56,957,370 35,775,340
Dreyfus Variable Investment Fund -
Small Cap Portfolio Division 18 ........................... 63,341,013 64,349,216
Putnam New Opportunities Fund Division 26 ....................... 196,437,438 3,727,492
Putnam OTC & Emerging Growth Fund Division 27 ................... 43,601,585 7,874,482
AGSPC Growth Fund Division 15 ................................... 168,030,279 22,896,950
AGSPC MidCap Index Fund Division 4 .............................. 121,443,834 59,433,835
American Century - Twentieth Century Ultra Fund Division 31 ..... 206,441,197 3,102,142
Founders Growth Fund Division 30 ................................ 203,148,927 4,157,924
AGSPC Growth & Income Fund Division 16 .......................... 35,712,751 22,023,607
</TABLE>
<PAGE> 670
===============================================================================
38 NOTES TO FINANCIAL STATEMENTS
===============================================================================
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPC Social Awareness Fund Division 12 .............................. $ 155,478,764 $ 4,747,514
AGSPC Stock Index Fund:
Division 10A ................................................ 16,487,825 57,170,007
Division 10B ................................................ 1,430,916 5,138,856
Division 10C ................................................ 409,382,612 36,743,609
Division 10D ................................................ 2,305,198 7,769,904
Neuberger Berman Guardian Trust Division 29 .......................... 24,369,333 4,106,246
Scudder Growth and Income Fund Division 21 ........................... 134,037,172 6,545,427
Vanguard Windsor II Fund Division 24 ................................. 380,154,266 5,838,118
Templeton Asset Allocation Fund Division 19 .......................... 48,497,460 40,983,269
AGSPC Asset Allocation Fund Division 5 ............................... 37,672,428 10,217,954
Vanguard Wellington Fund Division 25 ................................. 267,401,470 4,016,568
AGSPC International Government Bond Fund Division 13 ................. 63,147,566 81,054,776
AGSPC Capital Conservation Fund:
Division 1 .................................................. 832,531 1,006,283
Division 7 .................................................. 16,631,338 12,372,606
AGSPC Government Securities Fund Division 8 .......................... 54,546,370 32,043,559
Vanguard Long-Term Corporate Fund Division 22 ........................ 42,256,730 2,903,724
Vanguard Long-Term Treasury Fund Division 23 ......................... 102,868,659 11,315,873
AGSPC Money Market Fund:
Division 2 .................................................. 2,987,800 3,330,427
Division 6 .................................................. 379,702,464 248,100,695
American General International Growth Fund Division 33 ............... 3,652,817 --
American General Large Cap Growth Fund Division 39 ................... 2,853,503 --
American General Mid Cap Growth Fund Division 37 ..................... 4,050,270 --
American General Small Cap Growth Fund Division 35 ................... 3,918,373 --
American General International Value Fund Division 34 ................ 3,605,760 --
American General Large Cap Value Fund Division 40 .................... 2,910,224 --
American General Mid Cap Value Fund Division 38 ...................... 4,075,640 --
American General Small Cap Value Fund Division 36 .................... 3,914,722 --
American General Socially Responsible Fund Division 41 ............... 5,309,493 --
American General Balanced Fund Division 42 ........................... 5,063,135 --
American General High Yield Bond Fund Division 60 .................... 5,092,262 --
American General Strategic Bond Fund Division 59 ..................... 5,080,063 --
American General Domestic Bond Fund Division 43 ...................... 1,280,876 --
American General Core Bond Fund Division 58 .......................... 5,066,538 --
American General Money Market Fund Division 44 ....................... 5,082,478 --
American General Growth Lifestyle Fund Division 48 ................... 5,021,159 --
American General Moderate Growth Lifestyle Fund Division 49 .......... 5,024,332 --
American General Conservative Growth Lifestyle Fund Division 50 ...... 5,028,970 --
T. Rowe Price Small-Cap Stock Fund Division 51 .............. 139 --
-------------- --------------
Total ....................................................... $3,986,957,094 $1,151,638,796
============== ==============
</TABLE>
NOTE G -- YEAR 2000 (UNAUDITED)
VALIC is in the process of modifying its systems to achieve Year 2000
readiness. This endeavor is directed and managed by VALIC and monitored by the
parent company, American General Corporation. VALIC has developed clearly
defined and documented plans that have been implemented to minimize the risk of
significant negative impact on its operations.
These plans include the following activities: (1) perform an inventory
of VALIC's information technology and non-information technology systems; (2)
assess which items in the inventory may expose VALIC to business interruptions
due to Year 2000 issues; (3) test systems for Year 2000 readiness; (4)
reprogram or replace systems that are not Year 2000 ready; and (5) return the
systems to operation.
In addition, the Separate Account and VALIC have business
relationships with various third parties, each of which must also be Year 2000
ready. Therefore, VALIC's plans also include assessing and attempting to
mitigate the risks associated with the potential failure of third parties, as
well as contingency plans for any identified risks or shortcomings, to achieve
Year 2000 readiness. Due to the various stages of the third parties' Year 2000
readiness, VALIC's efforts in this regard will extend through 1999.
Through December 31, 1998, VALIC has incurred and expensed $26.7
million (pretax) related to Year 2000 readiness, including $20.2 million
incurred in 1998.
As of December 31, 1998, VALIC has completed the inventory,
assessment, testing, reprogramming and implementation phases of the plan with
respect to its critical systems. VALIC believes its comprehensive plan and
resource commitment will allow it to meet its Year 2000 objectives. However,
the Year 2000 issue remains complex and the risks, uncertainties, and
unforeseen circumstances associated with the Year 2000 issue could have a
material adverse impact on VALIC and the Separate Account.
<PAGE> 671
================================================================================
REPORT OF INDEPENDENT AUDITORS 39
================================================================================
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 ("the Separate Account") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, 11 through 44
inclusive, 48 through 51 inclusive, and 58 through 60, inclusive) comprising
the Separate Account as of December 31, 1998. 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 the
Separate Account and each of its divisions except for divisions 33 through 44
inclusive, divisions 48 through 50 inclusive, and divisions 58 through 60,
inclusive, for which we have audited the statements of operations and changes
in net assets for the period from August 26, 1998 (inception) to December 31,
1998, and for division 51 for which we have audited the statements of
operations and changes in net assets for the period from September 22, 1998
(inception) through December 31, 1998. These financial statements are the
responsibility of the Separate Account'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, 1998,
by correspondence with the transfer agents. 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 the Separate Account and each
of the divisions comprising the Separate Account at December 31, 1998, 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 15, 1999
<PAGE> 672
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-1 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 673
SUPPLEMENT DATED MAY 1, 1999 TO STATEMENT OF ADDITIONAL
INFORMATION DATED MAY 1, 1999
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
FOR SERIES 2.1 TO 2.12,
SERIES 2.1.20 TO 2.12.20,
SERIES 2.1.40 TO 2.12.40
The Statement of Additional Information ("SAI") has been amended as described
below to reflect the availability of the AGSPC Asset Allocation Division Five
and the AGSPC Small Cap Index Division Fourteen as investment options under
Certain Contracts.
The following paragraph has been added as the first paragraph to the section of
the SAI entitled "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.
- ---------------
** "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," and "S&P MidCap 400(R)" are
trademarks of Standard & Poor's ("S&P"). The AGSPC Asset Allocation Fund, the
AGSPC MidCap Index Fund and the AGSPC Stock 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.
<PAGE> 674
The following paragraph replaces the sixth paragraph in the section of the SAI
entitled "Performance Compared to Market Indices."
The performance of the AGSPC Small Cap Index Division Fourteen and the
Putnam OTC & Emerging Growth Division Twenty-seven may be compared with the
Russell 2000(R) Index ("Russell 2000").** The Russell 2000 was developed in
1984 by the Frank Russell Company to track the stock market performance of
small capitalization domestic stocks. The Russell 2000 is market weighted
and consists of approximately 2000 stocks. Stocks included in the Russell
2000 are chosen by the Frank Russell Company on the basis of their market
size.
- ---------------
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. Russell(TM) is a trademark of the Frank Russell Company.
The following tables showing the Hypothetical $10,000 Account Value and
Cumulative Return of the AGSPC Asset Allocation Division Five and the AGSPC
Small Cap Index Division Fourteen have been added to the section of the SAI
entitled "Performance Information."
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 BLENDED
DIVISION FIVE INDEX INDEX***
- ---------------------------------------------------------------------- ------- --------
<S> <C> <C> <C>
01/01/89.................................................... $10,000 $10,000 $10,000
12/31/89.................................................... 11,581 13,169 12,311
12/31/90.................................................... 11,189 12,760 12,583
12/31/91.................................................... 13,442 16,647 15,458
12/31/92.................................................... 13,212 17,915 16,579
12/31/93.................................................... 14,294 19,721 18,186
12/31/94.................................................... 13,967 19,982 18,186
12/31/95.................................................... 17,255 27,490 23,167
12/31/96.................................................... 18,979 33,804 26,372
12/31/97.................................................... 23,040 45,081 32,159
12/31/98.................................................... 26,999 57,966 38,548
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
AGSPC Asset Allocation Division Five................... 169.99% 88.88% 56.47% 17.19%
Benchmark Comparison
S&P 500 Index.......................................... 479.66% 193.93% 110.86% 28.58%
Blended Index***....................................... 285.48% 111.96% 66.39% 19.87%
</TABLE>
- ---------------
* The AGSPC Asset Allocation Fund was formerly known as the Timed Opportunity
Fund.
** This Division was initiated on September 6, 1983.
*** 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.
<PAGE> 675
AGSPC Small Cap Index Division Fourteen Performance Compared to Russell 2000
Index(R)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
RUSSELL
SMALL CAP INDEX 2000
DIVISION FOURTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/01/92.................................................... $10,000 $10,000
12/31/92.................................................... 11,128 11,416
12/31/93.................................................... 12,772 13,571
12/31/94.................................................... 12,223 13,324
12/31/95.................................................... 15,449 17,114
12/31/96.................................................... 17,854 19,937
12/31/97.................................................... 21,636 24,396
12/31/98.................................................... 21,005 23,775
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE 5 3 1
INCEPTION YEARS YEARS YEAR
--------- ----- ----- ----
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Small Cap Index Division Fourteen................ 110.05% 64.46% 35.96% (2.92)%
Benchmark Comparison
Russell 2000........................................... 137.75% 75.19% 38.92% (2.55)%
</TABLE>
- ---------------
* This Division was initiated May 1, 1992.
<PAGE> 676
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR 2
FOR SERIES 2.1 TO 2.12,
SERIES 2.1.20 TO 2.12.20
AND SERIES 2.1.40 TO 2.12.40
--------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1999
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for Portfolio
Director 2 dated May 1, 1999 ("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 A.G. Distributors, Inc. (A.G.
Distributors) at 2929 Allen Parkway, Houston, Texas 77019; 1-800-44-VALIC.
Prospectuses are also available from regional sales offices of A.G. Distributors
or from its registered sales representatives.
1
<PAGE> 677
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............... 15
Exchanges From Independence Plus Contracts...... 15
Exchanges From V-Plan Contracts................. 16
Exchanges From SA-1 and SA-2 Contracts.......... 17
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
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Performance Calculations............................ 23
AGSPC Money Market Division 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 Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 29
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 29
</TABLE>
2
<PAGE> 678
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 30
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 30
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 31
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 32
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 32
Founders Growth Division Thirty Compared to S&P
500 Index..................................... 33
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 33
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MCSI World Index and S&P 500
Index......................................... 34
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 35
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 35
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 36
Vanguard Long-Term Corporate Division Twenty-two
Compared to Merrill Lynch Corporate Master
Index......................................... 37
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 37
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 38
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 39
Payout Payments..................................... 40
Assumed Investment Rate......................... 40
Amount of Payout Payments....................... 40
Payout Unit Value............................... 40
Illustration of Calculation of Payout Unit
Value......................................... 41
Illustration of Payout Payments................. 41
Distribution of Variable Annuity Contracts.......... 42
Experts............................................. 42
Comments on Financial Statements.................... 43
</TABLE>
3
<PAGE> 679
GENERAL INFORMATION
The Variable Annuity Life Insurance Company (the "Company") is a stock life
insurance company organized under the laws of the State of Texas and is engaged
primarily in the offering and issuance of fixed and variable retirement annuity
contracts and combinations thereof. The Company also is licensed to write life
insurance in all states (other than Connecticut) and the District of Columbia,
and annuities in all fifty states and the District of Columbia. The Company is
an indirectly wholly owned subsidiary of American General Corporation.
On July 25, 1979, the Company established Separate Account A (the Separate
Account) in accordance with the Texas Insurance Code. The Separate Account is
registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "Act").
Each Division of the Separate Account (except for AGSPC's International
Government Bond Fund, which is a non-diversified Fund) invests in the shares of
a diversified, open-end, management-type investment company registered under the
Act, or a portfolio of a diversified, open-end, management investment company
registered under the Act. The Separate Account currently is made up of 53
Divisions.
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$3.7 billion as of December 31, 1998. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,954,190
accounts as of December 31, 1998. The number of employer groups which have
purchased Contracts has increased by 178 percent in the past ten years to more
than 26,392 as of December 31, 1998. As of December 31, 1998, 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, 1998 the Company's assets totaled more than $39
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
As of December 31, 1998, the Company was marketing Contracts in more than
10,218 public and private, primary and secondary schools with more than 494,584
participant accounts for employees in public and private schools nationwide.
From December 31, 1988 to December 31, 1998, the cash value of investments in
these Contracts has increased by 269 percent while the number of public and
private school groups in these Contracts increased 97 percent and the number of
participant accounts in these Contracts increased by 111 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1988 to December 31, 1998, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 166 percent and for the same period the
number of participant accounts has increased 131 percent. For the same time
period cash values for participants have increased 306 percent. As of December
31, 1998, more than 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 health care segment of the
not-for-profit organization market. From December 31, 1988 to December 31, 1998
Contract cash values have increased 802 percent. During the same period the
number of health care groups that have purchased these Contracts increased 274
percent and the number of participant accounts increased 727 percent.
4
<PAGE> 680
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1988 to December 31, 1998, Contract
cash values for participants in these groups have increased 310 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 229 percent and the number of employer groups has
increased 303 percent.
Additionally, several states have enacted, as an alternative to state
administered defined benefit retirement programs, Optional Retirement Plans
(ORPs). A state that sponsors an ORP will select the carriers which will be
allowed to participate in the ORP. The Company has been selected as one of the
carriers permitted to market Contracts to state employees who elect to
participate in the ORP in 26 of the last 29 states that sponsor ORPs as an
alternative to a state deferred, benefit plan and others multiple carriers, as
of December 31, 1998. From December 31, 1993 to December 31, 1998, in these ORPs
the number of participant accounts increased 81 percent and cash values
increased 153 percent to more than $2.7 billion dollars.
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
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 Plan
Specialists; (2) informative retirement-investment education programs, seminars
and materials; (3) specialized computer-aided services for retirement planning
and developing asset allocation strategies; (4) a wide selection of innovative,
market-responsive investment options; (5) advanced and efficient administration
of retirement accounts; and (6) a financially strong and stable Company with
which to do business.
The Company may, from time to time, 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., The Variable Annuity Research &
Data Services ("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
5
<PAGE> 681
that market segment, e.g., the health care segment of the not-for-profit
organization market. This sales literature and material may also be specific to
a certain group. For example, sales literature and material may be designed for
a specific hospital. The sales literature and material would address
specifically the group's contract and retirement plan.
The Company, in its marketing efforts, may also refer to the following
investment advisers referenced in the Prospectus.
The Company may, from time-to-time, refer to American Century Investment
Management, Inc. (ACIM) as investment adviser to the American 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 more than 70
no-load funds and manages assets for more than 2 million investors. American
Century, as of December 31, 1998, had more than $70 billion in assets under
management.
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. FAM has
established a growth-style investment management process which is consistent
throughout all portfolios. FAM, as of December 31, 1998, had over $7.5 billion
of assets under management. In 1998, FAM became part of the Mellon/Dreyfus
Family of investment management companies.
The Company may, from time to time, refer to Neuberger Berman Management
Inc. (NB 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. NB Management, an
affiliate of Neuberger Berman, LLC, was later established and now manages a
family of mutual funds. NB 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. As of December
31, 1998, NB Management and its affiliates managed approximately $55 billion of
aggregate net assets.
The Company may, from time to time, refer to Putnam Investment Management
Inc. (PIM) as investment adviser to the Putnam New Opportunities Fund -- Class A
Shares (underlying Division Twenty-six), Putnam OTC Emerging Growth
Fund -- Class A Shares (underlying Division Twenty-seven) and Putnam Global
Growth Fund -- Class A Shares (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, 1998, had approximately $303 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. 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 December 31, 1998, had more than $280 billion
in assets under management.
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,
6
<PAGE> 682
Hong Kong, Luxembourg, Singapore, Russia, Scotland and Germany. Templeton is a
member of the $220 billion Franklin Templeton Group with approximately 7 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, as of December 31, 1998, had more than $90
billion in assets under management.
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, 1998, had more than $461 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 Long-Term Corporate Fund
(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 Long-Term U.S. Treasury Fund
(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 Fund (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 Fund.
The Company may, from time to time, refer to Bankers Trust Company as
subadviser to American General Series Portfolio Company ("AGSPC") Stock Index
Fund (underlying Division 10); and T. Rowe Price Associates, Inc. as subadviser
to AGSPC Growth Fund (underlying Division 15) and AGSPC Science & Technology
Fund (underlying Division 17).
Bankers Trust Company, subadviser to Division 10, is a wholly owned
subsidiary of Bankers Trust Corporation. On November 30, 1998, Bankers Trust
Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG
under which Bankers Trust Corporation and all of its subsidiaries would merge
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including retail and commercial banking, investment banking and
insurance. The merger is contingent upon various regulatory approvals. On April
20, 1999, the AGSPC Fund's Board of Directors approved a new investment
sub-advisory agreement with Bankers Trust Company, subject to shareholder
approval. If the merger is approved and completed, Deutsche Bank AG, as the
Sub-Adviser's new parent company, will control the operations of the
Sub-Adviser. Bankers Trust believes that, under this new arrangement, the
services provided to the Fund will be maintained at their current level.
On March 11, 1999, Bankers Trust announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related recordkeeping problems that occurred between 1994 and early 1996.
Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
$60 million fine to federal authorities. Separately, Bankers Trust agreed to pay
a $3.5 million fine to the State of New York. The events leading up to the
guilty pleas did not arise out of the investment advisory or mutual fund
management activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would
not be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates to
continue
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to provide investment advisory services to registered investment companies.
There is no assurance that the SEC will grant a permanent order.
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 2 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 2 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. An A++
rating means, in the opinion of A. M. Best, that the insurer has demonstrated
the strongest ability to meet its respective policyholder and other contractual
obligations.
In addition, the claims-paying ability of the Company as measured by the
Standard and Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to D.
Further, from time to time the Company may refer to Moody's Investor's
Service's rating of the Company. Moody's Investor's Service's financial strength
ratings indicate an insurance company's ability to discharge senior policyholder
obligations and claims and are based on an analysis of the insurance company and
its relationship to its parent, subsidiaries and affiliates. Moody's Investor's
Service's ratings range from Aaa to C.
The Company may additionally refer to its Duff & Phelp's rating. A Duff &
Phelp's rating is an assessment of a company's insurance claims paying ability.
Duff & Phelp's ratings range from AAA to CCC.
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
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<PAGE> 684
may be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to the 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
Flexible payment deferred annuity Contracts are offered in connection with
the prospectus to which this Statement of Additional Information relates.
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.
The Contracts are non-participating and will not share in any of the
profits of the Company.
FEDERAL TAX MATTERS
This Section summarizes the major tax consequences of contributions,
payments, and withdrawals under Portfolio Director 2, during life and at death.
It is the opinion of VALIC and its tax counsel that a Qualified Contract
described in Section 403(a), 403(b), or 408(b) of the Code does not lose its
deferred tax treatment if Purchase Payments under the contract are invested in
publicly available mutual funds. If investment in publicly available mutual
funds were to cause the tax deferral provisions described below for these
specific types of contracts not to apply, you would be currently taxed on
transfers, redemptions, purchase payments and dividend and capital gains
distributions.
In addition, it is also the opinion of VALIC and its tax counsel that, for
each other type of Qualified Contract, an independent exemption provides tax
deferral regardless of ownership of the Mutual Fund shares.
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 general 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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<PAGE> 685
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 fully deductible 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 $31,000 or less ($30,000 for 1998, $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 $51,000 or less ($50,000 for 1998, $40,000 or less
prior to 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 1999 you may
contribute (and
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<PAGE> 686
defer tax on) the lesser of $8,000 (indexed for inflation) or 33 1/3% of your
"includible" compensation (compensation from the employer currently includible
in taxable income). Additional, catch-up deferrals are permitted in 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.
Simplified Employee Pension Plan ("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. In 1998 and 1999,
these salary reductions may not exceed $10,000 per year. This limit is indexed
and may be increased in future years. 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.
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<PAGE> 687
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.
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 they 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.
Currently, 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
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<PAGE> 688
(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 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
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<PAGE> 689
(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 inherited from
the same decedent 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.
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 in
a tax-free rollover, 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, avoidance of 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 ex-
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change from other fixed and/or variable contracts we issue (other contracts) to
Portfolio Director 2. These other contracts are listed in the prospectus. A more
detailed comparison of the features, charges and restrictions between each of
these listed other contracts and Portfolio Director 2 provided below.
In the prospectus we also describe exchanges between Portfolio Director and
Portfolio Director 2, as well as among series of Portfolio Director 2, and the
restrictions imposed on those exchanges. Specifically once you have exchanged
between Portfolio Director and Portfolio 2 or among series of Portfolio Director
2 you must wait 120 days before making another exchange between Portfolio
Director and Portfolio Director 2.
EXCHANGES FROM PORTFOLIO DIRECTOR
Sales/Surrender Charges.
Portfolio Director and Portfolio Director 2 have the same provisions for
imposing surrender charges upon total or partial surrenders. Both Portfolio
Director and Portfolio Director 2 have the same provisions where surrender
charges are not imposed. For purposes of satisfying the fifteen-year and
five-year holding requirements described in "Surrender Charge" in the
prospectus, Portfolio Director 2 will be deemed to have been issued on the same
date as Portfolio Director. Purchase Payments exchanged into Portfolio Director
2 will be treated as Purchase Payments under Portfolio Director 2 for purposes
of calculating the surrender charge. Exchanged payments will be deemed to have
been made under Portfolio Director 2 on the date they were made to Portfolio
Director for purposes of calculating the surrender charge under Portfolio
Director 2.
Other Charges
Portfolio Director and Portfolio Director 2 have the same provisions for
imposing the quarterly account maintenance fee.
Both Portfolio Director and Portfolio Director 2 impose an additional daily
charge with an annualized rate of 1.00% to 1.25% (or lower amounts during the
Purchase Period for different series of Portfolio Director 2), 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 2 the
Company will reimburse to certain Divisions any fees it receives from a Mutual
Fund for providing the Mutual Fund administrative and shareholder services.
Investment Options
Under Portfolio Director, sixteen divisions of VALIC Separate Account A are
available, thirteen of which invest in different investment portfolios of AGSPC
and three divisions of which invest in other mutual fund portfolios. These
mutual fund portfolios are managed either by the Company, the Dreyfus
Corporation or Templeton Investment Counsel Inc. for advisory fees at annual
rates ranging from .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 2, eighteen divisions of VALIC Separate Account A
are available, 6 of which invest in a different portfolio of AGSPC and 12
divisions of which invest in other publicly available mutual fund portfolios.
These mutual fund portfolios are managed either by the Company or other
investment managers for advisory fees ranging from 0.01% to 1.00% of each
portfolio's or mutual fund's average daily net assets. Two fixed investment
options are also available.
Annuity Options
Both Portfolio Director and Portfolio Director 2 provide the same annuity
options.
EXCHANGES FROM INDEPENDENCE PLUS CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within five years of the date
such Purchase Payments were made. The most recent Purchase Payments are deemed
to be withdrawn first. Up to 10% of the Account Value may be surrendered in a
Participant Year without any surrender charge being imposed. Portfolio Director
2 imposes a similar surrender charge upon total or partial surrenders. Both the
Portfolio Director 2 and Independence Plus Contracts have other similar
provisions where surrender charges are not imposed. However, Portfolio Director
2 provides at least one additional provision, not
15
<PAGE> 691
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 2 will
be deemed to have been issued on the same date as the Independence Plus Contract
or certificate thereunder, but no earlier than January 1, 1982. Purchase
Payments exchanged into Portfolio Director 2 and which were made within five
years before the date of exchange will be treated as Purchase Payments under
Portfolio Director 2 for purposes of calculating the surrender charge. Exchanged
payments will be deemed to have been made under Portfolio Director 2 on the date
they were made to Independence Plus Contracts for purposes of calculating the
surrender charge under Portfolio Director 2.
Other Charges. Under the Independence Plus Contracts, a maintenance charge
of $20 is assessed for the first year and an annual charge of $15 is assessed
for the second and later years during the accumulation period. The charge is due
in quarterly installments. A daily fee is charged at the annual rate of 1% of
the daily net asset value allocable to the Variable Subaccounts to cover
administrative expenses (other than those covered by the annual charge) and
mortality risks assumed by the Company. For Portfolio Director 2, 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 2. The fee may also be reduced or waived by the
Company for Portfolio Director 2 if the administrative expenses are expected to
be lower for that Contract. (See "Reduction or Waiver of Account Maintenance
Fee, 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 2,
an additional daily charge with an annualized rate of 1.00% to 1.25% (or lower
amounts during the Purchase Period for different series of Portfolio Director
2), depending upon the Variable Account Options selected, if any, on the daily
net asset value of VALIC Separate Account A is attributable to Portfolio
Director 2. (See "Separate Account Charges" and "Separate Account Expense
Reimbursement" in the prospectus.)
Investment Options. Under Independence Plus Contracts ten divisions of
VALIC Separate Account A are available variable investment alternatives, each
investing in shares of a different underlying fund of AGSPC portfolio. The ten
mutual funds are managed by the Company for advisory fees at annual rates
ranging from .28% to .50% of each respective portfolio's average daily net
assets. In addition, two fixed investment options are available. Under Portfolio
Director 2, eighteen divisions of VALIC Separate Account A are available, six of
which invest in a different investment portfolio of AGSPC and twelve divisions
of which invest in other publicly available mutual fund portfolios. These mutual
fund portfolios are managed either by the Company, or other investment advisers
for advisory fees at annual rates ranging from .01% to 1.00% of each portfolio's
or mutual fund's average daily net assets. Two fixed investment options are also
available.
Annuity Options. Annuity options under Independence Plus Contracts provide
for payments on a fixed or variable basis, or a combination of both. The
Independence Plus Contract permits annuity payments for a designated period
between 3 and 30 years on a fixed basis only. Portfolio Director 2 permits
annuity payments for a designated period between of 5 and 30 years on a fixed
basis only. Independence Plus Contracts and Portfolio Director 2 both provide
for "betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM V-PLAN CONTRACTS
Sales/Surrender Charges. Under a V-Plan Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 7% of
the Purchase
16
<PAGE> 692
Payments withdrawn within five years of the date such Purchase Payments were
made. The most recent Purchase Payments are deemed to be withdrawn first. Up to
10% of the account value may be surrendered in a Participant Year without any
surrender charge being imposed. Portfolio Director 2 also imposes a surrender
charge upon total or partial surrenders. However, the surrender charge under
Portfolio Director 2 may not exceed 5% of any Purchase Payments withdrawn within
the most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. V-Plan Contracts have other provisions where
surrender charges are not imposed. However, Portfolio Director 2 provides at
least two additional provisions, not included in V-Plan Contracts, under which
no surrender charge will be imposed. Those Portfolio Director 2 provisions
include no surrender 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 2 will be deemed to have been
issued on the same date as the V-Plan Contract or certificate thereunder, but no
earlier than January 1, 1982.
If there is a total or partial surrender, Purchase Payments exchanged into
Portfolio Directors 2 and which were made within five years before the date of
exchange will be treated as Purchase Payments under Portfolio Director 2 for
purposes of calculating the surrender charge. Exchanged payments will be deemed
to have been made under Portfolio Director 2 on the date they were made to the
V-Plan Contract for purposes of calculating the surrender charge under Portfolio
Director 2.
Other Charges. There are no administrative and risk charges under V-Plan
Contracts. For Portfolio Director 2, a quarterly account maintenance 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 2. The
fee may also be reduced or waived by the Company on Portfolio Director 2 if the
administrative expenses are expected to be lower for that Contract. (See
"Reduction or Waiver of Account Maintenance Fee, 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 2, an additional daily charge
with an annualized rate of 1.00% to 1.25% (or lower amounts during the Purchase
Period for different series of Portfolio Director 2), depending upon the
Variable Account Options selected, if any, on the daily net asset value of the
VALIC Separate Account A is attributable to Portfolio Director 2. (See "Separate
Account Charges" and "Separate Account Expense Reimbursement" in the
prospectus.)
Investment Options. There are no variable investment alternatives provided
under V-Plan Contracts.
Annuity Options. Annuity options under V-Plan Contracts provide for
payments on a fixed basis only. The V-Plan Contract permits annuity payments for
a designated period of 1 to 15 years. Under a V-Plan Contract, the designated
period option may, subject to adverse tax consequences, be commuted at any time
for its remaining value. Portfolio Director 2 permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Under
Portfolio Director 2, Payout Payments may be made on a fixed or variable basis,
or a combination of both. Portfolio Director 2 does not provide for commutation.
V-Plan Contracts and Portfolio Directors 2 both provide for "betterment of
rates." Under this provision, Payout Payments for fixed annuities will be based
on mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM SA-1 AND SA-2 CONTRACTS (GUP-64, GUP-74, GTS VA CONTRACTS)
Sales/Surrender Charges. Under the SA-1 and SA-2 Contracts a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a SA-1 or SA-2 Contract is
17
<PAGE> 693
exchanged for Portfolio Director 2 the surrender charge under Portfolio Director
2 will not apply to the amount of Account Value applied to Portfolio Director 2
("Exchanged Amount"). Purchase Payments made to Portfolio Director 2, however,
would be subject to a surrender charge. In the case of a partial surrender, all
Purchase Payments to Portfolio Director 2 will be deemed to be withdrawn before
any Exchanged Amount is deemed to be withdrawn. No exchange pursuant to this
offer will be allowed within 120 days of a transfer of fixed accumulations under
a SA-1 or SA-2 Contract to the variable portion of such Contract. Under
Portfolio Director 2, no sales charge is deducted at the time a Purchase Payment
is made, but a surrender charge may be imposed on partial or total surrenders.
The surrender charge may not exceed 5% of any Purchase Payments withdrawn within
the most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. For purposes of this surrender charge, the most
recent Purchase Payments are deemed to be withdrawn first. (See "Surrender
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 2, 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 2. The fee may also be reduced or waived by the Company on Portfolio
Director 2 if the administrative expenses are expected to be lower for that
Contract. (See "Reduction or Waiver of Account Maintenance Fee, 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 2, an additional daily charge
with an annualized rate of 1.00% to 1.25% (or lower amounts during the Purchase
Period for different series of Portfolio Director 2), depending upon the
Variable Account Options selected, if any, on the average daily net asset value
of the Separate Account is attributable to Portfolio Director 2. (See "Separate
Account Charges" and "Separate Account Expense Reimbursement" in the
prospectus.)
Investment Options. Under SA-1 and SA-2 Contracts only one division of
VALIC Separate Account A is available as a variable investment alternative. This
division invests in a portfolio of AGSPC. This portfolio is managed by the
Company for advisory fees at an annual rate of .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 2, eighteen divisions
of VALIC Separate Account A are available, six of which invest in a different
investment portfolio of AGSPC and twelve divisions of which invest in other
publicly available mutual fund portfolios. These mutual fund portfolios are
managed by either the Company or other investment managers, for advisory fees at
annual rates ranging from .01% to 1.00% of each portfolio's or mutual fund's
average daily net assets. Additionally, two fixed investment options are
available under Portfolio Director 2.
Annuity Options. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on a fixed or variable basis, or a combination of both. The SA-1
Contract annuity payments under a designated period option are limited to 15
years on a fixed basis only. Under this Contract, the designated period option
may, subject to adverse tax consequences, be commuted at any time for its
remaining value. SA-2 Contracts do not provide a designated period option nor do
they provide for commutation. Portfolio Director 2 permits Payout Payments for a
designated period of between 5 and 30 years on a
18
<PAGE> 694
fixed basis only. Portfolio Director 2 does not provide for commutation. The
SA-1 and SA-2 Contracts make no provision for transfers from a separate account
to a fixed annuity during the annuity period. This option, subject to certain
conditions, is available under Portfolio Director 2. The SA-1 Contracts provide
an option for monthly variable annuity payments to be made at a level payment
basis during each year of the annuity period. Portfolio Director 2 does not
provide this option. SA-1 and Portfolio Director 2, but not SA-2 Contracts, both
provide for "betterment of rates." Under this provision, Payout Payments for
fixed annuities will be based on mortality tables then being used by the
Company, if more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM IMPACT CONTRACTS
Sales/Surrender Charges. Under an Impact Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 5% of
the Purchase Payments withdrawn within three years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Portfolio Director 2 also imposes a surrender charge upon total or
partial surrenders which may not exceed 5% of any Purchase Payments withdrawn
within the most recent five years prior to the receipt of the surrender request
by the Company at its Home Office. Portfolio Director 2 also has other
provisions where surrender charges are not imposed. (See "Exceptions to
Surrender Charge" in the prospectus.) For purposes of satisfying the
fifteen-year and five-year holding requirements, Portfolio Director 2 will be
deemed to have been issued on the same date as the Impact Contract, or
certificate thereunder, but no earlier than January 1, 1982. Only Purchase
Payments exchanged into a Portfolio Director 2 which were made within three
years before the date of exchange will be treated as Purchase Payments under
Portfolio Director 2 for purposes of calculating the surrender charge. Exchanged
payments will be deemed to have been made under Portfolio Director 2 on the date
they were made to Impact Contracts for purposes of calculating the surrender
charge under Portfolio Director 2.
Other Charges. Under Impact Contracts, a $30 annual charge is assessed once
a year to cover administrative expenses. The charge may, with prior regulatory
approval if required, be increased or decreased. In addition, a daily charge is
made at an annual rate of 1% of the net asset value allocable to the Impact
Contracts to cover administrative expenses (other than those covered by the
annual charge) and mortality risks assumed by the Company. For Portfolio
Director 2, a quarterly account maintenance 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 2. The fee may also be reduced
or waived by the Company on Portfolio Director 2 if the administrative expenses
are expected to be lower for that Contract. (See "Reduction or Waiver of Account
Maintenance Fee, 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 2,
an additional daily charge with an annualized rate of 1.00% to 1.25% (or lower
amounts during the Purchase Period for different series of Portfolio Director
2), depending upon the Variable Account Options selected, if any, on the daily
net asset value of the Separate Account is attributable to Portfolio Director 2.
(See "Separate Account Charges" and "Separate Account Expense Reimbursement" in
the prospectus.)
Investment Options. Under the Impact Contract five divisions of Separate
Account A are available as variable investment alternatives, each investing in
shares of a different underlying fund of AGSPC. The five mutual funds are
managed by the Company for advisory fees at annual rates ranging from .28% to
.50% of each respective portfolio's average daily net assets. Under Portfolio
Director 2, eighteen divisions of VALIC Separate Account A are available, six of
which invest in a different investment portfolio of AGSPC and twelve divisions
of which invest in other publicly available mutual fund portfolios. These mutual
fund portfolios are managed by either the Company, or other invest-
19
<PAGE> 695
ment managers, for advisory fees at annual rates ranging from .01% to 1.00% of
each portfolio's or mutual fund's average daily net assets. In addition, two
fixed investment options are available under Portfolio Director 2.
Annuity Options. Annuity options under Impact Contracts provide for
payments on a fixed or variable basis, or a combination of both. The Impact
Contract permits annuity payments for a designated period of 1 to 15 years on a
fixed basis only. Under an Impact Contract, the designated period option may,
subject to adverse tax consequences, be commuted at any time for its remaining
value. Portfolio Director 2 permits Payout Payments for a designated period of
between 5 and 30 years on a fixed basis only. Portfolio Director 2 does not
provide for commutation. Impact Contracts and the Portfolio Director 2 both
provide for "betterment of rates." Under this provision, Payout Payments for
fixed annuities will be based on mortality tables then being used by the
Company, if more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM COMPOUNDER CONTRACTS
Sales/Surrender Charges. Under a Compounder Contract a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a Compounder Contract is exchanged for Portfolio Director
2 the surrender charge under Portfolio Director 2 will not apply to the amount
of Account Value applied to Portfolio Director 2. Purchase Payments made to
Portfolio Director 2, however, would be subject to the surrender charge under
Portfolio Director 2. In the case of a partial surrender, all Purchase Payments
to Portfolio Director 2 will be deemed to be withdrawn before any Exchanged
Amount is deemed to be withdrawn. Under Portfolio Director 2, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge may not exceed 5%
of any Purchase Payments withdrawn within the most recent five years prior to
the receipt of the surrender request by the Company at its Home Office. For
purposes of this surrender charge, the most recent Purchase Payments are deemed
to be withdrawn first. (See "Surrender 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 2, 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 2. The fee may also be reduced or waived by the
Company for Portfolio Director 2 if the administrative expenses are expected to
be lower for that Contract. (See "Reduction or Waiver of Account Maintenance
Fee, 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 2,
an additional daily charge with an annualized rate of 1.00% to 1.25% (or lower
amounts during the Purchase Period for different series of Portfolio Director
2), depending upon the Variable Account Options selected, if any, on the daily
net asset value of the Separate Account is attributable to Portfolio Director 2.
(See "Separate Account Charges" and "Separate Account Expense Reimbursement" in
the prospectus.)
Investment Options. There are no variable investment alternatives provided
under Compounder Contracts.
Annuity Options. Payout Payments under a Compounder Contract are on a fixed
basis only and the designated period option is limited to a period of 15 years.
However, under a Compounder Contract, the designated period option may, subject
to adverse tax consequences, be commuted at any time for its remaining value.
Portfolio Director 2 allows Payout Payments be made on a fixed or variable
basis, or both. One option under the Portfolio Director 2 provides for a
designated period of 5 and 30 years on a fixed basis only. Portfolio Director 2
does not provide for commutation. Unlike Portfolio Direc-
20
<PAGE> 696
tor 2, the Compounder Contracts contain no "betterment of rates" provision.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the other contracts. Therefore, the annuity rates guaranteed
in Portfolio Director 2 are less favorable to Contract Owners and Annuitants
than those guaranteed in the other contracts. However, the current annuity rates
being charged for fixed annuities under the "betterment of rates" provisions
discussed above are more favorable than those guaranteed under Portfolio
Director 2 or the other contracts. Of course, no assurance can be given that
this will continue to be true at the time of annuitization for a given contract.
Guaranteed annuity rate tables are set forth in your Contract or in current
endorsements thereto. Those guaranteed for Portfolio Director 2 are set forth
therein, and copies may be obtained from one of the Company's Regional Offices
listed on the inside back cover of this prospectus.
To satisfy a federal tax law requirement, non-spouse beneficiaries under
Portfolio Director 2 generally must receive the entire benefit payable upon the
death of the Annuitant over their life expectancy or within five years of the
Annuitant's death. This requirement may be inapplicable to certain other
contracts or certificates issued before January 19, 1985 if not exchanged.
21
<PAGE> 697
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>
2/1/93.......................... Purchase Payment $10,000
2/1/94.......................... Purchase Payment 5,000
2/1/95.......................... Purchase Payment 15,000
2/1/96.......................... Purchase Payment 2,000
2/1/97.......................... Purchase Payment 3,000
2/1/98.......................... Purchase Payment 4,000
7/1/98.......................... 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 2/1/93......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/94......... $ 250
3. Surrender Charge against Purchase Payment of 2/1/95......... $ 750
4. Surrender Charge against Purchase Payment of 2/1/96......... $ 100
5. Surrender Charge against Purchase Payment of 2/1/97......... $ 150
6. Surrender Charge against Purchase Payment of 2/1/98......... $ 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>
2/1/93.......................... Purchase Payment $10,000
2/1/94.......................... Purchase Payment 5,000
2/1/95.......................... Purchase Payment 15,000
2/1/96.......................... Purchase Payment 2,000
2/1/97.......................... Purchase Payment 3,000
2/1/98.......................... Purchase Payment 4,000
7/1/98.......................... 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
8/1/98.......................... 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.
22
<PAGE> 698
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 DIVISION YIELDS
CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Current Yield: 3.64%
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 December
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 2 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.
23
<PAGE> 699
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 3.71%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION
SIX
Example 6.
The effective yield quotation above is based on the seven days ended
December 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. 13 DIV. 22 DIV. 23
-------- -------- --------
<S> <C> <C> <C>
Standardized Yield.......................................... 3.28% 4.96% 4.18%
</TABLE>
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR BOND FUND DIVISIONS
Example 7.
The standardized yield quotation based on a 30-day period ended December
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> 700
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1998, 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> 701
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 for each Division as compared to the benchmarks shown. For
different series of Portfolio Director 2 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 Growth Division Fifteen, AGSPC Science &
Technology Division Seventeen, AGSPC Social Awareness Division Twelve, AGSPC
Stock Index Division Ten, Founders Growth Division Thirty, Neuberger Berman
Guardian Trust Division Twenty-nine, Putnam New Opportunities Division
Twenty-six, Scudder Growth and Income Division Twenty-one, and Vanguard Windsor
II Division Twenty-four may be compared to the record of the Standard &
Poor's(R) Corporation ("S&P(R)")* Composite Stock Price Index ("S&P 500(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.
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
- ---------------
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in this Fund.
26
<PAGE> 702
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 AGSPC Money Market Division Six may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The index is a money market index which reflects the average rate paid by New
York Banks on certificates of deposit of more than $100,000. The Index for 30
days is published daily.
The performance of the American 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 S&P 500 Index
is an unmanaged capitalization-weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. The S&P 500 Index
represents approximately 70% of the aggregate market capitalization of the
United States equity market. The NASDAQ Composite Price Index was developed by
the National Association of Securities Dealers (NASD) on May 17, 1971 with
figures available from February 5, 1971, at which time the index value was 100.
Through NASDAQ, the NASD provides daily, weekly, and monthly sets of stock price
indicators for Over-the-Counter (OTC) securities in different industry
categories. As of the end of 1996, over 5,800 issues were contained in the
NASDAQ Composite Price Index.
The Putnam Global Growth Division Twenty-eight may be compared to the
Morgan Stanley Capital International World Index ("MSCI World Index"). Total
returns (with income reinvested) for the MSCI World Index is published using two
methods. The first method includes gross income (income earned without
subtracting foreign income taxes which may be withheld from foreign investors).
The second method includes net income (income earned after subtracting estimated
foreign taxes. The Division currently compares its performance with the index
using the second method. The MSCI World Index is an unmanaged capitalization
weighed index consisting of more than 1,500 issues from 22 countries as well as
certain South African gold mining issues. The countries include Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States.
The performance of the Putnam OTC & Emerging Growth Division Twenty-seven
may be compared to the Russell 2000(R) Index ("Russell 2000").** The Russell
2000 was developed in 1984 by the Frank Russell Trust Company to track the stock
market performance of small capitalization domestic stocks. The Russell 2000 is
market weighted and consists of approximately 2000 stocks. Stocks included in
the Russell 2000 are chosen by the Frank Russell Trust Company on the basis of
their market size.
The Templeton Foreign Division Thirty-two may be compared to the Morgan
Stanley Capital International Europe, Australia, and Far East Index ("EAFE
Index"). The EAFE Index, which commenced in 1969, is an unmanaged stock index
consisting of more than 1,000 companies from Europe, Australia and the Far East.
The index is capitalization weighted. It is a well known measure for
international stock performance. Total returns (with income reinvested) for the
EAFE Index are published using two methods. The first method includes gross
income (income earned without subtracting foreign income taxes which may be
withheld from foreign investors). The second method includes net income (income
earned after subtracting estimated foreign taxes). The Division currently
compares it performance with the index using the second method.
The Vanguard Long-Term Corporate Division Twenty-two may be compared to the
Merrill Lynch Corporate Master Index. The Merrill Lynch Corporate Master Index
consists of an index of approximately 3,600 corporate bond holdings of which
assets are rated BBB- to AAA. The average years to maturity of these corporate
bond holdings are approximately 12 years.
- ---------------
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. RussellTM is a trademark of the Frank Russell Trust Company.
27
<PAGE> 703
The performance of the Vanguard Long-Term Treasury 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 Wellington Division Twenty-five may be
compared to a Blended Index, a measure of the investment performance of a
balanced portfolio of stocks and bonds, comprised of the S&P 500 Index (65%) and
the Merrill Lynch Corporate Master Index (35%). The S&P 500 Index is an
unmanaged capitalization-weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. The S&P 500 Index
represents approximately 70% of the aggregate market capitalization of the
United States equity markets. The Merrill Lynch Corporate Master Index consists
of an index of approximately 3,600 corporate bond holdings of which assets are
rated BBB- to AAA. The average years to maturity of the corporate bond holdings
are approximately 12 years.
28
<PAGE> 704
The Account Value of an assumed $10,000 investment in each of the Divisions
is shown in table form below. 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. See "How to
Review Investment Performance of Separate Account Divisions" in the prospectus
for information about how these returns were calculated as well as Standard
Average Annual Total Return information that reflects the deduction of all
separate account fees and charges.
AGSPC Growth Division Fifteen Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
GROWTH S&P 500
DIVISION FIFTEEN INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
12/31/94................................................... 10,018 10,407
12/31/95................................................... 14,667 14,318
12/31/96................................................... 17,333 17,606
12/31/97................................................... 20,765 23,480
12/31/98................................................... 24,286 30,191
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth Division Fifteen........................ 142.86% 65.59% 16.96%
Benchmark Comparison
S&P 500 Index........................................ 201.91% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
AGSPC International Government Bond Division Thirteen Performance Compared to
Salomon Brothers Non-U.S. Dollar World Government Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
SALOMON BROS.
NON-U.S. DOLLAR
WORLD
INTERNATIONAL GOVERNMENT BOND GOVERNMENT
DIVISION THIRTEEN BOND INDEX
- --------------------------------------------------------------------- ---------------
<S> <C> <C>
10/01/91................................................... $10,000 $10,000
12/31/91................................................... 10,905 11,042
12/31/92................................................... 11,128 11,540
12/31/93................................................... 12,583 13,246
12/31/94................................................... 13,014 13,999
12/31/95................................................... 15,308 16,692
12/31/96................................................... 15,822 17,331
12/31/97................................................... 14,906 16,568
12/31/98................................................... 17,280 19,497
</TABLE>
29
<PAGE> 705
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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........................ 72.80% 37.32% 12.88% 15.92%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World
Government Bond Index.................... 94.97% 47.19% 16.80% 17.68%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
AGSPC Money Market Division Six Performance Compared to Certificate of Deposit
Primary Offering by New York City Banks, 30 Day Index (Primary CD Index)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- -------------------------------------------------- --------
<S> <C> <C>
01/01/89................................ $10,000 $10,000
12/31/89................................ 10,792 10,867
12/31/90................................ 11,530 11,736
12/31/91................................ 12,048 12,377
12/31/92................................ 12,316 12,767
12/31/93................................ 12,521 13,098
12/31/94................................ 12,867 13,565
12/31/95................................ 13,447 14,235
12/31/96................................ 13,982 14,881
12/31/97................................ 14,559 15,592
12/31/98................................ 15,160 16,325
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Money Market Division Six................ 51.60% 21.07% 12.73% 4.12%
Benchmark Comparison
Primary CD Index............................... 63.25% 24.64% 14.68% 4.70%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
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
12/31/94................................................... 12,477 10,407
12/31/95................................................... 19,972 14,318
12/31/96................................................... 22,505 17,606
12/31/97................................................... 22,857 23,480
12/31/98................................................... 32,162 30,191
</TABLE>
30
<PAGE> 706
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Science & Technology Division
Seventeen.......................................... 221.62% 61.04% 40.71%
Benchmark Comparison
S&P 500 Index........................................ 201.91% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
AGSPC Social Awareness Division Twelve Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
10/02/89................................................... $10,000 $10,000
12/31/89................................................... 10,100 10,214
12/31/90................................................... 9,877 9,897
12/31/91................................................... 12,506 12,912
12/31/92................................................... 12,795 13,896
12/31/93................................................... 13,670 15,297
12/31/94................................................... 13,339 15,499
12/31/95................................................... 18,351 21,323
12/31/96................................................... 22,527 26,220
12/31/97................................................... 29,853 34,967
12/31/98................................................... 37,623 44,961
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Social Awareness Division Twelve...... 276.23% 175.23% 105.02% 26.03%
Benchmark Comparison
S&P 500 Index............................... 349.61% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
31
<PAGE> 707
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/89................................................. $ 10,000 $ 10,000
12/31/89................................................. 12,788 13,169
12/31/90................................................. 12,171 12,760
12/31/91................................................. 15,543 16,647
12/31/92................................................. 16,411 17,915
12/31/93................................................. 17,853 19,721
12/31/94................................................. 17,799 19,982
12/31/95................................................. 24,197 27,490
12/31/96................................................. 29,406 33,804
12/31/97................................................. 38,748 45,081
12/31/98................................................. 49,264 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Stock Index Division Ten............. 392.64% 175.95% 103.59% 27.14%
Benchmark Comparison
S&P 500 Index.............................. 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 20, 1987.
American 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
NASDAQ
ULTRA S&P 500 COMPOSITE
DIVISION THIRTY-ONE INDEX INDEX*
- -------------------------------------------------------- ------------- ---------
<S> <C> <C> <C>
01/01/89................................. $ 10,000 $ 10,000 $10,000
12/31/89................................. 13,550 13,169 11,926
12/31/90................................. 14,663 12,760 9,802
12/31/91................................. 27,052 16,647 15,374
12/31/92................................. 27,107 17,915 17,750
12/31/93................................. 32,674 19,721 20,368
12/31/94................................. 31,162 19,982 19,717
12/31/95................................. 42,454 27,490 27,587
12/31/96................................. 47,731 33,804 33,852
12/31/97................................. 58,109 45,081 41,175
12/31/98................................. 77,368 57,966 57,494
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
American Century Ultra Division
Thirty-One............................. 673.68% 136.79% 82.24% 33.14%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
NASDAQ Composite Index***................ 474.94% 182.27% 108.40% 39.63%
</TABLE>
32
<PAGE> 708
- ---------------
* The American Century Ultra Fund was formerly known as the American
Century -- Twentieth Century Fund.
** This Division was initiated on July 1, 1996.
*** Does not include dividends reinvested.
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 JANUARY 1, 1988
<TABLE>
<CAPTION>
FOUNDERS GROWTH S&P 500
DIVISION THIRTY INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................. $10,000 $10,000
12/31/89................................................. 14,034 13,169
12/31/90................................................. 12,424 12,760
12/31/91................................................. 18,131 16,647
12/31/92................................................. 18,714 17,915
12/31/93................................................. 23,263 19,721
12/31/94................................................. 22,264 19,982
12/31/95................................................. 32,098 27,490
12/31/96................................................. 37,025 33,804
12/31/97................................................. 46,376 45,081
12/31/98................................................. 57,395 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Founders Growth Division Thirty.......... 473.95% 146.72% 78.81% 23.76%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
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 AUGUST 3, 1993
<TABLE>
<CAPTION>
GUARDIAN TRUST S&P 500
DIVISION TWENTY-NINE INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
08/03/93................................................. $10,000 $10,000
12/31/93................................................. 10,692 10,514
12/31/94................................................. 10,748 10,653
12/31/95................................................. 14,047 14,656
12/31/96................................................. 16,370 18,022
12/31/97................................................. 19,097 24,034
12/31/98................................................. 19,353 30,903
</TABLE>
33
<PAGE> 709
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
Neuberger Berman Guardian Trust
Division Twenty-Nine............... 93.53% 81.00% 37.77% 1.34%
Benchmark Comparison
S&P 500 Index........................ 209.03% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* The Neuberger Berman Guardian Trust ("Trust") was formerly known as the
Neuberger&Berman Guardian Trust. The Trust started operating on August 3,
1993. Neuberger Berman Management Incorporated, the manager for the Trust,
voluntarily bears certain expenses of the Trust. This arrangement can be
terminated on sixty days' notice. Please see the prospectus for further
details.
** This Division was initiated on July 1, 1996.
Putnam Global Growth -- Class A Shares 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MSCI
GLOBAL GROWTH -- CLASS A SHARES WORLD S&P 500
DIVISION TWENTY-EIGHT INDEX INDEX
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/89.................................. $10,000 $10,000 $10,000
12/31/89.................................. 12,333 11,661 13,169
12/31/90.................................. 11,088 9,676 12,760
12/31/91.................................. 12,952 11,446 16,647
12/31/92.................................. 12,855 10,847 17,915
12/31/93.................................. 16,783 13,288 19,721
12/31/94.................................. 16,476 13,963 19,982
12/31/95.................................. 18,731 16,856 27,490
12/31/96.................................. 21,609 19,128 33,804
12/31/97.................................. 24,246 22,143 45,081
12/31/98.................................. 30,909 27,533 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Putnam Global Growth -- Class A Shares
Division Twenty-Eight........................ 209.09% 84.17% 65.01% 27.48%
Benchmark Comparison
MSCI World Index............................... 175.33% 107.19% 63.34% 24.34%
S&P 500 Index.................................. 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
34
<PAGE> 710
Putnam New Opportunities -- Class A Shares 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 -- CLASS A SHARES S&P 500
DIVISION TWENTY-SIX INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
08/31/90................................................. $10,000 $10,000
12/31/90................................................. 11,041 10,366
12/31/91................................................. 18,317 13,524
12/31/92................................................. 22,780 14,555
12/31/93................................................. 29,932 16,022
12/31/94................................................. 30,620 16,233
12/31/95................................................. 44,354 22,333
12/31/96................................................. 48,656 27,463
12/31/97................................................. 59,023 36,625
12/31/98................................................. 72,667 47,092
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Putnam New Opportunities -- Class A Shares
Division Twenty-Six.......................... 626.67% 142.78% 63.83% 23.12%
Benchmark Comparison
S&P 500 Index.................................. 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
Putnam OTC & Emerging Growth -- Class A Shares 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
OTC & EMERGING GROWTH -- CLASS A SHARES RUSSELL S&P 500
DIVISION TWENTY-SEVEN 2000 INDEX
- --------------------------------------------------- ------- -------
<S> <C> <C> <C>
01/01/89.................................. $10,000 $10,000 $10,000
12/31/89.................................. 12,770 11,626 13,169
12/31/90.................................. 11,401 9,356 12,760
12/31/91.................................. 15,899 13,672 16,647
12/31/92.................................. 17,739 16,189 17,915
12/31/93.................................. 23,196 19,246 19,721
12/31/94.................................. 23,483 18,895 19,982
12/31/95.................................. 36,262 24,271 27,490
12/31/96.................................. 37,540 28,274 33,804
12/31/97.................................. 40,949 34,597 45,081
12/31/98.................................. 44,993 33,716 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Putnam OTC & Emerging Growth -- Class A Shares
Division Twenty-Seven......................... 349.93% 93.97% 24.08% 9.87%
Benchmark Comparison
Russell 2000 Index.............................. 237.16% 75.19% 38.92% (2.55)%
S&P 500 Index................................... 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
35
<PAGE> 711
Scudder Growth and Income Division Twenty-One Performance Compared to S&P 500
Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
SCUDDER GROWTH AND INCOME S&P 500
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 12,480 13,169
12/31/90................................................... 12,040 12,760
12/31/91................................................... 15,241 16,647
12/31/92................................................... 16,491 17,915
12/31/93................................................... 18,828 19,721
12/31/94................................................... 19,079 19,982
12/31/95................................................... 24,719 27,490
12/31/96................................................... 29,818 33,804
12/31/97................................................... 38,404 45,081
12/31/98................................................... 40,322 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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.................... 303.22% 114.16% 63.12% 4.99%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
Templeton Foreign Division Thirty-Two Performance Compared to EAFE Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
FOREIGN EAFE
DIVISION THIRTY-TWO INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/89................................................. $ 10,000 $ 10,000
12/31/89................................................. 12,924 11,054
12/31/90................................................. 12,413 8,462
12/31/91................................................. 14,537 9,488
12/31/92................................................. 14,407 8,333
12/31/93................................................. 19,517 11,046
12/31/94................................................. 19,393 11,906
12/31/95................................................. 21,346 13,240
12/31/96................................................. 24,920 14,041
12/31/97................................................. 26,307 14,290
12/31/98................................................. 24,777 17,148
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Templeton Foreign Division Thirty-Two....... 147.77% 26.95% 16.07% (5.82)%
Benchmark Comparison
EAFE Index.................................. 71.48% 55.23% 29.52% 20.00%
</TABLE>
- ---------------
* The Division was initiated on July 1, 1996.
36
<PAGE> 712
Vanguard Long-Term Corporate* 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MERRILL LYNCH
LONG-TERM CORPORATE CORPORATE MASTER
DIVISION TWENTY-TWO INDEX
- ----------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/89............................................... $10,000 $10,000
12/31/89............................................... 11,376 11,411
12/31/90............................................... 11,933 12,253
12/31/91............................................... 14,251 14,487
12/31/92............................................... 15,451 15,808
12/31/93............................................... 17,472 17,773
12/31/94............................................... 16,344 17,176
12/31/95............................................... 20,404 20,882
12/31/96............................................... 20,256 21,590
12/31/97............................................... 22,752 23,832
12/31/98............................................... 24,582 25,910
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Vanguard Long-Term Corporate Fund Division
Twenty-Two................................ 145.82% 40.69% 20.48% 8.04%
Benchmark Comparison
Merrill Lynch Corporate Master Index........ 159.10% 45.78% 24.08% 8.72%
</TABLE>
- ---------------
* The Vanguard Long-Term Corporate Fund was formerly known as the Vanguard
Fixed Income Securities Fund -- Long-Term Corporate Portfolio.
** This Division was initiated on July 1, 1996.
Vanguard Long-Term Treasury 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 JANUARY 1, 1989
<TABLE>
<CAPTION>
LEHMAN BROS.
U.S. TREASURY
LONG-TERM TREASURY LONG-TERM
DIVISION TWENTY-THREE INDEX
- ----------------------------------------------------------------- -------------
<S> <C> <C>
01/01/89............................................... $10,000 $10,000
12/31/89............................................... 11,649 11,892
12/31/90............................................... 12,170 12,643
12/31/91............................................... 14,116 14,982
12/31/92............................................... 14,974 16,176
12/31/93............................................... 17,272 18,967
12/31/94............................................... 15,859 17,517
12/31/95............................................... 20,380 22,892
12/31/96............................................... 19,753 22,693
12/31/97............................................... 22,211 26,114
12/31/98............................................... 24,835 29,642
</TABLE>
37
<PAGE> 713
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Vanguard Long-Term Treasury Fund Division
Twenty-Three............................. 148.35% 43.79% 21.86% 11.82%
Benchmark Comparison
Lehman Brothers U.S. Treasury Long-Term
Index.................................... 196.42% 56.29% 29.48% 13.51%
</TABLE>
- ---------------
* The Vanguard Long-Term Treasury Fund was formerly known as the Vanguard Fixed
Income Securities Fund -- Long-Term U.S. Treasury Portfolio.
** This Division was initiated on July 1, 1996.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
VANGUARD WELLINGTON BLENDED
DIVISION TWENTY-FIVE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 12,011 12,546
12/31/90................................................... 11,530 12,629
12/31/91................................................... 14,082 15,952
12/31/92................................................... 15,009 17,260
12/31/93................................................... 16,828 19,148
12/31/94................................................... 16,540 19,094
12/31/95................................................... 21,716 25,170
12/31/96................................................... 24,906 29,162
12/31/97................................................... 30,299 36,475
12/31/98................................................... 33,526 44,465
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division**
Vanguard Wellington Division
Twenty-Five............................. 235.26% 99.22% 54.38% 10.65%
Benchmark Comparison
Blended Index***.......................... 344.65% 132.22% 76.66% 21.90%
</TABLE>
- ---------------
* The Vanguard Wellington Fund was formerly known as the Vanguard/Wellington
Fund.
** This Division was initiated on July 1, 1996.
*** 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.
38
<PAGE> 714
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
VANGUARD WINDSOR II S&P 500
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 12,625 13,169
12/31/90................................................... 11,225 12,760
12/31/91................................................... 14,268 16,647
12/31/92................................................... 15,781 17,915
12/31/93................................................... 17,707 19,721
12/31/94................................................... 17,285 19,982
12/31/95................................................... 23,703 27,490
12/31/96................................................... 29,051 33,804
12/31/97................................................... 37,970 45,081
12/31/98................................................... 43,627 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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............................ 336.27% 146.38% 84.06% 14.90%
Benchmark Comparison
S&P 500 Index............................ 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund.
** This Division was initiated on July 1, 1996.
39
<PAGE> 715
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 Annuity 2000 Table (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-
40
<PAGE> 716
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>
41
<PAGE> 717
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 A.G. Distributors, an affiliate of
VALIC. A.G. Distributors' address is 2929 Allen Parkway, Houston, Texas 77019.
A.G. Distributors is a Delaware corporation organized in 1994 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 6.0% 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 A.G. Distributors and VALIC
Separate Account A, the Company reimburses A.G. Distributors for reasonable
sales expenses, including overhead expenses. Prior to May 1, 1999, The Variable
Annuity Marketing Company (VAMCO) was the principal underwriter for VALIC
Separate account A. Sales commissions paid for the years 1996, 1997 and 1998
were $11,530,000, $46,521,000 and $63,212,594, respectively. VAMCO retained $0
in commissions for the years 1996, 1997 and 1998.
EXPERTS
The consolidated financial statements of the Company at December 31, 1998
and 1997, and for each of the three years in the period ended December 31, 1998,
and the financial statements of the Company's Separate Account A at December 31,
1998 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 and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
42
<PAGE> 718
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of The Variable Annuity Life Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
Divisions Six, Ten, Twelve, Thirteen, Fifteen, Seventeen, Twenty-one,
Twenty-two, Twenty-three, Twenty-four, Twenty-five, Twenty-six, Twenty-seven,
Twenty-eight, Twenty-nine, Thirty, Thirty-one and Thirty-two are the only
Divisions available under the Contracts described in the Prospectus. The
Separate Account financial statements contained herein reflect the composition
of the Separate Account as of December 31, 1998.
43
<PAGE> 719
[THIS PAGE INTENTIONALLY LEFT BLANK]
44
<PAGE> 720
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, 1998
and 1997, and the related consolidated statements of income, changes in
stockholder's equity, comprehensive income, and cash flows for each of the three
years in the period ended December 31, 1998. 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, 1998
and 1997, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 16, 1999
<PAGE> 721
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Balance Sheet
At December 31
In Thousands
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS Investments - Notes 2, 7, 8, 9:
Fixed maturity securities
(amortized cost: $21,733,209 in 1998 and $20,651,381 in 1997) $22,878,049 $21,641,084
Equity securities (cost: $176,799 in 1998 and $5,581 in 1997) 194,629 5,456
Mortgage loans on real estate 1,212,527 1,259,029
Real estate, net of accumulated depreciation
of $69 in 1998 and 1997 20,679 28,569
Policy loans 788,547 719,127
Other long-term invested assets 59,543 45,474
Short-term investments 164,484 60,904
----------- -----------
Total investments 25,318,458 23,759,643
----------- -----------
Investment income receivable 369,777 347,358
Cash 104,718 32,181
Receivable for securities sold 22,157 32,825
Deferred policy acquisition costs - Note 3 665,127 392,346
Cost of insurance purchased - Note 4 22,113 --
Due from reinsurer, net 13,343 14,545
Other assets 119,310 52,104
Assets held in Separate Accounts 14,712,465 10,564,220
----------- -----------
Total assets $41,347,468 $35,195,222
----------- -----------
LIABILITIES Policy reserves for fixed annuity investment contracts $23,218,626 $21,994,804
Payable for securities purchased 40,757 19,027
Remittances not allocated 95,797 79,392
Commissions, general expenses and taxes (other than income taxes) 37,613 39,546
Other liabilities 193,933 61,756
Income tax liabilities - Note 5 541,676 377,072
Liabilities related to Separate Accounts 14,712,465 10,564,220
----------- -----------
Total liabilities 38,840,867 33,135,817
----------- -----------
Common stock (voting) par value $1 per share, 5,000 shares authorized
STOCKHOLDER'S and 3,575 issued and outstanding in 1998 and 1997 - Note 6 3,575 3,575
EQUITY Additional paid-in capital 833,372 710,624
Retained earnings 1,142,194 1,038,731
Accumulated other comprehensive income - Note 2 527,460 306,475
----------- -----------
Total stockholder's equity 2,506,601 2,059,405
=========== ===========
Total liabilities and stockholder's equity $41,347,468 $35,195,222
=========== ===========
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 722
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Income
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES Surrender charges $ 14,512 $ 12,405 $ 12,348
Mortality charges 135,304 94,162 59,955
Expense charges 6,784 6,102 5,654
Net investment income - Note 2 1,810,624 1,729,541 1,654,496
Net reinsurance income 1,236 1,303 1,528
Realized investment gains (losses) - Note 2 (28,271) 20,235 21,551
Other income 18,593 15,320 10,920
----------- ----------- -----------
Total revenues 1,958,782 1,879,068 1,766,452
----------- ----------- -----------
COSTS AND Policy costs:
EXPENSES Increase in policy reserves for fixed annuity contracts 1,296,120 1,286,010 1,243,993
----------- ----------- -----------
Total costs 1,296,120 1,286,010 1,243,993
----------- ----------- -----------
Expenses:
Commissions 123,983 110,960 97,630
Salaries 70,904 58,873 54,016
Data processing 28,616 14,876 12,088
Postage and telephone 15,473 12,253 11,308
Sales promotion 10,250 10,161 10,394
Depreciation expense on furniture and equipment 10,292 8,964 8,920
Rent 9,315 7,931 7,524
Taxes, licenses and fees 8,302 6,874 6,208
Printing and supplies 6,393 4,496 5,290
Guaranty association assessments - Note 10 37 30 2,678
Other expenses 60,682 35,172 27,223
Amortization of deferred policy acquisition costs - Note 3 55,074 42,101 31,201
Amortization of cost of insurance purchased - Note 4 1,802 -- --
Policy acquisition costs deferred - Note 3 (159,778) (137,655) (116,818)
----------- ----------- -----------
Total expenses 241,345 175,036 157,662
----------- ----------- -----------
EARNINGS Total costs and expenses 1,537,465 1,461,046 1,401,655
----------- ----------- -----------
Income before income tax expense 421,317 418,022 364,797
Income tax expense - Note 5 136,854 144,238 124,370
----------- ----------- -----------
Net income $ 284,463 $ 273,784 $ 240,427
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 723
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Changes in Stockholder's Equity
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<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 710,624 459,281 384,126
PAID-IN-CAPITAL Capital contribution from stockholder 122,748 251,343 75,155
----------- ----------- -----------
Balance at end of year 833,372 710,624 459,281
----------- ----------- -----------
RETAINED Balance at beginning of year 1,038,731 1,143,947 1,014,520
EARNINGS Net income 284,463 273,784 240,427
Dividends paid to stockholder (181,000) (379,000) (111,000)
----------- ----------- -----------
Balance at end of year 1,142,194 1,038,731 1,143,947
----------- ----------- -----------
ACCUMULATED OTHER Balance at beginning of year 306,475 166,852 396,620
COMPREHENSIVE Change in net unrealized gains (losses) on securities 220,985 139,623 (229,768)
----------- ----------- -----------
INCOME Balance at end of year 527,460 306,475 166,852
----------- ----------- -----------
STOCKHOLDER'S
EQUITY Balance at end of year $ 2,506,601 $ 2,059,405 $ 1,773,655
----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
COMPREHENSIVE Net income $ 284,463 $ 273,784 $ 240,427
INCOME Other comprehensive income
Gross change in unrealized gains (losses) on securities
(pretax: $311,706; $235,040; ($331,938)) 202,609 152,776 (215,760)
Less: gains (losses) realized in net income - Note 2 (18,376) 13,153 14,008
--------- --------- ---------
Change in net unrealized gains (losses) on
securities (pretax: $339,977; $214,805; ($353,489)) 220,985 139,623 (229,768)
--------- --------- ---------
Comprehensive income $ 505,448 $ 413,407 $ 10,659
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 724
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Cash Flows
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING Net income $ 284,463 $ 273,784 $ 240,427
ACTIVITIES Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,296,120 1,286,010 1,243,993
Deferred policy acquisition costs (104,704) (95,554) (85,617)
Other, net (37,021) (51,241) (50,233)
------------ ------------ ------------
Net cash provided by operating activities 1,438,858 1,412,999 1,348,570
------------ ------------ ------------
INVESTING Investment purchases (15,180,407) (18,403,013) (14,883,271)
ACTIVITIES Investment calls, maturities and sales 14,731,932 17,500,312 13,897,479
Net increase in short-term investments (103,580) (7,904) (13,722)
------------ ------------ ------------
Net cash used for investing activities (552,055) (910,605) (999,514)
------------ ------------ ------------
FINANCING Policyholder account deposits 3,755,481 3,385,303 2,896,090
ACTIVITIES Policyholder account withdrawals (1,777,580) (1,427,005) (1,276,008)
Transfers to Separate Accounts (2,728,063) (2,325,214) (1,936,727)
Capital contribution from stockholder 116,896 251,343 75,155
Dividends paid (181,000) (379,000) (111,000)
------------ ------------ ------------
Net cash used for financing activities (814,266) (494,573) (352,490)
------------ ------------ ------------
NET CHANGE Net increase (decrease) in cash 72,537 7,821 (3,434)
IN CASH Cash at beginning of year 32,181 24,360 27,794
------------ ------------ ------------
Cash at end of year $ 104,718 $ 32,181 $ 24,360
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 725
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
December 31, 1998
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.
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
COMPREHENSIVE INCOME. During 1998, VALIC adopted Statement of Financial
Accounting Standards (SFAS) 130, "Reporting Comprehensive Income," which
establishes standards for reporting and displaying comprehensive income and its
components in the financial statements. VALIC elected to report comprehensive
income and its components in a separate statement of comprehensive income.
Adoption of this statement did not change recognition or measurement of net
income and, therefore, did not impact VALIC's consolidated results of operations
or financial position.
DERIVATIVES. In June 1998, the Financial Accounting Standards Board issued
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which
requires all derivative instruments to be recognized at fair value as either
assets or liabilities in the balance sheet. Changes in the fair value of a
derivative instrument are to be reported as earnings or other comprehensive
income, depending upon the intended use of the derivative instrument. This
statement is effective for years beginning after June 15, 1999. Adoption of SFAS
133 is not expected to have a material impact on VALIC's consolidated results of
operations or financial position.
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. At year end, 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 accumulated other
comprehensive income 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.
During 1998, VALIC maintained a trading portfolio of certain fixed maturity
securities. Trading securities are recorded at fair value. Unrealized gains
(losses), as well as realized gains (losses), are included in net investment
income. VALIC held no trading securities at December 31, 1998, and trading
securities did not have a material effect on net investment income.
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
are used to convert specific investment securities from a floating-rate 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.
- --------------------------------------------------------------------------------
6
<PAGE> 726
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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 accumulated other comprehensive income
included in stockholder's equity, consistent with the treatment of the related
investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into income
over the remaining term of the related investment. If the underlying investment
is extinguished or sold, any related gain or loss on swap agreements is
recognized in income.
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 prolonged periods of decreasing interest rates, the spread between
investment yields and interest crediting rates may be reduced as a result of
minimum rate guarantees on certain insurance and annuity contracts, which limit
VALIC's ability to reduce interest crediting rates. Call swaptions, which allow
VALIC to enter into interest rate swap agreements to receive fixed rates and pay
lower floating rates, effectively maintain the spread between investment yields
and interest crediting rates during such periods.
During prolonged periods of increasing interest rates, the spread between
investment yields and interest crediting rates may be reduced as a result of
VALIC's decision to increase interest crediting rates to limit surrenders. Put
swaptions, which allow VALIC to enter into interest rate swap agreements to pay
fixed rates and receive higher floating rates, effectively maintain the spread
between investment yields and interest crediting rates during such periods.
Premiums paid to purchase swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a 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 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) on securities had been realized at the balance sheet
date. The impact of this adjustment is included in accumulated other
comprehensive income 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 VALIC. Consequently, VALIC'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 credited 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.
- --------------------------------------------------------------------------------
7
<PAGE> 727
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
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 accumulated other
comprehensive income in stockholder's equity.
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>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 169,855 $ 237,719 $ 213,686
---------- ---------- ----------
Stockholder's equity $1,236,522 $1,189,278 $1,077,366
---------- ---------- ----------
</TABLE>
1.12 COINSURANCE TRANSACTION
On May 21, 1998, VALIC completed the acquisition of a block of individual
annuity business in a coinsurance transaction. This transaction increased assets
and insurance and annuity liabilities by $688,221.
2
INVESTMENTS
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,664,325 $1,562,802 $1,471,879
Affiliated fixed
maturity securities 2,761 2,588 2,851
Equity securities 245 483 782
Mortgage loans on
real estate 112,781 123,591 140,492
Other 62,680 53,543 51,040
---------- ---------- ----------
Gross investment income 1,842,792 1,743,007 1,667,044
Investment expense 32,168 13,466 12,548
---------- ---------- ----------
Net investment income $1,810,624 $1,729,541 $1,654,496
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income during
1998 totaled $313 or 0.001% 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, 1998.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities
Gross gains $ 14,472 $ 35,087 $ 38,222
Gross losses (49,745) (29,012) (36,805)
-------- -------- --------
Total fixed maturity
securities (35,273) 6,075 1,417
-------- -------- --------
Equity securities
Gross gains 158 31 15,867
Gross losses (30) (10) (72)
-------- -------- --------
Total equity securities 128 21 15,795
-------- -------- --------
Mortgage loans on real estate 8,811 21,647 4,635
Real estate 6,673 3,802 389
Other long-term investments (601) (28) (9)
DPAC amortization and
investment expense (8,009) (11,282) (676)
-------- -------- --------
Realized investment gains
(losses) before taxes (28,271) 20,235 21,551
Income tax expense (benefit) (9,895) 7,082 7,543
-------- -------- --------
Net realized investment
gains (losses) $(18,376) $ 13,153 $ 14,008
-------- -------- --------
</TABLE>
2.3 CASH FLOWS FROM INVESTING ACTIVITIES
Uses of cash for investment purchases were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 5,469,258 $ 5,174,707 $ 5,299,390
Other 9,711,149 13,228,306 9,583,881
----------- ----------- -----------
Total $15,180,407 $18,403,013 $14,883,271
----------- ----------- -----------
</TABLE>
Sources of cash from investment dispositions and repayments were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 4,444,092 $ 4,223,740 $ 4,235,560
Mortgage loans on
real estate 240,954 298,670 280,389
Equity securities 8,319 3,296 67,713
Real estate 17,086 22,525 1,627
Other 10,021,481 12,952,081 9,312,190
----------- ----------- -----------
Total $14,731,932 $17,500,312 $13,897,479
----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 728
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
2.4 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
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 299,377 $ 175,771 $ 38,019 $ 25,101
Obligations of states and
political subdivisions 55,694 32,264 3,320 1,193
Debt securities issued by
foreign governments 232,406 248,838 16,911 14,018
Corporate securities 16,153,147 15,207,118 933,904 755,877
Mortgage-backed securities 4,947,963 4,959,198 227,160 214,418
Affiliated fixed maturity securities 25,159 28,192 -- 67
Redeemable preferred stock 19,463 -- -- --
------------ ------------ ------------ ------------
Total fixed maturity securities $ 21,733,209 $ 20,651,381 $ 1,219,314 $ 1,010,674
------------ ------------ ------------ ------------
Equity securities $ 176,799 $ 5,581 $ 17,932 $ 114
------------ ------------ ------------ ------------
<CAPTION>
Gross Unrealized Losses Fair Value
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (136) $ (3) $ 337,260 $ 200,869
Obligations of states and
political subdivisions -- -- 59,014 33,457
Debt securities issued by
foreign governments (210) (1,988) 249,107 260,868
Corporate securities (73,396) (16,179) 17,013,655 15,946,816
Mortgage-backed securities (732) (2,801) 5,174,391 5,170,815
Affiliated fixed maturity securities -- -- 25,159 28,259
Redeemable preferred stock -- -- 19,463 --
------------ ------------ ------------ ------------
Total fixed maturity securities $ (74,474) $ (20,971) $ 22,878,049 $ 21,641,084
------------ ------------ ------------ ------------
Equity securities $ (102) $ (239) $ 194,629 $ 5,456
------------ ------------ ------------ ------------
</TABLE>
2.4 FIXED MATURITY AND EQUITY SECURITIES- (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1998 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 $ 387,495 $ 391,791
In years two through five 4,571,241 4,793,727
In years six through ten 7,580,048 8,010,517
After ten years 4,246,462 4,507,623
Mortgage-backed securities 4,947,963 5,174,391
----------- -----------
Total fixed maturity securities $21,733,209 $22,878,049
----------- -----------
</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.
2.5 NET UNREALIZED GAINS (LOSSES) ON SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in accumulated other comprehensive income at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 1,237,246 $ 1,010,788
Gross unrealized losses (74,576) (21,210)
DPAC adjustments (339,163) (511,037)
Deferred federal income taxes (296,047) (172,066)
----------- -----------
Net unrealized gains on securities $ 527,460 $ 306,475
----------- -----------
</TABLE>
2.6 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.
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 644,594 $ 614,627
Pacific and Mountain 327,969 355,006
Central 252,289 310,535
Allowance for losses (12,325) (21,139)
----------- -----------
Total mortgage loans $ 1,212,527 $ 1,259,029
----------- -----------
Property type:
Office $ 467,219 $ 467,326
Retail 359,368 396,934
Industrial 249,459 246,241
Apartments 93,476 145,272
Residential and other 55,330 24,395
Allowance for losses (12,325) (21,139)
----------- -----------
Total mortgage loans $ 1,212,527 $ 1,259,029
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 729
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
2.6 MORTGAGE LOANS ON REAL ESTATE - (CONTINUED)
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1 $ 21,139 $ 44,577 $ 54,213
Recovery of mortgage
loan losses (6,541) (18,178) (2,967)
Deductions (2,273) (5,260) (6,669)
-------- -------- --------
Balance at December 31 $ 12,325 $ 21,139 $ 44,577
-------- -------- --------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans on real estate and related interest
income were as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Impaired loans:
With allowance* $13,470 $28,317
------- -------
Total impaired loans $13,470 $28,317
------- -------
Average investment $20,893 $37,449
Interest income earned -- 2,887
Interest income - cash basis -- --
------- -------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$1,803 and $9,317, respectively.
3
DEFERRED POLICY ACQUISITION COSTS (DPAC)
Activity in DPAC was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 392,346 $ 557,748 $ 182,546
Deferrals:
Commissions 83,359 76,327 62,760
Other acquisition costs 76,419 61,328 54,058
Amortization:
Accretion of interest 72,536 65,388 59,810
Operating earnings (127,610) (107,489) (91,011)
Offset to realized gains (3,797) (11,282) (676)
Effect of net unrealized
(gains) losses on securities 171,874 (249,674) 290,261
--------- --------- ---------
Balance at December 31 $ 665,127 $ 392,346 $ 557,748
--------- --------- ---------
</TABLE>
4
COST OF INSURANCE PURCHASED (CIP)
Activity in CIP was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ---------- ---------
<S> <C> <C> <C>
Balance at January 1 $ -- $ -- $ --
Additions from acquisitions 23,915 -- --
Accretion of interest 733 -- --
Amortization (2,535) -- --
-------- ---------- ---------
Balance at December 31 $ 22,113 $ -- $ --
-------- ---------- ---------
</TABLE>
CIP amortization, net of accretion, expected to be recorded in each of the
next five years is $3,099, $2,644, $2,266, $1,920, and $1,763.
5
INCOME TAXES
5.1 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.
5.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (14,560) $ 2,027
--------- ---------
Deferred tax liabilities, applicable to:
Basis differential of investments 438,190 368,591
DPAC 229,803 134,541
Other 31,996 18,576
--------- ---------
Total deferred tax liabilities 699,989 521,708
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (134,409) (138,555)
Basis differential of investments (1,920) (1,545)
Other (7,424) (6,563)
--------- ---------
Total deferred tax assets (143,753) (146,663)
--------- ---------
Net deferred tax liabilities 556,236 375,045
--------- ---------
Total income tax liabilities $ 541,676 $ 377,072
--------- ---------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 730
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
5.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 77,492 $ 114,138 $ 99,560
State 2,154 3,099 2,842
--------- --------- ---------
Total current income
tax expense 79,646 117,237 102,402
--------- --------- ---------
Deferred, applicable to:
DPAC 35,105 29,113 29,308
Policy reserves 4,148 (14,920) (18,581)
Basis differential of
investments 12,484 3,569 2,754
Other, net 5,471 9,239 8,487
--------- --------- ---------
Total deferred income
tax expense 57,208 27,001 21,968
--------- --------- ---------
Income tax expense $ 136,854 $ 144,238 $ 124,370
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 147,461 $ 146,308 $ 127,679
Dividends received
deduction (7,851) (5,212) (4,935)
Tax-exempt interest (ESOP) (2,730) (3,326) (3,865)
State income taxes 3,811 3,695 3,311
Other items (3,837) 2,773 2,180
--------- --------- ---------
Income tax expense $ 136,854 $ 144,238 $ 124,370
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1998, 1997, and 1996 were $92,613, $106,338,
and $114,478, respectively. State income taxes paid in 1998, 1997, and 1996 were
$2,841, $2,978, and $3,060, respectively.
6
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 1999 is
$176,753.
7
DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate and currency swap agreements related to investment securities
at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Interest rate swap agreements
to pay fixed rate
Notional amount $ 332,000 $ 107,000
Average receive rate 5.97% 6.92%
Average pay rate 5.37 6.25
----------- -----------
Currency swap agreements
(receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $ 108,180 $ 123,326
Average exchange rate 1.50 1.49
----------- -----------
</TABLE>
During 1998, VALIC purchased call swaptions and put swaptions that expire
by 2000. The call swaptions had a notional amount of $950,000 and strike rates
ranging from 3.5% to 4.5% at December 31, 1998. The put swaptions had a notional
amount of $690,000 strike rates ranging from 8.0% to 8.5% at December 31, 1998.
Should the strike rates remain below market rates for call swaptions and above
market rates for put swaptions, the swaptions will expire, and VALIC's exposure
would be limited to the premiums paid. These premiums were immaterial.
CREDIT AND MARKET RISK. Derivative financial instruments expose VALIC to
credit risk in the event of nonperformance by counterparties. VALIC limits this
exposure by entering into agreements with counterparties having high credit
ratings and by regularly monitoring the ratings. VALIC does not expect any
counterparty to fail to meet its obligation; however, nonperformance would not
have a material impact on VALIC's consolidated results of operations and
financial position.
VALIC's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.
- --------------------------------------------------------------------------------
11
<PAGE> 731
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
8
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>
1998 1997
------------------------------ ------------------------------
Fair Value Carrying Amount Fair Value Carrying Amount
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $23,072,678* $ 23,072,678* $21,646,540* $21,646,540*
Mortgage loans on real estate 1,251,515 1,212,527 1,288,702 1,259,029
Policy loans 801,322 788,547 721,089 719,127
Liabilities
Insurance investment contracts $23,314,345 $23,218,626 $21,536,809 $21,994,804
----------- ----------- ----------- -----------
</TABLE>
- ------------
* Includes derivative financial instruments with a fair value of $19,342 in
1998 and $2,967 in 1997.
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.
9
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, 1998 were as follows:
Operating expenses include $46,556 in 1998, $22,061 in 1997, and $17,533 in
1996, 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 $152 in 1998, $501 in 1997, and $455 in 1996.
On November 4, 1982, VALIC invested $11,853 in 13 1U2% Restricted
Subordinated Note 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, 1998, 1997, and 1996. VALIC recognized $1,212 in interest income
during 1998, $1,292 for 1997, and $1,372 for 1996.
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, 1998, 1997, and 1996. VALIC
recognized $1,048, $1,296, and $1,479 of interest income on the note during
1998, 1997, and 1996, respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds from
the sale totaled $13,033 with a profit of $33 recognized on the transaction.
VALIC paid common stock dividends of $181,000, $50.63 per share; $379,000,
$106.01 per share; and $111,000, $31.05 per share, in 1998, 1997, and 1996,
respectively.
VALIC received capital contributions of $55,200, $67,000, $250,000, and
$75,000 from AGL on June 30, 1998, December 31, 1998, March 31, 1997, and
December 30, 1996, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 732
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
9. TRANSACTIONS WITH AFFILIATED COMPANIES - (CONTINUED)
VALIC acquired bonds of various issuers from American General Life and
Accident Insurance Company at a cost of $22,154 and $25,892 on January 30, 1997,
and April 8, 1997, respectively.
On December 5, 1997, VALIC acquired bonds of various issuers from Western
National Life Insurance Company at a cost of $129,715.
10
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 $37, $30, and $2,678, for the years
ended December 31, 1998, 1997, and 1996, respectively. The accrued liability for
anticipated assessments was $4,782, $7,402, and $13,661, at December 31, 1998,
1997, and 1996, respectively. The 1998 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.
11
EMPLOYEE BENEFIT PLANS
11.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
11.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1,342 $ 1,091 $ 917
Interest cost on projected
benefit obligation 1,346 1,145 843
Expected return on plan assets (1,102) (801) (575)
Amortization of unrecognized
net asset existing at date of
initial application -- -- (23)
Amortization of unrecognized
prior service cost 66 54 44
Actuarial gain (33) -- --
------- ------- -------
Total pension expense $ 1,619 $ 1,489 $ 1,206
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.00% 7.25% 7.50%
Rate of increase in
compensation levels 4.25 4.00 4.00
Expected long-term rate of
return on plan assets 10.25 10.00 10.00
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1998 and 1997 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Projected benefit obligation $ 21,125 $ 17,394
Plan assets at fair value 14,921 11,759
-------- --------
Projected benefit obligation in excess of
plan assets (6,204) (5,635)
Unrecognized net gain 738 2,162
Unrecognized prior service cost 487 26
-------- --------
Net pension liability $ (4,979) $ (3,447)
-------- --------
</TABLE>
Equity and fixed maturity securities were 66% and 32%, 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.
11.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through AGC, 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.
- --------------------------------------------------------------------------------
13
<PAGE> 733
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
11.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - (CONTINUED)
The life plans are fully insured; the retiree medical and dental plans are
unfunded and self-insured. The accrued liability for postretirement benefits was
$2,388 and $1,784 at year-end 1998 and 1997, respectively. These liabilities
were discounted at the same rates used for the pension plans. Postretirement
benefit expense in 1998, 1997, and 1996 was $275, $295, and $282, respectively.
12
IMPACT OF YEAR 2000 (UNAUDITED)
INTERNAL SYSTEMS. VALIC has numerous technology systems that are managed on
a decentralized basis. Year 2000 readiness efforts are therefore being
undertaken by its key business units with centralized oversight. Each business
unit has developed and is implementing a plan to minimize the risk of a
significant negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of VALIC's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose VALIC to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready, (4) test systems to prove that
they will function into the next century as they do currently, and (5) return
the system to operations. As of December 31, 1998, these activities have been
completed for substantially all of VALIC's critical systems, making them Year
2000 ready. Vendor upgrades for a small number of systems are expected in the
first half of 1999; therefore, activities (3) through (5) are ongoing for these
systems. VALIC will continue to test its systems throughout 1999 to maintain
Year 2000 readiness.
THIRD PARTY RELATIONSHIPS. VALIC has relationships with various third
parties who also must be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) VALIC and include organizations
with which VALIC exchanges information. Third parties include vendors of
hardware, software, and information services; providers of infrastructure
services such as voice and data communications and utilities for office
facilities; investors; customers; distribution channels; and joint venture
partners. Third parties differ from internal systems in that VALIC exercises
less, or no, control over their Year 2000 readiness. VALIC has developed a plan
to assess and attempt to mitigate the risks associated with the potential
failure of third parties to achieve Year 2000 readiness. The plan includes the
following activities: (1) identify and classify third party dependencies; (2)
research, analyze, and document Year 2000 readiness for critical third parties;
and (3) test critical hardware and software products and electronic interfaces.
A more detailed evaluation will be completed during first quarter 1999 as part
of VALIC's contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, VALIC's testing activities will extend throughout
1999.
CONTINGENCY PLANS. VALIC has commenced contingency planning to reduce the
risk of Year 2000 related business failures. The contingency plans, which
address both internal systems and third party relationships, include the
following activities: (1) evaluate the consequences of failure of business
processes with significant exposure to Year 2000 risk, (2) determine the
probability of a Year 2000-related failure for those processes that have a high
consequence of failure; (3) develop an action plan to complete contingency plans
for those processes that rank high in consequence and probability of failure;
and (4) complete the applicable action plans. VALIC is currently developing
contingency plans and expects to substantially complete all contingency-planning
activities by April 30, 1999.
RISKS AND UNCERTAINTIES. Based on its plans to make internal systems ready
for Year 2000, to deal with third party relationships, and to develop
contingency actions, VALIC believes that it will experience, at most, isolated
and minor disruptions of business processes following the turn of the century.
Such disruptions are not expected to have a material effect on VALIC's future
results of operations, liquidity, or financial condition. However, due to the
magnitude and complexity of this project, risks and uncertainties exist and
VALIC is not able to predict a most reasonably likely worst case scenario. If
Year 2000 readiness is not achieved due to nonperformance by significant third
party vendors, VALIC's failure to maintain critical systems as Year 2000 ready,
failure of critical third parties to achieve Year 2000 readiness on a timely
basis, or other unforeseen circumstances in completing VALIC's plans, the Year
2000 issues could have a material adverse impact on VALIC's operations following
the turn of the century.
COSTS. Through December 31, 1998, VALIC has incurred and expensed $27
million (pretax) related to Year 2000 readiness, including $20 million incurred
during 1998. VALIC currently anticipates that it will incur future costs of
approximately $2 million (pretax) to maintain Year 2000 readiness, complete Year
2000 work on noncritical systems and third party relationships, and complete
contingency planning activities. In addition, VALIC accelerated the planned
replacement of certain systems as part of the Year 2000 plans.
- --------------------------------------------------------------------------------
14
<PAGE> 734
================================================================================
CHAIRMAN'S LETTER 1
================================================================================
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1998, 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, Portfolio Director Plus,
Independence Plus, Group Unit Purchase and Impact) appears on pages two and
three.
1998 was a volatile year for investors around the world. Problems that began in
Asia in late 1997 circled the globe throughout 1998. Central banks, fearing the
worst lowered interest rates in the fourth quarter of 1998. The result was an
unexpected and dramatic rise in stock and bond prices worldwide.
The year was marked by extreme flight to quality. Investors general preference
was for larger cap growth in stocks over small cap value stocks, and U.S.
Treasury Securities.
The Standard & Poor's 500 Index, dominated by large cap, high-growth technology
and global consumer product companies, had a total return of 28.58%. The top 15
stocks alone accounted for half of the performance. It was a difficult year for
active equity fund managers, as almost 90% of the active managers lagged the S&P
500 Index returns. Also, the S&P 500 Index returns for the year outperformed
over 71% of all U.S.-traded common stocks. The medium to small-cap companies
lagged, with the large companies S&P MidCap 400 Index returning 6.27% and the
S&P SmallCap 600 Index, producing a negative 1.31%.
There was a greater variability in returns between growth and value components
of the equity indices. In the large capitalization arena, S&P 500/BARRA Growth
Index returned an outstanding 42.16%, while the S&P 500/BARRA Value Index
returned 14.67%. In the mid-cap sector, the S&P 400/BARRA Growth Index returned
34.86% compared to the S&P 400/BARRA Value Index return of 4.67%. However, the
small cap equity returns experienced wide variability, with the S&P SmallCap
600/BARRA Growth Index returning 2.29%, and the S&P SmallCap 600/BARRA Value
returning a negative 5.06%.
Globally, the pattern of investment results was very similar to the U.S. equity
returns. The MSCI world Index returned 22%. The top quintile of growth stocks
outperformed the bottom quintile of value stocks by over two times with returns
of 48% and 17%, respectively.
The yield on the 30 year Treasury bond opened the year at 5.92% and declined to
5.10% by the end of 1998, as the Federal Reserve lowered the federal fund rate
three times between September 29 and November 17, leaving the target rate at
4.75%.
For the year, the bond market return, reflected in the Lehman Aggregate Bond
Index, was 8.69% with the long U.S. Treasury Index showing the highest return of
13.52%, followed by the Long Corporate AA/Better Index 10.52%, and the High
Yield Index with 1.60%. Throughout the developed world international bond prices
appreciated as yields declined.
While international markets outside of North America and Europe remain
unsettled, the U.S. economy is experiencing unprecedented prosperity and growth.
Furthermore, with worldwide inflation rates low, and the Federal Reserve weary
of weakness in Asia and emerging markets, it appears that we can expect a
continuation of the current stable rate environment.
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., Chairman
The Variable Annuity Life Insurance Company
February 18, 1999
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> 735
================================================================================
2 CHAIRMAN'S LETTER
================================================================================
<TABLE>
<CAPTION>
GROUP PORTFOLIO
UNIT INDEPENDENCE DIRECTOR
PURCHASE IMPACT PLUS 1
DIVISION DIVISION DIVISION DIVISION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund ..................................... -- -- 11 11
Putnam Global Growth Fund ............................................. -- -- -- --
Templeton Foreign Fund ................................................ -- -- -- --
Templeton International Fund .......................................... -- -- -- 20
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund ....................................... -- -- -- 17
AGSPC Small Cap Index Fund ............................................ -- -- 14 14
Dreyfus Variable Investment Fund - Small Cap Portfolio ................ -- -- 18
Putnam New Opportunities Fund ......................................... -- -- -- --
Putnam OTC & Emerging Growth Fund ..................................... -- -- -- --
GROWTH
AGSPC Growth Fund ..................................................... -- -- -- 15
AGSPC MidCap Index Fund ............................................... -- 4 4 4
American Century - Twentieth Century Ultra Fund ....................... -- -- -- --
Founders Growth Fund .................................................. -- -- -- --
GROWTH & INCOME
AGSPC Growth & Income Fund ............................................ -- -- -- 16
AGSPC Social Awareness Fund ........................................... -- -- 12 12
AGSPC Stock Index Fund ................................................ 10A,10B 10D 10C 10C
Neuberger Berman Guardian Trust ....................................... -- -- -- --
Scudder Growth and Income Fund ........................................ -- -- -- --
Vanguard Windsor II Fund .............................................. -- -- -- --
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund ....................................... -- -- -- 19
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund ........................................... -- 5 5 5
Vanguard Wellington Fund .............................................. -- -- -- --
CURRENT INCOME
AGSPC International Government Bond Fund .............................. -- -- 13 13
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund ....................................... -- 1 7 7
AGSPC Government Securities Fund ...................................... -- -- 8 8
Vanguard Fixed Income Securities Fund - Long-Term Corporate Fund ...... -- -- -- --
Vanguard Fixed Income Securities Fund - Long-Term Treasury Fund ....... -- -- -- --
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund ............................................... -- 2 6 6
<CAPTION>
YEAR TO DATE
TOTAL RETURNS
PORTFOLIO PORTFOLIO FOR YEAR ENDING
DIRECTOR DIRECTOR DECEMBER 31,
2 PLUS ----------------------
DIVISION DIVISION 1998 1997
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund ..................................... -- 11 17.57% 1.18%
Putnam Global Growth Fund ............................................. 28 28 27.48 12.20
Templeton Foreign Fund ................................................ 32 32 (5.82) 5.57
Templeton International Fund .......................................... -- 20 7.95 12.54
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund ....................................... 17 17 40.71 1.57
AGSPC Small Cap Index Fund ............................................ -- 14 (2.92) 21.18
Dreyfus Variable Investment Fund - Small Cap Portfolio ................ -- 18 (4.51) 15.37
Putnam New Opportunities Fund ......................................... 26 26 23.12 21.31
Putnam OTC & Emerging Growth Fund ..................................... 27 27 9.87 9.08
GROWTH
AGSPC Growth Fund ..................................................... 15 15 16.96 19.80
AGSPC MidCap Index Fund ............................................... -- 4 17.80 30.45
American Century - Twentieth Century Ultra Fund ....................... 31 31 33.14 21.74
Founders Growth Fund .................................................. 30 30 23.76 25.25
GROWTH & INCOME
AGSPC Growth & Income Fund ............................................ -- 16 13.41 22.60
AGSPC Social Awareness Fund ........................................... 12 12 26.03 32.52
AGSPC Stock Index Fund ................................................ 10C 10C 27.14 31.77
Neuberger Berman Guardian Trust ....................................... 29 29 1.34 16.66
Scudder Growth and Income Fund ........................................ 21 21 4.99 28.80
Vanguard Windsor II Fund .............................................. 24 24 14.90 30.70
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund ....................................... -- 19 5.07 14.07
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund ........................................... -- 5 17.19 21.40
Vanguard Wellington Fund .............................................. 25 25 10.65 21.65
CURRENT INCOME
AGSPC International Government Bond Fund .............................. 13 13 15.92 (5.79)
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund ....................................... -- 7 6.30 7.49
AGSPC Government Securities Fund ...................................... -- 8 7.86 7.83
Vanguard Fixed Income Securities Fund - Long-Term Corporate Fund ...... 22 22 8.04 12.32
Vanguard Fixed Income Securities Fund - Long-Term Treasury Fund ....... 23 23 11.82 12.44
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund ............................................... 6 6 4.12 4.13
</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> 736
================================================================================
CHAIRMAN'S LETTER 3
================================================================================
<TABLE>
<CAPTION>
Group Portfolio Portfolio
Unit Independence Director Director
Purchase Impact Plus 1 2
- ------------------------------------------------------------------------------------------------------------------------------------
Division Division Division Division Division
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ACTIVELY MANAGED EQUITY FUNDS
American General International Growth Fund .............. -- -- -- -- --
American General Large Cap Growth Fund .................. -- -- -- -- --
American General Mid Cap Growth Fund .................... -- -- -- -- --
American General Small Cap Growth Fund .................. -- -- -- -- --
American General INternational Value Fund ............... -- -- -- -- --
American General Large Cap Value Fund ................... -- -- -- -- --
American General Mid Cap Value Fund ..................... -- -- -- -- --
American General Small Cap Value Fund ................... -- -- -- -- --
T. Rowe Price Small-Cap Stock Fund ...................... -- -- -- -- --
SPECIALTY EQUITY FUND
American General Socially Responsible Fund .............. -- -- -- -- --
BALANCED FUNDS
American General Balanced Fund .......................... -- -- -- -- --
INCOME FUNDS
American General High Yield Bond Fund ................... -- -- -- -- --
American General Strategic Bond Fund .................... -- -- -- -- --
American General Domestic Bond Fund ..................... -- -- -- -- --
American General Core Bond Fund ......................... -- -- -- -- --
MONEY MARKET FUND
American General Money Market Fund ...................... -- -- -- -- --
LIFESTYLE FUNDS
American General Growth Lifestyle Fund .................. -- -- -- -- --
American General Moderate Growth Lifestyle Fund ......... -- -- -- -- --
American General Conservative Growth Lifestyle Fund ..... -- -- -- -- --
Vanguard LifeStrategy Growth ............................ -- -- -- -- --
Vanguard LifeStrategy Moderate Growth ................... -- -- -- -- --
Vanguard LifeStrategy Conservative Growth ............... -- -- -- -- --
<CAPTION>
Year To Date
Total Returns
Portfolio For Year Ending
Director December 31,
Plus ------------------------
Division 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
ACTIVELY MANAGED EQUITY FUNDS
American General International Growth Fund .............. 33 5.17(a) N/A
American General Large Cap Growth Fund .................. 39 24.08(a) N/A
American General Mid Cap Growth Fund .................... 37 34.77(a) N/A
American General Small Cap Growth Fund .................. 35 34.94(a) N/A
American General International Value Fund ............... 34 14.99(a) N/A
American General Large Cap Value Fund ................... 40 24.66(a) N/A
American General Mid Cap Value Fund ..................... 38 25.47(a) N/A
American General Small Cap Value Fund ................... 36 16.53(a) N/A
T. Rowe Price Small-Cap Stock Fund ...................... 51 14.10(b) N/A
SPECIALTY EQUITY FUND
American General Socially Responsible Fund .............. 41 27.78(a) N/A
BALANCED FUNDS
American General Balanced Fund .......................... 42 17.01(a) N/A
INCOME FUNDS
American General High Yield Bond Fund ................... 60 5.31(a) N/A
American General Strategic Bond Fund .................... 59 4.99(a) N/A
American General Domestic Bond Fund ..................... 43 4.44(a) N/A
American General Core Bond Fund ......................... 58 2.92(a) N/A
MONEY MARKET FUND
American General Money Market Fund ...................... 44 1.33(a) N/A
LIFESTYLE FUNDS
American General Growth Lifestyle Fund .................. 48 19.25(a) N/A
American General Moderate Growth Lifestyle Fund ......... 49 18.54(a) N/A
American General Conservative Growth Lifestyle Fund ..... 50 16.20(a) N/A
Vanguard LifeStrategy Growth ............................ 52 16.81(b) N/A
Vanguard LifeStrategy Moderate Growth ................... 53 12.59(b) N/A
Vanguard LifeStrategy Conservative Growth ............... 54 8.40(b) N/A
</TABLE>
(a) Since August 26, 1998, initial capitalizations of Fund. See Note C.
(b) Since September 22, 1998, inception of the Division.
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> 737
[Intentionally Left Blank]
<PAGE> 738
================================================================================
FINANCIAL STATEMENTS 5
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1998
ASSETS: ALL DIVISIONS
----------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $11,178,484,452) .................. $ 14,587,138,409
Balance due from VALIC general account ........................................................ 4,821,209
----------------
NET ASSETS .................................................................................... 14,591,959,618
================
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts
(Net of applicable contract loans -- partial withdrawals with right of reinvestment) ....... $ 14,481,888,528
Reserves for annuity contracts on benefit ..................................................... 22,530,083
Capital surplus (Note C) ...................................................................... 87,541,007
----------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ............................................. $ 14,591,959,618
================
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
INVESTMENT INCOME: ALL DIVISIONS
----------------
<S> <C>
Dividends from mutual funds ................................................................... $ 161,161,461
----------------
EXPENSES:
Mortality and expense risk charge ............................................................. 133,464,532
Reimbursement of expenses (Note C) ............................................................ (5,204,060)
----------------
Total expenses ................................................................................ 128,260,472
----------------
NET INVESTMENT INCOME ......................................................................... 32,900,989
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 256,062,773
Capital gains distributions from mutual funds ................................................. 599,950,475
Net unrealized appreciation of investments during the period .................................. 1,171,591,133
----------------
Net realized and unrealized gain on investments ............................................... 2,027,604,381
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 2,060,505,370
================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS ALL DIVISIONS
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................. $ 32,900,989 $ 30,758,096
Net realized gain on investments ...................................................... 256,062,773 161,505,567
Capital gains distributions from mutual funds ......................................... 599,950,475 289,703,358
Net unrealized appreciation of investments during the period .......................... 1,171,591,133 1,001,756,337
---------------- ----------------
Increase in net assets resulting from operations ................................... 2,060,505,370 1,483,723,358
---------------- ----------------
PRINCIPAL TRANSACTIONS:
Purchase payments ..................................................................... 2,363,611,528 1,798,552,034
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ... (576,063,916) (328,105,329)
Annuity benefit payments .............................................................. (2,688,910) (2,273,125)
Amounts transferred from VALIC general account ........................................ 419,281,138 518,857,110
---------------- ----------------
Increase in net assets resulting from principal transactions ....................... 2,204,139,840 1,987,030,690
---------------- ----------------
Total increase in net assets .......................................................... 4,264,645,210 3,470,754,048
NET ASSETS:
Beginning of period ................................................................... 10,327,314,408 6,856,560,360
---------------- ----------------
End of period ......................................................................... $ 14,591,959,618 $ 10,327,314,408
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 739
================================================================================
6 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AGSPC PUTNAM
INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
EQUITIES GROWTH FOREIGN INTERNATIONAL
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 ....................... $ 148,718,766 $ 162,850,092 $ 218,291,648 $ 769,418,093
Balance due (to) from VALIC general account ........................... (444,384) 244,949 176,625 78,110
------------- ------------- ------------- -------------
NET ASSETS ............................................................ $ 148,274,382 $ 163,095,041 $ 218,468,273 $ 769,496,203
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment) ... $ 148,099,853 $ 163,052,748 $ 218,427,558 $ 769,292,514
Reserves for annuity contracts on benefit ............................. 174,529 42,293 40,715 203,689
Capital Surplus (Note C) .............................................. -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ..................... $ 148,274,382 $ 163,095,041 $ 218,468,273 $ 769,496,203
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN CENTURY -
TWENTIETH FOUNDERS AGSPC AGSPC
CENTURY GROWTH GROWTH & SOCIAL
ULTRA FUND - FUND - INCOME FUND - AWARENESS FUND -
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ..................... $ 366,344,764 $ 412,424,559 $ 285,113,626 $ 434,890,057
Balance due (to) from VALIC general account ......................... 495,565 496,361 114,285 251,402
------------- ------------- ------------- -------------
NET ASSETS .......................................................... $ 366,840,329 $ 412,920,920 $ 285,227,911 $ 435,141,459
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment).. $ 366,789,363 $ 412,850,610 $ 285,171,395 $ 435,010,800
Reserves for annuity contracts on benefit ........................... 50,966 70,310 56,516 130,659
Capital Surplus (Note C) ............................................ -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ................... $ 366,840,329 $ 412,920,920 $ 285,227,911 $ 435,141,459
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AGSPC AGSPC
TEMPLETON ASSET VANGUARD INTERNATIONAL
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 ...................... $ 324,138,930 $ 227,493,681 $ 406,576,731 $ 169,141,402
Balance due (to) from VALIC general account .......................... (10,923) 41,476 (66,066) 66,807
------------- ------------- ------------- -------------
NET ASSETS ........................................................... $ 324,128,007 $ 227,535,157 $ 406,510,665 $ 169,208,209
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment) .. $ 323,829,380 $ 227,370,013 $ 406,457,643 $ 169,153,179
Reserves for annuity contracts on benefit ............................ 298,627 165,144 53,022 55,030
Capital Surplus (Note C) ............................................. -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 324,128,007 $ 227,535,157 $ 406,510,665 $ 169,208,209
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 740
================================================================================
SEPARATE ACCOUNT A 7
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC DREYFUS VARIABLE PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP INVESTMENT NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX FUND - 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>
$1,357,008,368 $ 225,671,866 $ 801,729,449 $ 411,790,940 $ 142,153,064 $1,213,041,349 $ 850,345,675
233,960 (1,195) 277,466 622,014 158,931 219,257 159,959
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,357,242,328 $ 225,670,671 $ 802,006,915 $ 412,412,954 $ 142,311,995 $1,213,260,606 $ 850,505,634
============== ============== ============== ============== ============== ============== ==============
$1,356,787,386 $ 225,553,498 $ 801,796,471 $ 412,396,437 $ 142,270,946 $1,212,743,548 $ 850,117,314
454,942 117,173 210,444 16,517 41,049 517,058 388,320
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,357,242,328 $ 225,670,671 $ 802,006,915 $ 412,412,954 $ 142,311,995 $1,213,260,606 $ 850,505,634
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER
BERMAN SCUDDER VANGUARD
AGSPC STOCK INDEX FUND GUARDIAN GROWTH AND WINDSOR II
- ------------------------------------------------------------------ TRUST - INCOME FUND - FUND -
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 548,095,924 $ 42,538,426 $3,335,722,002 $ 56,510,591 $ 61,347,128 $ 247,754,620 $ 651,075,950
(342,049) 10,450 1,070,137 2,453 22,721 213,888 339,032
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 547,753,875 $ 42,548,876 $3,336,792,139 $ 56,513,044 $ 61,369,849 $ 247,968,508 $ 651,414,982
============== ============== ============== ============== ============== ============== ==============
$ 533,364,910 $ 40,484,822 $3,334,328,831 $ 56,292,876 $ 61,355,625 $ 247,893,617 $ 651,232,580
14,388,965 2,064,054 2,463,308 220,168 14,224 74,891 182,402
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 547,753,875 $ 42,548,876 $3,336,792,139 $ 56,513,044 $ 61,369,849 $ 247,968,508 $ 651,414,982
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT VANGUARD VANGUARD
AGSPC CAPITAL CONSERVATION FUND SECURITIES LONG-TERM LONG-TERM AGSPC MONEY MARKET FUND
- ------------------------------- FUND - CORPORATE FUND - TREASURY FUND - -------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,286,289 $ 60,017,936 $ 113,502,848 $ 59,843,445 $ 119,293,240 $ 4,184,151 $ 266,261,605
13,504 (46,396) (40,451) 121,207 (41,034) 13,336 389,999
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,299,793 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,252,206 $ 4,197,487 $ 266,651,604
============== ============== ============== ============== ============== ============== ==============
$ 6,295,147 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,238,598 $ 4,197,487 $ 266,634,790
4,646 -- -- -- 13,608 -- 16,814
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,299,793 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,252,206 $ 4,197,487 $ 266,651,604
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 741
================================================================================
8 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL INTERNATIONAL SMALL CAP SMALL CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 33 DIVISION 34 DIVISION 35 DIVISION 36
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ....................... $ 3,853,567 $ 4,153,036 $ 5,279,473 $ 4,500,106
Balance due to VALIC general account .................................. (2,817) -- -- --
------------ ------------ ------------ ------------
NET ASSETS ............................................................ $ 3,850,750 $ 4,153,036 $ 5,279,473 $ 4,500,106
============ ============ ============ ============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) .... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................. -- -- -- --
Capital surplus (Note C) .............................................. 3,850,750 4,153,036 5,279,473 4,500,106
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus ..................... $ 3,850,750 $ 4,153,036 $ 5,279,473 $ 4,500,106
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
MID CAP MID CAP LARGE CAP LARGE CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 37 DIVISION 38 DIVISION 39 DIVISION 40
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,475,870 $ 4,972,209 $ 3,549,043 $ 3,626,750
Balance due to VALIC general account ................................. (270) -- (1,410) --
----------- ----------- ----------- -----------
NET ASSETS ........................................................... $ 5,475,600 $ 4,972,209 $ 3,547,633 $ 3,626,750
=========== =========== =========== ===========
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................ -- -- -- --
Capital surplus (Note C) ............................................. 5,475,600 4,972,209 3,547,633 3,626,750
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus .................... $ 5,475,600 $ 4,972,209 $ 3,547,633 $ 3,626,750
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL SOCIALLY GENERAL GENERAL GENERAL
RESPONSIBLE BALANCED DOMESTIC MONEY MARKET
FUND - FUND - BOND FUND - FUND -
DIVISION 41 DIVISION 42 DIVISION 43 DIVISION 44
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
Balance due to VALIC general account ................................. -- -- -- --
------------ ------------ ------------ ------------
NET ASSETS ........................................................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
============ ============ ============ ============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................ -- -- -- --
Capital surplus (Note C) ............................................. 6,409,166 5,868,671 1,309,568 5,082,478
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus .................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 742
================================================================================
SEPARATE ACCOUNT A 9
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL GENERAL GENERAL T. ROWE PRICE
GROWTH MODERATE GROWTH CONSERVATIVE GROWTH CORE STRATEGIC HIGH YIELD SMALL-CAP STOCK
LIFESTYLE FUND - LIFESTYLE FUND - LIFESTYLE FUND - BOND FUND - BOND FUND - BOND FUND FUND -
DIVISION 48 DIVISION 49 DIVISION 50 DIVISION 58 DIVISION 59 DIVISION 60 DIVISION 51
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,991,538 $ 5,950,028 $ 5,829,911 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
(9,933) (4,420) (1,198) -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 5,981,605 $ 5,945,608 $ 5,828,713 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
============== ============== ============== ============== ============== ============== ==============
$ -- $ -- $ -- $ -- $ -- $ -- $ 139
-- -- -- -- -- -- --
5,981,605 5,945,608 5,828,713 5,161,936 5,265,532 5,282,173 --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 5,981,605 $ 5,945,608 $ 5,828,713 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
============== ============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 743
===============================================================================
10 FINANCIAL STATEMENTS
===============================================================================
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AGSPC PUTNAM
For the year ended December 31, 1998 INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
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 .......................... $ 3,115,042 $ 607,762 $ 5,873,157 $ 17,844,520
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge .................... 1,507,006 1,281,924 2,636,652 9,900,147
Reimbursement of expenses (Note C) ................... -- (256,355) (526,963) --
------------ ------------ ------------ ------------
Total expenses .................................... 1,507,006 1,025,569 2,109,689 9,900,147
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... 1,608,036 (417,807) 3,763,468 7,944,373
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .............. 4,716,155 107,190 (1,076,896) 52,533,310
Capital gains distributions from mutual funds ........ 11,021,627 4,089,731 17,280,633 31,903,839
Net unrealized appreciation (depreciation)
of investments during the year ..................... 7,346,991 21,600,190 (34,315,820) (37,039,574)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 23,084,773 25,797,111 (18,112,083) 47,397,575
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 24,692,809 $ 25,379,304 $(14,348,615) $ 55,341,948
============ ============ ============ ============
AGSPC
STATEMENTS OF OPERATIONS AMERICAN CENTURY- FOUNDERS AGSPC SOCIAL
For the year ended December 31, 1998 TWENTIETH GROWTH GROWTH & AWARENESS
CENTURY ULTRA FUND - INCOME FUND - FUND -
FUND - DIVISION 30 DIVISION 16 DIVISION 12
------------ ------------ ------------ ------------
INVESTMENT INCOME:
Dividends from mutual funds .......................... $ -- $ 202,602 $ 1,219,255 $ 3,599,599
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge .................... 2,804,758 3,631,491 2,643,321 3,409,326
Reimbursement of expenses (Note C) ................... (521,841) (726,411) -- --
------------ ------------ ------------ ------------
Total expenses .................................... 2,282,917 2,905,080 2,643,321 3,409,326
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... (2,282,917) (2,702,478) (1,424,066) 190,273
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ..................... 473,963 669,679 10,494,295 2,220,138
Capital gains distributions from mutual funds ........ 30,532,354 21,151,616 20,275,426 37,003,617
Net unrealized appreciation (depreciation)
of investments during the year .................... 39,033,600 42,627,883 3,996,252 38,477,902
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 70,039,917 64,449,178 34,765,973 77,701,657
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ......................... $ 67,757,000 $ 61,746,700 $ 33,341,907 $ 77,891,930
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 744
================================================================================
SEPARATE ACCOUNT A 11
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC DREYFUS VARIABLE PUTNAM PUTNAM OTC &
SCIENCE & SMALL CAP INVESTMENT FUND NEW EMERGING AGSPC AGSPC
TECHNOLOGY INDEX - SMALL CAP OPPORTUNITIES GROWTH GROWTH MIDCAP
FUND - FUND - PORTFOLIO - FUND - FUND - FUND - INDEX FUND -
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ 2,611,782 $ 2,936 $ -- $ 4,436,796 $ -- $ 7,011,168
------------- ------------- ------------- -------------- ------------- ------------- -------------
10,381,062 2,289,688 10,348,098 3,363,729 1,438,779 10,623,737 7,700,596
-- -- (1,244,807) (672,401) (288,124) -- --
------------- ------------- ------------- -------------- ------------- ------------- -------------
10,381,062 2,289,688 9,103,291 2,691,328 1,150,655 10,623,737 7,700,596
------------- ------------- ------------- -------------- ------------- ------------- -------------
(10,381,062) 322,094 (9,100,355) (2,691,328) 3,286,141 (10,623,737) (689,428)
------------- ------------- ------------- -------------- ------------- ------------- -------------
34,745,563 8,661,321 19,673,784 872,455 (332,944) 11,720,556 26,826,443
113,616,462 18,436,501 15,549,964 12,546,729 -- 51,517,534 69,472,796
250,423,659 (34,899,835) (67,338,458) 53,605,222 9,278,020 114,925,718 30,964,965
------------- ------------- ------------- -------------- ------------- ------------- -------------
398,785,684 (7,802,013) (32,114,710) 67,024,406 8,945,076 178,163,808 127,264,204
------------- ------------- ------------- -------------- ------------- ------------- -------------
$ 388,404,622 $ (7,479,919) $ (41,215,065) $ 64,333,078 $ 12,231,217 $ 167,540,071 $ 126,574,776
============= ============= ============= ============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
NEUBERGER GROWTH AND VANGUARD
AGSPC STOCK INDEX FUND BERMAN INCOME WINDSOR II
------------------------------------------------------------------- GUARDIAN TRUST - FUND - FUND -
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
------------- ------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,134,933 $ 482,467 $ 33,994,984 $ 635,074 $ 266,705 $ 4,796,472 $ 11,495,781
------------- ------------- ------------- ------------- -------------- ------------- -------------
5,099,302 206,480 28,029,502 529,334 728,024 2,644,262 5,873,266
-- (82,027) -- -- (145,133) (528,762) --
------------- ------------- ------------- ------------- -------------- ------------- -------------
5,099,302 124,453 28,029,502 529,334 582,891 2,115,500 5,873,266
------------- ------------- ------------- ------------- -------------- ------------- -------------
1,035,631 358,014 5,965,482 105,740 (316,186) 2,680,972 5,622,515
------------- ------------- ------------- ------------- -------------- ------------- -------------
36,292,713 2,895,173 21,789,375 4,368,980 447,267 1,067,960 1,366,076
2,140,138 166,018 13,033,369 219,975 5,112,104 17,737,903 51,898,120
82,035,996 6,394,969 631,036,013 7,900,957 (5,621,588) (15,926,329) 278,987
------------- ------------- ------------- ------------- -------------- ------------- -------------
120,468,847 9,456,160 665,858,757 12,489,912 (62,217) 2,879,534 53,543,183
------------- ------------- ------------- ------------- -------------- ------------- -------------
$ 121,504,478 $ 9,814,174 $ 671,824,239 $ 12,595,652 $ (378,403) $ 5,560,506 $ 59,165,698
============= ============= ============= ============= ============== ============= -------------
</TABLE>
<PAGE> 745
================================================================================
12 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
TEMPLETON ASSET VANGUARD INTERNATIONAL
STATEMENTS OF OPERATIONS ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
For the year ended December 31, 1998 FUND - FUND - FUND - BOND FUND -
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ 9,488,692 $ 5,918,741 $ 11,720,002 $ 3,619,997
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ............. 4,189,971 2,045,234 3,573,103 1,622,993
Reimbursement of expenses (Note C) ............ -- -- -- --
------------ ------------ ------------ ------------
Total expenses ............................. 4,189,971 2,045,234 3,573,103 1,622,993
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ......................... 5,298,721 3,873,507 8,146,899 1,997,004
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ....... 10,513,951 2,520,862 453,710 (1,068,211)
Capital gains distributions from mutual funds . 9,560,576 12,936,405 30,281,535 872,765
Net unrealized appreciation (depreciation)
of investments during the year .............. (10,693,322) 13,072,376 (13,016,167) 21,926,900
------------ ------------ ------------ ------------
Net realized and unrealized gain on investments 9,381,205 28,529,643 17,719,078 21,731,454
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 14,679,926 $ 32,403,150 $ 25,865,977 $ 23,728,458
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 746
================================================================================
FINANCIAL STATEMENTS 13
================================================================================
<TABLE>
<CAPTION>
AGSPC VANGUARD VANGUARD
GOVERNMENT LONG-TERM LONG-TERM
AGSPC CAPITAL CONSERVATION FUND SECURITIES CORPORATE TREASURY AGSPC MONEY MARKET FUND
- ------------------------------- FUND - FUND - FUND - ----------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 402,079 $ 3,710,371 $ 5,462,111 $ 2,478,178 $ 3,523,260 $ 230,073 $ 9,814,968
----------- ----------- ----------- ----------- ----------- ----------- -----------
63,904 585,563 993,952 504,256 798,645 46,056 1,965,005
-- -- -- (78,692) (132,544) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
63,904 585,563 993,952 425,564 666,101 46,056 1,965,005
----------- ----------- ----------- ----------- ----------- ----------- -----------
338,175 3,124,808 4,468,159 2,052,614 2,857,159 184,017 7,849,963
----------- ----------- ----------- ----------- ----------- ----------- -----------
12,194 413,199 1,352,903 136,212 1,195,397 -- --
-- -- -- 1,044,043 -- -- --
35,832 (35,856) 1,437,930 (64,200) 2,611,560 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
48,026 377,343 2,790,833 1,116,055 3,806,957 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 386,201 $ 3,502,151 $ 7,258,992 $ 3,168,669 $ 6,664,116 $ 184,017 $ 7,849,963
============ =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 747
================================================================================
14 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN AMERICAN AMERICAN AMERICAN
For the year ended December 31, 1998 GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL INTERNATIONAL SMALL CAP SMALL CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 33* DIVISION 34* DIVISION 35* DIVISION 36*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ -- $ 5,760 $ -- $ 13,079
---------- ---------- ---------- ----------
EXPENSES:
Mortality and expense risk charge ............. -- -- -- --
Reimbursement of expenses (Note C) ............ -- -- -- --
---------- ---------- ---------- ----------
Total expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
NET INVESTMENT INCOME ......................... -- 5,760 -- 13,079
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .............. -- -- -- --
Capital gains distributions from mutual funds . -- -- 18,373 51,644
Net unrealized appreciation
of investments during the year ............. 200,750 547,276 1,361,100 585,384
---------- ---------- ---------- ----------
Net realized and unrealized gain on investments 200,750 547,276 1,379,473 637,028
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 200,750 $ 553,036 $1,379,473 $ 650,107
========== ========== ========== ==========
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN AMERICAN AMERICAN AMERICAN
For the year ended December 31, 1998 GENERAL GENERAL GENERAL GENERAL
MID CAP MID CAP LARGE CAP LARGE CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 37* DIVISION 38* DIVISION 39* DIVISION 40*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ -- $ 10,079 $ 2,093 $ 10,224
---------- ---------- ---------- ----------
EXPENSES:
Mortality and expense risk charge ............. -- -- -- --
Reimbursement of expenses (Note C) ............ -- -- -- --
---------- ---------- ---------- ----------
Total expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
NET INVESTMENT INCOME ......................... -- 10,079 2,093 10,224
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .............. -- -- -- --
Capital gains distributions from mutual funds . -- 115,562 -- --
Net unrealized appreciation
of investments during the year .............. 1,425,600 896,569 695,540 716,526
---------- ---------- ---------- ----------
Net realized and unrealized gain on investments 1,425,600 1,012,131 695,540 716,526
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $1,425,600 $1,022,210 $ 697,633 $ 726,750
========== ========== ========== ==========
</TABLE>
* For the period from August 26, 1998 (initial capital contribution date)
through December 31, 1998.
See Note C.
** For the period from September 22, 1998 through December 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 748
================================================================================
SEPARATE ACCOUNT A 15
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
GENERAL AMERICAN AMERICAN AMERICAN GENERAL GENERAL
SOCIALLY AMERICAN GENERAL GENERAL GENERAL MODERATE CONSERVATIVE
RESPONSIBLE GENERAL DOMESTIC MONEY GROWTH GROWTH GROWTH
FUND - BALANCED FUND - BOND FUND - MARKET FUND - LIFESTYLE FUND - LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 41* DIVISION 42* DIVISION 43* DIVISION 44* DIVISION 48* DIVISION 49* DIVISION 50*
- ------------ --------------- ------------ ------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 23,760 $ 29,084 $ 14,978 $ 82,478 $ 11,226 $ 19,912 $ 27,772
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
23,760 29,084 14,978 82,478 11,226 19,912 27,772
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
285,733 34,051 15,898 -- -- -- --
1,099,673 805,536 28,692 -- 970,379 925,696 800,941
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1,385,406 839,587 44,590 -- 970,379 925,696 800,941
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$1,409,166 $ 868,671 $ 59,568 $ 82,478 $ 981,605 $ 945,608 $ 828,713
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL T. ROWE PRICE
CORE STRATEGIC HIGH YIELD SMALL-CAP STOCK
BOND FUND - BOND FUND - BOND FUND - FUND -
DIVISION 58* DIVISION 59* DIVISION 60* DIVISION 51**
- ------------ ------------ ------------ ----------------
<S> <C> <C> <C>
$ 50,247 $ 69,000 $ 92,262 $ --
- ---------- ---------- ---------- ----------
-- -- -- --
-- -- -- --
- ---------- ---------- ---------- ----------
-- -- -- --
- ---------- ---------- ---------- ----------
50,247 69,000 92,262 --
- ---------- ---------- ---------- ----------
-- -- -- --
16,291 11,064 -- --
95,397 185,469 189,911 --
- ---------- ---------- ---------- ----------
111,688 196,533 189,911 --
- ---------- ---------- ---------- ----------
$ 161,935 $ 265,533 $ 282,173 $ --
========== ========== ========== ==========
</TABLE>
<PAGE> 749
================================================================================
16 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES
FUND - DIVISION 11
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ 1,608,036 $ 1,546,185
Net realized gain (loss) on investments .............................. 4,716,155 8,844,811
Capital gains distributions from mutual funds ........................ 11,021,627 4,593,062
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 7,346,991 (11,693,489)
------------- -------------
Increase (decrease) in net assets resulting from operations ..... 24,692,809 3,290,569
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 14,604,832 21,604,936
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (9,033,065) (8,085,959)
Annuity benefit payments ............................................. (17,602) (10,712)
Amounts transferred interdivision, and (to) from VALIC general account (33,973,374) (56,024,580)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... (28,419,209) (42,516,315)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (3,726,400) (39,225,746)
NET ASSETS:
Beginning of year .................................................... 152,000,782 191,226,528
------------- -------------
End of year .......................................................... $ 148,274,382 $ 152,000,782
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 122,716,744 156,226,314
Purchase payments .................................................... 10,549,627 17,325,859
Surrenders ........................................................... (6,694,955) (6,456,410)
Transfers -- interdivision and (to) from VALIC general account ....... (24,759,665) (44,379,019)
------------- -------------
Total units outstanding, end of year ................................. 101,811,751 122,716,744
============= =============
Units outstanding, by class:
Standard units .................................................... 101,811,751 122,716,744
Enhanced units:
20 bp reduced ................................................... -- --
40 bp reduced ................................................... -- --
------------- -------------
Accumulation units end of year ....................................... 101,811,751 122,716,744
============= =============
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.454644 $ 1.237299
Enhanced unit:
20 bp reduced.................................................... -- --
40 bp reduced.................................................... -- --
</TABLE>
<TABLE>
<CAPTION>
PUTNAM GLOBAL GROWTH
FUND - DIVISION 28
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (417,807) $ 825,963
Net realized gain (loss) on investments .............................. 107,190 172,968
Capital gains distributions from mutual funds ........................ 4,089,731 9,300,593
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 21,600,190 (7,591,166)
------------- -------------
Increase (decrease) in net assets resulting from operations ..... 25,379,304 2,708,358
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 45,226,423 18,196,466
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (3,310,436) (812,004)
Annuity benefit payments ............................................. (2,617) (1,799)
Amounts transferred interdivision, and (to) from VALIC general account 36,967,959 21,134,329
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... 78,881,329 38,516,992
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 104,260,633 41,225,350
NET ASSETS:
Beginning of year .................................................... 58,834,408 17,609,058
------------- -------------
End of year .......................................................... $ 163,095,041 $ 58,834,408
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 49,548,732 16,648,600
Purchase payments .................................................... 32,447,084 15,748,353
Surrenders ........................................................... (2,408,897) (675,628)
Transfers -- interdivision and (to) from VALIC general account ....... 28,040,873 17,827,407
------------- -------------
Total units outstanding, end of year ................................. 107,627,792 49,548,732
============= =============
Units outstanding, by class:
Standard units .................................................... 101,468,260 49,548,732
Enhanced units:
20 bp reduced ................................................... 6,153,771 --
40 bp reduced ................................................... 5,760 --
------------- -------------
Accumulation units end of year ....................................... 107,627,792 49,548,732
============= =============
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.512865 $ 1.186775
Enhanced unit:
20 bp reduced.................................................... 1.549587 --
40 bp reduced.................................................... 1.591007 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 750
================================================================================
SEPARATE ACCOUNT A 17
================================================================================
<TABLE>
<CAPTION>
TEMPLETON FOREIGN TEMPLETON INTERNATIONAL AGSPC SCIENCE & TECHNOLOGY AGSPC SMALL CAP
FUND - DIVISION 32 FUND - DIVISION 20 FUND - DIVISION 17 INDEX FUND - DIVISION 14
- ---------------------------- ---------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,763,468 $ 3,566,211 $ 7,944,373 $ 7,044,706 $ (10,381,062) $ (8,359,405) $ 322,094 $ 321,469
(1,076,896) 180,290 52,533,310 24,143,886 34,745,563 27,202,326 8,661,321 7,403,801
17,280,633 12,359,374 31,903,839 6,157,699 113,616,462 -- 18,436,501 17,477,318
(34,315,820) (16,286,999) (37,039,574) 33,826,345 250,423,659 (11,571,856) (34,899,835) 13,195,192
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
(14,348,615) (181,124) 55,341,948 71,172,636 388,404,622 7,271,065 (7,479,919) 38,397,780
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
72,575,285 63,929,059 114,632,129 127,443,761 195,575,628 203,196,325 28,153,952 26,031,893
(7,939,318) (2,231,179) (35,093,007) (21,498,080) (44,292,549) (27,661,660) (11,145,100) (8,101,115)
(1,991) (1,149) (9,179) (6,675) (17,543) (17,353) (7,293) (6,381)
(12,669,089) 79,881,321 (95,114,875) 22,603,734 (92,089,284) 15,908,913 (13,919,719) (10,731,749)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
51,964,887 141,578,052 (15,584,932) 128,542,740 59,176,252 191,426,225 3,081,840 7,192,648
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
37,616,272 141,396,928 39,757,016 199,715,376 447,580,874 198,697,290 (4,398,079) 45,590,428
180,852,001 39,455,073 729,739,187 530,023,811 909,661,454 710,964,164 230,068,750 184,478,322
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
$ 218,468,273 $ 180,852,001 $ 769,496,203 $ 729,739,187 $1,357,242,328 $909,661,454 $ 225,670,671 $ 230,068,750
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
159,201,107 36,671,828 463,174,350 378,581,949 397,842,959 315,809,646 106,279,077 103,320,842
63,265,244 55,441,897 65,837,726 81,609,273 77,332,989 88,179,109 13,084,095 13,258,805
(7,600,467) (1,875,284) (21,321,029) (13,712,830) (17,946,718) (11,448,429) (5,229,338) (4,191,154)
(10,799,968) 68,962,666 (55,271,958) 16,695,958 (35,393,395) 5,302,633 (6,753,994) (6,109,416)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
204,065,916 159,201,107 452,419,089 463,174,350 421,835,835 397,842,959 107,379,840 106,279,077
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
198,626,024 159,201,107 452,419,089 463,174,350 418,601,069 397,842,959 107,321,015 106,279,077
5,437,288 -- -- -- 3,228,389 -- 58,825 --
2,604 -- -- -- 6,377 -- -- --
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
204,065,916 159,201,107 452,419,089 463,174,350 421,835,835 397,842,959 107,379,840 106,279,077
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ---------------------------- ---------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.069704 $ 1.135778 $ 1.700398 $ 1.575168 $ 3.216190 $ 2.285739 $ 2.100506 $ 2.163595
1.094954 -- -- -- 3.241847 -- 2.125983 --
1.123840 -- -- -- 3.272354 -- -- --
</TABLE>
<PAGE> 751
================================================================================
18 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS SMALL CAP
PORTFOLIO - DIVISION 18
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (9,100,355) $ (7,877,254)
Net realized gain (loss) on investments .............................. 19,673,784 10,514,976
Capital gains distributions from mutual funds ........................ 15,549,964 47,781,324
Net unrealized appreciation (depreciation)
of investments during the year ..................................... (67,338,458) 56,534,602
------------- -------------
Increase (decrease) in net assets resulting from operations .......... (41,215,065) 106,953,648
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 136,010,701 152,268,343
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (37,151,392) (25,995,894)
Annuity benefit payments ............................................. (12,769) (13,079)
Amounts transferred interdivision, and (to) from VALIC general account (105,448,868) (41,774,769)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (6,602,328) 84,484,601
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (47,817,393) 191,438,249
Net Assets:
Beginning of year .................................................... 849,824,308 658,386,059
------------- -------------
End of year .......................................................... $ 802,006,915 $ 849,824,308
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 479,851,525 428,883,250
Purchase payments .................................................... 78,837,263 92,300,416
Surrenders ........................................................... (22,827,377) (15,764,818)
Transfers -- interdivision and (to) from VALIC general account ....... (61,646,182) (25,567,323)
------------- -------------
Total units outstanding, end of year ................................. 474,215,229 479,851,525
============= =============
Units outstanding, by class:
Standard units .................................................... 474,215,229 479,851,525
Enhanced units:
20 bp reduced ................................................... -- --
40 bp reduced ................................................... -- --
------------- -------------
Accumulation units end of year ....................................... 474,215,229 479,851,525
============= =============
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.690786 $ 1.770622
Enhanced unit:
20 bp reduced.................................................... -- --
40 bp reduced.................................................... -- -
</TABLE>
<TABLE>
<CAPTION>
PUTNAM NEW OPPORTUNITIES
FUND - DIVISION 26
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (2,691,328) $ (1,052,294)
Net realized gain (loss) on investments .............................. 872,455 242,887
Capital gains distributions from mutual funds ........................ 12,546,729 3,494,327
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 53,605,222 18,445,868
------------- -------------
Increase (decrease) in net assets resulting from operations .......... 64,333,078 21,130,788
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 108,017,017 51,769,269
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (8,784,234) (2,540,805)
Annuity benefit payments ............................................. (575) (61)
Amounts transferred interdivision, and (to) from VALIC general account 84,011,090 44,254,408
Increase (decrease) in net assets
------------- -------------
resulting from principal transactions ........................ 183,243,298 93,482,811
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 247,576,376 114,613,599
Net Assets:
Beginning of year .................................................... 164,836,578 50,222,979
------------- -------------
End of year .......................................................... $ 412,412,954 $ 164,836,578
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 143,395,066 53,001,699
Purchase payments .................................................... 85,839,361 49,995,408
Surrenders ........................................................... (6,337,162) (2,517,125)
Transfers -- interdivision and (to) from VALIC general account ....... 68,362,756 42,915,084
------------- -------------
Total units outstanding, end of year ................................. 291,260,021 143,395,066
============= =============
Units outstanding, by class:
Standard units .................................................... 280,523,297 143,395,066
Enhanced units:
20 bp reduced ................................................... 10,725,927 --
40 bp reduced ................................................... 10,797 --
------------- -------------
Accumulation units end of year ....................................... 291,260,021 143,395,066
============= =============
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
------------- -------------
Accumulation value per unit:
<S> <C> <C>
Standard unit...................................................... $ 1.415175 $ 1.149453
Enhanced unit:
20 bp reduced.................................................... 1.434946 --
40 bp reduced.................................................... 1.459115 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 752
================================================================================
Separate Account A 19
================================================================================
<TABLE>
<CAPTION>
AMERICAN CENTURY -
PUTNAM OTC & EMERGING AGSPC GROWTH AGSPC MIDCAP INDEX TWENTIETH CENTURY ULTRA
GROWTH FUND - DIVISION 27 FUND - DIVISION 15 FUND - DIVISION 4 FUND - DIVISION 31
- ---------------------------- ----------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,286,141 $ (720,013) $ (10,623,737) $ (7,550,418) $ (689,428) $ 535,199 $ (2,282,917) $ (633,243)
(332,944) (47,363) 11,720,556 6,207,654 26,826,443 19,471,600 473,963 316,651
-- -- 51,517,534 15,041,175 69,472,796 39,891,431 30,532,354 24,559,704
9,278,020 8,912,297 114,925,718 132,575,644 30,964,965 109,426,279 39,033,600 (16,326,801)
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
12,231,217 8,144,921 167,540,071 146,274,055 126,574,776 169,324,509 67,757,000 7,916,311
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
36,165,527 32,976,492 183,983,180 185,814,571 71,049,146 66,141,090 95,865,928 43,175,072
(4,499,407) (1,887,137) (45,145,966) (24,997,689) (37,639,412) (24,993,718) (6,987,387) (1,444,132)
(2,072) (1,777) (23,099) (18,116) (23,570) (20,499) (1,933) (950)
960,600 14,456,676 (34,517,049) (764,959) (40,068,991) (45,549,090) 86,438,332 56,804,430
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
32,624,648 45,544,254 104,297,066 160,033,807 (6,682,827) (4,422,217) 175,314,940 98,534,420
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
44,855,865 53,689,175 271,837,137 306,307,862 119,891,949 164,902,292 243,071,940 106,450,731
97,456,130 43,766,955 941,423,469 635,115,607 730,613,685 565,711,393 123,768,389 17,317,658
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
$ 142,311,995 $ 97,456,130 $1,213,260,606 $ 941,423,469 $ 850,505,634 $730,613,685 $ 366,840,329 $123,768,389
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
99,785,041 48,902,828 453,172,490 366,272,509 171,065,657 172,816,978 97,745,282 16,654,076
36,257,228 36,775,163 82,864,073 99,349,760 16,010,438 17,600,471 63,913,168 36,243,458
(4,704,400) (2,370,530) (20,670,419) (12,033,793) (8,724,789) (6,688,206) (4,133,151) (1,152,164)
1,221,835 16,477,580 (16,039,778) (415,986) (9,311,419) (12,663,586) 59,835,828 45,999,912
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
132,559,704 99,785,041 499,326,366 453,172,490 169,039,887 171,065,657 217,361,127 97,745,282
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
129,463,792 99,785,041 494,997,997 453,172,490 169,039,887 171,065,657 209,221,513 97,745,282
3,092,839 -- 4,324,799 -- -- -- 8,116,612 --
3,073 -- 3,570 -- -- -- 23,002 --
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
132,559,704 99,785,041 499,326,366 453,172,490 169,039,887 171,065,657 217,361,127 97,745,282
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ---------------------------- ----------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.072660 $ 0.976262 $ 2.428587 $ 2.076503 $ 5.029093 $ 4.269122 $ 1.685503 $ 1.265937
1.098295 -- 2.448443 -- -- -- 1.737734 --
1.127653 -- 2.471473 -- -- -- 1.798208 --
</TABLE>
<PAGE> 753
================================================================================
20 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOUNDERS GROWTH AGSPC GROWTH & INCOME
FUND - DIVISION 30 FUND - DIVISION 16
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (2,702,478) $ (229,837) $ (1,424,066) $ (1,206,116)
Net realized gain on investments ................................ 669,679 270,661 10,494,295 3,270,580
Capital gains distributions from mutual funds ................... 21,151,616 21,678,474 20,275,426 2,863,622
Net unrealized appreciation (depreciation)
of investments during the year ................................ 42,627,883 (6,466,051) 3,996,252 38,217,716
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 61,746,700 15,253,247 33,341,907 43,145,802
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 117,393,497 54,770,398 39,532,854 44,825,180
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (9,478,330) (1,863,811) (11,951,930) (8,344,519)
Annuity benefit payments ........................................ (1,096) (66) (3,597) (2,954)
Amounts transferred interdivision, and (to) from
VALIC general account ......................................... 72,791,918 70,189,987 (32,787,298) 5,944,261
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................... 180,705,989 123,096,508 (5,209,971) 42,421,968
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 242,452,689 138,349,755 28,131,936 85,567,770
NET ASSETS:
Beginning of year ............................................... $ 170,468,231 32,118,476 257,095,975 171,528,205
------------- ------------- ------------- -------------
End of year ..................................................... 412,920,920 $ 170,468,231 $ 285,227,911 $ 257,095,975
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 132,167,162 31,197,464 132,434,555 108,341,635
Purchase payments ............................................... 80,460,723 45,575,203 19,715,398 24,988,066
Surrenders ...................................................... (6,588,832) (1,491,261) (6,142,924) (4,697,640)
Transfers -- interdivision and (to) from VALIC general account .. 52,471,956 56,885,756 (16,456,334) 3,802,494
------------- ------------- ------------- -------------
Total units outstanding, end of year ............................ 258,511,009 132,167,162 129,550,695 132,434,555
============= ============= ============= =============
Units outstanding, by class:
Standard units ............................................... 250,777,959 132,167,162 129,550,695 132,434,555
Enhanced units:
20 bp reduced .............................................. 7,720,189 -- -- --
40 bp reduced .............................................. 12,861 -- -- --
------------- ------------- ------------- -------------
Accumulation units end of year .................................. 258,511,009 132,167,162 129,550,695 132,434,555
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 1.595913 $ 1.289513 $ 2.201234 $ 19981997
Enhanced unit:
20 bp reduced .............................................. 1.633282 -- -- --
40 bp reduced .............................................. 1.676366 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 754
================================================================================
SEPARATE ACCOUNT A 21
================================================================================
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
AGSPC SOCIAL AWARENESS ----------------------------------------------------------------
FUND - DIVISION 12 DIVISION 10A DIVISION 10B
- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 190,273 $ 281,520 $ 1,035,631 $ 2,030,016 $ 358,014 $ 399,877
2,220,138 1,158,707 36,292,713 23,392,823 2,895,173 2,137,197
37,003,617 9,560,562 2,140,138 2,365,369 166,018 185,844
38,477,902 33,369,211 82,035,996 89,338,679 6,394,969 6,910,324
- ------------- ------------- ------------- ------------- ------------- -------------
77,891,930 44,370,000 121,504,478 117,126,887 9,814,174 9,633,242
- ------------- ------------- ------------- ------------- ------------- -------------
72,710,322 44,746,508 4,116,842 3,670,819 204,507 231,218
(13,355,087) (5,475,293) (30,874,894) (24,373,318) (2,153,577) (2,331,031)
(9,481) -- (1,996,857) (1,717,390) (327,696) (285,785)
54,323,803 55,022,728 (14,779,077) (3,572,644) (1,934,563) (1,027,537)
- ------------- ------------- ------------- ------------- ------------- -------------
113,669,557 94,293,943 (43,533,986) (25,992,533) (4,211,329) (3,413,135)
- ------------- ------------- ------------- ------------- ------------- -------------
191,561,487 138,663,943 77,970,492 91,134,354 5,602,845 6,220,107
243,579,972 104,916,029 469,783,383 378,649,029 36,946,031 30,725,924
- ------------- ------------- ------------- ------------- ------------- -------------
$ 435,141,459 $ 243,579,972 $ 547,753,875 $ 469,783,383 $ 42,548,876 $ 36,946,031
============= ============= ============= ============= ============= =============
81,577,104 46,574,016 25,835,933 27,379,389 1,256,974 1,380,401
21,359,028 16,505,152 206,729 226,321 6,328 9,647
(3,889,138) (1,970,414) (1,549,859) (1,529,579) (68,344) (92,576)
16,555,822 20,468,350 (766,299) (240,198) (63,845) (40,498)
- ------------- ------------- ------------- ------------- ------------- -------------
115,602,816 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
============= ============= ============= ============= ============= =============
114,382,494 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
1,218,871 -- -- -- -- --
1,451 -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- -------------
115,602,816 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31
- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.762308 $ 2.985333 $ 22.479709 $ 17.679054 $ 35.792019 $ 27956641
3.825649 -- -- --
3.897214 -- -- --
</TABLE>
<PAGE> 755
================================================================================
22 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
-----------------------------------
DIVISION 10C
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ 5,965,482 $ 9,342,792
Net realized gain on investments .................................. 21,789,375 19,691,626
Capital gains distributions from mutual funds ..................... 13,033,369 11,611,427
Net unrealized appreciation (depreciation)
of investments during the year .................................. 631,036,013 475,943,738
--------------- ---------------
Increase (decrease) in net assets resulting from operations ... 671,824,239 516,589,583
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 372,858,039 264,734,800
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (130,840,043) (73,944,144)
Annuity benefit payments .......................................... (164,035) (120,896)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 112,786,439 72,721,787
--------------- ---------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 354,640,400 263,391,547
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ...................................... 1,026,464,639 779,981,130
NET ASSETS:
Beginning of year ................................................. 2,310,327,500 1,530,346,370
--------------- ---------------
End of year ....................................................... $ 3,336,792,139 $ 2,310,327,500
=============== ===============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 615,053,124 536,806,965
Purchase payments ................................................. 85,764,962 77,757,636
Surrenders ........................................................ (29,978,801) (20,920,257)
Transfers -- interdivision and (to) from VALIC general account .... 27,731,410 21,408,780
--------------- ---------------
Total units outstanding, end of year .............................. 698,570,695 615,053,124
=============== ===============
Units outstanding, by class:
Standard units .................................................. 691,680,049 615,053,124
Enhanced units:
20 bp reduced ................................................ 6,859,835 --
40 bp reduced ................................................ 30,811 --
--------------- ---------------
Accumulation units end of year .................................... 698,570,695 615,053,124
=============== ===============
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------
DIVISION 10D
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ 105,740 $ 222,212
Net realized gain on investments .................................. 4,368,980 3,421,747
Capital gains distributions from mutual funds ..................... 219,975 249,976
Net unrealized appreciation (depreciation)
of investments during the year .................................. 7,900,957 9,003,055
--------------- ---------------
Increase (decrease) in net assets resulting from operations ... 12,595,652 12,896,990
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 654,342 789,193
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (3,879,247) (2,598,402)
Annuity benefit payments .......................................... (15,905) (13,201)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... (2,514,825) (3,872,680)
--------------- ---------------
Increase (decrease) in net assets
resulting from principal transactions ...................... (5,755,635) (5,695,090)
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ...................................... 6,840,017 7,201,900
NET ASSETS:
Beginning of year ................................................. 49,673,027 42,471,127
--------------- ---------------
End of year ....................................................... $ 56,513,044 $ 49,673,027
=============== ===============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 7,438,537 8,381,704
Purchase payments ................................................. 88,428 132,628
Surrenders ........................................................ (521,941) (430,026)
Transfers -- interdivision and (to) from VALIC general account .... (349,228) (645,769)
--------------- ---------------
Total units outstanding, end of year .............................. 6,655,796 7,438,537
=============== ===============
Units outstanding, by class:
Standard units .................................................. 6,655,796 7,438,537
Enhanced units:
20 bp reduced ................................................ -- --
40 bp reduced ................................................ -- --
--------------- ---------------
Accumulation units end of year .................................... 6,655,796 7,438,537
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit........................... $ 4.772052 $ 3.753436 $ 8.457722 $ 6.652806
Enhanced unit:
20 bp reduced........................ 4.875028 -- -- --
40 bp reduced........................ 4.991135 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 756
================================================================================
SEPARATE ACCOUNT A 23
================================================================================
<TABLE>
<CAPTION>
NEUBERGER BERMAN SCUDDER GROWTH AND VANGUARD WINDSOR II TEMPLETON ASSET
GUARDIAN TRUST - DIVISION 29 INCOME FUND - DIVISION 21 FUND - DIVISION 24 ALLOCATION FUND - DIVISION 19
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (316,186) $ (99,741) $ 2,680,972 $ 1,085,048 $ 5,622,515 $ 3,037,913 $ 5,298,721 $ 2,826,899
447,267 406,993 1,067,960 269,953 1,366,076 741,743 10,513,951 982,063
5,112,104 3,161,542 17,737,903 8,952,194 51,898,120 18,541,072 9,560,576 11,661,872
(5,621,588) (1,574,737) (15,926,329) 4,003,711 278,987 16,110,878 (10,693,322) 13,366,704
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(378,403) 1,894,057 5,560,506 14,310,906 59,165,698 38,431,606 14,679,926 28,837,538
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,727,026 14,861,097 79,800,185 37,754,331 172,075,011 82,698,118 55,452,646 61,278,823
(1,971,281) (661,852) (7,670,739) (1,502,937) (18,029,126) (3,075,223) (15,786,958) (9,457,167)
-- -- (3,718) (2,106) (6,802) (1,497) (22,337) (19,742)
(1,314,316) 21,010,215 34,897,873 66,400,722 162,813,002 115,544,417 (47,069,555) 41,633,946
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,441,429 35,209,460 107,023,601 102,650,010 316,852,085 195,165,815 (7,426,204) 93,435,860
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,063,026 37,103,517 112,584,107 116,960,916 376,017,783 233,597,421 7,253,722 122,273,398
46,306,823 9,203,306 135,384,401 18,423,485 275,397,199 41,799,778 316,874,285 194,600,887
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 61,369,849 $ 46,306,823 $ 247,968,508 $ 135,384,401 $ 651,414,982 $ 275,397,199 $ 324,128,007 $ 316,874,285
============= ============= ============= ============= ============= ============= ============= =============
35,406,663 8,211,592 94,225,984 16,524,046 187,929,868 37,292,761 196,150,946 137,384,670
13,737,161 11,711,541 51,892,138 28,874,922 105,145,249 63,199,633 32,881,580 38,574,901
(1,683,029) (501,980) (5,008,156) (1,088,301) (10,145,505) (2,242,658) (10,222,721) (5,822,716)
(1,186,725) 15,985,510 23,203,013 49,915,317 103,638,092 89,680,132 (27,846,098) 26,014,091
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
46,274,070 35,406,663 164,312,979 94,225,984 386,567,704 187,929,868 190,963,707 196,150,946
============= ============= ============= ============= ============= ============= ============= =============
45,261,146 35,406,663 159,815,811 94,225,984 372,737,595 187,929,868 190,963,707 196,150,946
1,012,671 -- 4,494,004 -- 13,800,156 -- -- --
253 -- 3,163 -- 29,953 -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
46,274,070 35,406,663 164,312,979 94,225,984 386,567,704 187,929,868 190,963,707 196,150,946
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.324970 $ 1.307438 $ 1.507724 $ 1.436011 $ 1.683226 $ 1.464949 $ 1.695764 $ 1.613943
1.368269 -- 1.542160 -- 1.723020 -- -- --
1.418252 -- 1.582856 -- 1.770257 -- -- --
</TABLE>
<PAGE> 757
================================================================================
24 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC ASSET ALLOCATION VANGUARD WELLINGTON
FUND - DIVISION 5 FUND - DIVISION 25
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 3,873,507 $ 3,768,356 $ 8,146,899 $ 3,011,918
Net realized gain (loss) on investments ........................... 2,520,862 5,941,975 453,710 713,048
Capital gains distributions from mutual funds ..................... 12,936,405 10,546,782 30,281,535 7,375,024
Net unrealized appreciation (depreciation)
of investments during the year .................................. 13,072,376 14,486,554 (13,016,167) 3,998,391
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations ... 32,403,150 34,743,667 25,865,977 15,098,381
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 16,199,430 11,497,764 128,896,516 51,882,204
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (12,309,318) (10,611,952) (11,075,983) (2,456,686)
Annuity benefit payments .......................................... (9,811) (8,301) (1,770) (68)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 6,673,714 (24,272,661) 106,781,378 66,331,198
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 10,554,015 (23,395,150) 224,600,141 115,756,648
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 42,957,165 11,348,517 250,466,118 130,855,029
NET ASSETS:
Beginning of year ................................................. 184,577,992 173,229,475 156,044,547 25,189,518
------------- ------------- ------------- -------------
End of year ....................................................... $ 227,535,157 $ 184,577,992 $ 406,510,665 $ 156,044,547
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 57,307,351 65,292,617 116,429,781 22,866,634
Purchase payments ................................................. 4,579,044 3,898,053 87,356,196 42,072,769
Surrenders ........................................................ (3,567,970) (3,591,047) (6,659,976) (1,913,812)
Transfers -- interdivision and (to) from VALIC general account .... 1,950,743 (8,292,272) 76,359,783 53,404,190
------------- ------------- ------------- -------------
Total units outstanding, end of year .............................. 60,269,168 57,307,351 273,485,784 116,429,781
============= ============= ============= =============
Units outstanding, by class:
Standard units .................................................... 60,237,818 57,307,351 253,840,498 116,429,781
Enhanced units:
20 bp reduced ................................................. 31,350 -- 19,636,072 --
40 bp reduced ................................................. -- -- 9,214 --
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 60,269,168 57,307,351 273,485,784 116,429,781
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Standard unit............................................... $ 3.772519 $ 3.219282 $ 1.482836 $ 1.340109
Enhanced unit:
20 bp reduced............................................. 3.882024 -- 1.529797 --
40 bp reduced............................................. -- -- 1.585688 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 758
================================================================================
SEPARATE ACCOUNT A 25
================================================================================
<TABLE>
<CAPTION>
AGSPC
AGSPC INTERNATIONAL CAPITAL CONSERVATION FUND
GOVERNMENT BOND ------------------------------------------------------------- AGSPC GOVERNMENT SECURITIES
FUND - DIVISION 13 DIVISION 1 DIVISION 7 FUND - DIVISION 8
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,997,004 $ 4,595,764 $ 338,175 $ 344,608 $ 3,124,808 $ 2,913,560 $ 4,468,159 $ 4,230,305
(1,068,211) (3,911,328) 12,194 23,005 413,199 (805,486) 1,352,903 (985,278)
872,765 136,607 -- -- -- -- -- --
21,926,900 (11,068,351) 35,832 90,579 (35,856) 1,739,391 1,437,930 3,130,717
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,728,458 (10,247,308) 386,201 458,192 3,502,151 3,847,465 7,258,992 6,375,744
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
25,413,792 40,582,861 146,532 366,816 7,027,648 7,324,860 12,902,909 12,424,460
(7,785,118) (6,757,210) (562,370) (389,473) (3,833,561) (3,026,469) (5,395,424) (3,958,609)
(2,691) (274) (455) (526) -- -- -- --
(38,345,989) (35,550,483) (97,641) (509,353) (2,143,426) (8,016,607) 10,528,632 (12,246,246)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(20,720,006) (1,725,106) (513,934) (532,536) 1,050,661 (3,718,216) 18,036,117 (3,780,395)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,008,452 (11,972,414) (127,733) (74,344) 4,552,812 129,249 25,295,109 2,595,349
166,199,757 178,172,171 6,427,526 6,501,870 55,418,728 55,289,479 88,167,288 85,571,939
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 169,208,209 $ 166,199,757 $ 6,299,793 $ 6,427,526 $ 59,971,540 $ 55,418,728 $ 113,462,397 $ 88,167,288
============= ============= ============= ============= ============= ============= ============= =============
111,480,591 112,601,593 1,831,961 1,991,536 28,242,598 30,286,494 45,034,894 47,130,169
16,433,799 27,009,353 40,472 109,285 3,402,874 3,840,755 6,558,071 6,646,726
(5,105,973) (4,696,042) (155,629) (116,952) (1,879,505) (1,555,673) (2,679,928) (2,143,349)
(24,924,879) (23,434,313) (27,361) (151,908) (1,014,305) (4,328,978) 4,816,634 (6,598,652)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,883,538 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
============= ============= ============= ============= ============= ============= ============= =============
97,473,851 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
408,156 -- -- -- -- -- -- --
1,531 -- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,883,538 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.728006 $ 1.490645 $ 3.726168 $ 3.505970 $ 2.085846 $ 1.962239 $ 2.111727 $ 1.957755
1.751922 -- -- -- -- -- -- --
1.777571 -- -- -- -- -- -- --
</TABLE>
<PAGE> 759
================================================================================
26 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VANGUARD LONG-TERM VANGUARD LONG-TERM
CORPORATE FUND - DIVISION 22 TREASURY FUND - DIVISION 23
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 2,052,614 $ 506,655 $ 2,857,159 $ 567,564
Net realized gain on investments .................................. 136,212 36,716 1,195,397 94,335
Capital gains distributions from mutual funds ..................... 1,044,043 156,984 -- --
Net unrealized appreciation (depreciation)
of investments during the year .................................. (64,200) 643,127 2,611,560 1,066,785
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .............. 3,168,669 1,343,482 6,664,116 1,728,684
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 18,953,737 6,013,744 30,970,739 6,985,216
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (1,608,861) (167,812) (2,748,295) (265,787)
Annuity benefit payments .......................................... -- -- (813) (176)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 19,011,058 9,719,778 60,728,245 10,813,576
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ....................... 36,355,934 15,565,710 88,949,876 17,532,829
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 39,524,603 16,909,192 95,613,992 19,261,513
NET ASSETS:
Beginning of year ................................................. 20,440,049 3,530,857 23,638,214 4,376,701
------------- ------------- ------------- -------------
End of year ....................................................... $ 59,964,652 $ 20,440,049 $ 119,252,206 $ 23,638,214
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 17,371,407 3,370,441 20,041,920 4,174,369
Purchase payments ................................................. 15,098,601 5,633,849 23,916,542 6,619,458
Surrenders ........................................................ (1,333,865) (151,626) (1,937,227) (227,789)
Transfers -- interdivision and (to) from VALIC general account .... 15,936,430 8,518,743 48,342,694 9,475,882
------------- ------------- ------------- -------------
Total units outstanding, end of year .............................. 47,072,573 17,371,407 90,363,929 20,041,920
============= ============= ============= =============
Units outstanding, by class:
Standard units .................................................... 44,122,646 17,371,407 86,673,300 20,041,920
Enhanced units:
20 bp reduced ................................................. 2,949,044 -- 3,682,809 --
40 bp reduced ................................................. 883 -- 7,820 --
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 47,072,573 17,371,407 90,363,929 20,041,920
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit............................................... $ 1.271278 $ 1.176649 $ 1.318263 $ 1.178938
Enhanced unit:
20 bp reduced............................................. 1.312731 -- 1.349397 --
40 bp reduced............................................. 1.360696 -- 1.384079 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 760
================================================================================
SEPARATE ACCOUNT A 27
================================================================================
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND
- ----------------------------------------------------------------
DIVISION 2 DIVISION 6
- ------------------------------ ------------------------------
1998 1997 1998 1997
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 184,017 $ 188,513 $ 7,849,963 $ 5,293,164
-- -- -- --
-- -- -- --
-- -- -- --
- ------------- ------------- ------------- -------------
184,017 188,513 7,849,963 5,293,164
- ------------- ------------- ------------- -------------
90,884 123,738 87,624,322 58,442,609
(292,611) (277,223) (33,439,890) (16,317,039)
-- -- (1,603) (1,592)
(364,560) (334,772) 63,714,230 (27,271,186)
- ------------- ------------- ------------- -------------
(566,287) (488,257) 117,897,059 14,852,792
- ------------- ------------- ------------- -------------
(382,270) (299,744) 125,747,022 20,145,956
4,579,757 4,879,501 140,904,582 120,758,626
- ------------- ------------- ------------- -------------
$ 4,197,487 $ 4,579,757 $ 266,651,604 $ 140,904,582
============= ============= ============= =============
1,931,439 2,142,534 84,182,521 75,124,095
37,542 53,405 56,361,872 35,256,772
(120,614) (119,264) (17,562,213) (10,205,685)
(148,034) (145,236) 29,891,462 (15,992,661)
- ------------- ------------- ------------- -------------
1,700,333 1,931,439 152,873,642 84,182,521
============= ============= ============= =============
1,700,333 1,931,439 147,547,688 84,182,521
-- -- 5,325,479 --
-- -- 475 --
- ------------- ------------- ------------- -------------
1,700,333 1,931,439 152,873,642 84,182,521
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
- ----------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
$ 2.468627 $ 2.371163 $ 1.742617 $ 1.673590
-- -- 1.786658 --
-- -- 1.833793 --
</TABLE>
<PAGE> 761
===============================================================================
28 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL INTERNATIONAL AMERICAN GENERAL INTERNATIONAL
GROWTH FUND - DIVISION 33 VALUE FUND - DIVISION 33
------------------------------ ------------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATIONS: $ -- $ -- $ 5,760 $ --
Net investment income ................................. -- -- -- --
Net realized gain on investments
Capital gains distributions from
mutual funds ........................................ -- -- -- --
Net unrealized appreciation
of investments during the year ...................... 200,750 -- 547,276 --
---------- --------- ---------- ---------
Increase in net assets resulting
from operations ................................ 200,750 -- 553,036 --
---------- --------- ---------- ---------
PRINCIPAL TRANSACTIONS:
Purchase payments ..................................... -- -- -- --
Surrenders of accumulation units by
terminations, withdrawals, and maintenance
fees ................................................ -- -- -- --
Annuity benefit payments .............................. -- -- -- --
Amounts transferred interdivision, and from
VALIC general account ............................... 3,650,000 -- 3,600,000 --
---------- --------- ---------- ---------
Increase in net assets
resulting from principal transactions ............ 3,650,000 -- 3,600,000 --
---------- --------- ---------- ---------
TOTAL INCREASE IN NET ASSETS .......................... 3,850,750 -- 4,153,036 --
NET ASSETS:
Beginning of year ..................................... -- -- -- --
End of year ........................................... $3,850,750 $ -- $4,153,036 $ --
========== ========= ========== =========
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .................. -- -- -- --
Purchase payments ..................................... -- -- -- --
Surrenders ............................................ -- -- -- --
Transfers -- interdivision and from VALIC
general account ..................................... -- -- -- --
---------- --------- ---------- ---------
Total units outstanding, end of year .................. -- -- -- --
========== ========= ========== =========
Units outstanding, by class:
Standard units ...................................... -- -- -- --
Enhanced units:
20 bp reduced .................................... -- -- -- --
40 bp reduced .................................... -- -- -- --
---------- --------- ---------- ---------
Accumulation units end of year ........................ -- -- -- --
========== ========= ========== =========
DECEMBER 31 DECEMBER 31
------------------------- -------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
Accumulation value per unit:
Standard unit ....................................... -- -- -- --
Enhanced unit:
20 bp reduced .................................... -- -- -- --
40 bp reduced .................................... -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 762
===============================================================================
SEPARATE ACCOUNT A 29
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL SMALL CAP AMERICAN GENERAL SMALL CAP AMERICAN GENERAL MID CAP AMERICAN GENERAL MID CAP
GROWTH FUND - DIVISION 35 VALUE FUND - DIVISION 36 GROWTH FUND - DIVISION 37 VALUE FUND - DIVISION 38
- ----------------------------- ------------------------------ ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ 13,079 $ -- $ -- $ -- $ 10,079 $ --
-- -- -- -- -- -- -- --
18,373 -- 51,644 -- -- -- 115,562 --
1,361,100 -- 585,384 -- 1,425,600 -- 896,569 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
1,379,473 -- 650,107 -- 1,425,600 -- 1,022,210 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
3,900,000 -- 3,849,999 -- 4,050,000 -- 3,949,999 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
3,900,000 -- 4,500,106 -- 5,475,600 -- 4,972,209 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
5,279,473 -- 4,500,106 -- 5,475,600 -- 4,972,209 --
-- -- -- -- -- -- -- --
$ 5,279,473 $ -- $ 4,500,106 $ -- $ 5,475,600 $ -- $ 4,972,209 $ --
============= =========== ============= =========== ============= =========== ============= ===========
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
============= =========== ============= =========== ============= =========== ============= ===========
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
============= =========== ============= =========== ============= =========== ============= ===========
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ------------------------------ ----------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- --
</TABLE>
<PAGE> 763
===============================================================================
30 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL LARGE CAP AMERICAN GENERAL LARGE CAP
GROWTH FUND - DIVISION 39 VALUE FUND - DIVISION 40
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ........................................... $ 2,093 $ -- $ 10,224 $ --
Net realized gain on investments ................................ -- -- -- --
Capital gains distributions from mutual funds ................... -- -- -- --
Net unrealized appreciation
of investments during the year ................................ 695,540 -- 716,526 --
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 697,633 -- 726,750 --
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... -- -- -- --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from VALIC general account 2,850,000 -- 2,900,000 --
------------- ------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 2,850,000 -- 2,900,000 --
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 3,547,633 -- 3,626,750 --
------------- ------------- ------------- -------------
Net Assets:
Beginning of year ............................................... -- -- -- --
End of year ..................................................... $ 3,547,633 $ -- $ 3,626,750 $ --
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- -- -- --
Purchase payments ............................................... - -- -- --
Surrenders ...................................................... -- -- -- --
Transfers -- interdivision and from VALIC general account ....... -- -- -- --
------------- ------------- ------------- -------------
Total units outstanding, end of year............................. -- -- -- --
============= ============= ============= =============
Units outstanding, by class:
Standard units ................................................ -- -- -- --
Enhanced units:
20 bp reduced ............................................... -- -- -- --
40 bp reduced ............................................... -- -- -- --
------------- ------------- ------------- -------------
Accumulation units end of year .................................. -- -- -- --
============= ============= ============= =============
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
Accumulation value per unit: ------------- -------------- ------------- --------------
Standard unit $ -- $ -- $ -- $ --
Enhanced unit:
20 bp reduced -- -- -- --
40 bp reduced -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 764
===============================================================================
SEPARATE ACCOUNT A 31
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL SOCIALLY AMERICAN GENERAL BALANCED AMERICAN GENERAL DOMESTIC AMERICAN GENERAL MONEY
RESPONSIBLE FUND - DIVISION 41 FUND - DIVISION 42 BOND FUND - DIVISION 43 MARKET FUND - DIVISION 44
- ------------------------------ -------------------------- -------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 23,760 $ -- $ 29,084 $ -- $ 14,978 $ -- $ 82,478 $ --
-- -- -- -- -- -- -- --
285,733 -- 34,051 -- 15,898 -- -- --
1,099,673 -- 805,536 -- 28,692 -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,409,166 -- 868,671 -- 59,568 -- 82,478 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
5,000,000 -- 5,000,000 -- 1,250,000 -- 5,000,000 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,000,000 -- 5,000,000 -- 1,250,000 -- 5,000,000 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,409,166 -- 5,868,671 -- 1,309,568 -- 5,082,478 --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 6,409,166 $ -- $ 5,868,671 $ -- $ 1,309,568 $ -- $ 5,082,478 $ --
============ ============ ============ ============ ============ ============ ============ ============
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
============ ============ ============ ============ ============ ============ ============ ============
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
============ ============ ============ ============ ============ ============ ============ ============
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- -------------------------- -------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
</TABLE>
<PAGE> 765
===============================================================================
32 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
AMERICAN GENERAL MODERATE GROWTH LIFESTYLE
FUND - DIVISION 49 FUND - DIVISION 49
------------------------ ------------------------
1998 1997 1998 1997
------------ ---------- ------------ ----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ........................................... $ 11,226 $ -- $ 19,912 $ --
Net realized gain on investments ................................ -- -- -- --
Capital gains distributions from mutual funds ................... -- -- -- --
Net unrealized appreciation
of investments during the year ................................. 970,379 -- 925,696 --
------------ ---------- ------------ ----------
Increase in net assets resulting from operations ........... 981,605 -- 945,608 --
------------ ---------- ------------ ----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... -- -- -- --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from VALIC
general account ............................................... 5,000,000 -- 5,000,000 --
------------ ---------- ------------ ----------
Increase in net assets
resulting from principal transactions .................... 5,000,000 -- 5,000,000 --
------------ ---------- ------------ ----------
TOTAL INCREASE IN NET ASSETS .................................... 5,981,605 -- 5,945,608 --
------------ ---------- ------------ ----------
NET ASSETS:
Beginning of year ............................................... -- -- -- --
------------ ---------- ------------ ----------
End of year ..................................................... $ 5,981,605 $ -- $ 5,945,608 $ --
============ ========== ============ ==========
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- -- -- --
Purchase payments ............................................... -- -- -- --
Surrenders ...................................................... -- -- -- --
Transfers - interdivision and from VALIC general account ........ -- -- -- --
------------ ---------- ------------ ----------
Total units outstanding, end of year ............................ -- -- -- --
============ ========== ============ ==========
Units outstanding, by class:
Standard units ................................................ -- -- -- --
Enhanced units:
20 bp reduced .............................................. -- -- -- --
40 bp reduced .............................................. -- -- -- --
------------ ---------- ------------ ----------
Accumulation units end of year .................................. -- -- -- --
============ ========== ============ ==========
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1998 1997 1998 1997
------------ ---------- ------------ ----------
Accumulation value per unit:
Standard unit ................................................. $ -- $ -- $ -- $ --
Enhanced unit:
20 bp reduced .............................................. -- -- -- --
40 bp reduced .............................................. -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 766
===============================================================================
SEPARATE ACCOUNT A 33
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL
CONSERVATIVE GROWTH LIFESTYLE AMERICAN GENERAL CORE BOND AMERICAN GENERAL STRATEGIC
FUND - DIVISION 50 FUND - DIVISION 58 BOND FUND - DIVISION 59
- --------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ----------- -------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 27,772 $ -- $ 50,247 $ -- $ 69,000 $ --
-- -- -- -- -- --
-- -- 16,291 -- 11,064 --
800,941 -- 95,397 -- 185,469 --
- ----------- -------- -------------- ---------- ------------- -------------
828,713 -- 161,935 -- 265,533 --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
5,000,000 -- 5,000,001 -- 4,999,999 --
- ----------- -------- -------------- ---------- ------------- -------------
5,000,000 -- 5,000,001 -- 4,999,999 --
- ----------- -------- -------------- ---------- ------------- -------------
5,828,713 -- 5,161,936 -- 5,265,532 --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
$ 5,828,713 $ -- $ 5,161,936 $ -- $ 5,265,532 $ --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
DECEMBER 31 DECEMBER 31 DECEMBER 31
- --------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ----------- -------- -------------- ---------- ------------- -------------
$ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- --
-- -- -- -- -- --
</TABLE>
<PAGE> 767
===============================================================================
34 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
HIGH YIELD BOND T. ROWE PRICE SMALL-CAP
FUND - DIVISION 60 STOCK FUND - DIVISION 51
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 92,262 $ -- $ -- $ --
Net realized gain on investments ................................... -- -- -- --
Capital gains distributions from mutual funds ...................... -- -- -- --
Net unrealized appreciation
of investments during the year .................................. 189,911 -- -- --
---------- ------------ ---------- ------------
Increase in net assets resulting from operations .............. 282,173 -- -- --
---------- ------------ ---------- ------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. -- -- 139 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ -- -- -- --
Annuity benefit payments ........................................... -- -- -- --
Amounts transferred interdivision, and from VALIC general account .. 5,000,000 -- -- --
---------- ------------ ---------- ------------
Increase in net assets
resulting from principal transactions ....................... 5,000,000 -- 139 --
---------- ------------ ---------- ------------
TOTAL INCREASE IN NET ASSETS ....................................... 5,282,173 -- 139 --
NET ASSETS:
Beginning of year .................................................. -- -- -- --
---------- ------------ ---------- ------------
End of year ........................................................ $5,282,173 $ -- $ 139 $ --
---------- ------------ ---------- ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................... -- -- -- --
Purchase payments .................................................. -- -- 122 --
Surrenders ......................................................... -- -- -- --
Transfers -- interdivision and from VALIC general account .......... -- -- -- --
---------- ------------ ---------- ------------
Total units outstanding, end of year ............................... -- -- 122 --
---------- ------------ ---------- ------------
Units outstanding, by class:
Standard units ................................................... -- -- 122 --
Enhanced units:
20 bp reduced ................................................. -- -- -- --
40 bp reduced ................................................. -- -- -- --
---------- ------------ ---------- ------------
Accumulation units end of year ..................................... -- -- 122 --
---------- ------------ ---------- ------------
DECEMBER 31 DECEMBER 31
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ---------- ------------
Accumulation value per unit:
Standard unit..................................................... $ -- $ -- $1.141049 $ --
Enhanced unit:
20 bp reduced.................................................. -- -- -- --
40 bp reduced.................................................. -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 768
===============================================================================
SEPARATE ACCOUNT A 35
===============================================================================
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 fifty-five 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 (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)
American General Series Portfolio Company 3 ("AGSPC 3"):
American General International Growth Fund (Division 33)
American General Large Cap Growth Fund (Division 39)
American General Mid Cap Growth Fund (Division 37)
American General Small Cap Growth Fund(Division 35)
American General International Value Fund (Division 34)
American General Large Cap Value Fund (Division 40)
American General Mid Cap Value Fund (Division 38)
American General Small Cap Value Fund (Division 36)
American General Socially Responsible Fund (Division 41)
American General Balanced Fund (Division 42)
American General High Yield Bond Fund (Division 60)
American General Strategic Bond Fund (Division 59)
American General Domestic Bond Fund (Division 43)
American General Core Bond Fund (Division 58)
American General Money Market Fund (Division 44)
American General Growth Lifestyle Fund (Division 48)
American General Moderate Growth
Lifestyle Fund (Division 49)
American General Conservative Growth
Lifestyle Fund (Division 50)
Dreyfus Variable Investment Fund -
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 Long-Term Corporate Fund (Division 22)
Vanguard Long-Term Treasury Fund (Division 23)
Vanguard Wellington Fund (Division 25)
Vanguard Windsor II Fund (Division 24)
Vanguard Lifestrategy Growth Fund (Division 52)
Vanguard Lifestrategy Moderate Growth Fund (Division 53)
Vanguard Lifestrategy Conservative Growth Fund (Division 54)
T. Rowe Price Small-Cap Stock Fund (Division 51)
Divisions 33 through 54 and 58 through 60 became available to contract holders
of the Separate Account effective September 22,1998.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets 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.
USE OF ESTIMATES. The financial statements have been prepared in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and disclosure of contingent
assets and liabilities. Ultimate results could differ from these estimates.
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 each 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 purchase 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, the Annuity 2000 Mortality Table, and the 1994 Group Annuity
Reserve Mortality Table have 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.
ACCUMULATION UNITS. VALIC offers both standard and enhanced contracts.
These contracts may have different Separate Account charges.
<PAGE> 769
===============================================================================
36 NOTES TO FINANCIAL STATEMENTS
===============================================================================
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment advisor ("the Advisor"), transfer agent, and
accounting services agent to AGSPC and AGSPC 3. American General Investment
Management, LLP, an affiliate of the Advisor, serves as investment sub-advisor
to certain AGSPC 3 mutual funds.
The Separate Account is charged for mortality and expense risks
assumed by VALIC and for distribution and administrative services provided by
VALIC. The standard 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 through 8, 10A, 10C and 10D, 11 through
17, 33 through 44, 48 through 50, and 58 through 60, 1.00%; and for Divisions
18 through 32, and 51 through 54, 1.25%. Certain 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 through 23, 26 through 30, 32 through 44, 48
through 50, and 58 through 60, 0.25%; for Division 31, 0.24% (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); and for Division
18, 0.15% (commencing July 1, 1997). Separate Account charges may be reduced if
contracts are issued to certain types of plans that are expected to result in
lower costs to VALIC. Consequently, each division may offer separate "classes"
of units of beneficial interest reflecting reductions in separate account
charges.
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, 1998 and 1997, VALIC reduced expenses of Division 10B
by $82,027 and $85,996, respectively.
A portion of the annual contract maintenance charge is assessed on
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 $5,575,601 and $4,510,903 for the
years ended December 31, 1998 and 1997, respectively.
VALIC received surrender charges of $4,581,641 and $2,769,370 for the
years ended December 31, 1998 and 1997, respectively. In addition, VALIC
received $53,171 and $6,156 for the year ended December 31, 1998, in sales load
on variable annuity purchase payments for Divisions 10A and 10B, respectively.
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 contributed to the Separate Account, $100,000 and $74,900,000 on
August 26, 1998 and September 1, 1998, respectively, in order to provide
initial funding for the AGSPC 3 mutual funds. Capital surplus amounts reflected
in the Statements of Net Assets for Divisions 33 through 44, 48 through 50 and
58 through 60 are not subject to contract holder charges since they do not
represent reserves for annuity contracts issued.
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, 1998:
<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 13,079,920 $11.37 $ 148,718,766 $ 148,478,416 $ 240,350
Putnam Global Growth Fund ................. 28 13,080,357 12.45 162,850,092 149,345,622 13,504,470
Templeton Foreign Fund .................... 32 26,018,073 8.39 218,291,648 267,772,677 (49,481,029)
Templeton International Fund .............. 20 37,187,918 20.69 769,418,093 672,572,557 96,845,536
AGSPC Science & Technology Fund ........... 17 52,052,496 26.07 1,357,008,368 1,058,583,311 298,425,057
AGSPC Small Cap Index Fund ................ 14 14,788,462 15.26 225,671,866 216,780,123 8,891,743
Dreyfus Variable Investment Fund -
Small Cap Portfolio ..................... 18 14,871,620 53.91 801,729,449 709,332,114 92,397,335
Putnam New Opportunities Fund ............. 26 7,047,598 58.43 411,790,940 341,359,629 70,431,311
Putnam OTC & Emerging Growth Fund ......... 27 8,240,758 17.25 142,153,064 128,583,339 13,569,725
AGSPC Growth Fund ......................... 15 53,087,130 22.85 1,213,041,349 867,944,168 345,097,181
AGSPC MidCap Index Fund ................... 4 33,517,770 25.37 850,345,675 593,845,989 256,499,686
American Century - Twentieth Century
Ultra Fund .............................. 31 10,965,109 33.41 366,344,764 344,297,873 22,046,891
Founders Growth Fund ...................... 30 20,206,988 20.41 412,424,559 377,960,267 34,464,292
AGSPC Growth & Income Fund ................ 16 14,227,222 20.04 285,113,626 214,814,089 70,299,537
AGSPC Social Awareness Fund ............... 12 19,099,259 22.77 434,890,057 350,790,377 84,099,680
AGSPC Stock Index Fund .................... 10A,B,C,D 106,096,626 37.54 3,982,866,943 2,020,245,208 1,962,621,735
Neuberger Berman Guardian Trust ........... 29 3,796,199 16.16 61,347,128 68,195,002 (6,847,874)
Scudder Growth and Income Fund ............ 21 9,416,745 26.31 247,754,620 259,592,520 (11,837,900)
Vanguard Windsor II Fund .................. 24 21,811,605 29.85 651,075,950 634,903,452 16,172,498
Templeton Asset Allocation Fund ........... 19 14,431,830 22.46 324,138,930 290,415,546 33,723,384
AGSPC Asset Allocation Fund ............... 5 16,111,443 14.12 227,493,681 191,458,464 36,035,217
</TABLE>
<PAGE> 770
===============================================================================
SEPARATE ACCOUNT A 37
===============================================================================
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
-------- ------ ----- ------ ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Vanguard Wellington Fund ................. 25 13,852,716 29.35 $ 406,576,731 $ 416,038,579 $ (9,461,848)
AGSPC International Government
Bond Fund .............................. 13 13,339,220 12.68 169,141,402 158,031,435 11,109,967
AGSPC Capital Conservation Fund .......... 1 & 7 6,849,612 9.68 66,304,225 65,365,302 938,923
AGSPC Government Securities Fund ......... 8 10,966,460 10.35 113,502,848 110,444,717 3,058,131
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Fund ............... 22 6,441,710 9.29 59,843,445 59,275,925 567,520
Long-Term Treasury Fund ................ 23 10,501,171 11.36 119,293,240 115,581,241 3,711,999
AGSPC Money Market Fund .................. 2 & 6 270,445,756 1.00 270,445,756 270,445,756 --
American General International
Growth Fund ............................ 33 365,269 10.55 3,853,567 3,652,817 200,750
American General Large Cap Growth Fund ... 39 285,293 12.44 3,549,043 2,853,503 695,540
American General Mid Cap Growth Fund ..... 37 405,021 13.52 5,475,870 4,050,270 1,425,600
American General Small Cap Growth Fund ... 35 391,362 13.49 5,279,473 3,918,373 1,361,100
American General International
Value Fund ............................. 34 360,507 11.52 4,153,036 3,605,760 547,276
American General Large Cap Value Fund .... 40 290,838 12.47 3,626,750 2,910,224 716,526
American General Mid Cap Value Fund ...... 38 405,233 12.27 4,972,209 4,075,640 896,569
American General Small Cap Value Fund .... 36 390,634 11.52 4,500,106 3,914,722 585,384
American General Socially
Responsible Fund ....................... 41 525,342 12.20 6,409,166 5,309,493 1,099,673
American General Balanced Fund ........... 42 505,484 11.61 5,868,671 5,063,135 805,536
American General High Yield Bond Fund .... 60 508,880 10.38 5,282,173 5,092,262 189,911
American General Strategic Bond Fund ..... 59 507,766 10.37 5,265,532 5,080,063 185,469
American General Domestic Bond Fund ...... 43 128,012 10.23 1,309,568 1,280,876 28,692
American General Core Bond Fund .......... 58 506,569 10.19 5,161,936 5,066,538 95,398
American General Money Market Fund ....... 44 5,082,478 1.00 5,082,478 5,082,478 --
American General Growth Lifestyle Fund ... 48 501,813 11.94 5,991,538 5,021,159 970,379
American General Moderate Growth
Lifestyle Fund ......................... 49 502,116 11.85 5,950,028 5,024,332 925,696
American General Conservative Growth
Lifestyle Fund ......................... 50 502,580 11.60 5,829,911 5,028,970 800,941
T. Rowe Price Small-Cap Stock Fund ....... 51 7 20.79 139 139 --
Total .................................. 853,696,997 $14,587,138,409 $11,178,484,452 $ 3,408,653,957
</TABLE>
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 sales 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, 1998, 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 ................... $ 70,340,669 $ 86,195,191
Putnam Global Growth Fund Division 28 ........................... 84,411,341 2,105,181
Templeton Foreign Fund Division 32 .............................. 82,320,483 9,313,676
Templeton International Fund Division 20 ........................ 176,311,032 153,728,857
AGSPC Science & Technology Fund Division 17 ..................... 262,237,519 101,549,488
AGSPC Small Cap Index Fund Division 14 .......................... 56,957,370 35,775,340
Dreyfus Variable Investment Fund -
Small Cap Portfolio Division 18 ........................... 63,341,013 64,349,216
Putnam New Opportunities Fund Division 26 ....................... 196,437,438 3,727,492
Putnam OTC & Emerging Growth Fund Division 27 ................... 43,601,585 7,874,482
AGSPC Growth Fund Division 15 ................................... 168,030,279 22,896,950
AGSPC MidCap Index Fund Division 4 .............................. 121,443,834 59,433,835
American Century - Twentieth Century Ultra Fund Division 31 ..... 206,441,197 3,102,142
Founders Growth Fund Division 30 ................................ 203,148,927 4,157,924
AGSPC Growth & Income Fund Division 16 .......................... 35,712,751 22,023,607
</TABLE>
<PAGE> 771
===============================================================================
38 NOTES TO FINANCIAL STATEMENTS
===============================================================================
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPC Social Awareness Fund Division 12 .............................. $ 155,478,764 $ 4,747,514
AGSPC Stock Index Fund:
Division 10A ................................................ 16,487,825 57,170,007
Division 10B ................................................ 1,430,916 5,138,856
Division 10C ................................................ 409,382,612 36,743,609
Division 10D ................................................ 2,305,198 7,769,904
Neuberger Berman Guardian Trust Division 29 .......................... 24,369,333 4,106,246
Scudder Growth and Income Fund Division 21 ........................... 134,037,172 6,545,427
Vanguard Windsor II Fund Division 24 ................................. 380,154,266 5,838,118
Templeton Asset Allocation Fund Division 19 .......................... 48,497,460 40,983,269
AGSPC Asset Allocation Fund Division 5 ............................... 37,672,428 10,217,954
Vanguard Wellington Fund Division 25 ................................. 267,401,470 4,016,568
AGSPC International Government Bond Fund Division 13 ................. 63,147,566 81,054,776
AGSPC Capital Conservation Fund:
Division 1 .................................................. 832,531 1,006,283
Division 7 .................................................. 16,631,338 12,372,606
AGSPC Government Securities Fund Division 8 .......................... 54,546,370 32,043,559
Vanguard Long-Term Corporate Fund Division 22 ........................ 42,256,730 2,903,724
Vanguard Long-Term Treasury Fund Division 23 ......................... 102,868,659 11,315,873
AGSPC Money Market Fund:
Division 2 .................................................. 2,987,800 3,330,427
Division 6 .................................................. 379,702,464 248,100,695
American General International Growth Fund Division 33 ............... 3,652,817 --
American General Large Cap Growth Fund Division 39 ................... 2,853,503 --
American General Mid Cap Growth Fund Division 37 ..................... 4,050,270 --
American General Small Cap Growth Fund Division 35 ................... 3,918,373 --
American General International Value Fund Division 34 ................ 3,605,760 --
American General Large Cap Value Fund Division 40 .................... 2,910,224 --
American General Mid Cap Value Fund Division 38 ...................... 4,075,640 --
American General Small Cap Value Fund Division 36 .................... 3,914,722 --
American General Socially Responsible Fund Division 41 ............... 5,309,493 --
American General Balanced Fund Division 42 ........................... 5,063,135 --
American General High Yield Bond Fund Division 60 .................... 5,092,262 --
American General Strategic Bond Fund Division 59 ..................... 5,080,063 --
American General Domestic Bond Fund Division 43 ...................... 1,280,876 --
American General Core Bond Fund Division 58 .......................... 5,066,538 --
American General Money Market Fund Division 44 ....................... 5,082,478 --
American General Growth Lifestyle Fund Division 48 ................... 5,021,159 --
American General Moderate Growth Lifestyle Fund Division 49 .......... 5,024,332 --
American General Conservative Growth Lifestyle Fund Division 50 ...... 5,028,970 --
T. Rowe Price Small-Cap Stock Fund Division 51 .............. 139 --
-------------- --------------
Total ....................................................... $3,986,957,094 $1,151,638,796
============== ==============
</TABLE>
NOTE G -- YEAR 2000 (UNAUDITED)
VALIC is in the process of modifying its systems to achieve Year 2000
readiness. This endeavor is directed and managed by VALIC and monitored by the
parent company, American General Corporation. VALIC has developed clearly
defined and documented plans that have been implemented to minimize the risk of
significant negative impact on its operations.
These plans include the following activities: (1) perform an inventory
of VALIC's information technology and non-information technology systems; (2)
assess which items in the inventory may expose VALIC to business interruptions
due to Year 2000 issues; (3) test systems for Year 2000 readiness; (4)
reprogram or replace systems that are not Year 2000 ready; and (5) return the
systems to operation.
In addition, the Separate Account and VALIC have business
relationships with various third parties, each of which must also be Year 2000
ready. Therefore, VALIC's plans also include assessing and attempting to
mitigate the risks associated with the potential failure of third parties, as
well as contingency plans for any identified risks or shortcomings, to achieve
Year 2000 readiness. Due to the various stages of the third parties' Year 2000
readiness, VALIC's efforts in this regard will extend through 1999.
Through December 31, 1998, VALIC has incurred and expensed $26.7
million (pretax) related to Year 2000 readiness, including $20.2 million
incurred in 1998.
As of December 31, 1998, VALIC has completed the inventory,
assessment, testing, reprogramming and implementation phases of the plan with
respect to its critical systems. VALIC believes its comprehensive plan and
resource commitment will allow it to meet its Year 2000 objectives. However,
the Year 2000 issue remains complex and the risks, uncertainties, and
unforeseen circumstances associated with the Year 2000 issue could have a
material adverse impact on VALIC and the Separate Account.
<PAGE> 772
================================================================================
REPORT OF INDEPENDENT AUDITORS 39
================================================================================
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 ("the Separate Account") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, 11 through 44
inclusive, 48 through 51 inclusive, and 58 through 60, inclusive) comprising
the Separate Account as of December 31, 1998. 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 the
Separate Account and each of its divisions except for divisions 33 through 44
inclusive, divisions 48 through 50 inclusive, and divisions 58 through 60,
inclusive, for which we have audited the statements of operations and changes
in net assets for the period from August 26, 1998 (inception) to December 31,
1998, and for division 51 for which we have audited the statements of
operations and changes in net assets for the period from September 22, 1998
(inception) through December 31, 1998. These financial statements are the
responsibility of the Separate Account'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, 1998,
by correspondence with the transfer agents. 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 the Separate Account and each
of the divisions comprising the Separate Account at December 31, 1998, 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 15, 1999
<PAGE> 773
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875-1 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 774
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR
--------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1999
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for Portfolio
Director dated May 1, 1999 ("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 A.G. Distributors, Inc. ("A.G.
Distributors") at 2929 Allen Parkway, Houston, Texas 77019; 1-800-44-VALIC.
Prospectuses are also available from regional sales offices of A.G. Distributors
or from its registered sales representatives.
1
<PAGE> 775
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 6
Types of Variable Annuity Contracts......................... 8
Federal Tax Matters......................................... 8
Tax Consequences of Purchase Payments..................... 8
Tax Consequences of Distributions......................... 10
Special Tax Consequences -- Early Distribution............ 11
Special Tax Consequences -- Required Distributions........ 12
Tax Free Rollovers, Transfers and Exchanges............... 13
Exchange Privilege.......................................... 13
Exchanges From Independence Plus Contracts................ 13
Exchanges From V-Plan Contracts........................... 14
Exchanges From SA-1 and SA-2 Contracts.................... 15
Exchanges From Impact Contracts........................... 17
Exchanges From Compounder Contracts....................... 18
Information Which May Be Applicable To Any Exchange....... 18
Calculation of Surrender Charge............................. 20
Illustration of Surrender Charge on Total Surrender....... 20
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 20
Purchase Unit Value......................................... 21
Illustration of Calculation of Purchase Unit Value........ 21
Illustration of Purchase of Purchase Units................ 21
Performance Calculations.................................... 21
AGSPC Money Market Division Yields........................ 21
Calculation of Current Yield for AGSPC Money Market
Division Six........................................... 21
Illustration of Calculation of Current Yield for AGSPC
Money Market Division Six.............................. 21
Calculation of Effective Yield for AGSPC Money Market
Division Six........................................... 21
Illustration of Calculation of Effective Yield for AGPSC
Money Market Division Six.............................. 21
Standardized Yield for Divisions Seven, Eight and
Thirteen.................................................. 22
Calculation of Standardized Yield for Divisions Seven,
Eight and Thirteen..................................... 22
Illustration of Calculation of Standardized Yield for
Divisions Seven, Eight and Thirteen.................... 22
Calculation of Average Annual Total Return................ 23
Performance Information..................................... 23
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to
Benchmark Tables....................................... 23
Performance Compared to Market Indices.................... 24
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.................................................. 27
AGSPC Capital Conservation Division Seven Performance
Compared to Merrill Lynch Corporate Master Index....... 28
AGSPC Government Securities Division Eight Performance
Compared to Lehman Brothers U.S. Treasury Composite
Index.................................................. 29
AGSPC Growth Division Fifteen Performance Compared to S&P
500 Index.............................................. 29
AGSPC Growth & Income Division Sixteen Performance
Compared to S&P 500 Index.............................. 30
AGSPC International Equities Division Eleven Performance
Compared to EAFE Index................................. 30
AGSPC International Government Bond Division Thirteen
Performance Compared to Salomon Brothers Non-U.S.
Dollar World Government Bond Index..................... 31
AGSPC MidCap Index Division Four Performance Compared to
S&P MidCap 400 Index................................... 32
</TABLE>
2
<PAGE> 776
<TABLE>
<S> <C>
AGSPC Money Market Division Six Performance Compared to
Certificate of Deposit Primary Offering by New York
City Banks, 30 Day Index............................... 33
AGSPC Science & Technology Division Seventeen Performance
Compared to S&P 500 Index.............................. 33
AGSPC Small Cap Index Division Fourteen Performance
Compared to Russell 2000 Index......................... 34
AGSPC Social Awareness Division Twelve Performance
Compared to S&P 500 Index.............................. 34
AGSPC Stock Index Division Ten Performance Compared to S&P
500 Index.............................................. 35
Dreyfus Variable Investment Fund -- Small Cap Division
Eighteen Performance Compared to Russell 2000.......... 35
Templeton Asset Allocation Division Nineteen Performance
Compared to MSCI World Index, Salomon Brothers World
Government Bond Index, and Certificate of Deposit
Primary Offering by New York City Banks, 30 Day
Index.................................................. 36
Templeton International Division Twenty Performance
Compared to MSCI World Index........................... 37
Payout Payments............................................. 37
Assumed Investment Rate................................... 37
Amount of Payout Payments................................. 37
Payout Unit Value......................................... 38
Illustration of Calculation of Payout Unit Value.......... 38
Illustration of Payout Payments........................... 39
Distribution of Variable Annuity Contracts.................. 39
Experts..................................................... 39
Comments on Financial Statements............................ 40
</TABLE>
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GENERAL INFORMATION
The Variable Annuity Life Insurance Company (the "Company") is a stock life
insurance company organized under the laws of the State of Texas and is engaged
primarily in the offering and issuance of fixed and variable retirement annuity
contracts and combinations thereof. The Company also is licensed to write life
insurance in all states (other than Connecticut) and the District of Columbia,
and annuities in all fifty states and the District of Columbia. The Company is
an indirectly wholly owned subsidiary of American General Corporation.
On July 25, 1979, the Company established Separate Account A (the Separate
Account) in accordance with the Texas Insurance Code. The Separate Account is
registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "Act").
Each Division of the Separate Account (except for AGSPC's International
Government Bond Fund which is a non-diversified Fund) invests in the shares of a
diversified, open-end, management-type investment company registered under the
Act, or a portfolio of a diversified, open-end, management investment company
registered under the Act. The Separate Account currently is made up of 53
Divisions.
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$3.7 billion as of December 31, 1998. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,954,190
accounts as of December 31, 1998. The number of employer groups which have
purchased Contracts has increased by 178 percent in the past ten years to more
than 28,094 as of December 31, 1998. As of December 31, 1998, 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, 1998 the Company's assets totaled more than $39
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
As of December 31, 1998, the Company was marketing Contracts in more than
10,218 public and private, primary and secondary schools with more than 494,584
participant accounts for employees in public and private schools nationwide.
From December 31, 1988 to December 31, 1998, the cash value of investments in
these Contracts has increased by 269 percent while the number of public and
private school groups in these Contracts increased 97 percent and the number of
participant accounts in these Contracts increased by 111 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1988 to December 31, 1998, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 166 percent and for the same period the
number of participant accounts has increased 131 percent. For the same time
period cash values for participants have increased 306 percent. As of December
31, 1998, more than 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 segment of the
not-for-profit organization market. From December 31, 1988 to December 31, 1998
Contract cash values have increased 802 percent. During the same period the
number of healthcare groups that have purchased these Contracts increased 274
percent and the number of participant accounts increased 727 percent.
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<PAGE> 778
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1988 to December 31, 1998, Contract
cash values for participants in these groups have increased 310 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 229 percent and the number of employer groups has
increased 303 percent.
Additionally, several states have enacted, as an alternative to state
administered defined benefit retirement programs, Optional Retirement Plans
(ORPs). A state that sponsors an ORP will select the carriers which will be
allowed to participate in the ORP. The Company has been selected as one of the
carriers permitted to market Contracts to state employees who elect to
participate in the ORP in 28 of the last 31 states to sponsor ORPs as an
alternative to a state defined, benefit plan and offers multiple carriers, as of
December 31, 1998. From December 31, 1993 to December 31, 1998, in these ORPs
the number of participant accounts increased 81 percent and cash values
increased 153 percent to nearly $2.7 billion dollars.
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
MidCap 400 Index, Russell 2000 Index, Morgan Stanley Capital International
Europe, Australia, and Far East (EAFE) Index, or any other appropriate market
index. The indexes are not managed funds and have no identifiable investment
objectives.
The Company may, from time to time, refer, individually or collectively, to
its package of retirement plan services. Collectively, this package of services
may be referred to as easy Retirement Plan, easy Retirement Plan includes: (1)
personal, face-to-face service from highly trained VALIC Retirement 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.
The Company may, from time to time 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., The Variable Annuity Research &
Data Services ("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
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<PAGE> 779
that market segment, e.g., the health care segment of the not-for-profit
organization market. This sales literature and material may also be specific to
a certain group. For example, sales literature and material may be designed for
a specific hospital. The sales literature and material would address
specifically the group's contract and retirement plan.
The Company, in its marketing efforts, may also refer to the following
investment advisers referenced in the Prospectus.
The Company may, from time to time, refer to The Dreyfus Corporation as
adviser for the Dreyfus Small Cap Portfolio (underlying Division Eighteen).
Dreyfus has been helping Americans invest for their future with quality mutual
funds for more than four decades. In 1994, Dreyfus joined forces with Mellon
Bank and the Boston Company to form an investment management organization with
over $300 billion in assets under management. Through 10 investment subsidiaries
and affiliates, Dreyfus/Mellon Global Asset Management offers a broad array of
products and services and a spectrum of investment opportunities designed to
provide competitive returns at varying risk levels. Dreyfus, as of December 31,
1998, had approximately $110 billion of assets under management.
For more than 40 years, the Templeton organization has been a leading
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 over $220 billion Franklin Templeton Group with
approximately 7 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 internal investing. Templeton, as of December 31, 1998, had
approximately $90 billion in assets under management.
The Company may, from time to time, refer to T. Rowe Price Associates, Inc.
(T. Rowe Price), as subadviser to the AGSPC Science & Technology Fund
(underlying Division Seventeen) and the AGSPC Growth Fund (underlying Division
Fifteen). T. Rowe Price, one of the nation's leading no-load mutual fund
managers, manages money for more than 6 million individual and institutional
accounts on the basis of proprietary research and a strict investment discipline
developed over 60 years. T. Rowe Price has delivered strong performance for its
clients by investing in both large- and small-growth companies which operate in
the service sector of the economy, and also by investing in common stocks of
companies expected to benefit from the development, advancement and use of
science and technology. This includes industries such as telecommunications,
computers, software, medical devices and biotechnology. T. Rowe Price, together
with its affiliates, as of December 31, 1998, had more than $148 billion of
assets under management.
The Company may, from time to time, refer to the Bankers Trust Company as
subadviser to AGSPC Stock Index Fund (underlying Division 10), AGSPC MidCap
Index Fund (underlying Division 4), and AGSPC Small Cap Index Fund (underlying
Division 14).
Bankers Trust Company is a wholly owned subsidiary of Bankers Trust
Corporation. On November 30, 1998, Bankers Trust Corporation entered into an
Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation and all of its subsidiaries would merge with and into a subsidiary
of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that
is engaged in a wide range of financial services, including retail and
commercial banking, investment banking and insurance. The merger is contingent
upon various regulatory approvals. On April 20, 1999, the AGSPC Fund's Board of
Directors approved a new investment sub-advisory agreement with Bankers Trust
Company, subject to shareholder approval. If the merger is approved and
completed, Deutsche Bank AG, as the Sub-Adviser's new parent company, will
control the operations of the Sub-Adviser. Bankers Trust believes that, under
this new arrangement, the services provided to the Fund will be maintained at
their current level.
On March 11, 1999, Bankers Trust announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related recordkeeping problems that occurred between 1994 and early 1996.
Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
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<PAGE> 780
$60 million fine to federal authorities. Separately, Bankers Trust agreed to pay
a $3.5 million fine to the State of New York. The events leading up to the
guilty pleas did not arise out of the investment advisory or mutual fund
management activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would
not be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
The Company may, from time to time, refer in advertisements or sales
materials to certain milestones which are intended to emphasize the Company's
growth and development in assets, groups and various market segments. The
Company may also refer to other versions of Portfolio Director in advertisements
or sales material. The Company may refer to certain aspects of its products such
as having a variety of shared mutual funds available 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 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. An A++
rating means, in the opinion of A. M. Best, that the insurer has demonstrated
the strongest ability to meet its respective policyholder and other contractual
obligations.
In addition, the claims-paying ability of the Company as measured by the
Standard and Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to D.
Further, from time to time the Company may refer to Moody's Investor's
Service's rating of the Company. Moody's Investor's Service's financial strength
ratings indicate an insurance company's ability to discharge senior policyholder
obligations and claims and are based on an analysis of the insurance company and
its relationship to its parent, subsidiaries and affiliates. Moody's Investor's
Service's ratings range from Aaa to C.
The Company may additionally refer to its Duff & Phelp's rating. A Duff &
Phelp's rating is an assessment of a company's insurance claims paying ability.
Duff & Phelp's ratings range from AAA to CCC. An AAA rating reflects that a
company has the highest claims paying ability.
Ratings relate to the claims paying ability of the Company's General
Account and not the investment characteristics of the Separate Account.
The Company may from time to time, refer to Lipper Analytical Services
Incorporated ("Lip-
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<PAGE> 781
per"), Morningstar, Inc. ("Morningstar") and CDA/Wiesenberger Investment
Companies (CDA/Wiesenberger) when discussing the performance of its Divisions.
Lipper, Morningstar and CDA/Wiesenberger are leading publishers of statistical
data about the investment company industry in the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. The published categories which
may be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to the VARDS. The VARDS Report
offers monthly analysis of the variable annuity industry, including marketing
and performance information.
The Company may, from time to time, refer to Bankers Trust Company's
Tactical Asset Allocation Model's historical performance and compare such
performance to that of the S&P 500 Index. Neither the Model nor the S&P 500
Index is a managed fund and neither have identifiable investment objectives.
Finally the Company will utilize as a comparative measure for the
performance of its Funds the Consumer Price Index ("CPI"). The CPI is a measure
of change in consumer prices, as determined in a monthly survey of the U.S.
Bureau of Labor Statistics. Housing costs, transportation, food, electricity,
changes in taxes and labor costs are among the CPI components. The CPI provides
a tool for determining the impact of inflation on an individual's purchasing
power.
TYPES OF VARIABLE ANNUITY
CONTRACTS
Flexible payment deferred annuity Contracts are offered in connection with
the prospectus to which this Statement of Additional Information relates.
Under flexible payment Contracts, Purchase Payments generally are made
until retirement age is reached. However, no Purchase Payments are required to
be made after the first payment. Purchase Payments are subject to any minimum
payment requirements under the Contract.
Under deferred annuity contracts, Purchase Payments are invested and
accumulate on a fixed or variable basis until the date the Contract Owner
selects to commence annuity payments.
Under immediate annuity Contracts, the first annuity payment is made on the
first day of the second month after the Purchase Payment is received. During the
period before the Annuity Date, the Purchase Payments are invested in the same
manner, and the other terms and conditions (including the options and rights of
Contract Owners, Annuitants and Beneficiaries) are the same under immediate
annuity Contracts as under deferred annuity Contracts.
The Contracts are non-participating and will not share in any of the
profits of the Company.
FEDERAL TAX MATTERS
This Section summarizes the major tax consequences of contributions,
payments, and withdrawals under Portfolio Director, during life and at death.
TAX CONSEQUENCES OF PURCHASE PAYMENTS
403(b) Annuities. Purchase Payments made by Section 501(c)(3) tax-exempt
organizations and public educational institutions toward Contracts for their
employees are excludable from the gross income of employees, to the extent
aggregate Purchase Payments do not exceed several competing tax limitations.
This gross income exclusion applies both to employer contributions and to your
voluntary and nonelective salary reduction contributions.
Your voluntary salary reduction contributions are generally limited to the
lesser $10,000 ($9,500
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before 1998), although additional, "catch-up" contributions are permitted under
certain circumstances. Combined employer and salary reduction contributions 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 fully deductible 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 $31,000 or less ($30,000 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 $51,000 or less ($50,000 for 1998, $40,000 or less
prior to 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: (i) perform services for the
government unit, and (ii) belong to a select group of management or highly
compensated employees and/or independent contractors.
This type of program allows eligible individuals to defer the receipt of
compensation (and taxes thereon) otherwise presently payable to them. If the
program is an eligible deferred compensation plan (an "EDCP"), in 1999 you may
contribute (and defer tax on) the lesser of $8,000 (indexed for
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<PAGE> 783
inflation) or 33 1/3% of your "includible" compensation (compensation from the
employer currently includible in taxable income). Additional, catch-up deferrals
are permitted in 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.
Simplified Employee Pension Plan ("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. In 1998 and 1999,
these salary reductions may not exceed $100,000 per year. This limit is indexed
and may be included in future years. 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.
Unfunded Deferred Compensation Plans. Private taxable employers may
establish unfunded, non-qualified deferred compensation plans for a select group
of management or highly compensated employees and/or for independent
contractors. Certain arrangements of nonprofit employers entered into prior to
August 16, 1986, and not subsequently modified, are also subject to the rules
discussed below.
An unfunded, deferred compensation plan is a bare contractual promise on
the part of the employer to defer current wages to some future time. The
Contract is owned by the employer and remains subject to the claims of the
employer's general creditors. Private taxable employers that are not natural
persons, however, are currently taxable on any increase in the Purchase Unit
Value attributable to Purchase Payments made after February 28, 1986 to such
Contracts. Participants have no present right or vested interest in the Contract
and are only entitled to payment in accordance with plan provisions.
Non-Qualified Contracts. Purchase Payments made under Non-Qualified
Contracts are neither excludible from the gross income of the Contract Owner nor
deductible for tax purposes. However, any increase in the Purchase Unit Value of
a Non-Qualified Contract resulting from the investment performance of VALIC
Separate Account A is not taxable to the Contract Owner until received by him.
Contract Owners that are not natural persons, however, are currently taxable on
any increase in the Purchase Unit Value attributable to Purchase Payments made
after February 28, 1986 to such Contracts.
TAX CONSEQUENCES OF DISTRIBUTIONS
403(b) Annuities. Voluntary salary reduction amounts accumulated after
December 31, 1988, and earnings on voluntary contributions before and after that
date, may not be distributed before one of the following:
(1) attainment of age 59 1/2;
(2) separation from service;
(3) death;
(4) disability, or
(5) hardship (hardship distributions are limited to salary reduction
contributions only, exclusive of earnings thereon).
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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) IRAs, 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.
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.
Unfunded Deferred Compensation Plans. Amounts received are includible in
gross income for the taxable year in which are paid or otherwise made available
to the recipient.
Non-Qualified Contracts. Partial redemptions 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 Owners'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, 1988, 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;
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<PAGE> 785
(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.
Currently, 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 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
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<PAGE> 786
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 inherited from the
same decedent 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.
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 an 408(b) individual
retirement account or annuity, or to another such plan.
408(b) IRAs. Funds may be transferred tax-free to an 408(b) IRA Contract in
a tax-free rollover, 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 over 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.
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<PAGE> 787
Special, complicated rules governing holding periods, avoidance of 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
408(b) IRA.
457 Plans. Tax-free transfer of EDCP amounts are permitted only to another
EDCP.
Unfunded Deferred Compensation Plans. Tax-free transfers or rollovers are
not allowed from these plans.
Non-Qualified Contracts. Certain of the Non-Qualified single payment
deferred annuity Contracts permit the Contract Owner to exchange the Contract
for a new deferred annuity contract prior to the commencement of annuity
payments. The exchange of one annuity contract for another is a tax-free
transaction under Section 1035, but is reportable to the IRS.
EXCHANGE PRIVILEGE
In the prospectus we described generally how under certain conditions we
will allow you to exchange from other fixed and/or variable contracts we issue
(other contracts) to Portfolio Director. These other contracts are listed in the
prospectus. A more detailed comparison of the features, charges and restrictions
between each of these listed other contracts and Portfolio Director is provided
below.
EXCHANGES FROM INDEPENDENCE PLUS
CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within five years of the date
such Purchase Payments were made. The most recent Purchase Payments are deemed
to be withdrawn first. Up to 10% of the Account Value may be surrendered in a
Participant Year without any surrender charge being imposed. Portfolio Director
imposes a similar surrender charge upon total or partial surrenders. Both the
Portfolio Director and Independence Plus Contracts have other similar provisions
where surrender charges are not imposed. However, Portfolio Director provides at
least one additional provision, not included in Independence Plus Contracts,
under which no surrender charge will be imposed. An additional provision allows
election of a systematic withdrawal method without surrender charges. (See
"Surrender 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 will be deemed to have been issued
on the same date as the Independence Plus Contract or certificate thereunder,
but no earlier than January 1, 1982. Purchase Payments exchanged into Portfolio
Director and which were made within five years before the date of exchange will
be treated as Purchase Payments under Portfolio Director for purposes of
calculating the surrender charge. Exchanged payments will be deemed to have been
made under Portfolio Director on the date they were made to Independence Plus
Contracts for purposes of calculating the surrender charge under Portfolio
Director.
Other Charges. Under the Independence Plus Contracts, a maintenance charge
of $20 is assessed for the first year and an annual charge of $15 is assessed
for the second and later years during the accumulation period. The charge is due
in quarterly installments. A daily fee is charged at the annual rate of 1% of
the daily net asset value allocable to the Variable Subaccounts to cover
administrative expenses (other than those covered by the annual charge) and
mortality risks assumed by the Company. For Portfolio Director, a quarterly
account maintenance 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. The fee may also be reduced or waived by the
Company for Portfolio Director if the administrative expenses are expected to be
lower for that Contract. (See "Reduction or Waiver of Account Maintenance Fee,
Surrender, Mortality and Expense Risk Fee or Administration and Distribution Fee
Charges" in the prospectus.) To cover expenses
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<PAGE> 788
not covered by the account maintenance fee and to compensate the Company for
assuming mortality risks and administration and distribution expenses under
Portfolio Director, an additional daily charge with an annualized rate of 1.00%
to 1.25%, depending upon the Variable Account Options selected, if any, on the
daily net asset value of VALIC Separate Account A is attributable to Portfolio
Director. (See "Separate Account Charges" in the prospectus)
Investment Options. Under Independence Plus Contracts ten divisions of
VALIC Separate Account A are available variable investment alternatives, each
investing in shares of a different underlying fund of the Series Company
portfolio. The ten mutual funds are managed by the Company for advisory fees at
annual rates ranging from .28% to .50% of each respective portfolio's average
daily net assets. In addition, two fixed investment options are available. Under
Portfolio Director, sixteen divisions of VALIC Separate Account A are available,
thirteen of which invest in a different investment portfolio of the Series
Company and three divisions of which invest in other mutual fund portfolios.
These mutual fund portfolios are managed either by the Company, the Dreyfus
Corporation, or Templeton Investment Counsel Inc. for advisory fees at annual
rates ranging from .28% to .90% of each portfolio's or mutual fund's average
daily net assets. Two fixed investment options are also available.
Annuity Options. Annuity options under Independence Plus Contracts provide
for payments on a fixed or variable basis, or a combination of both. The
Independence Plus Contract permits annuity payments for a designated period
between 3 and 30 years on a fixed basis only. Portfolio Director permits annuity
payments for a designated period between of 5 and 30 years on a fixed basis
only. Independence Plus Contracts and Portfolio Director both provide for
"betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM V-PLAN CONTRACTS
Sales/Surrender Charges. Under a V-Plan Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 7% of
the Purchase Payments withdrawn within five years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Up to 10% of the account value may be surrendered in a Participant Year
without any surrender charge being imposed. Portfolio Director also imposes a
surrender charge upon total or partial surrenders. However, the surrender charge
under Portfolio Director may not exceed 5% of any Purchase Payments withdrawn
within the most recent five years prior to the receipt of the surrender request
by the Company at its Home Office. V-Plan Contracts have other provisions where
surrender charges are not imposed. However, Portfolio Director provides at least
two additional provisions, not included in V-Plan Contracts, under which no
surrender charge will be imposed. Those Portfolio Director provisions include no
surrender charges on an election of the no charge systematic withdrawal method,
and where an employee-participant has maintained the account for a period of
five years and has attained the age 59 1/2. (See "Surrender Charge" in the
prospectus.) For purposes of satisfying the fifteen-year and five-year holding
requirements, Portfolio Director will be deemed to have been issued on the same
date as the V-Plan Contract or certificate thereunder, but no earlier than
January 1, 1982.
If there is a total or partial surrender, Purchase Payments exchanged into
Portfolio Director and which were made within five years before the date of
exchange will be treated as Purchase Payments under Portfolio Director for
purposes of calculating the surrender charge. Exchanged payments will be deemed
to have been made under Portfolio Director on the date they were made to the
V-Plan Contract for purposes of calculating the surrender charge under Portfolio
Director.
Other Charges. There are no administrative and risk charges under V-Plan
Contracts. For Portfolio Director, a quarterly account maintenance 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 Direc-
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tor. The fee may also be reduced or waived by the Company on Portfolio Director
if the administrative expenses are expected to be lower for that Contract. (See
"Reduction or Waiver of Account Maintenance Fee, 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, an additional daily charge with
an annualized rate of 1.00% to 1.25%, depending upon the Variable Account
Options selected, if any, on the daily net asset value of the VALIC Separate
Account A is attributable to Portfolio Director. (See "Separate Account Charges"
in the prospectus.)
Investment Options. There are no variable investment alternatives provided
under V-Plan Contracts.
Annuity Options. Annuity options under V-Plan Contracts provide for
payments on a fixed basis only. The V-Plan Contract permits annuity payments for
a designated period of 1 to 15 years. Under a V-Plan Contract, the designated
period option may, subject to adverse tax consequences, be commuted at any time
for its remaining value. Portfolio Director permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Under
Portfolio Director, Payout Payments may be made on a fixed or variable basis, or
a combination of both. Portfolio Director does not provide for commutation.
V-Plan Contracts and Portfolio Director both provide for "betterment of rates."
Under this provision, Payout Payments for fixed annuities will be based on
mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM SA-1 AND SA-2 CONTRACTS
(GUP-64, GUP-74, GTS VA CONTRACTS)
Sales/Surrender Charges. Under the SA-1 and SA-2 Contracts a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a SA-1 or SA-2 Contract is exchanged for Portfolio
Director the surrender charge under Portfolio Director will not apply to the
amount of Account Value applied to Portfolio Director ("Exchanged Amount").
Purchase Payments made to Portfolio Director, however, would be subject to a
surrender charge. In the case of a partial surrender, all Purchase Payments to
Portfolio Director will be deemed to be withdrawn before any Exchanged Amount is
deemed to be withdrawn. No exchange pursuant to this offer will be allowed
within 120 days of a transfer of fixed accumulations under a SA-1 or SA-2
Contract to the variable portion of such Contract. Under Portfolio Director, no
sales charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within the most recent five
years prior to the receipt of the surrender request by the Company at its Home
Office. For purposes of this surrender charge, the most recent Purchase Payments
are deemed to be withdrawn first. (See "Surrender 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, 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. The fee may also be reduced or waived by the Company on Portfolio
Director if the administrative expenses are expected to be lower for that
Contract. (See "Reduction or Waiver of Account Maintenance Fee, Surrender,
Mortality and Expense Risk
16
<PAGE> 790
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, an additional daily charge with an annualized
rate of 1.00% to 1.25%, depending upon the Variable Account Options selected, if
any, on the average daily net asset value of the Separate Account is
attributable to Portfolio Director. (See "Separate Account Charges" in the
prospectus.)
Investment Options. Under SA-1 and SA-2 Contracts only one division of
VALIC Separate Account A is available as a variable investment alternative. This
division invests in a portfolio of the Series Company. This portfolio is managed
by the Company for advisory fees at an annual rate of .29% of the portfolio's
average daily net assets. (Under a "grandfathering" arrangement, the total
advisory fees and certain other charges imposed against these Contracts are
limited to a maximum of the rate charged on April 1, 1987. See the prospectus
for these Contracts dated April 20, 1987.) Under Portfolio Director, sixteen
divisions of VALIC Separate Account A are available, thirteen of which invest in
a different investment portfolio of the Series Company and three divisions of
which invest in other mutual fund portfolios. These mutual fund portfolios are
managed by either the Company, The Dreyfus Corporation, or Templeton Investment
Counsel Inc., for advisory fees at annual rates ranging from .28% to .90% of
each portfolio's or mutual fund's average daily net assets. Additionally, two
fixed investment options are available under Portfolio Director.
Annuity Options. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on a fixed or variable basis, or a combination of both. The SA-1
Contract annuity payments under a designated period option are limited to 15
years on a fixed basis only. Under this Contract, the designated period option
may, subject to adverse tax consequences, be commuted at any time for its
remaining value. SA-2 Contracts do not provide a designated period option nor do
they provide for commutation. Portfolio Director permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Portfolio
Director does not provide for commutation. The SA-1 and SA-2 Contracts make no
provision for transfers from a separate account to a fixed annuity during the
annuity period. This option, subject to certain conditions, is available under
Portfolio Director. The SA-1 Contracts provide an option for monthly variable
annuity payments to be made at a level payment basis during each year of the
annuity period. Portfolio Director does not provide this option. SA-1 and
Portfolio Director, but not SA-2 Contracts, both provide for "betterment of
rates." Under this provision, Payout Payments for fixed annuities will be based
on mortality tables then being used by the Company, if more favorable to the
Annuitant than those included in the Contract.
EXCHANGES FROM IMPACT CONTRACTS
Sales/Surrender Charges. Under an Impact Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 5% of
the Purchase Payments withdrawn within three years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Portfolio Director also imposes a surrender charge upon total or partial
surrenders which may not exceed 5% of any Purchase Payments withdrawn within the
most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. Portfolio Director also has other provisions where
surrender charges are not imposed. (See "Exceptions to Surrender Charge" in the
prospectus.) For purposes of satisfying the fifteen-year and five-year holding
requirements, Portfolio Director will be deemed to have been issued on the same
date as the Impact Contract, or certificate thereunder, but no earlier than
January 1, 1982. Only Purchase Payments exchanged into a Portfolio Director
which were made within three years before the date of exchange will be treated
as Purchase Payments under Portfolio Director for purposes of calculating the
surrender charge. Exchanged payments will be deemed to have been made under
Portfolio Director on the date they were made to Impact Contracts for purposes
of calculating the surrender charge under Portfolio Director.
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
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<PAGE> 791
charge) and mortality risks assumed by the Company. For Portfolio Director, 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. The fee may also be reduced or waived by the
Company on Portfolio Director if the administrative expenses are expected to be
lower for that Contract. (See "Reduction or Waiver of Account Maintenance Fee,
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, an additional
daily charge with an annualized rate of 1.00% to 1.25%, depending upon the
Variable Account Options selected, if any, on the daily net asset value of the
Separate Account is attributable to Portfolio Director. (See "Separate Account
Charges" in the prospectus.)
Investment Options. Under the Impact Contract five divisions of Separate
Account A are available as variable investment alternatives, each investing in
shares of a different underlying fund of the Series Company portfolio. The five
mutual funds are managed by the Company for advisory fees at annual rates
ranging from .28% to .50% of each respective portfolio's average daily net
assets. Under Portfolio Director, sixteen divisions of VALIC Separate Account A
are available, thirteen of which invest in a different investment portfolio of
the Series Company and three divisions of which invest in other mutual fund
portfolios. These mutual fund portfolios are managed by either the Company, The
Dreyfus Corporation, or Templeton Investment Counsel Inc., for advisory fees at
annual rates ranging from .29% to .90% of each portfolio's or mutual fund's
average daily net assets. In addition, two fixed investment options are
available under Portfolio Director.
Annuity Options. Annuity options under Impact Contracts provide for
payments on a fixed or variable basis, or a combination of both. The Impact
Contract permits annuity payments for a designated period of 1 to 15 years on a
fixed basis only. Under an Impact Contract, the designated period option may,
subject to adverse tax consequences, be commuted at any time for its remaining
value. Portfolio Director permits Payout Payments for a designated period of
between 5 and 30 years on a fixed basis only. Portfolio Director does not
provide for commutation. Impact Contracts and the Portfolio Director both
provide for "betterment of rates." Under this provision, Payout Payments for
fixed annuities will be based on mortality tables then being used by the
Company, if more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM COMPOUNDER CONTRACTS
Sales/Surrender Charges. Under a Compounder Contract a sales and
administrative charge is deducted from each Purchase Payment. This charge ranges
from 5% of the first $5,000 of Purchase Payments to 3% of Purchase Payments in
excess of $15,000. If a Compounder Contract is exchanged for Portfolio Director
the surrender charge under Portfolio Director will not apply to the amount of
Account Value applied to Portfolio Director. Purchase Payments made to Portfolio
Director, however, would be subject to the surrender charge under Portfolio
Director. In the case of a partial surrender, all Purchase Payments to Portfolio
Director will be deemed to be withdrawn before any Exchanged Amount is deemed to
be withdrawn. Under Portfolio Director, no sales charge is deducted at the time
a Purchase Payment is made, but a surrender charge may be imposed on partial or
total surrenders. The surrender charge may not exceed 5% of any Purchase
Payments withdrawn within the most recent five years prior to the receipt of the
surrender request by the Company at its Home Office. For purposes of this
surrender charge, the most recent Purchase Payments are deemed to be withdrawn
first. (See "Surrender 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, 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 administra-
18
<PAGE> 792
tive 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. The fee may also be reduced or waived by the Company for Portfolio
Director if the administrative expenses are expected to be lower for that
Contract. (See "Reduction or Waiver of Account Maintenance Fee, 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, an additional
daily charge with an annualized rate of 1.00% to 1.25%, depending upon the
Variable Account Options selected, if any, on the daily net asset value of the
Separate Account is attributable to Portfolio Director. (See "Separate Account
Charges" in the prospectus.)
Investment Options. There are no variable investment alternatives provided
under Compounder Contracts.
Annuity Options. Payout Payments under a Compounder Contract are on a fixed
basis only and the designated period option is limited to a period of 15 years.
However, under a Compounder Contract, the designated period option may, subject
to adverse tax consequences, be commuted at any time for its remaining value.
Portfolio Director allows Payout Payments be made on a fixed or variable basis,
or both. One option under the Portfolio Director provides for a designated
period of 5 and 30 years on a fixed basis only. Portfolio Director does not
provide for commutation. Unlike Portfolio Director, the Compounder Contracts
contain no "betterment of rates" provision.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the other contracts. Therefore, the annuity rates guaranteed
in Portfolio Director are less favorable to Contract Owners and Annuitants than
those guaranteed in the other contracts. However, the current annuity rates
being charged for fixed annuities under the "betterment of rates" provisions
discussed above are more favorable than those guaranteed under Portfolio
Director or the other contracts. Of course, no assurance can be given that this
will continue to be true at the time of annuitization for a given contract.
Guaranteed annuity rate tables are set forth in your Contract or in current
endorsements thereto. Those guaranteed for Portfolio Director are set forth
therein, and copies may be obtained from one of the Company's Regional Offices
listed on the inside back cover of this prospectus.
To satisfy a Federal tax law requirement, non-spouse beneficiaries under
Portfolio Director generally must receive the entire benefit payable upon the
death of the Annuitant over their life expectancy or within five years of the
Annuitant's death. This requirement may be inapplicable to certain other
contracts or certificates issued before January 19, 1985 if not exchanged.
19
<PAGE> 793
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>
2/1/93.......................... Purchase Payment $10,000
2/1/94.......................... Purchase Payment 5,000
2/1/95.......................... Purchase Payment 15,000
2/1/96.......................... Purchase Payment 2,000
2/1/97.......................... Purchase Payment 3,000
2/1/98.......................... Purchase Payment 4,000
7/1/98.......................... 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 2/1/93......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/94 (0.05 X
$5,000)..................................................... $ 250
3. Surrender Charge against Purchase Payment of 2/1/95 (0.05 X
$15,000).................................................... $ 750
4. Surrender Charge against Purchase Payment of 2/1/96 (0.05 X
$2,000)..................................................... $ 100
5. Surrender Charge against Purchase Payment of 2/1/97 (0.05 X
$3,000)..................................................... $ 150
6. Surrender Charge against Purchase Payment of 2/1/98 (0.05 X
$4,000)..................................................... $ 200
Surrender Charge based on Purchase Payments (1 + 2 + 3 + 4 +
5 + 6)...................................................... $1,450
b. Surrender Charge calculated on the excess over 10% of the Account
Value at the time of surrender:
Account Value at time of surrender $ 50,000
Less 10% not subject to Surrender Charge -5,000
-----------
Subject to Surrender Charge 45,000
X .05
-----------
Surrender Charge based on Account
Value $ 2,250 ....................................... $2,250
c. Surrender Charge is the lesser of a or b......................... $1,450
</TABLE>
ILLUSTRATION OF SURRENDER CHARGE ON A 10% PARTIAL SURRENDER FOLLOWED BY A FULL
SURRENDER
Example 2.
TRANSACTION HISTORY (ASSUMES NO INTEREST EARNED)
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/93.......................... Purchase Payment $10,000
2/1/94.......................... Purchase Payment 5,000
2/1/95.......................... Purchase Payment 15,000
2/1/96.......................... Purchase Payment 2,000
2/1/97.......................... Purchase Payment 3,000
2/1/98.......................... Purchase Payment 4,000
7/1/98.......................... 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
8/1/98.......................... 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.
20
<PAGE> 794
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*.................................. .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 DIVISION YIELDS
CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Current Yield: 3.64%
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 December
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.
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 3.71%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION
SIX
Example 6.
The effective yield quotation above is based on the seven days ended
December 31, 1998, the date of the most recent balance sheet included in the
registration statement ("base period"). It is com-
21
<PAGE> 795
puted 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 DIVISIONS SEVEN, EIGHT AND THIRTEEN
CALCULATION OF STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND THIRTEEN
<TABLE>
<CAPTION>
DIV 7 DIV 8 DIV 13
-------- -------- --------
<S> <C> <C> <C>
Standardized Yield.......................................... 5.24% 4.82% 3.28%
</TABLE>
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND
THIRTEEN
Example 7.
The standardized yield quotation based on a 30-day period ended December
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.
22
<PAGE> 796
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1998, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual com-
pounded rates of over the 1, 3, 5, and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C>
P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value at the end of the 1, 3, 5 or 10 year
periods of a hypothetical $1,000 Purchase Payment made at
the beginning of the 1, 3, 5, or 10 year periods (or
fractional portion thereof)
</TABLE>
The Company may advertise standardized average annual total return which,
includes the surrender charge of up to 5% of Gross Purchase Payments received
during the most recent 60 months as well as non-standardized average annual
total returns which does not include a surrender charge or maintenance fee.
There is no sales charge for reinvested dividends. All recurring fees have
been deducted. For fees which vary with the account size, an account size equal
to that of the median account size has been assumed. Ending redeemable value has
been determined assuming a complete redemption at the end of the 1, 3, 5 or 10
year period and deduction of all nonrecurring charges at the end of each such
period.
PERFORMANCE INFORMATION
HYPOTHETICAL $10,000 ACCOUNT VALUE AND
CUMULATIVE RETURN AS COMPARED TO BENCHMARKS TABLES.
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return for each Division as compared to the benchmarks shown.
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 Dreyfus Small Cap.
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
23
<PAGE> 797
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 performance of AGSPC Capital Conservation Division Seven may be
compared to the Merrill Lynch Corporate Master Index. The Merrill Lynch
Corporate Master Index consists of an index of approximately 4,300 corporate
bond holdings of which assets are rated AAA to BBB-. The average years to
maturity of these corporate bond holdings are approximately 12 years.
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 performance of AGSPC Growth Division Fifteen, the AGSPC Growth & Income
Division Sixteen, AGSPC Social Awareness Division Twelve, the AGSPC Science &
Technology Division Seventeen and the AGSPC Stock Index Division Ten, may be
compared to the record of the Standard & Poor's(R) Corporation ("S&P(R)")*
Composite Stock Price Index ("S&P 500 Index"). The S&P 500(R) Index is a well
known measure of the price performance of 500 leading larger domestic stocks
which represents approximately 73% of the market capitalization of the United
States equity market. The index is an unmanaged weighted index of 500
industrial, transportation, utility and financial companies.
The performance of AGSPC International Equities Division Eleven may be
compared to the Morgan Stanley Capital International Europe, Australia and Far
East Index ("EAFE Index"). The EAFE Index, which commenced in 1969, is an
unmanaged stock index consisting of approximately 1,100 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 inves-
- ---------------
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400(R)" are
trademarks of Standard and Poor's ("S&P"). Neither the AGSPC MidCap Index Fund
nor the AGSPC Stock Index Fund is sponsored, endorsed, sold or promoted by S&P
and S&P makes no representation regarding the advisability of investing in
these Funds.
24
<PAGE> 798
tors). The second method includes net income (income earned after subtracting
estimated foreign taxes). The Division currently compares its performance with
the index using the second method.
The performance of the AGSPC International Government Bond Fund Division
Thirteen may be compared to the Salomon Brothers Non-US Dollar World Government
Bond Index ("Salomon Index"). Total returns with income reinvested for the
Salomon Index are published using two methods. The first method includes gross
income (income earned without subtracting foreign income taxes which may be
withheld from foreign investors). The second method includes net income (income
earned after subtracting estimated foreign taxes). The Division currently
compares its performance with the index using the second method. The Salomon
Index is an unmanaged aggregate index composed of 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 AGSPC MidCap Index Division Four may be compared to the
record of the S&P MidCap 400 Index. The S&P MidCap 400 Index was developed in
1991 by S&P to track the stock market performance of medium-capitalization
domestic stocks. The S&P MidCap 400 Index is market weighted and consists of 400
stocks of domestic companies having a median market capitalization of
approximately $1.998 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 may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The index is a money market index which reflects the average rate paid by New
York Banks on certificates of deposit of more than $100,000. The Index for 30
days is published daily.
The performance of the AGSPC Small Cap Index Division Fourteen and the
Dreyfus Small Cap Division Eighteen may be compared with the Russell 2000(R)
Index ("Russell 2000").** The Russell 2000 was developed in 1984 by the Frank
Russell Company to track the stock market performance of small capitalization
domestic stocks. The Russell 2000 is market weighted and consists of
approximately 2000 stocks. Stocks included in the Russell 2000 are chosen by the
Frank Russell Company on the basis of their market size.
The performance of the Templeton Asset Allocation Division Nineteen may be
compared to a benchmark comprised of a weighted average of three market sectors.
The base allocation of the index is: 55% in equity securities, 35% in
intermediate or long-term debt securities and 10% in money market or short-term
debt securities. There are no minimum or maximum percentages as to the amount of
the fund's assets which may be invested in each of the market segments. The
performance of the equity securities sector of the Division may be compared to
the Morgan Stanley Capital International World Index ("MSCI World Index"). The
performance of the intermediate or long-term debt securities sector may be
compared to the Salomon Brothers Non-US Dollar World Government Bond Index
("Salomon World Index"). The performance of the money market or short-term debt
securities sector may be compared to the Certificate of Deposit Primary Offering
by New York City Banks, 30 Day Index. Total returns (with income reinvested) for
the MSCI World Index and the Salomon World Index are published using two
methods. The first method includes gross income (income earned without
subtracting foreign income taxes which may be withheld from foreign investors).
The second method includes net income (income earned after subtracting estimated
foreign taxes). The Division currently compares its performance with these
indexes using the second method. The MSCI World Index is an unmanaged
capitalization weighted index consisting of more than 1,500 issues from 22
countries as well as certain South African gold mining issues. The countries
include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Italy, Japan, Malaysia, The Netherlands, New Zealand,
Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the
United States. The Salomon World Index is an unmanaged aggregate index composed
of approximately 667 issues from
- ---------------
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. Russell TM is a trademark of the Frank Russell Company.
25
<PAGE> 799
sixteen countries. The countries include Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Ireland, Germany, Italy, Japan, The Netherlands,
Spain, Sweden, Switzerland, and the United Kingdom.
The performance of the Templeton International Division Twenty may be
compared to the Morgan Stanley Capital International World Index ("MSCI World
Index"). Total returns (with income reinvested) for the MSCI World Index is
published using two methods. The first method includes gross income (income
earned without subtracting foreign income taxes which may be withheld from
foreign investors). The second method includes net income (income earned after
subtracting estimated foreign taxes). The Division currently compares its
performance with the index using the second method. The MSCI World Index is an
unmanaged capitalization weighted index consisting of more than 1,500 issues
from 22 countries as well as certain South African gold mining issues. The
countries include Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, The Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and
the United States.
26
<PAGE> 800
The Account Value of an assumed $10,000 investment in each of the Divisions is
shown in table form below. 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. See "How to
Review Investment Performance of Separate Account Divisions" in the prospectus
for information about how these returns were calculated as well as Standard
Average Annual Total Return information that reflects the deduction of all
separate account fees and charges.
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 BLENDED
DIVISION FIVE INDEX INDEX**
- ---------------------------------------------------------------- ------- -------
<S> <C> <C> <C>
01/01/89.............................................. 10,000 10,000 10,000
12/31/89.............................................. 11,581 13,169 12,311
12/31/90.............................................. 11,189 12,760 12,583
12/31/91.............................................. 13,442 16,647 15,458
12/31/92.............................................. 13,212 17,915 16,579
12/31/93.............................................. 14,294 19,721 18,186
12/31/94.............................................. 13,967 19,982 18,186
12/31/95.............................................. 17,255 27,490 23,167
12/31/96.............................................. 18,979 33,804 26,372
12/31/97.............................................. 23,040 45,081 32,159
12/31/98.............................................. 26,999 57,966 38,548
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division***
AGSPC Asset Allocation Division Five........... 169.99% 88.88% 56.47% 17.19%
Benchmark Comparison
S&P 500 Index.................................. 479.66% 193.93% 110.86% 28.58%
Blended Index**................................ 285.48% 111.96% 66.39% 19.87%
</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.
*** This Division was initiated on September 6, 1983.
27
<PAGE> 801
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- --------------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 11,063 11,411
12/31/90................................................... 10,922 12,253
12/31/91................................................... 12,669 14,487
12/31/92................................................... 13,626 15,808
12/31/93................................................... 15,108 17,773
12/31/94................................................... 14,044 17,176
12/31/95................................................... 16,795 20,882
12/31/96................................................... 16,920 21,590
12/31/97................................................... 18,187 23,832
12/31/98................................................... 19,333 25,910
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Capital Conservation Division Seven... 93.33% 27.96% 15.11% 6.30%
Benchmark Comparison
Merrill Lynch Corporate Master Index........ 159.10% 45.78% 24.08% 8.72%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
28
<PAGE> 802
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- --------------------------------------------------------------------- ---------------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 11,103 11,435
12/31/90................................................... 11,648 12,419
12/31/91................................................... 13,231 14,327
12/31/92................................................... 14,044 15,363
12/31/93................................................... 15,406 17,013
12/31/94................................................... 14,567 16,430
12/31/95................................................... 16,943 19,445
12/31/96................................................... 17,095 19,984
12/31/97................................................... 18,433 21,876
12/31/98................................................... 19,883 24,081
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Government Securities Division
Eight................................. 98.83% 29.06% 17.35% 7.86%
Benchmark Comparison
U.S. Treasury Composite Index........... 140.81% 41.55% 23.84% 10.08%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
AGSPC Growth Division Fifteen Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
<TABLE>
<CAPTION>
GROWTH S&P 500
DIVISION FIFTEEN INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
12/31/94................................................... 10,018 10,407
12/31/95................................................... 14,667 14,318
12/31/96................................................... 17,333 17,606
12/31/97................................................... 20,765 23,480
12/31/98................................................... 24,286 30,191
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth Division Fifteen.......................... 142.86% 65.59% 16.96%
Benchmark Comparison
S&P 500 Index.......................................... 201.91% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
29
<PAGE> 803
AGSPC Growth & 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
12/31/94................................................... 9,932 10,407
12/31/95................................................... 12,966 14,318
12/31/96................................................... 15,831 17,606
12/31/97................................................... 19,409 23,480
12/31/98................................................... 22,012 30,191
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth & Income Division Sixteen............... 120.12% 69.77% 13.41%
Benchmark Comparison
S&P 500 Index........................................ 201.91% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
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
12/31/89................................................. 10,284 10,467
12/31/90................................................. 8,134 8,013
12/31/91................................................. 8,952 8,984
12/31/92................................................. 7,671 7,891
12/31/93................................................. 9,864 10,460
12/31/94................................................. 10,545 11,274
12/31/95................................................. 11,565 12,537
12/31/96................................................. 12,229 13,295
12/31/97................................................. 12,373 13,532
12/31/98................................................. 14,546 16,237
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC International Equities Division Eleven... 45.46% 47.47% 25.78% 17.57%
Benchmark Comparison
EAFE Index..................................... 62.37% 55.23% 29.52% 20.00%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
30
<PAGE> 804
AGSPC International Government Bond Division Thirteen Performance Compared to
Salomon Brothers
Non-U.S. Dollar World Government Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
SALOMON BROS.
NON-U.S. DOLLAR
WORLD
INTERNATIONAL GOVERNMENT BOND GOVERNMENT
DIVISION THIRTEEN BOND INDEX
- --------------------------------------------------------------------- ---------------
<S> <C> <C>
10/01/91................................................... $10,000 $10,000
12/31/91................................................... 10,905 11,042
12/31/92................................................... 11,128 11,540
12/31/93................................................... 12,583 13,246
12/31/94................................................... 13,014 13,999
12/31/95................................................... 15,308 16,692
12/31/96................................................... 15,822 17,331
12/31/97................................................... 14,906 16,568
12/31/98................................................... 17,280 19,497
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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................................... 72.80% 37.32% 12.88% 15.92%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World
Government Bond Index...................... 94.97% 47.19% 16.80% 17.68%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
31
<PAGE> 805
AGSPC MidCap Index Division Four Performance Compared to S&P MidCap 400 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
S&P
MIDCAP
MIDCAP INDEX S&P 500 400
DIVISION FOUR INDEX INDEX
- -------------------------------------------------------------- -------- --------
<S> <C> <C> <C>
10/01/91............................................ $10,000 $10,000 $10,000
12/31/91............................................ 11,163 10,838 11,229
12/31/92............................................ 12,143 11,664 12,566
12/31/93............................................ 13,574 12,840 14,320
12/31/94............................................ 12,936 13,009 13,806
12/31/95............................................ 16,718 17,898 18,078
12/31/96............................................ 19,661 22,009 21,557
12/31/97............................................ 25,648 29,351 28,506
12/31/98............................................ 30,214 37,739 33,947
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION** 5 YEARS 3 YEARS 1 YEAR
----------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC MidCap Index Division Four........... 202.14% 122.59% 80.73% 17.80%
Benchmark Comparison
S&P 500 Index.............................. 277.39% 193.93% 110.86% 28.58%
S&P MidCap 400 Index....................... 239.47% 137.07% 87.79% 19.09%
</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 accumulation unit data for the last ten years for the Division
appears in the Prospectus. Figures appearing above for the S&P MidCap 400
Index for years prior to 1991 are based on estimates provided by Standard &
Poor's for illustrative purposes.
** This Division was initiated on October 13, 1982.
32
<PAGE> 806
AGSPC Money Market Division Six Performance Compared to Certificate of Deposit
Primary Offering by
New York City Banks, 30 Day Index (Primary CD Index)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/89................................................... $10,000 $10,000
12/31/89................................................... 10,792 10,867
12/31/90................................................... 11,530 11,736
12/31/91................................................... 12,048 12,377
12/31/92................................................... 12,316 12,767
12/31/93................................................... 12,521 13,098
12/31/94................................................... 12,867 13,565
12/31/95................................................... 13,447 14,235
12/31/96................................................... 13,982 14,881
12/31/97................................................... 14,559 15,592
12/31/98................................................... 15,160 16,325
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Money Market Division Six................. 51.60% 21.07% 12.73% 4.12%
Benchmark Comparison
Primary CD Index................................ 63.25% 24.64% 14.68% 4.70%
</TABLE>
- ---------------
* The Division was initiated on January 16, 1986.
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>
SCIENCE & TECHNOLOGY S&P 500
DIVISION SEVENTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
04/29/94................................................... $10,000 $10,000
12/31/94................................................... 12,477 10,407
12/31/95................................................... 19,972 14,318
12/31/96................................................... 22,505 17,606
12/31/97................................................... 22,857 23,480
12/31/98................................................... 32,162 30,191
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 3 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Science & Technology Division
Seventeen.......................................... 221.62% 61.04% 40.71%
Benchmark Comparison
S&P 500 Index........................................ 201.91% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
33
<PAGE> 807
AGSPC Small Cap Index Division Fourteen Performance Compared to Russell 2000
Index(R)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
RUSSELL
SMALL CAP INDEX 2000
DIVISION FOURTEEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
05/01/92................................................. $ 10,000 $ 10,000
12/31/92................................................. 11,128 11,416
12/31/93................................................. 12,772 13,571
12/31/94................................................. 12,223 13,324
12/31/95................................................. 15,449 17,114
12/31/96................................................. 17,854 19,937
12/31/97................................................. 21,636 24,396
12/31/98................................................. 21,005 23,775
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 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..... 110.05% 64.46% 35.96% (2.92)%
Benchmark Comparison
Russell 2000................................ 137.75% 75.19% 38.92% (2.55)%
</TABLE>
- ---------------
* This Division was initiated 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
12/31/89................................................... 10,100 10,214
12/31/90................................................... 9,877 9,897
12/31/91................................................... 12,506 12,912
12/31/92................................................... 12,795 13,896
12/31/93................................................... 13,670 15,297
12/31/94................................................... 13,339 15,499
12/31/95................................................... 18,351 21,323
12/31/96................................................... 22,527 26,220
12/31/97................................................... 29,853 34,967
12/31/98................................................... 37,623 44,961
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Social Awareness Division Twelve...... 276.23% 175.23% 105.02% 26.03%
Benchmark Comparison
S&P 500 Index............................... 349.61% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
34
<PAGE> 808
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 JANUARY 1, 1989
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------ -------
<S> <C> <C>
01/01/89................................................. $10,000 $10,000
12/31/89................................................. 12,788 13,169
12/31/90................................................. 12,171 12,760
12/31/91................................................. 15,543 16,647
12/31/92................................................. 16,411 17,915
12/31/93................................................. 17,853 19,721
12/31/94................................................. 17,799 19,982
12/31/95................................................. 24,197 27,490
12/31/96................................................. 29,406 33,804
12/31/97................................................. 38,748 45,081
12/31/98................................................. 49,264 57,966
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Stock Index Division Ten............. 392.64% 175.95% 103.59% 27.14%
Benchmark Comparison
S&P 500 Index.............................. 479.66% 193.93% 110.86% 28.58%
</TABLE>
- ---------------
* This Division was initiated on April 26, 1987.
Dreyfus Variable Investment Fund -- Small Cap Division Eighteen Performance
Compared to Russell 2000
HYPOTHETICAL $10,000 ACCOUNT VALUE*
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 31, 1990
<TABLE>
<CAPTION>
DREYFUS SMALL CAP RUSSELL
DIVISION EIGHTEEN INDEX
- -------------------------------------------------------------------- --------
<S> <C> <C>
08/31/90.................................................. $ 10,000 $10,000
12/31/90.................................................. 10,168 9,577
12/31/91.................................................. 26,105 13,996
12/31/92.................................................. 44,181 16,572
12/31/93.................................................. 73,477 19,701
12/31/94.................................................. 78,125 19,341
12/31/95.................................................. 99,825 24,844
12/31/96.................................................. 114,938 28,942
12/31/97.................................................. 132,607 35,414
12/31/98.................................................. 126,628 34,513
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Dreyfus Small Cap Division Eighteen........ 1,166.28% 72.34% 26.85% (4.51)%
Benchmark Comparison
Russell 2000............................... 245.13% 75.19% 38.92% (2.55)%
</TABLE>
- ---------------
* This Division was initiated July 11, 1994.
35
<PAGE> 809
Templeton Asset Allocation Division Nineteen Performance Compared to MSCI World
Index, Salomon Brothers World Government Bond Index and Certificate of Deposit
Primary Offering by New York City Banks, 30 Day Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
MSCI
TEMPLETON ASSET ALLOCATION WORLD BLENDED
DIVISION NINETEEN INDEX INDEX**
- -------------------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/89............................................ $10,000 $10,000 $10,000
12/31/89............................................ 11,186 11,661 11,149
12/31/90............................................ 10,164 9,676 10,599
12/31/91............................................ 12,821 11,446 12,325
12/31/92............................................ 13,685 10,847 12,239
12/31/93............................................ 17,050 13,288 14,342
12/31/94............................................ 16,328 13,963 14,920
12/31/95............................................ 19,759 16,856 17,679
12/31/96............................................ 23,197 19,128 19,284
12/31/97............................................ 26,461 22,143 21,066
12/31/98............................................ 27,803 27,533 25,210
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Templeton Asset Allocation Division
Nineteen................................ 178.03% 63.07% 40.71% 5.07%
Benchmark Comparison**
MSCI World Index.......................... 175.33% 107.19% 63.34% 24.34%
Blended Index............................. 152.10% 75.78% 42.60% 19.67%
</TABLE>
- ---------------
* This division was initiated on July 11, 1994.
** The Blended Index reflects an allocation of investments in the following
Indexes: 55% of investments included in the MSCI World Index, 35% of
investments included in the Salomon Brothers World Government Bond Index and
10% of investments included in the Certificate of Deposit Primary Offering by
New York City Bank, 30 Day index.
36
<PAGE> 810
Templeton International Division Twenty Performance Compared to MSCI World
Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
MSCI
TEMPLETON INTERNATIONAL WORLD
DIVISION TWENTY INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
05/01/92................................................... $10,000 $10,000
12/31/92................................................... 9,311 10,182
12/31/93................................................... 13,549 12,474
12/31/94................................................... 13,077 13,107
12/31/95................................................... 14,952 15,823
12/31/96................................................... 18,317 17,955
12/31/97................................................... 20,613 20,786
12/31/98................................................... 22,251 25,844
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 3 YEARS 1 YEAR
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division*
Templeton International Division Twenty...... 122.51% 64.23% 48.82% 7.95%
Benchmark Comparison
MSCI World Index............................. 158.44% 107.19% 63.34% 24.34%
</TABLE>
- ---------------
* This Division was initiated on July 11, 1994.
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 Annuity 2000 Table (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).
37
<PAGE> 811
The portion of the first monthly variable payout payment derived from a
Division of VALIC Separate Account A is divided by the Payout Unit value for
that Division (calculated ten days prior to the date of the first monthly
payment) to determine the number of Payout Units in each Division represented by
the payment. The number of such units will remain fixed during the Payout
Period, assuming the Annuitant makes no transfers of Payout Units to provide
Payout Units under another Division or to provide a fixed annuity.
In any subsequent month, the dollar amount of the variable payout payment
derived from each Division is determined by multiplying the number of Payout
Units in that Division by the value of such Payout Unit on the tenth day
preceding the due date of such payment. The Payout Unit value will increase or
decrease in proportion to the net investment return of the Division or Divisions
underlying the variable payout since the date of the previous payout payment,
less an adjustment to neutralize the 3 1/2% or other Assumed Investment Rate
referred to above.
Therefore, the dollar amount of variable payout payments after the first
will vary with the amount by which the net investment return is greater or less
than 3 1/2% per annum. For example, if a Division has a cumulative net
investment return of 5% over a one year period, the first payout payment in the
next year will be approximately 1 1/2 percentage points greater than the payment
on the same date in the preceding year, and subsequent payments will continue to
vary with the investment experience of the Division. If such net investment
return is 1% over a one year period, the first payout payment in the next year
will be approximately 2 1/2 percentage points less than the payment on the same
date in the preceding year, and subsequent payments will continue to vary with
the investment experience of the applicable Division.
Each deferred Contract provides that, when fixed payout payments are to be
made under one of the first four payout options, the monthly payment to the
Annuitant will not be less than the monthly payment produced by the then current
settlement option rates, which will not be less than the rates used for a
currently issued single payment immediate annuity contract. The purpose of this
provision is to assure the Annuitant that, at retirement, if the fixed payout
purchase rates then required by the Company for new single payment immediate
annuity contracts are significantly more favorable than the annuity rates
guaranteed by a Contract, the Annuitant will be given the benefit of the new
annuity rates.
PAYOUT UNIT VALUE
The value of a Payout Unit is calculated at the same time that the value of
an Purchase Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Purchase Period" in the prospectus.) The
calculation of Payout Unit value is discussed in the prospectus under "Payout
Period."
The following illustrations show, by use of hypothetical examples, the
method of determining the Payout Unit value and the amount of variable annuity
payments.
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>
38
<PAGE> 812
ILLUSTRATION OF PAYOUT PAYMENTS
Example 9. Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <C>
1. Number of Purchase Units at Payout Date................. 10,000.00
2. Purchase Unit value (see Example 3)..................... $ 1.800000
3. Account Value of Contract (1)X(2)....................... $18,000.00
4. First monthly Payout Payment per $1,000 of Account
Value..................................................... $ 5.63
5. First monthly Payout Payment (3)X(4)/1,000.............. $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5)/(6).......................... 103.408
8. Assume Payout Unit value for second month equal to...... $ .997000
9. Second monthly Payout Payment (7)X(8)................... $ 103.10
10. Assume Payout Unit value for third month equal to....... $ .953000
11. Third monthly Payout Payment (7)X(10)................... $ 98.55
</TABLE>
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for VALIC Separate Account A is A.G. Distributors, an affiliate of
VALIC. A.G. Distributors' address is 2929 Allen Parkway, Houston, Texas 77019.
A.G. Distributors is a Delaware corporation organized in 1994 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 6.0% 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 A.G. Distributors and VALIC
Separate Account A, the Company reimburses A.G. Distributors for reasonable
sales expenses, including overhead expenses. Prior to May 1, 1999, The Variable
Annuity Marketing Company (VAMCO) was the principal underwriter for VALIC
Separate Account A. Sales commissions paid for the years 1996, 1997 and 1998
were $52,963,000, $34,105,000 and $31,109,455, respectively. VAMCO retained $0
in commissions for the years 1996, 1997 and 1998.
EXPERTS
The consolidated financial statements of the Company at December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998,
and the financial statements of the Company's Separate Account A at December 31,
1998 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 and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
39
<PAGE> 813
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of The Variable Annuity Life Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
Divisions Four, Five, Six, Seven, Eight, Ten, Eleven, Twelve, Thirteen,
Fourteen, Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, and Twenty are the
only Divisions available under the Contracts described in the Prospectus. The
Separate Account financial statements contained herein reflect the composition
of the Separate Account as of December 31, 1998.
40
<PAGE> 814
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, 1998
and 1997, and the related consolidated statements of income, changes in
stockholder's equity, comprehensive income, and cash flows for each of the three
years in the period ended December 31, 1998. 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, 1998
and 1997, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 16, 1999
<PAGE> 815
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Balance Sheet
At December 31
In Thousands
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS Investments - Notes 2, 7, 8, 9:
Fixed maturity securities
(amortized cost: $21,733,209 in 1998 and $20,651,381 in 1997) $22,878,049 $21,641,084
Equity securities (cost: $176,799 in 1998 and $5,581 in 1997) 194,629 5,456
Mortgage loans on real estate 1,212,527 1,259,029
Real estate, net of accumulated depreciation
of $69 in 1998 and 1997 20,679 28,569
Policy loans 788,547 719,127
Other long-term invested assets 59,543 45,474
Short-term investments 164,484 60,904
----------- -----------
Total investments 25,318,458 23,759,643
----------- -----------
Investment income receivable 369,777 347,358
Cash 104,718 32,181
Receivable for securities sold 22,157 32,825
Deferred policy acquisition costs - Note 3 665,127 392,346
Cost of insurance purchased - Note 4 22,113 --
Due from reinsurer, net 13,343 14,545
Other assets 119,310 52,104
Assets held in Separate Accounts 14,712,465 10,564,220
----------- -----------
Total assets $41,347,468 $35,195,222
----------- -----------
LIABILITIES Policy reserves for fixed annuity investment contracts $23,218,626 $21,994,804
Payable for securities purchased 40,757 19,027
Remittances not allocated 95,797 79,392
Commissions, general expenses and taxes (other than income taxes) 37,613 39,546
Other liabilities 193,933 61,756
Income tax liabilities - Note 5 541,676 377,072
Liabilities related to Separate Accounts 14,712,465 10,564,220
----------- -----------
Total liabilities 38,840,867 33,135,817
----------- -----------
Common stock (voting) par value $1 per share, 5,000 shares authorized
STOCKHOLDER'S and 3,575 issued and outstanding in 1998 and 1997 - Note 6 3,575 3,575
EQUITY Additional paid-in capital 833,372 710,624
Retained earnings 1,142,194 1,038,731
Accumulated other comprehensive income - Note 2 527,460 306,475
----------- -----------
Total stockholder's equity 2,506,601 2,059,405
=========== ===========
Total liabilities and stockholder's equity $41,347,468 $35,195,222
=========== ===========
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 816
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Income
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES Surrender charges $ 14,512 $ 12,405 $ 12,348
Mortality charges 135,304 94,162 59,955
Expense charges 6,784 6,102 5,654
Net investment income - Note 2 1,810,624 1,729,541 1,654,496
Net reinsurance income 1,236 1,303 1,528
Realized investment gains (losses) - Note 2 (28,271) 20,235 21,551
Other income 18,593 15,320 10,920
----------- ----------- -----------
Total revenues 1,958,782 1,879,068 1,766,452
----------- ----------- -----------
COSTS AND Policy costs:
EXPENSES Increase in policy reserves for fixed annuity contracts 1,296,120 1,286,010 1,243,993
----------- ----------- -----------
Total costs 1,296,120 1,286,010 1,243,993
----------- ----------- -----------
Expenses:
Commissions 123,983 110,960 97,630
Salaries 70,904 58,873 54,016
Data processing 28,616 14,876 12,088
Postage and telephone 15,473 12,253 11,308
Sales promotion 10,250 10,161 10,394
Depreciation expense on furniture and equipment 10,292 8,964 8,920
Rent 9,315 7,931 7,524
Taxes, licenses and fees 8,302 6,874 6,208
Printing and supplies 6,393 4,496 5,290
Guaranty association assessments - Note 10 37 30 2,678
Other expenses 60,682 35,172 27,223
Amortization of deferred policy acquisition costs - Note 3 55,074 42,101 31,201
Amortization of cost of insurance purchased - Note 4 1,802 -- --
Policy acquisition costs deferred - Note 3 (159,778) (137,655) (116,818)
----------- ----------- -----------
Total expenses 241,345 175,036 157,662
----------- ----------- -----------
EARNINGS Total costs and expenses 1,537,465 1,461,046 1,401,655
----------- ----------- -----------
Income before income tax expense 421,317 418,022 364,797
Income tax expense - Note 5 136,854 144,238 124,370
----------- ----------- -----------
Net income $ 284,463 $ 273,784 $ 240,427
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 817
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Changes in Stockholder's Equity
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<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 710,624 459,281 384,126
PAID-IN-CAPITAL Capital contribution from stockholder 122,748 251,343 75,155
----------- ----------- -----------
Balance at end of year 833,372 710,624 459,281
----------- ----------- -----------
RETAINED Balance at beginning of year 1,038,731 1,143,947 1,014,520
EARNINGS Net income 284,463 273,784 240,427
Dividends paid to stockholder (181,000) (379,000) (111,000)
----------- ----------- -----------
Balance at end of year 1,142,194 1,038,731 1,143,947
----------- ----------- -----------
ACCUMULATED OTHER Balance at beginning of year 306,475 166,852 396,620
COMPREHENSIVE Change in net unrealized gains (losses) on securities 220,985 139,623 (229,768)
----------- ----------- -----------
INCOME Balance at end of year 527,460 306,475 166,852
----------- ----------- -----------
STOCKHOLDER'S
EQUITY Balance at end of year $ 2,506,601 $ 2,059,405 $ 1,773,655
----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
COMPREHENSIVE Net income $ 284,463 $ 273,784 $ 240,427
INCOME Other comprehensive income
Gross change in unrealized gains (losses) on securities
(pretax: $311,706; $235,040; ($331,938)) 202,609 152,776 (215,760)
Less: gains (losses) realized in net income - Note 2 (18,376) 13,153 14,008
--------- --------- ---------
Change in net unrealized gains (losses) on
securities (pretax: $339,977; $214,805; ($353,489)) 220,985 139,623 (229,768)
--------- --------- ---------
Comprehensive income $ 505,448 $ 413,407 $ 10,659
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 818
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Consolidated Statement of Cash Flows
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING Net income $ 284,463 $ 273,784 $ 240,427
ACTIVITIES Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,296,120 1,286,010 1,243,993
Deferred policy acquisition costs (104,704) (95,554) (85,617)
Other, net (37,021) (51,241) (50,233)
------------ ------------ ------------
Net cash provided by operating activities 1,438,858 1,412,999 1,348,570
------------ ------------ ------------
INVESTING Investment purchases (15,180,407) (18,403,013) (14,883,271)
ACTIVITIES Investment calls, maturities and sales 14,731,932 17,500,312 13,897,479
Net increase in short-term investments (103,580) (7,904) (13,722)
------------ ------------ ------------
Net cash used for investing activities (552,055) (910,605) (999,514)
------------ ------------ ------------
FINANCING Policyholder account deposits 3,755,481 3,385,303 2,896,090
ACTIVITIES Policyholder account withdrawals (1,777,580) (1,427,005) (1,276,008)
Transfers to Separate Accounts (2,728,063) (2,325,214) (1,936,727)
Capital contribution from stockholder 116,896 251,343 75,155
Dividends paid (181,000) (379,000) (111,000)
------------ ------------ ------------
Net cash used for financing activities (814,266) (494,573) (352,490)
------------ ------------ ------------
NET CHANGE Net increase (decrease) in cash 72,537 7,821 (3,434)
IN CASH Cash at beginning of year 32,181 24,360 27,794
------------ ------------ ------------
Cash at end of year $ 104,718 $ 32,181 $ 24,360
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 819
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
December 31, 1998
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.
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
COMPREHENSIVE INCOME. During 1998, VALIC adopted Statement of Financial
Accounting Standards (SFAS) 130, "Reporting Comprehensive Income," which
establishes standards for reporting and displaying comprehensive income and its
components in the financial statements. VALIC elected to report comprehensive
income and its components in a separate statement of comprehensive income.
Adoption of this statement did not change recognition or measurement of net
income and, therefore, did not impact VALIC's consolidated results of operations
or financial position.
DERIVATIVES. In June 1998, the Financial Accounting Standards Board issued
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which
requires all derivative instruments to be recognized at fair value as either
assets or liabilities in the balance sheet. Changes in the fair value of a
derivative instrument are to be reported as earnings or other comprehensive
income, depending upon the intended use of the derivative instrument. This
statement is effective for years beginning after June 15, 1999. Adoption of SFAS
133 is not expected to have a material impact on VALIC's consolidated results of
operations or financial position.
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. At year end, 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 accumulated other
comprehensive income 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.
During 1998, VALIC maintained a trading portfolio of certain fixed maturity
securities. Trading securities are recorded at fair value. Unrealized gains
(losses), as well as realized gains (losses), are included in net investment
income. VALIC held no trading securities at December 31, 1998, and trading
securities did not have a material effect on net investment income.
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
are used to convert specific investment securities from a floating-rate 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.
- --------------------------------------------------------------------------------
6
<PAGE> 820
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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 accumulated other comprehensive income
included in stockholder's equity, consistent with the treatment of the related
investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into income
over the remaining term of the related investment. If the underlying investment
is extinguished or sold, any related gain or loss on swap agreements is
recognized in income.
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 prolonged periods of decreasing interest rates, the spread between
investment yields and interest crediting rates may be reduced as a result of
minimum rate guarantees on certain insurance and annuity contracts, which limit
VALIC's ability to reduce interest crediting rates. Call swaptions, which allow
VALIC to enter into interest rate swap agreements to receive fixed rates and pay
lower floating rates, effectively maintain the spread between investment yields
and interest crediting rates during such periods.
During prolonged periods of increasing interest rates, the spread between
investment yields and interest crediting rates may be reduced as a result of
VALIC's decision to increase interest crediting rates to limit surrenders. Put
swaptions, which allow VALIC to enter into interest rate swap agreements to pay
fixed rates and receive higher floating rates, effectively maintain the spread
between investment yields and interest crediting rates during such periods.
Premiums paid to purchase swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a 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 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) on securities had been realized at the balance sheet
date. The impact of this adjustment is included in accumulated other
comprehensive income 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 VALIC. Consequently, VALIC'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 credited 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.
- --------------------------------------------------------------------------------
7
<PAGE> 821
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
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 accumulated other
comprehensive income in stockholder's equity.
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>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 169,855 $ 237,719 $ 213,686
---------- ---------- ----------
Stockholder's equity $1,236,522 $1,189,278 $1,077,366
---------- ---------- ----------
</TABLE>
1.12 COINSURANCE TRANSACTION
On May 21, 1998, VALIC completed the acquisition of a block of individual
annuity business in a coinsurance transaction. This transaction increased assets
and insurance and annuity liabilities by $688,221.
2
INVESTMENTS
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,664,325 $1,562,802 $1,471,879
Affiliated fixed
maturity securities 2,761 2,588 2,851
Equity securities 245 483 782
Mortgage loans on
real estate 112,781 123,591 140,492
Other 62,680 53,543 51,040
---------- ---------- ----------
Gross investment income 1,842,792 1,743,007 1,667,044
Investment expense 32,168 13,466 12,548
---------- ---------- ----------
Net investment income $1,810,624 $1,729,541 $1,654,496
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income during
1998 totaled $313 or 0.001% 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, 1998.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities
Gross gains $ 14,472 $ 35,087 $ 38,222
Gross losses (49,745) (29,012) (36,805)
-------- -------- --------
Total fixed maturity
securities (35,273) 6,075 1,417
-------- -------- --------
Equity securities
Gross gains 158 31 15,867
Gross losses (30) (10) (72)
-------- -------- --------
Total equity securities 128 21 15,795
-------- -------- --------
Mortgage loans on real estate 8,811 21,647 4,635
Real estate 6,673 3,802 389
Other long-term investments (601) (28) (9)
DPAC amortization and
investment expense (8,009) (11,282) (676)
-------- -------- --------
Realized investment gains
(losses) before taxes (28,271) 20,235 21,551
Income tax expense (benefit) (9,895) 7,082 7,543
-------- -------- --------
Net realized investment
gains (losses) $(18,376) $ 13,153 $ 14,008
-------- -------- --------
</TABLE>
2.3 CASH FLOWS FROM INVESTING ACTIVITIES
Uses of cash for investment purchases were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 5,469,258 $ 5,174,707 $ 5,299,390
Other 9,711,149 13,228,306 9,583,881
----------- ----------- -----------
Total $15,180,407 $18,403,013 $14,883,271
----------- ----------- -----------
</TABLE>
Sources of cash from investment dispositions and repayments were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 4,444,092 $ 4,223,740 $ 4,235,560
Mortgage loans on
real estate 240,954 298,670 280,389
Equity securities 8,319 3,296 67,713
Real estate 17,086 22,525 1,627
Other 10,021,481 12,952,081 9,312,190
----------- ----------- -----------
Total $14,731,932 $17,500,312 $13,897,479
----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 822
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
2.4 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
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 299,377 $ 175,771 $ 38,019 $ 25,101
Obligations of states and
political subdivisions 55,694 32,264 3,320 1,193
Debt securities issued by
foreign governments 232,406 248,838 16,911 14,018
Corporate securities 16,153,147 15,207,118 933,904 755,877
Mortgage-backed securities 4,947,963 4,959,198 227,160 214,418
Affiliated fixed maturity securities 25,159 28,192 -- 67
Redeemable preferred stock 19,463 -- -- --
------------ ------------ ------------ ------------
Total fixed maturity securities $ 21,733,209 $ 20,651,381 $ 1,219,314 $ 1,010,674
------------ ------------ ------------ ------------
Equity securities $ 176,799 $ 5,581 $ 17,932 $ 114
------------ ------------ ------------ ------------
<CAPTION>
Gross Unrealized Losses Fair Value
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (136) $ (3) $ 337,260 $ 200,869
Obligations of states and
political subdivisions -- -- 59,014 33,457
Debt securities issued by
foreign governments (210) (1,988) 249,107 260,868
Corporate securities (73,396) (16,179) 17,013,655 15,946,816
Mortgage-backed securities (732) (2,801) 5,174,391 5,170,815
Affiliated fixed maturity securities -- -- 25,159 28,259
Redeemable preferred stock -- -- 19,463 --
------------ ------------ ------------ ------------
Total fixed maturity securities $ (74,474) $ (20,971) $ 22,878,049 $ 21,641,084
------------ ------------ ------------ ------------
Equity securities $ (102) $ (239) $ 194,629 $ 5,456
------------ ------------ ------------ ------------
</TABLE>
2.4 FIXED MATURITY AND EQUITY SECURITIES- (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1998 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 $ 387,495 $ 391,791
In years two through five 4,571,241 4,793,727
In years six through ten 7,580,048 8,010,517
After ten years 4,246,462 4,507,623
Mortgage-backed securities 4,947,963 5,174,391
----------- -----------
Total fixed maturity securities $21,733,209 $22,878,049
----------- -----------
</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.
2.5 NET UNREALIZED GAINS (LOSSES) ON SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in accumulated other comprehensive income at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 1,237,246 $ 1,010,788
Gross unrealized losses (74,576) (21,210)
DPAC adjustments (339,163) (511,037)
Deferred federal income taxes (296,047) (172,066)
----------- -----------
Net unrealized gains on securities $ 527,460 $ 306,475
----------- -----------
</TABLE>
2.6 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.
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 644,594 $ 614,627
Pacific and Mountain 327,969 355,006
Central 252,289 310,535
Allowance for losses (12,325) (21,139)
----------- -----------
Total mortgage loans $ 1,212,527 $ 1,259,029
----------- -----------
Property type:
Office $ 467,219 $ 467,326
Retail 359,368 396,934
Industrial 249,459 246,241
Apartments 93,476 145,272
Residential and other 55,330 24,395
Allowance for losses (12,325) (21,139)
----------- -----------
Total mortgage loans $ 1,212,527 $ 1,259,029
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 823
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
2.6 MORTGAGE LOANS ON REAL ESTATE - (CONTINUED)
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1 $ 21,139 $ 44,577 $ 54,213
Recovery of mortgage
loan losses (6,541) (18,178) (2,967)
Deductions (2,273) (5,260) (6,669)
-------- -------- --------
Balance at December 31 $ 12,325 $ 21,139 $ 44,577
-------- -------- --------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans on real estate and related interest
income were as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Impaired loans:
With allowance* $13,470 $28,317
------- -------
Total impaired loans $13,470 $28,317
------- -------
Average investment $20,893 $37,449
Interest income earned -- 2,887
Interest income - cash basis -- --
------- -------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$1,803 and $9,317, respectively.
3
DEFERRED POLICY ACQUISITION COSTS (DPAC)
Activity in DPAC was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 392,346 $ 557,748 $ 182,546
Deferrals:
Commissions 83,359 76,327 62,760
Other acquisition costs 76,419 61,328 54,058
Amortization:
Accretion of interest 72,536 65,388 59,810
Operating earnings (127,610) (107,489) (91,011)
Offset to realized gains (3,797) (11,282) (676)
Effect of net unrealized
(gains) losses on securities 171,874 (249,674) 290,261
--------- --------- ---------
Balance at December 31 $ 665,127 $ 392,346 $ 557,748
--------- --------- ---------
</TABLE>
4
COST OF INSURANCE PURCHASED (CIP)
Activity in CIP was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ---------- ---------
<S> <C> <C> <C>
Balance at January 1 $ -- $ -- $ --
Additions from acquisitions 23,915 -- --
Accretion of interest 733 -- --
Amortization (2,535) -- --
-------- ---------- ---------
Balance at December 31 $ 22,113 $ -- $ --
-------- ---------- ---------
</TABLE>
CIP amortization, net of accretion, expected to be recorded in each of the
next five years is $3,099, $2,644, $2,266, $1,920, and $1,763.
5
INCOME TAXES
5.1 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.
5.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (14,560) $ 2,027
--------- ---------
Deferred tax liabilities, applicable to:
Basis differential of investments 438,190 368,591
DPAC 229,803 134,541
Other 31,996 18,576
--------- ---------
Total deferred tax liabilities 699,989 521,708
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (134,409) (138,555)
Basis differential of investments (1,920) (1,545)
Other (7,424) (6,563)
--------- ---------
Total deferred tax assets (143,753) (146,663)
--------- ---------
Net deferred tax liabilities 556,236 375,045
--------- ---------
Total income tax liabilities $ 541,676 $ 377,072
--------- ---------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 824
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
5.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 77,492 $ 114,138 $ 99,560
State 2,154 3,099 2,842
--------- --------- ---------
Total current income
tax expense 79,646 117,237 102,402
--------- --------- ---------
Deferred, applicable to:
DPAC 35,105 29,113 29,308
Policy reserves 4,148 (14,920) (18,581)
Basis differential of
investments 12,484 3,569 2,754
Other, net 5,471 9,239 8,487
--------- --------- ---------
Total deferred income
tax expense 57,208 27,001 21,968
--------- --------- ---------
Income tax expense $ 136,854 $ 144,238 $ 124,370
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 147,461 $ 146,308 $ 127,679
Dividends received
deduction (7,851) (5,212) (4,935)
Tax-exempt interest (ESOP) (2,730) (3,326) (3,865)
State income taxes 3,811 3,695 3,311
Other items (3,837) 2,773 2,180
--------- --------- ---------
Income tax expense $ 136,854 $ 144,238 $ 124,370
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1998, 1997, and 1996 were $92,613, $106,338,
and $114,478, respectively. State income taxes paid in 1998, 1997, and 1996 were
$2,841, $2,978, and $3,060, respectively.
6
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 1999 is
$176,753.
7
DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate and currency swap agreements related to investment securities
at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Interest rate swap agreements
to pay fixed rate
Notional amount $ 332,000 $ 107,000
Average receive rate 5.97% 6.92%
Average pay rate 5.37 6.25
----------- -----------
Currency swap agreements
(receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $ 108,180 $ 123,326
Average exchange rate 1.50 1.49
----------- -----------
</TABLE>
During 1998, VALIC purchased call swaptions and put swaptions that expire
by 2000. The call swaptions had a notional amount of $950,000 and strike rates
ranging from 3.5% to 4.5% at December 31, 1998. The put swaptions had a notional
amount of $690,000 strike rates ranging from 8.0% to 8.5% at December 31, 1998.
Should the strike rates remain below market rates for call swaptions and above
market rates for put swaptions, the swaptions will expire, and VALIC's exposure
would be limited to the premiums paid. These premiums were immaterial.
CREDIT AND MARKET RISK. Derivative financial instruments expose VALIC to
credit risk in the event of nonperformance by counterparties. VALIC limits this
exposure by entering into agreements with counterparties having high credit
ratings and by regularly monitoring the ratings. VALIC does not expect any
counterparty to fail to meet its obligation; however, nonperformance would not
have a material impact on VALIC's consolidated results of operations and
financial position.
VALIC's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.
- --------------------------------------------------------------------------------
11
<PAGE> 825
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
8
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>
1998 1997
------------------------------ ------------------------------
Fair Value Carrying Amount Fair Value Carrying Amount
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $23,072,678* $ 23,072,678* $21,646,540* $21,646,540*
Mortgage loans on real estate 1,251,515 1,212,527 1,288,702 1,259,029
Policy loans 801,322 788,547 721,089 719,127
Liabilities
Insurance investment contracts $23,314,345 $23,218,626 $21,536,809 $21,994,804
----------- ----------- ----------- -----------
</TABLE>
- ------------
* Includes derivative financial instruments with a fair value of $19,342 in
1998 and $2,967 in 1997.
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.
9
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, 1998 were as follows:
Operating expenses include $46,556 in 1998, $22,061 in 1997, and $17,533 in
1996, 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 $152 in 1998, $501 in 1997, and $455 in 1996.
On November 4, 1982, VALIC invested $11,853 in 13 1U2% Restricted
Subordinated Note 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, 1998, 1997, and 1996. VALIC recognized $1,212 in interest income
during 1998, $1,292 for 1997, and $1,372 for 1996.
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, 1998, 1997, and 1996. VALIC
recognized $1,048, $1,296, and $1,479 of interest income on the note during
1998, 1997, and 1996, respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds from
the sale totaled $13,033 with a profit of $33 recognized on the transaction.
VALIC paid common stock dividends of $181,000, $50.63 per share; $379,000,
$106.01 per share; and $111,000, $31.05 per share, in 1998, 1997, and 1996,
respectively.
VALIC received capital contributions of $55,200, $67,000, $250,000, and
$75,000 from AGL on June 30, 1998, December 31, 1998, March 31, 1997, and
December 30, 1996, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 826
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
9. TRANSACTIONS WITH AFFILIATED COMPANIES - (CONTINUED)
VALIC acquired bonds of various issuers from American General Life and
Accident Insurance Company at a cost of $22,154 and $25,892 on January 30, 1997,
and April 8, 1997, respectively.
On December 5, 1997, VALIC acquired bonds of various issuers from Western
National Life Insurance Company at a cost of $129,715.
10
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 $37, $30, and $2,678, for the years
ended December 31, 1998, 1997, and 1996, respectively. The accrued liability for
anticipated assessments was $4,782, $7,402, and $13,661, at December 31, 1998,
1997, and 1996, respectively. The 1998 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.
11
EMPLOYEE BENEFIT PLANS
11.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
11.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1,342 $ 1,091 $ 917
Interest cost on projected
benefit obligation 1,346 1,145 843
Expected return on plan assets (1,102) (801) (575)
Amortization of unrecognized
net asset existing at date of
initial application -- -- (23)
Amortization of unrecognized
prior service cost 66 54 44
Actuarial gain (33) -- --
------- ------- -------
Total pension expense $ 1,619 $ 1,489 $ 1,206
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.00% 7.25% 7.50%
Rate of increase in
compensation levels 4.25 4.00 4.00
Expected long-term rate of
return on plan assets 10.25 10.00 10.00
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1998 and 1997 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Projected benefit obligation $ 21,125 $ 17,394
Plan assets at fair value 14,921 11,759
-------- --------
Projected benefit obligation in excess of
plan assets (6,204) (5,635)
Unrecognized net gain 738 2,162
Unrecognized prior service cost 487 26
-------- --------
Net pension liability $ (4,979) $ (3,447)
-------- --------
</TABLE>
Equity and fixed maturity securities were 66% and 32%, 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.
11.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through AGC, 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.
- --------------------------------------------------------------------------------
13
<PAGE> 827
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements - Continued
December 31, 1998
- --------------------------------------------------------------------------------
11.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - (CONTINUED)
The life plans are fully insured; the retiree medical and dental plans are
unfunded and self-insured. The accrued liability for postretirement benefits was
$2,388 and $1,784 at year-end 1998 and 1997, respectively. These liabilities
were discounted at the same rates used for the pension plans. Postretirement
benefit expense in 1998, 1997, and 1996 was $275, $295, and $282, respectively.
12
IMPACT OF YEAR 2000 (UNAUDITED)
INTERNAL SYSTEMS. VALIC has numerous technology systems that are managed on
a decentralized basis. Year 2000 readiness efforts are therefore being
undertaken by its key business units with centralized oversight. Each business
unit has developed and is implementing a plan to minimize the risk of a
significant negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of VALIC's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose VALIC to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready, (4) test systems to prove that
they will function into the next century as they do currently, and (5) return
the system to operations. As of December 31, 1998, these activities have been
completed for substantially all of VALIC's critical systems, making them Year
2000 ready. Vendor upgrades for a small number of systems are expected in the
first half of 1999; therefore, activities (3) through (5) are ongoing for these
systems. VALIC will continue to test its systems throughout 1999 to maintain
Year 2000 readiness.
THIRD PARTY RELATIONSHIPS. VALIC has relationships with various third
parties who also must be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) VALIC and include organizations
with which VALIC exchanges information. Third parties include vendors of
hardware, software, and information services; providers of infrastructure
services such as voice and data communications and utilities for office
facilities; investors; customers; distribution channels; and joint venture
partners. Third parties differ from internal systems in that VALIC exercises
less, or no, control over their Year 2000 readiness. VALIC has developed a plan
to assess and attempt to mitigate the risks associated with the potential
failure of third parties to achieve Year 2000 readiness. The plan includes the
following activities: (1) identify and classify third party dependencies; (2)
research, analyze, and document Year 2000 readiness for critical third parties;
and (3) test critical hardware and software products and electronic interfaces.
A more detailed evaluation will be completed during first quarter 1999 as part
of VALIC's contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, VALIC's testing activities will extend throughout
1999.
CONTINGENCY PLANS. VALIC has commenced contingency planning to reduce the
risk of Year 2000 related business failures. The contingency plans, which
address both internal systems and third party relationships, include the
following activities: (1) evaluate the consequences of failure of business
processes with significant exposure to Year 2000 risk, (2) determine the
probability of a Year 2000-related failure for those processes that have a high
consequence of failure; (3) develop an action plan to complete contingency plans
for those processes that rank high in consequence and probability of failure;
and (4) complete the applicable action plans. VALIC is currently developing
contingency plans and expects to substantially complete all contingency-planning
activities by April 30, 1999.
RISKS AND UNCERTAINTIES. Based on its plans to make internal systems ready
for Year 2000, to deal with third party relationships, and to develop
contingency actions, VALIC believes that it will experience, at most, isolated
and minor disruptions of business processes following the turn of the century.
Such disruptions are not expected to have a material effect on VALIC's future
results of operations, liquidity, or financial condition. However, due to the
magnitude and complexity of this project, risks and uncertainties exist and
VALIC is not able to predict a most reasonably likely worst case scenario. If
Year 2000 readiness is not achieved due to nonperformance by significant third
party vendors, VALIC's failure to maintain critical systems as Year 2000 ready,
failure of critical third parties to achieve Year 2000 readiness on a timely
basis, or other unforeseen circumstances in completing VALIC's plans, the Year
2000 issues could have a material adverse impact on VALIC's operations following
the turn of the century.
COSTS. Through December 31, 1998, VALIC has incurred and expensed $27
million (pretax) related to Year 2000 readiness, including $20 million incurred
during 1998. VALIC currently anticipates that it will incur future costs of
approximately $2 million (pretax) to maintain Year 2000 readiness, complete Year
2000 work on noncritical systems and third party relationships, and complete
contingency planning activities. In addition, VALIC accelerated the planned
replacement of certain systems as part of the Year 2000 plans.
- --------------------------------------------------------------------------------
14
<PAGE> 828
================================================================================
CHAIRMAN'S LETTER 1
================================================================================
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1998, 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, Portfolio Director Plus,
Independence Plus, Group Unit Purchase and Impact) appears on pages two and
three.
1998 was a volatile year for investors around the world. Problems that began in
Asia in late 1997 circled the globe throughout 1998. Central banks, fearing the
worst lowered interest rates in the fourth quarter of 1998. The result was an
unexpected and dramatic rise in stock and bond prices worldwide.
The year was marked by extreme flight to quality. Investors general preference
was for larger cap growth in stocks over small cap value stocks, and U.S.
Treasury Securities.
The Standard & Poor's 500 Index, dominated by large cap, high-growth technology
and global consumer product companies, had a total return of 28.58%. The top 15
stocks alone accounted for half of the performance. It was a difficult year for
active equity fund managers, as almost 90% of the active managers lagged the S&P
500 Index returns. Also, the S&P 500 Index returns for the year outperformed
over 71% of all U.S.-traded common stocks. The medium to small-cap companies
lagged, with the large companies S&P MidCap 400 Index returning 6.27% and the
S&P SmallCap 600 Index, producing a negative 1.31%.
There was a greater variability in returns between growth and value components
of the equity indices. In the large capitalization arena, S&P 500/BARRA Growth
Index returned an outstanding 42.16%, while the S&P 500/BARRA Value Index
returned 14.67%. In the mid-cap sector, the S&P 400/BARRA Growth Index returned
34.86% compared to the S&P 400/BARRA Value Index return of 4.67%. However, the
small cap equity returns experienced wide variability, with the S&P SmallCap
600/BARRA Growth Index returning 2.29%, and the S&P SmallCap 600/BARRA Value
returning a negative 5.06%.
Globally, the pattern of investment results was very similar to the U.S. equity
returns. The MSCI world Index returned 22%. The top quintile of growth stocks
outperformed the bottom quintile of value stocks by over two times with returns
of 48% and 17%, respectively.
The yield on the 30 year Treasury bond opened the year at 5.92% and declined to
5.10% by the end of 1998, as the Federal Reserve lowered the federal fund rate
three times between September 29 and November 17, leaving the target rate at
4.75%.
For the year, the bond market return, reflected in the Lehman Aggregate Bond
Index, was 8.69% with the long U.S. Treasury Index showing the highest return of
13.52%, followed by the Long Corporate AA/Better Index 10.52%, and the High
Yield Index with 1.60%. Throughout the developed world international bond prices
appreciated as yields declined.
While international markets outside of North America and Europe remain
unsettled, the U.S. economy is experiencing unprecedented prosperity and growth.
Furthermore, with worldwide inflation rates low, and the Federal Reserve weary
of weakness in Asia and emerging markets, it appears that we can expect a
continuation of the current stable rate environment.
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., Chairman
The Variable Annuity Life Insurance Company
February 18, 1999
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> 829
================================================================================
2 CHAIRMAN'S LETTER
================================================================================
<TABLE>
<CAPTION>
GROUP PORTFOLIO
UNIT INDEPENDENCE DIRECTOR
PURCHASE IMPACT PLUS 1
DIVISION DIVISION DIVISION DIVISION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund ..................................... -- -- 11 11
Putnam Global Growth Fund ............................................. -- -- -- --
Templeton Foreign Fund ................................................ -- -- -- --
Templeton International Fund .......................................... -- -- -- 20
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund ....................................... -- -- -- 17
AGSPC Small Cap Index Fund ............................................ -- -- 14 14
Dreyfus Variable Investment Fund - Small Cap Portfolio ................ -- -- 18
Putnam New Opportunities Fund ......................................... -- -- -- --
Putnam OTC & Emerging Growth Fund ..................................... -- -- -- --
GROWTH
AGSPC Growth Fund ..................................................... -- -- -- 15
AGSPC MidCap Index Fund ............................................... -- 4 4 4
American Century - Twentieth Century Ultra Fund ....................... -- -- -- --
Founders Growth Fund .................................................. -- -- -- --
GROWTH & INCOME
AGSPC Growth & Income Fund ............................................ -- -- -- 16
AGSPC Social Awareness Fund ........................................... -- -- 12 12
AGSPC Stock Index Fund ................................................ 10A,10B 10D 10C 10C
Neuberger Berman Guardian Trust ....................................... -- -- -- --
Scudder Growth and Income Fund ........................................ -- -- -- --
Vanguard Windsor II Fund .............................................. -- -- -- --
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund ....................................... -- -- -- 19
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund ........................................... -- 5 5 5
Vanguard Wellington Fund .............................................. -- -- -- --
CURRENT INCOME
AGSPC International Government Bond Fund .............................. -- -- 13 13
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund ....................................... -- 1 7 7
AGSPC Government Securities Fund ...................................... -- -- 8 8
Vanguard Fixed Income Securities Fund - Long-Term Corporate Fund ...... -- -- -- --
Vanguard Fixed Income Securities Fund - Long-Term Treasury Fund ....... -- -- -- --
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund ............................................... -- 2 6 6
<CAPTION>
YEAR TO DATE
TOTAL RETURNS
PORTFOLIO PORTFOLIO FOR YEAR ENDING
DIRECTOR DIRECTOR DECEMBER 31,
2 PLUS ----------------------
DIVISION DIVISION 1998 1997
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund ..................................... -- 11 17.57% 1.18%
Putnam Global Growth Fund ............................................. 28 28 27.48 12.20
Templeton Foreign Fund ................................................ 32 32 (5.82) 5.57
Templeton International Fund .......................................... -- 20 7.95 12.54
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund ....................................... 17 17 40.71 1.57
AGSPC Small Cap Index Fund ............................................ -- 14 (2.92) 21.18
Dreyfus Variable Investment Fund - Small Cap Portfolio ................ -- 18 (4.51) 15.37
Putnam New Opportunities Fund ......................................... 26 26 23.12 21.31
Putnam OTC & Emerging Growth Fund ..................................... 27 27 9.87 9.08
GROWTH
AGSPC Growth Fund ..................................................... 15 15 16.96 19.80
AGSPC MidCap Index Fund ............................................... -- 4 17.80 30.45
American Century - Twentieth Century Ultra Fund ....................... 31 31 33.14 21.74
Founders Growth Fund .................................................. 30 30 23.76 25.25
GROWTH & INCOME
AGSPC Growth & Income Fund ............................................ -- 16 13.41 22.60
AGSPC Social Awareness Fund ........................................... 12 12 26.03 32.52
AGSPC Stock Index Fund ................................................ 10C 10C 27.14 31.77
Neuberger Berman Guardian Trust ....................................... 29 29 1.34 16.66
Scudder Growth and Income Fund ........................................ 21 21 4.99 28.80
Vanguard Windsor II Fund .............................................. 24 24 14.90 30.70
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund ....................................... -- 19 5.07 14.07
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund ........................................... -- 5 17.19 21.40
Vanguard Wellington Fund .............................................. 25 25 10.65 21.65
CURRENT INCOME
AGSPC International Government Bond Fund .............................. 13 13 15.92 (5.79)
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund ....................................... -- 7 6.30 7.49
AGSPC Government Securities Fund ...................................... -- 8 7.86 7.83
Vanguard Fixed Income Securities Fund - Long-Term Corporate Fund ...... 22 22 8.04 12.32
Vanguard Fixed Income Securities Fund - Long-Term Treasury Fund ....... 23 23 11.82 12.44
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund ............................................... 6 6 4.12 4.13
</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> 830
================================================================================
CHAIRMAN'S LETTER 3
================================================================================
<TABLE>
<CAPTION>
Group Portfolio Portfolio
Unit Independence Director Director
Purchase Impact Plus 1 2
- ------------------------------------------------------------------------------------------------------------------------------------
Division Division Division Division Division
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ACTIVELY MANAGED EQUITY FUNDS
American General International Growth Fund .............. -- -- -- -- --
American General Large Cap Growth Fund .................. -- -- -- -- --
American General Mid Cap Growth Fund .................... -- -- -- -- --
American General Small Cap Growth Fund .................. -- -- -- -- --
American General INternational Value Fund ............... -- -- -- -- --
American General Large Cap Value Fund ................... -- -- -- -- --
American General Mid Cap Value Fund ..................... -- -- -- -- --
American General Small Cap Value Fund ................... -- -- -- -- --
T. Rowe Price Small-Cap Stock Fund ...................... -- -- -- -- --
SPECIALTY EQUITY FUND
American General Socially Responsible Fund .............. -- -- -- -- --
BALANCED FUNDS
American General Balanced Fund .......................... -- -- -- -- --
INCOME FUNDS
American General High Yield Bond Fund ................... -- -- -- -- --
American General Strategic Bond Fund .................... -- -- -- -- --
American General Domestic Bond Fund ..................... -- -- -- -- --
American General Core Bond Fund ......................... -- -- -- -- --
MONEY MARKET FUND
American General Money Market Fund ...................... -- -- -- -- --
LIFESTYLE FUNDS
American General Growth Lifestyle Fund .................. -- -- -- -- --
American General Moderate Growth Lifestyle Fund ......... -- -- -- -- --
American General Conservative Growth Lifestyle Fund ..... -- -- -- -- --
Vanguard LifeStrategy Growth ............................ -- -- -- -- --
Vanguard LifeStrategy Moderate Growth ................... -- -- -- -- --
Vanguard LifeStrategy Conservative Growth ............... -- -- -- -- --
<CAPTION>
Year To Date
Total Returns
Portfolio For Year Ending
Director December 31,
Plus ------------------------
Division 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
ACTIVELY MANAGED EQUITY FUNDS
American General International Growth Fund .............. 33 5.17(a) N/A
American General Large Cap Growth Fund .................. 39 24.08(a) N/A
American General Mid Cap Growth Fund .................... 37 34.77(a) N/A
American General Small Cap Growth Fund .................. 35 34.94(a) N/A
American General International Value Fund ............... 34 14.99(a) N/A
American General Large Cap Value Fund ................... 40 24.66(a) N/A
American General Mid Cap Value Fund ..................... 38 25.47(a) N/A
American General Small Cap Value Fund ................... 36 16.53(a) N/A
T. Rowe Price Small-Cap Stock Fund ...................... 51 14.10(b) N/A
SPECIALTY EQUITY FUND
American General Socially Responsible Fund .............. 41 27.78(a) N/A
BALANCED FUNDS
American General Balanced Fund .......................... 42 17.01(a) N/A
INCOME FUNDS
American General High Yield Bond Fund ................... 60 5.31(a) N/A
American General Strategic Bond Fund .................... 59 4.99(a) N/A
American General Domestic Bond Fund ..................... 43 4.44(a) N/A
American General Core Bond Fund ......................... 58 2.92(a) N/A
MONEY MARKET FUND
American General Money Market Fund ...................... 44 1.33(a) N/A
LIFESTYLE FUNDS
American General Growth Lifestyle Fund .................. 48 19.25(a) N/A
American General Moderate Growth Lifestyle Fund ......... 49 18.54(a) N/A
American General Conservative Growth Lifestyle Fund ..... 50 16.20(a) N/A
Vanguard LifeStrategy Growth ............................ 52 16.81(b) N/A
Vanguard LifeStrategy Moderate Growth ................... 53 12.59(b) N/A
Vanguard LifeStrategy Conservative Growth ............... 54 8.40(b) N/A
</TABLE>
(a) Since August 26, 1998, initial capitalizations of Fund. See Note C.
(b) Since September 22, 1998, inception of the Division.
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> 831
[Intentionally Left Blank]
<PAGE> 832
================================================================================
FINANCIAL STATEMENTS 5
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1998
ASSETS: ALL DIVISIONS
----------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $11,178,484,452) .................. $ 14,587,138,409
Balance due from VALIC general account ........................................................ 4,821,209
----------------
NET ASSETS .................................................................................... 14,591,959,618
================
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts
(Net of applicable contract loans -- partial withdrawals with right of reinvestment) ....... $ 14,481,888,528
Reserves for annuity contracts on benefit ..................................................... 22,530,083
Capital surplus (Note C) ...................................................................... 87,541,007
----------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ............................................. $ 14,591,959,618
================
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
INVESTMENT INCOME: ALL DIVISIONS
----------------
<S> <C>
Dividends from mutual funds ................................................................... $ 161,161,461
----------------
EXPENSES:
Mortality and expense risk charge ............................................................. 133,464,532
Reimbursement of expenses (Note C) ............................................................ (5,204,060)
----------------
Total expenses ................................................................................ 128,260,472
----------------
NET INVESTMENT INCOME ......................................................................... 32,900,989
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 256,062,773
Capital gains distributions from mutual funds ................................................. 599,950,475
Net unrealized appreciation of investments during the period .................................. 1,171,591,133
----------------
Net realized and unrealized gain on investments ............................................... 2,027,604,381
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 2,060,505,370
================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS ALL DIVISIONS
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................. $ 32,900,989 $ 30,758,096
Net realized gain on investments ...................................................... 256,062,773 161,505,567
Capital gains distributions from mutual funds ......................................... 599,950,475 289,703,358
Net unrealized appreciation of investments during the period .......................... 1,171,591,133 1,001,756,337
---------------- ----------------
Increase in net assets resulting from operations ................................... 2,060,505,370 1,483,723,358
---------------- ----------------
PRINCIPAL TRANSACTIONS:
Purchase payments ..................................................................... 2,363,611,528 1,798,552,034
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ... (576,063,916) (328,105,329)
Annuity benefit payments .............................................................. (2,688,910) (2,273,125)
Amounts transferred from VALIC general account ........................................ 419,281,138 518,857,110
---------------- ----------------
Increase in net assets resulting from principal transactions ....................... 2,204,139,840 1,987,030,690
---------------- ----------------
Total increase in net assets .......................................................... 4,264,645,210 3,470,754,048
NET ASSETS:
Beginning of period ................................................................... 10,327,314,408 6,856,560,360
---------------- ----------------
End of period ......................................................................... $ 14,591,959,618 $ 10,327,314,408
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 833
================================================================================
6 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AGSPC PUTNAM
INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
EQUITIES GROWTH FOREIGN INTERNATIONAL
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 ....................... $ 148,718,766 $ 162,850,092 $ 218,291,648 $ 769,418,093
Balance due (to) from VALIC general account ........................... (444,384) 244,949 176,625 78,110
------------- ------------- ------------- -------------
NET ASSETS ............................................................ $ 148,274,382 $ 163,095,041 $ 218,468,273 $ 769,496,203
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment) ... $ 148,099,853 $ 163,052,748 $ 218,427,558 $ 769,292,514
Reserves for annuity contracts on benefit ............................. 174,529 42,293 40,715 203,689
Capital Surplus (Note C) .............................................. -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ..................... $ 148,274,382 $ 163,095,041 $ 218,468,273 $ 769,496,203
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN CENTURY -
TWENTIETH FOUNDERS AGSPC AGSPC
CENTURY GROWTH GROWTH & SOCIAL
ULTRA FUND - FUND - INCOME FUND - AWARENESS FUND -
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ..................... $ 366,344,764 $ 412,424,559 $ 285,113,626 $ 434,890,057
Balance due (to) from VALIC general account ......................... 495,565 496,361 114,285 251,402
------------- ------------- ------------- -------------
NET ASSETS .......................................................... $ 366,840,329 $ 412,920,920 $ 285,227,911 $ 435,141,459
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment).. $ 366,789,363 $ 412,850,610 $ 285,171,395 $ 435,010,800
Reserves for annuity contracts on benefit ........................... 50,966 70,310 56,516 130,659
Capital Surplus (Note C) ............................................ -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ................... $ 366,840,329 $ 412,920,920 $ 285,227,911 $ 435,141,459
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AGSPC AGSPC
TEMPLETON ASSET VANGUARD INTERNATIONAL
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 ...................... $ 324,138,930 $ 227,493,681 $ 406,576,731 $ 169,141,402
Balance due (to) from VALIC general account .......................... (10,923) 41,476 (66,066) 66,807
------------- ------------- ------------- -------------
NET ASSETS ........................................................... $ 324,128,007 $ 227,535,157 $ 406,510,665 $ 169,208,209
============= ============= ============= =============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of reinvestment) .. $ 323,829,380 $ 227,370,013 $ 406,457,643 $ 169,153,179
Reserves for annuity contracts on benefit ............................ 298,627 165,144 53,022 55,030
Capital Surplus (Note C) ............................................. -- -- -- --
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 324,128,007 $ 227,535,157 $ 406,510,665 $ 169,208,209
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 834
================================================================================
SEPARATE ACCOUNT A 7
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC DREYFUS VARIABLE PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP INVESTMENT NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX FUND - 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>
$1,357,008,368 $ 225,671,866 $ 801,729,449 $ 411,790,940 $ 142,153,064 $1,213,041,349 $ 850,345,675
233,960 (1,195) 277,466 622,014 158,931 219,257 159,959
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,357,242,328 $ 225,670,671 $ 802,006,915 $ 412,412,954 $ 142,311,995 $1,213,260,606 $ 850,505,634
============== ============== ============== ============== ============== ============== ==============
$1,356,787,386 $ 225,553,498 $ 801,796,471 $ 412,396,437 $ 142,270,946 $1,212,743,548 $ 850,117,314
454,942 117,173 210,444 16,517 41,049 517,058 388,320
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$1,357,242,328 $ 225,670,671 $ 802,006,915 $ 412,412,954 $ 142,311,995 $1,213,260,606 $ 850,505,634
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER
BERMAN SCUDDER VANGUARD
AGSPC STOCK INDEX FUND GUARDIAN GROWTH AND WINDSOR II
- ------------------------------------------------------------------ TRUST - INCOME FUND - FUND -
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 548,095,924 $ 42,538,426 $3,335,722,002 $ 56,510,591 $ 61,347,128 $ 247,754,620 $ 651,075,950
(342,049) 10,450 1,070,137 2,453 22,721 213,888 339,032
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 547,753,875 $ 42,548,876 $3,336,792,139 $ 56,513,044 $ 61,369,849 $ 247,968,508 $ 651,414,982
============== ============== ============== ============== ============== ============== ==============
$ 533,364,910 $ 40,484,822 $3,334,328,831 $ 56,292,876 $ 61,355,625 $ 247,893,617 $ 651,232,580
14,388,965 2,064,054 2,463,308 220,168 14,224 74,891 182,402
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 547,753,875 $ 42,548,876 $3,336,792,139 $ 56,513,044 $ 61,369,849 $ 247,968,508 $ 651,414,982
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT VANGUARD VANGUARD
AGSPC CAPITAL CONSERVATION FUND SECURITIES LONG-TERM LONG-TERM AGSPC MONEY MARKET FUND
- ------------------------------- FUND - CORPORATE FUND - TREASURY FUND - -------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,286,289 $ 60,017,936 $ 113,502,848 $ 59,843,445 $ 119,293,240 $ 4,184,151 $ 266,261,605
13,504 (46,396) (40,451) 121,207 (41,034) 13,336 389,999
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,299,793 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,252,206 $ 4,197,487 $ 266,651,604
============== ============== ============== ============== ============== ============== ==============
$ 6,295,147 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,238,598 $ 4,197,487 $ 266,634,790
4,646 -- -- -- 13,608 -- 16,814
-- -- -- -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,299,793 $ 59,971,540 $ 113,462,397 $ 59,964,652 $ 119,252,206 $ 4,197,487 $ 266,651,604
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 835
================================================================================
8 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL INTERNATIONAL SMALL CAP SMALL CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 33 DIVISION 34 DIVISION 35 DIVISION 36
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ....................... $ 3,853,567 $ 4,153,036 $ 5,279,473 $ 4,500,106
Balance due to VALIC general account .................................. (2,817) -- -- --
------------ ------------ ------------ ------------
NET ASSETS ............................................................ $ 3,850,750 $ 4,153,036 $ 5,279,473 $ 4,500,106
============ ============ ============ ============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) .... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................. -- -- -- --
Capital surplus (Note C) .............................................. 3,850,750 4,153,036 5,279,473 4,500,106
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus ..................... $ 3,850,750 $ 4,153,036 $ 5,279,473 $ 4,500,106
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
MID CAP MID CAP LARGE CAP LARGE CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 37 DIVISION 38 DIVISION 39 DIVISION 40
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,475,870 $ 4,972,209 $ 3,549,043 $ 3,626,750
Balance due to VALIC general account ................................. (270) -- (1,410) --
----------- ----------- ----------- -----------
NET ASSETS ........................................................... $ 5,475,600 $ 4,972,209 $ 3,547,633 $ 3,626,750
=========== =========== =========== ===========
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................ -- -- -- --
Capital surplus (Note C) ............................................. 5,475,600 4,972,209 3,547,633 3,626,750
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus .................... $ 5,475,600 $ 4,972,209 $ 3,547,633 $ 3,626,750
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL SOCIALLY GENERAL GENERAL GENERAL
RESPONSIBLE BALANCED DOMESTIC MONEY MARKET
FUND - FUND - BOND FUND - FUND -
DIVISION 41 DIVISION 42 DIVISION 43 DIVISION 44
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
Balance due to VALIC general account ................................. -- -- -- --
------------ ------------ ------------ ------------
NET ASSETS ........................................................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
============ ============ ============ ============
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ -- $ -- $ -- $ --
Reserves for annuity contracts on benefit ............................ -- -- -- --
Capital surplus (Note C) ............................................. 6,409,166 5,868,671 1,309,568 5,082,478
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES and Capital Surplus .................... $ 6,409,166 $ 5,868,671 $ 1,309,568 $ 5,082,478
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 836
================================================================================
SEPARATE ACCOUNT A 9
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL GENERAL GENERAL T. ROWE PRICE
GROWTH MODERATE GROWTH CONSERVATIVE GROWTH CORE STRATEGIC HIGH YIELD SMALL-CAP STOCK
LIFESTYLE FUND - LIFESTYLE FUND - LIFESTYLE FUND - BOND FUND - BOND FUND - BOND FUND FUND -
DIVISION 48 DIVISION 49 DIVISION 50 DIVISION 58 DIVISION 59 DIVISION 60 DIVISION 51
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,991,538 $ 5,950,028 $ 5,829,911 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
(9,933) (4,420) (1,198) -- -- -- --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 5,981,605 $ 5,945,608 $ 5,828,713 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
============== ============== ============== ============== ============== ============== ==============
$ -- $ -- $ -- $ -- $ -- $ -- $ 139
-- -- -- -- -- -- --
5,981,605 5,945,608 5,828,713 5,161,936 5,265,532 5,282,173 --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 5,981,605 $ 5,945,608 $ 5,828,713 $ 5,161,936 $ 5,265,532 $ 5,282,173 $ 139
============== ============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 837
===============================================================================
10 FINANCIAL STATEMENTS
===============================================================================
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AGSPC PUTNAM
For the year ended December 31, 1998 INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
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 .......................... $ 3,115,042 $ 607,762 $ 5,873,157 $ 17,844,520
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge .................... 1,507,006 1,281,924 2,636,652 9,900,147
Reimbursement of expenses (Note C) ................... -- (256,355) (526,963) --
------------ ------------ ------------ ------------
Total expenses .................................... 1,507,006 1,025,569 2,109,689 9,900,147
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... 1,608,036 (417,807) 3,763,468 7,944,373
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .............. 4,716,155 107,190 (1,076,896) 52,533,310
Capital gains distributions from mutual funds ........ 11,021,627 4,089,731 17,280,633 31,903,839
Net unrealized appreciation (depreciation)
of investments during the year ..................... 7,346,991 21,600,190 (34,315,820) (37,039,574)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 23,084,773 25,797,111 (18,112,083) 47,397,575
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 24,692,809 $ 25,379,304 $(14,348,615) $ 55,341,948
============ ============ ============ ============
AGSPC
STATEMENTS OF OPERATIONS AMERICAN CENTURY- FOUNDERS AGSPC SOCIAL
For the year ended December 31, 1998 TWENTIETH GROWTH GROWTH & AWARENESS
CENTURY ULTRA FUND - INCOME FUND - FUND -
FUND - DIVISION 30 DIVISION 16 DIVISION 12
------------ ------------ ------------ ------------
INVESTMENT INCOME:
Dividends from mutual funds .......................... $ -- $ 202,602 $ 1,219,255 $ 3,599,599
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge .................... 2,804,758 3,631,491 2,643,321 3,409,326
Reimbursement of expenses (Note C) ................... (521,841) (726,411) -- --
------------ ------------ ------------ ------------
Total expenses .................................... 2,282,917 2,905,080 2,643,321 3,409,326
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... (2,282,917) (2,702,478) (1,424,066) 190,273
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ..................... 473,963 669,679 10,494,295 2,220,138
Capital gains distributions from mutual funds ........ 30,532,354 21,151,616 20,275,426 37,003,617
Net unrealized appreciation (depreciation)
of investments during the year .................... 39,033,600 42,627,883 3,996,252 38,477,902
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 70,039,917 64,449,178 34,765,973 77,701,657
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ......................... $ 67,757,000 $ 61,746,700 $ 33,341,907 $ 77,891,930
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 838
================================================================================
SEPARATE ACCOUNT A 11
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC DREYFUS VARIABLE PUTNAM PUTNAM OTC &
SCIENCE & SMALL CAP INVESTMENT FUND NEW EMERGING AGSPC AGSPC
TECHNOLOGY INDEX - SMALL CAP OPPORTUNITIES GROWTH GROWTH MIDCAP
FUND - FUND - PORTFOLIO - FUND - FUND - FUND - INDEX FUND -
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ 2,611,782 $ 2,936 $ -- $ 4,436,796 $ -- $ 7,011,168
------------- ------------- ------------- -------------- ------------- ------------- -------------
10,381,062 2,289,688 10,348,098 3,363,729 1,438,779 10,623,737 7,700,596
-- -- (1,244,807) (672,401) (288,124) -- --
------------- ------------- ------------- -------------- ------------- ------------- -------------
10,381,062 2,289,688 9,103,291 2,691,328 1,150,655 10,623,737 7,700,596
------------- ------------- ------------- -------------- ------------- ------------- -------------
(10,381,062) 322,094 (9,100,355) (2,691,328) 3,286,141 (10,623,737) (689,428)
------------- ------------- ------------- -------------- ------------- ------------- -------------
34,745,563 8,661,321 19,673,784 872,455 (332,944) 11,720,556 26,826,443
113,616,462 18,436,501 15,549,964 12,546,729 -- 51,517,534 69,472,796
250,423,659 (34,899,835) (67,338,458) 53,605,222 9,278,020 114,925,718 30,964,965
------------- ------------- ------------- -------------- ------------- ------------- -------------
398,785,684 (7,802,013) (32,114,710) 67,024,406 8,945,076 178,163,808 127,264,204
------------- ------------- ------------- -------------- ------------- ------------- -------------
$ 388,404,622 $ (7,479,919) $ (41,215,065) $ 64,333,078 $ 12,231,217 $ 167,540,071 $ 126,574,776
============= ============= ============= ============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
NEUBERGER GROWTH AND VANGUARD
AGSPC STOCK INDEX FUND BERMAN INCOME WINDSOR II
------------------------------------------------------------------- GUARDIAN TRUST - FUND - FUND -
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
------------- ------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,134,933 $ 482,467 $ 33,994,984 $ 635,074 $ 266,705 $ 4,796,472 $ 11,495,781
------------- ------------- ------------- ------------- -------------- ------------- -------------
5,099,302 206,480 28,029,502 529,334 728,024 2,644,262 5,873,266
-- (82,027) -- -- (145,133) (528,762) --
------------- ------------- ------------- ------------- -------------- ------------- -------------
5,099,302 124,453 28,029,502 529,334 582,891 2,115,500 5,873,266
------------- ------------- ------------- ------------- -------------- ------------- -------------
1,035,631 358,014 5,965,482 105,740 (316,186) 2,680,972 5,622,515
------------- ------------- ------------- ------------- -------------- ------------- -------------
36,292,713 2,895,173 21,789,375 4,368,980 447,267 1,067,960 1,366,076
2,140,138 166,018 13,033,369 219,975 5,112,104 17,737,903 51,898,120
82,035,996 6,394,969 631,036,013 7,900,957 (5,621,588) (15,926,329) 278,987
------------- ------------- ------------- ------------- -------------- ------------- -------------
120,468,847 9,456,160 665,858,757 12,489,912 (62,217) 2,879,534 53,543,183
------------- ------------- ------------- ------------- -------------- ------------- -------------
$ 121,504,478 $ 9,814,174 $ 671,824,239 $ 12,595,652 $ (378,403) $ 5,560,506 $ 59,165,698
============= ============= ============= ============= ============== ============= -------------
</TABLE>
<PAGE> 839
================================================================================
12 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
TEMPLETON ASSET VANGUARD INTERNATIONAL
STATEMENTS OF OPERATIONS ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
For the year ended December 31, 1998 FUND - FUND - FUND - BOND FUND -
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ 9,488,692 $ 5,918,741 $ 11,720,002 $ 3,619,997
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ............. 4,189,971 2,045,234 3,573,103 1,622,993
Reimbursement of expenses (Note C) ............ -- -- -- --
------------ ------------ ------------ ------------
Total expenses ............................. 4,189,971 2,045,234 3,573,103 1,622,993
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ......................... 5,298,721 3,873,507 8,146,899 1,997,004
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ....... 10,513,951 2,520,862 453,710 (1,068,211)
Capital gains distributions from mutual funds . 9,560,576 12,936,405 30,281,535 872,765
Net unrealized appreciation (depreciation)
of investments during the year .............. (10,693,322) 13,072,376 (13,016,167) 21,926,900
------------ ------------ ------------ ------------
Net realized and unrealized gain on investments 9,381,205 28,529,643 17,719,078 21,731,454
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 14,679,926 $ 32,403,150 $ 25,865,977 $ 23,728,458
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 840
================================================================================
FINANCIAL STATEMENTS 13
================================================================================
<TABLE>
<CAPTION>
AGSPC VANGUARD VANGUARD
GOVERNMENT LONG-TERM LONG-TERM
AGSPC CAPITAL CONSERVATION FUND SECURITIES CORPORATE TREASURY AGSPC MONEY MARKET FUND
- ------------------------------- FUND - FUND - FUND - ----------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 402,079 $ 3,710,371 $ 5,462,111 $ 2,478,178 $ 3,523,260 $ 230,073 $ 9,814,968
----------- ----------- ----------- ----------- ----------- ----------- -----------
63,904 585,563 993,952 504,256 798,645 46,056 1,965,005
-- -- -- (78,692) (132,544) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
63,904 585,563 993,952 425,564 666,101 46,056 1,965,005
----------- ----------- ----------- ----------- ----------- ----------- -----------
338,175 3,124,808 4,468,159 2,052,614 2,857,159 184,017 7,849,963
----------- ----------- ----------- ----------- ----------- ----------- -----------
12,194 413,199 1,352,903 136,212 1,195,397 -- --
-- -- -- 1,044,043 -- -- --
35,832 (35,856) 1,437,930 (64,200) 2,611,560 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
48,026 377,343 2,790,833 1,116,055 3,806,957 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 386,201 $ 3,502,151 $ 7,258,992 $ 3,168,669 $ 6,664,116 $ 184,017 $ 7,849,963
============ =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 841
================================================================================
14 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN AMERICAN AMERICAN AMERICAN
For the year ended December 31, 1998 GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL INTERNATIONAL SMALL CAP SMALL CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 33* DIVISION 34* DIVISION 35* DIVISION 36*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ -- $ 5,760 $ -- $ 13,079
---------- ---------- ---------- ----------
EXPENSES:
Mortality and expense risk charge ............. -- -- -- --
Reimbursement of expenses (Note C) ............ -- -- -- --
---------- ---------- ---------- ----------
Total expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
NET INVESTMENT INCOME ......................... -- 5,760 -- 13,079
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .............. -- -- -- --
Capital gains distributions from mutual funds . -- -- 18,373 51,644
Net unrealized appreciation
of investments during the year ............. 200,750 547,276 1,361,100 585,384
---------- ---------- ---------- ----------
Net realized and unrealized gain on investments 200,750 547,276 1,379,473 637,028
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 200,750 $ 553,036 $1,379,473 $ 650,107
========== ========== ========== ==========
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN AMERICAN AMERICAN AMERICAN
For the year ended December 31, 1998 GENERAL GENERAL GENERAL GENERAL
MID CAP MID CAP LARGE CAP LARGE CAP
GROWTH FUND - VALUE FUND - GROWTH FUND - VALUE FUND -
DIVISION 37* DIVISION 38* DIVISION 39* DIVISION 40*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................... $ -- $ 10,079 $ 2,093 $ 10,224
---------- ---------- ---------- ----------
EXPENSES:
Mortality and expense risk charge ............. -- -- -- --
Reimbursement of expenses (Note C) ............ -- -- -- --
---------- ---------- ---------- ----------
Total expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
NET INVESTMENT INCOME ......................... -- 10,079 2,093 10,224
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .............. -- -- -- --
Capital gains distributions from mutual funds . -- 115,562 -- --
Net unrealized appreciation
of investments during the year .............. 1,425,600 896,569 695,540 716,526
---------- ---------- ---------- ----------
Net realized and unrealized gain on investments 1,425,600 1,012,131 695,540 716,526
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $1,425,600 $1,022,210 $ 697,633 $ 726,750
========== ========== ========== ==========
</TABLE>
* For the period from August 26, 1998 (initial capital contribution date)
through December 31, 1998.
See Note C.
** For the period from September 22, 1998 through December 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 842
================================================================================
SEPARATE ACCOUNT A 15
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
GENERAL AMERICAN AMERICAN AMERICAN GENERAL GENERAL
SOCIALLY AMERICAN GENERAL GENERAL GENERAL MODERATE CONSERVATIVE
RESPONSIBLE GENERAL DOMESTIC MONEY GROWTH GROWTH GROWTH
FUND - BALANCED FUND - BOND FUND - MARKET FUND - LIFESTYLE FUND - LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 41* DIVISION 42* DIVISION 43* DIVISION 44* DIVISION 48* DIVISION 49* DIVISION 50*
- ------------ --------------- ------------ ------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 23,760 $ 29,084 $ 14,978 $ 82,478 $ 11,226 $ 19,912 $ 27,772
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
23,760 29,084 14,978 82,478 11,226 19,912 27,772
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-- -- -- -- -- -- --
285,733 34,051 15,898 -- -- -- --
1,099,673 805,536 28,692 -- 970,379 925,696 800,941
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1,385,406 839,587 44,590 -- 970,379 925,696 800,941
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$1,409,166 $ 868,671 $ 59,568 $ 82,478 $ 981,605 $ 945,608 $ 828,713
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL T. ROWE PRICE
CORE STRATEGIC HIGH YIELD SMALL-CAP STOCK
BOND FUND - BOND FUND - BOND FUND - FUND -
DIVISION 58* DIVISION 59* DIVISION 60* DIVISION 51**
- ------------ ------------ ------------ ----------------
<S> <C> <C> <C>
$ 50,247 $ 69,000 $ 92,262 $ --
- ---------- ---------- ---------- ----------
-- -- -- --
-- -- -- --
- ---------- ---------- ---------- ----------
-- -- -- --
- ---------- ---------- ---------- ----------
50,247 69,000 92,262 --
- ---------- ---------- ---------- ----------
-- -- -- --
16,291 11,064 -- --
95,397 185,469 189,911 --
- ---------- ---------- ---------- ----------
111,688 196,533 189,911 --
- ---------- ---------- ---------- ----------
$ 161,935 $ 265,533 $ 282,173 $ --
========== ========== ========== ==========
</TABLE>
<PAGE> 843
================================================================================
16 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES
FUND - DIVISION 11
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ 1,608,036 $ 1,546,185
Net realized gain (loss) on investments .............................. 4,716,155 8,844,811
Capital gains distributions from mutual funds ........................ 11,021,627 4,593,062
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 7,346,991 (11,693,489)
------------- -------------
Increase (decrease) in net assets resulting from operations ..... 24,692,809 3,290,569
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 14,604,832 21,604,936
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (9,033,065) (8,085,959)
Annuity benefit payments ............................................. (17,602) (10,712)
Amounts transferred interdivision, and (to) from VALIC general account (33,973,374) (56,024,580)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... (28,419,209) (42,516,315)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (3,726,400) (39,225,746)
NET ASSETS:
Beginning of year .................................................... 152,000,782 191,226,528
------------- -------------
End of year .......................................................... $ 148,274,382 $ 152,000,782
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 122,716,744 156,226,314
Purchase payments .................................................... 10,549,627 17,325,859
Surrenders ........................................................... (6,694,955) (6,456,410)
Transfers -- interdivision and (to) from VALIC general account ....... (24,759,665) (44,379,019)
------------- -------------
Total units outstanding, end of year ................................. 101,811,751 122,716,744
============= =============
Units outstanding, by class:
Standard units .................................................... 101,811,751 122,716,744
Enhanced units:
20 bp reduced ................................................... -- --
40 bp reduced ................................................... -- --
------------- -------------
Accumulation units end of year ....................................... 101,811,751 122,716,744
============= =============
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.454644 $ 1.237299
Enhanced unit:
20 bp reduced.................................................... -- --
40 bp reduced.................................................... -- --
</TABLE>
<TABLE>
<CAPTION>
PUTNAM GLOBAL GROWTH
FUND - DIVISION 28
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (417,807) $ 825,963
Net realized gain (loss) on investments .............................. 107,190 172,968
Capital gains distributions from mutual funds ........................ 4,089,731 9,300,593
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 21,600,190 (7,591,166)
------------- -------------
Increase (decrease) in net assets resulting from operations ..... 25,379,304 2,708,358
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 45,226,423 18,196,466
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (3,310,436) (812,004)
Annuity benefit payments ............................................. (2,617) (1,799)
Amounts transferred interdivision, and (to) from VALIC general account 36,967,959 21,134,329
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... 78,881,329 38,516,992
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 104,260,633 41,225,350
NET ASSETS:
Beginning of year .................................................... 58,834,408 17,609,058
------------- -------------
End of year .......................................................... $ 163,095,041 $ 58,834,408
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 49,548,732 16,648,600
Purchase payments .................................................... 32,447,084 15,748,353
Surrenders ........................................................... (2,408,897) (675,628)
Transfers -- interdivision and (to) from VALIC general account ....... 28,040,873 17,827,407
------------- -------------
Total units outstanding, end of year ................................. 107,627,792 49,548,732
============= =============
Units outstanding, by class:
Standard units .................................................... 101,468,260 49,548,732
Enhanced units:
20 bp reduced ................................................... 6,153,771 --
40 bp reduced ................................................... 5,760 --
------------- -------------
Accumulation units end of year ....................................... 107,627,792 49,548,732
============= =============
<CAPTION>
DECEMBER 31
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.512865 $ 1.186775
Enhanced unit:
20 bp reduced.................................................... 1.549587 --
40 bp reduced.................................................... 1.591007 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 844
================================================================================
SEPARATE ACCOUNT A 17
================================================================================
<TABLE>
<CAPTION>
TEMPLETON FOREIGN TEMPLETON INTERNATIONAL AGSPC SCIENCE & TECHNOLOGY AGSPC SMALL CAP
FUND - DIVISION 32 FUND - DIVISION 20 FUND - DIVISION 17 INDEX FUND - DIVISION 14
- ---------------------------- ---------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,763,468 $ 3,566,211 $ 7,944,373 $ 7,044,706 $ (10,381,062) $ (8,359,405) $ 322,094 $ 321,469
(1,076,896) 180,290 52,533,310 24,143,886 34,745,563 27,202,326 8,661,321 7,403,801
17,280,633 12,359,374 31,903,839 6,157,699 113,616,462 -- 18,436,501 17,477,318
(34,315,820) (16,286,999) (37,039,574) 33,826,345 250,423,659 (11,571,856) (34,899,835) 13,195,192
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
(14,348,615) (181,124) 55,341,948 71,172,636 388,404,622 7,271,065 (7,479,919) 38,397,780
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
72,575,285 63,929,059 114,632,129 127,443,761 195,575,628 203,196,325 28,153,952 26,031,893
(7,939,318) (2,231,179) (35,093,007) (21,498,080) (44,292,549) (27,661,660) (11,145,100) (8,101,115)
(1,991) (1,149) (9,179) (6,675) (17,543) (17,353) (7,293) (6,381)
(12,669,089) 79,881,321 (95,114,875) 22,603,734 (92,089,284) 15,908,913 (13,919,719) (10,731,749)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
51,964,887 141,578,052 (15,584,932) 128,542,740 59,176,252 191,426,225 3,081,840 7,192,648
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
37,616,272 141,396,928 39,757,016 199,715,376 447,580,874 198,697,290 (4,398,079) 45,590,428
180,852,001 39,455,073 729,739,187 530,023,811 909,661,454 710,964,164 230,068,750 184,478,322
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
$ 218,468,273 $ 180,852,001 $ 769,496,203 $ 729,739,187 $1,357,242,328 $909,661,454 $ 225,670,671 $ 230,068,750
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
159,201,107 36,671,828 463,174,350 378,581,949 397,842,959 315,809,646 106,279,077 103,320,842
63,265,244 55,441,897 65,837,726 81,609,273 77,332,989 88,179,109 13,084,095 13,258,805
(7,600,467) (1,875,284) (21,321,029) (13,712,830) (17,946,718) (11,448,429) (5,229,338) (4,191,154)
(10,799,968) 68,962,666 (55,271,958) 16,695,958 (35,393,395) 5,302,633 (6,753,994) (6,109,416)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
204,065,916 159,201,107 452,419,089 463,174,350 421,835,835 397,842,959 107,379,840 106,279,077
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
198,626,024 159,201,107 452,419,089 463,174,350 418,601,069 397,842,959 107,321,015 106,279,077
5,437,288 -- -- -- 3,228,389 -- 58,825 --
2,604 -- -- -- 6,377 -- -- --
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
204,065,916 159,201,107 452,419,089 463,174,350 421,835,835 397,842,959 107,379,840 106,279,077
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ---------------------------- ---------------------------- ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.069704 $ 1.135778 $ 1.700398 $ 1.575168 $ 3.216190 $ 2.285739 $ 2.100506 $ 2.163595
1.094954 -- -- -- 3.241847 -- 2.125983 --
1.123840 -- -- -- 3.272354 -- -- --
</TABLE>
<PAGE> 845
================================================================================
18 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS SMALL CAP
PORTFOLIO - DIVISION 18
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (9,100,355) $ (7,877,254)
Net realized gain (loss) on investments .............................. 19,673,784 10,514,976
Capital gains distributions from mutual funds ........................ 15,549,964 47,781,324
Net unrealized appreciation (depreciation)
of investments during the year ..................................... (67,338,458) 56,534,602
------------- -------------
Increase (decrease) in net assets resulting from operations .......... (41,215,065) 106,953,648
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 136,010,701 152,268,343
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (37,151,392) (25,995,894)
Annuity benefit payments ............................................. (12,769) (13,079)
Amounts transferred interdivision, and (to) from VALIC general account (105,448,868) (41,774,769)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (6,602,328) 84,484,601
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (47,817,393) 191,438,249
Net Assets:
Beginning of year .................................................... 849,824,308 658,386,059
------------- -------------
End of year .......................................................... $ 802,006,915 $ 849,824,308
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 479,851,525 428,883,250
Purchase payments .................................................... 78,837,263 92,300,416
Surrenders ........................................................... (22,827,377) (15,764,818)
Transfers -- interdivision and (to) from VALIC general account ....... (61,646,182) (25,567,323)
------------- -------------
Total units outstanding, end of year ................................. 474,215,229 479,851,525
============= =============
Units outstanding, by class:
Standard units .................................................... 474,215,229 479,851,525
Enhanced units:
20 bp reduced ................................................... -- --
40 bp reduced ................................................... -- --
------------- -------------
Accumulation units end of year ....................................... 474,215,229 479,851,525
============= =============
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit...................................................... $ 1.690786 $ 1.770622
Enhanced unit:
20 bp reduced.................................................... -- --
40 bp reduced.................................................... -- -
</TABLE>
<TABLE>
<CAPTION>
PUTNAM NEW OPPORTUNITIES
FUND - DIVISION 26
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ......................................... $ (2,691,328) $ (1,052,294)
Net realized gain (loss) on investments .............................. 872,455 242,887
Capital gains distributions from mutual funds ........................ 12,546,729 3,494,327
Net unrealized appreciation (depreciation)
of investments during the year ..................................... 53,605,222 18,445,868
------------- -------------
Increase (decrease) in net assets resulting from operations .......... 64,333,078 21,130,788
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................... 108,017,017 51,769,269
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................................. (8,784,234) (2,540,805)
Annuity benefit payments ............................................. (575) (61)
Amounts transferred interdivision, and (to) from VALIC general account 84,011,090 44,254,408
Increase (decrease) in net assets
------------- -------------
resulting from principal transactions ........................ 183,243,298 93,482,811
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. 247,576,376 114,613,599
Net Assets:
Beginning of year .................................................... 164,836,578 50,222,979
------------- -------------
End of year .......................................................... $ 412,412,954 $ 164,836,578
============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ................................. 143,395,066 53,001,699
Purchase payments .................................................... 85,839,361 49,995,408
Surrenders ........................................................... (6,337,162) (2,517,125)
Transfers -- interdivision and (to) from VALIC general account ....... 68,362,756 42,915,084
------------- -------------
Total units outstanding, end of year ................................. 291,260,021 143,395,066
============= =============
Units outstanding, by class:
Standard units .................................................... 280,523,297 143,395,066
Enhanced units:
20 bp reduced ................................................... 10,725,927 --
40 bp reduced ................................................... 10,797 --
------------- -------------
Accumulation units end of year ....................................... 291,260,021 143,395,066
============= =============
<CAPTION>
DECEMBER 31
--------------------------------
1998 1997
------------- -------------
Accumulation value per unit:
<S> <C> <C>
Standard unit...................................................... $ 1.415175 $ 1.149453
Enhanced unit:
20 bp reduced.................................................... 1.434946 --
40 bp reduced.................................................... 1.459115 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 846
================================================================================
Separate Account A 19
================================================================================
<TABLE>
<CAPTION>
AMERICAN CENTURY -
PUTNAM OTC & EMERGING AGSPC GROWTH AGSPC MIDCAP INDEX TWENTIETH CENTURY ULTRA
GROWTH FUND - DIVISION 27 FUND - DIVISION 15 FUND - DIVISION 4 FUND - DIVISION 31
- ---------------------------- ----------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,286,141 $ (720,013) $ (10,623,737) $ (7,550,418) $ (689,428) $ 535,199 $ (2,282,917) $ (633,243)
(332,944) (47,363) 11,720,556 6,207,654 26,826,443 19,471,600 473,963 316,651
-- -- 51,517,534 15,041,175 69,472,796 39,891,431 30,532,354 24,559,704
9,278,020 8,912,297 114,925,718 132,575,644 30,964,965 109,426,279 39,033,600 (16,326,801)
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
12,231,217 8,144,921 167,540,071 146,274,055 126,574,776 169,324,509 67,757,000 7,916,311
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
36,165,527 32,976,492 183,983,180 185,814,571 71,049,146 66,141,090 95,865,928 43,175,072
(4,499,407) (1,887,137) (45,145,966) (24,997,689) (37,639,412) (24,993,718) (6,987,387) (1,444,132)
(2,072) (1,777) (23,099) (18,116) (23,570) (20,499) (1,933) (950)
960,600 14,456,676 (34,517,049) (764,959) (40,068,991) (45,549,090) 86,438,332 56,804,430
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
32,624,648 45,544,254 104,297,066 160,033,807 (6,682,827) (4,422,217) 175,314,940 98,534,420
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
44,855,865 53,689,175 271,837,137 306,307,862 119,891,949 164,902,292 243,071,940 106,450,731
97,456,130 43,766,955 941,423,469 635,115,607 730,613,685 565,711,393 123,768,389 17,317,658
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
$ 142,311,995 $ 97,456,130 $1,213,260,606 $ 941,423,469 $ 850,505,634 $730,613,685 $ 366,840,329 $123,768,389
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
99,785,041 48,902,828 453,172,490 366,272,509 171,065,657 172,816,978 97,745,282 16,654,076
36,257,228 36,775,163 82,864,073 99,349,760 16,010,438 17,600,471 63,913,168 36,243,458
(4,704,400) (2,370,530) (20,670,419) (12,033,793) (8,724,789) (6,688,206) (4,133,151) (1,152,164)
1,221,835 16,477,580 (16,039,778) (415,986) (9,311,419) (12,663,586) 59,835,828 45,999,912
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
132,559,704 99,785,041 499,326,366 453,172,490 169,039,887 171,065,657 217,361,127 97,745,282
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
129,463,792 99,785,041 494,997,997 453,172,490 169,039,887 171,065,657 209,221,513 97,745,282
3,092,839 -- 4,324,799 -- -- -- 8,116,612 --
3,073 -- 3,570 -- -- -- 23,002 --
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
132,559,704 99,785,041 499,326,366 453,172,490 169,039,887 171,065,657 217,361,127 97,745,282
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ---------------------------- ----------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------ -------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.072660 $ 0.976262 $ 2.428587 $ 2.076503 $ 5.029093 $ 4.269122 $ 1.685503 $ 1.265937
1.098295 -- 2.448443 -- -- -- 1.737734 --
1.127653 -- 2.471473 -- -- -- 1.798208 --
</TABLE>
<PAGE> 847
================================================================================
20 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOUNDERS GROWTH AGSPC GROWTH & INCOME
FUND - DIVISION 30 FUND - DIVISION 16
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (2,702,478) $ (229,837) $ (1,424,066) $ (1,206,116)
Net realized gain on investments ................................ 669,679 270,661 10,494,295 3,270,580
Capital gains distributions from mutual funds ................... 21,151,616 21,678,474 20,275,426 2,863,622
Net unrealized appreciation (depreciation)
of investments during the year ................................ 42,627,883 (6,466,051) 3,996,252 38,217,716
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 61,746,700 15,253,247 33,341,907 43,145,802
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 117,393,497 54,770,398 39,532,854 44,825,180
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (9,478,330) (1,863,811) (11,951,930) (8,344,519)
Annuity benefit payments ........................................ (1,096) (66) (3,597) (2,954)
Amounts transferred interdivision, and (to) from
VALIC general account ......................................... 72,791,918 70,189,987 (32,787,298) 5,944,261
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................... 180,705,989 123,096,508 (5,209,971) 42,421,968
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 242,452,689 138,349,755 28,131,936 85,567,770
NET ASSETS:
Beginning of year ............................................... $ 170,468,231 32,118,476 257,095,975 171,528,205
------------- ------------- ------------- -------------
End of year ..................................................... 412,920,920 $ 170,468,231 $ 285,227,911 $ 257,095,975
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 132,167,162 31,197,464 132,434,555 108,341,635
Purchase payments ............................................... 80,460,723 45,575,203 19,715,398 24,988,066
Surrenders ...................................................... (6,588,832) (1,491,261) (6,142,924) (4,697,640)
Transfers -- interdivision and (to) from VALIC general account .. 52,471,956 56,885,756 (16,456,334) 3,802,494
------------- ------------- ------------- -------------
Total units outstanding, end of year ............................ 258,511,009 132,167,162 129,550,695 132,434,555
============= ============= ============= =============
Units outstanding, by class:
Standard units ............................................... 250,777,959 132,167,162 129,550,695 132,434,555
Enhanced units:
20 bp reduced .............................................. 7,720,189 -- -- --
40 bp reduced .............................................. 12,861 -- -- --
------------- ------------- ------------- -------------
Accumulation units end of year .................................. 258,511,009 132,167,162 129,550,695 132,434,555
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 1.595913 $ 1.289513 $ 2.201234 $ 19981997
Enhanced unit:
20 bp reduced .............................................. 1.633282 -- -- --
40 bp reduced .............................................. 1.676366 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 848
================================================================================
SEPARATE ACCOUNT A 21
================================================================================
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
AGSPC SOCIAL AWARENESS ----------------------------------------------------------------
FUND - DIVISION 12 DIVISION 10A DIVISION 10B
- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 190,273 $ 281,520 $ 1,035,631 $ 2,030,016 $ 358,014 $ 399,877
2,220,138 1,158,707 36,292,713 23,392,823 2,895,173 2,137,197
37,003,617 9,560,562 2,140,138 2,365,369 166,018 185,844
38,477,902 33,369,211 82,035,996 89,338,679 6,394,969 6,910,324
- ------------- ------------- ------------- ------------- ------------- -------------
77,891,930 44,370,000 121,504,478 117,126,887 9,814,174 9,633,242
- ------------- ------------- ------------- ------------- ------------- -------------
72,710,322 44,746,508 4,116,842 3,670,819 204,507 231,218
(13,355,087) (5,475,293) (30,874,894) (24,373,318) (2,153,577) (2,331,031)
(9,481) -- (1,996,857) (1,717,390) (327,696) (285,785)
54,323,803 55,022,728 (14,779,077) (3,572,644) (1,934,563) (1,027,537)
- ------------- ------------- ------------- ------------- ------------- -------------
113,669,557 94,293,943 (43,533,986) (25,992,533) (4,211,329) (3,413,135)
- ------------- ------------- ------------- ------------- ------------- -------------
191,561,487 138,663,943 77,970,492 91,134,354 5,602,845 6,220,107
243,579,972 104,916,029 469,783,383 378,649,029 36,946,031 30,725,924
- ------------- ------------- ------------- ------------- ------------- -------------
$ 435,141,459 $ 243,579,972 $ 547,753,875 $ 469,783,383 $ 42,548,876 $ 36,946,031
============= ============= ============= ============= ============= =============
81,577,104 46,574,016 25,835,933 27,379,389 1,256,974 1,380,401
21,359,028 16,505,152 206,729 226,321 6,328 9,647
(3,889,138) (1,970,414) (1,549,859) (1,529,579) (68,344) (92,576)
16,555,822 20,468,350 (766,299) (240,198) (63,845) (40,498)
- ------------- ------------- ------------- ------------- ------------- -------------
115,602,816 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
============= ============= ============= ============= ============= =============
114,382,494 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
1,218,871 -- -- -- -- --
1,451 -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- -------------
115,602,816 81,577,104 23,726,504 25,835,933 1,131,113 1,256,974
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31
- ------------------------------ ------------------------------ ------------------------------
1998 1997 1998 1997 1998 1997
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.762308 $ 2.985333 $ 22.479709 $ 17.679054 $ 35.792019 $ 27956641
3.825649 -- -- --
3.897214 -- -- --
</TABLE>
<PAGE> 849
================================================================================
22 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
-----------------------------------
DIVISION 10C
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ 5,965,482 $ 9,342,792
Net realized gain on investments .................................. 21,789,375 19,691,626
Capital gains distributions from mutual funds ..................... 13,033,369 11,611,427
Net unrealized appreciation (depreciation)
of investments during the year .................................. 631,036,013 475,943,738
--------------- ---------------
Increase (decrease) in net assets resulting from operations ... 671,824,239 516,589,583
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 372,858,039 264,734,800
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (130,840,043) (73,944,144)
Annuity benefit payments .......................................... (164,035) (120,896)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 112,786,439 72,721,787
--------------- ---------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 354,640,400 263,391,547
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ...................................... 1,026,464,639 779,981,130
NET ASSETS:
Beginning of year ................................................. 2,310,327,500 1,530,346,370
--------------- ---------------
End of year ....................................................... $ 3,336,792,139 $ 2,310,327,500
=============== ===============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 615,053,124 536,806,965
Purchase payments ................................................. 85,764,962 77,757,636
Surrenders ........................................................ (29,978,801) (20,920,257)
Transfers -- interdivision and (to) from VALIC general account .... 27,731,410 21,408,780
--------------- ---------------
Total units outstanding, end of year .............................. 698,570,695 615,053,124
=============== ===============
Units outstanding, by class:
Standard units .................................................. 691,680,049 615,053,124
Enhanced units:
20 bp reduced ................................................ 6,859,835 --
40 bp reduced ................................................ 30,811 --
--------------- ---------------
Accumulation units end of year .................................... 698,570,695 615,053,124
=============== ===============
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------
DIVISION 10D
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ 105,740 $ 222,212
Net realized gain on investments .................................. 4,368,980 3,421,747
Capital gains distributions from mutual funds ..................... 219,975 249,976
Net unrealized appreciation (depreciation)
of investments during the year .................................. 7,900,957 9,003,055
--------------- ---------------
Increase (decrease) in net assets resulting from operations ... 12,595,652 12,896,990
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 654,342 789,193
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (3,879,247) (2,598,402)
Annuity benefit payments .......................................... (15,905) (13,201)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... (2,514,825) (3,872,680)
--------------- ---------------
Increase (decrease) in net assets
resulting from principal transactions ...................... (5,755,635) (5,695,090)
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ...................................... 6,840,017 7,201,900
NET ASSETS:
Beginning of year ................................................. 49,673,027 42,471,127
--------------- ---------------
End of year ....................................................... $ 56,513,044 $ 49,673,027
=============== ===============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 7,438,537 8,381,704
Purchase payments ................................................. 88,428 132,628
Surrenders ........................................................ (521,941) (430,026)
Transfers -- interdivision and (to) from VALIC general account .... (349,228) (645,769)
--------------- ---------------
Total units outstanding, end of year .............................. 6,655,796 7,438,537
=============== ===============
Units outstanding, by class:
Standard units .................................................. 6,655,796 7,438,537
Enhanced units:
20 bp reduced ................................................ -- --
40 bp reduced ................................................ -- --
--------------- ---------------
Accumulation units end of year .................................... 6,655,796 7,438,537
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit........................... $ 4.772052 $ 3.753436 $ 8.457722 $ 6.652806
Enhanced unit:
20 bp reduced........................ 4.875028 -- -- --
40 bp reduced........................ 4.991135 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 850
================================================================================
SEPARATE ACCOUNT A 23
================================================================================
<TABLE>
<CAPTION>
NEUBERGER BERMAN SCUDDER GROWTH AND VANGUARD WINDSOR II TEMPLETON ASSET
GUARDIAN TRUST - DIVISION 29 INCOME FUND - DIVISION 21 FUND - DIVISION 24 ALLOCATION FUND - DIVISION 19
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (316,186) $ (99,741) $ 2,680,972 $ 1,085,048 $ 5,622,515 $ 3,037,913 $ 5,298,721 $ 2,826,899
447,267 406,993 1,067,960 269,953 1,366,076 741,743 10,513,951 982,063
5,112,104 3,161,542 17,737,903 8,952,194 51,898,120 18,541,072 9,560,576 11,661,872
(5,621,588) (1,574,737) (15,926,329) 4,003,711 278,987 16,110,878 (10,693,322) 13,366,704
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(378,403) 1,894,057 5,560,506 14,310,906 59,165,698 38,431,606 14,679,926 28,837,538
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,727,026 14,861,097 79,800,185 37,754,331 172,075,011 82,698,118 55,452,646 61,278,823
(1,971,281) (661,852) (7,670,739) (1,502,937) (18,029,126) (3,075,223) (15,786,958) (9,457,167)
-- -- (3,718) (2,106) (6,802) (1,497) (22,337) (19,742)
(1,314,316) 21,010,215 34,897,873 66,400,722 162,813,002 115,544,417 (47,069,555) 41,633,946
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,441,429 35,209,460 107,023,601 102,650,010 316,852,085 195,165,815 (7,426,204) 93,435,860
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,063,026 37,103,517 112,584,107 116,960,916 376,017,783 233,597,421 7,253,722 122,273,398
46,306,823 9,203,306 135,384,401 18,423,485 275,397,199 41,799,778 316,874,285 194,600,887
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 61,369,849 $ 46,306,823 $ 247,968,508 $ 135,384,401 $ 651,414,982 $ 275,397,199 $ 324,128,007 $ 316,874,285
============= ============= ============= ============= ============= ============= ============= =============
35,406,663 8,211,592 94,225,984 16,524,046 187,929,868 37,292,761 196,150,946 137,384,670
13,737,161 11,711,541 51,892,138 28,874,922 105,145,249 63,199,633 32,881,580 38,574,901
(1,683,029) (501,980) (5,008,156) (1,088,301) (10,145,505) (2,242,658) (10,222,721) (5,822,716)
(1,186,725) 15,985,510 23,203,013 49,915,317 103,638,092 89,680,132 (27,846,098) 26,014,091
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
46,274,070 35,406,663 164,312,979 94,225,984 386,567,704 187,929,868 190,963,707 196,150,946
============= ============= ============= ============= ============= ============= ============= =============
45,261,146 35,406,663 159,815,811 94,225,984 372,737,595 187,929,868 190,963,707 196,150,946
1,012,671 -- 4,494,004 -- 13,800,156 -- -- --
253 -- 3,163 -- 29,953 -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
46,274,070 35,406,663 164,312,979 94,225,984 386,567,704 187,929,868 190,963,707 196,150,946
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.324970 $ 1.307438 $ 1.507724 $ 1.436011 $ 1.683226 $ 1.464949 $ 1.695764 $ 1.613943
1.368269 -- 1.542160 -- 1.723020 -- -- --
1.418252 -- 1.582856 -- 1.770257 -- -- --
</TABLE>
<PAGE> 851
================================================================================
24 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC ASSET ALLOCATION VANGUARD WELLINGTON
FUND - DIVISION 5 FUND - DIVISION 25
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 3,873,507 $ 3,768,356 $ 8,146,899 $ 3,011,918
Net realized gain (loss) on investments ........................... 2,520,862 5,941,975 453,710 713,048
Capital gains distributions from mutual funds ..................... 12,936,405 10,546,782 30,281,535 7,375,024
Net unrealized appreciation (depreciation)
of investments during the year .................................. 13,072,376 14,486,554 (13,016,167) 3,998,391
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations ... 32,403,150 34,743,667 25,865,977 15,098,381
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 16,199,430 11,497,764 128,896,516 51,882,204
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (12,309,318) (10,611,952) (11,075,983) (2,456,686)
Annuity benefit payments .......................................... (9,811) (8,301) (1,770) (68)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 6,673,714 (24,272,661) 106,781,378 66,331,198
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 10,554,015 (23,395,150) 224,600,141 115,756,648
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 42,957,165 11,348,517 250,466,118 130,855,029
NET ASSETS:
Beginning of year ................................................. 184,577,992 173,229,475 156,044,547 25,189,518
------------- ------------- ------------- -------------
End of year ....................................................... $ 227,535,157 $ 184,577,992 $ 406,510,665 $ 156,044,547
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 57,307,351 65,292,617 116,429,781 22,866,634
Purchase payments ................................................. 4,579,044 3,898,053 87,356,196 42,072,769
Surrenders ........................................................ (3,567,970) (3,591,047) (6,659,976) (1,913,812)
Transfers -- interdivision and (to) from VALIC general account .... 1,950,743 (8,292,272) 76,359,783 53,404,190
------------- ------------- ------------- -------------
Total units outstanding, end of year .............................. 60,269,168 57,307,351 273,485,784 116,429,781
============= ============= ============= =============
Units outstanding, by class:
Standard units .................................................... 60,237,818 57,307,351 253,840,498 116,429,781
Enhanced units:
20 bp reduced ................................................. 31,350 -- 19,636,072 --
40 bp reduced ................................................. -- -- 9,214 --
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 60,269,168 57,307,351 273,485,784 116,429,781
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Standard unit............................................... $ 3.772519 $ 3.219282 $ 1.482836 $ 1.340109
Enhanced unit:
20 bp reduced............................................. 3.882024 -- 1.529797 --
40 bp reduced............................................. -- -- 1.585688 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 852
================================================================================
SEPARATE ACCOUNT A 25
================================================================================
<TABLE>
<CAPTION>
AGSPC
AGSPC INTERNATIONAL CAPITAL CONSERVATION FUND
GOVERNMENT BOND ------------------------------------------------------------- AGSPC GOVERNMENT SECURITIES
FUND - DIVISION 13 DIVISION 1 DIVISION 7 FUND - DIVISION 8
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,997,004 $ 4,595,764 $ 338,175 $ 344,608 $ 3,124,808 $ 2,913,560 $ 4,468,159 $ 4,230,305
(1,068,211) (3,911,328) 12,194 23,005 413,199 (805,486) 1,352,903 (985,278)
872,765 136,607 -- -- -- -- -- --
21,926,900 (11,068,351) 35,832 90,579 (35,856) 1,739,391 1,437,930 3,130,717
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,728,458 (10,247,308) 386,201 458,192 3,502,151 3,847,465 7,258,992 6,375,744
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
25,413,792 40,582,861 146,532 366,816 7,027,648 7,324,860 12,902,909 12,424,460
(7,785,118) (6,757,210) (562,370) (389,473) (3,833,561) (3,026,469) (5,395,424) (3,958,609)
(2,691) (274) (455) (526) -- -- -- --
(38,345,989) (35,550,483) (97,641) (509,353) (2,143,426) (8,016,607) 10,528,632 (12,246,246)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(20,720,006) (1,725,106) (513,934) (532,536) 1,050,661 (3,718,216) 18,036,117 (3,780,395)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,008,452 (11,972,414) (127,733) (74,344) 4,552,812 129,249 25,295,109 2,595,349
166,199,757 178,172,171 6,427,526 6,501,870 55,418,728 55,289,479 88,167,288 85,571,939
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 169,208,209 $ 166,199,757 $ 6,299,793 $ 6,427,526 $ 59,971,540 $ 55,418,728 $ 113,462,397 $ 88,167,288
============= ============= ============= ============= ============= ============= ============= =============
111,480,591 112,601,593 1,831,961 1,991,536 28,242,598 30,286,494 45,034,894 47,130,169
16,433,799 27,009,353 40,472 109,285 3,402,874 3,840,755 6,558,071 6,646,726
(5,105,973) (4,696,042) (155,629) (116,952) (1,879,505) (1,555,673) (2,679,928) (2,143,349)
(24,924,879) (23,434,313) (27,361) (151,908) (1,014,305) (4,328,978) 4,816,634 (6,598,652)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,883,538 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
============= ============= ============= ============= ============= ============= ============= =============
97,473,851 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
408,156 -- -- -- -- -- -- --
1,531 -- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
97,883,538 111,480,591 1,689,443 1,831,961 28,751,662 28,242,598 53,729,671 45,034,894
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.728006 $ 1.490645 $ 3.726168 $ 3.505970 $ 2.085846 $ 1.962239 $ 2.111727 $ 1.957755
1.751922 -- -- -- -- -- -- --
1.777571 -- -- -- -- -- -- --
</TABLE>
<PAGE> 853
================================================================================
26 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VANGUARD LONG-TERM VANGUARD LONG-TERM
CORPORATE FUND - DIVISION 22 TREASURY FUND - DIVISION 23
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 2,052,614 $ 506,655 $ 2,857,159 $ 567,564
Net realized gain on investments .................................. 136,212 36,716 1,195,397 94,335
Capital gains distributions from mutual funds ..................... 1,044,043 156,984 -- --
Net unrealized appreciation (depreciation)
of investments during the year .................................. (64,200) 643,127 2,611,560 1,066,785
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .............. 3,168,669 1,343,482 6,664,116 1,728,684
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 18,953,737 6,013,744 30,970,739 6,985,216
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (1,608,861) (167,812) (2,748,295) (265,787)
Annuity benefit payments .......................................... -- -- (813) (176)
Amounts transferred interdivision, and (to) from
VALIC general account ........................................... 19,011,058 9,719,778 60,728,245 10,813,576
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ....................... 36,355,934 15,565,710 88,949,876 17,532,829
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 39,524,603 16,909,192 95,613,992 19,261,513
NET ASSETS:
Beginning of year ................................................. 20,440,049 3,530,857 23,638,214 4,376,701
------------- ------------- ------------- -------------
End of year ....................................................... $ 59,964,652 $ 20,440,049 $ 119,252,206 $ 23,638,214
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 17,371,407 3,370,441 20,041,920 4,174,369
Purchase payments ................................................. 15,098,601 5,633,849 23,916,542 6,619,458
Surrenders ........................................................ (1,333,865) (151,626) (1,937,227) (227,789)
Transfers -- interdivision and (to) from VALIC general account .... 15,936,430 8,518,743 48,342,694 9,475,882
------------- ------------- ------------- -------------
Total units outstanding, end of year .............................. 47,072,573 17,371,407 90,363,929 20,041,920
============= ============= ============= =============
Units outstanding, by class:
Standard units .................................................... 44,122,646 17,371,407 86,673,300 20,041,920
Enhanced units:
20 bp reduced ................................................. 2,949,044 -- 3,682,809 --
40 bp reduced ................................................. 883 -- 7,820 --
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 47,072,573 17,371,407 90,363,929 20,041,920
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit............................................... $ 1.271278 $ 1.176649 $ 1.318263 $ 1.178938
Enhanced unit:
20 bp reduced............................................. 1.312731 -- 1.349397 --
40 bp reduced............................................. 1.360696 -- 1.384079 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 854
================================================================================
SEPARATE ACCOUNT A 27
================================================================================
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND
- ----------------------------------------------------------------
DIVISION 2 DIVISION 6
- ------------------------------ ------------------------------
1998 1997 1998 1997
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 184,017 $ 188,513 $ 7,849,963 $ 5,293,164
-- -- -- --
-- -- -- --
-- -- -- --
- ------------- ------------- ------------- -------------
184,017 188,513 7,849,963 5,293,164
- ------------- ------------- ------------- -------------
90,884 123,738 87,624,322 58,442,609
(292,611) (277,223) (33,439,890) (16,317,039)
-- -- (1,603) (1,592)
(364,560) (334,772) 63,714,230 (27,271,186)
- ------------- ------------- ------------- -------------
(566,287) (488,257) 117,897,059 14,852,792
- ------------- ------------- ------------- -------------
(382,270) (299,744) 125,747,022 20,145,956
4,579,757 4,879,501 140,904,582 120,758,626
- ------------- ------------- ------------- -------------
$ 4,197,487 $ 4,579,757 $ 266,651,604 $ 140,904,582
============= ============= ============= =============
1,931,439 2,142,534 84,182,521 75,124,095
37,542 53,405 56,361,872 35,256,772
(120,614) (119,264) (17,562,213) (10,205,685)
(148,034) (145,236) 29,891,462 (15,992,661)
- ------------- ------------- ------------- -------------
1,700,333 1,931,439 152,873,642 84,182,521
============= ============= ============= =============
1,700,333 1,931,439 147,547,688 84,182,521
-- -- 5,325,479 --
-- -- 475 --
- ------------- ------------- ------------- -------------
1,700,333 1,931,439 152,873,642 84,182,521
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
- ----------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
$ 2.468627 $ 2.371163 $ 1.742617 $ 1.673590
-- -- 1.786658 --
-- -- 1.833793 --
</TABLE>
<PAGE> 855
===============================================================================
28 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL INTERNATIONAL AMERICAN GENERAL INTERNATIONAL
GROWTH FUND - DIVISION 33 VALUE FUND - DIVISION 33
------------------------------ ------------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATIONS: $ -- $ -- $ 5,760 $ --
Net investment income ................................. -- -- -- --
Net realized gain on investments
Capital gains distributions from
mutual funds ........................................ -- -- -- --
Net unrealized appreciation
of investments during the year ...................... 200,750 -- 547,276 --
---------- --------- ---------- ---------
Increase in net assets resulting
from operations ................................ 200,750 -- 553,036 --
---------- --------- ---------- ---------
PRINCIPAL TRANSACTIONS:
Purchase payments ..................................... -- -- -- --
Surrenders of accumulation units by
terminations, withdrawals, and maintenance
fees ................................................ -- -- -- --
Annuity benefit payments .............................. -- -- -- --
Amounts transferred interdivision, and from
VALIC general account ............................... 3,650,000 -- 3,600,000 --
---------- --------- ---------- ---------
Increase in net assets
resulting from principal transactions ............ 3,650,000 -- 3,600,000 --
---------- --------- ---------- ---------
TOTAL INCREASE IN NET ASSETS .......................... 3,850,750 -- 4,153,036 --
NET ASSETS:
Beginning of year ..................................... -- -- -- --
End of year ........................................... $3,850,750 $ -- $4,153,036 $ --
========== ========= ========== =========
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .................. -- -- -- --
Purchase payments ..................................... -- -- -- --
Surrenders ............................................ -- -- -- --
Transfers -- interdivision and from VALIC
general account ..................................... -- -- -- --
---------- --------- ---------- ---------
Total units outstanding, end of year .................. -- -- -- --
========== ========= ========== =========
Units outstanding, by class:
Standard units ...................................... -- -- -- --
Enhanced units:
20 bp reduced .................................... -- -- -- --
40 bp reduced .................................... -- -- -- --
---------- --------- ---------- ---------
Accumulation units end of year ........................ -- -- -- --
========== ========= ========== =========
DECEMBER 31 DECEMBER 31
------------------------- -------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
Accumulation value per unit:
Standard unit ....................................... -- -- -- --
Enhanced unit:
20 bp reduced .................................... -- -- -- --
40 bp reduced .................................... -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 856
===============================================================================
SEPARATE ACCOUNT A 29
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL SMALL CAP AMERICAN GENERAL SMALL CAP AMERICAN GENERAL MID CAP AMERICAN GENERAL MID CAP
GROWTH FUND - DIVISION 35 VALUE FUND - DIVISION 36 GROWTH FUND - DIVISION 37 VALUE FUND - DIVISION 38
- ----------------------------- ------------------------------ ----------------------------- ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ 13,079 $ -- $ -- $ -- $ 10,079 $ --
-- -- -- -- -- -- -- --
18,373 -- 51,644 -- -- -- 115,562 --
1,361,100 -- 585,384 -- 1,425,600 -- 896,569 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
1,379,473 -- 650,107 -- 1,425,600 -- 1,022,210 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
3,900,000 -- 3,849,999 -- 4,050,000 -- 3,949,999 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
3,900,000 -- 4,500,106 -- 5,475,600 -- 4,972,209 --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
5,279,473 -- 4,500,106 -- 5,475,600 -- 4,972,209 --
-- -- -- -- -- -- -- --
$ 5,279,473 $ -- $ 4,500,106 $ -- $ 5,475,600 $ -- $ 4,972,209 $ --
============= =========== ============= =========== ============= =========== ============= ===========
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
============= =========== ============= =========== ============= =========== ============= ===========
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
-- -- -- -- -- -- -- --
============= =========== ============= =========== ============= =========== ============= ===========
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- ----------------------------- ------------------------------ ----------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- --
</TABLE>
<PAGE> 857
===============================================================================
30 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL LARGE CAP AMERICAN GENERAL LARGE CAP
GROWTH FUND - DIVISION 39 VALUE FUND - DIVISION 40
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ........................................... $ 2,093 $ -- $ 10,224 $ --
Net realized gain on investments ................................ -- -- -- --
Capital gains distributions from mutual funds ................... -- -- -- --
Net unrealized appreciation
of investments during the year ................................ 695,540 -- 716,526 --
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 697,633 -- 726,750 --
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... -- -- -- --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from VALIC general account 2,850,000 -- 2,900,000 --
------------- ------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 2,850,000 -- 2,900,000 --
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 3,547,633 -- 3,626,750 --
------------- ------------- ------------- -------------
Net Assets:
Beginning of year ............................................... -- -- -- --
End of year ..................................................... $ 3,547,633 $ -- $ 3,626,750 $ --
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- -- -- --
Purchase payments ............................................... - -- -- --
Surrenders ...................................................... -- -- -- --
Transfers -- interdivision and from VALIC general account ....... -- -- -- --
------------- ------------- ------------- -------------
Total units outstanding, end of year............................. -- -- -- --
============= ============= ============= =============
Units outstanding, by class:
Standard units ................................................ -- -- -- --
Enhanced units:
20 bp reduced ............................................... -- -- -- --
40 bp reduced ............................................... -- -- -- --
------------- ------------- ------------- -------------
Accumulation units end of year .................................. -- -- -- --
============= ============= ============= =============
DECEMBER 31 DECEMBER 31
----------------------------- -----------------------------
1998 1997 1998 1997
Accumulation value per unit: ------------- -------------- ------------- --------------
Standard unit $ -- $ -- $ -- $ --
Enhanced unit:
20 bp reduced -- -- -- --
40 bp reduced -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 858
===============================================================================
SEPARATE ACCOUNT A 31
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL SOCIALLY AMERICAN GENERAL BALANCED AMERICAN GENERAL DOMESTIC AMERICAN GENERAL MONEY
RESPONSIBLE FUND - DIVISION 41 FUND - DIVISION 42 BOND FUND - DIVISION 43 MARKET FUND - DIVISION 44
- ------------------------------ -------------------------- -------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 23,760 $ -- $ 29,084 $ -- $ 14,978 $ -- $ 82,478 $ --
-- -- -- -- -- -- -- --
285,733 -- 34,051 -- 15,898 -- -- --
1,099,673 -- 805,536 -- 28,692 -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,409,166 -- 868,671 -- 59,568 -- 82,478 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
5,000,000 -- 5,000,000 -- 1,250,000 -- 5,000,000 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,000,000 -- 5,000,000 -- 1,250,000 -- 5,000,000 --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,409,166 -- 5,868,671 -- 1,309,568 -- 5,082,478 --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 6,409,166 $ -- $ 5,868,671 $ -- $ 1,309,568 $ -- $ 5,082,478 $ --
============ ============ ============ ============ ============ ============ ============ ============
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
============ ============ ============ ============ ============ ============ ============ ============
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- --
============ ============ ============ ============ ============ ============ ============ ============
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
- -------------------------- -------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
</TABLE>
<PAGE> 859
===============================================================================
32 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
AMERICAN GENERAL MODERATE GROWTH LIFESTYLE
FUND - DIVISION 49 FUND - DIVISION 49
------------------------ ------------------------
1998 1997 1998 1997
------------ ---------- ------------ ----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ........................................... $ 11,226 $ -- $ 19,912 $ --
Net realized gain on investments ................................ -- -- -- --
Capital gains distributions from mutual funds ................... -- -- -- --
Net unrealized appreciation
of investments during the year ................................. 970,379 -- 925,696 --
------------ ---------- ------------ ----------
Increase in net assets resulting from operations ........... 981,605 -- 945,608 --
------------ ---------- ------------ ----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... -- -- -- --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from VALIC
general account ............................................... 5,000,000 -- 5,000,000 --
------------ ---------- ------------ ----------
Increase in net assets
resulting from principal transactions .................... 5,000,000 -- 5,000,000 --
------------ ---------- ------------ ----------
TOTAL INCREASE IN NET ASSETS .................................... 5,981,605 -- 5,945,608 --
------------ ---------- ------------ ----------
NET ASSETS:
Beginning of year ............................................... -- -- -- --
------------ ---------- ------------ ----------
End of year ..................................................... $ 5,981,605 $ -- $ 5,945,608 $ --
============ ========== ============ ==========
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- -- -- --
Purchase payments ............................................... -- -- -- --
Surrenders ...................................................... -- -- -- --
Transfers - interdivision and from VALIC general account ........ -- -- -- --
------------ ---------- ------------ ----------
Total units outstanding, end of year ............................ -- -- -- --
============ ========== ============ ==========
Units outstanding, by class:
Standard units ................................................ -- -- -- --
Enhanced units:
20 bp reduced .............................................. -- -- -- --
40 bp reduced .............................................. -- -- -- --
------------ ---------- ------------ ----------
Accumulation units end of year .................................. -- -- -- --
============ ========== ============ ==========
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1998 1997 1998 1997
------------ ---------- ------------ ----------
Accumulation value per unit:
Standard unit ................................................. $ -- $ -- $ -- $ --
Enhanced unit:
20 bp reduced .............................................. -- -- -- --
40 bp reduced .............................................. -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 860
===============================================================================
SEPARATE ACCOUNT A 33
===============================================================================
<TABLE>
<CAPTION>
AMERICAN GENERAL
CONSERVATIVE GROWTH LIFESTYLE AMERICAN GENERAL CORE BOND AMERICAN GENERAL STRATEGIC
FUND - DIVISION 50 FUND - DIVISION 58 BOND FUND - DIVISION 59
- --------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ----------- -------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 27,772 $ -- $ 50,247 $ -- $ 69,000 $ --
-- -- -- -- -- --
-- -- 16,291 -- 11,064 --
800,941 -- 95,397 -- 185,469 --
- ----------- -------- -------------- ---------- ------------- -------------
828,713 -- 161,935 -- 265,533 --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
5,000,000 -- 5,000,001 -- 4,999,999 --
- ----------- -------- -------------- ---------- ------------- -------------
5,000,000 -- 5,000,001 -- 4,999,999 --
- ----------- -------- -------------- ---------- ------------- -------------
5,828,713 -- 5,161,936 -- 5,265,532 --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
$ 5,828,713 $ -- $ 5,161,936 $ -- $ 5,265,532 $ --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
-- -- -- -- -- --
- ----------- -------- -------------- ---------- ------------- -------------
DECEMBER 31 DECEMBER 31 DECEMBER 31
- --------------------------- --------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ----------- -------- -------------- ---------- ------------- -------------
$ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- --
-- -- -- -- -- --
</TABLE>
<PAGE> 861
===============================================================================
34 FINANCIAL STATEMENTS
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
HIGH YIELD BOND T. ROWE PRICE SMALL-CAP
FUND - DIVISION 60 STOCK FUND - DIVISION 51
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 92,262 $ -- $ -- $ --
Net realized gain on investments ................................... -- -- -- --
Capital gains distributions from mutual funds ...................... -- -- -- --
Net unrealized appreciation
of investments during the year .................................. 189,911 -- -- --
---------- ------------ ---------- ------------
Increase in net assets resulting from operations .............. 282,173 -- -- --
---------- ------------ ---------- ------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. -- -- 139 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ -- -- -- --
Annuity benefit payments ........................................... -- -- -- --
Amounts transferred interdivision, and from VALIC general account .. 5,000,000 -- -- --
---------- ------------ ---------- ------------
Increase in net assets
resulting from principal transactions ....................... 5,000,000 -- 139 --
---------- ------------ ---------- ------------
TOTAL INCREASE IN NET ASSETS ....................................... 5,282,173 -- 139 --
NET ASSETS:
Beginning of year .................................................. -- -- -- --
---------- ------------ ---------- ------------
End of year ........................................................ $5,282,173 $ -- $ 139 $ --
---------- ------------ ---------- ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................... -- -- -- --
Purchase payments .................................................. -- -- 122 --
Surrenders ......................................................... -- -- -- --
Transfers -- interdivision and from VALIC general account .......... -- -- -- --
---------- ------------ ---------- ------------
Total units outstanding, end of year ............................... -- -- 122 --
---------- ------------ ---------- ------------
Units outstanding, by class:
Standard units ................................................... -- -- 122 --
Enhanced units:
20 bp reduced ................................................. -- -- -- --
40 bp reduced ................................................. -- -- -- --
---------- ------------ ---------- ------------
Accumulation units end of year ..................................... -- -- 122 --
---------- ------------ ---------- ------------
DECEMBER 31 DECEMBER 31
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ---------- ------------
Accumulation value per unit:
Standard unit..................................................... $ -- $ -- $1.141049 $ --
Enhanced unit:
20 bp reduced.................................................. -- -- -- --
40 bp reduced.................................................. -- -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 862
===============================================================================
SEPARATE ACCOUNT A 35
===============================================================================
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 fifty-five 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 (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)
American General Series Portfolio Company 3 ("AGSPC 3"):
American General International Growth Fund (Division 33)
American General Large Cap Growth Fund (Division 39)
American General Mid Cap Growth Fund (Division 37)
American General Small Cap Growth Fund(Division 35)
American General International Value Fund (Division 34)
American General Large Cap Value Fund (Division 40)
American General Mid Cap Value Fund (Division 38)
American General Small Cap Value Fund (Division 36)
American General Socially Responsible Fund (Division 41)
American General Balanced Fund (Division 42)
American General High Yield Bond Fund (Division 60)
American General Strategic Bond Fund (Division 59)
American General Domestic Bond Fund (Division 43)
American General Core Bond Fund (Division 58)
American General Money Market Fund (Division 44)
American General Growth Lifestyle Fund (Division 48)
American General Moderate Growth
Lifestyle Fund (Division 49)
American General Conservative Growth
Lifestyle Fund (Division 50)
Dreyfus Variable Investment Fund -
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 Long-Term Corporate Fund (Division 22)
Vanguard Long-Term Treasury Fund (Division 23)
Vanguard Wellington Fund (Division 25)
Vanguard Windsor II Fund (Division 24)
Vanguard Lifestrategy Growth Fund (Division 52)
Vanguard Lifestrategy Moderate Growth Fund (Division 53)
Vanguard Lifestrategy Conservative Growth Fund (Division 54)
T. Rowe Price Small-Cap Stock Fund (Division 51)
Divisions 33 through 54 and 58 through 60 became available to contract holders
of the Separate Account effective September 22,1998.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets 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.
USE OF ESTIMATES. The financial statements have been prepared in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect amounts reported in the financial statements and disclosure of contingent
assets and liabilities. Ultimate results could differ from these estimates.
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 each 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 purchase 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, the Annuity 2000 Mortality Table, and the 1994 Group Annuity
Reserve Mortality Table have 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.
ACCUMULATION UNITS. VALIC offers both standard and enhanced contracts.
These contracts may have different Separate Account charges.
<PAGE> 863
===============================================================================
36 NOTES TO FINANCIAL STATEMENTS
===============================================================================
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment advisor ("the Advisor"), transfer agent, and
accounting services agent to AGSPC and AGSPC 3. American General Investment
Management, LLP, an affiliate of the Advisor, serves as investment sub-advisor
to certain AGSPC 3 mutual funds.
The Separate Account is charged for mortality and expense risks
assumed by VALIC and for distribution and administrative services provided by
VALIC. The standard 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 through 8, 10A, 10C and 10D, 11 through
17, 33 through 44, 48 through 50, and 58 through 60, 1.00%; and for Divisions
18 through 32, and 51 through 54, 1.25%. Certain 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 through 23, 26 through 30, 32 through 44, 48
through 50, and 58 through 60, 0.25%; for Division 31, 0.24% (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); and for Division
18, 0.15% (commencing July 1, 1997). Separate Account charges may be reduced if
contracts are issued to certain types of plans that are expected to result in
lower costs to VALIC. Consequently, each division may offer separate "classes"
of units of beneficial interest reflecting reductions in separate account
charges.
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, 1998 and 1997, VALIC reduced expenses of Division 10B
by $82,027 and $85,996, respectively.
A portion of the annual contract maintenance charge is assessed on
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 $5,575,601 and $4,510,903 for the
years ended December 31, 1998 and 1997, respectively.
VALIC received surrender charges of $4,581,641 and $2,769,370 for the
years ended December 31, 1998 and 1997, respectively. In addition, VALIC
received $53,171 and $6,156 for the year ended December 31, 1998, in sales load
on variable annuity purchase payments for Divisions 10A and 10B, respectively.
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 contributed to the Separate Account, $100,000 and $74,900,000 on
August 26, 1998 and September 1, 1998, respectively, in order to provide
initial funding for the AGSPC 3 mutual funds. Capital surplus amounts reflected
in the Statements of Net Assets for Divisions 33 through 44, 48 through 50 and
58 through 60 are not subject to contract holder charges since they do not
represent reserves for annuity contracts issued.
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, 1998:
<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 13,079,920 $11.37 $ 148,718,766 $ 148,478,416 $ 240,350
Putnam Global Growth Fund ................. 28 13,080,357 12.45 162,850,092 149,345,622 13,504,470
Templeton Foreign Fund .................... 32 26,018,073 8.39 218,291,648 267,772,677 (49,481,029)
Templeton International Fund .............. 20 37,187,918 20.69 769,418,093 672,572,557 96,845,536
AGSPC Science & Technology Fund ........... 17 52,052,496 26.07 1,357,008,368 1,058,583,311 298,425,057
AGSPC Small Cap Index Fund ................ 14 14,788,462 15.26 225,671,866 216,780,123 8,891,743
Dreyfus Variable Investment Fund -
Small Cap Portfolio ..................... 18 14,871,620 53.91 801,729,449 709,332,114 92,397,335
Putnam New Opportunities Fund ............. 26 7,047,598 58.43 411,790,940 341,359,629 70,431,311
Putnam OTC & Emerging Growth Fund ......... 27 8,240,758 17.25 142,153,064 128,583,339 13,569,725
AGSPC Growth Fund ......................... 15 53,087,130 22.85 1,213,041,349 867,944,168 345,097,181
AGSPC MidCap Index Fund ................... 4 33,517,770 25.37 850,345,675 593,845,989 256,499,686
American Century - Twentieth Century
Ultra Fund .............................. 31 10,965,109 33.41 366,344,764 344,297,873 22,046,891
Founders Growth Fund ...................... 30 20,206,988 20.41 412,424,559 377,960,267 34,464,292
AGSPC Growth & Income Fund ................ 16 14,227,222 20.04 285,113,626 214,814,089 70,299,537
AGSPC Social Awareness Fund ............... 12 19,099,259 22.77 434,890,057 350,790,377 84,099,680
AGSPC Stock Index Fund .................... 10A,B,C,D 106,096,626 37.54 3,982,866,943 2,020,245,208 1,962,621,735
Neuberger Berman Guardian Trust ........... 29 3,796,199 16.16 61,347,128 68,195,002 (6,847,874)
Scudder Growth and Income Fund ............ 21 9,416,745 26.31 247,754,620 259,592,520 (11,837,900)
Vanguard Windsor II Fund .................. 24 21,811,605 29.85 651,075,950 634,903,452 16,172,498
Templeton Asset Allocation Fund ........... 19 14,431,830 22.46 324,138,930 290,415,546 33,723,384
AGSPC Asset Allocation Fund ............... 5 16,111,443 14.12 227,493,681 191,458,464 36,035,217
</TABLE>
<PAGE> 864
===============================================================================
SEPARATE ACCOUNT A 37
===============================================================================
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
-------- ------ ----- ------ ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Vanguard Wellington Fund ................. 25 13,852,716 29.35 $ 406,576,731 $ 416,038,579 $ (9,461,848)
AGSPC International Government
Bond Fund .............................. 13 13,339,220 12.68 169,141,402 158,031,435 11,109,967
AGSPC Capital Conservation Fund .......... 1 & 7 6,849,612 9.68 66,304,225 65,365,302 938,923
AGSPC Government Securities Fund ......... 8 10,966,460 10.35 113,502,848 110,444,717 3,058,131
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Fund ............... 22 6,441,710 9.29 59,843,445 59,275,925 567,520
Long-Term Treasury Fund ................ 23 10,501,171 11.36 119,293,240 115,581,241 3,711,999
AGSPC Money Market Fund .................. 2 & 6 270,445,756 1.00 270,445,756 270,445,756 --
American General International
Growth Fund ............................ 33 365,269 10.55 3,853,567 3,652,817 200,750
American General Large Cap Growth Fund ... 39 285,293 12.44 3,549,043 2,853,503 695,540
American General Mid Cap Growth Fund ..... 37 405,021 13.52 5,475,870 4,050,270 1,425,600
American General Small Cap Growth Fund ... 35 391,362 13.49 5,279,473 3,918,373 1,361,100
American General International
Value Fund ............................. 34 360,507 11.52 4,153,036 3,605,760 547,276
American General Large Cap Value Fund .... 40 290,838 12.47 3,626,750 2,910,224 716,526
American General Mid Cap Value Fund ...... 38 405,233 12.27 4,972,209 4,075,640 896,569
American General Small Cap Value Fund .... 36 390,634 11.52 4,500,106 3,914,722 585,384
American General Socially
Responsible Fund ....................... 41 525,342 12.20 6,409,166 5,309,493 1,099,673
American General Balanced Fund ........... 42 505,484 11.61 5,868,671 5,063,135 805,536
American General High Yield Bond Fund .... 60 508,880 10.38 5,282,173 5,092,262 189,911
American General Strategic Bond Fund ..... 59 507,766 10.37 5,265,532 5,080,063 185,469
American General Domestic Bond Fund ...... 43 128,012 10.23 1,309,568 1,280,876 28,692
American General Core Bond Fund .......... 58 506,569 10.19 5,161,936 5,066,538 95,398
American General Money Market Fund ....... 44 5,082,478 1.00 5,082,478 5,082,478 --
American General Growth Lifestyle Fund ... 48 501,813 11.94 5,991,538 5,021,159 970,379
American General Moderate Growth
Lifestyle Fund ......................... 49 502,116 11.85 5,950,028 5,024,332 925,696
American General Conservative Growth
Lifestyle Fund ......................... 50 502,580 11.60 5,829,911 5,028,970 800,941
T. Rowe Price Small-Cap Stock Fund ....... 51 7 20.79 139 139 --
Total .................................. 853,696,997 $14,587,138,409 $11,178,484,452 $ 3,408,653,957
</TABLE>
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 sales 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, 1998, 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 ................... $ 70,340,669 $ 86,195,191
Putnam Global Growth Fund Division 28 ........................... 84,411,341 2,105,181
Templeton Foreign Fund Division 32 .............................. 82,320,483 9,313,676
Templeton International Fund Division 20 ........................ 176,311,032 153,728,857
AGSPC Science & Technology Fund Division 17 ..................... 262,237,519 101,549,488
AGSPC Small Cap Index Fund Division 14 .......................... 56,957,370 35,775,340
Dreyfus Variable Investment Fund -
Small Cap Portfolio Division 18 ........................... 63,341,013 64,349,216
Putnam New Opportunities Fund Division 26 ....................... 196,437,438 3,727,492
Putnam OTC & Emerging Growth Fund Division 27 ................... 43,601,585 7,874,482
AGSPC Growth Fund Division 15 ................................... 168,030,279 22,896,950
AGSPC MidCap Index Fund Division 4 .............................. 121,443,834 59,433,835
American Century - Twentieth Century Ultra Fund Division 31 ..... 206,441,197 3,102,142
Founders Growth Fund Division 30 ................................ 203,148,927 4,157,924
AGSPC Growth & Income Fund Division 16 .......................... 35,712,751 22,023,607
</TABLE>
<PAGE> 865
===============================================================================
38 NOTES TO FINANCIAL STATEMENTS
===============================================================================
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPC Social Awareness Fund Division 12 .............................. $ 155,478,764 $ 4,747,514
AGSPC Stock Index Fund:
Division 10A ................................................ 16,487,825 57,170,007
Division 10B ................................................ 1,430,916 5,138,856
Division 10C ................................................ 409,382,612 36,743,609
Division 10D ................................................ 2,305,198 7,769,904
Neuberger Berman Guardian Trust Division 29 .......................... 24,369,333 4,106,246
Scudder Growth and Income Fund Division 21 ........................... 134,037,172 6,545,427
Vanguard Windsor II Fund Division 24 ................................. 380,154,266 5,838,118
Templeton Asset Allocation Fund Division 19 .......................... 48,497,460 40,983,269
AGSPC Asset Allocation Fund Division 5 ............................... 37,672,428 10,217,954
Vanguard Wellington Fund Division 25 ................................. 267,401,470 4,016,568
AGSPC International Government Bond Fund Division 13 ................. 63,147,566 81,054,776
AGSPC Capital Conservation Fund:
Division 1 .................................................. 832,531 1,006,283
Division 7 .................................................. 16,631,338 12,372,606
AGSPC Government Securities Fund Division 8 .......................... 54,546,370 32,043,559
Vanguard Long-Term Corporate Fund Division 22 ........................ 42,256,730 2,903,724
Vanguard Long-Term Treasury Fund Division 23 ......................... 102,868,659 11,315,873
AGSPC Money Market Fund:
Division 2 .................................................. 2,987,800 3,330,427
Division 6 .................................................. 379,702,464 248,100,695
American General International Growth Fund Division 33 ............... 3,652,817 --
American General Large Cap Growth Fund Division 39 ................... 2,853,503 --
American General Mid Cap Growth Fund Division 37 ..................... 4,050,270 --
American General Small Cap Growth Fund Division 35 ................... 3,918,373 --
American General International Value Fund Division 34 ................ 3,605,760 --
American General Large Cap Value Fund Division 40 .................... 2,910,224 --
American General Mid Cap Value Fund Division 38 ...................... 4,075,640 --
American General Small Cap Value Fund Division 36 .................... 3,914,722 --
American General Socially Responsible Fund Division 41 ............... 5,309,493 --
American General Balanced Fund Division 42 ........................... 5,063,135 --
American General High Yield Bond Fund Division 60 .................... 5,092,262 --
American General Strategic Bond Fund Division 59 ..................... 5,080,063 --
American General Domestic Bond Fund Division 43 ...................... 1,280,876 --
American General Core Bond Fund Division 58 .......................... 5,066,538 --
American General Money Market Fund Division 44 ....................... 5,082,478 --
American General Growth Lifestyle Fund Division 48 ................... 5,021,159 --
American General Moderate Growth Lifestyle Fund Division 49 .......... 5,024,332 --
American General Conservative Growth Lifestyle Fund Division 50 ...... 5,028,970 --
T. Rowe Price Small-Cap Stock Fund Division 51 .............. 139 --
-------------- --------------
Total ....................................................... $3,986,957,094 $1,151,638,796
============== ==============
</TABLE>
NOTE G -- YEAR 2000 (UNAUDITED)
VALIC is in the process of modifying its systems to achieve Year 2000
readiness. This endeavor is directed and managed by VALIC and monitored by the
parent company, American General Corporation. VALIC has developed clearly
defined and documented plans that have been implemented to minimize the risk of
significant negative impact on its operations.
These plans include the following activities: (1) perform an inventory
of VALIC's information technology and non-information technology systems; (2)
assess which items in the inventory may expose VALIC to business interruptions
due to Year 2000 issues; (3) test systems for Year 2000 readiness; (4)
reprogram or replace systems that are not Year 2000 ready; and (5) return the
systems to operation.
In addition, the Separate Account and VALIC have business
relationships with various third parties, each of which must also be Year 2000
ready. Therefore, VALIC's plans also include assessing and attempting to
mitigate the risks associated with the potential failure of third parties, as
well as contingency plans for any identified risks or shortcomings, to achieve
Year 2000 readiness. Due to the various stages of the third parties' Year 2000
readiness, VALIC's efforts in this regard will extend through 1999.
Through December 31, 1998, VALIC has incurred and expensed $26.7
million (pretax) related to Year 2000 readiness, including $20.2 million
incurred in 1998.
As of December 31, 1998, VALIC has completed the inventory,
assessment, testing, reprogramming and implementation phases of the plan with
respect to its critical systems. VALIC believes its comprehensive plan and
resource commitment will allow it to meet its Year 2000 objectives. However,
the Year 2000 issue remains complex and the risks, uncertainties, and
unforeseen circumstances associated with the Year 2000 issue could have a
material adverse impact on VALIC and the Separate Account.
<PAGE> 866
================================================================================
REPORT OF INDEPENDENT AUDITORS 39
================================================================================
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 ("the Separate Account") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, 11 through 44
inclusive, 48 through 51 inclusive, and 58 through 60, inclusive) comprising
the Separate Account as of December 31, 1998. 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 the
Separate Account and each of its divisions except for divisions 33 through 44
inclusive, divisions 48 through 50 inclusive, and divisions 58 through 60,
inclusive, for which we have audited the statements of operations and changes
in net assets for the period from August 26, 1998 (inception) to December 31,
1998, and for division 51 for which we have audited the statements of
operations and changes in net assets for the period from September 22, 1998
(inception) through December 31, 1998. These financial statements are the
responsibility of the Separate Account'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, 1998,
by correspondence with the transfer agents. 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 the Separate Account and each
of the divisions comprising the Separate Account at December 31, 1998, 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 15, 1999
<PAGE> 867
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-1 REV 5/99
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 868
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTRACT FORM
PORTFOLIO DIRECTOR,
PORTFOLIO DIRECTOR 2 AND
PORTFOLIO DIRECTOR PLUS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Filed with Part A:
Selected Purchase Unit Data for each Fund for the last ten years or
since inception
Filed with Part B:
(i) Audited Financial Statements
The Variable Annuity Life Insurance Company
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholder Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(ii) Audited Financial Statements
The Variable Annuity Life Insurance Company Separate Account A --
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the related
information is included in the financial statements and therefore such
schedules have been omitted.
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(b) Exhibits
<TABLE>
<C> <S>
1. -- Resolutions adopted by The Variable Annuity Life
Insurance Company Board of Directors at its Annual
Meeting of April 18, 1979 establishing The Variable
Annuity Life Insurance Company Separate Account A,
incorporated herein by reference to Post-Effective
Statement No. 5 filed with the Securities and Exchange
Commission ("SEC") on March 1, 1996 (File No.
33-75292/811-3240).
2. -- Not Applicable.
3. -- Underwriting Agreement between The Variable Annuity Life
Insurance Company, The Variable Annuity Life Insurance
Company Separate Account A and The Variable Annuity
Marketing Company, incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(a). -- Specimen Individual Annuity Contract. (Form UIT-194),
incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3240).
4(b)(i). -- Specimen Group Annuity Contract. (Form UITG-194),
incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3240).
4(b)(ii). -- Specimen Individual Non-Qualified Annuity Contract. (Form
UITN-194), incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(b)(iii). -- Specimen Certificate of Participation under Group Annuity
Contract. (Form UITG-194P), incorporated herein by
reference to Post-Effective Amendment No. 5 filed with
the SEC on March 1, 1996 (File No. 33-75292/811-3240).
4(b)(iv). -- Specimen Individual Retirement Account Annuity Contract.
(Form UIT-IRA-194), incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(b)(v). -- Specimen Simplified Employee Pension Contract (Form
UIT-SEP-194), incorporated herein by reference to
Post-Effective Amendment No. 5 filed with the SEC on
March 1, 1996 (File No. 33-75292/811-3240).
4(b)(vi). -- Specimen Endorsement to Group Annuity Contract or
Certificate of Participation under Group Annuity
Contract. (Form UITG-194-RSAC), effective upon issu-
ance; incorporated herein by reference to Post-Effective
Amendment. No. 11 filed with the SEC on December 23, 1997
(File No. 33-75292/811-3240).
4(b)(vii). -- Specimen SIMPLE Individual Retirement Annuity Contract
(Form UIT-SIMPLE-897), incorporated herein by reference
to Post-Effective Amendment No. 15 filed with the SEC on
December 17, 1998 (File No. 33-75292/811-3240).
4(b)(viii). -- Specimen Portfolio Director Endorsement to Individual
Annuity Contract. (Form IPD-798), incorporated herein by
reference to Post-Effective Amendment No. 15 filed with
the SEC on December 17, 1998 (File No.
33-75292/811-3240).
4(b)(ix). -- Specimen Portfolio Director Individual Retirement Annuity
(IRA) Endorsement to Individual Retirement Account
Annuity Contract. (Form IPDIRA-798), incorporated herein
by reference to Post-Effective Amendment No. 15 filed
with the SEC on December 17, 1998 (File No.
33-75292/811-3240).
4(b)(x). -- Specimen Portfolio Director Non-Qualified Deferred
Annuity (NQDA) Endorsement to Individual Non-Qualified
Annuity Contract. (Form IPDN-798), incorporated herein by
reference to Post-Effective Amendment No. 15 filed with
the SEC on December 17, 1998 (File No.
33-75292/811-3240).
</TABLE>
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<TABLE>
<C> <S>
5(a)(i). -- Specimen Application for Portfolio Director/Portfolio
Director 2 Fixed and Variable Annuity for use with all
plan types except Individual Retirement Annuities (IRA),
Simplified Employee Pension Plan (SEP), and Non-Qualified
Deferred Annuities (NQDA); incorporated herein by
reference to Post-Effective Amendment No. 12 filed with
the SEC on April 29, 1998 (File No. 33-75292/811-3240).
5(a)(ii). -- Specimen Application for Portfolio Director/Portfolio
Director 2 Fixed and Variable Annuity for use with
Individual Retirement Annuities (IRA), Simplified
Employee Pension Plans (SEP), and Non-Qualified Deferred
Annuities (NQDA); incorporated herein by reference to
Post-Effective Amendment No. 12 filed with the SEC on
April 29, 1998 (File No. 33-75292/811-3240).
5(a)(iii). -- Specimen Application for Portfolio Director Plus Fixed
and Variable Annuity for use with all plan types except
NQDA, incorporated herein by reference to Post-Effective
Amendment No. 15 filed with the SEC on December 17, 1998
(File No. 33-75292/811-3240).
5(a)(iv). -- Specimen Application for Portfolio Director Plus Fixed
and Variable Annuity for use with all plan types,
primarily Non-Qualified, incorporated herein by reference
to Post-Effective Amendment No. 15 filed with the SEC on
December 17, 1998 (File No. 33-75292/811-3240).
5(b). -- Specimen Group Master Application, incorporated herein by
reference to Post-Effective Amendment No. 5 filed with
the SEC on March 1, 1996 (File No. 33-75292/811-3240).
5(b)(i). -- Specimen Portfolio Director Plus Group Master Application
for use with all plan types except NQDA, incorporated
herein by reference to Post-Effective Amendment No. 15
filed with the SEC on December 17, 1998 (File No.
33-75292/811-3240).
5(b)(ii). -- Specimen Portfolio Director Plus Group Master Application
for use with all plan types, primarily Non-Qualified,
incorporated herein by reference to Post-Effective
Amendment No. 15 filed with the SEC on December 17, 1998
(File No. 33-75292/811-3240).
6(a). -- Copy of Amended and Restated Articles of Incorporation of
The Variable Annuity Life Insurance Company, incorporated
herein by reference to Post-Effective Amendment No. 5
filed with the SEC on March 1, 1996 (File No.
33-75292/811-3240).
6(b). -- Copy of Amendment Number One to Amended and Restated
Articles of Incorporation of The Variable Annuity Life
Insurance Company (as amended through April 28, 1989)
effective March 28, 1990, incorporated herein by
reference to Post-Effective Amendment No. 5 filed with
the SEC on March 1, 1996 (File No. 33-75922/811-3240).
6(c). -- Copy of Amended and Restated Bylaws of The Variable
Annuity Life Insurance Company as amended through March
4, 1992; incorporated herein by reference to
Post-Effective Amendment No. 11 filed with the SEC on
December 23, 1997 (File No. 33-75292/811-3240).
7. -- Not Applicable.
8(a). -- Participation Agreement between The Variable Annuity Life
Insurance Company and Templeton Variable Products Series
Fund, incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3240).
</TABLE>
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<TABLE>
<C> <S>
8(b). -- (1) Participation Agreement between The Variable Annuity
Life Insurance Company and Dreyfus Variable Investment
Fund, incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File
No. 33-75292/811-3420).
(2) Agreement between The Variable Annuity Life Insurance
Company and The Dreyfus Corporation dated July 1, 1997;
incorporated herein by reference to Post-Effective
Amendment No. 12 filed with the SEC on April 29, 1998
(File No. 33-75292/811-3240).
8(c). -- (1) Order Transmission Agreement between The Variable
Annuity Life Insurance Company and Scudder Service
Corporation, incorporated herein by reference to
Post-Effective Amendment No. 8 filed with the SEC on June
28, 1996 (File No. 33-75292/811-3240).
(2) Amendment to Order Transmission Agreement between The
Variable Annuity Life Insurance Company and Scudder
Service Corporation, effective July 1, 1997, incorporated
herein by reference to Post-Effective Amendment No. 11
filed with the SEC on December 23, 1997 (File No.
33-75292/811-3240).
8(d). -- (1) Fund Participation Agreement between The Variable
Annuity Life Insurance Company and Putnam Mutual Funds
Corp., incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996 (File
No. 33-75292/811-3240).
(2) Amendment No. 1 to Fund Participation Agreement between
The Variable Annuity Life Insurance Company and Putnam
Mutual Funds Corp., effective August 18, 1997;
incorporated herein by reference to Post-Effective
Amendment No. 11 filed with the SEC on December 23, 1997
(File No. 33-75292/811-3240).
8(e). -- (1) Fund Participation Agreement between The Variable
Annuity Life Insurance Company and Twentieth Century
Investors Inc., incorporated herein by reference to
Post-Effective Amendment No. 8 filed with the SEC on June
28, 1996 (File No. 33-75292/811-3240).
(2) Amendment No. 1 to Fund Participation Agreement between
The Variable Annuity Life Insurance Company and American
Century Mutual Funds, Inc. and American Century
Investment Management, Inc., effective December 8, 1997;
incorporated herein by reference to Post-Effective
Amendment No. 11 filed with the SEC on December 23, 1997
(File No. 33-75292/811-3240).
8(f). -- (1) Participation Agreement between The Variable Annuity
Life Insurance Company and Founders Growth Fund Inc.,
incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996 (File
No. 33-75292/811-3240).
(2) Consent to Assignment between The Variable Annuity Life
Insurance Company and Premier Mutual Fund Services, Inc.
dated April 1, 1998; incorporated herein by reference to
Post-Effective Amendment No. 12 filed with the SEC on
April 29, 1998 (File No. 33-75292/811-3240).
8(g). -- Master Shareholder Services Agreement between The
Variable Annuity Life Insurance Company and Franklin
Templeton Group of Funds, incorporated herein by
reference to Post-Effective Amendment No. 8 filed with
the SEC on June 28, 1996 (File No. 33-75292/811-3240).
8(h). -- (1) Participation Agreement between The Variable Annuity
Life Insurance Company and Vanguard Group, Inc.,
incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996 (File
No. 33-75292/ 811-3240).
</TABLE>
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<TABLE>
<C> <S>
(2) Amendment No. 1 to Participation Agreement between The Variable Annuity Life Insurance
Company and The Vanguard Group, Inc., effective July 17, 1998, incorporated herein by
reference to Post-Effective Amendment No. 14 filed with the SEC on September 11, 1998
(File No. 33-75292/811-3240).
8(i). -- Agreement between The Variable Annuity Life Insurance Company and
Neuberger & Berman Management Inc., incorporated herein by reference to Post-Effective
Amendment No. 8 filed with the SEC on June 28, 1996 (File No. 33-75292/811-3240).
8(j). -- Agreement between The Variable Annuity Life Insurance Company and T. Rowe Price
Investment Services, Inc., entered into October 1, 1998, incorporated herein by
reference to Post-Effective Amendment No. 15 filed with the SEC on December 17, 1998
(File No. 33-75292/811-3240).
8(k). -- Participation Agreement between The Variable Annuity Life Insurance Company and
Evergreen Equity Trust, dated January 4, 1999.
9. -- Not Applicable.
10. -- Consent of Independent Auditors.
11. -- Not Applicable.
12. -- Not Applicable.
13. -- Calculation of standard and nonstandard performance information; incorporated herein by
reference to Post-Effective Amendment No. 11 filed with the SEC on December 23, 1997
(File No. 33-75292/811-3240).
14. -- Not Applicable.
15. -- Supplemental Information Form which discloses Section 403(b)(11) withdrawal
restrictions as set forth in a no-action letter issued by the SEC on November 28, 1988,
and which requires the signed acknowledgement of participants who purchase Section
403(b) annuities with regard to these withdrawal restrictions; incorporated herein by
reference to Post-Effective Amendment No. 12 filed with the SEC on April 29, 1998 (File
No. 33-75292/811-3240).
16(a). -- Copies of manually signed power of attorney for The Variable Annuity Life Insurance
Company Director Robert M. Devlin, incorporated herein by reference to Post-Effective
Amendment No. 5 filed with the SEC on March 1, 1996 (File No. 33-75292/811-3240).
16(b). -- Copy of manually signed power of attorney for The Variable Annuity Life Insurance
Company Director Jon P. Newton, incorporated herein by reference to Post-Effective
Amendment No. 6 filed with the SEC on April 19, 1996 (File No. 33-75292/811-3240).
16(c). -- Copy of manually signed powers of attorney for The Variable Annuity Life Insurance
Company Directors Brent C. Nelson, Thomas L. West, Jr., Bruce R. Abrams, John A. Graf,
Patrick E. Grady and Richard W. Scott; incorporated herein by reference to
Post-Effective Amendment No. 12 filed with the SEC on April 29, 1998 (File No.
33-75292/811-3240).
16(d). -- Copy of manually signed powers of attorney for The Variable Annuity Life Insurance
Company Directors John E. Arant, Kent E. Barrett and Carl J. Santillo.
</TABLE>
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ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and principal officers of the Company are set forth below,
together with their current principal occupations including any position with
American General Corporation ("AGC"), the indirect parent of The Variable
Annuity Life Insurance Company ("VALIC"), the depositor of the Registrant, and
The Variable Annuity Marketing Company ("VAMCO"), the principal underwriter of
the Contracts issued through the Registrant. The business address of each
officer and director is 2929 Allen Parkway, Houston, Texas 77019.
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Thomas L. West, Jr..................... Chairman and Chief Executive Officer, VALIC.
Vice Chairman and Group Executive -- Retirement Services,
American General Corporation.
Jon P. Newton.......................... Senior Chairman of the Board of Directors, VALIC. Vice
Chairman of the Board of Directors, American General
Corporation.
Kent E. Barrett........................ Director, Executive Vice President and Chief Financial
Officer, VALIC.
John A. Graf........................... Director and President, VALIC.
Robert M. Devlin....................... Director, VALIC.
Chairman of the Board of Directors, President and Chief
Executive Officer, American General Corporation.
Bruce R. Abrams........................ Director and Executive Vice President -- Marketing, VALIC.
John E. Arant.......................... Director and Executive Vice President -- Sales, VALIC.
Chairman of the Board of Directors and President, VAMCO.
Patrick E. Grady....................... Director, Senior Vice President and Treasurer, VALIC.
Brent C. Nelson........................ Director, Senior Vice President and Controller, VALIC.
Carl J. Santillo....................... Director and Executive Vice President -- Operations,
VALIC.
Richard W. Scott....................... Director, Vice President and Chief Investment Officer,
VALIC.
Executive Vice President and Chief Investment Officer,
American General Corporation.
Michael J. Akers....................... Senior Vice President and Chief Actuary, VALIC.
Dwight L. Cramer, II................... Senior Vice President -- Specialty Markets, VALIC.
Stephen G. Kellison.................... Senior Vice President -- Institutional Services, VALIC.
Charles D. Robinson.................... Senior Vice President -- Institutional Marketing, VALIC.
Executive Vice President, VAMCO.
Cynthia A. Toles....................... Senior Vice President, General Counsel and Secretary,
VALIC.
Director and Secretary, VAMCO.
Dan W. Arnold.......................... Vice President -- Customer Care Center, VALIC.
James D. Bonsall....................... Vice President -- Financial Reporting, VALIC.
Harry N. Bragg......................... Vice President -- Strategic Systems, VALIC.
Gregory S. Broer....................... Vice President -- Actuarial, VALIC.
Richard A. Combs....................... Vice President -- Actuarial, VALIC.
J. David Crank......................... Vice President -- Group Services, VALIC.
Neil J. Davidson....................... Vice President -- Actuarial, VALIC.
David H. denBoer....................... Vice President -- Compliance, VALIC.
Stephen R. Duff........................ Vice President -- Financial Institution Acquisitions,
VALIC.
Daniel Fritz........................... Vice President -- Actuarial, VALIC.
</TABLE>
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<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Paul W. Green.......................... Vice President and Investment Officer, VALIC.
Sharla A. Jackson...................... Vice President -- Operations and Customer Service, VALIC.
Jeff S. Johnson........................ Vice President -- Marketing Communications, VALIC.
Kent W. Lamb........................... Vice President -- Financial Reporting, VALIC.
Richard Lindsay........................ Vice President -- Personal Retirement Services, VALIC.
James J. Michel........................ Vice President -- Insurance Accounting, VALIC.
Craig R. Mitchell...................... Vice President and Investment Officer, VALIC.
Maruti More............................ Vice President -- Investments, VALIC.
Stephen J. Poston...................... Vice President -- National Sales Manager, VALIC.
Steven D. Rubinstein................... Vice President -- Financial Planning and Reporting, VALIC.
Gary N. See............................ Vice President -- Actuarial, VALIC.
Gregory R. Seward...................... Vice President -- Variable Product Accounting, VALIC.
Norman A. Skinrood, Jr................. Vice President -- Group Plan Administration, VALIC.
Paula F. Snyder........................ Vice President -- Marketing Services, VALIC.
Robert E. Steele....................... Vice President -- Structured Settlements, VALIC.
Kenneth R. Story....................... Vice President -- Amarillo Systems, VALIC.
Peter V. Tuters........................ Vice President and Investment Officer, VALIC.
Sr. Vice President -- Investments, American General
Corporation.
William C. Vetterling.................. Vice President -- Marketing Administration, VALIC.
William A. Wilson...................... Vice President -- Government Affairs, VALIC.
Jane E. Bates.......................... Chief Compliance Officer, VALIC.
Director, Treasurer and Chief Compliance Officer, VAMCO.
D. Lynne Walters....................... Tax Officer, VALIC.
Tax Officer, VAMCO.
Vice President -- Taxes, American General Corporation.
</TABLE>
ITEM 26. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
No person is controlled by the Registrant. The Registrant is a segregated
asset account of the Company ("Depositor") established in accordance with the
Texas Insurance Code. The Registrant supports benefits payable under the
Portfolio Director Variable Annuity Contracts investing in American General
Series Portfolio Company (the "Series Company"), the Templeton Asset Allocation
Fund and Templeton International Fund (each a separate series of Templeton
Variable Products Series Fund), and Small Cap Portfolio of the Dreyfus Variable
Investment Fund. The Registrant votes Series Company shares and shares held in
Templeton Variable Products Series Fund and Dreyfus Variable Investment Fund
only as directed by the contract owner. (See "Voting Rights" in the Prospectus
for these Contracts.)
The Registrant also supports benefits payable under the Portfolio Director
2 Variable Annuity Contracts investing in American General Series Portfolio
Company (the "Series Company"); American Century Investment Management, Inc.,
American Century Ultra Fund; Founders Funds, Inc., Founders Growth Fund;
Neuberger Berman Management, Inc., Neuberger Berman Guardian Trust; Putnam
Investments; Putnam Global Growth Fund, New Opportunities Fund, and OTC &
Emerging Growth Fund; Scudder Kemper Investments, Inc., Scudder Growth and
Income Fund; Templeton Funds, Inc., Templeton Foreign Fund, and The Vanguard
Group, Inc., Vanguard Long-Term Corporate Fund, Vanguard Long-Term Treasury
Fund, Vanguard Wellington Fund and Vanguard Windsor II Fund. The Registrant
votes shares held in the above Funds only as directed by the contract owner.
(See "Voting Rights" in the Prospectus for these Contracts.)
In addition, the Registrant supports benefits payable under the Portfolio
Director Plus Variable Annuity Contracts that invest in the above referenced
funds as well as American General Series Portfolio Company 3 ("AGSPC3");
Evergreen Asset Management Corp., Evergreen Growth and Income Fund and Evergreen
Small Cap Value Fund; Capital Management Group of First Union National Bank,
Evergreen Value Fund; T.
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Rowe Price Associates, Inc., T. Rowe Price Small-Cap Stock Fund; and The
Vanguard Group, Inc., Vanguard LifeStrategy Conservative Growth Fund, Vanguard
LifeStrategy Growth Fund, and Vanguard LifeStrategy Moderate Growth Fund. The
Registrant votes shares held in the above Funds only as directed by the contract
owner. (See "Voting Rights" in the Prospectus for these Contracts.)
The Depositor is indirectly wholly-owned by AGC (formerly American General
Insurance Company.) Therefore, the Depositor and various companies affiliated
with the Depositor may be deemed to be under common control with the Registrant.
These companies, together with their state of incorporation and the identity of
the owners of their common stock, are set forth in an exhibit entitled,
"Subsidiaries of American General Corporation," of the Form 10-K of AGC filed
for the year ended December 31, 1998 (File No. 1-7981), which is incorporated
herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1999, a date within 90 days prior to the date of filing,
there were 260,458 individual Contract Owners, 599,537 group Contract Owners of
the qualified Contracts, offered by the Portfolio Director prospectus of the
Registrant, and 19,964 individual Contract Owners and 405 group Contract Owners
of the non-qualified Contracts offered by the Portfolio Director prospectus. As
of a date within 90 days prior to the date of filing, there were 245,259
individual Contract Owners, 635,769 group Contract Owners of the qualified
Contracts, offered by the Portfolio Director 2 prospectuses of the Registrant,
and 0 individual Contract Owners and 0 group Contract Owners of the
non-qualified Contracts offered by the Portfolio Director 2 prospectus. As of a
date within 90 days prior to the date of filing, there were 47 individual
Contract Owners, 74,148 group Contract Owners of the qualified Contracts,
offered by the Portfolio Director Plus prospectuses of the Registrant, and 5
individual Contract Owners and 50 group Contract Owners of the non-qualified
Contracts offered by the Portfolio Director Plus prospectuses. The Registrant
issues different contracts through other Registration Statements.
ITEM 28. INDEMNIFICATION
Set forth below is a summary of the general effect of applicable provisions
of the Depositor's Bylaws regarding indemnification of, and advancement of legal
expenses to, the Depositor's officers, directors and employees (collectively,
"Indemnitees").
The Depositor shall indemnify any Indemnitee who was or is a named
defendant or respondent or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative (including any action by or in the
right of the Depositor), or any appeal of such action, suit or proceeding and
any inquiry or investigation that could lead to such an action, suit or
proceeding, by reason of the fact that the Indemnitee is or was a director, or
officer or employee of the Depositor, or is or was serving at the request of the
Depositor as a director, officer, partner, venturer, proprietor, trustee,
employee, or similar functionary of another foreign or domestic corporation or
nonprofit corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, against judgments, penalties
(including excise and similar taxes), fines, amounts paid in settlement, and
reasonable expenses (including court costs and attorneys' fees) actually
incurred by him in connection with such action, suit or proceeding, if
Indemnitee acted in good faith and in a manner he reasonably believed, (i) in
the case of conduct in his official capacity as a director of the Depositor, to
be in the best interests of the Depositor and (ii) in all other cases, to be not
opposed to the best interests of the Depositor; and, with respect to any
criminal action or proceeding, if Indemnitee had no reasonable cause to believe
his conduct was unlawful; provided, however that in the case of any threatened,
pending or completed action, suit or proceeding by or in the right of the
Depositor, the indemnity shall be limited to reasonable expenses (including
court costs and attorneys' fees) actually incurred in connection with such
action, suit or proceeding; and no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Depositor or liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity as a director or officer. The
termination of any action, suit or proceeding by judgment, order, settlement, or
conviction, or on a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the Indemnitee did not act in good faith and
in a manner which Indemnitee reasonably
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believed to be in the best interests of the Depositor; and, with respect to any
criminal action or proceeding, shall not create a presumption that the person
had reasonable cause to believe that his conduct was unlawful.
Where an Indemnitee of the Depositor or other person entitled to indemnity
hereunder has been wholly successful, on the merits or otherwise, in defense of
any such action, suit or proceeding, Indemnitee shall be indemnified against
reasonable expenses (including court costs and attorneys' fees) actually
incurred by him in connection therewith.
Any indemnification (unless otherwise ordered by a court of competent
jurisdiction) shall be made by the Depositor only as authorized in a specific
case upon a determination that the applicable standard of conduct has been met.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who at the time of the vote have not
been named as defendants or respondents in such action, suit or proceeding, or
(ii) if such a quorum cannot be obtained, by a majority vote of a committee of
the Board of Directors, designated to act in the matter by a majority vote of
all directors, consisting solely of two or more directors who at the time of the
vote are not named defendants or respondents in such action, suit or proceeding,
or (iii) by special legal counsel selected by the Board of Directors (or a
committee thereof) by vote in the manner set forth in subparagraphs (i) and (ii)
immediately above or if such a quorum cannot be obtained and such a committee
cannot be established, by a majority vote of all directors, or (iv) by the
shareholders in a vote that excludes the shares held by any Indemnitee who is
named as a defendant or respondent in such action, suit or proceeding.
Reasonable expenses incurred by an Indemnitee of the Depositor or other
person entitled to indemnity hereunder, who was, is or is threatened to be made
a named defendant or respondent in any such action, suit or proceeding described
above may be paid by the Depositor in advance of the final disposition thereof
upon (i) receipt of a written affirmation by the Indemnitee of his good faith
belief that he has met the standard of conduct necessary for indemnification
under this article and a written undertaking by or on behalf of the Indemnitee
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Depositor as authorized under this article and
(ii) a determination that the facts then known to those making the determination
would not preclude indemnification under this article.
Notwithstanding any other provision of this article, the Depositor may pay
or reimburse expenses incurred by any Indemnitee of the Depositor or any other
person entitled to indemnity hereunder in connection with his appearance as a
witness or other participation in any action, suit or a proceeding described
above at a time when he is not named defendant or respondent in such action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant, as provided above or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification by the Depositor is against public policy, as expressed in the
Act, and therefore may be unenforceable. In the event (a) that a claim for such
indemnification (except insofar as it provides for the payment by the Depositor
of expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against the
Depositor by such director, officer or controlling person; and (b) the
Securities and Exchange Commission is still of the same opinion that the
Depositor or Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit such cause to a court of
appropriate jurisdiction, the question of whether such indemnification by the
Depositor is against public policy as expressed in the Act will be governed by
the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) VAMCO acts as exclusive distributor and principal underwriter of the
Registrant and as principal underwriter for the Series Company, and AGSPC3, each
a registered investment company.
C-9
<PAGE> 877
(b) The following information is furnished with respect to each officer and
director of VAMCO:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH VAMCO
---------------- ----------
<S> <C>
John E. Arant(1)......................... Chairman of the Board of Directors and
President
Jane E. Bates(1)......................... Director, Treasurer and Chief Compliance
Officer
Cynthia A. Toles(1)...................... Director and Secretary
Joe C. Osborne(1)........................ Executive Vice President
Charles D. Robinson(1)................... Executive Vice President
Steven P. Boero.......................... Senior Vice President
1900 O'Farrell Street
Suite 390
San Mateo, CA 94403-1311
Thomas N. Lange.......................... Senior Vice President
14025 Riveredge Drive
Suite 250
Tampa, FL 33637
Jim C. Lehan............................. Senior Vice President
945 Concord Street
Suite 123 and 124
Framingham, MA 01701
Donald R. Van Putten..................... Senior Vice President
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
D. Lynne Walters(1)...................... Tax Officer
Todd M. Adams............................ Vice President
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
Edward K. Boero.......................... Vice President
222 South Harbor Blvd.
10th Floor
Anaheim, CA 92805
Evan Cole................................ Vice President
410 Amherst Street
Suite 250
Nashua, NH 03063
Joe H. Connell........................... Vice President
10851 N. Black Canyon Hwy.
Suite 700
Phoenix, AZ 85029
James J. Costello........................ Vice President
1767 Sentry Parkway West 19
Suite 300
Blue Bell, PA 19422
Paige T. Davis........................... Vice President
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21061
</TABLE>
C-10
<PAGE> 878
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH VAMCO
---------------- ----------
<S> <C>
Robert G. Fillmore....................... Vice President
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
James M. Garrison........................ Vice President
Two International Plaza
Suite 601
Nashville, TN 37217
James K. Graham.......................... Vice President
1301 West Long Lake Road
Suite 340
Troy, MI 48098
James T. Griffin......................... Vice President
3535 Grandview Parkway
Suite 200
Birmingham, AL 35243
Ernest Jordan III........................ Vice President
4266 Interstate 55N
Suite 108
Jackson, MS 39211
Alden D. Lewis........................... Vice President
1800 S.W. First Avenue
Suite 505
Portland, OR 97201
David R. Lyle............................ Vice President
University Tower
3100 Tower Blvd.
Suite 1601, Box 50
Durham, NC 27707
John MacTavish........................... Vice President
2450 Venture Oaks Way
Suite 120
Sacramento, CA 95833
Bryce Malsbary........................... Vice President
3505 Lake Lynda Drive
Suite 114
Orlando, FL 32817
Sharon J. Novickas....................... Vice President
230 West Monroe
Suite 1900
Chicago, IL 60606
Robert A. Obester........................ Vice President
800 Gessner
Suite 1280
Houston, TX 77024
Suzanne L. Perez......................... Vice President
10006 N. Dale Mabry Hwy.
Suite 113
Tampa, FL 33618
</TABLE>
C-11
<PAGE> 879
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH VAMCO
---------------- ----------
<S> <C>
Keith A. Poch............................ Vice President
1900 O'Farrell Street
Suite 390
San Mateo, CA 94403-1311
Fred Roberts............................. Vice President
100 Ashford Center North
Suite 100
Atlanta, GA 30338
F. William Scott......................... Vice President
Two Summit Park Drive
Suite 410
Independence, OH 44131
William G. Tubbs......................... Vice President
11711 N. Meridian St.
Suite 300
Carmel, IN 46032
Donna M. Zucchi.......................... Vice President
90 Woodbridge Center Dr.
Suite 300
Woodbridge, NJ 07095
</TABLE>
- ---------------
(1) 2929 Allen Parkway, Houston, Texas 77019
(c) VAMCO is the principal underwriter for the Registrant. The licensed
agents who sell the forms of Contract covered by this registration statement are
compensated for such sales by commissions paid by Depositor. These commissions
do not result in any charge to the Registrant or to Contract Owners,
Participants, Annuitants or Beneficiaries in addition to the charges described
in the prospectuses for the Contract.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated thereunder will be
in the physical possession of:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
ITEM 31. MANAGEMENT SERVICES
There have been no management-related services provided to the Separate
Account for the last three fiscal years.
ITEM 32. UNDERTAKINGS
a. VALIC hereby commits itself, on behalf of the Contract Owners, to the
following undertakings:
1. To file a post-effective amendment to this registration statement
as frequently as necessary to ensure that the audited financial statements
in the registration statement are never more than 16 months old for so long
as payments under the variable annuity contracts may be accepted;
2. To include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information; or (2) a post card or
similar written communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of Additional Information;
3. To deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly
upon written or oral request.
C-12
<PAGE> 880
b. The Company hereby represents that the fees and charges deducted under
the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by the
Company.
ITEM 33. WITHDRAWAL RESTRICTIONS FOR 403(B) PLANS
The Tax Reform Act of 1986 added to the Internal Revenue Code a new Section
403(b)(11) which applies to tax years beginning after December 31, 1988. This
paragraph provides that withdrawal restrictions apply to contributions made and
interest earned subsequent to December 31, 1988. Such restrictions require that
distributions not begin before age 59 1/2, separation from service, death,
disability, or hardship (only employee contributions without accrued interest
may be withdrawn in case of hardship). These withdrawal restrictions appear in
the Section "Federal Tax Matters" in either the Prospectus or the Statement of
Additional Information for Contracts of this Registration Statement.
The Company relies on a no-action letter issued by the Securities and
Exchange Commission on November 28, 1988 stating that no enforcement action
would be taken under sections 22(e), 27(c)(1), or 27(d) of the Investment
Company Act of 1940 (the "Act") if, in effect, the Company permits restrictions
on cash distributions from elective contributions to the extent necessary to
comply with Section 403(b)(11) of the Internal Revenue Code in accordance with
the following conditions:
(1) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration statement,
including the prospectus, used in connection with the offer of the
Contract;
(2) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the Contract;
(3) Instruct sales representatives who solicit participants to
purchase the Contract specifically to being the redemption restrictions
imposed by Section 403(b)(11) to the attention of the potential
participants;
(4) Obtain from each plan participant who purchases a Section 403(b)
annuity Contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his contract
value.
The Company has complied, and is complying, with the provisions of
paragraphs (1)-(4) above.
The Company relies on Rule 6c-7 of the Act which states that a registered
separate account, and any depositor of or underwriter for such account, shall be
exempt from the provisions of sections 22(e), 27(c)(1) and 27(d) of the Act with
respect to this Contract participating in this account to the extent necessary
to permit compliance with the Texas Optional Retirement Program (Program) in
accordance with the following conditions:
(a) include appropriate disclosure regarding the restrictions on
redemption imposed by the Program in each registration statement, including
the prospectus, used in connection with the Program;
(b) include appropriate disclosure regarding the restrictions on
redemption imposed by the Program in any sales literature used in
connection with the offer of this Contract to Program participants;
(c) instruct salespeople who solicit Program participants to purchase
this Contract specifically to bring the restrictions on redemption imposed
by the Program to the attention of potential Program participants;
(d) obtain from each Program participant who purchases this Contract
in connection with the Program, prior to or at the time of such purchase, a
signed statement acknowledging the restrictions on redemption imposed by
the Program.
C-13
<PAGE> 881
The Company has complied, and is complying, with the provisions of
paragraphs (a)-(d) above.
The Company relies on an order issued by the Securities and Exchange
Commission on May 19, 1993 exempting it from the provisions of section 22(e),
27(c)(1) and 27(d) of the Act with respect to this Contract participating in
this account to the extent necessary to permit compliance with the Optional
Retirement Program of the State University System of Florida ("Florida ORP") as
administered by the Division of Retirement of the Florida Department of
Management Services ("Division") in accordance with the following conditions:
(a) include appropriate disclosure regarding the restrictions on
redemption imposed by the Division in each registration statement,
including the prospectus, relating to the Contracts issued in connection
with the Florida ORP;
(b) include appropriate disclosure regarding the restrictions on
redemption imposed by the Division in any sales literature used in
connection with the offer of Contracts to Eligible Employees;
(c) instruct salespeople who solicit Eligible Employees to purchase
the Contracts specifically to bring the restrictions on redemption imposed
by the Division to the attention of the Eligible Employees;
(d) obtain from each Participant in the Florida ORP who purchases a
Contract, prior to or at the time of such purchase, a signed statement
acknowledging the Participant's understanding: (i) of the restrictions on
redemption imposed by the Division, and (ii) that other investment
alternatives are available under the Florida ORP, to which the Participant
may elect to transfer his or her Contract values.
The Company has complied, and is complying, with the provisions of
paragraphs (a)-(d) above.
C-14
<PAGE> 882
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Depositor, The Variable Annuity Life Insurance Company, certifies that
it meets the requirements of Securities Act Rule 485 for effectiveness of this
Registration Statement has duly caused this amendment to be signed on its behalf
by the undersigned thereunto duly authorized, and its seal to be hereunto
affixed and attested, all in the City of Houston, State of Texas, on the 23rd
day of April, 1999.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
<TABLE>
<S> <C>
Attest: /s/ CYNTHIA A. TOLES By: /s/ THOMAS L. WEST, JR.
---------------------------------------------- -------------------------------------------------
Cynthia A. Toles Thomas L. West, Jr.
Senior Vice President, General Counsel Chairman and Chief Executive Officer
and Secretary
</TABLE>
<PAGE> 883
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The Variable Annuity Life Insurance Company Separate
Account A, certifies that it meets the requirements of Securities Act Rule 485
for effectiveness of this Registration Statement has duly caused this amendment
to be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Houston, State of
Texas, on the 23rd day of April 1999.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE
ACCOUNT A
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
<TABLE>
<S> <C>
Attest: /s/ CYNTHIA A. TOLES By: /s/ THOMAS L. WEST, JR.
---------------------------------------------- -------------------------------------------------
Cynthia A. Toles Thomas L. West, Jr.
Senior Vice President, General Counsel Chairman and Chief Executive Officer
and Secretary
</TABLE>
<PAGE> 884
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS L. WEST, JR. Chairman and Chief Executive April 23, 1999
- ----------------------------------------------------- Officer
Thomas L. West, Jr.
* President and Director April 23, 1999
- -----------------------------------------------------
John A. Graf
/s/ BRENT C. NELSON Senior Vice President, Controller April 23, 1999
- ----------------------------------------------------- and Director
Brent C. Nelson
/s/ BRENT C. NELSON Principal Accounting Officer April 23, 1999
- -----------------------------------------------------
Brent C. Nelson
* Senior Chairman of the Board of April 23, 1999
- ----------------------------------------------------- Directors
Jon P. Newton
</TABLE>
<PAGE> 885
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* April 23, 1999
- ----------------------------------------------------- Director, Executive Vice President
Kent E. Barrett and Chief Financial Officer
* Executive Vice President -- April 23, 1999
- ----------------------------------------------------- Marketing and Director
Bruce R. Abrams
* Executive Vice President - Sales and April 23, 1999
- ----------------------------------------------------- Director
John E. Arant
* Executive Vice President -- April 23, 1999
- ----------------------------------------------------- Operations and Director
Carl J. Santillo
* Senior Vice President, Treasurer April 23, 1999
- ----------------------------------------------------- and Director
Patrick E. Grady
* Vice President, Chief Investment April 23, 1999
- ----------------------------------------------------- Officer and Director
Richard W. Scott
* Director April 23, 1999
- -----------------------------------------------------
Robert M. Devlin
*By: /s/ CYNTHIA A. TOLES April 23, 1999
-----------------------------------------------
Cynthia A. Toles
Attorney-in-Fact
**By: /s/ THOMAS L. WEST, JR. April 23, 1999
------------------------------------------------
Thomas L. West, Jr.
Attorney-in-Fact
</TABLE>
<PAGE> 886
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGES
----------- ------------
<C> <S> <C>
4(b)(viii). -- Specimen Portfolio Director Endorsement to Individual
Annuity Contract, (Form IPD-798).
4(b)(ix). -- Specimen Portfolio Director Individual Retirement Annuity
(IRA) Endorsement to Individual Retirement Account Annuity
Contract, (Form IPDIRA-798).
4(b)(x). -- Specimen Portfolio Director Non-Qualified Deferred
Annuity (NQDA) Endorsement to Individual Non-Qualified
Annuity Contract, (Form IPDN-798).
8(k). -- Participation Agreement between The Variable Annuity Life
Insurance Company and Evergreen Equity Trust, dated January
4, 1999.
10. -- Consent of Independent Auditors.
16(d). -- Copy of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors John E.
Arant, Kent E. Barrett and Carl J. Santillo.
</TABLE>
<PAGE> 1
EXHIBIT 4(b)(viii)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY (VALIC)
Houston, Texas
Portfolio Director Endorsement
Not withstanding any language in the Contract to the contrary, the Contract is
amended as follows:
Annuity Rate Tables. The value We use to determine annuity payments will be the
applied portion of the Accumulation Value on the tenth day (or the preceding
business day if the tenth day is not a business day) preceding the date of the
first annuity payment, less any applicable premium taxes. The following tables
are based on the Annuity 2000 mortality table and assume births before the year
1936. The tables show the amount required to purchase a first monthly payment of
$1.00. Quarterly, semiannual, and annual payments may also be selected. The
amount of each payment will depend upon the Annuitant's adjusted age at the
time the first payment is due. Adjusted age will be determined in accordance
with the following:
<TABLE>
<CAPTION>
CALENDAR YEAR ADJUSTED AGE IS
OF BIRTH ACTUAL AGE MINUS
------------- ----------------
<S> <C>
Before 1936 0
1936 - 1955 1
1956 - 1975 2
1976 - 1995 3
After 1995 4
</TABLE>
Actual age, as used above, means the Annuitants's age at the birthday nearest to
the Annuity Date. Table A is the Table to use for Variable Annuities with a 3%
AIR and to determine the minimum guarantees for Fixed Annuities. Tables B, C,
and D are to be used for Variable Annuities with 3 1/2%, 4 1/2%, and 5% AIRs
respectively.
<PAGE> 2
EXHIBIT 4(b)(viii)
TABLE A
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3%
Options 1, 2, and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
--------------------------------------------------------------------------- -----------
AGE NONE 60 120 180 240 UNIT REFUND
<S> <C> <C> <C> <C> <C> <C>
50 $257.21 $257.49 $258.42 $260.10 $262.72 $264.65
51 253.23 253.54 254.54 256.38 259.24 261.14
52 249.16 249.50 250.60 252.59 255.72 257.58
53 245.02 245.39 246.58 248.76 252.17 253.96
54 240.80 241.20 242.49 244.87 248.60 250.29
55 236.49 236.92 238.34 240.92 245.02 246.55
56 232.10 232.57 234.11 236.94 241.42 242.77
57 227.62 228.14 229.81 232.91 237.82 238.93
58 223.06 223.62 225.45 228.84 234.24 235.03
59 218.41 219.02 221.02 224.74 230.67 231.09
60 213.68 214.34 216.54 220.62 227.13 227.09
61 208.86 209.59 212.00 216.49 223.65 223.04
62 203.96 204.76 207.41 212.35 220.22 218.94
63 198.99 199.87 202.78 208.22 216.87 214.78
64 193.94 194.91 198.12 204.11 213.61 210.55
65 188.83 189.90 193.43 200.04 210.45 206.27
66 183.66 184.83 188.73 196.02 207.43 201.90
67 178.43 179.72 184.03 192.06 204.54 197.46
68 173.14 174.57 179.33 188.19 201.81 193.09
69 167.81 169.39 174.66 184.41 199.25 188.62
70 162.43 164.18 170.02 180.76 196.87 184.06
71 157.02 158.96 165.43 177.23 194.68 179.66
72 151.58 153.74 160.90 173.86 192.70 175.11
73 146.12 148.53 156.47 170.67 190.91 170.46
74 140.67 143.36 152.14 167.66 189.33 166.11
75 135.23 138.22 147.93 164.86 187.94 161.50
</TABLE>
Options 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER THAN OLDER ANNUITANT
YOUNGER ANNUITANT: -----------------------------------------------------------------------------------------------------------
AGE OF OLDER 0 1 2 3 4 5 6 7 8 9 10
ANNUITANT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $285.89 $287.65 $289.46 $291.31 $293.21 $295.15 $297.13 $299.14 $301.17 $303.22 $305.28
51 282.39 284.19 286.05 287.95 289.90 291.90 293.93 295.99 298.07 300.18 302.31
52 278.79 280.64 282.55 284.50 286.51 288.55 290.63 292.75 294.90 297.06 299.25
53 275.10 277.00 278.95 280.96 283.02 285.12 287.26 289.43 291.63 293.86 296.10
54 271.31 273.26 275.26 277.33 279.44 281.59 283.79 286.02 288.28 290.57 292.87
55 267.43 269.42 271.48 273.60 275.76 277.97 280.23 282.52 284.84 287.19 289.56
56 263.44 265.49 267.60 269.77 271.99 274.26 276.58 278.93 281.31 283.72 286.15
57 259.36 261.46 263.62 265.85 268.13 270.46 272.83 275.24 277.69 280.16 282.66
58 255.17 257.33 259.55 261.83 264.16 266.55 268.99 271.46 273.97 276.51 279.08
59 250.88 253.09 255.37 257.70 260.10 262.55 265.05 267.59 270.16 272.77 275.40
60 246.49 248.75 251.08 253.48 255.94 258.45 261.01 263.61 266.26 268.93 271.63
61 241.99 244.31 246.70 249.15 251.67 254.24 256.87 259.54 262.25 264.99 267.76
62 237.39 239.76 242.20 244.72 247.30 249.94 252.63 255.37 258.15 260.96 263.80
63 232.69 235.11 237.61 240.18 242.83 245.53 248.29 251.10 253.95 256.83 259.74
64 227.88 230.35 232.91 235.54 238.25 241.02 243.85 246.72 249.64 252.60 255.58
65 222.97 225.50 228.11 230.80 233.57 236.40 239.30 242.25 245.24 248.27 251.32
66 217.97 220.54 223.21 225.96 228.79 231.69 234.65 237.67 240.73 243.83 246.97
67 212.86 215.49 218.21 221.02 223.90 226.87 229.90 232.99 236.12 239.30 242.51
68 207.67 210.34 213.11 215.97 218.92 221.95 225.05 228.21 231.42 234.67 237.96
69 202.38 205.10 207.92 210.84 213.85 216.93 220.10 223.32 226.61 229.93 233.30
70 197.01 199.77 202.64 205.61 208.67 211.82 215.05 218.34 221.70 225.10 228.54
71 191.55 194.36 197.27 200.29 203.41 206.62 209.91 213.27 216.69 220.17 223.69
72 186.02 188.86 191.82 194.89 198.06 201.33 204.68 208.10 211.59 215.14 218.73
73 180.42 183.30 186.30 189.41 192.64 195.95 199.36 202.85 206.40 210.02 213.69
74 174.77 177.67 180.71 183.86 187.13 190.50 193.97 197.51 201.13 204.81 208.55
75 169.07 172.00 175.06 178.25 181.56 184.98 188.49 192.10 195.78 199.53 203.33
</TABLE>
<PAGE> 3
TABLE B
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3.5%
Options 1, 2 and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
--------------------------------------------------------------------------- -----------
AGE NONE 60 120 180 240 UNIT REFUND
<S> <C> <C> <C> <C> <C> <C>
50 $239.16 $239.44 $240.33 $241.91 $244.31 $245.38
51 235.77 236.07 237.04 238.76 241.39 242.39
52 232.29 232.62 233.68 235.55 238.42 239.33
53 228.73 229.09 230.24 232.28 235.42 236.21
54 225.09 225.48 226.73 228.96 232.39 233.03
55 221.36 221.79 223.15 225.58 229.34 229.78
56 217.55 218.01 219.49 222.15 226.27 226.47
57 213.65 214.15 215.76 218.67 223.19 223.10
58 209.66 210.20 211.96 215.15 220.10 219.66
59 205.57 206.17 208.09 211.59 217.03 216.16
60 201.40 202.05 204.16 208.00 213.98 212.59
61 197.13 197.85 200.16 204.38 210.96 208.95
62 192.78 193.57 196.11 200.76 207.98 205.24
63 188.35 189.21 192.01 197.12 205.06 201.46
64 183.83 184.78 187.86 193.50 202.22 197.60
65 179.24 180.29 183.68 189.90 199.46 193.66
66 174.58 175.73 179.48 186.33 196.81 189.83
67 169.85 171.12 175.26 182.82 194.27 185.82
68 165.05 166.46 171.03 179.36 191.87 181.73
69 160.19 161.75 166.81 175.99 189.61 177.79
70 155.28 157.00 162.61 172.72 187.51 173.66
71 150.32 152.23 158.45 169.55 185.58 169.44
72 145.31 147.44 154.33 166.52 183.82 165.46
73 140.28 142.65 150.29 163.64 182.23 161.24
74 135.23 137.87 146.33 160.93 180.83 157.15
75 130.18 133.12 142.47 158.39 179.59 152.96
</TABLE>
Option 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER THAN OLDER ANNUITANT
YOUNGER ANNUITANT: ------------------------------------------------------------------------------------------------------------
AGE OF OLDER 0 1 2 3 4 5 6 7 8 9 10
ANNUITANT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $263.95 $265.39 $266.87 $268.38 $269.93 $271.50 $273.09 $274.71 $276.33 $277.97 $279.62
51 261.05 262.54 264.07 265.63 267.22 268.84 270.49 272.15 273.83 275.53 277.23
52 258.07 259.61 261.18 262.79 264.43 266.11 267.80 269.52 271.26 273.00 274.76
53 255.00 256.58 258.20 259.86 261.56 263.28 265.03 266.81 268.60 270.40 272.21
54 251.83 253.46 255.13 256.85 258.59 260.37 262.18 264.00 265.85 267.71 269.58
55 248.57 250.25 251.97 253.74 255.54 257.37 259.23 261.12 263.02 264.94 266.87
56 245.21 246.94 248.71 250.53 252.39 254.28 256.20 258.14 260.10 262.08 264.07
57 241.75 243.53 245.36 247.23 249.14 251.09 253.07 255.07 257.10 259.14 261.19
58 238.19 240.02 241.90 243.83 245.80 247.81 249.85 251.91 254.00 256.10 258.22
59 234.52 236.41 238.34 240.33 242.36 244.43 246.53 248.65 250.80 252.97 255.15
60 230.75 232.69 234.68 236.73 238.82 240.95 243.11 245.30 247.52 249.75 252.00
61 226.87 228.86 230.92 233.02 235.17 237.36 239.59 241.85 244.13 246.43 248.75
62 222.88 224.93 227.04 229.21 231.42 233.68 235.97 238.30 240.65 243.02 245.41
63 218.78 220.89 223.06 225.29 227.57 229.89 232.25 234.64 237.07 239.51 241.96
64 214.58 216.75 218.97 221.26 223.60 225.99 228.42 230.89 233.38 235.89 238.42
65 210.28 212.49 214.78 217.13 219.53 221.99 224.49 227.03 229.59 232.18 234.78
66 205.87 208.14 210.48 212.89 215.36 217.88 220.45 223.06 225.70 228.36 231.04
67 201.35 203.67 206.07 208.54 211.08 213.67 216.31 218.99 221.70 224.44 227.20
68 196.73 199.11 201.56 204.09 206.69 209.35 212.06 214.81 217.60 220.42 223.25
69 192.02 194.44 196.95 199.54 202.20 204.92 207.70 210.52 213.39 216.28 219.20
70 187.20 189.68 192.24 194.89 197.61 200.39 203.24 206.14 209.08 212.05 215.05
71 182.29 184.82 187.44 190.14 192.92 195.77 198.68 201.65 204.66 207.71 210.79
72 177.30 179.87 182.53 185.29 188.13 191.04 194.02 197.06 200.14 203.27 206.42
73 172.23 174.84 177.55 180.36 183.25 186.22 189.27 192.37 195.53 198.73 201.96
74 167.08 169.73 172.48 175.34 178.28 181.32 184.42 187.59 190.82 194.09 197.40
75 161.88 164.55 167.34 170.24 173.24 176.33 179.49 182.72 186.02 189.36 192.74
</TABLE>
<PAGE> 4
TABLE C
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 4.5%
Options 1, 2, and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
------------------------------------------------------------------------------------------ -----------
AGE NONE 60 120 180 240 UNIT REFUND
<S> <C> <C> <C> <C> <C> <C>
50 $208.77 $209.03 $209.86 $211.25 $213.28 $213.12
51 206.28 206.57 207.46 208.98 211.20 210.91
52 203.71 204.02 205.00 206.66 209.08 208.64
53 201.06 201.40 202.46 204.27 206.92 206.30
54 198.32 198.70 199.86 201.83 204.72 203.88
55 195.51 195.92 197.17 199.33 202.49 201.40
56 192.60 193.05 194.42 196.77 200.24 198.84
57 189.61 190.10 191.59 194.16 197.97 196.21
58 186.53 187.06 188.69 191.51 195.68 193.50
59 183.35 183.93 185.71 188.80 193.39 190.78
60 180.08 180.71 182.66 186.06 191.10 187.95
61 176.71 177.40 179.55 183.28 188.83 185.04
62 173.25 174.01 176.37 180.47 186.57 182.05
63 169.70 170.53 173.13 177.65 184.35 179.07
64 166.06 166.97 169.83 174.82 182.18 175.97
65 162.33 163.34 166.49 171.99 180.06 172.80
66 158.52 159.63 163.11 169.17 178.01 169.54
67 154.63 155.85 159.69 166.38 176.05 166.36
68 150.65 152.01 156.26 163.63 174.18 163.01
69 146.60 148.10 152.80 160.93 172.42 159.60
70 142.48 144.14 149.35 158.29 170.78 156.25
71 138.28 140.13 145.90 155.73 169.26 152.77
72 134.03 136.09 142.48 153.27 167.88 149.22
73 129.73 132.02 139.10 150.93 166.63 145.60
74 125.38 127.94 135.78 148.71 165.51 142.18
75 121.01 123.86 132.53 146.63 164.54 138.56
</TABLE>
Options 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER THAN OLDER ANNUITANT
YOUNGER ANNUITANT: ----------------------------------------------------------------------------------------------------------
AGE OF OLDER 0 1 2 3 4 5 6 7 8 9 10
ANNUITANT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $227.47 $228.45 $229.45 $230.46 $231.49 $232.53 $233.58 $234.63 $235.68 $236.74 $237.79
51 225.49 226.51 227.55 228.60 229.67 230.76 231.85 232.94 234.04 235.14 236.23
52 223.42 224.49 225.57 226.67 227.78 228.91 230.04 231.18 232.33 233.47 234.61
53 221.28 222.38 223.51 224.65 225.81 226.98 228.17 229.35 230.54 231.74 232.93
54 219.05 220.20 221.37 222.56 223.76 224.98 226.21 227.45 228.69 229.93 231.17
55 216.73 217.93 219.14 220.38 221.63 222.90 224.18 225.47 226.76 228.05 229.34
56 214.33 215.57 216.83 218.12 219.42 220.74 222.07 223.41 224.75 226.09 227.44
57 211.82 213.11 214.43 215.76 217.12 218.49 219.87 221.26 222.66 224.06 225.46
58 209.22 210.56 211.93 213.32 214.73 216.15 217.59 219.04 220.49 221.94 223.40
59 206.53 207.92 209.33 210.78 212.24 213.72 215.22 216.72 218.23 219.74 221.26
60 203.73 205.17 206.64 208.14 209.66 211.20 212.75 214.32 215.89 217.46 219.03
61 200.82 202.32 203.85 205.40 206.98 208.58 210.20 211.82 213.45 215.09 216.72
62 197.81 199.36 200.95 202.56 204.20 205.86 207.54 209.23 210.92 212.62 214.32
63 194.70 196.30 197.94 199.62 201.32 203.04 204.78 206.54 208.30 210.06 211.83
64 191.47 193.13 194.83 196.57 198.33 200.12 201.93 203.75 205.58 207.41 209.24
65 188.14 189.85 191.61 193.41 195.24 197.09 198.97 200.86 202.76 204.66 206.56
66 184.69 186.47 188.28 190.14 192.04 193.96 195.90 197.86 199.83 201.81 203.79
67 181.14 182.97 184.85 186.77 188.73 190.71 192.73 194.76 196.81 198.86 200.91
68 177.47 179.36 181.30 183.28 185.31 187.36 189.45 191.55 193.67 195.80 197.93
69 173.70 175.64 177.64 179.69 181.78 183.90 186.06 188.24 190.43 192.63 194.84
70 169.82 171.82 173.87 175.98 178.14 180.33 182.56 184.81 187.08 189.36 191.65
71 165.83 167.88 170.00 172.17 174.39 176.65 178.95 181.27 183.62 185.98 188.35
72 161.74 163.85 166.02 168.25 170.54 172.87 175.23 177.63 180.06 182.50 184.94
73 157.56 159.71 161.94 164.23 166.58 168.97 171.41 173.89 176.38 178.90 181.43
74 153.28 155.48 157.76 160.11 162.52 164.98 167.49 170.03 172.61 175.20 177.81
75 148.92 151.16 153.49 155.89 158.36 160.89 163.46 166.08 168.73 171.40 174.09
</TABLE>
<PAGE> 5
TABLE D
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 5%
Options 1, 2, and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------- -----------
AGE NONE 60 120 180 240 UNIT REFUND
<S> <C> <C> <C> <C> <C> <C>
50 $195.93 $196.19 $196.98 $198.29 $200.16 $199.57
51 193.78 194.06 194.93 196.36 198.39 197.66
52 191.56 191.87 192.81 194.37 196.59 195.69
53 189.26 189.60 190.62 192.32 194.75 193.65
54 186.88 187.25 188.36 190.22 192.88 191.57
55 184.42 184.82 186.03 188.06 190.97 189.40
56 181.88 182.32 183.63 185.85 189.04 187.16
57 179.25 179.72 181.16 183.58 187.08 184.85
58 176.53 177.04 178.61 181.27 185.11 182.46
59 173.71 174.28 175.99 178.90 183.12 180.05
60 170.80 171.42 173.30 176.50 181.14 177.53
61 167.80 168.48 170.54 174.06 179.16 174.94
62 164.70 165.44 167.72 171.58 177.19 172.27
63 161.51 162.33 164.83 169.09 175.25 169.52
64 158.23 159.13 161.88 166.58 173.34 166.79
65 154.86 155.85 158.89 164.07 171.48 163.94
66 151.41 152.50 155.85 161.56 169.68 161.00
67 147.86 149.07 152.77 159.06 167.95 157.99
68 144.24 145.57 149.66 156.60 166.31 155.03
69 140.53 142.00 146.53 154.18 164.75 151.93
70 136.74 138.38 143.39 151.81 163.29 148.76
71 132.88 134.69 140.25 149.51 161.95 145.51
72 128.95 130.97 137.13 147.29 160.72 142.39
73 124.96 127.21 134.03 145.17 159.60 139.09
74 120.92 123.43 130.99 143.16 158.61 135.73
75 116.84 119.64 128.00 141.27 157.74 132.49
</TABLE>
Options 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER THAN OLDER ANNUITANT
YOUNGER ANNUITANT: -----------------------------------------------------------------------------------------------------
AGE OF OLDER 0 1 2 3 4 5 6 7 8 9 10
ANNUITANT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $212.26 $213.07 $213.89 $214.73 $215.57 $216.42 $217.27 $218.12 $218.97 $219.82 $220.67
51 210.61 211.46 212.32 213.19 214.07 214.96 215.85 216.74 217.63 218.52 219.41
52 208.89 209.78 210.68 211.59 212.51 213.44 214.37 215.30 216.23 217.16 218.09
53 207.09 208.02 208.96 209.91 210.87 211.84 212.82 213.79 214.77 215.74 216.71
54 205.21 206.18 207.16 208.16 209.16 210.18 211.19 212.22 213.24 214.25 215.27
55 203.25 204.26 205.29 206.33 207.38 208.44 209.50 210.57 211.63 212.70 213.76
56 201.21 202.26 203.33 204.42 205.52 206.62 207.73 208.85 209.96 211.07 212.18
57 199.07 200.17 201.29 202.43 203.57 204.72 205.89 207.05 208.21 209.38 210.53
58 196.85 198.00 199.16 200.34 201.54 202.75 203.96 205.17 206.39 207.60 208.81
59 194.53 195.72 196.94 198.17 199.42 200.68 201.94 203.21 204.48 205.75 207.02
60 192.11 193.36 194.62 195.91 197.21 198.52 199.85 201.17 202.50 203.82 205.14
61 189.59 190.89 192.21 193.55 194.91 196.28 197.66 199.04 200.42 201.81 203.18
62 186.97 188.32 189.69 191.09 192.51 193.94 195.37 196.82 198.26 199.71 201.14
63 184.24 185.64 187.08 188.53 190.01 191.50 193.00 194.50 196.01 197.52 199.02
64 181.40 182.86 184.35 185.87 187.41 188.96 190.52 192.09 193.66 195.23 196.80
65 178.46 179.98 181.53 183.10 184.70 186.32 187.95 189.58 191.22 192.86 194.49
66 175.41 176.98 178.59 180.23 181.89 183.57 185.27 186.97 188.68 190.39 192.09
67 172.25 173.88 175.54 177.24 178.97 180.72 182.48 184.26 186.04 187.82 189.59
68 168.98 170.66 172.39 174.15 175.94 177.76 179.59 181.44 183.29 185.14 186.99
69 165.60 167.34 169.12 170.95 172.80 174.69 176.59 178.51 180.44 182.36 184.29
70 162.10 163.90 165.75 167.64 169.56 171.51 173.48 175.47 177.47 179.48 181.48
71 158.50 160.36 162.26 164.21 166.20 168.22 170.27 172.33 174.41 176.49 178.57
72 154.79 156.70 158.67 160.68 162.73 164.82 166.94 169.08 171.23 173.39 175.55
73 150.98 152.94 154.96 157.04 159.16 161.32 163.51 165.72 167.95 170.19 172.43
74 147.07 149.09 151.16 153.30 155.48 157.71 159.97 162.25 164.56 166.88 169.20
75 143.08 145.14 147.26 149.45 151.70 153.99 156.32 158.68 161.06 163.46 165.86
</TABLE>
<PAGE> 6
Beneficiaries.
a. Unlocatable Beneficiaries. If We cannot obtain a mailing address
for the designated beneficiary using methods allowed by and
within the period required by applicable state or federal
regulations, then We will deem the contract holder to have no
designated beneficiary and We will pay the proceeds accordingly.
If no applicable law provides guidelines and We cannot obtain a
mailing address for the designated beneficiary by reasonable
means and within a reasonable period, then We will deem the
contract holder to have no designated beneficiary and We will pay
the proceeds accordingly.
b. Trust or Estate as Beneficiary. Payments to a Beneficiary that
is a trust or an estate will be made in a lump sum or in
installments over a period not to exceed five years, to the
extent required by applicable law.
Investment Options. We reserve the right to limit allocations among Investment
Options.
Separate Account Charge. The amount of the Separate Account Charge depends on
the Variable Investment Option from which it is deducted, and is imposed at an
annual rate of up to 1.25% of the assets of the Variable Investment Option.
The effective date of this Endorsement is the Policy Issue Date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
/s/ CYNTHIA A. TOLES
-------------------------------------------
Cynthia A. Toles
Senior Vice President, General Counsel, and
Secretary
<PAGE> 1
EXHIBIT 4(b)(ix)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY (VALIC)
Houston, Texas
Portfolio Director Individual Retirement Annuity (IRA) Endorsement
Not withstanding any language in the Contract to the contrary, the Contract is
amended as follows:
Annuity Rate Tables. The value We use to determine annuity payments will be the
applied portion of the Accumulation Value on the tenth day (or the preceding
business day if the tenth day is not a business day) preceding the date of the
first annuity payment, less any applicable premium taxes. The following tables
are based on the Annuity 2000 mortality table and assume births before the year
1936. The tables show the amount required to purchase a first monthly payment of
$1.00. Quarterly, semiannual, and annual payments may also be selected. The
amount of each payment will depend upon the Annuitant's adjusted age at the time
the first payment is due. Adjusted age will be determined in accordance with the
following:
<TABLE>
<CAPTION>
CALENDAR YEAR ADJUSTED AGE IS
OF BIRTH ACTUAL AGE MINUS
------------- ----------------
<S> <C>
Before 1936 0
1936 - 1955 1
1956 - 1975 2
1976 - 1995 3
After 1995 4
</TABLE>
Actual age, as used above, means the Annuitants's age at the birthday nearest to
the Annuity Date. Table A is the Table to use for Variable Annuities with a 3%
AIR and to determine the minimum guarantees for Fixed Annuities. Tables B, C,
and D are to be used for Variable Annuities with 3 1/2%, 4 1/2%, and 5% AIRs
respectively.
<PAGE> 2
TABLE A
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- -----------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $245.22 $261.35 $245.66 261.58 247.07 262.34 249.53 263.75 253.25 265.99 255.41 267.74
51 241.12 257.40 241.60 257.65 243.12 258.48 245.78 260.03 249.82 262.48 251.86 264.24
52 236.95 253.36 237.47 253.64 239.11 254.55 241.98 256.25 246.37 258.94 248.27 260.67
53 232.72 249.25 233.28 249.55 235.04 250.54 238.14 252.40 242.92 255.35 244.63 257.04
54 228.41 245.04 229.02 245.37 230.91 246.46 234.26 248.50 239.48 251.73 240.95 253.35
55 224.04 240.75 224.69 241.11 226.72 242.31 230.36 244.54 236.06 248.08 237.23 249.60
56 219.58 236.37 220.28 236.77 222.47 238.08 226.43 240.53 232.65 244.41 233.46 245.78
57 215.05 231.91 215.80 232.34 218.16 233.78 222.48 236.46 229.28 240.73 229.65 241.91
58 210.44 227.35 211.24 227.83 213.80 229.41 218.52 232.35 225.95 237.05 225.79 237.99
59 205.74 222.71 206.60 223.23 209.38 224.97 214.56 228.20 222.67 233.38 221.89 234.01
60 200.95 217.99 201.88 218.56 204.93 220.47 210.60 224.01 219.46 229.73 217.94 229.97
61 196.08 213.18 197.09 213.81 200.43 215.90 206.67 219.80 216.32 226.12 213.94 225.88
62 191.13 208.28 192.24 208.98 195.91 211.28 202.76 215.57 213.28 222.55 209.90 221.73
63 186.11 203.31 187.33 204.08 191.38 206.60 198.91 211.34 210.34 219.06 205.79 217.52
64 181.03 198.26 182.37 199.11 186.85 201.88 195.11 207.12 207.51 215.64 201.63 213.25
65 175.90 193.14 177.38 194.07 182.34 197.12 191.39 202.92 204.82 212.33 197.41 208.92
66 170.73 187.95 172.38 188.97 177.86 192.34 187.76 198.76 202.27 209.14 193.11 204.50
67 165.54 182.69 167.38 183.81 173.43 187.53 184.24 194.65 199.87 206.08 189.05 200.01
68 160.35 177.36 162.39 178.59 169.06 182.71 180.84 190.61 197.63 203.18 184.77 195.43
69 155.16 171.95 157.42 173.31 164.76 177.89 177.57 186.65 195.55 200.46 180.64 190.97
70 149.98 166.48 152.50 167.99 160.56 173.09 174.45 182.81 193.65 197.92 176.39 186.35
71 144.84 160.95 147.63 162.63 156.45 168.32 171.49 179.09 191.91 195.58 172.08 181.63
72 139.73 155.37 142.81 157.25 152.46 163.61 168.69 175.52 190.34 193.45 167.99 177.17
73 134.67 149.76 138.06 151.86 148.60 158.97 166.06 172.13 188.93 191.54 163.75 172.45
74 129.65 144.14 133.38 146.50 144.86 154.43 163.61 168.93 187.69 189.84 159.43 167.93
75 124.68 138.51 128.78 141.16 141.27 150.01 161.35 165.95 186.60 188.35 155.43 163.25
76 119.78 132.90 124.28 135.88 137.84 145.73 159.26 163.20 185.65 187.07 151.22 158.47
77 114.93 127.33 119.87 130.67 134.57 141.63 157.36 160.68 184.83 185.96 146.95 154.08
78 110.17 121.79 115.58 125.55 131.48 137.71 155.65 158.41 184.13 185.03 143.08 149.40
79 105.49 116.32 111.42 120.53 128.57 133.99 154.11 156.38 183.55 184.25 138.95 145.00
80 100.91 110.91 107.39 115.63 125.84 130.51 152.74 154.59 183.06 183.60 134.76 140.47
81 96.44 105.59 103.51 110.88 123.31 127.27 151.53 153.02 182.66 183.07 131.07 135.86
82 92.08 100.37 99.78 106.29 120.97 124.29 150.48 151.67 182.33 182.64 127.08 131.72
83 87.84 95.27 96.22 101.89 118.83 121.57 149.56 150.51 182.08 182.30 123.02 127.35
84 83.73 90.32 92.83 97.70 116.87 119.11 148.78 149.53 181.88 182.04 119.53 122.91
85 79.75 85.51 89.61 93.74 115.10 116.92 148.11 148.70 181.72 181.84 115.71 119.13
</TABLE>
<PAGE> 3
TABLE A (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $298.82 $296.59 $294.36 $292.16 $289.99 $287.84 $285.72 $283.65 $281.62 $279.63 $277.70
51 295.67 293.37 291.09 288.83 286.60 284.39 282.22 280.09 278.01 275.97 273.99
52 292.43 290.08 287.73 285.41 283.12 280.85 278.63 276.44 274.30 272.22 270.19
53 289.11 286.69 284.28 281.90 279.55 277.22 274.94 272.70 270.51 268.37 266.29
54 285.70 283.21 280.74 278.30 275.88 273.50 271.16 268.86 266.62 264.42 262.29
55 282.20 279.65 277.11 274.60 272.13 269.68 267.28 264.93 262.63 260.38 258.20
56 278.61 275.99 273.39 270.82 268.27 265.77 263.31 260.90 258.54 256.24 254.00
57 274.92 272.23 269.57 266.93 264.32 261.76 259.24 256.77 254.35 252.00 249.71
58 271.14 268.38 265.65 262.95 260.28 257.65 255.06 252.53 250.06 247.65 245.31
59 267.26 264.44 261.63 258.86 256.13 253.43 250.79 248.20 245.67 243.20 240.81
60 263.29 260.39 257.52 254.68 251.87 249.11 246.41 243.75 241.17 238.65 236.21
61 259.22 256.25 253.30 250.39 247.52 244.69 241.92 239.21 236.57 233.99 231.50
62 255.04 252.00 248.98 246.00 243.06 240.17 237.34 234.56 231.86 229.24 226.69
63 250.77 247.65 244.56 241.51 238.50 235.54 232.65 229.81 227.06 224.38 221.78
64 246.40 243.20 240.04 236.92 233.84 230.82 227.86 224.97 222.15 219.42 216.77
65 241.92 238.65 235.42 232.23 229.08 225.99 222.97 220.02 217.15 214.37 211.67
66 237.35 234.01 230.70 227.43 224.22 221.07 217.99 214.98 212.06 209.22 206.48
67 232.68 229.26 225.88 222.55 219.27 216.06 212.91 209.85 206.87 203.99 201.20
68 227.91 224.42 220.97 217.57 214.23 210.95 207.75 204.63 201.60 198.67 195.84
69 223.05 219.49 215.97 212.50 209.10 205.76 202.50 199.33 196.25 193.27 190.41
70 218.10 214.47 210.88 207.35 203.88 200.49 197.18 193.95 190.83 187.81 184.92
71 213.07 209.36 205.71 202.11 198.59 195.14 191.77 188.50 185.34 182.29 179.37
72 207.94 204.17 200.46 196.80 193.21 189.71 186.30 182.99 179.80 176.73 173.79
73 202.74 198.90 195.12 191.41 187.77 184.22 180.76 177.42 174.21 171.12 168.17
74 197.46 193.55 189.71 185.94 182.25 178.66 175.18 171.81 168.58 165.49 162.54
75 192.09 188.13 184.23 180.41 176.68 173.06 169.55 166.17 162.93 159.83 156.89
76 186.66 182.64 178.69 174.83 171.06 167.41 163.89 160.50 157.26 154.18 151.25
77 181.15 177.08 173.09 169.19 165.41 161.74 158.21 154.83 151.60 148.53 145.62
78 175.59 171.47 167.45 163.53 159.73 156.06 152.53 149.16 145.95 142.90 140.02
79 169.97 165.82 161.78 157.84 154.04 150.38 146.86 143.51 140.32 137.31 134.47
80 164.32 160.15 156.09 152.15 148.35 144.71 141.21 137.89 134.74 131.77 128.98
81 158.64 154.46 150.40 146.47 142.69 139.06 135.60 132.32 129.21 126.30 123.57
82 152.95 148.77 144.72 140.81 137.05 133.46 130.05 126.81 123.77 120.91 118.26
83 147.26 143.09 139.06 135.18 131.47 127.92 124.56 121.39 118.41 115.63 113.06
84 141.59 137.45 133.45 129.61 125.94 122.45 119.16 116.06 113.16 110.47 107.99
85 135.96 131.84 127.89 124.10 120.49 117.08 113.86 110.85 108.05 105.45 103.07
</TABLE>
<PAGE> 4
TABLE B
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3 1/2%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- ------------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $228.73 $242.76 $229.16 242.98 230.52 243.71 232.83 245.04 236.24 247.10 237.28 248.09
51 225.20 239.41 225.67 239.65 227.13 240.45 229.63 241.91 233.33 244.16 234.21 245.11
52 221.60 235.97 222.11 236.24 223.68 237.11 226.38 238.71 230.41 241.18 231.09 242.07
53 217.92 232.44 218.47 232.74 220.17 233.70 223.08 235.44 227.47 238.15 227.92 238.96
54 214.18 228.83 214.77 229.15 216.59 230.21 219.74 232.12 224.53 235.08 224.68 235.78
55 210.35 225.13 210.99 225.49 212.95 226.64 216.37 228.73 221.60 231.98 221.40 232.53
56 206.45 221.34 207.13 221.73 209.24 222.99 212.96 225.29 218.67 228.86 218.05 229.21
57 202.46 217.46 203.20 217.88 205.47 219.27 209.53 221.79 215.77 225.71 214.65 225.83
58 198.38 213.49 199.17 213.95 201.64 215.47 206.07 218.24 212.89 222.56 211.18 222.38
59 194.22 209.42 195.07 209.93 197.75 211.60 202.61 214.64 210.06 219.40 207.66 218.86
60 189.96 205.27 190.87 205.83 193.80 207.66 199.14 211.00 207.27 216.25 204.08 215.27
61 185.61 201.02 186.60 201.64 189.82 203.66 195.68 207.32 204.54 213.12 200.43 211.62
62 181.17 196.69 182.26 197.37 185.80 199.58 192.24 203.62 201.89 210.03 196.72 207.89
63 176.65 192.27 177.85 193.02 181.75 195.45 188.83 199.91 199.32 206.99 193.06 204.08
64 172.07 187.76 173.38 188.59 177.70 191.26 185.46 196.19 196.85 204.01 189.30 200.20
65 167.42 183.18 168.88 184.09 173.65 187.03 182.16 192.48 194.49 201.12 185.49 196.23
66 162.72 178.51 164.34 179.51 169.62 182.75 178.93 188.79 192.25 198.32 181.61 192.29
67 157.99 173.77 159.80 174.86 165.62 178.45 175.79 185.14 190.14 195.64 177.91 188.24
68 153.24 168.94 155.25 170.15 161.67 174.12 172.75 181.54 188.17 193.09 174.02 184.10
69 148.48 164.03 150.71 165.36 157.77 169.77 169.82 178.01 186.33 190.68 170.08 180.04
70 143.72 159.04 146.19 160.52 153.95 165.43 167.02 174.57 184.65 188.44 166.36 175.84
71 138.97 153.98 141.71 155.62 150.21 161.11 164.36 171.23 183.11 186.37 162.44 171.56
72 134.25 148.86 137.27 150.70 146.57 156.82 161.83 168.03 181.72 184.49 158.47 167.43
73 129.55 143.69 132.89 145.75 143.03 152.59 159.46 164.97 180.47 182.79 154.76 163.13
74 124.89 138.49 128.55 140.81 139.61 148.44 157.25 162.08 179.37 181.29 150.84 158.75
75 120.26 133.27 124.28 135.88 136.31 144.39 155.20 159.39 178.39 179.96 146.87 154.63
76 115.67 128.05 120.09 130.98 133.16 140.47 153.31 156.89 177.55 178.82 143.21 150.28
77 111.13 122.85 115.98 126.14 130.14 136.69 151.59 154.61 176.82 177.83 139.33 145.85
78 106.65 117.67 111.97 121.36 127.29 133.07 150.02 152.55 176.20 177.00 135.40 141.82
79 102.25 112.53 108.07 116.67 124.59 129.64 148.62 150.70 175.67 176.30 131.84 137.49
80 97.92 107.44 104.29 112.09 122.07 126.41 147.38 149.07 175.24 175.72 128.05 133.08
81 93.69 102.42 100.64 107.63 119.72 123.41 146.28 147.64 174.88 175.25 124.22 129.24
82 89.55 97.49 97.14 103.31 117.55 120.64 145.31 146.41 174.59 174.87 120.78 125.01
83 85.52 92.65 93.77 99.16 115.55 118.11 144.48 145.35 174.36 174.56 117.14 121.16
84 81.61 87.93 90.57 95.20 113.73 115.82 143.76 144.45 174.18 174.32 113.46 117.17
85 77.82 83.36 87.52 91.45 112.08 113.78 143.15 143.69 174.04 174.14 109.73 113.15
</TABLE>
<PAGE> 5
TABLE B (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $274.42 $272.62 $270.82 $269.04 $267.27 $265.51 $263.78 $262.07 $260.39 $258.75 $257.14
51 271.86 270.01 268.15 266.31 264.48 262.67 260.89 259.13 257.40 255.70 254.05
52 269.23 267.31 265.40 263.50 261.62 259.75 257.91 256.10 254.31 252.57 250.86
53 266.51 264.53 262.56 260.60 258.66 256.74 254.84 252.97 251.14 249.34 247.58
54 263.71 261.67 259.64 257.62 255.61 253.63 251.68 249.75 247.86 246.01 244.21
55 260.82 258.71 256.62 254.54 252.47 250.43 248.42 246.44 244.50 242.59 240.73
56 257.84 255.67 253.51 251.37 249.24 247.14 245.07 243.03 241.03 239.07 237.16
57 254.77 252.53 250.31 248.10 245.91 243.75 241.61 239.52 237.46 235.45 233.48
58 251.60 249.30 247.01 244.74 242.48 240.26 238.06 235.90 233.79 231.72 229.70
59 248.34 245.97 243.61 241.27 238.95 236.66 234.40 232.18 230.01 227.88 225.81
60 244.99 242.55 240.12 237.71 235.32 232.96 230.64 228.36 226.13 223.94 221.82
61 241.53 239.02 236.52 234.04 231.58 229.16 226.77 224.43 222.14 219.90 217.72
62 237.98 235.39 232.82 230.27 227.74 225.25 222.80 220.39 218.04 215.74 213.51
63 234.32 231.66 229.02 226.39 223.80 221.24 218.72 216.25 213.84 211.48 209.20
64 230.57 227.83 225.11 222.41 219.74 217.12 214.53 212.00 209.53 207.12 204.78
65 226.71 223.89 221.10 218.33 215.59 212.89 210.24 207.65 205.12 202.65 200.26
66 222.74 219.85 216.98 214.14 211.33 208.57 205.85 203.20 200.61 198.09 195.64
67 218.68 215.71 212.76 209.85 206.97 204.14 201.36 198.65 196.00 193.42 190.93
68 214.51 211.47 208.45 205.46 202.51 199.62 196.78 194.00 191.29 188.66 186.12
69 210.25 207.13 204.03 200.97 197.96 195.00 192.09 189.26 186.50 183.82 181.23
70 205.89 202.69 199.52 196.39 193.31 190.29 187.32 184.43 181.62 178.89 176.27
71 201.43 198.16 194.92 191.72 188.58 185.49 182.46 179.52 176.66 173.90 171.24
72 196.88 193.54 190.23 186.96 183.75 180.60 177.52 174.53 171.63 168.84 166.16
73 192.24 188.82 185.44 182.11 178.84 175.63 172.51 169.48 166.54 163.72 161.03
74 187.51 184.02 180.57 177.18 173.85 170.59 167.43 164.36 161.40 158.57 155.86
75 182.69 179.13 175.62 172.17 168.79 165.49 162.29 159.20 156.22 153.38 150.66
76 177.79 174.16 170.59 167.09 163.66 160.33 157.11 154.00 151.01 148.16 145.45
77 172.80 169.12 165.49 161.95 158.49 155.13 151.89 148.77 145.79 142.94 140.24
78 167.74 164.01 160.34 156.75 153.27 149.90 146.65 143.53 140.55 137.72 135.04
79 162.62 158.84 155.14 151.53 148.03 144.65 141.40 138.29 135.32 132.51 129.86
80 157.44 153.63 149.90 146.28 142.77 139.40 136.15 133.06 130.12 127.34 124.73
81 152.23 148.39 144.65 141.02 137.52 134.15 130.93 127.86 124.96 122.22 119.65
82 146.98 143.13 139.38 135.76 132.27 128.93 125.74 122.71 119.85 117.16 114.66
83 141.72 137.87 134.13 130.52 127.06 123.74 120.59 117.61 114.81 112.19 109.76
84 136.46 132.61 128.89 125.31 121.88 118.61 115.52 112.60 109.87 107.32 104.97
85 131.21 127.38 123.69 120.15 116.77 113.56 110.52 107.68 105.03 102.57 100.31
</TABLE>
<PAGE> 6
TABLE C
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 4 1/2%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- -----------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $200.79 $211.52 $201.20 $211.73 $202.46 $212.41 $204.51 $213.58 $207.39 $215.32 $206.83 $215.23
51 198.14 209.08 198.59 209.31 199.95 210.05 202.16 211.34 205.29 213.24 204.51 213.05
52 195.42 206.55 195.91 206.81 197.38 207.62 199.76 209.03 203.16 211.11 202.13 210.81
53 192.63 203.95 193.16 204.23 194.74 205.12 197.31 206.66 201.02 208.94 199.68 208.50
54 189.77 201.26 190.34 201.57 192.03 202.54 194.82 204.23 198.86 206.73 197.15 206.11
55 186.82 198.48 187.44 198.82 189.25 199.88 192.28 201.74 196.69 204.48 194.56 203.65
56 183.80 195.61 184.46 195.98 186.41 197.15 189.70 199.19 194.52 202.20 191.96 201.12
57 180.68 192.65 181.39 193.06 183.50 194.34 187.09 196.57 192.36 199.88 189.26 198.50
58 177.48 189.60 178.24 190.05 180.52 191.46 184.45 193.91 190.20 197.55 186.49 195.81
59 174.18 186.46 174.99 186.95 177.48 188.50 181.78 191.18 188.07 195.20 183.64 193.04
60 170.78 183.23 171.66 183.77 174.38 185.46 179.10 188.41 185.96 192.84 180.81 190.26
61 167.28 179.89 168.24 180.49 171.22 182.36 176.41 185.60 183.89 190.49 177.88 187.35
62 163.69 176.47 164.74 177.13 168.02 179.18 173.72 182.75 181.87 188.16 174.88 184.36
63 160.01 172.95 161.16 173.67 164.78 175.93 171.04 179.87 179.90 185.85 171.82 181.29
64 156.24 169.34 157.51 170.14 161.52 172.61 168.39 176.97 178.00 183.57 168.80 178.23
65 152.40 165.64 153.81 166.52 158.24 169.24 165.77 174.06 176.18 181.35 165.68 175.04
66 148.50 161.85 150.07 162.81 154.96 165.81 163.20 171.16 174.45 179.20 162.51 171.76
67 144.54 157.96 146.28 159.02 151.69 162.34 160.69 168.27 172.81 177.12 159.28 168.50
68 140.54 153.98 142.48 155.15 148.44 158.83 158.25 165.40 171.27 175.14 156.15 165.12
69 136.51 149.91 138.67 151.19 145.23 155.28 155.89 162.57 169.84 173.27 152.90 161.65
70 132.47 145.74 134.86 147.16 142.06 151.72 153.63 159.80 168.52 171.52 149.60 158.11
71 128.41 141.48 131.06 143.06 138.94 148.15 151.47 157.11 167.31 169.89 146.24 154.67
72 124.35 137.14 127.27 138.91 135.89 144.59 149.41 154.51 166.21 168.41 143.08 151.06
73 120.29 132.73 123.51 134.72 132.92 141.07 147.48 152.02 165.23 167.07 139.74 147.37
74 116.23 128.26 119.78 130.50 130.04 137.59 145.67 149.66 164.35 165.88 136.36 143.82
75 112.19 123.76 116.08 126.28 127.25 134.18 143.98 147.45 163.58 164.83 133.14 140.12
76 108.16 119.22 112.44 122.06 124.57 130.86 142.42 145.40 162.91 163.92 129.81 136.34
77 104.16 114.68 108.86 117.86 122.00 127.64 141.00 143.52 162.33 163.14 126.44 132.74
78 100.19 110.13 105.34 113.70 119.56 124.56 139.71 141.81 161.83 162.48 123.03 129.01
79 96.27 105.58 101.91 109.59 117.25 121.62 138.54 140.28 161.41 161.92 119.93 125.22
80 92.40 101.06 98.57 105.55 115.08 118.85 137.51 138.92 161.06 161.45 116.63 121.37
81 88.60 96.58 95.34 101.61 113.05 116.26 136.59 137.73 160.77 161.07 113.29 117.96
82 84.87 92.14 92.21 97.78 111.17 113.87 135.79 136.70 160.54 160.77 109.91 114.25
83 81.23 87.78 89.21 94.08 109.44 111.67 135.09 135.82 160.35 160.52 107.03 110.49
84 77.67 83.51 86.34 90.53 107.86 109.69 134.49 135.06 160.21 160.33 103.83 107.24
85 74.21 79.34 83.60 87.17 106.42 107.90 133.97 134.42 160.10 160.18 100.61 103.72
</TABLE>
<PAGE> 7
TABLE C (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $234.39 $233.22 $232.04 $230.85 $229.67 $228.49 $227.32 $226.15 $225.00 $223.86 $222.74
51 232.70 231.48 230.25 229.01 227.78 226.56 225.33 224.12 222.92 221.74 220.58
52 230.94 229.66 228.38 227.10 225.82 224.54 223.27 222.01 220.77 219.54 218.33
53 229.10 227.78 226.44 225.11 223.78 222.45 221.13 219.82 218.53 217.25 215.99
54 227.19 225.81 224.43 223.04 221.65 220.27 218.90 217.54 216.20 214.87 213.56
55 225.21 223.77 222.33 220.89 219.45 218.01 216.59 215.17 213.78 212.40 211.05
56 223.14 221.65 220.15 218.65 217.15 215.66 214.18 212.71 211.26 209.84 208.43
57 221.00 219.44 217.88 216.32 214.77 213.22 211.68 210.16 208.66 207.18 205.72
58 218.76 217.15 215.53 213.91 212.29 210.69 209.09 207.51 205.95 204.41 202.91
59 216.44 214.76 213.08 211.40 209.72 208.05 206.40 204.76 203.14 201.55 199.99
60 214.03 212.29 210.54 208.80 207.05 205.32 203.60 201.91 200.23 198.58 196.97
61 211.53 209.72 207.91 206.09 204.28 202.49 200.71 198.95 197.21 195.51 193.84
62 208.93 207.05 205.17 203.29 201.41 199.55 197.71 195.88 194.09 192.32 190.60
63 206.24 204.29 202.33 200.38 198.44 196.51 194.60 192.71 190.85 189.03 187.25
64 203.45 201.42 199.39 197.37 195.36 193.36 191.38 189.43 187.51 185.63 183.79
65 200.55 198.45 196.35 194.26 192.17 190.11 188.06 186.05 184.07 182.12 180.23
66 197.56 195.38 193.21 191.04 188.88 186.74 184.63 182.55 180.51 178.51 176.55
67 194.46 192.21 189.96 187.71 185.48 183.28 181.10 178.95 176.85 174.78 172.77
68 191.26 188.93 186.60 184.28 181.98 179.71 177.46 175.25 173.08 170.96 168.89
69 187.96 185.55 183.14 180.75 178.38 176.03 173.71 171.44 169.21 167.03 164.91
70 184.55 182.06 179.58 177.12 174.67 172.25 169.87 167.53 165.24 163.00 160.84
71 181.05 178.48 175.92 173.38 170.86 168.37 165.92 163.52 161.17 158.89 156.68
72 177.44 174.79 172.16 169.54 166.95 164.39 161.88 159.42 157.02 154.70 152.45
73 173.73 171.00 168.29 165.60 162.94 160.32 157.74 155.23 152.79 150.43 148.15
74 169.92 167.11 164.33 161.56 158.83 156.15 153.52 150.96 148.48 146.09 143.79
75 166.01 163.12 160.26 157.43 154.64 151.90 149.23 146.63 144.11 141.69 139.38
76 162.00 159.04 156.10 153.21 150.36 147.57 144.86 142.23 139.69 137.25 134.92
77 157.89 154.86 151.86 148.90 146.01 143.18 140.43 137.78 135.22 132.77 130.43
78 153.69 150.59 147.54 144.53 141.59 138.73 135.96 133.28 130.71 128.26 125.92
79 149.41 146.25 143.14 140.10 137.12 134.24 131.45 128.76 126.19 123.73 121.41
80 145.05 141.84 138.69 135.61 132.61 129.71 126.91 124.22 121.65 119.21 116.91
81 140.63 137.38 134.19 131.09 128.07 125.16 122.36 119.68 117.12 114.71 112.44
82 136.16 132.87 129.66 126.54 123.52 120.60 117.81 115.15 112.62 110.24 108.01
83 131.64 128.33 125.11 121.98 118.96 116.06 113.28 110.65 108.16 105.82 103.64
84 127.10 123.77 120.54 117.42 114.41 111.53 108.79 106.19 103.75 101.47 99.35
85 122.53 119.20 115.98 112.87 109.88 107.04 104.34 101.80 99.42 97.20 95.15
</TABLE>
<PAGE> 8
TABLE D
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 5%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- -----------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $188.91 $198.35 $189.32 $198.56 $190.53 $199.20 $192.46 $200.31 $195.10 $201.90 $194.00 $201.44
51 186.61 196.25 187.05 196.48 188.36 197.19 190.44 198.40 193.31 200.15 192.00 199.57
52 184.24 194.08 184.72 194.33 186.12 195.11 188.37 196.43 191.49 198.35 189.92 197.63
53 181.79 191.83 182.31 192.10 183.83 192.95 186.25 194.41 189.66 196.50 187.77 195.62
54 179.28 189.49 179.84 189.79 181.46 190.73 184.08 192.32 187.80 194.62 185.56 193.55
55 176.68 187.07 177.28 187.40 179.03 188.43 181.88 190.17 185.93 192.69 183.27 191.43
56 174.00 184.57 174.65 184.93 176.53 186.06 179.63 187.97 184.06 190.74 180.96 189.21
57 171.24 181.98 171.94 182.37 173.97 183.61 177.34 185.71 182.19 188.75 178.56 186.93
58 168.39 179.29 169.13 179.73 171.33 181.09 175.02 183.39 180.32 186.73 176.09 184.56
59 165.44 176.52 166.24 177.00 168.63 178.49 172.68 181.01 178.46 184.70 173.56 182.12
60 162.39 173.65 163.26 174.18 165.87 175.82 170.31 178.59 176.62 182.66 170.95 179.64
61 159.24 170.69 160.19 171.27 163.05 173.07 167.94 176.12 174.82 180.62 168.36 177.06
62 156.00 167.63 157.03 168.28 160.19 170.25 165.55 173.61 173.04 178.58 165.66 174.40
63 152.66 164.48 153.80 165.19 157.28 167.36 163.18 171.07 171.32 176.57 162.90 171.66
64 149.24 161.24 150.49 162.02 154.35 164.41 160.81 168.51 169.65 174.58 160.08 168.90
65 145.74 157.90 147.13 158.76 151.39 161.39 158.48 165.93 168.05 172.63 157.20 166.03
66 142.17 154.47 143.71 155.42 148.42 158.31 156.18 163.34 166.52 170.73 154.42 163.07
67 138.54 150.95 140.25 151.99 145.46 155.19 153.93 160.76 165.08 168.91 151.49 160.04
68 134.86 147.32 136.77 148.47 142.51 152.01 151.74 158.20 163.72 167.16 148.50 157.01
69 131.15 143.60 133.27 144.87 139.58 148.81 149.62 155.67 162.45 165.50 145.46 153.87
70 127.40 139.78 129.75 141.18 136.69 145.57 147.58 153.18 161.28 163.95 142.57 150.65
71 123.64 135.86 126.24 137.42 133.84 142.32 145.63 150.76 160.20 162.51 139.52 147.35
72 119.87 131.86 122.74 133.60 131.05 139.08 143.78 148.41 159.23 161.19 136.42 144.12
73 116.08 127.77 119.25 129.74 128.32 135.85 142.03 146.16 158.36 160.00 133.26 140.76
74 112.30 123.63 115.78 125.83 125.67 132.66 140.39 144.03 157.57 158.94 130.34 137.33
75 108.51 119.43 112.34 121.91 123.10 129.52 138.86 142.02 156.89 158.01 127.22 133.82
76 104.73 115.20 108.94 117.99 120.63 126.46 137.44 140.16 156.29 157.19 124.04 130.52
77 100.96 110.94 105.59 114.07 118.25 123.50 136.15 138.45 155.77 156.49 121.07 127.02
78 97.22 106.67 102.29 110.18 115.99 120.65 134.97 136.89 155.32 155.90 117.96 123.45
79 93.52 102.39 99.07 106.33 113.85 117.93 133.91 135.50 154.95 155.40 114.83 120.11
80 89.86 98.12 95.92 102.54 111.83 115.35 132.96 134.26 154.64 154.99 111.65 116.61
81 86.25 93.88 92.87 98.83 109.95 112.95 132.12 133.17 154.38 154.64 108.78 113.06
82 82.70 89.67 89.92 95.21 108.20 110.72 131.39 132.23 154.17 154.37 105.73 109.47
83 79.23 85.52 87.08 91.72 106.59 108.67 130.75 131.42 154.00 154.15 102.67 106.36
84 75.83 81.44 84.36 88.36 105.11 106.82 130.20 130.72 153.87 153.98 99.57 102.95
85 72.52 77.46 81.77 85.16 103.77 105.16 129.73 130.14 153.77 153.84 96.88 99.52
</TABLE>
<PAGE> 9
TABLE D (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $217.91 $216.96 $215.99 $215.03 $214.06 $213.09 $212.12 $211.15 $210.19 $209.24 $208.30
51 216.53 215.53 214.52 213.51 212.50 211.48 210.47 209.46 208.46 207.46 206.48
52 215.08 214.03 212.98 211.92 210.86 209.80 208.74 207.69 206.65 205.61 204.59
53 213.56 212.47 211.37 210.27 209.16 208.05 206.95 205.85 204.76 203.68 202.61
54 211.98 210.84 209.69 208.54 207.38 206.22 205.07 203.92 202.78 201.66 200.55
55 210.33 209.14 207.94 206.73 205.52 204.31 203.11 201.91 200.73 199.55 198.39
56 208.60 207.36 206.10 204.84 203.58 202.32 201.07 199.82 198.58 197.36 196.15
57 206.80 205.50 204.19 202.88 201.56 200.25 198.94 197.63 196.35 195.07 193.81
58 204.92 203.56 202.19 200.82 199.45 198.08 196.71 195.36 194.01 192.69 191.38
59 202.95 201.54 200.11 198.68 197.25 195.82 194.40 192.98 191.59 190.20 188.85
60 200.90 199.42 197.94 196.45 194.95 193.46 191.98 190.51 189.06 187.62 186.21
61 198.77 197.22 195.67 194.12 192.56 191.01 189.47 187.94 186.42 184.93 183.47
62 196.54 194.93 193.31 191.69 190.07 188.46 186.85 185.26 183.69 182.14 180.62
63 194.22 192.54 190.86 189.17 187.48 185.80 184.13 182.48 180.84 179.24 177.66
64 191.80 190.06 188.30 186.54 184.79 183.04 181.31 179.59 177.89 176.23 174.59
65 189.29 187.47 185.64 183.81 181.99 180.17 178.37 176.59 174.84 173.11 171.42
66 186.68 184.78 182.88 180.98 179.09 177.20 175.34 173.49 171.67 169.88 168.13
67 183.97 182.00 180.02 178.05 176.08 174.13 172.19 170.28 168.40 166.55 164.74
68 181.15 179.11 177.06 175.01 172.97 170.95 168.94 166.96 165.02 163.11 161.24
69 178.24 176.11 173.99 171.87 169.75 167.66 165.59 163.54 161.53 159.56 157.64
70 175.22 173.02 170.81 168.62 166.43 164.27 162.12 160.01 157.94 155.92 153.95
71 172.10 169.82 167.54 165.27 163.01 160.77 158.56 156.39 154.25 152.18 150.16
72 168.88 166.52 164.16 161.81 159.48 157.17 154.89 152.66 150.47 148.35 146.29
73 165.55 163.11 160.68 158.25 155.85 153.47 151.13 148.84 146.61 144.44 142.35
74 162.12 159.60 157.09 154.59 152.11 149.67 147.28 144.94 142.66 140.45 138.33
75 158.59 155.99 153.40 150.83 148.29 145.79 143.34 140.95 138.64 136.40 134.26
76 154.96 152.28 149.61 146.97 144.37 141.82 139.32 136.90 134.55 132.29 130.13
77 151.22 148.47 145.73 143.03 140.37 137.77 135.24 132.78 130.41 128.13 125.95
78 147.39 144.56 141.76 139.01 136.30 133.66 131.10 128.61 126.22 123.93 121.75
79 143.47 140.57 137.72 134.91 132.17 129.50 126.91 124.41 122.01 119.71 117.53
80 139.46 136.51 133.61 130.76 127.98 125.29 122.68 120.17 117.77 115.48 113.31
81 135.38 132.38 129.44 126.56 123.76 121.05 118.43 115.92 113.52 111.25 109.10
82 131.24 128.20 125.23 122.32 119.51 116.78 114.17 111.66 109.29 107.04 104.93
83 127.05 123.98 120.98 118.06 115.24 112.52 109.91 107.43 105.08 102.87 100.80
84 122.82 119.72 116.71 113.79 110.96 108.26 105.67 103.22 100.91 98.75 96.73
85 118.56 115.45 112.43 109.51 106.70 104.02 101.47 99.06 96.80 94.70 92.75
</TABLE>
<PAGE> 10
Beneficiaries.
a. Unlocatable Beneficiaries. If We cannot obtain a mailing address
for the designated beneficiary using methods allowed by and
within the period required by applicable state or federal
regulations, then We will deem the contract holder to have no
designated beneficiary and We will pay the proceeds accordingly.
If no applicable law provides guidelines and We cannot obtain a
mailing address for the designated beneficiary by reasonable
means and within a reasonable period, then We will deem the
contract holder to have no designated beneficiary and We will pay
the proceeds accordingly.
b. Trust or Estate as Beneficiary. Payments to a Beneficiary that
is a trust or an estate will be made in a lump sum or in
installments over a period not to exceed five years, to the
extent required by applicable law.
Investment Options. We reserve the right to limit allocations among Investment
Options.
Separate Account Charge. The amount of the Separate Account Charge depends on
the Variable Investment Option from which it is deducted, and is imposed at an
annual rate of up to 1.25% of the assets of the Variable Investment Option.
The effective date of this Endorsement is the Policy Issue Date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
/s/ CYNTHIA A. TOLES
-------------------------------------------
Cynthia A. Toles
Senior Vice President, General Counsel, and
Secretary
<PAGE> 1
EXHIBIT 4(b)(x)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY (VALIC)
Houston, Texas
Portfolio Director Non-Qualified Deferred Annuity (NQDA) Endorsement
Not withstanding any language in the Contract to the contrary, the Contract is
amended as follows:
Annuity Rate Tables. The value We use to determine annuity payments will be the
applied portion of the Accumulation Value on the tenth day (or the preceding
business day if the tenth day is not a business day) preceding the date of the
first annuity payment, less any applicable premium taxes. The following tables
are based on the Annuity 2000 mortality table and assume births before the year
1936. The tables show the amount required to purchase a first monthly payment of
$1.00. Quarterly, semiannual, and annual payments may also be selected. The
amount of each payment will depend upon the Annuitant's adjusted age at the time
the first payment is due. Adjusted age will be determined in accordance with the
following:
<TABLE>
<CAPTION>
CALENDAR YEAR ADJUSTED AGE IS
OF BIRTH ACTUAL AGE MINUS
------------- ----------------
<S> <C>
Before 1936 0
1936 - 1955 1
1956 - 1975 2
1976 - 1995 3
After 1995 4
</TABLE>
Actual age, as used above, means the Annuitants's age at the birthday nearest to
the Annuity Date. Table A is the Table to use for Variable Annuities with a 3%
AIR and to determine the minimum guarantees for Fixed Annuities. Tables B, C,
and D are to be used for Variable Annuities with 3 1/2%, 4 1/2%, and 5% AIRs
respectively.
<PAGE> 2
TABLE A
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- -----------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $245.22 $261.35 $245.66 261.58 247.07 262.34 249.53 263.75 253.25 265.99 255.41 267.74
51 241.12 257.40 241.60 257.65 243.12 258.48 245.78 260.03 249.82 262.48 251.86 264.24
52 236.95 253.36 237.47 253.64 239.11 254.55 241.98 256.25 246.37 258.94 248.27 260.67
53 232.72 249.25 233.28 249.55 235.04 250.54 238.14 252.40 242.92 255.35 244.63 257.04
54 228.41 245.04 229.02 245.37 230.91 246.46 234.26 248.50 239.48 251.73 240.95 253.35
55 224.04 240.75 224.69 241.11 226.72 242.31 230.36 244.54 236.06 248.08 237.23 249.60
56 219.58 236.37 220.28 236.77 222.47 238.08 226.43 240.53 232.65 244.41 233.46 245.78
57 215.05 231.91 215.80 232.34 218.16 233.78 222.48 236.46 229.28 240.73 229.65 241.91
58 210.44 227.35 211.24 227.83 213.80 229.41 218.52 232.35 225.95 237.05 225.79 237.99
59 205.74 222.71 206.60 223.23 209.38 224.97 214.56 228.20 222.67 233.38 221.89 234.01
60 200.95 217.99 201.88 218.56 204.93 220.47 210.60 224.01 219.46 229.73 217.94 229.97
61 196.08 213.18 197.09 213.81 200.43 215.90 206.67 219.80 216.32 226.12 213.94 225.88
62 191.13 208.28 192.24 208.98 195.91 211.28 202.76 215.57 213.28 222.55 209.90 221.73
63 186.11 203.31 187.33 204.08 191.38 206.60 198.91 211.34 210.34 219.06 205.79 217.52
64 181.03 198.26 182.37 199.11 186.85 201.88 195.11 207.12 207.51 215.64 201.63 213.25
65 175.90 193.14 177.38 194.07 182.34 197.12 191.39 202.92 204.82 212.33 197.41 208.92
66 170.73 187.95 172.38 188.97 177.86 192.34 187.76 198.76 202.27 209.14 193.11 204.50
67 165.54 182.69 167.38 183.81 173.43 187.53 184.24 194.65 199.87 206.08 189.05 200.01
68 160.35 177.36 162.39 178.59 169.06 182.71 180.84 190.61 197.63 203.18 184.77 195.43
69 155.16 171.95 157.42 173.31 164.76 177.89 177.57 186.65 195.55 200.46 180.64 190.97
70 149.98 166.48 152.50 167.99 160.56 173.09 174.45 182.81 193.65 197.92 176.39 186.35
71 144.84 160.95 147.63 162.63 156.45 168.32 171.49 179.09 191.91 195.58 172.08 181.63
72 139.73 155.37 142.81 157.25 152.46 163.61 168.69 175.52 190.34 193.45 167.99 177.17
73 134.67 149.76 138.06 151.86 148.60 158.97 166.06 172.13 188.93 191.54 163.75 172.45
74 129.65 144.14 133.38 146.50 144.86 154.43 163.61 168.93 187.69 189.84 159.43 167.93
75 124.68 138.51 128.78 141.16 141.27 150.01 161.35 165.95 186.60 188.35 155.43 163.25
76 119.78 132.90 124.28 135.88 137.84 145.73 159.26 163.20 185.65 187.07 151.22 158.47
77 114.93 127.33 119.87 130.67 134.57 141.63 157.36 160.68 184.83 185.96 146.95 154.08
78 110.17 121.79 115.58 125.55 131.48 137.71 155.65 158.41 184.13 185.03 143.08 149.40
79 105.49 116.32 111.42 120.53 128.57 133.99 154.11 156.38 183.55 184.25 138.95 145.00
80 100.91 110.91 107.39 115.63 125.84 130.51 152.74 154.59 183.06 183.60 134.76 140.47
81 96.44 105.59 103.51 110.88 123.31 127.27 151.53 153.02 182.66 183.07 131.07 135.86
82 92.08 100.37 99.78 106.29 120.97 124.29 150.48 151.67 182.33 182.64 127.08 131.72
83 87.84 95.27 96.22 101.89 118.83 121.57 149.56 150.51 182.08 182.30 123.02 127.35
84 83.73 90.32 92.83 97.70 116.87 119.11 148.78 149.53 181.88 182.04 119.53 122.91
85 79.75 85.51 89.61 93.74 115.10 116.92 148.11 148.70 181.72 181.84 115.71 119.13
</TABLE>
<PAGE> 3
TABLE A (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $298.82 $296.59 $294.36 $292.16 $289.99 $287.84 $285.72 $283.65 $281.62 $279.63 $277.70
51 295.67 293.37 291.09 288.83 286.60 284.39 282.22 280.09 278.01 275.97 273.99
52 292.43 290.08 287.73 285.41 283.12 280.85 278.63 276.44 274.30 272.22 270.19
53 289.11 286.69 284.28 281.90 279.55 277.22 274.94 272.70 270.51 268.37 266.29
54 285.70 283.21 280.74 278.30 275.88 273.50 271.16 268.86 266.62 264.42 262.29
55 282.20 279.65 277.11 274.60 272.13 269.68 267.28 264.93 262.63 260.38 258.20
56 278.61 275.99 273.39 270.82 268.27 265.77 263.31 260.90 258.54 256.24 254.00
57 274.92 272.23 269.57 266.93 264.32 261.76 259.24 256.77 254.35 252.00 249.71
58 271.14 268.38 265.65 262.95 260.28 257.65 255.06 252.53 250.06 247.65 245.31
59 267.26 264.44 261.63 258.86 256.13 253.43 250.79 248.20 245.67 243.20 240.81
60 263.29 260.39 257.52 254.68 251.87 249.11 246.41 243.75 241.17 238.65 236.21
61 259.22 256.25 253.30 250.39 247.52 244.69 241.92 239.21 236.57 233.99 231.50
62 255.04 252.00 248.98 246.00 243.06 240.17 237.34 234.56 231.86 229.24 226.69
63 250.77 247.65 244.56 241.51 238.50 235.54 232.65 229.81 227.06 224.38 221.78
64 246.40 243.20 240.04 236.92 233.84 230.82 227.86 224.97 222.15 219.42 216.77
65 241.92 238.65 235.42 232.23 229.08 225.99 222.97 220.02 217.15 214.37 211.67
66 237.35 234.01 230.70 227.43 224.22 221.07 217.99 214.98 212.06 209.22 206.48
67 232.68 229.26 225.88 222.55 219.27 216.06 212.91 209.85 206.87 203.99 201.20
68 227.91 224.42 220.97 217.57 214.23 210.95 207.75 204.63 201.60 198.67 195.84
69 223.05 219.49 215.97 212.50 209.10 205.76 202.50 199.33 196.25 193.27 190.41
70 218.10 214.47 210.88 207.35 203.88 200.49 197.18 193.95 190.83 187.81 184.92
71 213.07 209.36 205.71 202.11 198.59 195.14 191.77 188.50 185.34 182.29 179.37
72 207.94 204.17 200.46 196.80 193.21 189.71 186.30 182.99 179.80 176.73 173.79
73 202.74 198.90 195.12 191.41 187.77 184.22 180.76 177.42 174.21 171.12 168.17
74 197.46 193.55 189.71 185.94 182.25 178.66 175.18 171.81 168.58 165.49 162.54
75 192.09 188.13 184.23 180.41 176.68 173.06 169.55 166.17 162.93 159.83 156.89
76 186.66 182.64 178.69 174.83 171.06 167.41 163.89 160.50 157.26 154.18 151.25
77 181.15 177.08 173.09 169.19 165.41 161.74 158.21 154.83 151.60 148.53 145.62
78 175.59 171.47 167.45 163.53 159.73 156.06 152.53 149.16 145.95 142.90 140.02
79 169.97 165.82 161.78 157.84 154.04 150.38 146.86 143.51 140.32 137.31 134.47
80 164.32 160.15 156.09 152.15 148.35 144.71 141.21 137.89 134.74 131.77 128.98
81 158.64 154.46 150.40 146.47 142.69 139.06 135.60 132.32 129.21 126.30 123.57
82 152.95 148.77 144.72 140.81 137.05 133.46 130.05 126.81 123.77 120.91 118.26
83 147.26 143.09 139.06 135.18 131.47 127.92 124.56 121.39 118.41 115.63 113.06
84 141.59 137.45 133.45 129.61 125.94 122.45 119.16 116.06 113.16 110.47 107.99
85 135.96 131.84 127.89 124.10 120.49 117.08 113.86 110.85 108.05 105.45 103.07
</TABLE>
<PAGE> 4
TABLE B
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3 1/2%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- ------------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $228.73 $242.76 $229.16 242.98 230.52 243.71 232.83 245.04 236.24 247.10 237.28 248.09
51 225.20 239.41 225.67 239.65 227.13 240.45 229.63 241.91 233.33 244.16 234.21 245.11
52 221.60 235.97 222.11 236.24 223.68 237.11 226.38 238.71 230.41 241.18 231.09 242.07
53 217.92 232.44 218.47 232.74 220.17 233.70 223.08 235.44 227.47 238.15 227.92 238.96
54 214.18 228.83 214.77 229.15 216.59 230.21 219.74 232.12 224.53 235.08 224.68 235.78
55 210.35 225.13 210.99 225.49 212.95 226.64 216.37 228.73 221.60 231.98 221.40 232.53
56 206.45 221.34 207.13 221.73 209.24 222.99 212.96 225.29 218.67 228.86 218.05 229.21
57 202.46 217.46 203.20 217.88 205.47 219.27 209.53 221.79 215.77 225.71 214.65 225.83
58 198.38 213.49 199.17 213.95 201.64 215.47 206.07 218.24 212.89 222.56 211.18 222.38
59 194.22 209.42 195.07 209.93 197.75 211.60 202.61 214.64 210.06 219.40 207.66 218.86
60 189.96 205.27 190.87 205.83 193.80 207.66 199.14 211.00 207.27 216.25 204.08 215.27
61 185.61 201.02 186.60 201.64 189.82 203.66 195.68 207.32 204.54 213.12 200.43 211.62
62 181.17 196.69 182.26 197.37 185.80 199.58 192.24 203.62 201.89 210.03 196.72 207.89
63 176.65 192.27 177.85 193.02 181.75 195.45 188.83 199.91 199.32 206.99 193.06 204.08
64 172.07 187.76 173.38 188.59 177.70 191.26 185.46 196.19 196.85 204.01 189.30 200.20
65 167.42 183.18 168.88 184.09 173.65 187.03 182.16 192.48 194.49 201.12 185.49 196.23
66 162.72 178.51 164.34 179.51 169.62 182.75 178.93 188.79 192.25 198.32 181.61 192.29
67 157.99 173.77 159.80 174.86 165.62 178.45 175.79 185.14 190.14 195.64 177.91 188.24
68 153.24 168.94 155.25 170.15 161.67 174.12 172.75 181.54 188.17 193.09 174.02 184.10
69 148.48 164.03 150.71 165.36 157.77 169.77 169.82 178.01 186.33 190.68 170.08 180.04
70 143.72 159.04 146.19 160.52 153.95 165.43 167.02 174.57 184.65 188.44 166.36 175.84
71 138.97 153.98 141.71 155.62 150.21 161.11 164.36 171.23 183.11 186.37 162.44 171.56
72 134.25 148.86 137.27 150.70 146.57 156.82 161.83 168.03 181.72 184.49 158.47 167.43
73 129.55 143.69 132.89 145.75 143.03 152.59 159.46 164.97 180.47 182.79 154.76 163.13
74 124.89 138.49 128.55 140.81 139.61 148.44 157.25 162.08 179.37 181.29 150.84 158.75
75 120.26 133.27 124.28 135.88 136.31 144.39 155.20 159.39 178.39 179.96 146.87 154.63
76 115.67 128.05 120.09 130.98 133.16 140.47 153.31 156.89 177.55 178.82 143.21 150.28
77 111.13 122.85 115.98 126.14 130.14 136.69 151.59 154.61 176.82 177.83 139.33 145.85
78 106.65 117.67 111.97 121.36 127.29 133.07 150.02 152.55 176.20 177.00 135.40 141.82
79 102.25 112.53 108.07 116.67 124.59 129.64 148.62 150.70 175.67 176.30 131.84 137.49
80 97.92 107.44 104.29 112.09 122.07 126.41 147.38 149.07 175.24 175.72 128.05 133.08
81 93.69 102.42 100.64 107.63 119.72 123.41 146.28 147.64 174.88 175.25 124.22 129.24
82 89.55 97.49 97.14 103.31 117.55 120.64 145.31 146.41 174.59 174.87 120.78 125.01
83 85.52 92.65 93.77 99.16 115.55 118.11 144.48 145.35 174.36 174.56 117.14 121.16
84 81.61 87.93 90.57 95.20 113.73 115.82 143.76 144.45 174.18 174.32 113.46 117.17
85 77.82 83.36 87.52 91.45 112.08 113.78 143.15 143.69 174.04 174.14 109.73 113.15
</TABLE>
<PAGE> 5
TABLE B (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $274.42 $272.62 $270.82 $269.04 $267.27 $265.51 $263.78 $262.07 $260.39 $258.75 $257.14
51 271.86 270.01 268.15 266.31 264.48 262.67 260.89 259.13 257.40 255.70 254.05
52 269.23 267.31 265.40 263.50 261.62 259.75 257.91 256.10 254.31 252.57 250.86
53 266.51 264.53 262.56 260.60 258.66 256.74 254.84 252.97 251.14 249.34 247.58
54 263.71 261.67 259.64 257.62 255.61 253.63 251.68 249.75 247.86 246.01 244.21
55 260.82 258.71 256.62 254.54 252.47 250.43 248.42 246.44 244.50 242.59 240.73
56 257.84 255.67 253.51 251.37 249.24 247.14 245.07 243.03 241.03 239.07 237.16
57 254.77 252.53 250.31 248.10 245.91 243.75 241.61 239.52 237.46 235.45 233.48
58 251.60 249.30 247.01 244.74 242.48 240.26 238.06 235.90 233.79 231.72 229.70
59 248.34 245.97 243.61 241.27 238.95 236.66 234.40 232.18 230.01 227.88 225.81
60 244.99 242.55 240.12 237.71 235.32 232.96 230.64 228.36 226.13 223.94 221.82
61 241.53 239.02 236.52 234.04 231.58 229.16 226.77 224.43 222.14 219.90 217.72
62 237.98 235.39 232.82 230.27 227.74 225.25 222.80 220.39 218.04 215.74 213.51
63 234.32 231.66 229.02 226.39 223.80 221.24 218.72 216.25 213.84 211.48 209.20
64 230.57 227.83 225.11 222.41 219.74 217.12 214.53 212.00 209.53 207.12 204.78
65 226.71 223.89 221.10 218.33 215.59 212.89 210.24 207.65 205.12 202.65 200.26
66 222.74 219.85 216.98 214.14 211.33 208.57 205.85 203.20 200.61 198.09 195.64
67 218.68 215.71 212.76 209.85 206.97 204.14 201.36 198.65 196.00 193.42 190.93
68 214.51 211.47 208.45 205.46 202.51 199.62 196.78 194.00 191.29 188.66 186.12
69 210.25 207.13 204.03 200.97 197.96 195.00 192.09 189.26 186.50 183.82 181.23
70 205.89 202.69 199.52 196.39 193.31 190.29 187.32 184.43 181.62 178.89 176.27
71 201.43 198.16 194.92 191.72 188.58 185.49 182.46 179.52 176.66 173.90 171.24
72 196.88 193.54 190.23 186.96 183.75 180.60 177.52 174.53 171.63 168.84 166.16
73 192.24 188.82 185.44 182.11 178.84 175.63 172.51 169.48 166.54 163.72 161.03
74 187.51 184.02 180.57 177.18 173.85 170.59 167.43 164.36 161.40 158.57 155.86
75 182.69 179.13 175.62 172.17 168.79 165.49 162.29 159.20 156.22 153.38 150.66
76 177.79 174.16 170.59 167.09 163.66 160.33 157.11 154.00 151.01 148.16 145.45
77 172.80 169.12 165.49 161.95 158.49 155.13 151.89 148.77 145.79 142.94 140.24
78 167.74 164.01 160.34 156.75 153.27 149.90 146.65 143.53 140.55 137.72 135.04
79 162.62 158.84 155.14 151.53 148.03 144.65 141.40 138.29 135.32 132.51 129.86
80 157.44 153.63 149.90 146.28 142.77 139.40 136.15 133.06 130.12 127.34 124.73
81 152.23 148.39 144.65 141.02 137.52 134.15 130.93 127.86 124.96 122.22 119.65
82 146.98 143.13 139.38 135.76 132.27 128.93 125.74 122.71 119.85 117.16 114.66
83 141.72 137.87 134.13 130.52 127.06 123.74 120.59 117.61 114.81 112.19 109.76
84 136.46 132.61 128.89 125.31 121.88 118.61 115.52 112.60 109.87 107.32 104.97
85 131.21 127.38 123.69 120.15 116.77 113.56 110.52 107.68 105.03 102.57 100.31
</TABLE>
<PAGE> 6
TABLE C
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 4 1/2%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- -----------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $200.79 $211.52 $201.20 $211.73 $202.46 $212.41 $204.51 $213.58 $207.39 $215.32 $206.83 $215.23
51 198.14 209.08 198.59 209.31 199.95 210.05 202.16 211.34 205.29 213.24 204.51 213.05
52 195.42 206.55 195.91 206.81 197.38 207.62 199.76 209.03 203.16 211.11 202.13 210.81
53 192.63 203.95 193.16 204.23 194.74 205.12 197.31 206.66 201.02 208.94 199.68 208.50
54 189.77 201.26 190.34 201.57 192.03 202.54 194.82 204.23 198.86 206.73 197.15 206.11
55 186.82 198.48 187.44 198.82 189.25 199.88 192.28 201.74 196.69 204.48 194.56 203.65
56 183.80 195.61 184.46 195.98 186.41 197.15 189.70 199.19 194.52 202.20 191.96 201.12
57 180.68 192.65 181.39 193.06 183.50 194.34 187.09 196.57 192.36 199.88 189.26 198.50
58 177.48 189.60 178.24 190.05 180.52 191.46 184.45 193.91 190.20 197.55 186.49 195.81
59 174.18 186.46 174.99 186.95 177.48 188.50 181.78 191.18 188.07 195.20 183.64 193.04
60 170.78 183.23 171.66 183.77 174.38 185.46 179.10 188.41 185.96 192.84 180.81 190.26
61 167.28 179.89 168.24 180.49 171.22 182.36 176.41 185.60 183.89 190.49 177.88 187.35
62 163.69 176.47 164.74 177.13 168.02 179.18 173.72 182.75 181.87 188.16 174.88 184.36
63 160.01 172.95 161.16 173.67 164.78 175.93 171.04 179.87 179.90 185.85 171.82 181.29
64 156.24 169.34 157.51 170.14 161.52 172.61 168.39 176.97 178.00 183.57 168.80 178.23
65 152.40 165.64 153.81 166.52 158.24 169.24 165.77 174.06 176.18 181.35 165.68 175.04
66 148.50 161.85 150.07 162.81 154.96 165.81 163.20 171.16 174.45 179.20 162.51 171.76
67 144.54 157.96 146.28 159.02 151.69 162.34 160.69 168.27 172.81 177.12 159.28 168.50
68 140.54 153.98 142.48 155.15 148.44 158.83 158.25 165.40 171.27 175.14 156.15 165.12
69 136.51 149.91 138.67 151.19 145.23 155.28 155.89 162.57 169.84 173.27 152.90 161.65
70 132.47 145.74 134.86 147.16 142.06 151.72 153.63 159.80 168.52 171.52 149.60 158.11
71 128.41 141.48 131.06 143.06 138.94 148.15 151.47 157.11 167.31 169.89 146.24 154.67
72 124.35 137.14 127.27 138.91 135.89 144.59 149.41 154.51 166.21 168.41 143.08 151.06
73 120.29 132.73 123.51 134.72 132.92 141.07 147.48 152.02 165.23 167.07 139.74 147.37
74 116.23 128.26 119.78 130.50 130.04 137.59 145.67 149.66 164.35 165.88 136.36 143.82
75 112.19 123.76 116.08 126.28 127.25 134.18 143.98 147.45 163.58 164.83 133.14 140.12
76 108.16 119.22 112.44 122.06 124.57 130.86 142.42 145.40 162.91 163.92 129.81 136.34
77 104.16 114.68 108.86 117.86 122.00 127.64 141.00 143.52 162.33 163.14 126.44 132.74
78 100.19 110.13 105.34 113.70 119.56 124.56 139.71 141.81 161.83 162.48 123.03 129.01
79 96.27 105.58 101.91 109.59 117.25 121.62 138.54 140.28 161.41 161.92 119.93 125.22
80 92.40 101.06 98.57 105.55 115.08 118.85 137.51 138.92 161.06 161.45 116.63 121.37
81 88.60 96.58 95.34 101.61 113.05 116.26 136.59 137.73 160.77 161.07 113.29 117.96
82 84.87 92.14 92.21 97.78 111.17 113.87 135.79 136.70 160.54 160.77 109.91 114.25
83 81.23 87.78 89.21 94.08 109.44 111.67 135.09 135.82 160.35 160.52 107.03 110.49
84 77.67 83.51 86.34 90.53 107.86 109.69 134.49 135.06 160.21 160.33 103.83 107.24
85 74.21 79.34 83.60 87.17 106.42 107.90 133.97 134.42 160.10 160.18 100.61 103.72
</TABLE>
<PAGE> 7
TABLE C (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $234.39 $233.22 $232.04 $230.85 $229.67 $228.49 $227.32 $226.15 $225.00 $223.86 $222.74
51 232.70 231.48 230.25 229.01 227.78 226.56 225.33 224.12 222.92 221.74 220.58
52 230.94 229.66 228.38 227.10 225.82 224.54 223.27 222.01 220.77 219.54 218.33
53 229.10 227.78 226.44 225.11 223.78 222.45 221.13 219.82 218.53 217.25 215.99
54 227.19 225.81 224.43 223.04 221.65 220.27 218.90 217.54 216.20 214.87 213.56
55 225.21 223.77 222.33 220.89 219.45 218.01 216.59 215.17 213.78 212.40 211.05
56 223.14 221.65 220.15 218.65 217.15 215.66 214.18 212.71 211.26 209.84 208.43
57 221.00 219.44 217.88 216.32 214.77 213.22 211.68 210.16 208.66 207.18 205.72
58 218.76 217.15 215.53 213.91 212.29 210.69 209.09 207.51 205.95 204.41 202.91
59 216.44 214.76 213.08 211.40 209.72 208.05 206.40 204.76 203.14 201.55 199.99
60 214.03 212.29 210.54 208.80 207.05 205.32 203.60 201.91 200.23 198.58 196.97
61 211.53 209.72 207.91 206.09 204.28 202.49 200.71 198.95 197.21 195.51 193.84
62 208.93 207.05 205.17 203.29 201.41 199.55 197.71 195.88 194.09 192.32 190.60
63 206.24 204.29 202.33 200.38 198.44 196.51 194.60 192.71 190.85 189.03 187.25
64 203.45 201.42 199.39 197.37 195.36 193.36 191.38 189.43 187.51 185.63 183.79
65 200.55 198.45 196.35 194.26 192.17 190.11 188.06 186.05 184.07 182.12 180.23
66 197.56 195.38 193.21 191.04 188.88 186.74 184.63 182.55 180.51 178.51 176.55
67 194.46 192.21 189.96 187.71 185.48 183.28 181.10 178.95 176.85 174.78 172.77
68 191.26 188.93 186.60 184.28 181.98 179.71 177.46 175.25 173.08 170.96 168.89
69 187.96 185.55 183.14 180.75 178.38 176.03 173.71 171.44 169.21 167.03 164.91
70 184.55 182.06 179.58 177.12 174.67 172.25 169.87 167.53 165.24 163.00 160.84
71 181.05 178.48 175.92 173.38 170.86 168.37 165.92 163.52 161.17 158.89 156.68
72 177.44 174.79 172.16 169.54 166.95 164.39 161.88 159.42 157.02 154.70 152.45
73 173.73 171.00 168.29 165.60 162.94 160.32 157.74 155.23 152.79 150.43 148.15
74 169.92 167.11 164.33 161.56 158.83 156.15 153.52 150.96 148.48 146.09 143.79
75 166.01 163.12 160.26 157.43 154.64 151.90 149.23 146.63 144.11 141.69 139.38
76 162.00 159.04 156.10 153.21 150.36 147.57 144.86 142.23 139.69 137.25 134.92
77 157.89 154.86 151.86 148.90 146.01 143.18 140.43 137.78 135.22 132.77 130.43
78 153.69 150.59 147.54 144.53 141.59 138.73 135.96 133.28 130.71 128.26 125.92
79 149.41 146.25 143.14 140.10 137.12 134.24 131.45 128.76 126.19 123.73 121.41
80 145.05 141.84 138.69 135.61 132.61 129.71 126.91 124.22 121.65 119.21 116.91
81 140.63 137.38 134.19 131.09 128.07 125.16 122.36 119.68 117.12 114.71 112.44
82 136.16 132.87 129.66 126.54 123.52 120.60 117.81 115.15 112.62 110.24 108.01
83 131.64 128.33 125.11 121.98 118.96 116.06 113.28 110.65 108.16 105.82 103.64
84 127.10 123.77 120.54 117.42 114.41 111.53 108.79 106.19 103.75 101.47 99.35
85 122.53 119.20 115.98 112.87 109.88 107.04 104.34 101.80 99.42 97.20 95.15
</TABLE>
<PAGE> 8
TABLE D
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 5%
Options 1, 2, and 3 -- Single Life Annuities -- Male(M), Female(F)
<TABLE>
<CAPTION>
MONTHLY PAYMENTS GUARANTEED
-------------------------------------------------------------------------------------------------- -----------------
AGE NONE 60 120 180 240 CASH REFUND
M F M F M F M F M F M F
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $188.91 $198.35 $189.32 $198.56 $190.53 $199.20 $192.46 $200.31 $195.10 $201.90 $194.00 $201.44
51 186.61 196.25 187.05 196.48 188.36 197.19 190.44 198.40 193.31 200.15 192.00 199.57
52 184.24 194.08 184.72 194.33 186.12 195.11 188.37 196.43 191.49 198.35 189.92 197.63
53 181.79 191.83 182.31 192.10 183.83 192.95 186.25 194.41 189.66 196.50 187.77 195.62
54 179.28 189.49 179.84 189.79 181.46 190.73 184.08 192.32 187.80 194.62 185.56 193.55
55 176.68 187.07 177.28 187.40 179.03 188.43 181.88 190.17 185.93 192.69 183.27 191.43
56 174.00 184.57 174.65 184.93 176.53 186.06 179.63 187.97 184.06 190.74 180.96 189.21
57 171.24 181.98 171.94 182.37 173.97 183.61 177.34 185.71 182.19 188.75 178.56 186.93
58 168.39 179.29 169.13 179.73 171.33 181.09 175.02 183.39 180.32 186.73 176.09 184.56
59 165.44 176.52 166.24 177.00 168.63 178.49 172.68 181.01 178.46 184.70 173.56 182.12
60 162.39 173.65 163.26 174.18 165.87 175.82 170.31 178.59 176.62 182.66 170.95 179.64
61 159.24 170.69 160.19 171.27 163.05 173.07 167.94 176.12 174.82 180.62 168.36 177.06
62 156.00 167.63 157.03 168.28 160.19 170.25 165.55 173.61 173.04 178.58 165.66 174.40
63 152.66 164.48 153.80 165.19 157.28 167.36 163.18 171.07 171.32 176.57 162.90 171.66
64 149.24 161.24 150.49 162.02 154.35 164.41 160.81 168.51 169.65 174.58 160.08 168.90
65 145.74 157.90 147.13 158.76 151.39 161.39 158.48 165.93 168.05 172.63 157.20 166.03
66 142.17 154.47 143.71 155.42 148.42 158.31 156.18 163.34 166.52 170.73 154.42 163.07
67 138.54 150.95 140.25 151.99 145.46 155.19 153.93 160.76 165.08 168.91 151.49 160.04
68 134.86 147.32 136.77 148.47 142.51 152.01 151.74 158.20 163.72 167.16 148.50 157.01
69 131.15 143.60 133.27 144.87 139.58 148.81 149.62 155.67 162.45 165.50 145.46 153.87
70 127.40 139.78 129.75 141.18 136.69 145.57 147.58 153.18 161.28 163.95 142.57 150.65
71 123.64 135.86 126.24 137.42 133.84 142.32 145.63 150.76 160.20 162.51 139.52 147.35
72 119.87 131.86 122.74 133.60 131.05 139.08 143.78 148.41 159.23 161.19 136.42 144.12
73 116.08 127.77 119.25 129.74 128.32 135.85 142.03 146.16 158.36 160.00 133.26 140.76
74 112.30 123.63 115.78 125.83 125.67 132.66 140.39 144.03 157.57 158.94 130.34 137.33
75 108.51 119.43 112.34 121.91 123.10 129.52 138.86 142.02 156.89 158.01 127.22 133.82
76 104.73 115.20 108.94 117.99 120.63 126.46 137.44 140.16 156.29 157.19 124.04 130.52
77 100.96 110.94 105.59 114.07 118.25 123.50 136.15 138.45 155.77 156.49 121.07 127.02
78 97.22 106.67 102.29 110.18 115.99 120.65 134.97 136.89 155.32 155.90 117.96 123.45
79 93.52 102.39 99.07 106.33 113.85 117.93 133.91 135.50 154.95 155.40 114.83 120.11
80 89.86 98.12 95.92 102.54 111.83 115.35 132.96 134.26 154.64 154.99 111.65 116.61
81 86.25 93.88 92.87 98.83 109.95 112.95 132.12 133.17 154.38 154.64 108.78 113.06
82 82.70 89.67 89.92 95.21 108.20 110.72 131.39 132.23 154.17 154.37 105.73 109.47
83 79.23 85.52 87.08 91.72 106.59 108.67 130.75 131.42 154.00 154.15 102.67 106.36
84 75.83 81.44 84.36 88.36 105.11 106.82 130.20 130.72 153.87 153.98 99.57 102.95
85 72.52 77.46 81.77 85.16 103.77 105.16 129.73 130.14 153.77 153.84 96.88 99.52
</TABLE>
<PAGE> 9
TABLE D (CONTINUED)
Options 4 -- Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
NUMBER OF YEARS YOUNGER NUMBER OF YEARS OLDER
------------------------------------------------------------------ --------------------------
SAME
FEMALE: 7 6 5 4 3 2 1 AGE 1 2 3
---------------------------------------------------------------------------------------------------------------------
MALE AGE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $217.91 $216.96 $215.99 $215.03 $214.06 $213.09 $212.12 $211.15 $210.19 $209.24 $208.30
51 216.53 215.53 214.52 213.51 212.50 211.48 210.47 209.46 208.46 207.46 206.48
52 215.08 214.03 212.98 211.92 210.86 209.80 208.74 207.69 206.65 205.61 204.59
53 213.56 212.47 211.37 210.27 209.16 208.05 206.95 205.85 204.76 203.68 202.61
54 211.98 210.84 209.69 208.54 207.38 206.22 205.07 203.92 202.78 201.66 200.55
55 210.33 209.14 207.94 206.73 205.52 204.31 203.11 201.91 200.73 199.55 198.39
56 208.60 207.36 206.10 204.84 203.58 202.32 201.07 199.82 198.58 197.36 196.15
57 206.80 205.50 204.19 202.88 201.56 200.25 198.94 197.63 196.35 195.07 193.81
58 204.92 203.56 202.19 200.82 199.45 198.08 196.71 195.36 194.01 192.69 191.38
59 202.95 201.54 200.11 198.68 197.25 195.82 194.40 192.98 191.59 190.20 188.85
60 200.90 199.42 197.94 196.45 194.95 193.46 191.98 190.51 189.06 187.62 186.21
61 198.77 197.22 195.67 194.12 192.56 191.01 189.47 187.94 186.42 184.93 183.47
62 196.54 194.93 193.31 191.69 190.07 188.46 186.85 185.26 183.69 182.14 180.62
63 194.22 192.54 190.86 189.17 187.48 185.80 184.13 182.48 180.84 179.24 177.66
64 191.80 190.06 188.30 186.54 184.79 183.04 181.31 179.59 177.89 176.23 174.59
65 189.29 187.47 185.64 183.81 181.99 180.17 178.37 176.59 174.84 173.11 171.42
66 186.68 184.78 182.88 180.98 179.09 177.20 175.34 173.49 171.67 169.88 168.13
67 183.97 182.00 180.02 178.05 176.08 174.13 172.19 170.28 168.40 166.55 164.74
68 181.15 179.11 177.06 175.01 172.97 170.95 168.94 166.96 165.02 163.11 161.24
69 178.24 176.11 173.99 171.87 169.75 167.66 165.59 163.54 161.53 159.56 157.64
70 175.22 173.02 170.81 168.62 166.43 164.27 162.12 160.01 157.94 155.92 153.95
71 172.10 169.82 167.54 165.27 163.01 160.77 158.56 156.39 154.25 152.18 150.16
72 168.88 166.52 164.16 161.81 159.48 157.17 154.89 152.66 150.47 148.35 146.29
73 165.55 163.11 160.68 158.25 155.85 153.47 151.13 148.84 146.61 144.44 142.35
74 162.12 159.60 157.09 154.59 152.11 149.67 147.28 144.94 142.66 140.45 138.33
75 158.59 155.99 153.40 150.83 148.29 145.79 143.34 140.95 138.64 136.40 134.26
76 154.96 152.28 149.61 146.97 144.37 141.82 139.32 136.90 134.55 132.29 130.13
77 151.22 148.47 145.73 143.03 140.37 137.77 135.24 132.78 130.41 128.13 125.95
78 147.39 144.56 141.76 139.01 136.30 133.66 131.10 128.61 126.22 123.93 121.75
79 143.47 140.57 137.72 134.91 132.17 129.50 126.91 124.41 122.01 119.71 117.53
80 139.46 136.51 133.61 130.76 127.98 125.29 122.68 120.17 117.77 115.48 113.31
81 135.38 132.38 129.44 126.56 123.76 121.05 118.43 115.92 113.52 111.25 109.10
82 131.24 128.20 125.23 122.32 119.51 116.78 114.17 111.66 109.29 107.04 104.93
83 127.05 123.98 120.98 118.06 115.24 112.52 109.91 107.43 105.08 102.87 100.80
84 122.82 119.72 116.71 113.79 110.96 108.26 105.67 103.22 100.91 98.75 96.73
85 118.56 115.45 112.43 109.51 106.70 104.02 101.47 99.06 96.80 94.70 92.75
</TABLE>
<PAGE> 10
Beneficiaries.
a. Unlocatable Beneficiaries. If We cannot obtain a mailing address
for the designated beneficiary using methods allowed by and
within the period required by applicable state or federal
regulations, then We will deem the contract holder to have no
designated beneficiary and We will pay the proceeds accordingly.
If no applicable law provides guidelines and We cannot obtain a
mailing address for the designated beneficiary by reasonable
means and within a reasonable period, then We will deem the
contract holder to have no designated beneficiary and We will pay
the proceeds accordingly.
b. Trust or Estate as Beneficiary. Payments to a Beneficiary that
is a trust or an estate will be made in a lump sum or in
installments over a period not to exceed five years, to the
extent required by applicable law.
Death of the Owner. If You are not the Annuitant and die during the
Accumulation Period, the Contract values must be distributed in the same manner
and time as the Contract would require for the Annuitant's death, except that
those Contract provisions shall be applied to You instead of the Annuitant. In
that case, payments will be made to the Contingent Owner, if any, or to the
Beneficiary if there is no Contingent Owner who survives You. Unless You are
also the Annuitant. Your death during the Annuity Period will cause no change
in the operation of, or payments under, the Contract.
Investment Options. We reserve the right to limit allocations among Investment
Options.
Separate Account Charge. The amount of the Separate Account Charge depends on
the Variable Investment Option from which it is deducted, and is imposed at an
annual rate of up to 1.25% of the assets of the Variable Investment Option.
The effective date of this Endorsement is the Policy Issue Date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
/s/ CYNTHIA A. TOLES
-------------------------------------------
Cynthia A. Toles
Senior Vice President, General Counsel, and
Secretary
<PAGE> 1
EXHIBIT 8(k)
PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and between, Evergreen Equity Trust, a
Delaware trust, and such other funds or portfolios of series-type mutual funds
set forth on Schedule A attached hereto as amended from time to time, ("FUND")
and The Variable Annuity Life Insurance Company ("VALIC"), a life insurance
company organized under the laws of the State of Texas, on its own behalf and
on behalf of each segregated asset account set forth on Schedule B hereto as
amended from time to time (each such account hereinafter referred to
as "ACCOUNT").
WHEREAS, FUND is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act") as
an open-end, diversified, management investment company; and
WHEREAS, FUND shares are issued to the general public and to the
separate accounts of insurance companies ("Participating Insurance Companies")
to fund variable insurance products and certain qualified pension and
retirement plans; and
<PAGE> 2
WHEREAS, VALIC has established ACCOUNT to offer variable contracts (the
"Contracts") which VALIC has registered under the Securities Act of 1933, as
amended (the "1933 Act"), and is desirous of having FUND as one of the
underlying funding vehicles for the Contracts; and
WHEREAS, FUND knows of no reason why FUND shares may not be sold
to Participating Insurance Companies to fund variable insurance products
and qualified pension and retirement plans; and
WHEREAS, VALIC intends to purchase shares of other open-end,
management investment companies that offer shares to the general public to fund
the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, VALIC intends to purchase shares of FUND to fund the Contracts and
FUND is or will be authorized to sell such shares to VALIC at net asset value;
WHEREAS, VALIC and affiliates of VALIC will provide subcustodian,
record keeping, account maintenance and/or other administrative services for
Contract owners and participants, employee benefit plans and participants, and
other investors;
NOW, THEREFORE, in consideration of their mutual promises, VALIC and
FUND agree as follows:
-2-
<PAGE> 3
1. FUND agrees to make FUND shares available for purchase by VALIC and
ACCOUNT at the applicable net asset value per share on those days on which FUND
calculates its net asset value pursuant to SEC rules. FUND shall use reasonable
efforts to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the FUND may refuse
to sell shares to any person, or suspend or terminate the offering of shares, if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the FUND acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of the FUND.
2. Issuance and transfer of FUND's shares will be by book entry only.
Stock certificates will not be issued to VALIC or ACCOUNT. Shares ordered from
FUND will be recorded in an appropriate title for ACCOUNT or the appropriate
subaccount of ACCOUNT.
3. FUND shall furnish same day notice (by wire, telecopier, or
telephone followed by written confirmation) to VALIC of any income, dividends
or capital gain distributions payable on FUND's shares. VALIC hereby elects to
receive all such income, dividends and capital gain distributions of a FUND in
the form of additional shares of that FUND. VALIC reserves the right to revoke
this election and to receive all such income, dividends and capital gain
distributions in cash. FUND shall notify VALIC of the number of shares so
issued as payment of such dividends and distributions.
-3-
<PAGE> 4
4. (a) FUND agrees to sell to VALIC shares of the FUND which VALIC
orders, executing such orders on a daily basis at the net asset value next
computed after receipt by FUND or its designee in proper form of the order for
the shares of FUND. For purposes of this Section 4(a), VALIC shall be the
designee of FUND for receipt of such orders from VALIC and receipt by such
designee shall constitute receipt by FUND; provided that FUND receives notice
of such order by 9:00 a.m. Eastern time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which FUND calculates its net asset value pursuant to the
rules of the SEC. "Proper form" means that amounts to be invested or redeemed
are identified on VALIC's computer system by Participant, Contract and Fund in
accordance with VALIC's standard procedures for processing transactions. (which
comply with procedures and form in Fund's prospectus).
(b) FUND agrees to redeem for cash (or in kind to the limited extent
disclosed in the Fund's prospectus), on VALIC's request, any full or fractional
shares of FUND held by VALIC, executing such requests on a daily basis at the
net asset value next computed after receipt by FUND or its designee of the
request for redemption in proper form. Fund shall not bear any responsibility
whatsoever for the proper disbursement to Contract Participants or crediting
redemption proceeds to Contract Participants; VALIC alone shall be responsible
for such actions. For purposes of this Section 4(b), VALIC shall be the designee
of FUND for receipt of requests for redemption from VALIC and receipt by such
designee shall constitute receipt by FUND; provided that FUND receives notice of
such request for redemption by 9:00 a.m. Eastern time on the next following
Business Day.
-4-
<PAGE> 5
(c) FUND shall make the net asset value per share available to VALIC
on a daily basis as soon as reasonably practical after the net asset value per
share is calculated but shall use its best efforts to make such net asset value
available by 6:30 p.m. Eastern time. If FUND provides VALIC with the incorrect
share net asset value information through no fault of VALIC, VALIC on behalf of
the Separate Accounts, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct share net asset value. Any
error in the calculation of net asset value, dividend and capital gain
information greater than the materiality standard set by the SEC shall be
reported to VALIC immediately upon discovery.
(d) If VALIC requests the purchase of FUND shares, VALIC shall pay
for such purchase by wiring federal funds to FUND or its designated custodial
account on the day the order is transmitted by VALIC. If VALIC requests a net
redemption resulting in a payment of redemption proceeds to VALIC (VALIC shall
use its best efforts to pre-notify the Fund of any large trades), FUND shall
wire the redemption proceeds to VALIC on the day the order is transmitted by
VALIC, unless doing so would require FUND to dispose of portfolio securities or
otherwise incur additional costs, but in such event, proceeds shall be wired to
VALIC within three business days and FUND shall notify the person designated in
writing by VALIC as the recipient for such notice of such delay by 3:00 p.m.
Eastern time the same Business Day that VALIC transmits the redemption order to
FUND. If VALIC's order requests the application of redemption proceeds from the
redemption of shares of one FUND to the purchase of shares of another FUND, FUND
shall so apply such proceeds the same Business Day that VALIC transmits such
order to FUND.
-5-
<PAGE> 6
5. (a) FUND shall provide VALIC with as many copies of FUND's current
prospectus as VALIC may reasonably request. If requested by VALIC in lieu
thereof, FUND shall provide such documentation (including a copy of the new
prospectus in computer form) and other assistance as is reasonably necessary in
order for VALIC once each year (or more frequently if the prospectus for FUND is
amended) to have the prospectuses for the Contracts and for the FUND printed
together in one document. FUND shall provide VALIC with as many copies of any
prospectus supplement as VALIC may reasonably request.
(b) Unless otherwise provided herein, all parties to this Agreement
shall bear all expenses incident to the performance of their respective duties
under this Agreement. FUND will bear the printing costs (or duplicating costs
with respect to the statement of additional information) and mailing costs
associated with the delivery, to the extent legally required, of the following
FUND (or individual portfolio) documents, and any supplements thereto, to
existing variable contract owners of VALIC:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
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<PAGE> 7
VALIC will submit any bills for printing, duplicating and/or mailing costs,
relating to FUND documents described above, to FUND for reimbursement by FUND.
VALIC shall monitor such costs and shall use its best efforts to control these
costs. VALIC will provide FUND on a semi-annual basis, or more frequently as
reasonably requested by FUND, with a current tabulation of the number of
existing variable contract owners of VALIC whose variable contract values are
invested in FUND. This tabulation will be sent to FUND in the form of a letter
signed by a duly authorized officer of VALIC attesting to the accuracy of the
information contained in the letter.
(c) At its expense FUND will provide VALIC with the following FUND
documents, and any supplements thereto, with respect to prospective variable
contract owners of VALIC:
(i) camera ready copy of the current prospectus for printing
by VALIC;
(ii) a copy of the statement of additional information
suitable for duplication;
(iii) camera ready copy of proxy material suitable for
printing; and
(iv) camera ready copy of the annual and semi-annual reports
for printing by VALIC.
(d) FUND shall not bear any costs of preparing, printing,
recording, taping or disseminating VALIC sales literature or other VALIC
promotional materials or the costs of mailing prospective Contract Participants
copies of FUND prospectus, statement of additional information, periodic
reports or other printed materials.
(e) FUND shall bear the costs of printing FUND prospectus,
statement of additional information, periodic reports or other printed
materials associated with the FUND.
(f) VALIC will bear the costs of registering and qualifying the
Accounts for sale, printing (or duplicating costs with respect to the statement
of additional information) mailing costs associated with the delivery of the
ACCOUNT's current prospectuses and statements of additional information, annual
and semi-annual reports, Contracts, Contract applications, sales literature or
other promotional material, ACCOUNT sponsored proxy materials and voting
solicitation instructions.
6. (a) VALIC will furnish, or will cause to be furnished, to FUND or
its designee, each piece of sales literature or other promotional material in
which FUND or the adviser of any of the Portfolios of the Fund is named at least
fifteen days prior to its intended use. No such material will be used if FUND or
its designee objects to its use in writing within ten days after receipt of such
material.
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<PAGE> 8
(b) FUND or its designee will furnish, or will cause to be
furnished, to VALIC, each piece of sales literature or other promotional
material in which VALIC is named at least fifteen days prior to its intended
use. No such material will be used if VALIC objects to its use in writing
within ten days after receipt of such material.
(c) FUND and its affiliates and agents shall not give any
information or make any representations on behalf of VALIC or concerning VALIC,
ACCOUNT, or the Contracts issued by VALIC, other than the information or
representations contained in a registration statement or prospectus for such
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports for ACCOUNT or prepared for
distribution to owners of the Contracts, or in sales literature or other
promotional material approved by VALIC or its designee, except with the
permission of VALIC.
(d) VALIC and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or its advisers or
concerning FUND or its advisers other than the information or representations
contained in a registration statement or prospectus for FUND, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in sales literature or other promotional material approved by FUND
or its designee, except with the permission of FUND.
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<PAGE> 9
(e) For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for use, in
a newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, computer
facility or service including the Internet, or other public media), sales
literature (such as any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, or reprints or excerpts
or any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under National Association of Securities Dealers,
Inc. ("NASD") rules or the 1933 or 1940 Acts. Notwithstanding the foregoing,
the fifteen-day notice requirement of this Section 6 does not apply to FUND
registration statements, prospectuses, statements of additional information,
reports to shareholders, proxy materials, and any other document filed with the
SEC, provided that the reference to VALIC in those documents is limited to: (1)
disclosing that VALIC and ACCOUNT are shareholders of FUND; (2) information
about the amount of shares held by VALIC and ACCOUNT; (3) disclosing that VALIC
purchased seed money shares and information about those shares; and (4) basic
information about VALIC such as its address and state of organization.
(f) VALIC will bear the responsibility and correlative expense for
administration and support services for Contract Participants. FUND recognizes
VALIC as the sole shareholder of shares of FUND issued under this Agreement.
(g) VALIC agrees and acknowledges that one of FUND's advisors,
Evergreen Asset Management Corp., is the sole owner of the name and mark
"Evergreen" and that all use of any designation comprised in whole or in part
of Evergreen (an "Evergreen Mark") under this Agreement shall inure to the
benefit of Evergreen Asset Management Corp. VALIC shall not use any Evergreen
Mark on its own behalf or on behalf of the ACCOUNTS or Contracts without prior
written consent of Evergreen Asset Management Corp. Upon termination of this
Agreement for any reason, VALIC shall cease all use of any Evergreen Mark as
soon as practicable.
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<PAGE> 10
7. Compensation and Expenses. In consideration of its providing the
administrative and record-keeping services below, VALIC shall be entitled to
receive from the FUND, the fees set forth in Exhibit C hereto. The obligation of
FUND to pay VALIC fees and expenses shall continue, notwithstanding the
termination of this Agreement, as long as the ACCOUNT holds shares of the FUNDS
on behalf of any Contract owner. The administrative and record-keeping services
include:
(a) responding to inquiries from Contract owners using one or more
of the FUNDs as an investment vehicle regarding the services performed by VALIC
as they relate to a FUND;
(b) providing information to FUND and to Contract owners with
respect to shares attributable to Contract owner accounts;
(c) developing and maintaining a means of identifying and analyzing
information relating to contract owners using one or more of the FUNDS as an
investment vehicle through computer databases or similar approaches;
(d) printing and mailing of shareholder communications from each
FUND as may be required;
(e) serving as the designee of the FUND for the receipt of orders
to purchase and redeem shares of the FUND pursuant to Section 4;
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<PAGE> 11
(f) cooperating with the FUND, its service agents and governmental
authorities in connection with the regulation of the FUNDS and the sale of the
shares of the FUNDS;
(g) providing data and materials to the FUND needed to maintain the
compliance of the FUND with the securities laws; and
(h) communicating directly with Contract owners concerning FUND
operations. FUND shall pay all reasonable out-of-pocket expenses actually
incurred by VALIC in connection with the transfer of proxy statements and
reports to shareholders.
8. (a) Except as limited by and in accordance with the provisions of
Sections 8(b) and 8(c) hereof, VALIC agrees to indemnify and hold harmless FUND
and each trustee, officer, employee or agent of FUND and each person, if any,
who controls FUND and each of the directors and officers of ADVISER and each
person, if any, who controls ADVISER within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of VALIC) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale, acquisition or redemption of FUND's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the
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<PAGE> 12
registration statement or prospectus or sales literature
for the Contracts or contained in the Contracts (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to VALIC by or on behalf of FUND
for use in the registration statement or prospectus for
the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or FUND shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of FUND not supplied by VALIC, or
persons under its control) or wrongful conduct of VALIC
or persons under its control, with respect to the sale or
distribution of the Contracts or FUND shares; or
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<PAGE> 13
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of FUND, or
any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading if such statement
or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to FUND by or on behalf of VALIC; or
(iv) arise as a result of (i) a failure by VALIC to
substantially provide the services and furnish the
materials under the terms of this Agreement; or (2) a
failure by VALIC to register the Contracts under the
1933 Act;
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by VALIC in
this Agreement or arise out of or result from any other
material breach of this Agreement by VALIC; or
(vi) arise out of or result from the fact that the Contracts
are invested in shares of regulated investment companies
that are also available without limitation to investors
from the general public; or
(vii) arise out of or result from negligence or wrongful conduct
in VALIC's administration of the ACCOUNTS or the
Contracts.
(b) VALIC shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party is subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to FUND.
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<PAGE> 14
(c) VALIC shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified VALIC in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify VALIC of any such claim shall not relieve VALIC
from any liability for indemnification which it may have to the Indemnified
Party against whom such action is brought other than that liability which may
have been incurred solely as a result of the failure to give notice. In case
any such action is brought against an Indemnified Party, VALIC shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from VALIC to such party of VALIC's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and VALIC will not be liable
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
9. (a) Except as limited by and in accordance with the provisions of
Sections 9(b) and 9(c), FUND agrees to indemnify and hold harmless VALIC and
each of its
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<PAGE> 15
directors and officers and each person, if any, who controls VALIC within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 9) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
FUND) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of FUND's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales
literature of FUND (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to FUND or
its adviser by or on behalf of VALIC for use in the
registration statement or prospectus for FUND or in sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or
FUND shares; or
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<PAGE> 16
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature for the Contracts not supplied by FUND or
its adviser or persons under their control) or wrongful
conduct of FUND or persons under their control, with
respect to the sale or distribution of the Contracts or
FUND shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity
with information furnished to VALIC by or on behalf of
FUND; or
(iv) arise as a result of (1) a failure by FUND to
substantially provide the services and furnish the
materials under the terms of this Agreement; (2) a
failure by FUND to qualify as a
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<PAGE> 17
Regulated Investment Company under Subchapter M of the
Code; or (3) a failure by FUND to register its shares but
only if such registration is required in those states
where the FUND is subject to the state securities
commission.
(v) arise out of or result from any material breach of any
representation and/or warranty made by FUND in this
Agreement or arise out of or result from any other
material breach of this Agreement by FUND.
(vi) arise out of or result from negligence or wrongful
conduct in FUND's administration of FUND Shares.
(b) FUND shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party is subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
VALIC.
(c) FUND shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified FUND in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify FUND of any
such claim shall not relieve
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<PAGE> 18
FUND from any liability for indemnification which it may have to the Indemnified
Party against whom such action is brought other than that liability which may
have been incurred solely as a result of the failure to give notice. In case any
such action is brought against the Indemnified Parties, FUND shall be entitled
to participate at its own expense in the defense thereof. FUND also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from FUND to such party of FUND's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and FUND will not be liable
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
(d) VALIC agrees to notify FUND promptly of the commencement of
any litigation or proceedings that impact the FUND, against VALIC or any of its
officers or directors in connection with the issuance or sale of the Contracts,
the operation of the ACCOUNTS or the sale or acquisition of shares of the FUND.
10. FUND represents and warrants that FUND shares sold pursuant to this
Agreement shall be registered under the 1933 Act and duly authorized for
issuance, and shall be issued, in compliance in all material respects with
applicable law, and that FUND is and shall remain registered under the 1940 Act
for so long as required thereunder. FUND further represents and warrants that
FUND qualifies as a Regulated Investment Company under Subchapter M of the Code,
and will make every effort to maintain such qualification (under Subchapter M or
any successor or similar provisions), and that FUND will notify VALIC
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future. FUND will register and
qualify its shares for sale in accordance with the laws of the various states as
may be required by law in those states where this FUND is subject to the
jurisdiction of the state securities commission. FUND makes no representations
or warranties as to whether any aspect of its operations (including, but not
limited to, fees, expenses and investment policies) complies or will comply with
the insurance laws or insurance regulations of the various states. FUND further
represents and warrants that all of its directors, officers, employees,
investment advisers, and other individuals/entities dealing with the money or
securities of the FUND are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the FUND in an
amount not less than the minimal coverage as required by Rule 17g-1 under the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
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<PAGE> 19
11. VALIC represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established ACCOUNT as a segregated asset account under Texas law and
has registered ACCOUNT as a unit investment trust under the 1940 Act. VALIC
represents and warrants that the Contracts are or will be registered under the
1933 Act and that the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws and that the sale
of the Contracts shall apply in all material aspects with state insurance
suitability requirements were applicable. VALIC will notify FUND immediately
upon having a reasonable basis for believing that the ACCOUNT or Contracts have
ceased to qualify as segregated accounts or variable annuity contracts for
relevant diversification purposes. VALIC represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
described in Rule 17g-1 under the 1940 Act, that deal with the money and/or
securities of the FUND, are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of FUND, in the amount
not less than the Rule requires. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
12. FUND will provide VALIC with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications which disclose the
relationship of the FUND and VALIC or which may have an effect upon the FUND's
relationship with VALIC, and all amendments or supplements to any of the above
that relate to the FUND promptly after the filing of each such document with the
SEC or other regulatory authority. VALIC will provide FUND or its designee with
at least one complete copy of all prospectuses, statements of additional
information, annual and semi-annual reports, solicitation for voting
instructions, proxy statements, prices of sales literature and other promotional
material, exemptive applications, requests for no-action relief, and all
amendments or supplements to any of the above in which Fund or its advisers are
named, that relate to ACCOUNT or Contracts, contemporaneously with the filing of
each document with the SEC, NASD or other regulatory authority.
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<PAGE> 20
13. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
14. VALIC will provide pass-through voting privileges to all Contract
owners so long as the Commission continues to interpret the 1940 Act as
requiring pass-through voting privileges for variable contract owners.
Accordingly, VALIC will solicit voting instructions from Contract Participants
and vote shares of FUND held in ACCOUNT in a manner consistent with voting
instructions timely-received from Contract owners. VALIC will vote shares of
FUND held in ACCOUNT for which no voting instructions from Contract owners are
timely-received, as well as shares of FUND which VALIC itself owns, in the same
proportion as those shares of FUND for which voting instructions from Contract
owners are timely-received. Participating Insurance Companies will be
responsible for assuring that each of their separate accounts participating in
FUND calculates voting privileges in a manner consistent with other
Participating Insurance Companies.
15. FUND agrees to comply with any applicable state insurance laws or
regulations, including cooperating with VALIC in any filings of sales literature
for the Contracts, to the extent notified thereof in writing by VALIC, unless
such compliance is deemed by FUND to be unduly burdensome, in which event any
Party may exercise its option to terminate this Agreement under Section 16
hereof, except that such termination shall be effective immediately.
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<PAGE> 21
16. (a) This Agreement shall be effective as of the date hereof and
shall continue in force until terminated in accordance with the provisions
herein.
(b) This Agreement shall terminate automatically in the event of
its assignment unless such assignment is made with the written consent of VALIC
and FUND.
(c) This Agreement shall terminate without penalty at the option of
the terminating party in accordance with the following provisions:
(i) At the option of VALIC or FUND at any time from the date
hereof upon 90 days' advance written notice, unless a
shorter time is agreed to by the parties;
(ii) At the option of VALIC if FUND shares are not reasonably
available to meet the requirements of the Contracts,
provided however, that such a termination shall apply only
to the series of FUND not reasonably available and FUND
shall have thirty (30) days from initial notification by
VALIC of the deficiency to correct such deficiency.
Thereafter, prompt written notice of the election to
terminate shall be furnished by VALIC and termination
shall be effective ten days after FUND's receipt of said
notice;
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<PAGE> 22
(iii) At the option of VALIC, upon the institution of formal
proceedings against FUND by the SEC, the NASD, or any
other regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in VALIC'S reasonable
judgment exercised in good faith, materially impair FUND'S
ability to meet and perform FUND'S obligations and duties
hereunder. Prompt notice of election to terminate under
this paragraph shall be furnished by VALIC with said
termination to be effective upon receipt of notice;
(iv) At the option of FUND, upon the institution of formal
proceedings against VALIC by the SEC, the NASD, or any
other regulatory body, the expected or anticipated
ruling, judgement or outcome which would, in FUND'S
reasonable judgment, materially impair VALIC'S ability to
meet and perform its obligations and duties hereunder.
Prompt notice of election to terminate under this
paragraph shall be furnished by FUND with said
termination to be effective upon receipt of notice;
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<PAGE> 23
(v) At the option of FUND, if (1) FUND shall determine in its
sole judgment reasonably exercised in good faith, that
VALIC has suffered a material adverse change in its
business or financial condition or is the subject of
material adverse publicity and such material adverse
change or material adverse publicity is likely to have a
material adverse impact upon the operation or business
reputation of FUND, (2) FUND shall have notified VALIC in
writing of such determination and its intent to terminate
this Agreement, and, (3) after consideration of the
actions taken by VALIC and any other changes in
circumstances since the giving of such notice, the
determination of FUND shall continue to apply on the
sixtieth (60th) day since giving of such notice, then such
sixtieth day shall be the effective date of termination;
(vi) At the option of VALIC after having been notified by FUND
of a termination or proposed termination of the Investment
Advisory Agreement between FUND or its successors, which
notice FUND shall provide promptly to VALIC, the effective
date of termination of the Agreement to be as determined
by VALIC;
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<PAGE> 24
(vii) In the event FUND's shares are not registered, issued or
sold in accordance with applicable federal law, or such
law precludes the use of such shares of the FUND as the
underlying investment medium of the Contracts issued or
to be issued by VALIC. Prompt notice of election to
terminate under this paragraph shall be furnished by
VALIC with said termination to be effective upon receipt
of notice;
(viii) At the option of FUND upon a reasonable determination by
the Board in good faith that it is no longer advisable
and in the best interests of shareholders for FUND to
continue to operate pursuant to this Agreement. Prompt
notice of election to terminate under this paragraph
shall be furnished by FUND with said termination to be
effective upon receipt of notice;
(ix) At the option of FUND if the Contracts cease to qualify
as annuity contracts or life insurance contracts, as
applicable, under the Code, or if FUND reasonably
believes that the Contracts may fail to so qualify.
Prompt notice of election to terminate under this
paragraph shall be furnished by FUND with said
termination to be effective upon receipt of notice;
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<PAGE> 25
(x) At the option of VALIC, upon FUND'S breach of any
material provision of this Agreement, which breach has
not been cured to the satisfaction of VALIC within ten
days after written notice of such breach is delivered to
FUND;
(xi) At the option of FUND, upon VALIC's breach of any
material provision of this Agreement, which breach has
not been cured to the satisfaction of FUND within ten
days after written notice of such breach is delivered to
VALIC;
(xii) At the option of FUND, if the variable contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law. Prompt notice of election to
terminate under this paragraph shall be furnished by FUND
with said termination to be effective upon receipt of
notice;
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<PAGE> 26
(xiii) At the option of VALIC, if (1) VALIC shall determine, in
its sole judgment reasonably exercised in good faith,
that FUND is the subject of material adverse publicity
and such material adverse publicity is likely to have a
material adverse impact on the sale of the Contracts
and/or the operations or business reputation of VALIC,
(2) VALIC shall have notified FUND in writing of such
determination and its intent to terminate this Agreement,
and, (3) after consideration of the actions taken by FUND
and any other changes in circumstances since the giving
of such notice, the determination of VALIC shall continue
to apply on the sixtieth (60th) day since giving of such
notice, then such sixtieth day shall be the effective
date of termination;
(xiv) At the option of VALIC, if VALIC shall determine that it
is no longer advisable and in the best interests of
Contract owners to utilize the FUND as underlying
investment vehicle and VALIC determines to substitute the
shares of another investment company for the
corresponding shares of FUND in accordance with the terms
of the Contracts for which those shares had been selected
to serve as the underlying investment media.
(d) No termination of this Agreement shall be effective unless and
until the party terminating this Agreement gives prior written notice to all
other parties to this Agreement of its intent to terminate, which notice shall
set forth the basis for such termination.
-26-
<PAGE> 27
(e) Notwithstanding any termination of this Agreement pursuant to
Section 16(c) hereof, at the election of VALIC, FUND shall continue to make
available additional FUND shares, as provided below, pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if VALIC elects to have FUND
make additional shares available, the owners of the Existing Contracts or
VALIC, whichever shall have legal authority to do so, shall be permitted to
reallocate investments in FUND, redeem investments in FUND and/or invest in
FUND upon the payment of additional premiums under the Existing Contracts. In
the event of a termination of this Agreement pursuant to Section 16(c) hereof,
VALIC, as promptly as is practicable under the circumstances, shall notify FUND
whether VALIC shall elect to continue to have FUND shares made available after
such termination. If FUND shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either FUND or VALIC may terminate the Agreement, as so continued
pursuant to this Section 16(e), upon prior written notice to the other party
such notice to be for a period that is reasonable under the circumstances. In
determining whether to elect to continue to have additional FUND shares made
available, VALIC shall act in good faith, giving due consideration to the
interests of existing shareholders, including holders of Existing Contracts.
Notwithstanding the foregoing, FUND shall not be required to make available
additional FUND shares if doing so would be prohibited by law. VALIC and FUND
agree that this Section 16(e) shall not apply to any termination under Sections
8 or 9.
(f) VALIC shall not redeem FUND shares attributable to Contract
except (i) as necessary to implement Contract Participant initiated
transactions, or (ii) as required by state and/or federal laws or regulations
or judicial or other legal precedent of general application. Upon request,
VALIC will promptly furnish to FUND the opinion of counsel for VALIC to the
effect that any redemption pursuant to clause (ii) above is a legally required
redemption. Furthermore, VALIC shall not prevent new Contract Participants from
allocating payments to FUND that formerly was available under the Contracts
without first giving FUND ninety (90) days notice of its intention to do so.
17. Potential Conflicts.
(a) The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. A material irreconcilable conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory or other authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any portfolio are being managed; (e) a difference in voting
instruction given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trustees shall promptly inform the VALIC
if they determine that a material irreconcilable conflict exists and the
implications thereof. The Trustees shall have sole authority to determine
whether a material irreconcilable conflict exists and their determination shall
be binding upon the VALIC.
(b) VALIC agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. VALIC will assist the Trustees
in carrying out their responsibilities under the Shared Trust Exemptive Order
and this Section 17 by providing the Trustees with all information reasonably
necessary for them to consider any issues raised including, but not limited to,
information as to a decision by the VALIC to disregard Contract Participant
voting instructions.
(c) If it is determined by a majority of the Trustees, or a
majority of the disinterested Trustees, that a material irreconcilable conflict
exists that affects the interest of Contract Participants, VALIC shall, in
cooperation with other Participating Insurance Companies whose contract owners
are also affected, at its expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps could include: (a)
withdrawing the assets allocable to some of the Accounts from the Trust or any
portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another portfolio of the Trust, or submitting
the question of whether or not such segregation should be implemented to a vote
of all affected Contract Participants and, as appropriate, segregating the
assets of any appropriate group (i.e. annuity contract owners, life insurance
contract owners, variable annuity contract owners, or variable life insurance
contract owners of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Contact Participants the
option of making such change; and (b) establishing a new registered management
investment company or managed separate account and obtaining any necessary
approvals or orders of the Commission in connection therewith.
(d) If any material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to VALIC conflicts
with the majority of other state regulators, then VALIC will withdraw the
affected ACCOUNT investment in the Trust and terminate this Agreement with
respect to such ACCOUNT within six (6) months after the Trust gives written
notice that it has determined that such decision has created a material
irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by VALIC for the purchase and redemption of
shares of the Trust.
(e) For purposes of (c) and (d) of this Section 17 of this
Agreement, a majority of the disinterested Trustees shall determine whether any
proposed action adequately remedies any material irreconcilable conflict. VALIC
shall not be required by (c) of this Section 17 to establish a new funding
medium for the Contracts if any offer to do so has been declined by a vote of a
majority of Contract Participants materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine that any
proposed action does not adequately remedy any material irreconcilable
conflict, then VALIC will withdraw the ACCOUNT's investment in the Trust and
terminate this Agreement within six (6) months after the Trust gives written
notice of the foregoing determination; provided, however, that such withdrawal
and termination shall be limited to the extent required by any such material
irreconcilable conflict, as determined by a majority of the disinterested
Trustees.
(f) VALIC shall at least annually submit to the submit to the
Trustees such reports, materials or data as the Trustees may reasonably request
so that the Trustees may fully carry out the duties imposed upon them by the
Shared Trust Exemptive Order and this Section 17. Said reports, materials and
data shall be submitted more frequently if deemed appropriate by the Trustees.
(g) If and to the extent that Rule 6e-2 and Rule 6e-(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed and/or
shared funding (as defined in the Shared Trust Exemptive Order) on terms and
conditions materially different from those contained in the Shared Trust
Exemptive Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
(h) If a material irreconcilable conflict arises because of a
decision by VALIC to disregard Contract Participant voting instructions as set
forth in Section 14 of this Agreement, and that decision represents a minority
position or would preclude a majority vote, VALIC may be required, at the
Trust's election, to withdraw the affected ACCOUNT's investment in the Trust and
terminate this Agreement with respect to such ACCOUNT; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by VALIC for the purchase and
redemption of share of the Trust.
18. Any notice shall be sufficiently given when sent by registered or
certified mail (return receipt requested) to the other party at the address of
such party set forth below or at such other address as such party may from time
to time specify in writing to the other party.
-27-
<PAGE> 28
If to FUND: Evergreen Funds
200 Berkeley Street
Boston, MA 02116-9000
Attn: Legal Department
If to VALIC: The Variable Annuity life Insurance Company
2929 Allen Parkway
Houston, TX 77019
Attn: Nori L. Gabert
19. Confidentiality. Each party agrees that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall be kept confidential and shall not be voluntarily disclosed to
any other person, except as may be required by law. This provision shall
survive the termination of this Agreement.
20. This Agreement shall be subject to the provisions of the 1933 Act,
1934 Act and 1940 Act and the rules and regulations thereunder, including any
exemptive relief therefrom and the orders of the SEC setting forth such relief.
21. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
22. If any provisions of this Agreement shall be held or made invalid
by a court, decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
23. The rights, remedies and obligations contained in this agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled under
state and federal law.
24. The Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns; provided that no party may
assign this Agreement without prior written consent of the others.
25. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one instrument.
Executed this 4th day of January, 1999.
Evergreen Equity Trust
Attest: /s/ BETH WERTHS By: /s/ MICHAEL (ILLEGIBLE)
-------------------------- -------------------------------------
Beth Werths Michael (Illegible)
The Variable Annuity Life
Insurance Company
Attest: /s/ CYNTHIA A. TOLES By: /s THOMAS L. WEST, JR.
-------------------------- -------------------------------------
Cynthia A. Toles Thomas L. West, Jr.
-28-
<PAGE> 29
SCHEDULE A
Funds
-----
Evergreen Small Cap Equity Income Fund - Class A
Evergreen Value Fund - Class A
Evergreen Growth & Income Fund - Class A
-29-
<PAGE> 30
SCHEDULE B
Accounts Date Established
-------- ----------------
The Variable Annuity Life Insurance Company April 18, 1979
Separate Account A
Contracts
---------
Standard Form Number Name
- -------------------- ----
UITG-194 Group Fixed and
Variable Deferred
Annuity Contract
UIT-194 Individual Fixed and
Variable Deferred
Annuity Contract
UITN-194 Individual Fixed and Variable
Nonqualified Deferred
Annuity Contract
UIT-IRA-194 Individual Fixed and Variable
Deferred Retirement
Annuity Contract
IRA-SEP-194 Individual Fixed and Variable
Simplified Employee Pension
Annuity Contract
UIT-SIMPLE-897 Individual Fixed and Variable
Deferred Simplified Retirement
Annuity Contract
<PAGE> 31
EXHIBIT C
FUND will pay VALIC the following asset-based Services fee computed daily and
payable quarterly on the aggregate net asset value of the shares of each FUND
maintained in accounts established with the FUND by VALIC:
12b-1 Fee
Fund Per Annum
- ---- ---------
Evergreen Small Cap Equity Income Fund - Class A 0.25%
Evergreen Value Fund - Class A 0.25%
Evergreen Growth and Income Fund - Class A 0.25%
<PAGE> 1
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 16, 1999 as to The Variable Annuity Life
Insurance Company and February 15, 1999 as to The Variable Annuity Life
Insurance Company Separate Account A in Post-Effective Amendment No. 16 to the
Registration Statement (Form N-4 No. 33-75292/811-3240) of The Variable Annuity
Life Insurance Company Separate Account A.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Houston, Texas
April 23, 1999
<PAGE> 1
EXHIBIT 16(d)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of The Variable Annuity Life Insurance Company, a life insurance
corporation organized and existing under Chapter 3 of the Texas Insurance Code,
does hereby constitute and appoint Jon P. Newton, Thomas L. West, Jr. and
Cynthia A. Toles, and each of them, with full power of substitution as his true
and lawful attorney and agent, to do any and all acts and things and to execute
any and all instruments which said attorney and agent may deem necessary or
advisable:
(i) to enable the said corporation to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the registration under the said Securities Act of variable annuity
contracts of the said corporation, interests under benefit plans for
employees and agents and managers of said corporation and of its
affiliates, and the variable annuity contracts of the said corporation with
respect to such benefit plans (hereinafter collectively called "VALIC
Securities"), including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer and/or director of the
said corporation to a registration statement or to any amendment thereto
filed with the Securities and Exchange Commission in respect to said VALIC
Securities and to any instrument or document filed as a part of, as an
exhibit to or in connection with, said registration statement or amendment;
and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker
or dealer in said VALIC Securities under the securities or Blue Sky Laws of
all such states as may be necessary or appropriate to permit therein the
offering and sale of said VALIC Securities as contemplated by said
registration statement, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as an officer and/or
director of said corporation to any application, statement, petition,
prospectus, notice or other instrument or document, or to any amendment
thereto, or to any exhibit filed as a part thereto or in connection
therewith, which is required to be signed by the undersigned and to be
filed with the public authority or authorities administering said
securities or Blue Sky Laws for the purpose of so registering or qualifying
said VALIC Securities or registering or licensing said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this 30th
day of November, 1998.
/s/ JOHN E. ARANT
------------------------------------
John E. Arant
In the Presence of:
/s/ CHERYL G. HEMLEY
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of The Variable Annuity Life Insurance Company, a life insurance
corporation organized and existing under Chapter 3 of the Texas Insurance Code,
does hereby constitute and appoint Jon P. Newton, Thomas L. West, Jr. and
Cynthia A. Toles, and each of them, with full power of substitution as his true
and lawful attorney and agent, to do any and all acts and things and to execute
any and all instruments which said attorney and agent may deem necessary or
advisable:
(i) to enable the said corporation to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the registration under the said Securities Act of variable annuity
contracts of the said corporation, interests under benefit plans for
employees and agents and managers of said corporation and of its
affiliates, and the variable annuity contracts of the said corporation with
respect to such benefit plans (hereinafter collectively called "VALIC
Securities"), including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer and/or director of the
said corporation to a registration statement or to any amendment thereto
filed with the Securities and Exchange Commission in respect to said VALIC
Securities and to any instrument or document filed as a part of, as an
exhibit to or in connection with, said registration statement or amendment;
and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker
or dealer in said VALIC Securities under the securities or Blue Sky Laws of
all such states as may be necessary or appropriate to permit therein the
offering and sale of said VALIC Securities as contemplated by said
registration statement, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as an officer and/or
director of said corporation to any application, statement, petition,
prospectus, notice or other instrument or document, or to any amendment
thereto, or to any exhibit filed as a part thereto or in connection
therewith, which is required to be signed by the undersigned and to be
filed with the public authority or authorities administering said
securities or Blue Sky Laws for the purpose of so registering or qualifying
said VALIC Securities or registering or licensing said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this 21st
day of April, 1999.
/s/ KENT E. BARRETT
------------------------------------
Kent E. Barrett
In the Presence of:
/s/ CHERYL G. HEMLEY
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of The Variable Annuity Life Insurance Company, a life insurance
corporation organized and existing under Chapter 3 of the Texas Insurance Code,
does hereby constitute and appoint Jon P. Newton, Thomas L. West, Jr. and
Cynthia A. Toles, and each of them, with full power of substitution as his true
and lawful attorney and agent, to do any and all acts and things and to execute
any and all instruments which said attorney and agent may deem necessary or
advisable:
(i) to enable the said corporation to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the registration under the said Securities Act of variable annuity
contracts of the said corporation, interests under benefit plans for
employees and agents and managers of said corporation and of its
affiliates, and the variable annuity contracts of the said corporation with
respect to such benefit plans (hereinafter collectively called "VALIC
Securities"), including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer and/or director of the
said corporation to a registration statement or to any amendment thereto
filed with the Securities and Exchange Commission in respect to said VALIC
Securities and to any instrument or document filed as a part of, as an
exhibit to or in connection with, said registration statement or amendment;
and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker
or dealer in said VALIC Securities under the securities or Blue Sky Laws of
all such states as may be necessary or appropriate to permit therein the
offering and sale of said VALIC Securities as contemplated by said
registration statement, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as an officer and/or
director of said corporation to any application, statement, petition,
prospectus, notice or other instrument or document, or to any amendment
thereto, or to any exhibit filed as a part thereto or in connection
therewith, which is required to be signed by the undersigned and to be
filed with the public authority or authorities administering said
securities or Blue Sky Laws for the purpose of so registering or qualifying
said VALIC Securities or registering or licensing said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this 21st
day of April, 1999.
/s/ CARL J. SANTILLO
------------------------------------
Carl J. Santillo
In the Presence of:
/s/ CHERYL G. HEMLEY
